Defense and the Budget - Session Three Summary
Chaired by Michael Lind

Michael Lind
Our final session is “Defense and the Budget.” During the Cold War years, defense as a percentage of US GDP was about 6% on average. It spiked up to 15% or more during the Korean and Vietnam Wars, then went down to about 3% around 2000. Recently, it’s risen to nearly 5%, about 4.7%. Add various off-budget spending, black programs, and so on, it’s probably well over 5%, 6% of GDP. Yet despite all of the talk about the fiscal crisis and budgetary problems, discussion of defense and its relation to the rest of the budget has been curiously missing.

As we know, when President Obama announced a freeze on discretionary spending, he specifically exempted defense spending. The purpose of this panel is to look at defense and its relation to the civilian budget and the overall budget, and to explore various questions. How big should the defense budget be? Apart from the question of overall numbers, what should the composition of spending be? What should the focuses of foreign policy be?

Ultimately, the discussion of the defense budget has to be within the context of some sort of vision of American grand strategy going forward, after the Iraq and Gulf Wars. We’ll also be addressing the costs of those wars, and of ongoing military operations and the health care costs associated with them. This is a major contribution, in my opinion, to the discussion about the federal budget in the years and decades ahead.

Linda Bilmes
I want to start off this conversation by asking whether wars are an efficient way to achieve our strategic defense objectives.

Since 2001, the wars in Afghanistan and Iraq have cost us more than a trillion dollars in cash, which is the very top-of-the-line visible expense. Since 2001, the defense budget has also grown by a trillion dollars, over and above war appropriations. We estimate that at least 25% of that amount is related either directly or indirectly to the wars in Iraq and Afghanistan.

We know that wars have a long tail, and the cost of wars continues for a very, very long time. For example, the peak year for paying disability compensation for World War I veterans was 1969, more than 50 years after armistice. Based on historical patterns, the cost of treating Iraq and Afghanistan veterans over the next 40 years was initially expected to be between $400 and $700 billion, depending on the length and intensity of the wars. This current war is expected to be much more expensive than previous wars, both in disability compensation and in medical care. With medical care, in particular, we have a much higher survival rate with 95% of those who are seriously wounded surviving, compared to around 50% in previous wars; a much higher level of noncombat injuries, a much higher incidence of mental health disease, such as PTSD. We now expect that the cost will be between $500 and $900 billion, as the numbers of those who have been treated and have filed for disability is much higher than expected.

These costs do not include many of the other costs, such as subsidized housing loans, burial benefits, family benefits, vocational benefits, training benefits, and the GI Bill, which we support. When you add those together, we come to at least a trillion dollars of veterans’ benefits just from the current wars. There are also extensive social-economic costs for veterans and their families. They also exclude the macro-economic costs, such as the impact on the oil price – it was $25 a barrel when we invaded Iraq, and it rose to $140 a barrel at the peak of the war in 2007.

In any analysis of the current wars, the bottom line is that you pretty much reach a minimum of $4–, $5– or $6 trillion that we’ve spent. The question is whether that is an efficient expenditure to get rid of a dictator that you don’t like, as we did in Iraq. The benefits can be debated, but the costs are not debatable.

I have two recommendations. First, we need good accounting on what wars actually cost in order to have transparency on what is actually truly being spent in defense and national security. Currently, the spending is fragmented across the Departments of Defense, Energy, Veterans, Homeland Security, State, Labor, Housing, and elsewhere. We really have no idea what the real costs are. Second, we need to change the way we analyze conflicts so that the costs are taken into account and fully estimated at the beginning of a conflict. We need a smarter way to achieve defense objectives, so that we are not eroding our economic security in order to achieve objectives related to military security.

Lawrence Korb
I have been working with Bill Hartung and Heather Hurlburt on the Sustainable Defense Task Force to propose a number of reductions for the Deficit Commission to consider. As you might expect, we’ve gotten an awful lot of pushback, calling us an awful lot of names.

We are briefly going to explain the recommendations that we made to the Commission. I’m going to outline some of the personnel reduction, Bill will get into the hardware, and Heather will get into the politics of the whole thing.

No matter how much is spent on defense, it would not guarantee perfect security. We suggest that by implementing these reductions, we still will be very, very, very secure.

I’ll start with the personnel costs. Whatever you think about the wars in Iraq or Afghanistan, these are the first significant conflicts in our history where taxes were not raised. In fact, they were cut. That is one of the reasons for the deficit; the other is we didn’t have conscription, so the cost of military personnel has been driven to astronomical levels. In terms of personnel, we should do a couple of things.

First, why do we still have 150,000 troops in Europe and Japan? The Europeans are cutting their defense budget to deal with the deficit, because they can basically be free-riders. We, too, can cut back and take troops out of the force. Secretary Gates said in Foreign Affairs, “We will never do Iraq and Afghanistan again; no more nation-building under fire.” If that’s the case, roll back the strength of the Army and the Marine Corps to where they were before we got involved in these conflicts. About 100,000 people at a cost of close to $150,000 per person would save about $15 billion.

Then, of course, the most controversial recommendation: military pay and health care benefits. Every four years, the Pentagon has what they call a Quadrennial Review of Military Compensation. The 2008 review found that DoD is using the wrong metric to decide on pay raises every year. Base pay is not really the total value of compensation. Military personnel get free healthcare, don’t pay for retirement, and get a whole bunch of other benefits. The Pentagon’s own review found that $55 billion could be saved over the next ten years, just by adjusting pay according to full military compensation.

Similarly, with a military health care plan (and we’re talking about retirees now, we’re not talking about people on active duty), there are about nine million retirees and their dependents who have access to a plan called TRICARE, with premiums that haven’t gone up since 1995. We should change that; for retirees, means test it. Raise the premium gradually to about $1100 a year, which is not bad for a family, and save another $50 billion.

The answers are there. The question is whether we have the political courage to do it. Will the Pentagon take the lead and make it easier for the Congress? Right now, nobody seems to want to take these issues on.

William Hartung
It is true that if you’re concerned about the size of the budget, you have to look at the Pentagon. This year, its budget is about $738 billion, not counting Homeland Security, veterans’ benefits, and some other military-related items. It’s about the same size as Social Security. About two-thirds of growth in discretionary spending since 2001 has come from military spending. It’s a huge budgetary concern, a huge component of the budget.

It’s also true that the United States is now spending almost as much as the rest of the world combined on its military, which was not the case during the Cold War. There’s some question as to whether that is really needed. Where is all that money going? Who are the enemies that would justify that level of spending? The Pentagon’s own ac-counting says that we’ve spent a projected $159 billion for the wars in this current year, so there are hundreds of billions of dollars available to be cut that have nothing to do with the troops in the field. I think people who don’t want to cut military spending try to confuse that. They try to say it’s all for the troops, and how could you possibly cut military spending during wartime?

For example, the United States Navy is larger than the next thirteen navies in the world combined, and eleven of those navies are US allies. By 2025, the United States will have 1700 fifth-generation fighter jets, top of the line, the most sophisticated in the world. China will have literally a handful. We have 300,000 troops overseas, many of which are not involved in the wars. Given all of that, it seems reasonable that we could cut back or stabilize the Navy; we don’t need to rush ahead pell-mell with a new fighter plane program. If we cut back on troops overseas, we would cut back also on military bases and other supporting services.

In the Sustainable Defense Task Force report, we looked at a number of items in the procurement budget. In terms of the cuts proposed, I believe that a determined administration could win these battles. There are a lot of weapons systems in this current budget that aren’t related to the wars we’re fighting, that don’t seem to relate to threats we face in the future, and that therefore are ripe to be eliminated in any new budget plan. The Joint Strike Fighter, the Expedi-tionary Fighting Vehicle (which is supposed to help do marine landings we haven’t done in 50 years or more), and the Trident Submarine ($6 billion a copy) could easily be canceled.

I think ultimately, we’re going to have to limit missions, and that the most important limit is what Larry mentioned: not fighting wars of counterinsurgency, not fighting wars of occupation. That also would have a whole different effect on the trajectory of military spending.

Heather Hurlburt
I want to circle back to where Linda started, with a slightly different view, to ask what the current military budget buys us from a political standpoint.

First, a bipartisan bet is being placed that we can use our military (and endlessly expanding military spending) to avoid coming to terms with a world that is complex and driven by globalized economics. This is in either the hope or the appearance that with hardware we can buy what we can’t deliver for ourselves through global markets.

Second, the bet ties into the notion that we can use the military to hold the clock back, allowing us to retain the virtues of our continental isolation and our post-World War II military and economic preeminence.

Third, our military budget represents a hedge, used at various times by both political parties, that defense spending is perceived by the public and the media as a symbol for seriousness about public security. I think many of us on the progressive end of things thought that we had defeated that demon in the ’06 and ’08 election cycles. The bad news is, like the character in Halloween, it’s back.

To that end, the Pentagon and Congress have bound themselves together in a codependent relationship with soldiers’ pay and benefits as just one excellent example. The Pentagon sends its annual budget to Congress with a pay rate increase. Then Congress increases pay, goes back and says, “We’re taking care of the troops. My opponent over there, whoever he or she is, is not taking care of the troops.” Our task force actually did include some suggestions about slowing the rate of increase. I must say, the most bipartisan reaction to the report has been was running away from it.

Having laid all that out as a set of bad news, there is actually some good news on the political front. Three critiques are relevant.

One is what I’ll call the Sieve Mill Balance Critique, which is simply that we have one very expensive hammer in the Pentagon, and we’ve made the whole world into a nail. We’ve chronically under-resourced state, USAID, Treas-ury, all of our implements of national power that don’t involve guns. That, then, becomes an argument for shifting resources, and in some cases, a net cost-saving argument.

Second is a more technocratic critique: the Pentagon is spending money on the wrong things, on expensive toys it doesn’t need. Similarly, the debate over the romance of high-tech continues. This is where the administration has actually scored a couple of modest but significant wins, ending programs that bipartisan forces of reason had been trying to end, in some cases for a decade or more. The technocratic critique has more attraction that it has ever had, I think.

Third, there’s the broader economic critique, that the fundamental source of our military strength is our economic strength. Ultimately, you can’t have a strong military sitting on top of a bankrupt country. A number of people who want to affiliate themselves with the Tea Party are also taking up this critique.

There are a couple of recommendations. One is that there has to be a real willingness to be politically confrontational on this issue in order to take on the military budget and still seem serious about national security. The other is that we need a new language of cost in which to articulate the trade-offs between economic and strategic costs.