Wednesday, August 17, 2005

Dollars and Cents

The paper, US Defense Strategy After Saddam authored by Dr. Michael O'Hanlon of the Army War College's Strategic Studies Institute examines how the War on Terror will affect US military expenditures in the coming years. (Hat tip: MIG) O'Hanlon, a Senior Fellow at Brookings, makes a number of surprising points in his analysis. The first is that military expenditures will be lower, as a percentage of GNP, than at any time in the past. On page 8 of his paper, O'Hanlon gives the following figures from the Office of Management  and Budget.

Decade Percent of GNP
1960s 10.7
1970s 5.9
1980s 5.8
1990s 4.1
2000-2009 (projected) 3.4

However, the size of the military budget in absolute terms will continue to be huge because the American economy itself is so gigantic. O'Hanlon puts it this way:

America’s defense budget is staggeringly high. Depending on how one estimates the spending of countries such as China and  Russia, U.S. defense spending almost equals that of the rest of the world combined. In 2002, prior to additional U.S. budget increases as well as the added costs of the war in Iraq, American defense spending equaled that of all the rest of the North Atlantic Treaty Organization (NATO), Russia, China, and Japan, combined. That said, judging whether U.S. defense spending is high or low depends on the measure. Compared with other countries, it is obviously enormous ... Relative to the size of the American economy, by contrast, it remains modest by modern historical standards at about 4 percent of GDP (half of typical Cold War levels, though nearly twice the current average of most of its major allies). Compared with Cold War norms, it is high in inflation-adjusted or constant dollars, though not astronomically so.

Although Defense is spending more dollars, it has not greatly expanded  in numbers of personnel. "Still, one might ask why an active duty military of the same size as the Clinton administration’s has grown in cost by more $100 billion a year during the Bush presidency". The answer is surprising. Examining the 2005 budget request O'Hanlon found that "even adding up all these pieces, less than 20 percent of the $100 billion real-dollar growth in the annual Pentagon budget is due to the direct effects of the war on terror." Twenty seven percent of the requested increases were for higher salaries for military personnel, reflecting the need to retain personnel who might be lost to the service. Much of the rest was required to "to restore funding for hardware to historic norms after a 'procurement holiday' in the 1990s". Most of the pressure comes from "the main combat systems of the military services, which are generally wearing out. Living off the fruits of the Reagan military buildup, the Clinton administration spent an average of $50 billion a year on equipment, only about 15 percent of the defense budget in contrast to a historical norm of about 25 percent. This 'procurement holiday' must end, and is ending."

However, spending more money on the same number of troops was not enough. The War on Terror required adding men to the ground forces and more money had to be found to support them. The uncertain duration and progress of operations in Iraq and Afghanistan and the possibility of action elsewhere meant that unanticipated expenses might occur. The Congressional Budget Office believed it possible that a 17% real increase in the Defense budget might be necessary to fight the War on Terror, threatening to push the military share of GNP back to its 1990s levels.

Expectations are for continued annual increases of about $20 billion a year -- roughly twice what is needed to compensate for the effects of inflation (or to put it differently, real budgets are expected to keep rising at about $10 billion a year). By 2009, the annual national security budget would total about $500 billion, in rough numbers -- about $450 billion when expressed in 2005 dollars. Indeed, given the administration’s plans, that is a conservative estimate of what its future defense program would cost the country (not even including any added costs from future military operations or the ongoing missions in Iraq and Afghanistan). The Congressional Budget Office estimates that, to fully fund the Pentagon’s current plans, average annual costs from 2010 through 2020 would exceed $480 billion (in 2005 dollars) and perhaps as much as $530 billion.

Dollars and cents provide part of the framework in which to examine strategic options. It's all very well to say "there are not enough troops in Iraq" or "we must teach Syria a lesson" or "we must continue to deter North Korea". But in the final analysis, the means to these proposed ends must be provided or the goals themselves adjusted to the resources at hand.

31 Comments:

Blogger Doug said...

Members of Both parties in Congress Spend Billions more than ever before in history for PORK.
"Conservative" president signs the bill.
"Liberals" complain about the cost of the primary guarantor of freedom, our Military, even though as a percentage of the federal budget, it must be near all time historic lows.
---
Anybody got that percentage of the *federal budget* number?

8/17/2005 02:47:00 AM  
Blogger Doug said...

Given the relatively low cost of a successful mass terror attack, comparisons of relative military budget amounts become less useful.

How to calculate, for instance, the potential lethality of the graduates of the Madrasas in relation to the amount of "military investment" by the Saudis?

8/17/2005 03:04:00 AM  
Blogger Subsunk said...

Wretchard,

This is exactly what I witnessed in 1996 - 97. As a member of the DoD staff at that time, I had friends who were involved in the Quadrennial Defense Review for 1997. They were members of the Joint Staff. They analyzed our needs and requirements based on 2 major regional conflicts (MRCs) -- think Iraq and North Korea simultaneously, although Iran was also one of the three primary threat listed at that time.

Their attitude was one that required they recognize that we were only going to get so much funding and that asking for the moon would get us nothing extra. Military Officers and bureaucrats understand that you must work with what you can afford, not with what you need to cover every eventuality.

So we ended up with an all volunteer military in which 51% of the combat arms capability resided in the Reserves and National Guard. Folks who believe we can throw more troops at the War in Iraq are not looking at the available manpower. Doubling the size of the troop commitment in Iraq would negate the excellent retention figures we are seeing and would lead to a mass exodus of trained soldiers over the next 3 yrs. Recruiting will never make up this difference because there aren't enough men of the correct age in our country to meet the doubling billet requirements without drafting them. At historical recruiting percentages, the bodies just aren't there in the "baby bust". We knew this in 1990 because we looked at the pool then and started taking action to improve the armed forces image then. It worked, but who knew we would need twice the size of the Army we have today.

So again, anyone who thinks we can just conjure up an additional 100,000 men in uniform from a manpower base that can't support that number, is either the Sorceror's Apprentice or is a fool and a charlatan.

My friends on the 97 QDR regaled me frequently with stories on the average age of a truck in the US Army and Marine Corps in those days. It was over 28 yrs old (average). That means we were using trucks from 1950 and older to run our operations. Buying trucks wasn't sexy. So we need the money now just to get to where our airline industry would be with 20 yr old aircraft.

O'Hanlon seems to have done a good job. Is there pork which could be eliminated -- sure. Are there efficiencies we could use to lessen the waste and improve our readiness -- sure. But in any organization where a million men and women work together, there are a million different ideas about what is efficient and what works. I think we are as good as we are ever going to get. A certain amount of waste is just part of the friction inherent in huge enterprises every day. And since one man is not truly in charge of this (Congressmen and politicians and the media influence things all the time), we will never get more efficient than we are now -- in wartime. Combat focuses the mind and the efforts of military men faster and more precisely than anything else in this world.

Our military is cheap at twice the price. Our success depends only on refuting the propaganda provided by ex-military pundits and media leftists who seek support for their politics and their pet projects. And that gets men killed on the battlefield due to "fog of political maneuvering".

We should carry on and quit whining about not enough troops and not enough money. If we really want to do this cheap, then nuke the entire Middle East, eliminate every body in the place and our problems would be over -- cheap. No takers???? I thought so. Maybe cheap and easy isn't what we really want anyway.

Subsunk

8/17/2005 07:45:00 AM  
Blogger Evan said...

Doug, I think pork is the least of our fiscal problems. One looming problem in my judgment, which impacts not just the military but all arenas of government, is the rising burden of the welfare state. State health and pension spending will be crowding out all kinds of activities in the coming years, and various defense options will undoubtedly be among them. Europe is in even worse shape, essentially exhausted by entitlements, but that is no consolation.

8/17/2005 07:50:00 AM  
Blogger Fernand_Braudel said...

I would vote for nerve-gas. I don't want radioactive gas running in my car.

8/17/2005 07:54:00 AM  
Blogger Cardozo Bozo said...

... or we could "outsource" the security the way we have chip design and manufacturing. China has a greater interest in a stable N. Korea than we do. Both India and China have a strong interest in a stable, oil & gas-exporting Iran.

Why we haven't put the screws to China and India on these matters I don't understand. I hope there's good reason, but letting the six-party talks lead to no where and letting Iran build that gas line to India without asking for anything in return seems a bit crazy. Why are we wasting these opportunities?

We have the fire-power to overturn anthills anywhere in the world. China and India have the manpower to manage the aftermath that we don't. Both India and China would benefit from a more stable security environment. The only explanation I have for why we haven't put two and two together is a lack of imagination on our part, or a lack on faith on their part.

There are imaginative solutions, if we look outside the USA. Britain, Australia, etc. helped us out in Iraq, but we need more than that to un-do the rest of the Axis of Evil.

8/17/2005 09:55:00 AM  
Blogger The Machinist said...

As for the 100,000 new men, it is hard to believe they don't exist to be inducted. Now, we don;t want a draft for all the usual reasons, but:

{conspiracy}
what if the economy tanks, or at least declines, or at least has unemployment rise? Right now economic figures are very good. What if they were to worsen? How many bodies would a 6% unemployment rate free up vs. the current 5%?
{/conspiracy}

Tough to do more than we're doing. But of course Visions 2020 prepared us for scenarios with a drawn-down military. I don;t remember, do we always win? ;>

8/17/2005 10:32:00 AM  
Blogger Red River said...

Larry Niven posited a "Co-Dominion" agreement between the superpowers to control anarchy around the world.

8/17/2005 10:34:00 AM  
Blogger Cutler said...

This comment has been removed by a blog administrator.

8/17/2005 11:38:00 AM  
Blogger Cutler said...

The time to increase the size of the military was in the immediate aftermath of 9-11. Less strong economy, increased patriotism, and increased sense of urgency. We gambled and lost on that bet.

Even more, however, it is necessary to better prepare the military for the operations it faces, rather than dreaming about huge clashes with China, who we should keep an eye on, but are not yet in our weight class. More civil affairs, MP, etc.

Also moving reserve components back into the active force, the powell and weinberger doctrines are a failure for the world we face. Being unable to fight low intensity wars without calling up reserves is unacceptable, even if there were understandable reasons for the force structure, i.e. avoid protracted and politically difficult efforts complicated by partisan bickering and political opportunism. Tough, the Army doesn't make policy, it carries it out, unpopular or not.

8/17/2005 11:43:00 AM  
Blogger al fin said...

The draft is a non-starter, kept alive by nincompoop democrat strategists who try repeatedly to use it against the american President Bush, but keep getting stung by their own efforts.

The Clinton era destruction of the military and intelligence communities has dire reverberations through the present and into the future. What idiots.

The only way now to enlarge the combat force of the military is through a "foreign legion" style force, fighting under an american flag and populated by foreign nationals. The ancient romans made it work.

8/17/2005 12:06:00 PM  
Blogger exhelodrvr said...

Cutler,
As far as "better preparing the military" with more MPs, civil affairs, etc. I think that would fall into the "fighting the last war" paradigm, with the "the last war" being the post-OIF period. We don't want to significantly restructure our military based on post-OIF, we want to try and anticipate the future, and aim the structure of the military towards that. I don't see us doing another major "nation-building" scenario in the near future.

8/17/2005 12:49:00 PM  
Blogger Cedarford said...

We have massive deficits due to new Bush entitlements, corporate and Congressional pork, and tax cuts for the wealthy.

All while we are diverting military dollars into "bells and whistles" inducements desperately aed at recruiting or keeping the volunteer military forces in the military. When Bush has to decide between new tankers or warplanes or new gov't goodies for wealthy businessmen who peel out big bucks for the Party - it's no contest.

al fin and others blaming Clinton conveniently overlook most of the cuts in military programs are by the folks behind Bush I and Bush II. And don't assume the Draft is forever off the table. It existed all through the Cold War, and did so because the low-paying military with no hot war fervor stimulating volunteer enlistments needed it.

China's military is rising. And we have people that say we cannot afford any new Naval ship, have to have a radically shrinking AF with most new weapons systems cancelled, and an Army and Marines that just goes with existing inventory of artillery and armor so we can offer 100,000 dollar recruiting incentives for E-1 privates.

At a time of China building it's forces like crazy with it's hundreds of billions in WalMart dollars, we have BRAC. Demilitarizing the Northeast and Midwest, plus most of the West Coast, to minimize impact on Bush's Southern Bastion that loves their military pork. Stripping half the air national guard of warplanes. Disconnecting 60% of the population from any military presence in their regions. While of course relying on them to volunteer for the military.

It will take a President of vision to reverse the damage of Bush I, Clinton, and Bush II to our military readiness.

8/17/2005 01:39:00 PM  
Blogger Cutler said...

"As far as "better preparing the military" with more MPs, civil affairs, etc. I think that would fall into the "fighting the last war" paradigm, with the "the last war" being the post-OIF period. We don't want to significantly restructure our military based on post-OIF, we want to try and anticipate the future, and aim the structure of the military towards that. I don't see us doing another major "nation-building" scenario in the near future."

I recognize your point, exhelo, and of course we shouldn't recklessly restructure the force, thereby tempting open competition, but at the moment our enemies can't muster the conventional forces to stand up to us, and they won't for some time. We're too far ahead and we spend enough so that we can remain ahead, and still better prepare for "Operations Other Than War".

8/17/2005 03:31:00 PM  
Blogger desert rat said...

Pick a land contest where we would not fight, grab and hold.
Iran's oil fields?
The KSA's oil fields?
Venezuelan oil fields?

You advocate an Air assault against over 300 targets in Iran, aristides, the Battle of Mesopotamia will have just BEGUN the day the first of those strikes occur.

At least Newt taught history, more than can be said for Ms Clinton

8/17/2005 03:33:00 PM  
Blogger Cutler said...

Was that on the wrong thread Desert?

8/17/2005 05:42:00 PM  
Blogger Buddy Larsen said...

C4, if you write "walmart dollars" one more time, I'm going to find you and kill you.

8/17/2005 06:01:00 PM  
Blogger Doug said...

Buddy,
How 'bout
"Tax Cuts for the Wealthy?"

8/17/2005 06:25:00 PM  
Blogger Doug said...

But I agree totally w/Evan and parts of C4, namely:
" Disconnecting 60% of the population from any military presence in their regions. While of course relying on them to volunteer for the military."
---
...a "CONSERVATIVE" administration that keeps on adding welfare bennies like free Meds for folks, including Viagra, while DOWNSIZING the military to save a fraction of the dollars being promised in the future for bennies.
Don't take an accounting genie to figure out sumpin don't add up.

8/17/2005 06:28:00 PM  
Blogger Doug said...

Sure wish someone would look up a graph of Defense v Total Govt Budgets (Local, State, Fed).
If this keeps up, I'll have to find it myself...
...like anybuddee says:
Why should we have to do that?

8/17/2005 06:31:00 PM  
Blogger Cedarford said...

Uh, Buddy - how else do you think they are paying hard dollars for their Russian Submarines, whole Russian SRBM missile factories, Sukoi-30s, and purloined US defense technology from Israel?

It's not like they are getting the hundreds of billions by borrowing it from the US, buddy!

No, its Walmart bucks and Sears bucks and HomeDepot bucks....

8/17/2005 08:10:00 PM  
Blogger Robert Schwartz said...

The budget deficit is a non-issue. Hop over to Steve Connover's blog, The Skeptical Optimist. Nonetheless, I disagree with the administration from the right. I think we need to up military spending dramatically, with less emphasis on toys and more emphasis on people.

Increasing the Army/Marines by at least 100,000 active duty is a minimum. I realize that recruiting can be tough in the current environment. Conscription is, however, a non-starter. We invest way too much in training soldiers to lose them after a short hitch.

We need to increase signing bonuses. In addition we should use the opportunity to eliminate free college tuition from the federal budget. The price of college tuition should be service. A year of active duty for a year of tuition sounds fair to me. Maybe three or four years in the Guard/Reserves as an alternative.

We need to fund this expenditure. I think a $3/gal gas tax increase would be perfect. (Stop whining and replace your damn Suburban with a Subaru). It should produce $200-300*10^9/yr. It would cut the deficit and pay for the ramp up.

8/17/2005 08:12:00 PM  
Blogger Podman4 said...

This comment has been removed by a blog administrator.

8/17/2005 08:12:00 PM  
Blogger Podman4 said...

Doug, Clearly since the percentage of GDP spent on defense has been falling as tax receipts as a percent of GDP have been rising the share of defense expenditures as a percent of federal outlays has been falling. Here are some indicative OMB numbers (percent is percentage of federal budget spent on national defense):
1960: 52.2%
1970: 41.8%
1980: 22.7%
1985: 26.7% (Gotta love RR)
1990: 23.9%
1995: 17.9%
2000: 16.5%
2002: 17.3%
2004: 19.6% (est)

I too would like Bush to impose some restraint on Congress. Has he even vetoed anyhting yet?

I don't know how to hyperlink it, but here's the URL to the OMB spreadsheet I got the numbers from:

http://www.whitehouse.gov/omb/budget/fy2005/sheets/hist03z1.xls

8/17/2005 08:24:00 PM  
Blogger Podman4 said...

Cedar,

You should get your facts straight on recruiting. Marine Corps, Air Force and Navy recruiting are all hitting their targets. It's only Army that is having shortfalls and they are working on that.

Moreover, you say that we are desperately trying to keep people in the military. That's not true as well. Retention is at higher levels than normal, particularly in the combat zones.

I do think the wars are having an adverse effect on the Guard and Reserve units, however, and this is a cause for concern, particularly if they keep getting rotated back in.

One thing to keep in mind is that all wars are very hard on a country's military. It's a truism and our military knows this.

8/17/2005 08:38:00 PM  
Blogger Buddy Larsen said...

FDR himself, in the spirit of candor, allowed the publishing of photos of battlefield KIA Marines on Tarawa in the Gilberts in 1943. Marine recruitment numbers dropped off precipitously as one result. And this was the WWII generation, fighting a dangerous threat to the nation, in a year wherein the war could still go either way. Marines didn't mind--the effect was of course a rising battlefield effectiveness.

C4, okay, now that you you added Sears and Home Depot, it's okay to imply we're getting the shaft, consuming all those high-quality, low-price consumer soft goods, durables, non-durables, and discretionery goods that that raise our standard of living and maintain a low-inflation economy even despite the vast liquidity available. Our boom, their boom, too bad they're buying boom-booms.

8/17/2005 10:36:00 PM  
Blogger Doug said...

podman4,
Thanks, exactly what everyone should see!
The 60's Democrats still like to pretend that every dollar spent on defense is a dollar wasted.
...and even some Republicans, too, but they sure don't mind SPENDING your money.

8/18/2005 04:55:00 AM  
Blogger Doug said...

Robert Schwarz,
But, but,
if we got rid of our SUV's, there would be no more gas crisis to whine about.
(for a few more years, at least.)

8/18/2005 05:07:00 AM  
Blogger exhelodrvr said...

Cutler,
"but at the moment our enemies can't muster the conventional forces to stand up to us, and they won't for some time"
If you consider China an enemy, or at least a potential enemy, then I disagree with you. They could give us a run for our money right now over Taiwan (considering our commitments elsewhere) if they wanted to, and in another 10 years?

8/18/2005 08:07:00 AM  
Blogger Tibor said...

Remember Ben & Jerry's had a program called "1% for Peace" under which they donated 1% of all profits to "peace" charities? I propose that the US defense budget be memorialized as "5% For Peace (Through Strength)." A nation this rich and this willing to shoulder the burden of being the defender of the world's freedoms, should institutionalize the notion of allocating appropriate resources to the defense of liberty against tyranny (Islamofascism, Chinese Capitommulism or otherwise). This will involve expanding the military, rearming for the coming fights and spreading democracy (all while defending ourselves at home). To my mind, this is not too much of a burden to bear.

(Crossposted on my blog (incompetenttibor.blogspot.com)

8/18/2005 11:39:00 AM  
Blogger Cutler said...

"but at the moment our enemies can't muster the conventional forces to stand up to us, and they won't for some time"
If you consider China an enemy, or at least a potential enemy, then I disagree with you. They could give us a run for our money right now over Taiwan (considering our commitments elsewhere) if they wanted to, and in another 10 years?"


I'm still hoping we can wind up dealing with them as a relatively rational foe, but you're right, they're our biggest problem.

However, I always keep in mind the fact they haven't won a naval battle in 4 centuries, have no experience with serious air campaigns, and have very little war experience overall - the best example having their asses handed to them by the North Vietnamese.

This is going to seem like an unusual statement, but I'd rather fight a naval and air battle with the Chinese, backed up potentially by the Japanese and Taiwanese, than fight ground wars in the Middle East. To turn the Bradley quote on its head, I think that's the right war, at the right time, with the right enemy. We can do massed firepower against visible enemies.

*Puts hands in front* Take me to the mental institution if you wish.

8/18/2005 12:06:00 PM  

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