Why We Spend What We Spend

Tuesday, March 29, 2011

Two bedrock beliefs of traditional conservatism are fiscal discipline and strong national defense. Likewise, two general rules of budgetary reform in times of economic crisis are, first, to scale back expenditures rather than raise taxes, and, second, to look at defense for some of the deepest cuts. Something therefore will have to give.

In the past two years the United States has piled up record $1.3 trillion annual budget deficits. That red ink has pushed the national debt beyond $14 trillion, approaching 98 percent of the nation’s gross domestic product, a peacetime record. Worse still, there is no end in sight to this massive borrowing. Trillion-dollar budget deficits are scheduled at least through 2014 and will take our national debt beyond $18 trillion. Washington is being chastised as profligate by everyone from Germany to China, which worries about the solvency of its massive surplus dollar accounts.

No wonder, then, that the quest for fiscal sanity became the signature of the tea party movement and fueled the recent Republican political renaissance. Amid the talk of across-the-board budget freezes, radical entitlement reform, and elimination of entire programs, is it fair to spare defense from the anticipated cuts?

At first glance, clearly no. After all, the United States budgeted $680 billion for defense this past year—slated to rise to $712 billion for fiscal year 2011—and well over $1 trillion when you include defense-related expenses that are not counted in the official Pentagon budget. Depending on how one categorizes the figures, defense spending now represents more than 19 percent of the federal budget and is nearing 5 percent of the nation’s GDP. Over the past nine years, the Pentagon’s budget has grown on average about 9 percent each year, more than triple the rate of inflation—apart from the supplementary spending on the Afghanistan and Iraq wars.

Amid across-the-board spending freezes, radical entitlement reform, and elimination of entire programs, is it fair to spare defense from the ax?

Indeed, America now accounts for about 40 percent of the world’s military spending. That is six times as much as its supposed chief rival, China. And when America’s defense expenditure is added to the military budgets of Europe, as well as those of Australia, Canada, Japan, South Korea, and other allies, the Western alliance accounts for nearly three-fourths of all global outlay on defense. Why can’t fiscal conservatives at least freeze Pentagon spending in an era of near–financial collapse?

In addition, arms alone are not always enough to foster national security and global influence. China, with an economy one-third the size of ours and a military budget one-sixth the size of ours, is increasing its profile in Africa and Latin America and is insidiously reminding Japan, the Philippines, South Korea, and Taiwan that the time is approaching when a near-bankrupt United States either cannot or will not support them in times of existential crisis. Flush with nearly $2.5 trillion in cash reserves (the result of huge ongoing trade surpluses and budgetary discipline), China reminds both neutrals and rivals that it has plenty of money to buy, bribe, or persuade its way with nations—and will have even more in the years ahead, even as its chief rival, the United States, will have less.

In Washington, meanwhile, the Democratic White House and Senate are most likely to compromise on budget cuts if defense-spending freezes or reductions are on the table—concessions that might both preclude increases in income-tax rates and facilitate reductions in general social spending. After all, most government bureaucracies have plenty of waste, the Pentagon included—especially in a period of rapid expansion that saw the military budget double in less than ten years and consume $1 trillion in aggregate budget increases above the rate of inflation.


Yet there are also compelling reasons not to cut defense, and these are rarely discussed. The United States has an alarming record of courting danger when it has slashed defense, or even been merely perceived abroad to be pruning its military. In the 1930s the Germans and Japanese did not take the United States seriously as a deterrent power, and understandably so: it was not until 1943—after tens of thousands of American deaths—that the United States finally deployed planes, armor, and ships that were roughly equal in numbers and quality to those of its Axis enemies.

China reminds both neutrals and rivals that it has plenty of money to buy, bribe, or persuade its way around the world—and will have even more in the years ahead.

After World War II ended, America demobilized and returned to its parsimonious military ways. The result: by August 1950 an outnumbered and outclassed U.S. Army in South Korea was confined to the tiny Pusan perimeter. For the first six months of hard fighting in Korea, the military’s obsolete tanks, antitank weapons, and planes proved no match for Soviet-supplied T-34 tanks and MiG-15 jets.

Three decades later, in April 1980, post–Vietnam War budget cuts were the subtext of the humiliating failed mission (Operation Eagle Claw) to rescue American hostages from revolutionary Iran. And the post–Cold War defense cuts of the 1990s may have made it far more difficult to pursue terrorists or fight in Iraq and Afghanistan in the new millennium. As Rudyard Kipling wrote in his poem “Tommy,” the public demands a superb wartime military as much as it neglects it in peacetime: “For it’s Tommy this, an’ Tommy that, an’ ‘Chuck him out, the brute!’ / But it’s ‘Saviour of ’is country’ when the guns begin to shoot.”

At present, the world is not tranquil. At least a half dozen countries, including Iran, North Korea, and Venezuela, have ratcheted up their bellicose rhetoric, spurned U.S. efforts at outreach, and either threatened or harassed their neighbors. Our future relations with China, Syria, and Turkey are at best problematic. Soon-to-be-nuclear Iran may start a new strategic-arms race in the Middle East, as Sunni Arab states seek to deter the Shiite Persian hegemon. Potentially more frightening are the increasing tensions between Japan and both China and Russia that stem from territorial disputes over islands near the Japanese mainland. It is almost a given that anytime the postwar United States cuts its military or tires of its global deterrent role, it will soon rue the effort and pay for its laxity with blood and treasure.

Also, the United States military keeps international peace in many quiet ways that transcend its more overt efforts to rid the world of assorted thugs, genocidal dictators, and terrorist sponsors such as Saddam Hussein, Slobodan Milosevic, Manuel Noriega, and the Taliban. NATO, which would be impossible without the United States, cools a number of traditional hot spots like Cyprus, the Aegean Sea between Greece and Turkey, and the historically vulnerable eastern European borderlands that abut Russia. The U.S. military hunts down Al-Qaeda from the Horn of Africa to South America, fights Somalian pirates, organizes tsunami relief in Indonesia, facilitates aid to earthquake-stricken Haiti, and keeps sea lanes open from the China Sea to the Persian Gulf. These costly deterrent and humanitarian efforts save lives and build goodwill—and many of them either would not occur or would be taken up by less-conciliatory powers should the United States cut back its military budget.

Much of the Pentagon budget is well spent on military personnel—at least $150 billion—including college education and vocational training. After twenty years as a professor in the California State University system, I can attest that returning military veterans were more mature and responsible in general, and were better-motivated students, than my average undergraduates, who often expanded their college experience to six or eight years of intermittent study. In short, the military was able to train twenty-year-old signalmen on aircraft-carrier decks to park $150 million jet fighters wingtip to wingtip safely, in contrast to the college students who zoom through campus parking lots.

Moreover, the United States is currently spending on defense (at least on average) one point of GDP less than during the Cold War in the 1980s—which ended with the implosion of a Soviet Union that simply could not produce a technologically sophisticated and disciplined military commensurate with America’s re-equipped and expanded armed forces. When the George W. Bush administration entered office, the United States was spending only about 3 percent of GDP on defense, a historic low, and the figure did not exceed 4 percent until the latter half of Bush’s second term. In other words, in terms of the overall economy, the present military budget is not historically high.

What is more, the U.S. military is billions of dollars behind in repairing or replacing equipment worn out by years of fighting in Afghanistan and Iraq and by its increased responsibilities in the war on terror. Indeed, we sometimes forget that we are in a global conflict with radical Islamists who most recently have attempted to kill thousands of Americans in the New York subway system, in Times Square, and on both passenger and cargo planes.

The failures of these planned operations are attributable in part to stepped-up military intelligence, the elimination of thousands of terrorists in Afghanistan and Iraq, and the ongoing targeting of terrorists by drone attacks in the badlands of Pakistan, Somalia, Sudan, and Yemen. But this does not show that conventional weapons are unnecessary. As personnel costs and the prices of weapons systems skyrocket, we are forced to buy fewer planes and vehicles. Those economies increase both the per-unit cost of acquisition and the hours of usage per asset. The result, for example, is that in just twenty years the Air Force has gone from deploying more than four thousand fighter aircraft to scarcely fifteen hundred. That means fewer and more costly planes than ever before, and more wear and tear on those the military can afford.


Of course it is salutary to review carefully all Pentagon expenditures, and to make sure we are not purchasing assets or fielding forces that we do not need, or that are not in line with our strategic goals and responsibilities. But we should also remember that near the end of the Cold War, in 1988, income taxes were lower (28 percent on top brackets), budget deficits were smaller (3 percent of GDP), and defense expenditures were proportionally greater (5.8 percent of GDP) than they are now—reminding us that the present budget meltdown reflects particular policies and priorities that transcend both tax rates and defense spending.

The present military budget is not historically high.

In the end, the problem of national security in a time of budget restraint is not so much about defense spending per se; instead it lies in two other areas. First, we must establish our global responsibilities in the context of our fiscal limitations and fund our military to fulfill the ensuing obligations. At present, defense spending is increasingly out of sync with any clear and understandable strategic mission. Second, we must allow the economy to grow. Our defense capability improved radically in the past thirty years without a great leap in expenditures as a percentage of GDP, simply because GDP grew at such a rapid clip. But unless we continue to expand the pie, there will be fights over the size of the slices. A healthy economy is the best national security measure of all.