Spending Cuts and National Security
An op-ed by Peter Singer and Michael O’Hanlon in today’s Politico questions the impact of spending cuts on the military. “Substantial defense budget cuts are possible, make no mistake,” the Brookings’ scholars concede, “But they could mean loss of capability, and some may increase security risks.”
Another Brookings scholar, Robert Kagan, is more emphatic, telling Jennifer Rubin of the Washington Post that “[The proposed cuts are] utterly irresponsible and dangerous to national security.” Max Boot agrees. Cuts of up to $1 trillion over the next 10 years “would be nothing short of a disaster.” Lawmakers who are considering such cuts, Boot claims, “are flirting with eviscerating American combat capabilities — and with it the role of the United States in world affairs.” AEI’s Tom Donnelly wails: “Nobody has defense as a high priority. It’s increasingly looking like everybody wants to toss the military overboard.”
Wow. Sounds scary. What is actually going on here?
For starters, the military’s budget has still not been cut. As I noted yesterday at the National Interest‘s “The Skeptics”:
The Department of Defense has enjoyed an unbroken streak of rising budgets since 1998. In real, inflation-adjusted terms, U.S. taxpayers now spend more on national security than at any time since the end of World War II. An effort led by South Carolina Republican Mick Mulvaney to hold the DoD base budget to last year’s levels failed. Mulvaney’s amendment, which would have cut $17 billion from the budget voted out of committee, attracted support from more than a quarter of the House GOP caucus, but was ultimately defeated. So the DoD base budget that emerged from the House continues its growth.
Second, the various proposed cuts to future spending are just that: proposed. As with everything else associated with the debt negotations, the details matter a lot. The cuts might never materialize; future Congresses might simply renege on deals made this summer. More importantly, in nearly every case, they aren’t actual cuts. They are projections based against certain assumptions about future spending. And depending on inflation, the growth of the economy, and a host of other factors, those assumptions will change.
How Much Defense Acquisition Waste Is Enough?
Stories in DoD Buzz and the Christian Science Monitor this week cover a new Center for Strategic and Budgetary Assessment report on the Pentagon’s 2012 budget request. Both articles focus on the insightful section of the report explaining how the post 9-11 defense spending explosion has barely increased our war-fighting capacity. Unfortunately, both echo the report’s claim that all money spent on cancelled programs is money wasted and an indictment of the Pentagon acquisition system (page 36 and 37).
Here’s how the Monitor put it:
The new spending involves considerable waste, the report says. The Pentagon has spent nearly $50 billion since the 9/11 attacks on weapons systems that it never used due to technological failures or cost overruns, according to the study.
“These are weapons systems that have been started and then canceled without using any of them – we never saw one system fielded as a result of these programs,” says Todd Harrison, defense budget studies senior fellow with CSBA. “We can’t keep starting programs that are unrealistic and unaffordable and getting them canceled without getting anything out of it.”
In some ways, that complaint is sound. At least some of these programs suffered troubles made predictable by an acquisition process that often allows overly ambitious projects to break the bank. The Marines’ Expeditionary Fighting Vehicle is an example.
The main problem with this analysis is the implication that the correct acquisition failure rate is zero. Reward rarely comes without risk. Successful enterprises often fail. Apple failed with the Newton. Great base stealers often get thrown out.
Militaries are particularly prone to missteps because of their uncertain environment. Their business is competitive as can be, but the competitions (wars) are rare and thus hard to predict. Platforms last longer than enemies and cutting edge technology. This uncertainty means that programs should often be found wanting and cancelled. The question is not how to build an acquisition system that never fails but the right ratio of success to failure.
CSBA counts $46.4 billion in spending over the past decade on programs that got cancelled before procurement. That’s a big number. But it is a modest failure rate. It’s just 6.3 percent of total RDT&E (Research, Development, Testing and Evaluation) spending in the period, 2.4 percent of total acquisition spending (RDT&E plus procurement) and 2.7 percent of the Pentagon’s ongoing major acquisition programs. You could add percentage point or two in each category by including programs that got cancelled after we bought only a handful, like the DDG-1000 destroyer.
I don’t know what the perfect rate of failure is. But I see no reason why this one is unsustainable, as Harrison says. I actually suspect, for a couple reasons, that the numbers are too low; that the Pentagon should fail more.
First, bad programs often survive thanks to the iron triangle—services bureaucracies that want a new platform, contractors that make it, and Congressmen representing districts where they build. Cancellation shows that the political system can make choices serving the national interest at the expense of parochial ones. Parochialism usually wins.
Second, we foolishly limit competition that would increase cancellations. Our four services largely manage their own procurement, with oversight from feuding officials in two branches. This dispersal of power produces diverse solutions to military challenges. We also launch more acquisition programs than we can afford, encouraging low bids to hide costs that everyone knows are coming. Wealth encourages us to replace manpower with technology, increasing the need for innovation. The natural result of these forces is competition for survival among programs. Contrary to conventional wisdom, that competition is useful. It encourages program managers to outshine rivals on cost and capability.
Rather than harvest this creative destruction, we suppress it. The Pentagon’s culture of jointness quiets public fights where program managers attack rival programs. Fixed budget shares encourage them to cover procurement shortfalls by growing the entire pie, rather than competing. Ever-increasing defense budgets delay reckoning. Embracing competition would produce more innovation and more cancelled programs, which CSBA would call waste.
* Cross-posted on National Defense Magazine‘s blog.
Gauging the Mood of Congress on Military Spending
Amidst the wrangling over a debt deal between the White House and Congress, the most interesting movement pertains to military spending. Several reports today suggest that up to $700 billion in military spending cuts is under consideration, which would amount to a bit more than 10 percent less than current projections over the next 10 years. A more realistic bottom line might be $300 billion, which could be achieved by allowing the budget to grow at the rate of inflation (in other words, no real cuts in spending).
As always, the devil is in the details. From what baseline? Over what time period? Would the cuts apply only to the base DoD budget, or all national security spending, including the costs of the wars, as well as the budgets for the Departments of Homeland Security and Veterans Affairs? Most important is timing. If the savings are all backloaded in the out years, they may never materialize. Today’s budgets project spending out five or 10 years, and the “savings” really just amount to a new set of projections against that baseline. Plus, these agreements are rarely binding on future congresses; a different cast of characters will be responsible for passing DoD appropriations bills in 2018 or 2020.
One thing is clear, however. People here in Washington are now considering military spending cuts that they thought strategically unwise and politically impossible just a few years ago. And conservatives are joining in. South Carolina Republican Mick Mulvaney offered an amendment to the DoD budget appropriation bill that would have frozen spending at 2011 levels, a $17 billion cut below the amount voted out of committee. Meanwhile, three Democrats and three Republicans co-sponsored an amendment to cut the proposed increase in the FY 2012 budget in half, generating savings of $8.5 billion. The bad news for taxpayers is that both amendments failed. The good news is that some in the GOP are starting to match their rhetorical zeal for spending cuts with actual votes that do so; 43 Republicans voted for both measures. (h/t DSM)
It is no longer credible to declare military spending off limits in the search for savings, and most Americans understand that we can make significant cuts without undermining U.S. security (William Kristol being one of the predictable outliers).
I’ll hazard a prediction: I think that military spending in FY 2012 will be slightly less than President Obama initially requested, but still not less than will be spent in FY 2011 (in other words, they’re still only faking cuts).
To get real cuts, Washington is going to have to clear some things off the military’s plate. If we want a military that costs less, we have to ask it to do less. And I don’t see a lot of enthusiasm for that—yet. Starting a new war in Libya (and signaling that similar missions are in the military’s future) doesn’t help.
Perhaps the key will be to connect two seemingly disconnected dots: our subsidizing defense spending for other rich countries has allowed them to divert money to dubious social spending and a too-large public sector with too-generous pay and benefits. I don’t know how Republicans (or Democrats, for that matter) can go to their constituents and say they’re cutting popular programs here in the United States, and holding the line on the DoD’s budget, so that our European and East Asian allies can fend off cuts in their pensions and avoid taking responsibility for their own security.
For more, see the video after the jump.
Pawlenty Understands Incentives, Except When It Comes to Defense
Former Minnesota governor Tim Pawlenty’s brief visit to Cato yesterday elicited some snide commentary in the blogosphere, especially this piece by the Huffington Post’s Jon Ward. Ward notes how the just-declared presidential candidate has been pretty adept at annoying audiences with his answers to questions. This one rankled the questioner, and a number of others in the auditorium.
I’m not one who is going to stand before you and say we should cut the defense budget.
[...]
I’m not for shrinking America’s presence in the world. I’m for making sure that America remains the world leader, not becoming second or third or fourth in the list.
One can sort of forgive a governor for not knowing much about foreign policy, although governors who aspire to be president should probably know that the U.S. government could cut military spending in half and still spend more than our next two potential rivals, combined.
The average governor, however, should know that people don’t feel obligated to pay for things that you are willing to give them for free. And Pawlenty does understand this when it comes to domestic spending. Check out his comments about the difference between a cash bar and an open bar at a wedding reception, via the Daily Caller:
If people have the impression that things are free, and they get to consume it endlessly, and the provider has the only incentive to provide on volume, and the myth or the lie is created that the bill goes somewhere else and that a third party pays for it, that is a system that I can tell you is doomed to failure and inefficiency. And that’s much of our government, unfortunately.
But the same principle applies in military spending. Our European and East Asian allies are consumers of the security provided by the U.S. military, and all Americans are the third party payers. As my colleague Ben Friedman likes to say, we agree to defend our allies, and they agree to let us. We shouldn’t blame them for under-providing for their own defense; it’s our fault for agreeing to do it for them.
Cato President and Founder Ed Crane’s quick take on Pawlenty’s view on defense military spending is worth repeating:
There is a difference between military spending and defense spending. The Constitution provides for a military to defend the U.S—not to democratize the world. One would hope that presidential candidates would consider America’s commitments overseas very seriously before endorsing those commitments.
Cato scholars have been out in front for years making the case for a principled, constitutional view of “defense” that does not include defending others who can and should defend themselves. If we adopted a strategy of restraint, we could responsibly make significant cuts in military spending, deliver the savings to American taxpayers, and remain the safest and most secure country on the planet. Yesterday, Tim Pawlenty took the opposite tack. He argued that the U.S. military should continue to serve as the world’s policeman/armed social worker, allow other countries to free ride, and require U.S. taxpayers to foot the bill.
Although that might be popular elsewhere in Washington, I can’t imagine it will sell in Cedar Rapids, Iowa, or Manchester, New Hampshire.
Wednesday Links
- DON’T FORGET: Today at 2:00 p.m. Eastern at Cato, former Minnesota governor Tim Pawlenty will detail specific spending cuts Congress can make as it tries to rein in the size and scope of the federal government in “Limiting Government: What Washington Can Learn from Minnesota.” Tune in at our live events hub, or watch on Facebook.
- It’s not low taxes that caused the Greek crisis, but high spending.
- A new Internal Revenue Service account reporting rule would drive out foreign capital.
- A defense budget that does not force trade-offs assumes the United States can take on any mission, and that all are necessary.
- If the Affordable Care Act is so great, why are so many people seeking waivers?
Martin Feldstein on the Defense Budget
Martin Feldstein, a distinguished economist and a former colleague, made a surprising case for maintaining a large U.S. defense budget, despite a huge federal budget deficit, in the annual Irving Kristol lecture Tuesday night at the American Enterprise Institute.
On one point, he was clearly right: we can afford it. “There is no danger of bankrupting ourselves by so-called ‘imperial overreach’ when we spend less than 5 percent of GDP on defense” (in fact, 5.6 percent of GDP in 2010).
But he failed to make a convincing case that we should spend this much for defense, especially given the dire outlook for federal deficits and the debt. In 2010, U.S. real (inflation-corrected) spending for national security was over twice the annual spending during the Ford and Carter administrations and over 40 percent of total current world defense spending. What conditions, what national objectives, might justify continued U.S. defense spending of this or a higher magnitude?
Feldstein first plays the China card, arguing that “The United States should maintain a military capability such that no future generation of Chinese leaders will consider a military challenge to the United States or consider using military force to intimidate the United States or our allies,” maybe forgetting that a much weaker China successfully challenged us in Korea in the early 1950s. He next makes the case for the importance of a global military presence, arguing that “We have to make it clear by our budgets and by our actions that we are the global force now and will continue to be that in the future.” And finally, “we have to ask ourselves whether we have a moral obligation to defend our allies. …. There are those who say the United States should not be the global policeman. But if not us, who? As the only democratic superpower with the ability to defend and punish, do we not have a moral obligation to be willing to use that power?” All of this assumes without argument or evidence that it is important for the world to have a global policeman, that we can play this role effectively, and that it is a moral obligation for the United States to serve in this role.
The U.S. military had a central role in the most important strategic development since World War II — prevailing in the Cold War against the (former) Soviet Union. But it is critical to recognize that our military has not been very effective as a global policeman or nation builder. The Korean War ended in a draw, leaving a despotic communist government, now with nuclear weapons, in control of North Korea. After 20 years of a U.S. military presence, we abandoned Vietnam to a communist government that now controls most of southeast Asia. The U.S.-sponsored invasion of the Bay of Pigs was defeated, leaving a communist government in control of a large island 90 miles from Florida. U. S. forces have now been in Afghanistan for nearly 10 years without securing it from lightly armed local forces without significant external support. And U.S. forces have now been in Iraq for over eight years without securing it from frequent terrorist attacks.
I wonder what evidence Feldstein or anyone else would offer to support a view that the United States has a comparative advantage as the global policeman. Most of our allies can afford higher defense spending if our support is reduced. The total GDP of the European Union is higher than the U.S. GDP. The GDP of South Korea is many times that of North Korea. There is no obvious calamity that would result if the U.S. contribution to the collective defense with our allies were reduced.
Yes, we can afford a large defense budget, and national security is one of the few federal programs for which there is clear constitutional authority. But like the budgets for most other federal programs, the defense budget is too large. So a substantial reduction of the defense budget should be on the table in any serious effort to avoid a fiscal collapse, a threat that is more serious and more urgent than any that might be effectively countered by trying to maintain the role of a global policeman.
Monday Links
- Habeas corpus applies to anyone, citizen or not, in custody under American law, no matter what President Bush and President Obama decree.
- House Republicans’ cuts to the Department of Education, which will spend over $70 billion next year, didn’t even amount to $1 billion.
- “Regardless of whether Pakistan gets its way, its impudence in pushing Afghanistan to abandon America exposes the real balance of power in the region.”
- “It doesn’t make a lot of sense to refer to a government whose intelligence service assists military efforts by al Qaeda and the Taliban against U.S. troops in Afghanistan as an ‘ally.’”
- Here are five ways to cut military spending today without changing our strategic focus:
Friday Links
- Penalizing millionaires won’t help President Obama get re-elected, but partnering with Republicans on corporate tax reforms and spending cuts would boost the economy — and his prospects.
- Of course, both Republicans and President Obama will have to stop pretending to cut defense spending if either want the economy to recover.
- Chasing the energy independence white rabbit isn’t helping much, either.
- Soaking the rich definitely won’t work.
- When you look back at the grueling [sic] debate over an underwhelming $38 billion in spending cuts, you realize the fight was never about cutting spending–it was over how much to grow the size and scope of government:
Thursday Links
- One thing is clear after President Obama’s speech yesterday: He envisions a smaller national debt, but a much bigger government.
- One percent is better than nothing, but it’s still pretty close to nothing.
- One thing is clear about climate change: it’s causing a rising tide of red ink in Washington. See the forthcoming book Climate Coup: Global Warming’s Invasion of Our Government and Our Lives and join us for the accompanying book forum, featuring MIT meteorologist Richard Lindzen and American Meteorological Society fellow Bob Ryan, on Wednesday, May 4 at 4:00 p.m. Eastern. Complimentary registration is required of all attendees by 12:00 p.m. Eastern on Tuesday, May 3. If you cannot join us in person, we hope you’ll watch live online.
- One cannot be serious about reining in reckless spending without putting the Pentagon on the chopping block.
- One need not look very far to see how similar Republicans and Democrats are:
No, Paul Ryan Really Doesn’t Cut Pentagon Spending
Last week I expressed my disappointment with Paul Ryan’s budget plan, specifically about his unwillingness to cut military spending. Some people think that he does cut spending through his acceptance of Secretary Gates’s $78 in “cuts.” (see, for example, Sen. John Sununu; Sen. Joseph Lieberman, AEI’s Gary Schmitt and Tom Donnelly; and the Heritage Foundation’s Baker Spring).
So either I am wrong, or they are. Let me try to set the record straight.
First, all of Ryan’s other savings — savings which I support — were projected either against the Obama administration’s FY 2012 budget or against the current budget baseline. For example, according to Ryan’s own “Key Facts” his plan “Cuts $6.2 trillion in government spending over the next decade compared to the President’s budget, and $5.8 trillion relative to the current-policy baseline.” With respect to military spending, however, Ryan’s plan basically follows the Obama/Gates budget, proposing to spend a staggering $670.9 billion in FY 2012. The Obama administration’s DoD budget request for FY 2012 — including the Pentagon’s base budget plus overseas contingency operations (OCO) — totals $670.9 billion as well. Of course, that total leaves out national defense spending tucked away in other departments (including nuclear weapons spending in the Department of Energy). Total national defense spending in FY 2012 will top $700 billion. I stand by my earlier assertion that the Pentagon’s budget escapes from Ryan’s budget axe “essentially unscathed.”
Ryan and others claim that military spending has already been cut, hence the decision to embrace this portion of the president’s budget. Sen. Lieberman explained to Bloomberg news, “To a certain extent, Secretary Gates has enabled us at least temporarily to take defense off the table because he has initiated his own round of defense cuts.”
“To a certain extent” is doing a lot of work in that statement. In fact, Gates and Obama do not cut military spending.
First, they don’t claim to do so. These supposed cuts are only “cuts” in Washington-speak. The Pentagon’s base budget under both the Ryan and Obama plans will increase 1 percent in real, inflation-adjusted terms. See the table below, recreated by my colleague Charles Zakaib from the official DoD budget request.
Second, Ryan claims that Gates’s “exhaustive review of the Pentagon’s budget” identified $178 billion in savings. It does nothing of the sort. By Ryan’s own admission, taxpayers will see only $78 billion of these; the other $100 billion are to be “reinvested” elsewhere in the Pentagon. (They’re always “investments” when you’re spending the taxpayers’ money, even when Republicans do it.)
So we’re really talking about $78 billion toward deficit reduction over the next five years, or approximately 2.6 percent of the Pentagon’s base budget (excluding the wars) over that same period. With all due respect, that isn’t a bold plan for reducing the crushing burden of spending and debt; that’s a rounding error.
What’s more, it is highly unlikely that these savings will materialize. Many of these efficiencies involve consolidation of commands — something that Congress has already balked at — and unspecified savings that are relatively easy to identify, but extremely difficult to implement.
But if, by some miracle, Robert Gates’s successor(s) manage to get them passed by Congress, those savings won’t actually be dedicated to deficit reduction: they will be completely devoured by spending on the wars. This is the greatest sham of all. Charles Knight at the Project on Defense Alternatives (and a key contributor to the Sustainable Defense Task Force, of which I was also a member) explains:
For several years now White House budget projections have included a “placeholder for outyear overseas contingency operations” most of which are accounted for by the wars in Iraq and Afghanistan. This placeholder number has been and remains $50 billion. Every year actual OCO (overseas contingency operations) spending turns out to be several times that number. FY11′s OCO is $159 billion and FY12′s is $118 billion.
Adjusting for the effect of the new OCO for FY12, the $68 billion budgeted above the placeholder of $50 billion eats up most of the $78 billion in Pentagon cuts that Secretary Gates offered up in January to fiscal responsibility….The remaining $8 billion (and much more) will go to the war budgets when reality collides with placeholder projections.
On 14 February Pentagon Comptroller Hale confirmed that the $50 billion placeholders for FY13 and beyond was the “best we can do.” Others make an attempt to be more realistic. The high tech industry association called Tech America annually projects DoD budgets for ten years out. In their 2010 projection they estimate that OCO spending will be $102 billion in FY13, $69 billion in FY14 and $57 billion in FY15. When we subtract the $50 billion placeholder for each of those years and total the remainder we find that the Pentagon is likely to spend $78 billion more in the years FY13 through FY15 than in the White House budget projections.
I hope that I’m proved wrong. I hope that the wars in Iraq and Afghanistan are brought to a close. I hope that the Congress gets serious about tackling Pentagon waste, and stops treating the military budget as an elaborate jobs program. I hope that our brave men and women in uniform get the hardware, equipment, and training that they need, and that Americans get the “defense budget” that they deserve. But if past history is any guide, the Pentagon’s budget will continue to climb, other countries around the world will continue to free ride on Uncle Sam’s largesse, and U.S. taxpayers will be left to foot the bill.
Tuesday Links
- Republicans have a big opportunity to undo Obamacare and reform Medicaid and Medicare all at once.
- It’s a good thing, too, because we’re facing a big debt crisis and if we don’t change course, federal spending will crest 42% of GDP by 2050.
- There’s also a big elephant in the room in an excessively complicated tax code.
- One has to wonder if the Republicans intend to put the big sacred cow of defense spending on the table.
- Unrelated to the budget, education choice proponents scored a big victory in the U.S. Supreme Court yesterday in ACSTO v. Winn, a decision that upheld education tax credits:
Wednesday Links
- Please join us on Thursday, April 7 at 2:00 p.m. ET for “The Economic Impact of Government Spending,” featuring Sen. Bob Corker (R-TN), Sen. Mike Lee (R-UT), Rep. Kevin Brady (R-TX), former Sen. Phil Gramm, former IMF director of fiscal affairs department Vito Tanzi, and Ohio University economist and AEI adjunct scholar Richard Vedder. We encourage you to attend in person, but if you cannot, you can tune in online at our new live events hub.
- The last time we saw a green energy economy was in the 13th century.
- This isn’t quite what we meant by “defense spending.” For a refresher, see this itemized list of proposed cuts that could save taxpayers $150 billion annually.
- “Prosperity reigns where taxes are low and right to work prevails.”
- In case you missed it last Friday, check out Cato director of financial regulation studies Mark A. Calabria discussing the Federal Reserve on FOX News’s Glenn Beck show:
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