The Party's Over: Long Term Budgets and National Security Posted by Gordon Adams

The budgetary demands of national security are large; and they are going to grow. I have noted already in these blogs that funding for defense will rise 7% in Fiscal Year 2007, assuming the President’s budget is appropriated (which would be 45% above its 2001 level), while homeland security funding would rise 9% and international affairs nearly 12%.

What’s more, if defense is going to transform its forces to achieve greater agility, mobility and flexibility to deal with the “long war,” the Pentagon projects, it will have to continue to grow at somewhere near this rate. This is especially true if the Department of Defense continues to avoid the “tough choices” between transformation and modernization and to expand the benefit programs for military personnel, which are consuming a growing share of normal defense spending.

Homeland security spending, too, will continue to rise, to cope with the needs of infrastructure security, adequate funding for first responders, greater protection for the transportation infrastructure, and fixing the problems in disaster response that were exposed by Hurricane Katrina.

And, as I have suggested, there is going to be a demand for continued growth in international affairs spending to strengthen economic assistance programs, address global poverty issues, and design an effective civilian capability to cope with requirements for security, stabilization, governance and reconstruction in failed and post-conflict states.

As a former budget official, I can see this train bearing down on the federal budget already. And the demands of national security spending are heading for a train wreck, if the new budget proposal is to be believed.

Analysts who work on national security resource issues tend not to see the train wreck. They are infused with the myopia that comes from having only one focus and one set of interests. It’s normal, but in this case, dangerous.

The train wreck is coming down a track the national security community does not normally look at: the overall status of federal spending. It is time to stop looking at the wizard who is promising deficit reductions of fifty percent over the next five years and check out what the man behind the curtain actually knows: federal budgets are totally out of control and the deficit is going to grow.

Don’t trust me; check out the analysis of the President’s budget done by the Center on Budget and Policy Priorities this week. Set aside their discussion of the drastic cuts being proposed to domestic spending programs. There may be a “guns v. butter” problem in the budget, but the big problem is the deficit and the things that are likely to happen over the next five years to make the deficit even worse than we expect.

Tax cuts are one thing. The administration wants to make the 2001 tax cuts permanent, but proposes new ones that would add another $285 b. to the deficit over the next five years, more than the proposed $187 b. in spending cuts they propose.

Iraq and Afghanistan are another problem. The budget assumes no additional supplemental spending for this commitment after 2007. Not that the US will be gone; just that the costs are not included in their budget projections.

The Alternate Minimum Tax is a third. Too arcane to explain here, but because its formula will start to hit middle-income taxpayers, Congress will want to provide a fix to the formula or relief to those affected, costing more millions over the next five years, millions that are not included in the budget calculations.

This is just some of the bad fiscal news over the next five years; some is in the budget proposal; some is just ignored, as if it would go away.

Moreover, the problem is likely to get worse after 2011. We don’t know how much worse, because the budget, which normally projects numbers over ten years, only does so over five this time, leaving it up to us to guess what the longer-term future might look like. As CBPP reports, some of the new tax cuts the administration has proposed balloon starting in 2011, and get substantially larger after that date. So the budgetary dilemma could get really acute, after this administration is long gone.

Congress is not going to like this problem. And while most Congresses spend, rather than cut, there is also a history of deficit reduction efforts to consider. From 1985 to 2002, budgets were significantly constrained by legislated deficit reduction efforts – one of the most sustained assaults on federal deficits in our history. Surprisingly, that fiscal accountability also made good politics.

It is likely to make good politics again. And the price will be paid, in part, by national security spending. When deficit reductions began in 1985, bipartisan support for the effort was only possible if all spending was included, which meant defense was not protected. There is, in my mind, a very real possibility that this could happen again, especially as the 2006 Congressional and 2008 presidential elections approach.

It is worth thinking through now what needs to happen to anticipate the train wreck. While nobody likes policy to be constrained by fiscal realities, everyone knows that, in fact, resources do put limits on commitments. What are the defense choices that need to be made now? What are the homeland security priorities? What should State and the economic assistance agencies focus on? And what, above all, is the strategic framework that will give coherence to those choices. More on this in the next blog.

Comments

[libertarian soldier]

"This is especially true if the Department of Defense continues to avoid the “tough choices” between transformation and modernization and to expand the benefit programs for military personnel, which are consuming a growing share of normal defense spending"?
Aw, c'mon. DoD is already taking huge hits for trying to reduce the size of the NG. DoD is taking hits for trying to reduce the medical costs for retirees. DoD is taking hits for not going for a permanent increase in the size of the Army. DoD is taking hits for trying to reduce shipbuilding. DoD is taking hits for trying to reduce the size of the Raptor fleet. The bottom line for DoD is, how many fights do you seek with Congress and how many times can you fall on your sword before the relationship becomes bad that daily operations are affected? And don't forget it is ultimately how much of a fight POTUS is willing to seek (through OMB's modification of the proposed DoD budget before it goes to Congress).

[J Thomas]

As libertarian soldier points out, there's no particular reason to expect responsibility within the next 3 years. DoD has no incentive to look for cuts that won't be appreciated by Congress or the President. Nor does anyone else.

It's time to think about your personal finances and look after your own skin. It's real hard to get off the train before the trainwreck, but there may be things you can do that might possibly cushion the shock.

Learn a useful skill, one that would be useful in a barter economy.

[Lane Brody]

Libertarian Soldier is exactly right. The entire issue is that nobody has ever said the nation must be able to do XYZ with our military and then asked what size force do we need for XYZ and then how much does that cost. All we get are complaints that too much money is being spent.

It's a false notion in many respects. Defense spending as a percentage of GDP, per decade, has fallen every single decade since the 1960's. JFK was spending over 9%, Reagan's buildup peaked at 6.2%, and during the late 1990's this nation drew down to 3.0% which in reality just might be too little. Part of the reason we are back around 4% now is we underfunded the Pentagon for around a decade.

One can argue money could be better spent, or that tax rates need to be changed, or that the nation must spend more money on other things but it's not "guns vs guns" or "guns vs butter". The nation can not afford an underfunded military. We must decide what that military must be capable of doing, what sized force that requires, and then pay for it. Being unwilling to pay for it should mean a smaller military that the nation is willing to afford. Of course I had thought that in many repects (the US Army) most people already accepted we already went too far trying to save money.

Lane Brody

[raisin]

"The nation cannot afford an underfunded military."

We don't have an underfunded military. We have underfunded ground troops. We have not underfunded the non-functional fantasy missile defense (just to name one of a large number of projects). It's time to say that spending tons of cash on missile defense and other "what if" projects that don't work, are easily circumvented, and don't correspond with reality on the ground is costing lives and is a poor tradeoff for much more urgently needed (but less sexy) homeland security programs.

[Jeff Younger]

Basic research is vital to national defense. The Advanced Technical Laser weapon system could revolutionize pre-emptive warfare by practically eliminating collateral damage, and it was developed from the basic research initiatives for missile defense. The political advantages are obvious.

People who want to stop "spending tons of cash on missile defense and other 'what if' projects that don't work" completely misunderstand the nature of real-world research. Basic research is not a linearly planned activity. Specific basic research outcomes cannot be predicted, but we can have some confidence that some useful outcome will emerge. In this sense, basic research is like maneuver warfare: we hunt for surfaces and gaps, while being unable to predict where they will occur.

Basic research is expensive, but nonetheless vitally important --- and that includes missile defense research.

[J Thomas]

Basic research is vital to the nation's economy, and classified military research is the least useful part of it. The more of our researchers who get sucked into need-to-know stuff, the worse we'll do.

We like to do secret weapons, to think we have a big technological edge on the rest of the world. But we never seem to get more than about ten or fifteen years out of an advance before somebody else is selling something similar. And some advances favor somebody else more than they favor us.

Military research doesn't help the civilian economy until it's declassified. If that time difference amounted to even a 1% per year increase in GDP....

One way to slow down other people copying us is to build things that are overcomplex and expensive. It might take them a long time to reverse-engineer the things and simplify them to the point they're cheap enough to be useful. When we could afford it, that worked for us. No longer.

We are better off without missile defense results -- provided nobody else gets them either. Land-based missiles aren't the point any more, unless you don't care who knows who launched them. Far more important to arrange that nobody can sneak nuclear weapons in some other way.

[Gordon Adams]

I was struck by Lane's comment: "We must decide what that military must be capable of doing, what sized force that requires, and then pay for it. Being unwilling to pay for it should mean a smaller military that the nation is willing to afford."

I agree, with one very important caveat, addressed in my final blog. The end-game here is national security, not the military. The military is an instrument, one of the tools of statecraft, and not the only one. It is large, in part, because we lean on it to do many things we ought to be doing with greater synergy, using the other tools. Lane is right, ultimately, it is the goals of policy that ought to drive the military we have, in its proper role.

[Lane Brody]

One can make a rational argument that "national defenseA" includes many things besides the defense budget. One can further make a rational argument that less should be spent by the Pentagon in favor of more spending by the State Dept or other such agency because that is a better way to spend the defense dollar.

Anyone who actually believes this line of arguement makes for good election politics is irrational. The democratic party just shoots itself in the head going down this road. Not being able to talk about the Defense Budget within terms of that budget alone is electoral suicide.

If spending doesn't stand on it's own merits it should not be spent. One does not have to compare State Dept spending to the Pentagon in order to argue for more money for State.

Foreign aid may very well be the most important "defense dollars" this nation spends but it's always going to be just that- foreign aid. Highly misunderstood by the public but even more unpopular. It's simply irrational to believe that talking about more "foreign aid" makes for good election politics.

Lane Brody

[Gordon Adams]

Thinking about Lane' Brody's comment that budgets need to be considered on their own, and not in relationship to other budgets. This is especially not true in national security. Defense is a support function for the protection of the nation's security. If we are to figure out what its role is, we need, as he argued earlier, to figure it out at a broader level. Then we use all the tools, and with synergy, to achieve that. As long as we believe something called the "long war" defines our national security, we are going to be relying too strongly on the military to prosecute it, and undervaluing the other tools and the ways in which they can be used to support the mission: a sharp reduction in the threat of terrorist attacks. Other tools bring much to that mission that looking at defense , alone, will miss. As for his electoral politics, that, my friend, is what leadership is all about. John F. Kennedy and Harry Truman pulled that one off easily.

[Lane Brody]

Gordon Adams you failed to grasp my point and in any case are wrong vis a vis JFK. My point is not whether or not it makes logical sense to compare and contrast foreign aid with the defense budget but rather that on a practical level doing so is electoral suicide for the democratic party.

JFK won a very close election in 1960 by running to the right on defense and increased defense spending upon assuming office. At the time the nation was spending over 9% of GDP on defense compared to the 3% we were spending in the late 1990's and the roughly 4% we are spending today. JFK had no problem whatsoever in talking about defense matters as seperate and distinct from other matters such as the Peace Corps and Foreign Aid. He knew that each program must stand and fall on it's own merits.

Finally however you arrive at the roles and missions of the US Military once those missions are arrived at you can then make intelligent choices vis a vis force structure. Now you must pay for that force structure.
It would be a grave diservice to the entire process at this point to then compare Defense and other programs. The same way one should logically arrive at a long term plan, supporting structure, and budgets for National Defense is the exact same manner we should go at other programs. Instead we get the exact same arguements year after year over competing dollars in annual budget battles. It does not serve the nation well, not at all.

Lane Brody

[J Thomas]

Lane, in an ideal world we would decide on our long-term military goals and our long-term other goals, and then once we'd decided what we wanted we'd figure out how much it all cost and pay for it, no matter what the total came out to.

But at the moment we don't have an economy which can do that. We have to cut back on all fronts.

I don't right off see how we can do that. We found out the last time around that our military contractors are utterly unable to survive doing civilian work. If we cut back on those contracts then they will be crippled for decades. But if we don't, our economy will be crippled for decades. And we have a government which is unable to make choices like that, the general approach is to promise everybody what they want and then try to make it through to the next election.

You are right that any honest policy would be political suicide. So we're stuck.