China’s Economic Reckoning
The Price of Failed Reforms
A new era of budget-cutting has begun in Washington, and the Pentagon is in the crosshairs. Desperate to reduce expenditures anywhere they can, the country's elected leaders are turning to national defense. In 2011, the Pentagon's base budget was $530 billion, plus an additional $159 billion for the wars in Iraq and Afghanistan. Total defense spending is now 73 percent higher than in 2001 in real terms, and it makes up about 20 percent of the federal budget -- a figure exceeded only by Social Security.
Last summer's debt ceiling debate and the resulting Budget Control Act have put Congress on a path to cut defense spending by as much as $882 billion over the next decade, according to the Congressional Budget Office. The exact size of the cuts depends on future decisions by Congress, including those related to the super committee's ongoing deliberations. Regardless of the outcome, the Pentagon anticipates that spending caps in the Budget Control Act will cut the military's non-war budget by at least $450 billion over ten years.
While the defense budget does constitute a huge slice of federal spending, it has become a target in part because Americans overestimate its contribution to the country's fiscal woes. In a June 2011 Pew poll, 60 percent of respondents identified the wars in Iraq and Afghanistan as the leading cause of a "great deal" of U.S. indebtedness. In fact, both the George W. Bush administration's tax cuts and the global financial crisis bear more of the responsibility; they added far more to America's debt than war and non-war defense spending.
Washington's national security community has wasted no time sounding the alarm. Republicans on the House Armed Services Committee released a report arguing that cuts beyond $450 billion over the next decade would downgrade the United States from a superpower to a regional power. The report went so far as to suggest that budget reductions could require reinstituting the draft to make up for troops who would leave the service if their benefits were cut or their deployments were accelerated.
Such dire warnings notwithstanding, spending cuts -- if they remain reasonable and are implemented strategically -- can preserve a preeminent U.S. military that can cooperate with allies, maintain a presence in key areas of the world, and prosecute armed conflicts when and where necessary. In our judgment, that means not going beyond $550 billion in total cuts, approximately $100 billion more than the Pentagon is now planning. To ensure that outcome, civilian and military leaders should implement targeted budget reductions that prioritize the most important regions, military capabilities, and weapons systems.
Careful cutting means that policymakers must decide where U.S. forces should and should not be involved in the future. A commitment to the Western Pacific and Indian Ocean is essential, and the Pentagon needs to broaden engagements throughout the Pacific Rim, largely through a stronger maritime and air presence. China's military modernization continues to outpace forecasts, and America's Asian allies, such as Japan and South Korea, are increasingly looking for assurance and engagement from the U.S. military. The Middle East and Mediterranean Basin must also remain a high priority, where the United States needs to contain hostile regimes, dismantle terrorist networks, and ensure secure routes in the global energy supply chain.
But there are also regions where Washington can dial back its military involvement. In South Asia, the United States can shift to a primarily defensive stance that limits nuclear proliferation, prevents a major Indian-Pakistani conflict, and disrupts terrorist networks capable of striking the United States. Other areas of the world -- especially Africa and Latin America -- should be the lowest priority. Reducing U.S. military activities in these regions could save billions of dollars per year in operating and support costs.
In allocating shrinking resources, the Pentagon should also avoid the so-called "golden ratio," the long-standing custom of dividing the defense budget evenly among the Army, the Navy, and the Air Force. Instead of seeking parity, the Pentagon should invest resources in the key capabilities that the United States will need most in the future. Naval and air forces will grow increasingly important as U.S. interests shift toward Asia, and they deserve a bigger slice of the pie. Meanwhile, large active-duty ground forces -- which are expensive to maintain, especially at high readiness levels -- will become less necessary as the United States continues to withdraw from Afghanistan and Iraq. With an increased focus on the vast Asian theater, there is less reason to maintain today's high levels of ground forces, which are hard to move quickly in large numbers. Cutting ground forces also makes sense for another reason: it is easier to reverse in the future than canceling naval and air modernization programs. The Pentagon should therefore return the Army and the Marine Corps to roughly pre-9/11 levels, a reduction of about 56,000 troops compared with current Pentagon plans, starting in 2014, when the majority of U.S. troops have left Afghanistan. Doing so would save approximately $40 billion by 2021.
The American military currently has too many heavy armored formations, short-range strike fighters, amphibious assault capabilities, and manned aircraft. Some of these capabilities have not been in high demand for decades, and some have become less useful as countries such as China have developed defenses to neutralize them. The Army and the Marines, in particular, should transfer more of their expensive heavy capabilities -- such as armor, artillery, and fixed-wing aircraft -- to their reserve components in order to reduce the burden on active-duty forces while simultaneously hedging against uncertainty by maintaining the capabilities in the reserves. Making these changes would save tens of billions of dollars, at minimum, in the next ten years.
Billions more are spent every year on weapons systems that do not make the country safer. For instance, the Army wants to replace its $3 million Bradley Fighting Vehicle, which can carry six deployable soldiers, with a new $10 million Ground Combat Vehicle, which carries nine and offers better protection from roadside bombs. Protecting U.S. soldiers is always an important goal, but upgrading existing Bradleys and using the tens of thousands of mine-resistant, ambush-protected vehicles already purchased for use in Iraq and Afghanistan should prove equally effective while saving about $7 billion over ten years.
The Ground Combat Vehicle issue demonstrates a broader point: too often, the Pentagon develops new weapons systems that ignore cost and usefulness. The Joint Tactical Radio System and the Littoral Combat Ship, which provide ground mobile communications and speedy surface warfare capabilities, respectively, are overpriced relative to the U.S. military's need for what they offer. Scaling them back would save $15 billion and $7 billion, respectively, by 2021. Future U.S. weapons systems should counter specific threats to the United States, rather than simply increasing general capabilities at ever-increasing cost. Likewise, buying improved versions of existing weapons systems and making operational changes, such as obtaining access to new bases overseas to reduce sailing time from U.S.-based ports, could save money as well.
Even if the Pentagon makes these strategic shifts and cuts unnecessary programs, it will still face pressure to slash personnel costs. Military salaries and benefits (especially health care) currently consume about 34 percent of the Pentagon's annual base budget. Yet personnel programs are fundamentally different from other types of defense costs. Reforming them can affect recruiting, retention, length of service, and morale in unpredictable ways. Personnel reforms also face enormous political obstacles that make them difficult to achieve in the near term. There is probably nothing a member of Congress fears more than being accused of betraying serving troops or veterans; reforming personnel policies could trigger exactly such accusations, however unjustified they may be. Finally, the United States should not break faith with the men and women who have served in uniform and continue to put their lives on the line. They should retain the benefits that they have signed up for; they have more than earned them.
To the greatest extent possible, the Pentagon and Congress should reduce non-combat spending on facilities maintenance, civilian workers, commercial retail activities, contractors, and redundant intelligence capabilities, which could save at least $160 billion over ten years and help preserve resources for the naval and air forces that are expensive but essential to a more Asia-focused U.S. strategy. Implementing that strategy requires aircraft carriers, amphibious ships, attack submarines, long-range strike bombers, surveillance drones, Joint Strike Fighters, and destroyers equipped with missile defense systems. While policymakers could reduce the planned purchases of some of these forces with acceptable risk, cutting them all deeply -- which could prove necessary if the defense budget is reduced by the full $882 billion without reforming personnel policies -- would seriously diminish the country's ability to project power, support allies, and deter potential adversaries.
Throughout the budget-cutting process, Washington must remember that some defense cuts can be implemented with minimal risk, while others would jeopardize U.S. security. Unwise or excessive cuts would threaten U.S. preeminence in key areas and undermine the U.S. military's long-standing strategy of global engagement. Yet moderate cuts, implemented wisely, can preserve military strength and generate significant savings while still enabling the United States to respond effectively to future security challenges.