Wednesday, November 26, 2008

The 4% Doctrine

As discussed in a prior post, there is a showdown looming on the horizon between an Obama administration that will be faced with the stark fiscal realities of the post-Bush era, and a Pentagon maneuvering to ensure that its outsized share of the federal budget remains intact and untouched - expanded even. The Pentagon is readying its battle plan, and has begun market-testing a catchy new slogan: Four Percent for Freedom - as in, defense spending should be fixed at 4% of GDP in perpetuity.

If that number seems arbitrary and detached from the applicable context, that's because it is - at least in terms of assessing the need to spend the amount prescribed. Optimally, and logically, defense spending should be based on a rational assessment of risks, needs and exigencies. By relying on a fixed percentage, rather than a review of needs, the Pentagon can obviate the risks of cuts brought about by a peace dividend, or the need for a cash-strapped country to make fiscal trade-offs.

The 4% approach also has its advantages from a marketing perspective, and the number chosen serves multiple purposes. For one, its proponents will claim that the US is currently spending under 4%, and that, therefore, we must increase defense spending to reach the magic ratio. That calculation is misleading, however. As Cernig points out that while Four-Percenters claim that our current spending is a mere 3.43% of GDP, that calculation ignores supplemental spending on Iraq and Afghanistan which, when added in, pushes spending to 4.73% of GDP. But even if you remove Iraq and Afghanistan from the equation, as those spending items will be eventually (sooner the better), could anyone really argue that the US would be spending too little on defense if the percentage hovers around 3-3.5%? Actually, Some would:

Taking their cue from this groundswell of Pentagon support and nongovernmental advocacy, Senator Elizabeth Dole (R-N.C.) and Representative Trent Franks (R-Ariz.) introduced a joint resolution in December 2007 stating that the United States should “commit a minimum of four percent of the nation’s gross domestic product to the base defense budget.” In explaining the legislation, Franks said it was “the only way we can stop the inexorable slide of national defense.”

The inexorable slide? Really? Any fair accounting of US defense spending compared to the rest of the world, or any other relevant metric, would not describe the trend in recent decades, years or months as an inexorable slide. Perhaps an inexorable drag, but that's something quite different.

The other argument will be historical in nature: pointing to past eras in which US defense spending was much higher than 4%. Even then, however, pegging defense spending to GDP in such a manner elides the actual dollar amounts being spent due to the fact that GDP has increased so dramatically over our nation's history. As Travis Sharp explains:

[T]he United States will spend significantly more, in inflation-adjusted dollars, for defense in FY 2009 than it did during the peak years of the Korean War (1953; $545 billion), the Vietnam War (1968; $550 billion), or the 1980s Reagan-era buildup (1989; $522 billion). The United States is also projected to spend more on defense in FY 2009 than the next 45 highest spending countries combined, including 5.8 times more than China (second highest), 10.2 times more than Russia (third highest), and 98.6 times more than Iran (22d highest). Indeed, the United States is expected to account for 48 percent of the world’s total military spending in FY 2009.

Further, as Sharp points out, there is money to be saved and, where not cut entirely, redirected to more efficient uses*:

Our current armed forces have more than sufficient budget and manpower to deal with the current threat and [fourth-generation warfare] threats. However, they must be reorganized to fight the enemy as he is rather than remaining organized to fight the enemy of the past. The United States could take some current funding away from expensive high-tech weaponry, which may be useless in future Iraq-style conflicts, and redirect it toward enhanced intelligence, diplomacy, counterinsurgency training, language competency, humanitarian assistance, and nuclear nonproliferation programs.

Bruce Falconer highlights just how difficult it is to rein in spending on the expensive - and often underperforming - big ticket items:

"The last I heard, Al Qaeda doesn't have an air force," says Winslow Wheeler, director of the Straus Military Reform Project at Washington's Center for Defense Information and the editor of the forthcoming book America's Defense Meltdown: Pentagon Reform for President Obama and the New Congress**. The F-22, which he describes as a "dog" on performance (more fragile and less maneuverable than Vietnam-era fighters), "is ridiculously expensive, and its huge cost prevents you from buying a respectable inventory of them."

But focusing on individual boondoggles like the F-22 is not the solution, says Wheeler. Instead, if Obama hopes to switch things up, he and his aides must understand that cost overruns and development delays at the Pentagon are not the exception but the rule. "I'm all for getting rid of the garbage, but if we simply trot out a cut list, we're going to get killed," Wheeler says. "The advocates [for each weapons program] inside the Pentagon will go on full alert. They'll activate their porker friends inside Congress, and that will be the end of it." Rather, he suggests, change rests on getting decision makers the real, unvarnished information they need to grapple with structural problems inherent in the defense acquisitions system.

Getting that information is not as easy as it might seem. According to retired Marine Lt. Colonel John Sayen, a former Pentagon analyst, the Defense Department's procurement bureaucracy is practiced at pushing its wish list through Congress "by downplaying costs and/or exaggerating benefits" and "quickly building a support network of vested interests to lock in a front-loaded decision before its true costs or performance become apparent." In other words, military procurement is an institutionalized scam. Even when problems surface, Congress rarely interferes. Assembly of the F-22 alone involves spending in 44 states, says Wheeler, and "people on Capitol Hill are leaving drool trails in the hallways to buy more."

The only way that we, as a nation, can continue to dedicate such a large share of our treasury to defense spending is if we either continue to grow our already enormous deficits, or severely curtail spending on all other priorities: from infrastructure, education and environmental protection, to health care, social security and other safety net initiatives. Not to mention other unforeseen, cough, crises that might require bail outs and other spending.

Ironically, our out-of-balance spending on defense runs the risk of making us less secure as a nation if we continue to ignore our more pressing needs and sink deeper into debt.

(*I shall discuss spending priorities in a subsequent post)

(**I hope to review America's Defense Meltdown at some point in the near future)

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