The war in Iraq ignited a defense spending boom that continues unabated. A slew of staggering estimates released in recent weeks reveal it could cost more than a trillion dollars to keep troops in Iraq until 2017.
It is safe to assume that defense budgets will stay high as long as U.S. forces remain in Iraq, and then they will fall. Based on historical trends, the defense budget always takes a dive after a major war. But this time around the defense spending boom may suffer an unparalleled bust.
This could be really bad news for the Pentagon and for the nation’s long term security, says Robert D. Hormats, vice chairman of Goldman Sachs International. After Iraq, “the military is going to face the most challenging environment to obtain budget resources than it has had in the last 100 years, with the possible exception of the isolationist period just before World War II,” he says.
Hormats, a former member of the White House National Security Council, is the author of “The Price of Liberty: Paying for America’s Wars,” in which he paints a strikingly sobering picture that shows how the financial cost of the war ultimately could weaken U.S. national security.
“After every major war, particularly wars that turn out as badly as this one, there is a reaction to cut the defense budget,” he says. But unlike previous wars, this one has been accompanied by an extraordinary set of circumstances — tax cuts, increases in domestic spending, emergency supplemental appropriations to fund the war, and unprecedented levels of borrowing from foreign countries.
These conditions, coupled with a gradually rising discontent among Americans about the war, will set the stage for a national backlash against defense spending and a political environment where even legitimate pleadings from the Pentagon for funds will fall on skeptical ears. One of the most serious consequences of the Iraq war, says Hormats, is that it has taught Americans all the wrong lessons about the price of security.
“Even during Vietnam, only one-fifth of the war was funded through supplementals,” he says. “We had a normal budget process for most of that war.” The war in Iraq has been financed by IOUs — 60 percent of Treasury bills are sold to foreigners. By 2006, the United States was more dependent on foreign capital than at any time since the nation’s founding. Americans clearly have not been engaged in the process of paying for this war, laments Hormats.
“This leaves a very poor legacy for the future. Americans have been led to believe that we can get our security on the cheap. That we don’t have to suffer any inconveniencies,” he says. The only sacrifices have been borne by the military. “This is a very bad precedent for the future.”
Military spending post-Iraq also will be scrutinized in the context of other big-ticket items the nation will have to finance, such as retirement and medical programs. The doomsday scenarios about Social Security and Medicare budget train wrecks are not far fetched, says Hormats. When future administrations look at the demands for entitlement programs, there is a high probability that they will target defense budgets.
To be sure, military budgets should be examined carefully, and there ought to be sensible oversight to prevent the waste and abuse that has been witnessed in recent years. But the country also needs to have an intelligent debate about how much defense is needed before military budgets are cut indiscriminately, based on narrow political agendas.
“We need to educate the public that security can’t be done on the cheap,” says Hormats. “It doesn’t mean we shouldn’t scour the defense budget for inefficiencies … We have to figure out national security priorities and how they fit with domestic priorities and social programs. We have not done that, have not had a conversation. Some cuts in the defense budget may be justified but others may not be.”
One unfortunate legacy of Iraq may be that it will leave the country so war-weary that it will be unable or unwilling to prepare for legitimate threats to national security. “As the Founding Fathers recognized more than 200 years ago in the economic as well as the military realm, weakness invites aggression,” Hormats says. “For them, a sound economy and sound finances were as much a part of the nation’s defense as a strong military. That remains true today. Chronic deficits, rising debt and significant dependence on foreign capital make the United States vulnerable and offer an added enticement to terrorists.”
These forebodings could not come at a worst time for the Pentagon, where the military services face ballooning personnel and health care bills, and at the same time that they are drafting expensive wish-lists, including a massive expansion of the Army and the Marine Corps and costly modernization plans to replace aging Navy and Air Force hardware. In a perverse twist of fate, the military — the only sector of American society that has borne the brunt of the war in Iraq — could once again become a casualty. In this case, a casualty of the nation’s inability to get its financial priorities in order.
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