Facing Up to the True Cost of Defense

Defense Secretary Ashton Carter has appealed to Congress on multiple occasions to pass the president’s 2017 budget — a request of $582.7 billion for the Defense Department that adheres to the top line set in a bipartisan deal last fall. That includes a base budget and additional funds for overseas contingency operations.

From day one, the budget proposal has been slammed repeatedly by congressional hawks as grossly inadequate to support military needs.

“We’re in a bigger readiness crisis than I understood,” said House Armed Services Committee Chairman Rep. Mac Thornberry, R-Texas. He has sought to make the case that budget cuts have weakened the armed services, forcing them to train in run-down facilities and operating weapons systems from the Reagan administration. “There is more stress on the force than most of us have recognized,” Thornberry lamented.

His solution was a creative budget maneuver that surprised even defense insiders. In his markup of the 2017 National Defense Authorization Act, Thornberry stuck with the president’s overall topline but shifted $18 billion from the overseas operations account to the base budget, purposely letting the military run out of OCO funds in April. “This gives the new president a chance to reconcile OCO activities and OCO funding,” Thornberry said.

“It would have been better if the president had asked for enough money,” Thornberry said. “People are being sent on missions for which they aren’t adequately trained or equipped.”

The HASC budget gambit impressed many as politically astute — it sets up a fiscal cliff for the Pentagon that will require immediate attention once a new administration is sworn in. This budget tactic also was adopted by the House defense appropriators but faces slim chances in the Senate and eventually the threat of a presidential veto.

Regardless of how disagreements over OCO are resolved as the NDAA moves through the legislative process, these clashes bring into sharp relief the reality that after 15 years of war and numerous studies on the subject, we still don’t know how much national defense really costs.

For years there has been a constant drumbeat in Washington in support of a national debate on the country’s global security and military posture; and what level of resources that requires. But those policy questions mostly have descended into partisan squabbling.

The administration’s $610 billion request is about $18 billion short of what the Pentagon planned to request a year ago. It is presumably tens of billions below what defense advocates claim is needed to bulk up the Army and the Air Force to combat emerging threats. And the number does not even include other categories of national security and veterans-related spending that are kept outside the Pentagon’s budget.

The controversial OCO budget that started under the Bush administration has now been baked into the military’s spending requests, which also helps to obscure the true cost of defense.

Budget analyst Todd Harrison, of the Center for Strategic and International Studies, noted that defense costs are far bigger than most people realize. He calculated that 2017 defense-related funding, in fact, tops $905 billion. In addition to $523.9 billion for Pentagon base expenditures and $58.8 billion for OCO, there’s $20.5 billion for Department of Energy programs — nuclear weapons and naval reactors used in Navy aircraft carriers and submarines but not funded by the Navy, $8 billion for FBI bomb forensics done for DoD, $83.4 billion for the amortization of unfunded liabilities, $22.8 billion for tax expenditures, and $179.2 billion for veterans’ benefits and services.

“Those are all funded outside the DoD budget,” said Harrison. And some of these expenses are soaring. At the beginning of the Obama administration, the Pentagon’s costs related to veterans approached $96 billion, have now ballooned to $179 billion and are projected to reach about $212 billion by 2021.

Trying to wrap one’s head around defense spending also requires understanding that costs are rising faster than inflation and, unless measures are taken to slow that down, the Pentagon will need hundreds of billions of dollars more than projected — a perennial concern known as the “bow wave.”

Harrison pegged the program-resource mismatch at about $233 billion over the next five years. The president’s request already is $113 billion over the congressionally mandated budget caps. Then there’s $30 billion of OCO funding that DoD appears to be using in part for base budget activities. “If you assume that they are planning to have that same level of OCO funding supplement their budget in the future, that’s another $120 billion that they would be planning over the five-year defense plan,” said Harrison. Because OCO is a yearly request, over time it amounts to a significant amount of money that today is not counted as “enduring requirements.”

The mismatch between defense programs and resources, Harrison said, should be a “big issue for the next administration to handle.” Presidential hopefuls will bicker over whether the United States should have a larger or a smaller force, but they should consider that just to continue the Obama administration’s plan, the Pentagon needs another $233 billion. How that would be paid is the $64,000 question.

A new budget deal perhaps is the only way out of this, suggests former Defense Department Comptroller Robert Hale, now a senior fellow at the consulting firm Booz Allen Hamilton. It’s a timeless problem at the Pentagon that requirements always exceed budgets, Hale noted. The military needs more resources, Hale said. That could happen in the next administration, but there are no guarantees.

The United States has broad foreign policy and defense commitments and, short of changing that, the nation will have to financially support substantial forces on the ground, in the air and at sea. Hale predicts the Pentagon will remain under continuing pressure to cut wasteful spending, an effort that every administration embarks on but ultimately abandons because they require unpopular reforms that are politically toxic.

Topics: Defense Department, DOD Budget, DOD Leadership