Military Spending: How do we make it best serve our country’s interests?

Military spending as a percent of GDP has actually decreased since the 1980s, but we currently spend more on our military than the next fourteen countries combined – and by some metrics more than the rest of the world combined. (Accounting formats can be difficult to compare between countries, and some countries, including us, are not fully forthcoming in their budget numbers, so precise totals are impossible to come by.)

Much evidence suggests that financial mismanagement is rife in the American military. The Government Accountability Office has been warning for years that the Pentagon’s accounts are so tangled that no one can figure out where the money goes.

In 2009 the GAO identified 30 federal programs that were at high risk of fraud, waste, abuse, mismanagement, or ineffectiveness, of which 15 were related to the military. In 2010 the GAO stated that it could not render an opinion on the federal government’s financial statements. The first of three key issues was “serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable.”

In 2011 Congressional study commission estimated that at least $31 to $60 billion has gone astray in Iraq and Afghanistan, either wasted or used against American troops.

The wars in Iraq and Afghanistan have lasted longer than World War II, and they have been financed entirely by debt. The combination of debt and military over-reach has historically brought down many major powers.

I am not so naïve as to think we can do without a military altogether. But I do think we should try to make sure our military serves our country’s interests. At the very least, military spending needs to be reformed.

In 2010, the Department of Defense budget was $691 billion. Of that, $162 billion went to “Overseas Contingency Operations,” which primarily means operations in Iraq, Afghanistan, and Pakistan.

The DoD budget does not include intelligence programs, veterans’ benefits and services, the Department of Homeland Security, or military assistance to other countries. The intelligence budget is classified, but the other three items totaled about $103 billion in 2010.

To put this in perspective, our adult population (age 18 and over) was just a little under 233 million in 2010. This means that, on average, each American adult spent more than $3,400 on military-related activities. More precisely, given the size of the deficit in 2010, each of us spent about $2,040 on the military and borrowed about $1,360 on its behalf, to be paid back later.

Many factors contribute to this high level of military spending. From the small to the large, they include:

➢ Procurement procedures, payment procedures, and other business practices are very vulnerable to fraud and waste.

➢ As in any other bureaucracy, each department has strong incentives to grab and keep as large a share of the budget as it can.

➢ By law, the DoD is not supposed to consider how much a proposed program or purchase would cost or do a cost-benefit analyses. Instead, each branch creates lists of things it wants, which are presented to Congress using the word “requirements.”

➢ The DoD controls about half of the “discretionary” part of the federal budget, about 20% of all federal spending, and nearly 5% of the American economy. Much of this spending supports jobs that are directly tied to specific line items. No member of Congress is likely to survive re-election if they allow DoD spending cuts that affect bases or military contractors in their own district. Congress therefore has strong incentives to keep all aspects of the DoD budget stable or growing.

➢ Support for the military has become entangled with the American culture wars. In some circles, skepticism about the effectiveness of military spending is equated with being unpatriotic. In other circles, it is common to condemn military activities altogether. Few people, in any circles, are inclined to critically examine what our military goals should be and how we could support those goals in a cost-effective and sustainable way.

➢ The United States is highly dependent on imports from other parts of the world. These imports have helped raise our standard of living, but they have also given us a national interest in having stable suppliers and open trade routes, which we have sometimes chosen to defend militarily. Petroleum, especially, is more expensive than it seems if we include the price of our military involvements in oil exporters and their neighbors.

➢ The United States has repeatedly taken on the role of the policeman of the world. We have taken responsibility for keeping trade routes open, for guaranteeing the security of our allies, for enforcing national boundaries, for selectively deposing dictators, and for preventing genocide and humanitarian disasters. These activities are expensive.

➢ For the last generation, the United States has made our military activities as invisible as possible to the American people. The last war that was declared by Congress was World War II. All of our conflicts since then – in Korea, Vietnam, Iraq, Afghanistan – have been considered “military operations,” not officially wars. Since Vietnam, we have not asked Americans to pay higher taxes to support military operations, but instead have funded them entirely through debt. George W. Bush’s administration increased military spending by $1.5 trillion while giving Americans $1.8 trillion in tax cuts. (How the Deficit Got this Big) Such policies make war seem cheap, and thus discourage discussion of whether the benefits are worth the costs, but also encourage greater spending precisely because debt is abstract and invisible.

➢ Great powers always tend to become over-extended militarily and financially. When a country is powerful, it is tempting to conclude that it can impose its will on less powerful countries. Usually great powers get their way by diplomacy, economic sanctions, and other non-military means, but these tactics work best if they are backed by the credible threat of military force, and sometimes the threat turns into action. Once a great power has undertaken a military venture, it cannot back down without threatening its credibility. Sooner or later, therefore, great powers get involved in unwinnable wars that cost a lot. Once they have started this pattern, they also need to spend a lot on general military preparedness, to keep up the deterrence threat once the world sees that they are not actually invincible. This pattern of military over-reach and over-spending contributed to the decline of most of the world’s great powers, from Rome to the British Empire to the Soviet Union.

If we want a healthy economy, we have to cut our debt. And if we want to cut our debt, we have to cut our military spending. It is simply too large to not be part of our budget considerations.

David Walker, the former head of the GAO, has suggested that we set military spending at 3% of GDP, which is economically sustainable and sufficient to meet our baseline needs if we use the money wisely. If we engage in an armed conflict, he proposes that it be paid for with a surtax that is clearly marked on each individual’s tax form. These proposals would provide a useful budgetary discipline.

In addition, the following four principles seem essential to me:

➢ The military needs to get its books in order and institute adequate financial management procedures to prevent waste, abuse, and fraud. This is not just a financial issue. When we don’t know where our money is going, it too easily finds its way into the hands of people who will use it for their own purposes, not ours.

➢ We should define our goals and seek cost-effective ways to achieve those goals. This will require a cultural change in Congress, among the general public, and in the military itself, so it will take some time and some hard work. We cannot, however, afford to do everything imaginable, so we have to decide what is most important to do. Indeed, some possible activities are ineffective or even counter-productive to our goals. Certain types of military interventions, for example, create so much local resentment that it becomes harder, not easier, to achieve our goals. We should identify and avoid such activities, no matter how much or how little they cost. More is not always better, in any realm of life, and we should target our military spending at activities that are of high benefit to our country.

➢ Arguments about preserving jobs should be no more allowed for military personnel and contractors than it is for other types of jobs. Almost all government spending is used to hire people, one way or another. Cutting government spending therefore inevitably means fewer jobs. Cutting education means fewer teachers and teachers’ aides. Cutting medical spending means fewer nurses and drug researchers. That’s the way it is. Opposition to making the American military affordable because it would reduce jobs in your district, even though it would be better for the country as a whole, should be seen and named for what it is: unpatriotic.

➢ We should pay for at least 90% of the cost of military operations out of current revenues, not debt. If, heaven forefend, we find ourselves in a conflict on the scale of World War II, then additional debt will be necessary. But if a conflict does not require retooling our national economy, then we should pay for it ourselves rather than pushing the cost into the future. If it isn’t worth paying for, it isn’t worth doing.

One of the key issues here is that military practices cannot be unquestionable. In some circles, it seems that any less than adulatory discussion of military people and practices is seen as unpatriotic at best. But our military is supposed to serve the interests of our country, and it is supposed to be under civilian control. History shows that an unaccountable military establishment is a very dangerous thing.

This approach I’ve suggested doesn’t solve all the problems. But if we can focus on our goals, get spending at the nuts-and-bolts level under control, emphasize that the purpose of military spending is the good of the country, and pay for special projects we undertake, we will be in much better condition.

And we will be far less likely to follow the well-trodden path of military over-reach, excessive debt, and a sharp decline in global influence and economic well-being.

Back to Our Country’s Finances

Or other topics that might be of interest …

The Federal Budget : Where does the money go?

Where Government More Than Pays for Itself : Which programs are especially cost-effective?

Health Care Inflation : The crux of the problem

Social Security : Not the problem, not the solution, but needs tweaking

Economic & Environmental Sustainability : The economic implications of environmental changes

Our Current Tax System : Where we are now

Raise Our Taxes! : Testimony before the Massachusetts’ Legislature’s Joint Committee on Revenue

Thought Pieces : Articles by other people that got me thinking

Bibliography : Books worth knowing about

Organizations : Where to get more information and/or move into action