U.S. Defense Spending: The Mismatch Between Plans and Resources Mackenzie Eaglen Abstract: President Barack Obama’s defense budget request perpetuates a long-standing pattern of underfund- ing defense needs. Defense spending is already near his- toric lows, and the Administration’s budget would reduce it to levels unprecedented during wartime. Furthermore, Congress appears poised to repeat the past mistake of promptly disarming after major combat operations sub- side. Instead, Congress should maintain current levels of defense spending to allow the military to reset and recapi- talize. Congress needs to control entitlement growth, domestic spending, and public debt, which are beginning to threaten national security. Congress also needs to reform military compensation to ease strains within the defense budget. President Barack Obama’s fiscal year (FY) 2011 defense budget request 1 would increase the defense topline by between 1 percent and 2 percent in real terms. However, even with this modest increase, the budget is still insufficient to pay the Pentagon’s bills. In fact, the nation’s defense plans have become so chronically underfunded that most defense analysts dismiss the out-year projections in the Pentagon’s five- year budget plan as implausible. The news that the defense budget is inadequate to meet the nation’s security plans may come as a sur- prise to many Members of Congress who approved cuts in nearly 50 defense programs in FY 2010. Not- ing that the defense budget has been growing since 9/11, some observers argue that there should be no prob- lem. However, despite the post-9/11 budget increases, No. 2418 June 7, 2010 Talking Points This paper, in its entirety, can be found at: http://report.heritage.org/bg2418 Produced by the Douglas and Sarah Allison Center for Foreign Policy Studies of the Kathryn and Shelby Cullom Davis Institute for International Studies Published by The Heritage Foundation 214 Massachusetts Avenue, NE Washington, DC 20002–4999 (202) 546-4400 • heritage.org Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress. • The share of federal spending devoted to national defense has declined significantly. Despite increases after 9/11, the defense budget is still inadequate to pay the Pentagon’s bills. • Spending on the three major entitlements— Social Security, Medicare, and Medicaid—has more than tripled. Entitlements and interest on the debt are crowding out defense spend- ing and could soon consume every dollar of federal revenue. • There is a similar trend within the defense bud- get. The escalating cost of personnel compen- sation, retirement benefits, and military health care programs is crowding out such key func- tions as modernization and procurement. • As build rates decline, the defense sector is also losing economies of scale. Escalating prices for important input materials, fuel, and skilled man- ufacturing labor are imposing additional strains. • Congress must maintain current levels of defense spending and implement a compre- hensive reform agenda to prevent a debilitat- ing investment crisis in defense.
Transcript
U.S. Defense Spending: The Mismatch Between Plans and Resources
Mackenzie Eaglen
Abstract: President Barack Obama’s defense budgetrequest perpetuates a long-standing pattern of underfund-ing defense needs. Defense spending is already near his-toric lows, and the Administration’s budget would reduceit to levels unprecedented during wartime. Furthermore,Congress appears poised to repeat the past mistake ofpromptly disarming after major combat operations sub-side. Instead, Congress should maintain current levels ofdefense spending to allow the military to reset and recapi-talize. Congress needs to control entitlement growth, domesticspending, and public debt, which are beginning to threatennational security. Congress also needs to reform militarycompensation to ease strains within the defense budget.
President Barack Obama’s fiscal year (FY) 2011defense budget request1 would increase the defensetopline by between 1 percent and 2 percent in realterms. However, even with this modest increase, thebudget is still insufficient to pay the Pentagon’s bills.In fact, the nation’s defense plans have become sochronically underfunded that most defense analystsdismiss the out-year projections in the Pentagon’s five-year budget plan as implausible.
The news that the defense budget is inadequate tomeet the nation’s security plans may come as a sur-prise to many Members of Congress who approvedcuts in nearly 50 defense programs in FY 2010. Not-ing that the defense budget has been growing since9/11, some observers argue that there should be no prob-lem. However, despite the post-9/11 budget increases,
No. 2418June 7, 2010
Talking Points
This paper, in its entirety, can be found at: http://report.heritage.org/bg2418
Produced by the Douglas and Sarah Allison Center for Foreign Policy Studies
of theKathryn and Shelby Cullom Davis Institute for International Studies
Published by The Heritage Foundation214 Massachusetts Avenue, NEWashington, DC 20002–4999(202) 546-4400 • heritage.org
Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to
aid or hinder the passage of any bill before Congress.
• The share of federal spending devoted tonational defense has declined significantly.Despite increases after 9/11, the defense budgetis still inadequate to pay the Pentagon’s bills.
• Spending on the three major entitlements—Social Security, Medicare, and Medicaid—hasmore than tripled. Entitlements and intereston the debt are crowding out defense spend-ing and could soon consume every dollar offederal revenue.
• There is a similar trend within the defense bud-get. The escalating cost of personnel compen-sation, retirement benefits, and military healthcare programs is crowding out such key func-tions as modernization and procurement.
• As build rates decline, the defense sector is alsolosing economies of scale. Escalating prices forimportant input materials, fuel, and skilled man-ufacturing labor are imposing additional strains.
• Congress must maintain current levels ofdefense spending and implement a compre-hensive reform agenda to prevent a debilitat-ing investment crisis in defense.
No. 2418
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defense spending is still tight, and core defense capa-bilities are being shortchanged.1
Congress needs to acknowledge this problem andopenly confront the situation with realistic solu-tions. Congress can begin to address the mismatchbetween defense strategy and resources by provid-ing more predictable defense outlays, controllingdomestic spending, aligning military compensationwith the needs of a highly mobile 21st-centuryworkforce, increasing foreign military sales, andinstituting performance-based logistics. The gov-ernment’s obligation to provide for the commondefense deserves nothing less than policymakers’best efforts, not another period of disarmament aftermajor hostilities cease.
Strains on the Defense BudgetMost Americans believe the U.S. government
spends far more on defense than it actually does.Defense spending is near historic lows, however, andthe Administration’s proposed five-year budget planwould further reduce defense spending to levelsunprecedented during wartime. Between 2010 and2015, total defense spending is set to fall from 4.9 per-cent to 3.6 percent of gross domestic product (GDP),even though the nation has assigned more missions tothe military over the past two decades. This growingdisparity between funding and requirements is theprimary cause of the increasing strain on the defensebudget, but numerous other external and internal fac-tors also are contributing to the problem.
External sources of strain outside the Pentagon’scontrol include:
• Historical hangovers. Years of underinvestmentin defense, especially during the 1990s, have hadlasting effects on the defense program. Efforts toremedy the problem and play catch-up havebeen insufficient to rebuild the military.
• Crowding out by entitlements. The explodingcosts of domestic entitlements and health careare placing severe pressure on the defense bud-get. If their growth is left unchecked, they couldsoon consume every dollar of federal revenue,completely crowding out defense spending.
Internal strains include:
• Defense entitlements. Paralleling trends in thelarger federal budget, key defense spending prior-ities are being overtaken by escalating personnelcompensation costs, including numerous de-ferred and in-kind benefits. Modernization fundsfor new planes, ships, aircraft, vehicles, and otherweapons systems are being hit the hardest.
• Shrinking economies of scale and defenseinflation. Military modernization accounts areunder further duress because the cost of militaryequipment is rising faster than the overalldefense budget and outpacing inflation in thewider economy. The problem is caused largelyby declining build rates and lost economies ofscale. Other factors include the rising costs offuel, input materials, labor, and increasinglycomplex systems.
Unless Congress addresses these unsustainabletrends in the larger federal budget and within thedefense budget itself, these problems could rein-force one another, devastating military moderniza-tion by forcing another procurement holiday. Thiswould severely reduce the military’s fighting capa-bility for decades to come.
America’s defense investment crisis may havealready begun. Modernization funding (the pro-curement account plus the research, development,test, and evaluation account) is projected to stagnatein FY 2011 and then decline in subsequent years.Planned defense cuts over the next five years willexacerbate the problem, further reducing buildrates, overall efficiency and possibly shrinkingcompetition further. However, before addressingdefense spending imbalances, Congress should firstensure that it has correctly identified and definedthe problem.
1. Supporting documents submitted by the Administration included the Future Years Defense Program (FYDP), long-term shipbuilding and aviation plans, and the Quadrennial Defense Review.
_________________________________________
Before addressing defense spending imbalances, Congress should first ensure that it has correctly identified and defined the problem.
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No. 2418 June 7, 2010
External Causes of Defense Budget Erosion
In 1994, in a seminal paper on defense planning,defense analyst Kevin Lewis charted “a topline viewof our budget history.”2 Chart 1 updates this exer-cise and presents an overview of total spending onnational defense between 1940 and 2015 in con-stant FY 2005 dollars.3
The defense topline reveals disturbing trends.As Lewis pointed out more than a decade ago, thedefense budget experienced “slow erosion” dur-ing most periods of recent U.S. history, inter-spersed with event-driven booms. Unsurprisingly,these swings in the defense budget have under-mined the development of a stable, coherent defenseprogram designed with sufficient regard for thelong term.
World War II, the Korean War, the Vietnam War,the Cold War, and the attacks on September 11each prompted sharp increases in defense spend-ing. The resulting defense hikes were necessarybecause they were preceded by periods of inade-quate investment, which produced military short-comings that were often fully exposed only whentroops entered combat.
During each war, the bulk of the new spendingwent toward the specific mix of capabilitiesrequired to prevail in the contingency of the day.For example, Lewis notes that Washington pro-cured large numbers of fighter jets during someyears of budget plenty, but these systems reachedthe end of their service lives at the same time, pro-ducing a requirement for a major investment initia-tive to prevent inventory obsolescence.4 Inadequatemeasures to stabilize the force will produce predict-able capability shortfalls in the near future.
Today’s looming tactical fighter deficits in theNavy, Marine Corps, and Air Force illustrate howerratic defense spending can impose larger, deferredcosts on taxpayers. In 2008, Air Force officials pro-jected a fighter shortfall of up to 800 aircraft by2024, and Navy officials projected a shortfall of upto 200 aircraft by 2018.5 Although more optimisticstudies project smaller shortfalls, the Pentagon’splans to narrow the fighter gap will probably proveto be too little too late.
After each war-driven boom, the defense bud-get has experienced an extended period of decline.In May 2007, U.S. Secretary of Defense RobertGates explained:
Five times over the past 90 years—after theFirst and Second World Wars, Korea, Viet-nam and most recently after the Cold War—the United States has slashed defense spend-ing or disarmed outright in the mistakenbelief that the nature of man or the behaviorof nations had changed with the end of eachof the wars, or that somehow we would notface threats to our homeland or would notneed to take a leadership role abroad.6
Time and again, policymakers have tended toneglect defense absent immediate, manifest threatsto U.S. interests, and Americans and their militarypersonnel have repeatedly paid the price of beingless prepared.
Common sense dictates that the Pentagonshould take advantage of peacetime lulls to replacedamaged or destroyed equipment, to modernizelegacy systems, and to purchase next-generationreplacements to avoid predictable shortfalls infuture force structure. Yet most Administrationshave failed to do so.
2. Kevin N. Lewis, “The Discipline Gap and Other Reasons for Humility and Realism in Defense Planning,” chap. 5 in Paul K. Davis, ed., New Challenges for Defense Planning: Rethinking How Much Is Enough (Santa Monica, Calif.: RAND Corporation, 1994), p. 104.
3. Spending levels for FY 2011 through FY 2015 are based on the Obama Administration’s budget projections.
4. Lewis, “The Discipline Gap,” p. 113.
5. Ronald O’Rourke, “Navy-Marine Corps Strike-Fighter Shortfall: Background and Options for Congress,” Congressional Research Service Report for Congress, May 12, 2008, p. 4, at http://www.fas.org/sgp/crs/weapons/RS22875.pdf (April 15, 2010).
6. Robert Gates, remarks to the Greater Dallas Chamber of Commerce, May 3, 2007, at http://www.defense.gov/transcripts/transcript.aspx?transcriptid=3956 (April 15, 2010).
No. 2418
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June 7, 2010
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No. 2418 June 7, 2010
Procurement Holiday. The most recent periodof slow erosion was the “procurement holiday” dur-ing the 1990s. With bipartisan support in Congress,the Clinton Administration drastically cut defensespending after the collapse of the Soviet Union inthe overly optimistic belief that an era of relativepeace would ensue. Purchases of new weapons fellparticularly sharply, resulting in a near freeze in thedevelopment of new planes, ships, and vehicles.Indeed, the U.S. did not purchase a single tacticalfighter jet in 1995.7 Unsurprisingly, the U.S. mili-tary shrank by one-third across the board, and theaverage ages of most major platforms doubled.
This is the military that went to war in Afghani-stan and Iraq after 9/11 and is still deployed today. Itis essentially the military that Ronald Reagan built.
During the 1990s, policymakers chose to investin service-life extensions of Reagan-era platformsinstead of new equipment. This increased the billfor maintenance, repairs, and upgrades but onlydelayed (and increased) the bill for modernization.Weapons systems can be patched up for only so longbefore they retire completely. Equipment eventuallyfalls apart, breaks down, or becomes too hazardousand costly to use. The 1990s modernization hiatusmerely deferred the cost of replacing aging plat-forms that were built in the 1970s and 1980s—evenwhile the need for replacements remained constant.
Under President George W. Bush, the defensebudget grew significantly after the 9/11 terroristattacks, but the bulk of the increase was consumedby operations in Afghanistan and Iraq. The relent-less demands of wartime operations forced theAdministration to prioritize endstrength growthand investment in counterinsurgency capabilities
while capping investment in resetting the force anddeveloping new capabilities. As a result, the U.S.military has yet to fully recover from its procure-ment hangover during the 1990s.
Inaccurate Cost Estimates, Poor Planning,and Systematic Underfunding. Another deficiencyin the defense planning process is the systematictendency of planners to underestimate costs andrequirements. This leads Congress to appropriateinadequate funding at the front end of procurementprograms, which results in unexpected, unbud-geted costs later in the process.
Stephen Daggett, a specialist in defense policyand budgets at the Congressional Research Service(CRS), has testified before Congress about howdefense cost estimation has become far less accuratein recent years:
On average, in 2000, DoD underestimatedthe R&D cost of weapons programs byabout 27 percent, which in itself is not verygood. But, in 2007, they underestimatedR&D costs by an average of 44 percent. Ifyou look at it from the point of view of theimpact on the overall budget, cost growth inthe 2007 inventory of major weapons is pro-jected now to total about $300 billion,which is more than a year’s worth of weap-ons acquisition, and it is about 18 percentcost growth over initial projections. So, ineffect, we are losing…our ability to acquirealmost one-fifth of the weapons we plan tobuy because we underestimate cost.8
Lowball cost estimates are symptoms of thegovernment’s wider inability to examine the futureand make accurate predictions about defense invest-ment. Granted, many of today’s weapons systems,such as bombers, were built decades ago for differentmissions and have since been adapted to irregularwarfare operations in Iraq, Afghanistan, and otherplaces. However, as Lewis cautioned in 1993, his-
7. See Congressional Budget Office, “Total Quantities and Unit Procurement Cost Tables 1974–1995,” April 13, 1994, p. A8, at http://www.cbo.gov/ftpdocs/75xx/doc7535/94doc02b.pdf (April 15, 2010), and Congressional Budget Office, A Look at Tomorrow’s Tactical Air Forces, January 1997, p. xviii, at http://www.cbo.gov/ftpdocs/75xx/doc7539/97doc29.pdf (April 15, 2010).
8. Stephen Daggett, in hearing, Long-Term Sustainability of Current Defense Plans, Committee on the Budget, U.S. House of Representatives, 11th Cong., 1st Sess., February 4, 2009, at http://0-www.gpo.gov.library.colby.edu/fdsys/pkg/CHRG-111hhrg11147035/html/CHRG-111hhrg11147035.htm (March 2, 2010).
_________________________________________
The U.S. military has yet to fully recover from its procurement hangover during the 1990s.
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tory suggests that the U.S. frequentlyunderestimates the forces needed forcontingencies while overestimatingthe capabilities generated by itsdefense programs.9 The U.S. also hasa poor record of predicting and pre-paring for emerging security threats.
Exploding Entitlements andInterest Payments. Although theboom-and-bust defense pattern hasbecome relatively routine over thepast six decades, the next bust may beparticularly deep given America’s direfiscal position and runaway spend-ing. The rapid expansion of domesticentitlements, the recent passage ofcostly health care legislation, and theunprecedented growth of public debtare certain to create extraordinarypressure for further cuts in thedefense budget.
These cuts would come at a timewhen defense’s share of the federalbudget is already shrinking. Defenseclaimed almost 90 percent of the fed-eral budget during World War II, 70percent during the Korean War, about50 percent during Vietnam, and about30 percent during the Cold War.Today, defense accounts for less than20 percent of the federal budget and isfalling. President Obama’s budget planwould reduce defense spending tojust 15.6 percent in FY 2015, beforeaccounting for the effects of health care reform.10
The substantial decline in the defense share ofthe budget largely reflects the dramatic growth ofentitlement spending. Entitlements now accountfor around 65 percent of all federal spending anda record 18 percent of GDP.11 The three largestentitlements—Social Security, Medicare, and
Medicaid—eclipsed defense spending in 1976and have been growing ever since. If future taxesare held at the historical average, these three enti-tlements will consume all tax revenues by 2052,leaving no money for the government’s primaryconstitutional obligation: providing for the com-mon defense.12
9. Lewis, “The Discipline Gap,” p. 103.
10. Heritage Foundation calculations based on U.S. Office of Management and Budget, Historical Tables, Budget of the United States Government, Fiscal Year 2011 (Washington, D.C.: U.S. Government Printing Office, 2010), pp. 90–104, Table 5.1, and pp. 210–211, Table 10.1, at http://www.whitehouse.gov/omb/budget/fy2011/assets/hist.pdf (May 17, 2010).
11. Ibid., pp. 56–76, Table 3.2.
0%
1940 1950 1960 1970 1980 1990 2000 2010 2015
20%
40%
60%
80%
100%
As a Percentage of GDP
As a Percentage of Federal
Budget
3.6%
15.6%
heritage.orgChart 2 • B 2418
Defense’s Share of the Federal Pie and Economy Has Been Declining
Source: U.S. Office of Management and Budget, Historical Tables, Budget of the United States Government, Fiscal Year 2011 (Washington, D.C.: U.S. Government Printing Office, 2010), pp. 47–55, Table 3.1, at http://www.whitehouse.gov/omb/budget/fy2009/pdf/hist.pdf (March 2, 2010).
National Defense Spending
(estimate)
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No. 2418 June 7, 2010
Furthermore, with deficits at recordlevels and interest payments on thenational debt set to rise at a real rate of13 percent annually over the next 10years, interest payments could reach$725 billion and exceed defensespending by 201813 if not sooner.
With so much of the federal bud-get allocated to mandatory spending,this Administration—like othersbefore it—will increasingly look tonational defense as a bill payer.Roughly half of the Obama Adminis-tration’s $17 billion in governmentspending cuts for FY 2010 wasfound in the defense budget. Thesecuts included reductions in or termi-nations of 16 major programs andnumerous smaller ones.14
Defense is often seen by policy-makers as an attractive pot of cashthat can be raided without obviousor immediate consequence. Ofcourse, in the long run, lowerdefense spending leads to a smallerforce, reduced troop readiness,longer deployment times, less capa-ble weapons systems, and ultimatelythe de facto or overt abandonmentof America’s security commitmentsaround the world.
Internal Causes of Defense Budget Imbalance
Trends within the defense budget parallel thosein the wider federal budget. In the 1990s, defenseanalysts noted that overhead costs for functionssuch as operational support, health care, basingstructure, and administration (overhead) wereaccounting for increasing shares of the total bud-
get.15 The pattern has only become more pro-nounced in the past decade.
Unsustainable Growth in the Operations andSupport Accounts. The portion of the defense bud-get devoted to operations and support (O&S), whichincludes the military personnel account and the oper-
12. Heritage Foundation, 2010 Budget Chart Book: The Federal Budget in Pictures, April 2010, p. 34, at http://www.heritage.org/BudgetChartBook/ (April 15, 2010).
13. Todd Harrison, “Avoiding a DOD Bailout,” Center for Strategic and Budgetary Assessment, October 2009, at http://www.csbaonline.org/4Publications/PubLibrary/W.20091021.Avoid_Bailout/W.20091021.Avoid_Bailout.pdf (March 1, 2010).
14. D. Andrew Austin and Mindy R. Levit, “Trends in Discretionary Spending,” Congressional Research Service Report for Congress, July 10, 2009, p. 6, at http://assets.opencrs.com/rpts/RL34424_20090610.pdf (March 2, 2010).
Entitlement Spending Is Encroaching on the Defense Budget
Source: U.S. Office of Management and Budget, Historical Tables, Budget of the United States Government, Fiscal Year 2011 (Washington, D.C.: U.S. Government Printing Office, 2010), Tables 8.4, 8.5, and 10.1, at http://www.whitehouse.gov/omb/budget/fy2009/pdf/hist.pdf(March 2, 2010).
Spending as a Percentage of GDP
4.9%4.9%
9.6%9.6%
4.9%
9.6%
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ation and maintenance (O&M) account, is expectedto grow to 64.5 percent of the total defense budget in2011 and 72 percent by 2028. This is more than dou-ble the share allocated to military modernization.16
The imbalance stems in large measure from thegrowing cost of compensating America’s all-volunteerforce. The cost of paying the military, particularlydeferred and in-kind benefits that are often unfundedentitlements, is rising unsustainably despite onlymarginal increases in the number of ground force
troops and recent reductions in Navy and Air Forceendstrength. If these benefits continue to grow whilethe overall defense budget remains flat, fundingthem will require taking ever more money frommodernization programs to pay personnel.
The Congressional Budget Office (CBO) projectsthat the situation will only grow worse. Between 2010and 2028, the military personnel account is projectedto increase from $136 billion to $178 billion (in con-stant 2010 dollars), and the O&M account is pro-jected to grow from $188 billion to $247 billion. Atthe same time, modernization accounts will stagnateor fall in real terms.17 In a recent conference call withdefense analysts, Under Secretary of Defense (Comp-troller) Robert Hale confirmed that the Department ofDefense (DOD) may need to rob modernization tocover O&M growth,18 essentially mortgaging thefuture force to pay for present needs.
Escalating Cost of Military Benefits. Militarymedical programs account for almost half of therecent growth in O&S funding. The CBO estimatesthat real spending on medical programs will morethan double under the Pentagon’s current plans,from $44 billion in 2009 to $90 billion in 2028, faroutpacing inflation in the wider economy. Pharma-ceutical spending alone will increase by about 120percent, direct care costs by more than 90 percent,and the cost of purchased care and contracts byaround 125 percent.19 As has often happened in thedefense budget and in the U.S. economy, medicalcosts could rise even faster than anticipated.
Over the past decade, Congress has added newpension benefits and authorized large pay increases,all of which are contributing to rising personnelcosts. For example, retirement pay for military per-sonnel who retire after 20 years of service wasincreased in 2000 from 40 percent to 50 percent ofa servicemember’s basic pay. In addition, the FY2000 defense authorization bill enacted TriCare for
16. U.S. Office of Management and Budget, Historical Tables, p. 94, Table 5.1, and Congressional Budget Office, “Long-Term Implications of the Fiscal Year 2010 Defense Budget,” January 2010, p. 2, at http://www.cbo.gov/ftpdocs/108xx/doc10852/01-25-FYDP.pdf (March 2, 2009).
17. Congressional Budget Office, “Long-Term Implications of the Fiscal Year 2010 Defense Budget,” p. 2.
18. Robert Hale, Defense Department Conference Call Briefing, February 4, 2010, p. 6.
19. Congressional Budget Office, “Long-Term Implications of the Fiscal Year 2010 Defense Budget,”, p. 9 and 14–16.
$50
2010 2028
$100
$150
$200
$250
$109
$79
$136
$188
$115
$54
$178
$247 Operations and Maintenance
Personnel
Procurement
Research, Development, Test, and Evaluation
heritage.orgChart 4 • B 2418
Shifting Balance in the Defense Budget
Source: Congressional Budget Office, “Long-Term Implications of the Fiscal Year 2010 Defense Budget,” January 2010, at http://www.cbo.gov/ ftpdocs/108xx/doc10852/01-25-FYDP.pdf (March 17, 2010).
Defense Resources, in Billions of 2010 Dollars
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Life, expanding health care coverage for militaryretirees and their families.20
The retirement annuity for surviving spouses ofservicemembers was also increased from 35 percentto 55 percent of the deceased’s retirement pay,21 andthe retirement age for some members of the ReserveComponent has been lowered to 60. The costs ofthese benefit expansions are compounded by mili-tary pay increases. As the CBO points out, “higherbasic pay today leads to higher projections of futureannuities, in turn requiring larger payments todayfrom the military personnel accounts into the retire-ment fund.”22
Military pay raises are automatically linked to theEmployment Cost Index, an index of wage growth inthe private sector, but Congress authorized additionalwage increases on many occasions in the past decadein an attempt to reward the all-volunteer force for ser-vice during protracted wars and to reduce the per-
ceived civil–military “pay gap,” which has since beeneliminated. The long-term result, however, has been asignificant increase in the cost of compensation bene-fits that are indexed to basic pay. While these payincreases were necessary (and certainly deserved) torecruit and retain the all-volunteer force, many werenot enacted under budget rules to ensure that theywere paid for in future years.
High Wartime Operations Tempo. Constantwartime deployments of manpower and materielfor missions in Afghanistan and Iraq are anotherinternal strain on defense budgets. An increasinglylarge portion (60 percent, according to the DODComptroller) of the account for overseas contin-gency operations (OCO) is paying for maintenance,replacements, repairs, and other costs associatedwith a higher-than-usual pace of operations.23
According to the Center for Strategic and Inter-national Studies, the projected costs of replacingvehicles, armor, and helicopters already exceed theArmy’s budget by billions of dollars each year.24
The outlook will only grow darker for the services,particularly ground forces, whose leaders have longtold Congress that the cost of resetting the forcewill remain significant after major combat opera-tions subside.
During numerous budget hearings, members ofthe Joint Chiefs have testified repeatedly that theservices will continue to need billions of dollars forat least three years after operations in Iraq concludeto repair and replace equipment damaged duringcombat operations. Marine Corps Commandant
20. Ibid., p. 11.
21. Ibid., p. 12.
22. Ibid.
23. Ibid., p. 4.
24. David Berteau, “Fixing the Shortfalls: Defense Budget Trends and Long Term Impact,” Center for Strategic and International Studies, Defense Industrial Initiatives Group Current Issues No. 19, December 14, 2009, at http://csis.org/publication/diig-current-issues-no-19-fixing-shortfalls-defense-budget-trends-and-long-term-impact (May 17, 2010).
$02010 2013 2020 2028
$20
$40
$60
$80
$100
$46
$90
$70
heritage.orgB 2418
Projected Military Medical Costs
Source: Congressional Budget Office, “Long-Term Implications of the Fiscal Year 2010 Defense Budget,” January 2010, at http://www.cbo.gov/ ftpdocs/108xx/ doc10852/01-25-FYDP.pdf (March 17, 2010).
In Billions of 2010 Dollars, Adjusted for Inflation
$54$54$54
_________________________________________
The services will continue to need billions of dollars for at least three years after operations in Iraq conclude to repair and replace equipment damaged during combat operations.
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General James Conway testified in February 2008,“Reset funding has partially alleviated this strain,but continued funding is needed as we are simplyrunning short of aircraft on our flight lines due toage, attrition, and wartime losses.” While reset pro-grams have helped to mitigate degradation of air-craft readiness through modifications, proactiveinspections, and additional maintenance actions,the additional requirements for depot-level mainte-nance on airframes, engines, weapons, and supportequipment will continue well beyond the conclu-sion of hostilities.25
The Costs of Maintaining an Aging Force. Inaddition to the wartime damage sustained by mili-tary equipment, ordinary aging imposes significantcosts. As the average ages of many planes, ships,and vehicles increase, so does the cost of maintain-ing and repairing them.
One example is the KC-135 Stratotanker. Vari-ous press reports have discussed the high cost ofmaintaining this old platform.26 These tankers werebuilt during the Eisenhower Administration, andmany are more than 50 years old. They are oftengrounded because of leaks or broken parts, some-times for weeks as Air Force engineers cannibalizeold tankers for spare parts or recreate them fromscratch. Old systems like KC-135 tankers are anadditional drain on resources because they are lessfuel efficient than newer platforms.
Another example is the Army’s ground combatvehicle fleet. With the cancellation of its FutureCombat Systems program, the Army will need toupgrade its entire fleet of medium-weight combatvehicles at an annual cost of $200 million from2010 through 2021. Revitalizing the aging Abramstanks and Bradley vehicles will cost an additional $2billion annually.27 Production of a new ground
combat vehicle is not scheduled to begin for aboutseven years.
This is a common story across the services.Scarce defense funds are being used to maintain,repair, upgrade, and fuel old platforms that badlyneed to be replaced by more efficient next-genera-tion systems. While patching up older systems mayappear to save money up front, replacing them out-right often brings its own savings through reducedcrew size, more efficient energy usage, more capa-ble and advanced technology, and better network-ing capabilities.
War Funding Shifts to the Core Defense Bud-get. The defense budget will endure additionalstrain as select funding from the OCO budget iscontinuously shifted into the base defense budget.The Pentagon’s FY 2011 defense budget overviewexplains that war funding requests will no longer beused to make up for base budget shortfalls and thatcertain types of funding have been moved fromOCO requests to base budget requests. The docu-ment states further that the Defense Department“will explore additional OCO-to-base shifts infuture budgets.”28
Of particular note is the outright confession byPentagon leaders that the base defense budget hasshortfalls in the first place. While moving away fromusing emergency supplementals to fund the warsoverseas is a positive procedural development, thecore defense budget cannot fully absorb all of theexcess warfighting costs unless its topline isincreased accordingly. The defense budget processis already zero-sum, and irresponsibly shifting OCObills without providing adequate funding to pay forthem will further reduce each account’s share of thedefense budget.
25. General James T. Conway, “The Posture of the United States Marine Corps,” statement before the Committee on Armed Services, U.S. Senate, February 28, 2008, p. 8, at http://armed-services.senate.gov/statemnt/2008/February/Conway%2002-28-08.pdf (May 17, 2010).
26. Andrea Stone, “Aging Air Force Tankers Fly on Leaky Wings and Prayer,” AOL News, February 22, 2010, at http://www.aolnews.com/nation/article/air-forces-ancient-tankers-limp-along-as-bidding-fornew-35-billion-fleet-looms/19364619 (March 1, 2010).
27. Congressional Budget Office, “Long-Term Implications of the Fiscal Year 2010 Defense Budget,” p. 23.
28. U.S. Department of Defense, “Fiscal Year 2011 Budget Request: Overview,” pp. 3–4 and 6–10, at http://comptroller.defense.gov/defbudget/fy2011/FY2011_Budget_Request_Overview_Book.pdf (April 15, 2010).
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Rising Unit Costs and Lost Economies of Scale.Within the procurement account, defense inflation—the rising unit costs of defense platforms—is an addi-tional source of pressure. Military equipment isbecoming more expensive primarily because it isbecoming increasingly advanced technologically.Other cost drivers include a shrinking workforce inthe design, engineering, and manufacturing sectorsand soaring prices for input materials, including cer-tain metals. In addition, per-unit overhead costs atproduction facilities have increased as the total num-ber of units produced has declined. The overall resultin the shipbuilding industry, for example, has beenthat “the cost of building ships has been rising about1.4 percent faster per year than the prices of finalgoods and services in the U.S. economy.”29
Generally, the military services have respondedto rapid cost growth by reducing procurement rates,thereby creating a vicious cycle. For example, dur-ing the 1980s, the Navy purchased more than 17ships per year at an average cost of $1.2 billion (in2009 dollars) per ship. By the 2000s, the averagecost had increased to $2.0 billion per ship for aboutsix ships per year.30
Falling procurement has then fed back into acycle of further cost growth as defense productionhas suffered from economies of scale. As formerSenator Jim Talent has explained:
The Defense Department regularly projectswhat it intends to buy in the out years of itsdefense plan, but then institutes last-minutecuts, changes, and delays that allow it tomeet annual budget targets but increase pro-gram costs in the long run. The Navy, forexample, originally planned to buy a total of32 DDG-1000s—the Navy’s next-generationmulti-mission destroyer. A few years later,Navy officials said the military requirementshad dropped to only eight to twelve destroy-ers, and the most recent Navy plan now calls
for a total of only seven. It is no coincidencethat over the same period, due to the loss ofeconomies of scale, the cost per destroyerhas increased.31
In turn, increasing costs have reduced acquisi-tion plans even further, perpetuating the dysfunc-tional cycle at enormous cost and with significantconsequences for the force. While purchasing moreadvanced equipment can offset Pentagon decisionsnot to replace systems on a one-for-one basis, thereare limits to this approach. At some point, sheernumbers outweigh the advantages of advancedcapabilities because each ship, plane, and vehiclecan be in only one place at one time. If the U.S.intends to continue fulfilling its commitmentsaround the globe, increasing capability alone is notenough. It must be backed by a sufficient quantityof next-generation systems.
29. Eric J. Labs, “The Long-Term Outlook for the U.S. Navy’s Fleet,” statement before the Subcommittee on Seapower and Expeditionary Forces, Committee on Armed Services, U.S. House of Representatives, January 20, 2010, p. 5, at http://www.cbo.gov/ftpdocs/108xx/doc10877/01-20-NavyShipbuilding.pdf (May 19, 2010).
30. Ibid., p. 4.
31. Jim Talent, “More: The Crying Need for a Bigger U.S. Military,” Heritage Foundation Commentary, February 20, 2007, at http://www.heritage.org/Research/Commentary/2007/02/More-The-crying-need-for-a-bigger-US-Military (April 15, 2010).
$1.01980s 1990s 2000s 1980s 1990s 2000s
$1.5
$2.0
$2.5
5
10
15
20
7.4
heritage.orgChart 6 • B 2418
Rising Costs Have Prompted a Drop in Procurement Rates and Vice Versa
Source: Eric J. Labs, “The Long-Term Outlook for the U.S. Navy’s Fleet,” testimony before the Subcommittee on Seapower and Expeditionary Forces, Committee on Armed Services, U.S. House of Representatives, January 20, 2010, p. 4, at http://www.cbo.gov/ftpdocs/108xx/doc10877/01-20-NavyShipbuilding.pdf (March 1, 2010).
Average Cost per Ship(Billions of 2009 Dollars)
Average Number of Ships Purchased per Year
$1.2$1.2
$1.5$1.5
$2.0$2.0
17.217.2
6.06.0$1.2
$1.5
$2.0
17.2
6.0
No. 2418
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After more than a decade and millions of dollarsin funding, only three DDG-1000s are being built.Recent defense procurement is replete with similarexamples of programs that have been terminatedshort of originally planned numbers or that haveentered the dreaded defense “death spiral.” TheArmy’s Future Combat Systems program, the pro-gram to replace OH-58D Kiowa helicopters, theMarine Corps’ Osprey program, and the F-22 tacti-cal fighter program have been truncated or elimi-nated, largely as a result of unbudgeted cost growth.Ultimately, all of these programs have suffered fromdisconnects between the Defense Department’s pro-posed plans and annual budgets.
Acquisition Reform Without SignificantProcurement Account Growth. For more than acentury, think tanks and congressional oversightbodies have produced numerous studies onacquisition problems. Regrettably, many of thechanges implemented to streamline the defenseacquisition system have instead added layers ofregulations and complex requirements that havemade the process less competitive, more costly,and more cumbersome. For the most part, theseefforts have failed to rein in costs or alleviateschedule delays. Instead, additional layers of redtape, combined with a growing number of person-nel to oversee a declining number of new pro-grams, have only exacerbated cost increases andschedule delays32 without adding accountabilityto the process.
Delays and cost overruns that were often theresult of government changes, not contractor inabil-ities, have the added consequence of making weap-ons systems easy political targets. Meanwhile, theunderlying causes of cost growth—such as barriersto entry in the defense market and excessivelydemanding regulations and standards—are oftenpoorly understood.
The favored solution of many policymakers,including those in the Obama Administration, isoften simply to slash “underperforming” programs.In the long run, cutting or delaying programs toreap savings has often been spectacularly counter-productive. Overhead costs have remained high andbureaucracies have often increased despite fallingproduction rates. Former Secretary of the NavyJohn Lehman illustrates the point:
There were about 1,000 people in theBureau of Ships during World War II…. Andthey were the ones that mainly ran the ship-building program—not micromanaged thecontractors, but developed and did the sys-tems integration and oversaw the program.Through World War II, they built on averageabout a thousand ships a year. That’s oneship per person.
Now in my day, there were 4,000 people inthe Bureau of Ships, and we averaged 28ships a year.
…Today, we’re averaging about 6 to 7 ships ayear, and there are 25,000 people in theequivalent of the Bureau of Ships. That’s awhole Pentagon-load of people in the Bureauof Ships. Now they’re scattered all over thecountry in different offices and functions,but the numbers are—you can get into lotsof quibbles about it—but the numbersincreased, 1,000; 4,000; 25,000 as the num-bers of ships decline precipitously.
And so what’s the answer? Reform? We havea new budget that will add 20,000 additionalcivil servants to oversee the already-bloatedlayers of bureaucracy that are there today.33
Recently, Pentagon leaders have expressed somepolitical will to remove red tape and loosen protec-tionist arms trade restrictions that have helped toinflate costs,34 but more must be done. Any effec-
32. See Moshe Schwartz, “Defense Acquisitions: How DOD Acquires Weapon Systems and Recent Efforts to Reform the Process,” Congressional Research Service Report for Congress, July 10, 2009, p. 13 at http://www.fas.org/sgp/crs/natsec/RL34026.pdf (March 2, 2010).
33. John Lehman, “What the Navy Should Look Like,” address at Hudson Institute Conference, “Don’t Give up the Ships: A Look at a 200-Ship Navy,” May 22, 2009.
34. See John Bennett, “Obama Administration Renews Export Control Reform Push,” Defense News, April 15, 2010, at http://www.defensenews.com/story.php?i=4584876 (April 19, 2010).
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tive acquisition reform efforts must be paired withincreased procurement funding to buy moreneeded systems.
America’s Defense Budget Gap. The biggestproblem by far is the growing mismatch betweendefense resources and plans. One side of the polit-ical spectrum often argues that the Pentagon’splans are too broad. The other side states thatdefense budgets are too low. From both perspec-tives, it should be obvious that there is a huge andgrowing disconnect.
Dr. Michael O’Hanlon, a defense budget expertat the Brookings Institution, has observed that Pres-ident Obama’s 2010 defense budget plans are“insufficient to support the national security estab-lishment over the next five years.” O’Hanlon arguesthat by adopting a policy of zero real growth in thebase budget, the Administration will leave the U.S.military with a cumulative requirement gap ofabout $150 billion between 2010 and 2014.35 Inexplaining this, O’Hanlon identifies many of thepressures discussed above:
For the Defense Department to merelytread water a good rule of thumb is that itsinflation-adjusted budget must grow about2 percent a year (roughly $10 billion annu-ally, each and every year). Simply put, thecosts of holding on to good people, pro-viding them with health care and otherbenefits, keeping equipment functional,maintaining training regimes, and buyingincreasingly complex equipment tend to growfaster than inflation.36
Similarly, Travis Sharp of the Center for a NewAmerican Security has noted that Congress willneed to “increase defense spending and to keep itelevated for most of the next two decades…to exe-cute existing initiatives.”37 Sharp elaborates that“the DoD base budget must average 567 billion dol-lars per year between 2011 and 2028 in order tocarry out current plans.”38
Taking unbudgeted costs into account, a recentCBO report estimated an even larger shortfall. Itcalculated that carrying out DOD plans for 2010and beyond could require an annual base budgetof $632 million (in 2010 dollars) through 2028—a figure 18 percent higher than current 2010 fund-ing levels.39
The persistent mismatch between defense plansand budgets translates into gaps in each of the mil-itary services’ capabilities. CSIS estimates that“today’s shortfalls in the Army alone may exceed thesize of the entire Army budget pre-9/11.”40 Con-gressional Research Service analyst Stephen Daggettestimates that the Army’s requirement gap isbetween $30 billion and $40 billion and has testi-fied that the Navy’s shipbuilding plans and AirForce’s aviation plans are similarly underfunded.41
The immediate consequence is that many high-priority defense programs are being cut or can-celled because of artificial budget constraints, notbecause of changing military requirements. OnFebruary 22, Representative Howard P. “Buck”McKeon (R–CA) released the services’ lists ofunfunded priority programs. They totaled $548million for the Air Force, $359 million for the
35. Michael O’Hanlon, “Obama’s Defense Budget Gap,” The Washington Post, June 10, 2009, at http://www.washingtonpost.com/wp-dyn/content/article/2009/06/09/AR2009060902647.html (February 4, 2010).
36. Ibid.
37. Travis Sharp, “Vision Meets Reality: 2010 QDR and 2011 Defense Budget,” Center for a New American Security Policy Brief, February 2010, p. 5, at http://www.cnas.org/files/documents/publications/2011DefenseBudget_Sharp_Feb2010_code904_policybrf_1.pdf (March 2, 2010).
38. Ibid.
39. Congressional Budget Office, “Long-Term Implications of the Fiscal Year 2010 Defense Budget,” p. 1.
40. Berteau, “Fixing the Shortfalls,” p. 2.
41. Daggett, in hearing, Long-Term Sustainability of Current Defense Plans. See also Hearing to Receive Testimony on the Department of the Air Force in Review of the Defense Authorization Request for Fiscal Year 2009 and the Future Years Defense Program, Committee on Armed Services, U.S. Senate, 110th Cong., 2nd Sess., March 5, 2008, at http://armed-services.senate.gov/Transcripts/2008/03%20March/A%20Full%20Committee/08-17%20-%203-5-08.pdf (March 2, 2010).
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Army, $532 million for the Navy, and $351 millionfor the Marine Corps.42 The long-term conse-quence is that the Defense Department is failing tobuild the capabilities that it has long identified asnecessary to defend America’s interests.
Solving the ProblemClosing the gap between the Defense Depart-
ment’s modernization requirements and the fund-ing allocated by Congress will require honestlyassessing the underlying causes and repudiatingfailed solutions. Congress should specifically rejectdefense program cuts masked as acquisition reform.
In March, Deputy Defense Secretary WilliamLynn touted the cancellation of seven major programs,including the C-17 cargo aircraft and the alternateengine for the Joint Strike Fighter, as major acquisi-tion reform successes.43 Killing programs is a simpleway to show immediate dollar savings, but it willnot change how the military actually buys equip-ment or address underlying problems. Furthermore,cutting current investment in next-generation sys-tems will simply balloon future bills. It will alsoexpose servicemembers to greater risks on the bat-tlefield and further reduce the military’s capabilities.
Instead of temporary measures to reduce today’soutlays, Members should pursue true reforms thatwill restructure troubled programs and restore long-term efficiencies. Congress should take steps designedto alleviate each of the budget pressures identified,taking into account competing demands for the mar-ginal defense dollar and prioritizing the maintenanceand improvement of core defense capabilities.
To ensure that resources are allocated wisely,Congress should:
• Smooth the defense budget peaks and valleysthrough more predictable outlays. Through itsannual budget resolutions, Congress should sus-tain a defense topline that outpaces inflation forat least three years after the wars in Iraq andAfghanistan subside. Members should pursuethis even though it will likely require addingfunding to the President’s annual budget request.This is particularly important given that a flatdefense budget is really a declining defense bud-get because the cost growth of personnel andO&M typically outpaces inflation by 3 percent to8 percent annually.
Furthermore, when current operations winddown, Congress will likely be pressured to cutdefense spending, but reducing the budget atthat time will prevent the armed forces fromresetting and recapitalizing effectively. The Pen-tagon will also need to broaden military trainingand modernize aging systems with next-genera-tion programs. Relieving the strains of wartimedeployments will give the Pentagon greater flex-ibility in a stable, predictable defense budget toimprove overall readiness levels and developcoherent programming plans.
• Control entitlement growth, domestic spend-ing, and public debt. Congress urgently needsto begin substantively addressing entitlementreform as a national security challenge, both forthe sake of the government’s fiscal health and tofulfill the government’s constitutional responsi-bility to provide for the common defense. Neces-sary reforms include gradually raising theretirement age to reflect longer life expectanciesand reducing Medicare subsidies for upper-income taxpayers.44
42. Press release, “McKeon Releases Unfunded Priorities Lists for the Military Services,” Committee on Armed Services, U.S. House of Representatives, February 22, 2010, at http://republicans.armedservices.house.gov/News/PRArticle.aspx?NewsID=905 (March 2, 2009).
43. William Lynn, statement before the Committee on the Budget, U.S. House of Representatives, March 4, 2010, pp. 3–4, at http://budget.house.gov/hearings/2010/03.04.2010%20Lynn_testimony.pdf (May 17, 2010).
44. J. D. Foster, “A First Big Step Toward Medicare Sustainability,” Heritage Foundation Backgrounder No. 2253, March 24, 2009, at http://www.heritage.org/Research/Reports/2009/03/A-First-Big-Step-Toward-Medicare-Sustainability.
_________________________________________
Killing programs is a simple way to show immediate dollar savings, but it will not change how the military actually buys equipment or address underlying problems.
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Congress should also reform the budgeting pro-cess to put entitlements on a more level playingfield with other priorities. It could do this byincluding unfunded entitlement obligations as atopic for consideration during annual budgetdebates and by establishing a long-term obliga-tion limit. Additionally, Congress should intro-duce a process for scoring major policy proposalsover the long term, not just the current budgetwindow, and should consider creating a long-term budget for entitlement programs.45
• Align military compensation with 21st cen-tury workforce demands. Congress knows thatit needs to reform how the Pentagon pays its uni-formed personnel, but it keeps delaying the inev-itable. Military compensation is too heavilyskewed toward deferred and in-kind benefits,which poorly reflect the demands of America’shighly mobile workforce. The vast majority ofmen and women serving in the all-volunteerforce today will not remain in uniform for a full20 years.
Congress should promote the principles ofchoice and flexibility for military benefits, par-ticularly health care and retirement. Militarycompensation should be adjusted to providemore cash up front, which will give service-members greater mobility throughout theircareers. Congress should change the compen-sation system toward a continuum-of-servicemodel that allows troops more flexibility inmoving between the reserve and active-dutycomponents and into and out of the military,private sector, and civil service.
Congress should also reform military health careby shifting new enlistees to a defined-contribu-tion health care system that they can take withthem to different jobs and employers, whethergovernment or private. Congress should elimi-nate TriCare copayments for preventative ser-vices to encourage enrollees to seek preventativecare early, improve their health, and reduceoverall medical costs.
• Address the primary causes of defense infla-tion. By maintaining a stable defense topline andbetter paying military personnel, Congress canensure the health of the defense modernizationaccounts. Robust and stable modernizationfunding will support higher and more efficientproduction rates, restore economies of scale, andcut unit production costs.
Avoiding budget spikes would also provide sta-bility in defense planning and offer a steadierworkload for the industrial base. When budgetrequests change dramatically from year to year,the industrial base cannot plan with confidence,and this increases the cost of individual systems.U.S. national security is best served by a com-petitive industrial base, and defense budget pre-dictability will contribute to this effort.
• Increase foreign military sales. Governmentleaders need to further ease restrictions on sales ofselect platforms to U.S. allies and partners both toachieve more efficient production rates and to off-set costs borne by the U.S. taxpayer. Increased mil-itary sales to and purchases from reliable allies willstrengthen America’s defense industrial base byincreasing America’s participation as a producerand consumer in the global defense market.
Understanding that it is impossible to find a sin-gle, standard, globally applicable export policy,Congress should rationalize export controls toinclude fewer restrictions and licensing require-ments for more reliable allies and give themgreater consideration as cleared suppliers of sen-sitive military technologies. This will involveparing back controls, such as International Traf-fic in Arms Regulations. Deregulation of thedefense market will also enable newer, smallersuppliers to enter the defense sector, therebyincreasing competition and reducing costs.
As a first step in this overall process, the Senateshould consider two pending treaties that wouldexempt the United Kingdom and Australia, thetwo most reliable U.S. allies, from variousrestrictions.
45. Alison Fraser, “Obama’s Fiscal Commission: Avoiding a Standoff,” Heritage Foundation WebMemo No. 2882, April 27, 2010, at http://www.heritage.org/Research/Reports/2010/04/Obamas-Fiscal-Commission-Avoiding-a-Standoff.
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• Increase international defense cooperation.Congress should support greater allied involve-ment and burden sharing in procurement,research, and development. The U.S. should facil-itate partnerships with allies during the develop-ment phase of weapons programs when feasible.
One example of such collaboration is the partner-ship of the U.S., the U.K., Australia, Denmark,Italy, Turkey, Canada, and Norway in funding thedevelopment of the F-35 Joint Strike Fighter. TheU.S. is the prime customer and investor, butmember nations are contributing substantially tothe costs. Foreign purchases of the F-35, whichare expected to make up a significant portion ofoverall sales, will help to reduce the unit cost paidby the U.S. government.
• Continue to reform the wider acquisition pro-cess. Improving and updating the military’sacquisition process will require that Congresstake the lead on initiating a wider reform agenda,including restoring systems engineering teamswithin the acquisition buying divisions, simpli-fying acquisition criteria, carrying competitionwell into the production phase, and carefullyderegulating the defense market to remove barri-ers to entry.
• Support performance-based logistics manage-ment. This little-understood logistics manage-ment process is based on forging partnershipsbetween DOD employees and industry at themilitary’s logistical centers in the U.S. andabroad. For it to continue to succeed, Congresswill need to explore additional opportunities to
apply performance-based logistics as part ofdefense systems lifecycle management. This willrequire establishing a pilot program to identifythe barriers to expanded public–private partner-ships in logistics.46
ConclusionCongress appears poised to repeat past mistakes
by voluntarily disarming when operations inAfghanistan and Iraq eventually wind down, startinganother period of defense underinvestment anddecline. Despite requirement shortfalls dating fromthe 1990s, the Administration is planning to cut thedefense budget, even though the existing budget isinadequate to repair, rehabilitate, and replace equip-ment worn down in combat, much less diversify theforce and build the capabilities required to maintaincurrent margins of U.S. military superiority.
Five times in the past century, the U.S. has foughta major war and then promptly disarmed, withdamaging and avoidable consequences. Congressshould not repeat the same mistake yet again.Instead, Congress should dare to take a longer per-spective by justifying robust defense spending tovoters in terms of the national security and eco-nomic benefits produced by a sound defense invest-ment and modernization strategy.
—Mackenzie Eaglen is Research Fellow forNational Security in the Douglas and Sarah AllisonCenter for Foreign Policy Studies, a division of the Kathrynand Shelby Cullom Davis Institute for InternationalStudies, at The Heritage Foundation. Julia Bertelsmann,Research Assistant for Defense Studies in the AllisonCenter, assisted with the preparation of this report.
46. Baker Spring, “Performance-Based Logistics: Making the Military More Efficient,” Heritage Foundation Backgrounder No. 2411, May 6, 2010, at http://www.heritage.org/Research/Reports/2010/05/Performance-Based-Logistics-Making-the-Military-More-Efficient.
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