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Defense Spending During Economic Crisis

Author: Greg Bruno
Updated: December 4, 2008
This publication is now archived.

Introduction

With some important caveats, military analysts broadly agree that President-elect Barack Obama will inherit a U.S. military hobbled by aging weaponry, stretched to the breaking point by more than seven years of conflict, and funded by procurement and operational budgets that exceed even the most optimistic assessments of future military spending. All that was true before the global economic crisis took hold in September 2008. Now, experts suggest, something has to give. Obama made ending the war in Iraq a top priority during his two-year campaign for the presidency. As his own campaign brief on defense (PDF) stresses, Iraq and Afghanistan represent only part of the defense agenda. Challenges loom, including streamlining the Pentagon's budget process, procuring threat-specific weaponry, and weighing cuts to some programs (NYT) to free up discretionary spending for other policy priorities. Meanwhile, within the defense community, debate rages on exactly what kind of missions the U.S. armed forces should prepare for: future asymmetric combat like Iraq and Afghanistan, or more conventional threats arising from a world in which U.S. military primacy begins to slip away.

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Obama on the Issues

Both Obama and Vice President-elect Joe Biden vowed during the campaign to increase the size of the most basic component of the U.S. military: Army and Marine Corps troops. Supporting a plan endorsed by President Bush in 2007, Obama said he would add 65,000 Army soldiers and 27,000 Marines to active duty service. He also promised to "solve recruitment and retention problems" that have emerged since 2001. But doing so will not be cheap, experts say. P. W. Singer of the Brookings Institution says in 2005 the army suffered its worst recruiting year in decades, despite the addition of hundreds of recruiters and a $726 million increase in the recruitment budget. Rebuilding the force, especially the army, will take more than promises (PDF), Singer says.

Beyond ending the war in Iraq and shifting focus to Afghanistan, Obama said he would expand mental health services for veterans, and increase spending on aviation programs like unmanned aerial vehicles and the KC-X aerial refueling tanker. Other defense pledges were less precise. For instance, Obama said he would "rebuild the military for 21st Century tasks," but offered few specifics—other than adding troops—on how he would do that. He said he would work to secure nuclear material around the world within four years; establish a civilian assistance corps; reform Pentagon budgeting and contracting; and beef up Special Forces and civil affairs units. He also said he would review major weapons programs for relevance "in the post 9-11 world." He did not, however, pinpoint how these reforms would be funded, or what might be cut to pay for them.

Defense Spending: What’s on the Block

Even before Obama was elected, senior Pentagon officials were cautioning that the forty-fourth president would have tough choices to make on future defense programs. "I think every one of the big programs will get some level of attention (AFPS)," John J. Young Jr, undersecretary of defense for acquisition, technology, and logistics, said in October 2008.

Major military programs that could be reevaluated in Obama's first term include:

The Navy's $27 billion DDG 1000 Zumwalt-class program of multi-mission destroyers is also on most analysts' short list, but Navy officials have already announced plans to scale that program back (PDF).

"This is the opportunity one has to make big changes. He’s a reform president, he’s a new president, and he doesn’t have a lot of ties to the defense establishment." - Christopher Bolkcom, specialist in national defense, Congressional Research

The Pentagon has started bracing itself for these scenarios. A series of internal Pentagon briefings, provided to CFR.org, say the 2008 financial crisis has reordered the military's funding landscape, making reforms all the more urgent. "Business as usual is no longer an option," says one of the briefings prepared by the Defense Business Board. "The current and future fiscal environments facing the department demand bold action," it continues. Major weapons systems would make a logical place to start. According to a September 2008 report by the U.S. Government Accountability Office (GAO), each of the ninety-five major weapons systems under way as of 2007 were on average nearly two years behind schedule, and a combined $300 billion over budget (PDF). Major changes are needed to the Pentagon's acquisitions program, the GAO said in that report, to ensure the Pentagon is "buying the right things, the right way."

Realistic Expectations—a Service by Service Breakdown

Given the nature of defense budgeting, however, cuts are unlikely to happen overnight. An assessment of Obama's defense policies (DefenseNews) by Morgan Stanley finds that Obama "will not cut the DoD budget within his first 18 months in office," but could "curtail defense spending growth, with an eye for a potential defense budget peak possibly in 2010 or the year after." Lawrence J. Korb, senior fellow at the Center for American Progress, says the first Pentagon budget Obama will have a chance to shape is fiscal year 2011. The budget for 2009 is in place, and planning for 2010 spending is too far along for immediate slicing, Korb says. Yet experts agree that regardless of near-term funding streams, the nation's military services all face tough decisions in coming years:

  • Army: With the Iraq war winding down, the army will be faced with serious equipment shortages when units return home. Resetting the force-the military's jargon for rehabilitating and replacing worn out equipment-will cost tens of billions of dollars, experts predict. Beyond Iraq, the chief question mark for the army will be the survival of the service's cornerstone transformation program, the Future Combat Systems. Intended as the next step away from the lumbering army divisions of the Cold War era, the program would provide new vehicles, sensors, and weapons to the army's slimmed down brigade-based force structure. But the program has been besieged by cost overruns and performance setbacks. It faces a key review in 2009, though GAO has already recommended that "viable alternatives" (PDF) be considered. Army officials, meanwhile, say they maintain support on Capitol Hill because of the program's relevance in an era of counterinsurgency conflict. "You're beginning to see soldier-users of this equipment become believers, because they've had hands on (experience) and they can see the benefit that this will provide them on the battlefield," says Paul Mehney, a spokesman for the program. "That's a pretty rock solid argument, when you've got an 18-year-old kid saying, 'Yeah, I can use this when I go back'" into battle.
  • Air Force: Unlike the army, which faces tough choices on select weapons systems, the Air Force is faced with a more fundamental crisis over leadership and direction. A series of high-profile mishaps involving the security of U.S.-based nuclear weapons led to the ouster of Air Force Secretary Michael W. Wynne and Chief of Staff Gen. Michael T. Moseley in June 2008. Some analysts say the Air Force is facing a larger identity problem. For one thing, no other military in the world has fielded a viable match for the last generation of U.S. combat aircraft, undercutting Air Force arguments about the need for "next generation" warplanes. Secondly, the reliance by ground force commanders in Iraq and Afghanistan on unmanned aerial vehicles poses an even more fundamental challenge to a force based on highly-trained pilots flying multibillion dollar hardware. These shifts could challenge funding for programs like the F-22.
  • Navy: The service is plagued by shipbuilding delays and cost overruns. GAO reports that setbacks in the DDG 1000 program reflect more endemic design and execution troubles plaguing the service's shipbuilding endeavors (PDF). These range from the modest Littoral Combat Ship to the Gerald R. Ford-class aircraft carrier. As in the Air Force, reinvention is the order of the day. In late 2007 the service unveiled a new maritime strategy that places equal emphasis on securing strategic assets, deterring conflict, and strengthening partnerships with allies. Humanitarian missions also won new weight.
  • Marines: Like the Army, the Marine Corps faces staffing, equipment, and procurement challenges. A 2006 assessment of the service's equipment needs found that nearly half of the Marine Corps' assets had been shipped to Iraq; replacement and repair costs could run upwards of $20 billion dollars. To defray these high costs, some analysts say the corps should divert funding from the controversial V-22 Osprey, a troubled tilt-rotor aircraft, and instead fund the purchase of new H-92 and CH-53 helicopters. Doing so could save the Marines more than $10 billion over the next five years, says a 2007 budget assessment (PDF) prepared by the Institute for Policy Studies. Critics have also called for the cancellation of the troubled Expeditionary Fighting Vehicle program.
Beyond the Basics

Beyond troop numbers and weapons systems, President-elect Obama will face a number of tactical and strategic decisions early in his tenure. Among them will be issues like how to define torture and how to close the military detention center at Guantanamo Bay. "I have said repeatedly that I intend to close Guantanamo, and I will follow through on that," Obama said in a "60 Minutes" interview in mid-November 2008. But doing so would require relocating dozens of suspected terrorists, many of whom are still considered a threat to U.S. national security.

"Business as usual is no longer an option. The current and future fiscal environments facing the department demand bold action." -Internal Pentagon briefing

What to do about the legal system underpinning Guantanamo-and the broader question of whether to ban torture in interrogations-will be another issue on the president's plate. In his "60 Minutes" interview, Obama reiterated his view: "I have said repeatedly that America doesn't torture. And I'm gonna make sure that we don't torture." And yet defining torture has been at the cornerstone of the controversy during the Bush presidency. Korb says Obama could consider transferring all Guantanamo prisoners to Fort Leavenworth in Kansas, a move that would solve the detention center issues. But it would not solve the criticism underlying the legal framework. Obama is said to be considering trying detainees in U.S. federal court, or in a new court system, but details remain unclear (AP).

U.S. military strategy could also be in for an overhaul. During the campaign, Obama promised to establish congressional committees to review "major military action" before operations are launched. But such a pledge could put the president-elect at odds with current initiatives (NYT), including covert operations authorized by the president and carried out by the Central Intelligence Agency (CIA) and the Joint Special Operations Command against al-Qaeda in nearly a dozen countries, including Syria, Pakistan, and elsewhere. Military leaders have said these tools are vital for success in the wars in Iraq and Afghanistan. Obama himself has said he would not hesitate to strike in Pakistan, with or without Pakistani permission, should al-Qaeda targets present themselves. Meanwhile, Defense Secretary Robert Gates, who has agreed to stay on under the Obama administration, says that the U.S. military must strengthen its capacity building programs. "The United States cannot kill or capture its way to victory," Gates writes in the January/February 2009 issue of Foreign Affairs. "What the military calls kinetic operations should be subordinated to measures aimed at promoting better governance, economic programs that spur development, and efforts to address the grievances among the discontented, from whom the terrorists recruit."

A New Day or Status Quo?

How Obama will use his mandate for reform is far from settled. Christopher Bolkcom, a specialist in national defense with the Congressional Research Service, says Obama's defense priorities are unpredictable. "On the one hand Obama and Biden don't want to be seen as weak on defense. But on the other hand this is the opportunity one has to make big changes. He's a reform president, he's a new president, and he doesn't have a lot of ties" to the defense establishment. Others say Obama will be in no position to make a dramatic course shift, especially when cutting defense programs could mean slashing jobs-a tenuous proposition for a new president assuming office during a recession. "Nothing is going to change in the next couple of years," Jon B. Kutler, head of an aerospace private equity firm in California, told the Los Angeles Times. "These things don't turn on a dime." Loren B. Thompson, a military analyst at the Lexington Institute, argues that unlike defense cuts during the Carter and Clinton administrations, Obama will govern in a new world of threats and priorities. And that, Thompson says, means spending may never come back down to earth.

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