James M. Lindsay, Senior Vice President, Director of Studies, and Maurice R. Greenberg Chair
The United States has cut defense spending in the past, and it is doing so again today. In 1989, for example, the Defense Department spent $295 billion; seven years later it spent $253 billion, or about 14 percent less in nominal dollars. When inflation is taken into account, defense spending dropped by more than 25 percent during the 1990s.
U.S. defense spending will likely follow a similar trajectory over the next decade with the Afghanistan war ending and pressure mounting to cut government spending. In 2012, the Defense Department spent $688 billion. The budget that President Obama submitted to Congress last year projected that the Pentagon's budget would fall to $562 billion in five years, a drop of nearly 17 percent before considering inflation. The actual number will probably be far lower. The across-the-board budget cuts ("sequestration") set to go into effect on March 1 require the Pentagon to cut this year's base defense budget (that is, excluding operations in Afghanistan) by $42.7 billion or 7.3 percent. If the sequester isn't repealed, tight budgets would persist for the remainder of the decade.
The pending budget cuts have Pentagon officials worried, especially since personnel costs for the uniformed military, which account for a third of the Defense Department's budget, are exempt from sequestration. When asked to rate the risk that sequestration poses to the military on a scale of one to ten, Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey replied, "It sure feels like a ten."