How to Shrink the Defense Budget and Come Out Winning
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By William Matthews,
The Fiscal Times
December 14, 2012

The U.S. military is going to shrink, that much is clear. Whether it will be harmful or helpful is less certain.

Shedding unneeded troops, surplus bases and 20th century weapons could be a good thing.  Deputy Defense Secretary Ashton Carter envisions a U.S. military that is “leaner, but agile, ready, technologically advanced.”

Critics of the coming cuts fear a different outcome. They worry that the United States will field an anemic force ill-prepared to confront increasingly sophisticated adversaries with growing arsenals of precision munitions, stealth aircraft, cyber weapons and anti-satellite missiles and lasers.

Carter envisions greater reliance on highly-trained special operations forces and on high technology – including “new capabilities, novel capabilities that we haven’t revealed yet,” he told a Duke University audience Nov. 29. Critics like Sen. John McCain (R-AZ) fear “a swift decline of the United States as the world’s leading military power.”

To many, the U.S. military is still living large on a budget swollen by 11 years of war. The 2012 defense budget of $646 billion has declined from the war-spending peak of $691 in 2010. But the 2012 budget, which is still in effect because Congress hasn’t passed the 2013 spending bill, is more than double the pre-war $316 billion budget of 2001.

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Defense now consumes almost 20 percent of the U.S. budget. Only Social Security at $773 billion and health care programs such as Medicare, Medicaid and children’s health insurance at $838 billon, cost more.

With the Iraq war over and Afghanistan winding down, many wonder why defense spending can’t be cut dramatically. It has been in the past. Defense spending plunged 43 percent after the Korean War, 33 percent after Vietnam and 36 percent after the Cold War, according to the Center for Strategic and International Studies.

“How much deeper can defense cuts responsibly be?” asks defense scholar Michael O’Hanlon of the Brookings Institution.

The 2013 defense budget is likely to be a bit lower than 2012. The House version calls for $635 billion; the Senate approved $632 billion. And that downward trend seems likely to drop markedly if automatic cuts called sequestration kick in Jan. 2.

Sequestration will cost the military $492 billion over the next 10 years – $56.5 billion in 2013. Congress and the president are struggling to prevent those cuts, which they approved last year in the Budget Control Act, hoping to give themselves an incentive to come up with a better deficit reduction plan.

Sequestration would cut far too much, says O’Hanlon. The Defense Department is already struggling to cut $60 billion through new efficiencies and by eliminating waste, he said. The department also faces $487 billion in cuts over ten years imposed by spending cap limits set by the Budget Control Act. Those cuts would slow growth in the defense budget to the rate of inflation, but not reduce defense spending.

Given the national budget crisis, O’Hanlon says defense can be cut more. In a Dec. 11 address to the military advocacy group Concerned Veterans for America, O’Hanlon said additional cuts would be “a little risky, and a little painful,” but they should be made to help control the federal deficit and fix the U.S. economy.

He joins a range of other defense experts who say deeper defense cuts can, indeed, be made. 

“I tried to identify specific defense savings that I believe we can responsibly make,” he said. “When I go through my list I can find ways to save maybe $100 billion over the next 10 years, maybe $150 billion. I’m doing this in a cautious way.” He stressed that deeper military spending cuts “only make sense in the context of broader national deficit reduction and fiscal reform.”

Speaking to the same group, Sen. Lindsey Graham, R-S.C., tentatively endorsed O’Hanlon’s plan.

“I’m one of the strongest defense hawks in the Congress,” Graham said. But “if we could come up with an entitlement reform deal that saves Social Security and Medicare and deals with Medicaid and sets spending limits that are sustainable, I would entertain going past $487 billion” in defense cuts over the next decade.