President Obama has proposed the largest defense budget since World War II.

Military analysis.
Feb. 1 2010 7:42 PM

Too Big To Fail?

President Obama has proposed the largest defense budget since World War II.

Robert Gates. Click image to expand.
Defense Secretary Robert Gates

The Pentagon released its budget for fiscal year 2011 this afternoon, and it is enormous—much larger, even adjusting for inflation, than any budget since World War II. What's more, some numbers buried within the budget suggest that it's set to grow larger still in the coming years—to a greater extent than the White House or the Defense Department acknowledges.

One bit of good news: Defense Secretary Robert Gates is more honest than his recent predecessors about how much money he's really requesting. The figure for FY 2011 is $708.2 billion—consisting of $548.9 billion for the "baseline" budget plus $159.3 billion to pay for "overseas contingency operations," mainly the wars in Afghanistan and Iraq. And, by the way, he says, tack on another $33 billion to the current year's budget, to pay for the 30,000 extra troops (and all their supplies, weapons, and so forth) that President Obama is sending to Afghanistan.

All told, that's $741.2 billion in new money—and Gates is upfront about it.

In the past, defense secretaries, in presenting their budgets to Congress, have pretended that the costs of war are completely separate from the rest of the military budget. And they've itemized  those war costs very sketchily, if at all. By contrast, Gates breaks down that $159.3 billion in some detail ($89.4 billion for operations, $21.3 billion to repair broken equipment, $13.6 billion to train the Afghan and Iraqi security forces, etc.).

Still, $708.2 billion, the sum requested just for fiscal year 2011, is an extraordinary chunk of change. The Center for a New American Security (hardly a dovish think tank) calculates that, adjusting for inflation, this sum is 13 percent higher than the defense budget at the peak of the Korean War, 33 percent higher than at the peak of the Vietnam War, 23 percent higher than at the peak of the Cold War, and 64 percent higher than the Cold War's average.

Granted, the comparisons aren't quite commensurate. For one thing, payroll costs are much higher for an all-volunteer military, and over the past 10 years, Congress has passed pay increases totaling 64 percent. (Military personnel costs are now nearly 20 percent of the defense budget; health care eats up another 5 percent and is climbing.) But on the other side of the equation, the U.S. military consists of far fewer servicemen and -women than before. The United States no longer needs massive garrisons to stave off a Soviet invasion of Western Europe, nor does it face any prospective enemy that approaches its global reach in air or naval power.

Let's assume that all the money Gates is requesting for war-related costs—some $192 billion in this and next year's budgets—really is related to the war. (Donald Rumsfeld, Gates' predecessor, treated those accounts as a slush fund.) What about the half-trillion-plus "baseline"?

Last year, in the FY 2010 budget, Gates cut or killed a slew of weapons programs that he (and many others) considered unnecessary or ineffective: the Air Force's F-22 fighter, the Navy's DDG-1000 destroyer, the more high-tech components of the Army's Future Combat Systems. Today, he's calling for an end to the C-17 cargo-transport plane (we have enough of them) and a second engine for the F-35 fighter (the one it has already is fine). But, except for a handful of teeny programs (including some I'd never heard of), that's it.

For the most part, the big-ticket weapons programs are on the rise: $25 billion for 10 new ships, including two Virginia-class submarines and two DDG-51 destroyers (to make up for his killing the more "advanced" DDG-1000 last year, perhaps). Gates is requesting another $10 billion on missile defense (a billion more than last year). And he is requesting $11 billion for 43 more F-35 fighter planes.

One thing about the F-35, the joint Air Force-Navy fighter that Gates wants to accelerate after halting production of the more costly, somewhat more capable F-22: It's having problems. The problems are so severe, Gates announced today, that he's withholding $614 million in fees from its contractor, Lockheed-Martin (which also made the F-22), and he's fired the plane's program manager.

This is a potentially big story that raises several questions. For instance, is the F-35 going to turn out so riddled with problems that Gates will regret killing the F-22?And more immediately, why is he penalizing the contractor, canning the program manager—yet, at the same time, vastly increasing the buy?

I have a theory: He can't cut it too deeply, especially after cutting the F-22, without raising holy hell inside the Pentagon.

There has been one constant in the defense budget ever since the mid-1960s: the money has been divided almost exactly evenly —never varying by more than a couple of percentage points—among the Army, Navy, and Air Force. For all of Gates' apparent rationality, the same is true in this budget: 32 percent goes to the Army, 35 percent goes to the Navy, 33 percent goes to the Air Force. (For more on this, click here.) It is extremely unlikely that our national-security needs just so happen to demand a response that gives each of our three services a nearly equal share of the military budget.

In other words, the Defense Department is a monstrous bureaucracy, and its budget is a political document—a set of weights and balances to keep the natural tensions from erupting out of control. (In the 1950s, when budgets were very tight, and before this tacit pie-splitting deal was worked out, the service chiefs saw one another as, quite literally, enemies. For an example, click here.)  

Gates is slashing, trimming, and rejiggering along the margins—more so than any defense secretary since Robert McNamara (and taking a lot more care than McNamara ever did to bring the service chiefs along). Yet there may be only so much he can do.

If he can't cut much more, though, Obama's nascent cost-cutting efforts may be in trouble. And in this regard, the White House budgeteers—the number-crunchers in the Office of Management and Budget—are misleading him a bit.

In the OMB's voluminous documents, there's one set of tables projecting each federal department's budget—including the Defense Department's—across the next 10 years, from FY 2011 to FY 2020. This projection feeds into estimates of future expenditures and, thus, deficits. According to this projection (which has little to do with the Pentagon's own estimates, and even less to do with reality), the DoD budget goes down from $708 billion in FY 2011 to $616.4 billion in FY 2012.

Now the $708 billion includes $159.3 billion in war costs, while the $616.4 billion … well, it includes some war costs, namely an arbitrary $50 billion "placeholder" for "out-year overseas contingency operations."

But unless Obama decides to declare victory and pull out of Afghanistan in 2012, actual war costs are going to be substantially more than $50 billion. That means the DoD budget for that year will be substantially larger than $616.4 billion—and the deficit will be larger than whatever the OMB officials are projecting it will be.

Looking at how the OMB breaks down that $616.4 billion, we can infer that the real defense budget will be a lot bigger. For instance, the projection assumes that costs for operations and maintenance will go down from $317.1 billion in FY 2011 to $212.2 billion in FY 2012. That's impossible, even if the war did wind down considerably. It assumes that military personnel costs will decline from $153.8 billion in FY11 to $142 billion in FY12, even though the Army is scheduled to grow and pay is scheduled to go up by another 3 percent. And it assumes that procurement of weapons systems will go down from $137.5 billion to $120.3 billion, even though in fact the cost of weapons will go slightly up.

Again, Gates has nothing to do with any of this sleight of hand. In fact, according to one senior Pentagon official, the White House has promised the Defense Department an increase of $100 billion over the next five years—and that's just in the baseline budget, not including extra money for fighting wars.

So, one of two things is likely to happen in the next couple years. Either the budget—the overall federal budget—and the deficit will zoom higher than the White House is projecting. Or Obama will order his budgeteers to stop playing with numbers and give Gates the authority to bulldoze through a few more bureaucratic barriers in the Pentagon.

Either way, there will be some ugly fights.

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