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Outside View: The Challenge Of Resources

This year we will spend something like $500 billion on the Department of Defense, including supplements; plus some $37 billion in civilian spending on Homeland Defense. We are spending around $5 billion-7 billion a month in Iraq, and one major regional contingency is costing some $84 billion a year in direct costs, and perhaps $100 billion-120 billion in total costs.

Washington (UPI) April 26, 2005
As a nation, the United States needs to be more honest about the costs and burden of being a superpower. Iraq is, after all, only one regional contingency and one where we did not face an opponent with anything like the capabilities of a North Korea or China.

We need to be careful about talking about overstretch in ways that imply our problems in Iraq and in total defense spending are related to our capability to fund our strategic posture and this kind of war.

This means we need to take a much broader look at the patterns in federal spending and what we can and cannot afford. No one can argue that national security is cheap.

This year we will spend something like $500 billion on the Department of Defense, including supplements; plus some $37 billion in civilian spending on Homeland Defense. We are spending around $5 billion-7 billion a month in Iraq, and one major regional contingency is costing some $84 billion a year in direct costs, and perhaps $100 billion-120 billion in total costs.

This is scarcely cheap, but it must be kept in the perspective of the total size of our economy, and the overall burden that federal spending places on the taxpayer.

We have a gross national product of more than $11 trillion. It seems likely that total outlays for defense in Fiscal Year 2006 will still be around 4 percent of our GNP, 4 percent even with supplemental: This compares with 6 to 14 percent of the U.S. GNP during the Cold War from 1945 to 1989. The historical low in the post-cold war era reached 3 percent in FY1999-FY2001, but the average since 1992 has been around 3.6 percent.

If we look at the "worst-case" estimates for the cost of our force posture -- even after the more ambitious estimates of force transformation costs -- it would probably total around 5 to 7 percent of our GNP, and the real cost of the burden may average several percent less.

Is this really "overstretch" in any practical sense in today's world? It is certainly affordable in terms of the size of our economy. We know we have spent at similar or far greater levels for half a century.

The issue is more complex when we look at the burden maintaining an effective force posture places on the federal budget. This is an issue that clearly merits a national debate.

One of the few things that most government officials, the Congress, think tanks, journalists and academics have in common is that most have become functional budget illiterates. They do not analyze programs in terms of how the total federal budget should be allocated or the past and projected trends in total spending.

If we look at current Congressional Budget Office projections for FY2006-FY2015, defense spending will make up around 18-20 percent of the federal budget. In FY 2006, it is likely to be a bit more than 20 percent -- levels that have been the same or higher for virtually all of the period since 1941:

-- The projected FY2006 level is about 2 percent less than in 1992, when we were taking the "peace dividend" from the end of the Cold War.

-- It is only about 2 percent lower as share of the federal budget than during the lowest year for defense spending in the Clinton administration.

-- The Bush administration out-year projections for defense spending seem much too low, and it may have to be much closer to $700 billion than some $550 billion. That still, however, is unlikely to push defense spending much above 21 percent.

When it does come to economic and federal "overstretch," defense is unlikely to be the cause. The problem is mandatory spending and entitlements. In fact, the risk of "geriatric understretch" has become considerably greater than "imperial overstretch."

If one looks at the latest Congressional Budget Office Budget and Economic Outlook, these trends are brutally clear:

-- Entitlements place the major strain on the U.S. budget. We overstretched Medicaid last year more than U.S. forces.

-- Mandatory expenditures rose from $615 billion in 2000 to $895 billion in 2004. Defense rose from $295 billion to $454 billion -- about 60 percent as much.

-- If one looks at the future, the cost of defense -- with supplementals -- will rise from $517 billion in FY2006 to $564 billion in 2015.

-- In contrast, mandatory federal expenditure will rise from around 50 percent of the budget today to around 60 percent in 2015 -- driven heavily by Social Security, disability, medical and other expenses for the elderly.

-- If one looks at CBO projections for the period 2005-2013, mandatory expenses will rise at an average of 5.7 percent versus 1.3 percent for defense.

-- Put differently, the cost of mandatory expenditures will rise from $1.4 trillion to $2.3 trillion.

This means that the cost of the mandatory programs that younger Americans will have to pay for will have to pay for will rise roughly $0.9 trillion more than defense over the next 10 years. Moreover, this may only be the beginning as our population ages.

A recent calculation by Elizabeth Bell of the Urban Institute indicates that the cost of Social Security and Medicare could rise from $822 billion in 2005 (net of premiums paid by recipients) to $4.64 trillion in 2030 -- a rise of $3.82 trillion. If we are to have a national resource debate, however, it should clearly focus on "overstretch " issues that are far more burdensome than defense spending even if we do raise spending from roughly 4 percent of GNP to 5 to 7 percent.

(Anthony H. Cordesman holds the Arleigh A. Burke chair in Strategy at the Center for Strategic and International Studies in Washington.)

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

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