In a Dangerous World, Don’t Flatten Defense Spending for a Deficit Deal

As President Biden, House Speaker Kevin McCarthy (R-Calif.) and others in Washington attempt to construct a default-evading last-minute budget deal, the future of U.S. defense spending is one of the hottest potatoes in the discussion. At a time of considerable international peril, should the Pentagon be held to the same kind of fiscal austerity — or any type of meaningful budgetary discipline — that is being considered for so-called domestic discretionary accounts? 

Clearly, any serious plan for fiscal prudence and American economic health needs to address the rate of growth of entitlement spending, which accounts for nearly two-thirds of the $7 trillion federal budget being proposed for 2024. But that apparently will not happen during this round of budgetary brinkmanship. Thus, the question remains, what is the smartest way to think about U.S. defense spending as a near-term deal is hopefully hammered out in the coming days? 

I believe the most sensible path forward is to provide very modest real growth in the defense budget, of about 1% a year above inflation, over the next several years.  

In broad terms, real growth of about 1% constitutes a compromise of sorts. It is less than recent independent commissions, or Secretary of Defense Jim Mattis, advocated for in 2018-2019 when they proposed increases of 3% to 5% a year above the rate of inflation. But it is more than a freeze, more than is being proposed for domestic discretionary accounts, and enough to allow the Pentagon at least some room for new initiatives, provided that it curtails its overall appetite while instituting additional reforms.

With this approach, the national defense budget would remain near its current level of 3.3% of gross domestic product — around half the Cold War norm — and 13% of total federal spending. At roughly $850 billion to $900 billion over the next few years (including Department of Energy nuclear weapons costs), it would continue to exceed even peak levels of Cold War spending in absolute dollar terms (adjusted for inflation); however, it would remain about 10% less than peak levels of the latter Bush and early Obama years. It would continue to be about three times China’s estimated spending, and many times that of Russia.

But why, Pentagon critics and deficit hawks might ask, can’t a Department of Defense unable even to audit its own books, still possessing many more bases than its current force structure requires, and rife with numerous inefficiencies be asked to contribute more meaningfully to deficit reduction at a time of national fiscal crisis? Why any increase at all?

To be sure, the Defense Department can tighten its belt; more on that below. But the big determinants of U.S. military spending are hard to whittle away appreciably, while most fat in the system is marbled into military muscle. Today’s active-duty force of 1.3 million is far smaller than the 2.2 million or so of the Reagan years, even at a time when the military is very busy around the world. Military compensation is strong, relative to analogous jobs in the civilian economy — but we should want to keep it that way, given what our all-volunteer armed forces do for the country, and given recent challenges in recruiting.  

Congress indeed should authorize another round of the base realignment and closure (BRAC) process — but even with BRAC, savings don’t show up for a decade and would total some $2 billion to $4 billion a year once they do. Military readiness is better than it was a decade ago, when much of the force was worn out by the forever wars. But that is as it should be in a dangerous world; we should not shortchange training or equipment maintenance. Some spending on weaponry can be debated, but America’s technological edge is crucial to deterring China and Russia. There are also unmet needs in areas such as shipping, aerial refueling, other logistics support, long-range unmanned aircraft (especially those that would fly off carriers) and munitions stockpiles that require fairly urgent attention.

Given that the size and structure, and modernization agenda, of the Department of Defense are all about right — in fact, already somewhat lean by historical standards — finding economies at the Pentagon becomes a game of small ball. Still, a few hundred million here and a couple billion there do add up. As former Pentagon Comptroller Bob Hale once entitled a study on such defense reforms, “Be realistic, but keep trying.” Those words may not be Churchillian, but they are right. With such a mindset, the Department of Defense working with Congress still could modernize key weaponry, harden command and control webs, build more resilient cyber and space systems, make Taiwan more resilient against China’s possible invasion, strengthen its posture in the western Pacific and eastern Europe, and take care of its people without further big boosts to defense spending. Some ideas would include:

Sometime this decade, as a result of military needs and inflation trends, U.S. national defense spending will wind up exceeding $1 trillion. But in the next couple years or so, that would be slightly too much of a good thing. Without cutting defense spending, we can slow down the arrival of that historic trillion-dollar milestone while asking the Pentagon to contribute at least modestly to a national sense of shared sacrifice and fiscal discipline.

Michael E. O'Hanlon is the Philip H. Knight Chair in Defense and Strategy at the Brookings Institution, where he directs the Strobe Talbott Center on Security, Strategy and Technology and the Defense Industrial Base working group.