The fiscal reality is that it will be difficult for Congress to find a way to avoid sequestration or further significant defense cuts. Doing so would require some combination of increased borrowing, major cuts to programs like Social Security and Medicare, and higher taxes. No alternative is particularly attractive. Sequestration would return the defense budget to roughly the level it was in 2007, a decline of about 14% from 2010, adjusting for inflation. To put things in historical perspective, the end of the Cold War saw a decline in defense spending of 34% from the peak in 1985 to the floor in 1998. Further cuts are likely, and the Pentagon would be wise to begin planning for them, even if it requires another rethink of American military strategy.
But for the moment, the Pentagon stopped short of providing specifics on how it will implement even the strategy it announced Thursday, deferring many of the details to the release of the president’s budget request in a few weeks. One unanswered question is how the Pentagon will curb military personnel costs, one of the fastest-growing areas of the defense budget. From 2001 to 2011, military pay and benefits increased by 46% on a per-person basis, excluding war funding and adjusting for inflation. If personnel costs are allowed to keep growing that quickly while the overall defense budget grows only with inflation, pay and benefits will swallow the entire defense budget by 2039. The new budget needs to tackle the complex issue of military compensation reform, and health care in particular.
The new strategy also calls for shrinking the Army and Marine Corps and relying more on air and sea power. This is consistent with the new focus on Asia, and China in particular, where war plans would probably place a greater emphasis on stealthy systems that can operate over longer distances, such as submarines and long-range bombers. But for decades, the military services have garnered roughly equal shares of the budget. If the Pentagon is serious about the strategy, the new budget should show a shift toward funding for the Air Force and Navy.
The bottom line is it is too soon to tell if the Pentagon’s new plan is a real shift in defense strategy or just words on a page. The test will be in a few weeks, when the administration submits its budget request to Congress. To understand if the Pentagon means what it says, follow the money.