Healing the Wounded Giant: Maintaining Military Preeminence while Cutting the Defense Budget

Healing the Wounded Giant: Maintaining Military Preeminence while Cutting the Defense Budget

by Michael E. O'Hanlon

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President Barack Obama survived a tenuous economy and a toxic political environment to win re-election in 2012, but the bitter partisan divide in Washington survived as well. So did the country's huge fiscal deficit. in this, the latest in a long line of Brookings Institution analyses of the defense budget, Michael O'Hanlon considers how best to balance national

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President Barack Obama survived a tenuous economy and a toxic political environment to win re-election in 2012, but the bitter partisan divide in Washington survived as well. So did the country's huge fiscal deficit. in this, the latest in a long line of Brookings Institution analyses of the defense budget, Michael O'Hanlon considers how best to balance national security and fiscal responsibility during a period of prolonged economic stress and political acrimony—even as the world remains unsettled, from Afghanistan to Iran to Syria to the western Pacific region.

O'Hanlon explains why the large defense cuts that would result from prolonged sequestration or from deficit-reduction projects such as the Bowles-Simpson plan are too deep. But the bulk of his book represents an effort to look for greater savings than the Obama administration's 2012 proposals would allow.

Praise for the work of Michael O'Hanlon

The Opportunity: "A practical and hard-headed analysis of how another Strategic Arms Reduction Treaty might be achieved"— Financial Times The Science of War: "Timely, thoughtful, and full of insight. A signal contribution to the field."—General David S. Petraeus, U.S. Army

A Skeptic's Case for Nuclear Disarmament: "O'Hanlon expertly unravels the myriad threads of the often abstruse disputes about nuclear weapons and disarmament."— New York Times Book Review

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Healing the Wounded GIANT

Maintaining Military Preeminence while Cutting the Defense Budget

By Michael E. O'Hanlon


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ISBN: 978-0-8157-2486-5



American Military Strategy and Grand Strategy

American national security strategy is premised on international presence, deterrence, and engagement. Jarred by the world wars into recognizing that its geographic isolation from most of the world's industrial and resource centers did not allow it to stay out of other nations' conflicts, the United States chose to stay active internationally after World War II. It developed a network of alliances throughout Western Europe, East Asia, parts of the broader Middle East, and Latin America.

At times the United States was arguably not quick enough to form alliances, as when deterrence failed and North Korea invaded South Korea in 1950. At other times it forged partnerships with regimes that did not share its values or lacked staying power, as with the Shah's Iran or the government of South Vietnam. But for the most part, U.S. security partnerships endured. Even after the cold war ended, the United States retained this system of alliances. The rise of new dangers, such as the proliferation of nuclear weapons, as well as ongoing threats posed by hostile regimes in North Korea, Iran, and Iraq, made American disengagement seem an imprudent option—for the United States and for its security partners as well. Indeed, in playing its worldwide military role, the United States has more than sixty formal allies or other close security partners with whom it teams in one way or another.

This set of partnerships and overseas commitments sounds enormously ambitious and costly. In some ways, it surely is. Defending only America's own territory would be feasible at far less cost, with far fewer forces, than maintenance of this global network—at least for a while. But the costs of war can be far greater, in lives and treasure, than the costs of preparedness and deterrence. As such, the United States has now sustained a standing military at an average annual cost of some $475 billion (expressed in constant or inflation-adjusted 2013 dollars) for more than half a century. At present it spends some $650 billion, though those numbers are gradually declining under current law and policy, as the war in Afghanistan winds down. By mid-decade, national defense budget and spending levels will trend toward $550 billion a year (excluding Veterans Administration expenses, but including most intelligence functions and Department of Energy nuclear weapons activities). Sequestration, as required by the 2011 Budget Control Act unless superseded, or similar plans would reduce that latter annual figure to about $500 billion (again, as expressed in constant 2013 dollars).

This book searches for responsible ways to cut defense a bit more. It concludes that sequestration, or plans like the 2010 Simpson-Bowles deficit reduction proposal, would cut the military too deeply. That said, there is room for further economizing that would allow moderately significant additional cuts in weapons, forces, and compensation levels, as well as administrative reforms and efficiencies—totaling up to $200 billion over a decade in gross terms. Net savings in the overall national security budget might be $100 billion to $150 billion—a modest, but hardly insignificant, contribution toward the $2.5 trillion or so in ten-year federal deficit reduction that many economists consider advisable prior to sequestration. Taken together, these planned and suggested changes would result in an annual national defense spending level of perhaps $525 billion to $535 billion.

The Economic Challenge to American Security

The recent run of trillion-dollar federal deficits, coupled with the deep recession of 2008–09 and a still-sluggish economy, has contributed to the anxieties Americans have about the future; many lost their homes and jobs, have seen their investment portfolios shrink, and have lost faith in the American dream. For foreign policy strategists, these worries are compounded by a sense that throughout history, great powers with weakening economic foundations cannot stay great powers for long. In a democracy like America's, the economic problem is compounded by the political risk that as fewer citizens perceive personal benefit from America's strategy of internationalism, their support for continued engagement abroad can be expected to weaken. Such tendencies are already seen in a number of demographic and socioeconomic groups, including in the attitudes of younger generations today. And as great powers decline or fall, others generally seek to fill the resulting power vacuum—resulting not only in diminished influence for the former power, but greater instability and risk for the international system on the whole, since war is often the result.

As such, while defense cuts must be made, they must be made carefully. It would be unwise to spend more on defense than is necessary, but it would be penny-wise and pound-foolish to jeopardize the general stability of today's international system in an overly assertive effort to reduce the U.S. federal deficit by some specific percentage. Perhaps interstate war has become unthinkable today. But that theory was voiced in earlier eras, only to be proven wrong by subsequent events, as when Norman Angell's prediction that economic interlinkages made war unthinkable was invalidated shortly thereafter by the outbreak of World War I. Maybe the twentieth century's experiences—huge casualties from the world wars and huge projected casualties in any future war involving nuclear weapons—have taught mankind the risks of armed conflict. But it is hardly inconceivable that new sources of conflict could emerge—over disputed seabed resources, over the uneven effects of climate change on different countries and regions, over nuclear or biological weapons dangers or threats.

China's rise is causing tectonic shifts in the international power distribution as well. One need not be a Sinophobe to understand that changes of the current magnitude can be destabilizing; at least, that has been the historical tendency in other periods of hegemonic transformation. China is on balance acting reasonably responsibly in most domains of international affairs. But its very rise produces temptations at home and insecurities abroad. Its recent behavior in the South China Sea as well as the East China Sea suggests certain ambitions, particularly among its often nationalistic and anti-American military leadership. One need not expect to fight China to believe that it is important to retain strong American capabilities and American alliances to preserve a stable existing order as China continues to reach toward likely superpower status.

Robust U.S. defense spending levels are surely preferable to a major-power war or other serious conflict. Nor do they seem inherently dangerous. The United States already has enough checks on its uses of force, including general aversion to casualties, as well as a desire to look inward and focus on domestic issues rather than expend resources abroad, that it is probably not necessary to cut defense in order somehow to prevent unwanted military operations. The United States of modern times is not exactly a peaceful nation, and it is certainly not pacifist. But neither is it an imperialistic country, as traditionally defined.

Yes, the United States invaded Iraq without desirable levels of international support or legitimacy. And that war may be seen as unwise by history. But if that was the worst thing that modern America could do—invading a country to overthrow one of the world's worst dictators who was in violation of the terms of the 1991 ceasefire ending Operation Desert Storm and more than a dozen UN Security Council resolutions—it is easy to see why more than sixty countries still ally with the United States even as they sometimes harshly disagree with it. American power is apparently perceived by others as desirable and stabilizing, as also reflected in the fact that no hostile or opposing bloc of nations has formed against it.

If having a smaller military guaranteed that the country would avoid mistakes about the use of force, while having enough capability to prevail in smart wars, most people would presumably assent to that arrangement. However, history does not tend to back up such a theory. Moreover, during some of the times when the United Stats was at its maximum national power, as during the Reagan years, it went to war relatively infrequently, or engaged only in low-level conflicts. So it hardly appears that having a strong military makes America more prone to adventurism, or that having a smaller and less costly military necessarily improves the odds of peace

Some people favor asking U.S. allies to do more, thereby enabling the United States to do less. That sentiment might seem to be sensible. But allies are sovereign and make their own decisions. As such, the alternative to current policy is not simply asking allies to do more, which Washington already does frequently, but to leave them to fend more for themselves and hope that they pick up the slack of American retrenchment. That would be a major strategic gamble. In places like the Persian Gulf, such an approach could easily produce conventional and nuclear arms races if countries such as Saudi Arabia and Turkey sought to counter Iran (and each other). Similar dynamics also could ensue among Japan, Korea, and China in East Asia. History suggests that such arms races do not tend to end well. For all the turbulence in today's world, American power would still seem stabilizing, as there have been no large-scale great-power wars since 1945. Put differently, Iran does not have the capacity and China does not have the inclination to challenge American power directly at present. However, those states might well seek to challenge and dominate their regional neighbors absent compelling American security guarantees. War that ultimately dragged in the United States could well be the result.

Matters more mundane than global power balances also affect defense budget decisions. In considering possible reductions to the military budget, it is important to remember that most defense costs—for personnel, health care, environmental restoration, equipment maintenance, equipment modernization, and the like—go up faster than general inflation. In fact, the Congressional Budget Office (CBO) estimates that the average annual defense budget requirement for the next two decades will be about 10 percent greater than planned levels, with costs for operations, maintenance, and personnel collectively growing 1.5 percent a year faster than inflation over the period. It is for that reason that I warn that some of the additional cuts in weapons, forces, and other Department of Defense expenses proposed below may be needed simply to comply with the initial budget caps of the 2011 Budget Control Act that were already in the books as of February 2013 (before sequestration). Just to "tread water," in other words, the Pentagon needs real budget growth of 1 to 2 percent, above the rate of inflation.

Some might quarrel with this, wondering why very large reductions are not possible for a military that has nearly doubled its real spending since 9/11, from around $400 billion in 2001 to around $700 billion annually a decade later and now some $650 billion (expressed in 2013 dollars). The answer is that, of that $300 billion in real growth in the annual budget, more than half was for wars that are ending (with resulting budget cuts already well under way). Of the remaining $125 billion or so, some was eaten up by higher per capita costs in areas such as health care. And about half of that amount, or some $60 billion to $70 billion in annual spending, was needed to reverse the "procurement holiday" that the country had enjoyed in the 1990s. The Reagan buildup had left us with large stocks of new equipment. By the George W. Bush years, that equipment was aging and in need of replacement, so procurement budgets had to go back up. Unfortunately, we have not yet bought enough new equipment to have the luxury of going back to Clinton-era budget levels. There is waste, and room for reform, but the amounts of savings ripe for easy harvest are not as great as some allege.

Such are the arguments in favor of avoiding big new cuts in U.S. defense spending. But of course, that is not the only side of the story. At the same time, it is also true that major American deficit reduction is necessary for the country's long-term strength. Former chairman of the Joint Chiefs of Staff Admiral Mike Mullen, former secretary of defense Robert Gates, and former secretary of state Hillary Rodham Clinton have all identified U.S. deficit and debt levels as major national security threats, and they are all surely right. Mullen has even called the debt the nation's "biggest security threat." While that claim can be debated, the broader point remains.

Some argue that military spending should be selectively protected, and currently planned cuts even reversed, as part of national deficit reduction efforts. But even from a national security perspective, that argument is problematic. The deficit reduction debate is a difficult one that can only engender political consensus when there exists a sense of shared sacrifice and comprehensive national belt-tightening. That is the lesson of the major deficit reduction efforts of the late 1980s and early 1990s, when taxes and military budgets and domestic spending were all part of the deficit-reduction effort. If some defense hawks were to succeed in excluding the Pentagon budget from the nation's fiscal reform efforts, the most likely outcomes would be a less successful deficit reduction outcome, growing debt, inadequate investment in the nation's economic fundamentals, and over time a weaker country with less national security. This is not to say that defense spending should take it on the chin. The 2011 Budget Control Act mistakenly placed most of the short-term burden of deficit reduction on the back of the Pentagon (as well as domestic discretionary accounts also important for long-term national power, since they fund science, infrastructure, education, and the like). But defense spending cannot be excluded from the deficit reduction effort either.

At a political level, too, the American public is likely ready for a period of less assertive foreign policy. The relative desirability of "wars of choice" probably will be seen—and should be seen—as lower in the future than it may have been in the past. The trick is to reflect this sentiment without going too far.

Some toss around numbers to make their case that the United States either overspends or underspends on defense. These arguments are common, usually among those with a predetermined agenda of either making the defense budget seem high or low.

Those who wish to defend the magnitude of Pentagon spending often point out that in recent decades the military's share of the nation's economy has been modest by historical standards. During the 1960s, national defense spending was typically 8 to 9 percent of gross domestic product or GDP, declining to just under 5 percent by the late 1970s. During the Reagan buildup of the 1980s it reached 6 percent of GDP before declining to around 3 percent by the late 1990s after the cold war ended. During the first term of George W. Bush, the figure rose and ultimately approached 5 percent of GDP, but is now again headed back down and will soon be just over 3 percent. Seen in this light, current levels, even including wartime supplemental budgets, seem relatively moderate.

On the other hand, those who criticize the Pentagon budget often note that it constitutes almost half of aggregate global military spending, and that American allies contribute another one-third or more of the total. Or they note that recent defense spending levels, attaining at one point $700 billion a year, exceeded the cold war inflation-adjusted spending average of $475 billion by about 50 percent (when all figures are expressed in inflation-adjusted 2013 dollars). Or they note that defense spending dwarfs the size of America's diplomatic, foreign assistance, and homeland security spending levels, which total around $100 billion a year between them.

The numbers games go on. Some defense hawks describe the cuts made under President Obama as already totaling $1 trillion over ten years (before sequestration). They make that claim by including cuts made prior to the Budget Control Act of 2011—which were in fact not cuts at all but simply a scaling back of plans for growth that the Pentagon had previously assumed. Some defense budget critics go to the other extreme and claim that there have been no cuts yet, even under the initial effects of the Budget Cointrol Act. This too is misleading. In fact, in 2011, 2012, and 2013, defense budgets exclusive of war costs were effectively held constant relative to the year before, without adjustments for inflation. That amounts to a significant real cut in spending, and one that will not be reversed in future years according to current plans (since the budget will grow roughly with the rate of inflation in those future years, but not much more). Again, it is easy to blow smoke—or at least to confuse—in this business.

Excerpted from Healing the Wounded GIANT by Michael E. O'Hanlon. Copyright © 2013 by THE BROOKINGS INSTITUTION. Excerpted by permission of BROOKINGS INSTITUTION PRESS.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Meet the Author

Michael E. O'Hanlon is the director of research for foreign policy at the Brookings Institution, where he holds the Sydney Stein Jr. Chair and is a senior fellow with the Center on 21st Century Security and Intelligence (21CSI). His previous books include The Opportunity: Next Steps in Reducing Nuclear Arms, with Steven Pifer (Brookings, 2012); Bending History: Barack Obama's Foreign Policy, with Martin Indyk and Kenneth Lieberthal (Brookings, 2012); A Skeptic's Case for Nuclear Disarmament (Brookings, 2010); and The Science of War: Defense Budgeting, Military Technology, Logistics, and Combat Outcomes (Princeton, 2009).

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