Some Things You Haven't Yet Heard
About the 2004 Defense Budget,
And Probably Never Will

by Winslow T. Wheeler

Center for Defense Information, The Defense Monitor, April / May 2003

Every year about this time, the new defense budget comes out. Each year, the budget materials from the Defense Department and the newspaper articles say pretty much the same thing, just with new numbers. There are some very predictable elements:

* Very few of the newspaper articles will agree on the dollar amount of the new budget, or even of the old budget.

* Newspaper articles that agree on the dollar amounts will disagree on the percentage of growth in the new budget, but they will agree that number is important and something that should be at the top of their news stories.

* Conservatives will complain the budget is too small; liberals will complain it is too big, and the Congressional Budget Office or the General Accounting Office will produce a study asserting that the multi-year defense plan does not project enough money to pay for the programs planned. Conservatives will say this proves their argument; liberals will say this proves the Defense Department is mismanaged.

* Members of Congress from both parties will say they support a strong national defense, but .... (take your pick)

* The president's emphasis on increases in defense spending shortchanges needed domestic spending.

-or

* The puny percentage of gross domestic product spent for defense shows how modest this year's defense budget really is.

It has become a tired and predictable debate. Most of the points either side will make to prove their argument will demonstrate just how vapid the debate has become.

Do the Numbers Have a Meaning?

This year, different newspaper articles reported the amount of the old, fiscal year 2003 defense budget to be $355 billion, $365 billion, and $382 billion. They are all, of course, technically correct and badly inaccurate at the same time.

For FY 03, Congress appropriated $355 billion in the Department of Defense appropriations bill. It also appropriated another $10 billion in the Military Construction appropriations bill (ergo, $365 billion) and another $17 billion for the defense activities of the Department of Energy, Coast Guard, Selective Service, and other defense miscellany (ergo, $382 billion).

But $382 billion is hardly the right total number for FY 03. Congress decided not to pay DoD for the cost of all military operations in Afghanistan, the Persian Gulf, and elsewhere. DoD asked for $19 billion in FY 03 for all that; it got only $7 billion. DoD wants about another $20 billion in FY 03 for these operations; the Office of Management and Budget wants to whack that down to about $13 billion or 14 billion, but hasn't worked it out yet, so we don't know what the final 2003 request will be.

We also don't know what the total cost of the war in Iraq will be, although Congress recently appropriated $65 billion to cover the cost of military operations through the end of FY 03.

The truth is, no one knows how much more the 2003 Budget will be. In fact, we don't even know if the first digit in the hundreds of billions column will be a "3" or a "4."

And, by the way, if you're counting "defense related" costs, don't forget veterans healthcare and disability costs; for starters there, add another $20 billion.

So, how big did you say the "old" 2003 defense budget was?

Get Real about Growth

A favorite metric the DoD Comptroller, congressional staff, and the press like to throw around is the amount of "real growth" in the defense budget. By "real growth" they mean a percentage change from one year to the next using "constant dollars," which are expressed in terms of the value of dollars in one fiscal year. For the percentage change from FY 03 to FY 04, I have seen 4.4 percent (The Washington Post), 4.2 percent (Wall Street Journal), 3.8 percent (Bloomberg news service), and 6.5 percent (Defense News). There are certainly more out there, but whatever they cite, I wouldn't recommend paying too much attention.

First of all, we don't know the ultimate size of the 2003 defense budget (see above), and we certainly don't know the size of the 2004 budget, for which there will surely be supplementals and adjustments by Congress. Nor do we know what the actual inflation rates will be for 2004, or for that matter 2003; so we can't calculate an inflation adjustment, either.

Finally, I don't know what "real growth" really means in a defense budget. If we're not replacing things like ships and aircraft at the rate we are retiring them, which is DoD's plan, will a defense budget that increases by four, five or six percent in dollars, after inflation, but which shrinks the size of the force show "real growth" or "real shrinkage?"

And, while the dollars are growing and the forces are shrinking, they haven't even begun to get serious about measuring what's happening to capability. Some say it's growing; some say it's declining. History and objective analysis - not the glossy fluff from DoD and corporate technology boosters - show some real problems where people thought they found "silver bullets."

Good luck on that one, tiger.

World's Worst Measures of Spending

While it's highly unlikely that anyone in Congress will try to reduce defense spending, some will show graphs of how dramatically defense spending has been increasing since Bill Clinton's FY 99 defense budget, when dollar increases resumed. A variation on such graphs will show defense spending increasing, and "non-defense" decreasing. The accompanying rhetoric will likely talk about the sacrifices being imposed on Americans as a result of "cuts" in non-defense spending.

There are three elements to this game. First, the "non-defense" spending will likely be just "non-defense" "discretionary spending," a budget geek term for annual appropriations. Not included in the graph will be the far larger "entitlement" spending, otherwise known as Medicare, Medicare, welfare, and a host of other very "non-defense" forms of federal government spending. Second, the graph will likely not go very far back in time: to do so would require showing huge increases not just in "entitlements," but "non-defense discretionary" as well. Third, in talking about cuts in the future, the graphs will likely show not absolute numbers but percentages or rates of growth. The reason is simple, most programs will actually be increasing, growing with inflation, but to make the data show a convenient downward line, ergo cuts, the metric needs to be fixed a little.

The advocates of growth in the defense budget will show just one graph: the percentage of gross domestic product (GDP) for defense over time. They will show defense spending at 10.8 percent in 1955, or 8.1 percent in 1970, or 6.1 percent in 1985. Now the percentage of GDP is just a puny 3.3 percent. The more aggressive versions of this graph-gimmickery will show defense spending at 5.6 percent in 1941 - a particularly useful year given the presumed inadequacy of the defense budget when Pearl Harbor was attacked.

This argument is specious in the extreme. First, it assumes there is a logical connection between the size of the national economy and the size of the defense budget: that defense is entitled to some particular "share" of the overall economy. Second, GDP measure is a lunatic one: in years when the economy is growing and the defense budget is also growing, but at a lower rate, this measure shows "decline." This can also mean that if the economy is stagnant or shrinking, and if defense spending were to shrink, but less, this measure would show "growth." These advocates could get the defense share of GDP up to five, or even 10, percent of GDP just by getting the economy to shrink enough. We're unhappily too close to that situation in the economy now, but to the advocates of this measure, this would be good news.

Conclusion

For years, the defense budget debate in this country has been on a treadmill. Both sides of the political spectrum have been citing budget data and using measures that appear to prove their point but, in fact, have very little real meaning. It would be a nice change to hear a secretary of defense talk about how huge his budget has become, how little he knows about its ultimate size just a few months from now, and which budget gimmicks he has instructed his comptroller to never use again. I'm not holding my breath.

Military Budget watch

Index of Website

Home Page