The Military’s Money Malaise

August 18, 2017

Imagine if 90 percent of federal spending went to defense. Could the military satisfy all of its readiness and wartime needs with nearly 3 trillion more dollars than it currently gets in a fiscal year? 

At one point in time, that level of defense spending was a reality. While the example of World War II is not an appropriate benchmark for defense spending today, it demonstrates a stark contrast in fiscal realities during wartime, then and now. 

Defense spending is being choked by entitlement spending while we're in the midst of a 15-year-long conflict in the Middle East. Just 3.1 percent of gross domestic product (GDP) goes towards defense, a continuation of the unnerving trend of historically low defense spending by that measurement. Even at that relatively low amount, defense spending takes up about half of all discretionary spending. 

Further, total discretionary spending equates to only half of total mandatory spending. Mandatory spending, meaning entitlement programs such as Social Security, Medicare, and Medicaid, continues to take funds away from discretionary spending accounts. Little has been done to reverse the trajectory, as shown in the table below. 

CBO Chart Spending GDP

“Do more with less” is a familiar phrase for many, but it's a fallacy. Paying for the world's finest fighting force is an expensive endeavor. Don't expect more from the men and women in uniform if you can't compensate and equip them properly. 

There is a lot of talk about increasing the defense budget lately, and indeed, this year's defense bill is poised to do just that. But it is only incremental, and the long-term trends are still troubling. 

Mandatory spending consumes a larger piece of the budget pie every year, and it's leaving less and less room for defense spending. It's increasingly clear national security is at risk if entitlement spending isn't reined in. 

DoD already feels the pain from recent sequestration spending cuts, which Defense Secretary Jim Mattis said "[did] more to harm the combat readiness of our military” than any enemy in the field. The defense budget is shrinking as a portion of federal spending, having fallen in every decade since the 1940s. 

Reaching financial stability is going to be painful. Something has to give, but how much more can we really ask of the military? It's likely Congress will have to make uncomfortable decisions on cutting spending or increasing taxes, or some combination of both. 

It's time to find a long-term budget plan that starts chipping away at the national debt. The Congressional Budget Office estimates federal debt held by the public will near 90 percent of GDP in about a decade.

CBO Chart public debt

The future of America's financial stability and therefore global security footing is at stake. 

Senate Armed Services Committee Chair John McCain (R-Ariz.) acknowledged, “With the present operational tempo and drastic reductions to defense spending, we will continue the downward spiral of military capacity and readiness that will compromise each service's ability to execute our Defense Strategic Guidance at a time of accumulating danger to our national security.” 

But rhetoric is not enough. Action is needed, and national leadership must accept the uncomfortable prognosis if the financial situation isn't brought under control. With emboldened enemies and new frontiers for conflict, we cannot afford to skimp on national security needs. If mandatory spending isn't addressed, however, there won't be a choice. 

MOAA is determined to prevent the terrible past mistakes, such as cutting critical career-service incentives, from reappearing for the sake of balancing the budget. Those short-term gains inevitably result in unacceptable costs in the form of retention and readiness problems. 


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