Some Things You Haven't Yet
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
* Very few of the newspaper articles will
agree on the dollar amount of the new budget, or even of the old
* 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
* The president's emphasis on increases
in defense spending shortchanges needed domestic spending.
* 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
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,
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
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
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
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.
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.