President Obama just signed into law a $626 billion fiscal 2010 defense spending bill that provided the Pentagon with its annual appropriation, including funding to help pay for the conflicts in Iraq and Afghanistan. Another defense funding request is expected in the new year to cover the costs of sending over an additional 30,000 U.S. troops to Afghanistan.
As our overseas conflicts continue, some people believe that the federal government's budget problems are largely caused by excessive spending fueled by unnecessary wars and that defense funding must decrease. Others believe that we aren't spending enough on defense and that more resources should be dedicated to our national security. I would argue that, in several significant ways, both views are incorrect.
Defense spending, as a portion of our national budget has actually declined over the past 40 years, and its former dominance has been replaced with a new budget behemoth: entitlement programs, primarily Medicare, Medicaid and Social Security, that grow on auto-pilot. In 1969, defense represented 45 percent of the federal budget, while by comparison Medicare/Medicaid and Social Security represented 19 percent of the federal budget. In 2009, defense represented 19 percent of the federal budget, including the cost of Iraq and Afghanistan, while Medicare/Medicaid and Social Security combined represented 38 percent of the federal budget.
If this isn't shocking enough, the fastest growing expenditure for the federal government is interest expense. The U.S. Government Accountability Office (GAO) recently projected that the single largest expense of the federal government within 12 years could be interest on our mounting federal debt. Their estimate did not consider the likely increase in interest rates that will occur when the economy begins to grow in earnest. And what do we get for those interest payments? Nothing!
Irrespective of the above, there is still considerable waste in the defense budget that needs to be addressed. For example, whenever military services outline their "requirements" for federal funding consideration, by law, they are not supposed to consider the cost of their requests. As a result, too many costly, unnecessary and unaffordable weapon systems and other wants get added into the pipeline, thereby adding to costs and diminishing funds available for other national security needs. Additionally, the current acquisitions and contracting process within the Defense Department has a number of systemic flaws which result in billions and billions of dollars in waste each year.
Despite its popularity, our current all-volunteer military is very expensive. To give you a sense of how expensive, the GAO determined that the average annual total compensation (including base pay, allowances, current and deferred benefits and tax exemptions) for a member of the active duty military in 2005 was about $115,000. By comparison, the median annual household income in 2005 was less than $50,000.
The Pentagon has also become a bloated bureaucracy. There are far too many layers, players and hardened silos within its five walls. The time has come to dramatically transform and streamline the organization of both the Defense Department and the overall national security structure.
Does this mean our nation will reinstitute a draft in the near future or dramatically cut back on defense spending given our challenges overseas? Unlikely, but we may see some form of mandatory national service in the future for which the military would be an option.
It's true that defense spending, like all government expenditures, must be carefully monitored because all wasteful spending contributes to our nation's deficit. And yes, the costs of wars in Iraq and Afghanistan have been undeniably high, both in lives lost and affected as well as dollars spent. However, even if we pull all our troops out of Iraq and Afghanistan and crack down on waste in the Defense Department, the savings would only get the government a relatively small fraction of the way toward restoring overall fiscal sustainability. We need to take many more steps than these to put our nation on a more prudent and sustainable fiscal path.
So what will do so?
We must also re-impose tough statutory budget controls, reform Social Security, Medicare and Medicare, control overall health care spending, engage in comprehensive tax reform, and raise more revenues. Otherwise, based on our current fiscal path, we will continue to mortgage the future of children while reducing important investments in our future. While we confront conflicts overseas, we must also face the crisis of debt, spending and unfunded obligations here on the home front. And to do so, we will likely require a new form of Fiscal Future Commission that will engage the American people and make a range of recommendations that will be guaranteed a vote in Congress. The time to create such a commission is early in 2010.