Michael Boskin: Defense Budgeting For A Safer World

>> Bill Whalen: It's Thursday, November 9th, 2023, and welcome back to Matters of Policy and Politics, the Hoover Institution podcast devoted to governance and balance of power here in America around the globe. I'm Bill Whelan. I'm the Hoover Institution's Virginia Hobbs Carpenter Distinguished Policy Fellow in Journalism. But I'm not the only fellow who's podcasting these days.

If you're curious as to what the Hoover Institution has to offer in the way of podcast content, go to our website, which is hoover.org, comma. Click on the tab at the top of the homepage that says commentary, then move over to where it says multimedia. And up will come a whole list of audio podcasts, including this one, which is at the top of the list.

And that is because I think I endeavor to get the best and the brightest of the Hoover Institution on the show, today's show being no exception. Our guest is Doctor Michael Boskin. Doctor Boskin is the Hoover Institution's Wolford family senior fellow and the Tally M Friedman professor of economics at Stanford University.

In a past life inside the Capitol Beltway, Michael Boskin chaired the White House's Council of Economic Advisors during the presidency of the late George H.W Bush. He joins us today to discuss a new publication he's co edited. It's titled Defense Budgeting for a Safer World. It's available at Hoover Institution Press.

Michael, congratulations on the book. And I'd like to note that you get an award for good timing, and here's why. This nation is currently involved in not one but two hot wars. There is a possibility of matters escalating with China in the near future. Add to that budget games going on in Washington.

With current funding of the federal government due to expire a week from tomorrow, you couldn't have timed this book any better.

>> Michael J. Boskin: Well, the book and the subject matter, Bill, are timely, but they're also timeless. We have a major multi-year effort in front of us to make sure our defense budget, which is the foundation of our military's ability, and our related intelligence and diplomatic capabilities to deter aggression and, if necessary, to defeat it if we cannot deter it.

Think of it as the foundation. And if the foundation's weak, if the foundation's creaky, if the foundation's sporadic, if it's shaky, it's gonna be very, very difficult to accomplish what we need to accomplish. We'd all prefer the world was a much safer place. But between Russia's invasion of Ukraine, the Hamas' terrorist attack in Israel, and the resulting war in Gaza.

The increased assertiveness and aggressiveness of China's rapid rebuilding of its military and assertiveness in the South China Sea and with respect to its intentions with Taiwan, not to mention terrorist threats elsewhere. And as former Secretary of Defense Donald Rumsfeld used to say, the possibility of an unknown unknown.

We have a lot on our plate and our defense capabilities, our national security is stretched, challenged, and complex as perhaps more than any time since the end of the Cold War.

>> Bill Whalen: I will get into the book in a minute, Michael, but first, I want to talk a little bit about the process that is putting a defense budget together.

And here I want to tap into your experience in Washington. Like you, I'm a creature of Washington, DC. In fact, when you were working in White House, I was a few blocks away up on 15th street, and that ill fated campaign tried to give you and the president a second term.

It didnt work out too well, I might point out, if you go to Bush Quail reunions and you mentioned you worked on Bush Quail, 92 people put an l on their forehead, pointing out that you have the distinction of working on the only losing Bush November campaign. But anyway, it was a learning experience.

But heres my question, Michael. If you go back and you look at the Bush 41 years, you notice a certain certainty, a certain consistency. Every November, early December, there is the president signing the National Defense Reauthorization Act. One time for one year, sometimes two years, budgeting was done consistently.

Budgeting was done traditionally, Michael. It was done bill by bill, appropriation by appropriation. We didn't have this current mess. In fact, I did a little research here. It goes this way up until 1997, but since 1997, you don't have the president signing these appropriation measures. How did things go off the rails?

 

>> Michael J. Boskin: Well, there are a variety of things that happen. Partly is a sharp divergence in the political parties and what they're trying to accomplish. There used to be more of a center, a larger fraction of senators and congressmen, whether that was moderates from swing states or whatever it happened to be, who would work together, who would put in the work in the committees, where people actually became very knowledgeable about the subject matter.

We're not just doing this based on current political winds, and had a commitment. In fact, if you go back to 1970, which was still during the Vietnam War, the National Defense Authorization act was ten pages long and was passed on a voice vote in one day. Last year's the executive summary was twice that long.

It's thousands of pages with thousands of line items. So a variety of things have happened. Congress has become increasingly micromanager of the defense budget. The Pentagon has a sporadic 60-year-old planning, programming and budgeting execution system for procurement of weapons, for example, that was put in by Secretary McNamara in the 1960s.

It's still using that. And back then, the Defense Department was basically financing or producing almost all of its technology. Now the most advanced technology is going on in the private sector, which moves at a pace far more rapidly than the defense procurement system. So the modern age between technological advancements, between the aftermath of Vietnam War and the church report and so on, Congress has been less willing to give the Pentagon free rein.

We need civilian oversight to be sure the president's the commander of chief. Congress authorizes and appropriates the funds and should have a considerable say. But that's on the defense side. More generally, what's happened is the process has broken down into the leadership trying to negotiate at the last minute, often beyond the last minute, with continuing resolutions that keep the government open for a short period of time at last year's levels until a new bill can be passed.

And they've gone as long as a half year, actually, recent past. And so instead of doing these bill by bill, getting the particulars right, within broad constraints from the Budget Reform Act that was supposed to put limits on and targets and so on. They've wound up basically ceding much more authority and centralizing much more in leadership, which puts together these omnibus packages and tries to negotiate it, take it or leave it, to the last minute when they think they have more leverage.

That means a lot more nonsense gets put into the bills, a lot more structural underpinnings that could be firmer and stronger and maybe sustainable. When political winds change and parties change, power has been eroded. So I think that's a combination of things, political, technological, financial, and also, of course, we have very, very large budget deficits and very, very large national debt.

When we were looking back before the financial crisis in 2007, the financial crisis of 2008, 9, the Great Recession, America's debt GDP ratio is 40%, then it was 65% before COVID, now it's 100%. And that's not sustainable. And we're heading into problems in the coming decade in Social Security and Medicare, where they're gonna have to be some non-trivial changes to get those on a firm financial footing.

 

>> Bill Whalen: Let's turn to the book, Michael. Two things I'd point to the listeners. Number one, this is a very serious read. My card copy here is 500 pages of very small print. This is not something that you devour on a flight from San Francisco to Los Angeles. It takes time to read, but it's worth it.

The second thing that stands out, Michael, is you look on the back and it says, featuring contributions from, and there are too many names to read here, but about three dozen people in all. I see Condoleezza Rice's name on this. I see H.R McMaster's name on this. I see Gary Ruffhead's name on this.

He is a Hoover fellow and a Former chief of naval operations. I see Michael, not one, but two former secretary of defense and Jim Mattis and Leon Panetta. This is a very, very impressive group of people. Tell me how you got this group together to do this.

>> Michael J. Boskin: Well, we have a project, a program at Hoover called the Tantamount Project, after its generous donor who became very concerned that.

Much of policy was being discussed and debated without much regard to the facts. So we, Doug Rivers, a colleague, a Hoover colleague, science professor, is also the chief scientist for YouGov. And I did some polling about what people knew about and what they thought they would benefit from knowing more about.

And other people would benefit from knowing more objective information about about 15 or 18 public policy issues. And national security and defense budget was one of the top five. I started calling some friends I had known and that had been in these high positions, secretaries under secretaries, chairman of the Joint Chiefs, etc.

And they said it would be most valuable we'd be to get everybody together and put together a volume and a conference that really discussed everything from soup to nuts. Everything from what are the threats we face? What's the strategy we need to employ, and how does that relate to what we're actually doing?

What do we need to do to improve procurement and technology and innovation? What's more sensible personnel. How do we attract and train and retain the people we need, including high tech talent, cyber and so on? What reforms make sense? What has been the historical effort to reform, and when did it work and when didn't it?

Why? And what's the view from Congress? So we had former chairman of the House Armed service Committee, Mac Thornberry. We've had Mike Mullen, former chairman of the Joint Chiefs, as you said, secretaries Rice, Panetta and Mattis. We've had national security advisors like HR McMasters, under secretaries for policy, procurement and personnel, including Michelle Flournoy.

We had the first head of Cyber Command, the first two heads of defense, elevation unit and leading think tankers from a variety of backgrounds, brookings, AI, Hoover. So these people serve in the highest levels and are extremely knowledgeable and in close contact with their successors in Republican Democratic administrations.

Whose goal is to make sure we have the national security we need. So in talking to them, we did that. And the book kind of evolved out of that, out of the idea of getting everybody interacting and coming up with what they think reasonable solutions are. Obviously, were disagreements, for example, about how soon China is gonna be an active threat against Taiwan.

There were disagreements about other issues, but there was general agreement on a wide range of things and basically were gonna need more bucks for the military. But were gonna have to get some of what we need by getting a bigger bang for the bucks we do spend through reforms in the Pentagon and the way Congress budgets.

 

>> Bill Whalen: Let's talk about some areas in which there is consensus. Michael, the first one being the world is increasingly dangerous and complex. Here's how I see it. There was a cold war that ended in the early 1990s, Soviet Union. You happen to be in the White House and oversaw the transition.

Then we have the war on terror, and it seems to be now, Michael, we're in a news phase. Neil Ferguson, our Hoover historian, calls it Cold War two but we see this right now. We see the war in Ukraine, we see the war in the Middle east, as you mentioned, and we see the threat with China.

So it's a very different ballgame.

>> Michael J. Boskin: Absolutely, I would say, actually this was all latent, and it's just become a lot more obvious in the last few years.

>> Bill Whalen: Yeah.

>> Michael J. Boskin: Democracies have always tended to underinvest in their militaries. In peacetime, other priorities become more move to the top of the list for voters and for elected officials.

The classic example, of course, is Great Britain ignoring Churchill's admonitions about Hitler's intentions in the military build up in Germany in the 1930s. So we don't want to repeat that. We have done many versions of that in recent years. And defense spending has been at relatively historic lows of GDP as a percentage of GDP.

At the height of the Reagan military buildup and arms build up and new weapons systems, just procurement was 3% of GDP. Now, that's basically the Pentagon space budget is around 3% of GDP. Now there's some additional stuff for them. What we've authorized for Ukraine support and so on.

So when we take a look at that, we really need to appreciate the fact that it's not just that there are different threats in the world. But Iran, Russia, and China seem to be growing closer together, which is very unhealthy for us. Secondly, they have devoted their military buildups to actions in a particular theater, Russia and eastern Europe, Iran and its proxies in the Middle East.

China and Taiwan and the South China Sea, which is unnerving, India, the Philippines, etc. So we have to be alert to the fact that we're stuck, whether we like it or not. Hopefully, our allies are continuing to rebuild their militaries, as some have committed to do. Japan, for example, has committed to double its defense budget.

And as Jim Mattis likes to say, the only thing worse than gonna war with allies is gonna war without them. So hopefully we won't have a war, hopefully be able to deter, but we have to be alert to these. So we're gonna be able to deter in multiple theaters simultaneously while they have, if you want to call it this.

The luxury of focusing only on their neighborhood that they're really interested in right now. And we don't want things to explode beyond that. And history is replete with examples where insufficient attention to this has resulted in a much harsher reality later, much greater loss in lives and treasure than needs to be.

Because we've underinvested in our defense capabilities and we've misallocated those resources as well.

>> Bill Whalen: All right, a second point of consensus, Michael. Greater adequacy, flexibility and accountability are needed in the defense budget now. Again, going back to my long ago Washington days, I remember Bill Proxmire with his Golden Fleece award.

I remember the news stories about expensive toilet seats and hammers and so forth. But this sounds a little more serious than that.

>> Michael J. Boskin: Yes, absolutely. First of all, the Navy can't send ships to keep sea lanes open. It doesn't have, the army can't send, deploy troops that it hasn't been able to attract and train and retain, and the same for the other services, including space and the like.

So we have some serious issues here. People appreciate the fact that the Pentagon budget is a large number. It does a lot of things. There's stuff that is put in there by Congress that has little to do with defense that ought to be taken out and the funds be used for what we really need to deter aggression.

But the lack of flexibility is a very big problem. For example, there are very tiny overages allowed in a particular situation. There's very few multi year budget line items. So commanders of a battalion or a regiment are faced with use it or lose it by the end of the fiscal year.

So they're put in a situation where they have to kind of realign what they're doing, spend money that, and efficiently in order to do it in the current fiscal year. There are what are called colors of money, things that can only be used for specific purposes. So, as I said, we have thousands of pages in the National Defense Authorization Act, and we have thousands of line items.

We should be reducing that to what's absolutely necessary. There's a planning, programming, budgeting, execution commission of leading experts, several of whom were at our conference and participated in the book, that will make recommendations about overhauling the basic structure of how Pentagon procurement works. But in the meantime, they need to sit down and say, this year, why don't we remove the following half dozen constraints, relax them by five or 8%, and let us have a little more flexibility.

We can make sure the funds are going forth or give us the biggest bang for the buck. We've all been in a situation where, in our own household, where we leave a little constraint here, leave a little constraint there, it makes things a lot easier, even if the overall budget doesn't go up much.

But we're gonna need some more dough. We're gonna need more flexibility. The accountability is really important because we cannot expect american voters, and therefore our elected officials who rely on them, to put them in office and keep them there, to be voting for these changes, for reforms and for some additional resources as necessary without the public being aware that efforts are being made to make sure the funds are being used wisely.

There's very little waste. There's very little overage. Now, there are many reasons waste and overage occurs when you have a big weapon system with a long timeline, and it's, you know, it started out and was supposed to do something, and then events in the world change, and we want that weapon system be able to add some additional capabilities.

That's one of the reasons. But there's definitely a lot of overhead that can be reduced and a lot of funds that can be reprioritized, realigned to better suit our strategy in what we need to do to combat the aggression we seem to be facing and the potential aggression from potential adversaries.

China is a risk, and we have to pay attention to that. It's also an important economic and trading partner. We have issues in our trade with them, intellectual property and so on, but nobody wants to have a confrontation with China that results in military activity, if it all can be avoided.

Let me give you a simple hypothetical, right now, our only viable response to a Chinese launching a seaborne invasion on the west coast of Taiwan, which, by the way, is difficult. Topography for a military invasion would be long range missiles. You wanna give the president of the United States as the only option, either do nothing, send these long range missiles to take out some Chinese ships or send the Navy.

That will take two weeks to get there after the fact. So we need to have a sense that we have the ability to position our forces in a way that deters them, make them understand they shouldn't be doing this because it will be very risky for them. So those are examples of some of the things we need.

But it's adequacy, enough flexibility and realignment and accountability, including doing better on things like audits. Some service has a bunch of surplus stuff. They should be going to other services that might need it, things of that sort.

>> Bill Whalen: Let's talk about personnel for a moment. Michael, one of the consensus points here is more flexible, incentive based reforms to better recruit, train, promote and retain people, including those with advanced technical and business skills.

Two questions here, Michael. Number one, within the book, is there any consensus or is any opinion as to which is the more dire problem, recruiting or retainment? And then secondly, I'd like you to explain what advanced technical and business skills means.

>> Michael J. Boskin: Yeah, okay. So the military, some services had difficulty meeting their quotas recently for what they need, for the modest size they are now relative to historical standards.

And there are many people who believe, especially the Navy, but also Army and force strength needs to be a larger. But the Navy, we've allowed it to atrophy. For example, we've been losing a submarine every two years. In 2022, we almost got below the minimum required fleet, while China's building theirs rapidly and it's now larger than ours.

Whether it's, we have immense capability, we still have the strongest and most capable military in the world. I don't want anybody to not understand that, but we need to keep it that way. And the big issue is the gap has been narrowing because our adversaries and potential adversaries have been getting increasingly sophisticated in their weaponry and they're spending more on defense.

So we need to reestablish or maintain and perhaps even enhance our gap, which has been dwindling. But on the personnel side, part of the reason is a generic social problem. We have a large number of young people who'd like to join the military, who are overweight, have been using drugs and things of this sort.

And so we need to, that's sort of a general social problem we need to address for health, but also that's been part of it. But it's been a tight labor market in recent years. That's a tough to compete against for the military, for many reasons. They do provide a lot of valuable skill and training that helps people after they're in the military, get civilian jobs, but that's part one.

So that's kind of at the beginning, at the lowest level of enlisted personnel. But then we have problems in that we have a system which moves people around too frequently before they finish the job they're in. Gary Roughhead, in the book, notes that the Manhattan Project and the nuclear Navy bet on people, not on processes.

Rickover was in his job probably too long, but it took him seven years to get the first nuclear submarine, the Nautilus, done. But we mostly rotate people out every two years, so that's a problem. It's hard to get people to come in for a stint. Many people would like to serve their country, especially people with technical skills and business skills running a business.

We get some people in that way, but the confirmation process has become onerous and an avenue for people to play gotcha on trivia. And so that's a problem. And we have too little opportunities for people, including the increasing number of women in the military, to have choices in exactly what they do.

That doesn't mean their choices should be unlimited or they don't have to conform to what the military needs. But the all volunteer Army was a great improvement. Morale's better. It's easier to run than run based on a draft, which, of course, became very contentious during the Vietnam War.

But we need a little bit more flexibility and choice for our sailors and marines and Army personnel and so on, coast guardsmen, so all those are important. But I say the biggest things are getting top people who have business skills and advanced technical skills into top jobs and including, if they want to come in for three or four years, not make a long lifetime commitment.

We would benefit from that. And those are reforms that are important. I'd say I would be remiss if I didn't add that the country in general, and therefore the military, is short trade skills like welders and electricians, which are vital, for example, for the navy. So we're gonna need to beef that up as well.

And so I think there are lots to do. I think there is wide agreement among the people and the participated that the overhead and the bloat seems to be in the civilian workforce, which is quite large. And that savings could be made there because the tendency is you've got a problem you can't fix inside the military, hire an outside contractor.

That's better than not being able to. To fill the need, but we need to do better in that regard.

>> Bill Whalen: Well, now, Mike, are we talking about things related to the defense in the military, but not necessarily part of it? For example, you mentioned training people with vocational schools.

You've seen in your lifetime the slow death of vocational education in America. So perhaps this is something else needs to be on the table to discuss, encouraging young men and women, not just to maybe one day get involved in the military, but also perhaps pursue a career in some sort of vocational work.

 

>> Michael J. Boskin: There's no doubt about that. It's down a little bit. But even during the peak of the boom, we had many, many millions of job openings, and they were not mostly for software engineers, things like welders, electrician, crane operators, etc. These are things that require some skill, but they're not skills that require a four year college degree and a master's degree.

There are skills that require kinda very specific training with some increasingly technical background. You need to be able to have some ability to operate some little bit of complex electronic machinery to do these these days. But there are things that could be done in a year or two, and there are many.

And these jobs are pretty high paid, many of them six figures. It would be a good thing if we didn't obsess on trying to get everybody to go to a four year college thinking that's the be all and end all, even if they wind up in doing some major or studying things that don't really wind up helping them get a decent job afterwards.

 

>> Bill Whalen: Okay, and a final point of consensus. Michael, you wrote a vital need to better educate the public on the role that its investment of tax dollars and defense plays in enabling the military, along with intelligence and diplomacy, to keep America and the world free and safe. So I have, over the course of my lifetime, seen a lot of ads for joining the army.

Joining the Navy. The annual Army Navy football game is a great advertisement for young men and women who want to serve their country. But what are you getting at when you talk about better educating the public?

>> Michael J. Boskin: Yeah, there are a variety of things, but Admiral Mullen made a really interesting observation, which is, after 50 years, it's the 50th anniversary of the all volunteer Army service, all volunteer force.

The military is a little bit disassociated from the public. When we had a draft, when the military was much larger, many in America, most families had some fairly direct tie with a smaller force, the all volunteer force. There's a risk that they're, even though many are based in the US, they're not the little league coaches, they're not the PTA meetings, etc.

And it's important that the public understand what the mission of the military is, the quality of the people trying to do that, what they're actually trying to accomplish that there are brothers and sisters, children and parents, and a little bit of that has resulted in a disassociation. And when people look at the top line number, they say $858 billion.

That's a lot of money. Well, absolutely. But you have to look at what it's going, what it has to buy. It's a lot more expensive to recruit and train an american GI than it is in China, where wages are much lower, where the pay is much lower, et cetera.

So we have an expensive military, and there's certainly some waste. There's certainly stuff in the military budget that doesn't belong there. That's kind of social policy. If it's good social policy, it should be in the agencies that are more readily able and designed to deal with it. Elaine McCusker at AEI estimates $109 billion of that budget was not directly related to our military needs.

So even if it was just half that that we could redeploy to stuff that was more important, it would go a long way to helping us improve our national security and our ability to deter. I'd just add one other thing. It's really important to appreciate the fact that it's not like in world war two, with military production getting us out of the depression, just in general, our ability to maintain stability, keep sea lanes open, prevent many wars from breaking out, et cetera, is foundational to our economic prosperity and security.

If you would like to have a lot of sea lanes disrupted and have goods not arrive here that we depend upon and we need, or are goods going abroad that others depend on and need and want, that would be a big hit to our economy. The fact that when there's massive disruption in the world, that the private economy tends to suffer a lot and that would wind up affecting people's everyday lives and the prices they pay for goods and the jobs that are available and so on.

 

>> Bill Whalen: Michael, I'd point out that America is not the only nation that's struggling with the issue of military bang for the buck. If you look at Australia right now, which has become an important partner with us, Aukus, the submarine deal with Australia, the US and the UK. There's a report out by the Australian Strategic Policy Institute.

This is a government funded think tank, Michael. It says that the nation's defense budget is already falling behind on what it needs for the next three years. The goal in that country is to push defense funding to 2.3% of its GDP. They're not gonna make it. It looks like then you look at Japan, Michael, you have the collapse of the yen.

That nation has very ambitiously built up its military in the past few years because it wants to deter a take over of Taiwan. Japan struggling, too. Does this put extra pressure back here on the US to get our act together on defense spending?

>> Michael J. Boskin: Well, yes and no.

I think we're all in this boat together because we've all taken what might be thought of as a holiday because the world didn't seem as dangerous as it turned out to be for a while. Now, you go back 20 years. Let's get beyond the recent administrations and arguments about what they did.

It would have been hard to predict a brutal ground war in Europe. It was just not on anybody's radar screen, right? And you could go on and on. Terrorism, of course, was.

>> Bill Whalen: Right.

>> Michael J. Boskin: So I think part of the problem is that we're readjusting and it's gonna take some adjustment.

And my view has always been, from my observations, just generally, not just economically but socially and politically. Democracies have an ability to absorb change if it's modest and gradual, but when it's really, really forced, rushed, rapid, creates immense disruption. It becomes very contentious and very difficult, whether that's an immigration or whatever.

So right now, we're seeing on immigration a lot of tension around the world in a lot of places. But on the defense buildup, there's a universal recognition in the leadership of world's major democracies is necessary. President Trump pushed this, the NATO allies to start raising their spending. And successful, partly, some are continuing, but they're gonna need to do better.

We need our allies. We're gonna need to do a better job of integrating. We already do a lot of this on the military and intelligence side. And diplomatically, we're gonna need to do that. One of the things Leon Panetta points out in the book, which I think is really important, is America, everywhere needs this.

But America in particular needs to do a better job of understanding how other nations view their security needs, both national security and economic security. And they don't always exactly coincide with how we do things. For example, Japan and South Korea export a lot more to China than we do.

We all import a lot. They export a lot more. So de risking from China, as the phrase goes, is going to be more difficult for them and more painful. So we have to be aware of this as we work toward our common goals of making the world a safer and a better place for.

Our citizens and hopefully those that are not yet in free societies.

>> Bill Whalen: All right, Michael, I'm now going to ruin your life. I'm gonna take you out of your comfortable California existence and move you east and make you the president of the United States, which an idea I like because, number one, you're a very bright man.

Secondly, your remarkable wife, Chris Boskin, would be a great first lady if you asked me. Here's my question, Michael. You have this book in your hand and you wanna implement this book. Actually, let's do two questions here. My first question is for you, the president of the United States.

What are you looking for in a defense secretary? So you mentioned Leon Panetta, for example, a triple threat, a rather unique triple threat. He was a longtime member of Congress. He was director of OMB, actually a quadruple threat. He was the White House chief of staff, I believe, and defense secretary.

Pretty unique resident.

>> Michael J. Boskin: Yeah, a director.

>> Bill Whalen: A director, yeah. Okay, so the list goes on. Jim Mattis. Jim Mattis comes over to the Pentagon from the military. You mentioned Don Rumsfeld. Don Rumsfeld had worked in the White House, but a White House chief of staff. He'd worked in the private sector, ran a pharmaceutical company.

Just a strong manager. Going back even further into history, gosh, we have Bob McNamara. He was what, the chair of Ford, I believe, when he came in as the best, in the brightest. So there's no one kind of set description for what is the secretary of defense. What would Michael Boskin look for in a secdef?

 

>> Michael J. Boskin: Well, there are a variety of things that secretary of defense and his very close advisors in what's called the office of the secretary, which has gotten very large. But just as they need to do a variety of things, number one, they have to have a very, very strong sense of history, current politics and geopolitics, and in my opinion, be a strategic thinker.

Secondly, we need someone who's a very adept manager because this is going to require not just a few processes to change in the Pentagon, but some cultural changes and also in Congress by the way. The good news is that the armed services committees and their appropriators have generally, in the last couple of years, overridden President Biden.

President Biden's request for declining real defense, inflation adjusted defense spending had added enough to make up that difference and make a big difference, and that needs to continue. But you need somebody who understands politics, understands what people on the Hill need and want and why, and can figure out how to maneuver through all those minefields to get some of these reforms authorized by Congress and implemented.

And I'll take leadership from the top. And the defense secretary will be very important. Perhaps most important will be the president. The president needs to explain to the public why this is necessary. And we know you can't just do that one off, give one speech and go off and do something else.

He or she's gonna have to continually reemphasize how important this is to our security and our prosperity. And he's gonna have to have somebody who's a good manager and is gonna be a good steward of the taxpayers funds in the Pentagon. But those are the things I would look for if they need to understand how the military thinks and operates, too, down to the enlisted personnel.

I remember when Dick Cheney, who was secretary of defense in the first Gulf war, he would go to military bases and he would insist it on seeing the corporals and sergeants and throwing the officers out of the room to get their view of what's actually going on. Because he didn't think they would say something in front of their superior officer.

Something was going wrong. So you need somebody who, those are unique individuals. They do exist. Not everyone's gonna have all those skills, but the deputy secretary can complement those skills, for example. Being the strong manager, for example. So that's what I'd be looking for. I'd also be looking for somebody who had a really clear understanding of what the cost to America and the free world would be if this is, this project, which is going to take a years, isn't mostly successful, it's government work even in the private sector, we strike out on occasion.

Apple had the Lisa and the Newton before the Mac, etc., so. And, Steph Curry only makes 90% of his free throws. So they're not gonna get everything right, but they're gonna need to, to start and to push and to implement and to get off to a very strong start, even if they're only there for four years.

A very strong start, some fundamental changes that will better position us to make better use of taxpayer resources for the national security we need.

>> Bill Whalen: Now, do you think this is possible for a president to pull this off? And here's why I asked this, Michael, I have seen two big defense buildups in terms of spending in my lifetime.

There's what happened under Ronald Reagan. Well, Ronald Reagan won 44 states in 1980. He flipped the Senate. He was a force to be reckoned with. And as you mentioned earlier in the podcast, there are a lot of southern Democrats who are very pro defense kind of guys whose names ended up on ships, not coincidentally, so possible for Reagan to make that happen.

The second buildup, Michael, is in the first decade of the century. I did a little sleuthing on this. Defense spending in your last year in the White House is about $325 billion. And I know these are all pre adjusted dollars. It then jumps to about 378 billion by the end of the decade.

But then by 2011, at the end of that first decade, Michael, it's up to $752 billion. So this is reaction to what? The war on terror? So you have A, a president with the mandate and B, a God awful thing happened to the United States. So I asked this question because there's category C, which is this period where now of close, bitter elections in which a president arrives in the White House without a mandate, with sometimes a divided Congress or hostile Congress.

So how does a president with that book in his hand make this happen?

>> Michael J. Boskin: Well, they're gonna have to be quite adept. You remember that while Reagan had some southern Democrats that helped him with his policies, he did not have the House. He had the Senate, but not the House.

That's number one. Often not appreciated is that Senior Bush, a major reason he wound up agreeing to what was a modest tax increase, which was not the best policy, but also was horrible for him politically. Was he managed to protect the defense budget for several years, which his opponents in Congress, you got to remember back then, he was working with 57 Democrats and 230 or 40 Democrats in the House, 57 Democratic senators.

We had very small Republican minorities, but he managed to wall off the defense budget from large cuts, which were coming for several years. And that, I think, was very important. So that's number one. Now, let's hope we don't have a repeat of 911. I know people are concerned about that with the lack of vetting at the southern border and the large influx of illegal immigrants and so on.

Let's hope we don't have something like that that becomes a catalyst. Let's hope we can prevent that, but also be wise to the fact that it's a lot cheaper in lives and treasure to stop it from getting to our shores, to stop it. To protecting our allies, keeping the sea lanes open, deterring aggression, because, aggression from totalitarian states will wind up trying to fill a vacuum.

They'll seize an opening. They'll sense weakness. And those are the risks. And that, I think, is what probably is happening now. I will say that there were two huge and damaging hits to the Pentagon budget. There was an attempt, an attempt to control the budget deficit and debt.

There was something called a sequester that was not ever supposed to happen. It would only go into effect if Republicans and Democrats Could not get together and agree on a budget that met certain targets. The thinking was, well, Democrats couldn't handle any large cut in domestic programs. Republicans couldn't handle a very large cut in defense.

So it couldn't possibly happen. But they couldn't agree, so it happened. And the Pentagon budget was really starved for quite some number of years. President Trump, when he came in, kind of rushed a large increase. This isn't the way to fund things efficiently. You want to have something more steady and predictable, not just for the military, but for all the suppliers.

The defense industrial base is withered because of this. They don't get predictable demand signals, so they can do their own private investment, getting ready to produce the weapons we need, etc. So these were very big events. And we did a calculation that if we just went back to 2010 and we just had kept pace with inflation, we accumulate that shortfall from the sequester onward.

Even with that Trump buildup and the two additions the last two years made by the Congress to Biden's budget, we still wind up over $1 trillion short. That may not be the right number. Maybe it's too small, maybe it's too big. But if it's even half or two thirds that this is a very large shortfall.

We can get some of it from reforms where it needs some more funds. We need to have a predictable plan to do this over a series of years that makes sense and will enable us to do what we need to do now. We're not gonna build a lot more ships quickly.

We need to start that process. But we can deploy some anti-ship weaponry forward into the first island chain, from Japan down to the Philippines, that would be able to help deter a Chinese invasion of Taiwan. That can be done more quickly. So smart, sensible, planned, extra resources that are vital and getting a bigger bang for the buck, targeted to what we really need.

 

>> Bill Whalen: One final thought, Michael, and I'll let you go. And this would be the idea of congressional buy-in, and particularly bipartisan congressional buy-in. Maybe I'm a salmon swimming upstream here, there are young men in Congress, young men and women in Congress who have military experience. Tom Cotton, Mike Gallagher come to mind, for example.

I remember back in the era in Washington, there was this creature called BRAC. B-R-A-C, which stood for what, base realignment and closure. And I thought, Michael, this is a very clever way of going about what to do with the end of the cold War. And you put together Republicans and Democrats, and they sat down and they had to decide what bases got closed.

And I lived this personally. I worked for governor of California at the time, and there was a lot of pain passed around. But the point here was that there was buy in by both parties, and they addressed a serious problem. And so I don't know if there's a way to do a brac for defense budgeting, but it seems to me that there needs to be a way to get Congress rather than have the poor president go out there and try to preach.

You need Congress buying in.

>> Michael J. Boskin: Absolutely, Congress authorizes the military to do what it needs to do, or to do what Congress authorized it to do, in any event, and appropriates the funds. And without that, the military wouldn't be able to operate in the way it needs to operate.

So you're exactly right about that. And there are some hopeful signs, I would say, among many, including the fact that younger people are getting more interested and more concerned as they see what's going on in the world. They're awaking along with their elders to the fact that the world's dangerous is that veterans, people with military experience, have become much more attractive.

And there are more of them joining Congress virtually every election in both parties, I might add. And I think they're being appreciated for their service, their mission orientation, their ability to complete something, their no-nonsense, their trying to solve problems and the like. And that, I think, augurs well, especially cuz we've had the all volunteer force.

A generation ago, most of the people in Congress and the Senate had either served or had parents who had served, because of the World War and Korea. So that's one promising sign. There are these bills for a bipartisan fiscal commission to get us out of this inability to enact anything that's been going on for some time, and leaving the default to be higher and higher debt, if that occurs.

Putting some sensible defense budgeting priorities in there, I think, would be a valuable thing, and hopefully the recommendations won't get beat up one at a time. We tried this a few years ago. The Simpson-Bowles commission was appointed by President Obama, which included Clinton's former Chief of Staff Erskine Bowles and Alan Simpson, a highly regarded senator from Wyoming.

And they had bipartisan members, they had some outside experts. And they came up with a solution which country on a much firmer fiscal footing. Actually, a better tax code, a more pro-growth tax code would have raised a little more revenue, would have slowed the growth of entitlements and a variety of other things.

And that was extremely promising, but President Obama pulled the rug out from his own commission and refused to back it. And that made it impossible for moderates and some conservatives and liberals to join forces against the more extreme people on both parties to pass something. So hopefully, something like that can happen this time.

We will see the need for reform is ever more urgent because of the strains our fiscal situation and the constraints we'll place on more money for the military. If we were just rolling in dough and there was plenty of money around to spend on stuff, it would be bad.

But it wouldn't be so horrible if we wasted a little bit to get the military we need. Given where we are now, we're going to need to do both a frugal and sensible expansion of the top line and reform so we get a bigger bang for the buck and the results we really need.

 

>> Bill Whalen: Okay, Michael, a final question, I promise this is it. We are now within one year of the presidential election. I don't know if you watched the debate last night. I hope you have better uses of your time than that. I watched it, but that's my life. What can I say?

I don't know, if we assume that Joe Biden and Donald Trump are the two principals a year from now, and I don't know if they'll actually have debates or not. That's a very good argument to be had right now. But if there is a debate, Michael, since you have co-edited these 500 pages, did you know what is inside this book?

If you were to distill this book down to one question for those two candidates, what would be that question?

>> Michael J. Boskin: Let me first say that you don't have to read the whole book. You can just look at the individual chapters. You're interested in what the threats we face are from counterterrorism.

Michael McFaul, former ambassador, about Russia beyond Ukraine, Oriana Mastro on the PLA, etc. You can look at individual chapters. If procurement is your thing, if reforms are your thing, if the politics are your thing, if personnel are your thing, if strategies are your thing, but it is integrated and it's, I think, a useful resource.

But the one question I would ask them. What are your plans over the four years of your term to greatly strengthen our national security and get us the military intelligence and diplomacy we need to deter aggression across many theaters around the world?

>> Bill Whalen: Good question.

>> Michael J. Boskin: And the answer to that, and what actually happens in the real world if either are elected, or anybody else, will determine a lot about the safety, security, and prosperity of our country.

 

>> Bill Whalen: Okay, well, Dr Boskin, we'll leave it there. Thank you very much for your time today. I hope you and your wife have a wonderful thanksgiving.

>> Michael J. Boskin: You too, Bill, take care, great to be with you.

>> Bill Whalen: You've been listening to Matters of Policy and Politics, the Hoover Institution podcast devoted to governance and balance of power here in America and around the globe.

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While you're on that site, I strongly suggest that you sign up for the Hoover Daily Report, which keeps you updated on what Michael Boskin and his colleagues are thinking. That's emailed to you weekdays. The title of the book we've been discussing, once again, is Defense Budgeting for a Safer World.

It's available courtesy of Hoover Institution Press, and the website there is hooverpress.org. For the Hoover Institution, this is Bill Whalen, we'll be back soon with a new installment of Matters of Policy and Politics. Until then, take care. And by the way, if you're listening to this before Veterans Day, make sure to thank the people in your life who either served or still serve in freedom's cause.

Thank you, thanks for listening.

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