This interview takes a closer look at Defense Budgeting for a Safer World: The Experts Speak, a new book edited by Michael J. Boskin, John Rader, and Kiran Sridhar and published by the Hoover Institution Press.
Jonathan Movroydis: Professor Boskin, how did this project originate? And what should our readers know about defense budgeting and how it works?
Michael J. Boskin: The project started because we’ve had a startling inconsistency—wild swings, delays, and poor implementation—in the defense budget, and this has become an increasingly dangerous problem. It’s become more obvious that the world is dangerous on multiple fronts. So, the defense budget has become more salient and urgent.
The project itself started in conversations I and others had about this problem. We formed a little working group. [Hoover senior fellow] John Cogan was a big help. The three of us ran a conference under the auspices of Hoover’s Tennenbaum Program for Fact-Based Policy and listened to leading figures, including several former defense secretaries; undersecretaries for policy, procurement, and personnel; the first head of Cyber Command; heads of the Defense Innovation Unit; leading academics; think-tankers who had served in Republican and Democratic administrations; former chairs of the Joint Chiefs of Staff, and the like. We had the idea of putting everything together in one volume: threats, strategy, procurement, technology and innovation, and personnel, and then analyzing how we get reforms done, why they haven’t succeeded in the past, and what actually did work and what’s possible.
Our conference earlier this year brought together several dozen leaders in this sector, and the book is basically a presentation by all of these serious thinkers and includes their many suggestions for aligning the budget more closely with our needs, both in the topline amount and in what the budget’s being spent on.
It’s not often appreciated; it seems like a boring topic—a green eyeshade thing—but the defense budget is the foundation of our military capability, what we need to deter aggression and to defeat it if we cannot deter it. Without the proper budget and the proper authorities on how to use it, we’re going to be constrained. We’re not going to be able to send the Navy to prevent a naval blockade of Taiwan if we don’t have the ships. The Army can’t deploy troops it hasn’t attracted, trained, and retained. And I think we’re seeing this with all the other services, too; we have new areas of contention in cyber and space, for example.
There’s some feeling that we’re possibly entering, unfortunately, a new Cold War with Iran and China and Russia closely aligned. Those nations are saying they have better systems than democracy and mixed capitalist systems, which they claim are in decline and unable to do what they need to do and are fracturing internally. We’ve got a big mission ahead of us, and if the defense budget isn’t realigned, rightsized, and reformed, that mission’s going to become very much more difficult.
Movroydis: What does this book propose for how the defense budget can be reformed?
Boskin: Well, we start with the severe fiscal problems that the United States and many of its allies face—although, fortunately, they’re finally starting to increase their defense budget. Japan is doubling its defense spending, for example, and some of our NATO allies are moving up to the 2 percent level that they have long neglected. Most people in the book propose a mix of some increase in the topline and a much bigger bang for the buck on what we actually spend. There are differences of opinion presented in the book, and readers can understand why even experts come to different conclusions about how much more spending we need and about what reforms are feasible. But the proposals converge on certain problems.
For one, we need to reduce the severe restrictions placed through the defense budget on the authorities given to the military. That’s not unleashing them to do things; we retain civilian control and our elected leaders will decide when we do this and that. But it’s so micromanaged now. In 1970, the National Defense Authorization Act was ten pages long and passed on a voice vote. It’s now thousands of pages and innumerable line items telling them what they can spend and where. It takes decades, at times, and certainly years to sustain any serious procurement. In the 1960s, when Secretary Robert McNamara put in the planning, programming, budgeting, and execution system that the Pentagon still uses today, almost all the military technology and innovation was either done or funded by the Department of Defense. Now, most of the most important technologies are available commercially, but DoD has been very slow to adopt them. It’s sclerotic, and what they buy is often too expensive. The goals can be met more inexpensively and with more state-of-the-art technology by working with commercial firms and even using existing commercial technology.
We also have to do a much better job of allowing some multiyear budgeting to relax the severe restrictions that result in “use it or lose it” and wasteful spending at the end of the fiscal year. It doesn’t have to be the whole budget, but in selected areas that’s important.
And we need to remove from the defense budget a lot of things that have been stuffed into it that have almost nothing to do with our military readiness. Elaine McCusker at the American Enterprise Institute identifies $109 billion out of an $858 billion budget that falls into that category. These include things such as social policy goals. The pros and cons can be debated, but they belong in other agencies, not in the military.
Movroydis: How is defense budgeting affected by mandatory government spending and outlays such as the COVID-19 programs, which amounted to $5 trillion? Can we adequately budget for defense when it seems as if the government is running intractable deficits?
Boskin: Obviously, we have a big problem with our deficits and debt. The debt is the accumulation of all previous deficits. Our debt-to-GDP ratio has gone up from around 40 percent before the financial crisis of 2008–9, and 65 percent before COVID: it’s now running roughly 100 percent of GDP. No one knows the magical number that will cause a lot of investors to have problems, but we’ve seen that we can’t just finance with deficits ad infinitum. Deficit financing, especially toward the end of COVID, was pretty clearly a main cause of the surge in inflation, as the deficit spending was several times the estimated output gap. It clearly drove inflation and higher interest rates, and we’re heading to a point where interest costs in the near future will be higher than defense spending.
Social Security and Medicare have their own issues; the trust funds are going to be unable to make full payment in the not-too-distant future, something I’ve warned about since the mid-1980s. But we have to think about our priorities. We can certainly deal with those pressures. There is some justification for a temporary need for military buildup to be deficit-financed as an investment and not to create wild swings in tax rates. Economists have known that for a long time. FDR financed, to take the extreme example, World War II, mostly with debt. But the fact is, we do need more resources, we’re going to have to make room for them, and we’re going to have to tighten our belts more generally.
Every time we’ve tried to increase the defense budget, there are people in the political process who want to spend more on non-defense discretionary spending. You can debate the pros and cons of that, but the problem is they insist on tying unrelated goals to needed military spending. We’re going to have to have some discipline and not do that.
We’ve also had a big inconsistency in defense spending, everything from a sequester some years ago, which sharply reduced so-called discretionary spending, straining the Pentagon and causing major repercussions, to President Trump coming in and pouring a lot of money into the military budget. That’s not a wise way to do things effectively and efficiently. We need a more sensible multiyear layout of what we’re trying to accomplish.
Now we’re seeing a lot of pressure because of the support for Ukraine and some needed support for Israel, which is being worked out as we speak. But the reforms we’re talking about are broader and will require continuous effort and resources over many years. And we don’t have time to waste. We need to reach taxpayers who understand that we already spend a lot on defense but wonder why it’s not enough, and who feel there’s a lot of waste in the Pentagon. There’s some validity to that, though it’s overstated, so taxpayers have to be convinced that it’s worthwhile and that the investment’s going to pay off. So, far greater transparency and accountability is a necessary component, both substantively and politically. We need to do a better job of educating the public, which is one thing the book is trying to do. For instance, if we didn’t have some stability from our ability to deter aggression, we’d be in much worse shape economically, not just militarily.
Movroydis: How much more do we need to spend for an effective defense?
Boskin: The ideas in the book range from inflation plus a few percent to, at the other end, raising defense spending from around 3 percent of GDP to 4 percent or more for multiple years (each percentage point of GDP is about $275 billion). If you look back at a year when there was some consensus—when we had more or less the right level of spending with a different set of challenges, including some certainly not as severe or as multifaceted as we have now—and calculate what adjusting for inflation would have done from just before the sequester, there’s a gap of well over a trillion dollars to be made up, from some combination of more topline funding, removing unnecessary items from the defense budget, and realignment and efficiency reforms. And, of course this would be done over a number of years. That doesn’t mean this number is exactly right, but it’s meant to suggest that this is nontrivial: this is a serious time, a time for serious people to speak up and do what’s right. There’s a lot riding on this for us and for the world, and that’s why the title of the book is Defense Budgeting for a Safer World.
As “green eyeshade” and boring as it can be, the defense budget really is a foundation. And the weaker that foundation, the weaker everything is that’s built on top of it, including our military, and ultimately, our economy.
