This essay is adapted from Defense Budgeting for a Safer World: The Experts Speak, a new publication by the Hoover Institution Press.
The Pentagon excels at producing strategy documents, reports, studies, and policy papers. They are just words on paper (or the monitor) without the funding to make them a reality. When and how the money is spent, and what the money is spent on, provide a more accurate reading of the United States’ national security strategy. But it can be difficult to see the connection if one compares the strategy documents written by various administrations with the actual spending.
Why does military funding not follow the proclaimed US strategy? Part of the reason is that the strategy is produced solely by the executive branch, usually without seeking much input from the legislative branch. Funding, on the other hand, is primarily a legislative responsibility. Many people assume that when it comes to national defense, the president and cabinet officials decide what is needed and send the request to Congress, which may quibble but eventually salutes smartly and writes the check. But that is not what the Constitution says. Article I, Section 8 provides, “The Congress shall have power . . . to raise and support armies . . . to provide and maintain a navy,” among other duties. And Article I, Section 9 states, “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law.”
In reality, the executive branch submits a funding request, but it is up to Congress to decide how much to spend and on what—subject, of course, to the president’s veto of the relevant legislation. Congress does consider the individual items in the administration’s request but also takes input from the members themselves based on their oversight, travel, and parochial interests, as well as proposals from outside groups. Congress’s decisions on defense spending occur primarily with two of the bills it enacts each year. The National Defense Authorization Act (NDAA) sets recommended funding levels for each program and establishes the policies under which the funds are spent. The annual appropriations bill actually provides the funds.
The different perspectives and responsibilities of the two branches of government make it difficult to have actual spending that reflects a single, coherent defense strategy. However, beyond the separation of powers, our system is challenged in four areas related to defense spending: the amount we spend, what we spend it on, how we spend it, and the time it takes to get results. Some brief observations on each from a congressional perspective may be useful in finding a better approach.
The amount
Under the 1974 Budget Act, Congress is supposed to approve a budget establishing the amounts to be spent in various categories of federal spending, including defense. That topline number is then given to the authorization and appropriations committees to write the individual bills. In reality, Congress has not followed this road map in some time, and the topline spending number is generally decided well after the fiscal year has begun, in a negotiation among the House, Senate, and White House. Therefore, the total amount of defense spending is more the result of a political negotiation than a considered strategy. It is obviously challenging for planners and program managers to cope with these year-to-year topline fluctuations resulting from political forces and negotiations.
Defense spending as a percentage of the economy (measured by the gross domestic product) was around 9 percent during the Cold War years of the early 1960s and was between 6 percent and 7 percent during the Reagan years. It is now less than 4 percent. Similarly, as a percentage of total federal spending, defense has fallen from roughly 50 percent of total spending in the early 1960s to about 13 percent today.
While the trend over the past sixty years is clear, world events, such as Russia’s invasion of Ukraine, can affect the political dynamics and thus the topline amount for defense. At the same time, the year-to-year change in US defense spending is followed closely by other countries looking for signs either of growing resolve and unity or of dissonance and unreliability in US defense commitments.
The what
As typically categorized, the largest component of defense spending is operation and maintenance, which includes upkeep and operation of existing equipment, training costs, expenses to run military bases, military health care, and a host of other items. The next largest category is personnel costs. Procurement of weapons and equipment comprises about 20 percent of defense spending, with research and development at about 15 percent. Perhaps surprisingly, with political fluctuations and yearly bills, what defense funding actually buys is largely consistent from one year to the next. The vast majority of the funding continues to fund the same kinds of operations, pay roughly the same number of people, and buy the same weapons and equipment as the year before. Changes are only on the margins.
Some of that makes sense. We need some stability in personnel. Large weapons purchases take years to buy, then more time to train personnel to use and maintain. But there is also a certain degree of inertia. Virtually any spending program has a constituency interested in maintaining or growing that funding and will resist efforts to cut it. Cuts can be made but only with a willingness to take on program supporters. With most of the money locked in, even marginal changes can have disproportional consequences for the warfighter. For example, defense spending cuts under sequestration and pursuant to the Budget Control Act of 2011 resulted in less money for maintenance and training, leading to alarming increases in accident rates.
Over the years, defense procurement dollars have been geared toward purchases of hardware—often large, complex weapons. The entire system is oriented toward—and is more comfortable with—those kinds of buying decisions. It is much less comfortable with acquiring software, for example, which is increasingly essential in everything from weapons systems to decision making. Without a significant push from within or from Congress, the Department of Defense (DoD) will continue to buy what it is comfortable buying, and that will exclude newer technologies, nontraditional suppliers, and different approaches to getting military capabilities to the troops.
Virtually all the spending on weapons and equipment results from decisions made by the military services. The rest of the department can issue lists of important technologies associated with the strategies it produces and make declarations about the changing nature of warfare, but they have limited tools to force compliance from the services.
For example, the DoD’s undersecretary for research and engineering, Heidi Shyu, has identified fourteen critical technologies that she considers vital to national security. But analysis of how much is spent on each area points to a discrepancy in what is said versus what is done. The business intelligence firm Govini looked not at budget requests or appropriations but at actual contracts that were issued. It found that increases in many areas of technology identified as a high priority were not commensurate with the guidance.
The how
In addition to how much the government spends on defense and what those defense dollars are used to buy, the matter of how the money is spent—what process is followed—presents challenges for those responsible for safeguarding the country. The long, complex process usually begins with a five-year budget plan that attempts to meet a military need with a spending program that must find its way into a bill that becomes law. Even after a decision is made on what to buy, funds are approved, and a contract is awarded to a particular company, that is not the end of the story. Other bidders may appeal the awarding of the contract, leading to a protracted bid appeal process. And the many regulations that affect defense spending must be applied.
As with any endeavor pursued by human beings, mistakes appear in various stages. Those mistakes often result in a new legal or regulatory requirement to reduce the chance of the mistake happening again. Over time, the laws and regulations, as well as the informal cultural caution they instill, add up to impose greater costs in dollars and time on the system. They also reduce the number of suppliers willing to enter the defense marketplace.
Congress and various Pentagon officials have regularly and recurringly pushed acquisition reform over the years, with mixed results. Various mechanisms have been created to shorten these laborious requirements, including streamlined acquisition authorities and even new offices and organizations. All of these, however, are workarounds to an increasingly clogged system through which most of the DoD spending is made.
The time
Time—it may be the most difficult and most significant challenge facing defense spending in the United States. By any standard, the time it takes to go from an identified need to getting something into the hands of the warfighters is excessive. And it is even worse when compared with the pace at which technology develops and the speed at which successful commercial companies operate. It calls to mind the statement General Douglas MacArthur made in 1940: “The history of failure in war can almost be summed up in two words: ‘Too late.’ ”
Part of the reason for the sluggishness is an outdated process designed for a different time and for purchasing a large number of items usually made of metal. That process has been encumbered over the years by layer upon layer of additional mandates and regulations. Another factor is that competition over resources, whether within the executive branch or among Congress, and the decision-making process to sort it all out take time. The test and evaluation process at the Pentagon, which can have the effect of writing or amending the attributes required of the product, is often blamed for more delays. Of course, erratic funding usually means efficient production is compromised, and delivery is delayed even further.
The results speak for themselves. A study by Bill Greenwalt and Dan Patt of the Hudson Institute compared the time to market for commercial aircraft and automobiles to DoD aircraft. It found that as automobiles took less time to get to market over the past fifty years and commercial aircraft slightly more, DoD aircraft went from five years in 1975 to more than twenty-five currently.
While we have slowed down, China is speeding up. China “is the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to advance that objective,” according to the 2022 National Security Strategy.
How to improve
We can start with the recognition that we will not and should not upend the fundamentals of our system of government. Separation of powers is built into our system and is one of our great strengths. We will continue to have administrations draw up national security strategies, which will depend upon congressional funding decisions consistent with those strategies. Administrations that consult more closely with bipartisan leaders of the relevant congressional committees in writing their strategies will find a greater likelihood that their strategies are funded. No category of defense spending can be exempt from reform. For example, accelerating the adoption of artificial intelligence (AI) can make equipment maintenance more efficient and improve availability rates, as some commercial companies are proving daily. It can also increase the efficiency of administrative functions and decision making, as well as a host of other operations.
Congress and the DoD must continually re-examine military pay and benefits to ensure that the proper recruitment and retention incentives are in place to continue to attract the best and brightest of our nation. We will always pay our service members more than our adversaries, and our personnel costs will be higher. But we should never automatically assume that the current benefits package continues to address the interests and concerns of those who volunteer to serve and their families. The passage of the new military retirement system is a good model to follow when adjustments seem appropriate.
Improvements are clearly needed in two areas: funding—the actual appropriations made available to the department—and culture. On funding, there is little dispute that the process developed by the RAND Corporation and brought into the Pentagon by Secretary Robert McNamara in the early 1960s is out of date. Even with the modifications made over the years, it does not fit an era of rapidly changing technology and innovations developed largely in the commercial market. Congress has authorized a commission to examine and make recommendations about the current budgeting system. It is scheduled to publish its final report in March 2024.
In the meantime, at least three important steps can be taken to improve the funding of military capability. One is to permit greater flexibility and speed in making certain purchases. A second is to provide more stability in funding. Congress always will and should put its stamp on defense spending, but it must do its work on time. The actual cost to the American taxpayer in wasteful spending, lost productivity, and the inefficient purchasing that comes with every continuing resolution is massive. In addition to passing bills on time, multiyear procurement can be expanded. Large ships have been authorized and funded over several years because of the high costs of each ship. Multiyear contracts do not fit all DoD purchases, but wider use would provide greater stability, certainty, and efficiency. A third improvement that can be made in DoD funding is to make it easier for nontraditional suppliers, whether they are established commercial companies, new start-ups, or something in between, to do business with the Department of Defense.
The other area where improvements are a prerequisite for success is the culture surrounding the defense budget process. The culture of organizations has been the subject of many studies and countless books. It is influenced by the organization’s mission, its power, its leadership, and especially by incentives—what sort of behavior is rewarded and what gets punished. Within both the DoD and Congress, the culture must accept and encourage a willingness to experiment and fail quickly when developing new capabilities. It must also accept a willingness to field a 70 percent solution rather than the perfect answer years later.
Is it even possible to make significant reforms in a system so well entrenched and in a time of such extreme partisanship? Recent history says that it is. The military retirement system, one of the most sensitive and politically volatile issues Congress or the Pentagon could tackle, was recently reformed—reducing taxpayer costs by billions of dollars and adding flexible retirement benefits to service members. There have also been attempts at reform that were not successful. No reform will occur without leadership, which is necessary to overcome inertia and outright resistance to change. And much of leadership is about reminding as much as educating. Especially in the United States, with our many differences, we need leadership that reminds us of our commonality— past accomplishments, not just past failings. And with those reminders, leaders can point us optimistically toward a safer, more prosperous future that we can build together.
