Defense Cuts Must Be Part of Fiscal Solution, Secretary Says

WASHINGTON, May 24, 2011 – Curtailing defense spending must be part of the solution for the nation’s financial woes, Defense Secretary Robert M. Gates said here today.
Gates told an audience at the American Enterprise Institute that the United States faces a serious fiscal predicament that, if not addressed soon, could become a crisis affecting the nation’s credit, confidence and position in the world.

President Barack Obama has set a goal of holding growth in base national security spending slightly below inflation for the next 12 years. That would save about $400 billion, the preponderance of which would come from the Defense Department, the secretary said.

„I have long believed — and I still do — that the defense budget, however large it may be, is not the cause of this country’s fiscal woes,“ Gates said. „However, as matter of simple arithmetic and political reality, the Department of Defense must be at least part of the solution.“

The secretary said he understands those who believe that the only reason the nation faces tough choices in defense spending is that the Pentagon’s budget isn’t as large as it should be. He noted that it is a much smaller percentage of the nation’s gross domestic product — the output of goods and services produced in the United States – than it used to be.

„Defense expenditures are currently a lower share of GDP than most of the last half century, and a much lower percentage than during previous major wars,“ the secretary said. „When President [Dwight D.] Eisenhower warned of the ‚Military Industrial Complex‘ in 1961, defense consumed more than half the federal budget, and the portion of the nation’s economic output devoted to the military was about 9 percent.

„By comparison,“ Gates continued, „this year’s base defense budget of $530 billion – the highest since World War II adjusted for inflation – represents less than 15 percent of all federal spending and equates to roughly 3 and a half percent of GDP – a number that climbs to about 4 and a half percent when the war costs in Iraq and Afghanistan are included.“ Still, Gates said, he doesn’t foresee a return of defense spending to levels sparked by the Soviet threat in the second half of the 20th century.

„Absent a catastrophic international conflict or new existential threat, we are not likely to return to Cold War levels of defense expenditures, at least as a share of national wealth anytime soon,“ he said. „Nor do I believe we need to.“

The threats and potential adversaries the nation faces today are dangerous and daunting for their complexity, variety and unpredictability, Gates said. „But as a matter of national survival,“ he added, „they do not approach the scale of the Soviet military threat that provided the political and strategic rationale for defense expenditures that consumed a significant portion of our economy.“

Another reason why Cold War-level defense budgets probably won’t return — at least as a share of GDP – is that the nation’s financial condition has changed, whether measured in the size of debt and deficits, ratios of retirees to workers, or the share of the federal budget consumed by entitlements.

„The money and political support simply aren’t there,“ he said.

Gates detailed efforts over the last two years to rein in Pentagon overhead costs and implement other efficiencies, and he said more needs to be done in that regard.

„I believe there are more savings possible by culling more overhead and better accounting for, and thus better managing, the funds and people we have,“ he said. „But one thing is quite clear: these efficiencies efforts will not come close to meeting the budget targets laid out by the president, much less other, higher targets being bandied about.“

Still, he said, perspective is important.

„What’s being proposed by the president is nothing close to the dramatic cuts of the past,“ he said. „For example, defense spending in constant dollars declined by roughly a third between 1985 and 1998. What’s being considered today, assuming all $400 billion comes from DOD over 12 years, corresponds to a projected reduction of about 5 percent in constant dollars – or slightly less than keeping pace with inflation.

„Nonetheless,“ he added, „meeting this savings target will require real cuts – given the escalating costs of so many parts of the defense budget – and, as a result, real choices.“

U.S. Department of Defense
Office of the Assistant Secretary of Defense (Public Affairs)

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