Defense Budgeting: Grappling with New Threats

This essay is adapted from Defense Budgeting for a Safer World: The Experts Speak, a new publication by the Hoover Institution Press.

In the post–Cold War period, Pax Americana and the concurrent period of Western ascendance undergirded a relative peace that was founded on liberal values, democratic governance, and free markets. The predominant views through the 1990s and 2000s were that nations were drawing together around Western values, particularly political and economic liberalization. This direction of progress seemed inevitable, and US military and economic strength overmatched any potential rival.

The 1992 National Military Strategy explained that the United States would move away from threat analysis as a basis for planning, since there were no significant threats facing the country. “We can still point to a North Korea, a weakened Iraq, and perhaps even a hostile Iran,” it observed, and there may be “one or two added to such a list without straining credulity,” but the real threat was “the threat of the unknown.” As one military analyst later observed, “a strategy oriented on a potential enemy was out.”

A year later, the Defense Department’s Bottom-Up Review set the foundation for major cuts in the defense budget. Defense Secretary Les Aspin explained that the Department of Defense (DoD) would reduce its combat forces and make related cuts in “support forces, the massive and costly infrastructure of bases, centralized maintenance and supply facilities—all of which were built up during the Cold War.” Total active-duty personnel declined from 1.6 million to 1.4 million. The “bottom line of the Bottom-Up Review,” he said, “was that most elements of the force will be smaller.” The resulting budget cuts were dubbed a “peace dividend” and persisted throughout the Clinton administration.

Today, as evident in the national security strategies of the Trump and Biden administrations, leaders of both political parties accept that we have entered a new era of great-power competition. Moscow continues its attempts to conquer Ukraine and grows its defense relationship with Iran; Beijing has pursued a breathtaking, decades-long military buildup, founded on economic growth—and unfair trade practices—that was catalyzed by access to export markets when it was granted ascension to the World Trade Organization. It continues to make illegal claims to sovereignty over the South China Sea, has sought to create a chain of civilian and military maritime facilities across the Indo-Pacific region, and appears to be preparing to coerce Taiwan into unification on China’s terms. In addition, Russia and China have proclaimed a partnership with “no limits,” designed to challenge the US-led international order and to discredit the idea of universal democratic values. Iran, working through proxies in Iraq, Syria, Lebanon, and Yemen—and most recently through Hamas and Hezbollah—seeks to dominate the region through the so-called “axis of resistance.” Iran’s leaders have revealed, once again, their depraved brutality—this time through their support for the murder of Israeli civilians.  And Tehran is once again approaching the status of a nuclear threshold state.

In short, the unipolar moment enjoyed by the United States lapsed within two decades, with American power going from uncontested to contested in virtually all military domains. Across the traditional domains of warfare—land, sea, and air—the United States can no longer operate freely. The spread of technologies and the development of new weapons systems, from precision-guided munitions to unmanned autonomous vehicles, meant that America’s ability to find and hold targets at risk; supply and safeguard its forces abroad; freely navigate the seas and control sea lines of communication; and protect its homeland had now diminished significantly. In the critical regions of Eurasia, rival powers sought to create anti-access/area denial zones—areas where US power projection assets would be under threat of ballistic missiles, airpower, and other systems. Thanks to the proliferation of accurate and extremely fast (even hypersonic) weapons systems, the ability of US aircraft, ships, and troops to get to where they needed to go, on our terms, was gone.

With these developments, much of what had given the US military overmatch against its rivals was gone. Although the US defense budget remained the largest in the world, America’s relative advantages were declining.  

Where to begin  

Today’s highly contested world creates a range of operational challenges for the Defense Department, which in turn have budget implications. Four of these might be considered starting points for considering budgetary pressures of the future: (1) resetting US strategic forces for the second nuclear age; (2) rightsizing and integrating US and allied conventional forces; (3) restoring the US defense industrial base to support a protracted war; and (4) preserving freedom of action in space.

>>  Modernizing our nuclear abilities: The United States faces a world with three major nuclear powers, along with lesser but rising nuclear powers; qualitative changes in nuclear weapons themselves; challenges related to defending against ballistic missiles and new types of missiles such as hypersonics; and the destabilizing implications of artificial intelligence (AI) and other software on nuclear command-and-control infrastructure. As the head of US Strategic Command put it, he is working with “submarines built in the ’80s and ’90s, an air-launched cruise missile built in the ’80s, intercontinental ballistic missiles built in the ’70s, a bomber built in the ’60s, and part of our nuclear command and control that predates the Internet.”

The United States must address qualitative issues by continuing to modernize US nuclear delivery systems and weapons to ensure they remain effective, safe, and reliable. The Defense Department must ensure that the US nuclear force structure is adequate to deter two peer competitors simultaneously, as well as countries such as Iran and North Korea. And the United States must maintain a credible missile defense posture.

>>  Integrating defense capabilities with allies: US policy makers consistently herald the strength of America’s alliances. The Biden administration’s 2022 National Security Strategy reaffirmed that America’s “alliances and partnerships around the world are our most strategic asset” and are indispensable to peace and stability. The United States does not have or cannot amass capabilities at scale without partners. Yet the ability of the United States and its allies and partners to actually fight together in highly contested environments in a fully integrated manner remains open to question.

Improvements in the ability to fight together are needed across several key areas. Significant communications challenges exist at the tactical, operational, and strategic levels. Radios, for instance, must be able to operate inside challenging cyber or electronic warfare environments. At the operational and strategic levels, allies must share a common operating picture (COP) and improve their command-and-control architectures. High-end combined warfare requires that allies integrate their digital weapons systems. The United States must reduce the byzantine bureaucracy of Foreign Military Sales (FMS) that prevents the timely provision of equipment, weapons, and services to its partners. Related to this problem are outdated laws that prevent Washington from sharing information with key allies such as Australia and the United Kingdom. And as artificial intelligence enters the picture, integration will become even harder—the United States will depend upon AI to fight what Alex Karp has called “algorithmic warfare.”

>>  Growing the defense industrial base: During the Cold War, the strength of the US industrial base was not in question. It was considered a source of long-term strategic advantage for the United States. It produced the bombers and missiles on which nuclear deterrence rested and armed the US military with world-class weapons and reliable guided munitions that were cheap enough to be employed in large numbers. With the dissolution of the Soviet Union and the absence of a peer competitor, the concept of “rapid decisive operations” emerged, leading to the view that wars would be short and that the United States could coerce or defeat the enemy “without a lengthy campaign.”

The collapse of the Soviet Union not only increased pressures to reduce the defense budget but also led to the reallocation of a large portion of the budget from national security to other national needs. These developments led to the consolidation of defense firms, setting the foundation for the situation today. The government took a hands-off approach to the industrial base, leading to supplier monopolies or duopolies, which in turn began to erode competition.

Today, the Pentagon needs to increase suppliers, which means that procurement problems must be addressed, to include fostering competition. Improving supply chain security, another recognized problem, will take years, if not longer, to achieve. Maintenance delays also have a direct impact on combat capabilities, since aircraft or ships are unavailable when needed. As one retired senior officer put it while discussing notorious backlogs in naval shipyards, it’s “the equivalent of losing half an aircraft carrier and three submarines each year.” And the DoD also needs to consider stockpiling as a strategic necessity, since it provides strategic depth. This means it must increase procurement of systems and weapons to build these stockpiles—which will require multiyear contracts.

>>  Preserving freedom of action in space: Ever since the United States launched satellites to track and monitor nuclear missiles during the Cold War, it has relied on its space infrastructure to protect its national security. For much of the post–Cold War period, the United States was optimistic that it would enjoy advantages in space capabilities across all mission areas, maintaining its advantages by “staying at least one technology generation ahead of any foreign or commercial space power.” The space domain is now a critical commercial as well as a warfighting domain. And it’s highly contested.

The Defense Department is developing a resilient, layered system of satellites in low and medium Earth orbit. The simultaneous pursuit of these systems will cost billions but will offer significant increases in capabilities, such as tracking hypersonic missiles. DoD is also working to make sure that its assets in space, and related infrastructure on the ground, are survivable. The United States must be able to conduct not just defensive but offensive operations, which include the ability to “negate an adversary’s use of space capabilities.” And finally, the Defense Department has overall responsibility for a space infrastructure that provides reliable services to all aspects of American life: next-generation GPS, Internet infrastructures, and assets related to imaging, tracking, and cellular services.

Inertia is the enemy

Much of our defense infrastructure remains stubbornly archaic, crippling America’s ability to respond to new threats and to developing and deploying the changes described above. Most of the challenges identified here have been recommended for more than a decade, if not longer. Unless defense officials begin their initiatives by identifying the consistent and underlying obstacles to change, and spend the bureaucratic capital required to reduce those obstacles, progress will be halting or unlikely. It is not all about new ideas—it is also about understanding why past good ideas have failed.

Further complicating these challenge is that policy makers are limited by the relative lack of flexibility in the defense budget. As one defense budget expert observed, between two-thirds and three-quarters of the budget is essentially fixed, even before accounting for the changes needed to address new threats. In practice, this means few “flexible dollars” are available to address new requirements. It also remains difficult to assess how existing categories of defense spending—categories that have been fixed for some forty years—actually come together to address some of the operational challenges described here. Defense budget line items don’t necessarily present a picture of how capabilities come together in an operational concept. This sort of assessment—often arrived at through wargaming and other exercises —is needed to give us better insights into the degree to which the United States is actually prepared to deter adversaries and, if necessary, to fight and win.

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November 15 2023