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How Much is Enough: Setting a Topline for Defense Spending

Twenty-six years after the end of the Cold War, the United States once again must prepare for great power competition and confrontation. Russian aggression along NATO’s eastern front presents military challenges to European security not seen in decades. China’s military modernization and coercive behavior toward U.S. allies and partners threatens stability in the Asia-Pacific region. Both nations are disrupting the post-World War II international order that has long provided relative peace and prosperity for the United States, its allies and partners, and much of the rest of the world.

The shifting strategic environment is further complicated by an evolving set of operational-level military challenges. Recent military innovation, driven by the increasing “informationization” of potential rivals and their adoption of advanced conventional and asymmetric capabilities, threatens the traditional means with which the United States projects power. Confronting these strategic and operational challenges will require U.S. defense leaders to rethink how they prioritize resources and how they view the use of force. Given the strategic and operational challenges confronting the United States, the Department of Defense (DoD) must reevaluate how it operates—its operational concepts—in addition to rebalancing its portfolio of capabilities and its force structure to defend American interests from ever-changing threats.

The Department of Defense’s ability to confront these challenges has been hampered by the consistent demands of the Global War on Terror—on operations, sustainment, and modernization funding—and with a defense budget that has been shrinking since its 2010 peak. This period of decreasing resources, however, may be at an end.

The answer to how much is enough is a function of what missions the U.S. military is tasked with, how the U.S. military chooses to fight, and how much risk the U.S. is willing to accept.  The Center for Strategic and Budgetary Assessments (CSBA) recently held an exercise to answer that exact question. CSBA’s team argued for an additional $572 billion in base-budget discretionary spending over the next decade above the 2017 budget request.

That, however, should only be considered a notional base-budget discretionary spending increase. The magnitude of DoD’s budget is driven by three main factors: personnel costs, operations and maintenance expenditures, and modernization funding.

Twenty-six percent of DoD’s base discretionary spending funds military personnel.  Add in the Defense Health Program (DHP) and civilian pay, funded from the operations and maintenance accounts, and DoD has already spent more than 55-percent of its budget before allocating any funds for military modernization, maintenance, or training. Moreover, the cost per active-duty person has grown by 60-percent since 2001. DoD and Congress have attempted to rein in compensation costs by implementing some of the recommended reforms in the recent report from the Military Compensation and Retirement Modernization Commission. The CSBA team’s notional spending increase assumed additional compensation reform beyond what Congress has already improved. If that reform does not go through, the required topline increase would grow.

Almost 48-percent of the base budget funds operations and maintenance (O&M) accounts, although roughly 61-percent of that sum funds the DHP and civilian pay. Most of the remaining O&M spending funds the training and maintenance requirements of each service. Since DoD can quickly save money by cutting training hours or maintenance, these accounts are often targeted when DoD must slash spending. While financially effective, it also harms overall readiness. CSBA’s team recommended increasing funding to counteract the current readiness shortfall, however, if near-term readiness is not valued, the overall topline requirement would decrease.

The remainder of the budget funds modernization, providing money for the research and development, and procurement accounts. Much of the team’s recommendations focused on military modernization, which drove much of the recommended ten-year spending increase.

CSBA’s team envisioned a military that had adopted concepts and fielded capabilities to leap ahead to the next phase of ongoing operational competitions; developed capabilities that would impose costs on adversaries; and postured forces in Europe, the Pacific, and the Middle East to strengthen deterrence and improve crisis response.

The Army should prepare for multi-domain operations where both the physical and informational battlespaces are contested. This requires investments in long-range precision fires; higher capacity and mobile shorter-range air and missile defenses; multi-mission electronic warfare systems; and the forward basing of forces and material.

The Air Force should prioritize a globally responsive family of manned and unmanned, long-range, penetrating surveillance and strike aircraft backed by resilient C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) networks and large inventories of short-range standoff (70 – 400 nm) precision-guided munitions.

The Navy should shift strike capacity to manned and unmanned undersea systems; sustain forward presence in key areas through the increased use of small surface combatants and unmanned systems; and maintain sea-based sea control and power projection capabilities through the development of a longer-range unmanned penetrating ISR and strike carrier-based aircraft.

The Marine Corps should remain the United States “9-1-1” response force and develop the capability to conduct distributed amphibious operations.

All services should allocate increased resources to hardening, through both active and passive means, forward forces and bases and should invest in a more resilient logistics network.

To once again prepare for great power competition and confrontation, the United States must not only increase defense spending, but also change how it fights. The aforementioned priorities offer a roadmap to and suggest a topline necessary for securing an enduring military advantage over the coming decades as the United States once again faces great power competition and the potential for conflict.

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