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Strategic Insolvency

Strategic Insolvency

The thirty-year story of U.S. defense decline.

Gary J. Schmitt

The only things that are inevitable, they say, are death and taxes.  But over the past thirty years, almost as inevitable has been the notion that, when it comes to the defense budget, there have to be trade-offs. Resources are limited. So, when it comes to paying for a force sized to match the country’s national security interests—keeping it trained and ready, procuring the weapons and platforms necessary to modernize it—the question in every administration and Congress is, more often than not, what has to be cut or deferred to keep the Pentagon under the top line it’s been given by the White House and the Hill.

Though we won’t know exactly what the Biden Administration has in mind until it delivers its first budget two months from now, we do know the pressure will be strong to cut defense spending. First, the Democratic Party platform explicitly says the Pentagon can get by with less. Second, President-elect Biden has set out plans for spending more than $5 trillion in new money over the next decade; and while proposed tax increases might cover half of the new spending, it’s virtually inevitable that his team will look to the defense budget as a way to free up funds for his domestic spending plans. Compounding the pressure on the defense budget will be an almost certain return of Republicans’ concern about the federal deficit in the wake of the pandemic’s emergency spending.

With an existing “base” defense budget (which keeps the military running outside of money spent on wars and other contingencies) of over $630 billion, and total defense expenditures (including those contingencies, plus the Department of Energy’s security-related expenditures) at over $730 billion, one can understand why it’s an attractive target for those in Congress and the incoming administration who want to set different priorities for spending, or just not spend as much.

But before slicing and dicing money from the Defense Department, it would be useful to see how the military’s budget has fared over the past three decades—and, hence, why more cutting is problematic. The brief spending bump-up that we saw in Trump’s middle two years in office can’t get the department out of the hole that government has taken years to dig.

The Hollowing Out

Immediately following the Cold War, after the George H. W. Bush team had already begun the “peace dividend” reduction in the American military, the Clinton White House and the Les Aspin-led Pentagon cut even more deeply.  This reduction in defense spending helped produce balanced federal budgets in Clinton’s final years, but left the United States with “the hollow force” of the late 1990s, marked by low readiness levels and a dramatic slowing in the procurement of new weapon systems and platforms. Defense spending as a percentage of GDP slipped below 3 percent for the first time since before World War II, and dropped from nearly 22 percent to 16.5 percent of the overall federal budget.

It was with this force that America went to war in October 2001 after 9/11. The defense budget did increase to fight the wars in Afghanistan and Iraq, but the great majority of the increase went toward increased pay and benefits for the all-volunteer force in order to keep retention numbers high, and toward operations and maintenance to keep planes and vehicles procured in the 1980s up and running. What the increase in spending did not buy was new weapons, delaying for another eight years the recapitalization needed to keep a military properly equipped and not tied to systems and platforms that were aging even faster than anticipated because of the wars. As one prominent analyst put it, “The defense buildup has not resulted in a significant modernization of the military. Indeed, from a procurement standpoint, the U.S. military can be said to have experienced a ‘hollow buildup.’”

In other words, despite being involved in two major conflicts, the country was not on a war footing. To the contrary, President Bush was determined to keep things moving along as normally as possible domestically; to do otherwise would be to give a victory to the terrorists. As a result, though, the military fought in Iraq and Afghanistan with too small a force and was left increasingly behind the curve for meeting more conventional military threats—Russia and China—that were already on the horizon.

The 2008 Great Recession put a big red Stop sign to any thought of the newly elected Obama administration’s turning things around. While the White House pushed through an $800 billion stimulus package over its first three years to prop up the American economy, it eliminated or capped some thirty defense procurement programs—a “savings” of some $500 billion out of current and future Pentagon spending plans.

To make matters worse for the military, Congress and the President agreed in 2011 to the Budget Control Act, which, in an effort to reduce federal deficits, required half of the budget savings to come from defense. The law potentially required nearly $1 trillion in cuts over a decade to the Obama Administration’s already trimmed-down 2012 budget request.

True, subsequent budget amendments reduced the cuts; and war-fighting accounts were exempted from the requirement. Even so, the difference between the Obama Administration’s planned 2012–16 base defense budget and what was actually authorized was $380 billion. When combined with the earlier cuts, it can be argued, the military in effect paid for Obama’s stimulus package.

What inevitably resulted were cuts in the size of the military, a growing crisis in readiness, and increasing operations and maintenance costs for aging platforms and systems. Compounding the problem was the regular use of continuing resolutions to fund the Department of Defense when the normal appropriations process had failed by the end of the fiscal year, leaving the Pentagon unable to start new acquisitions on time or even plan to have the money to do so. Meanwhile, defense dollars devoted to research and development, a key indicator of future capabilities, continued to drop as a percentage of the defense budget, from 2.7 percent in 2008 to 1.3 percent in 2017.

Trump the presidential candidate talked big about rebuilding America’s military, but his initial suggestions to increase the Pentagon’s top line were dictated more by the deficit hawks in Office of Management and Budget than by national security needs. After taking office in January of 2017, the White House bumped up the defense budget by a mere 3 percent over what Obama had planned.  Luckily for the military, the chairs of the Senate and House Armed Services Committees (the late Senator John McCain and the now-retiring Rep. Mac Thornberry) saw the yawning gap between the global threats the country faced and what the Pentagon could actually put in the field. The result was a budget agreement that allowed, over 2018 and 2019, an increase in the defense base budget of some $90 billion. The President crowed that U.S. forces would now be “almost totally rebuilt from the depleted military I took over.”


The Trump defense budgets for the following two years showed little growth. The fiscal year 2021 budget, when inflation was factored in, was a slight cut. The two years of increase would not be sufficient to get the military out of the hole. Much of the extra money went to repairing combat readiness levels—dealing with severe maintenance backlogs, depleted munitions stocks, and postponed training. Still, readiness rates, at least for the navy and Marine Corps, remain an issue for ships and planes.

Procurement of new platforms and systems saw the benefit of the new money. In fiscal year 2018, procurement increased 20 percent over the previous year. Since then, however, the procurement budget has stayed flat or, counting inflation, declined. The bump-up in no way makes up for the declining recapitalization rates of U.S. forces for most of the period from the end of the Cold War until now. Worse, the Pentagon will soon enter a period of needed new acquisitions (including platforms like bombers, fighters, tankers, SSBNs, helicopters, satellites, frigates, and ICBMs) with a funding profile that, according to administration projections, will actually be less (adjusted for inflation) than it is today.

Lest anyone think this decline is intended to save money in order to expand research on high-tech future weapons, the fact is that research, development, and technology (RD&T) funding is also projected to decline in future years, dropping to just 1.3 percent of the national defense budget. How the Trump team expected this budget profile and level of RD&T to produce a fleet of next-generation fighters, advanced missile defenses, and two hundred more navy vessels is anybody’s guess.

The Ground Not Made Up

Congress just passed the defense authorization for fiscal year 2021. The base defense budget of $635.5 billion is, in current dollars, a small bump up from the previous year—but is, in inflation-adjusted dollars, a cut. This stands in contrast to statements from the previous chairman of the Joint Chiefs of Staff, General Joseph Dunford, that the Pentagon’s ability to carry out the national defense strategy with confidence depended on a sustained 3 to 5 percent annual increase in future defense budgets.

If one were to take the 2012 presidential base defense budget and straight-line it to the current budget, that fiscal year 2012 budget would actually be higher. Moreover, the overall size of U.S. forces is not appreciably different—except for the army, which is smaller. Yet, as we know, world security has gotten more difficult and complex. As the bipartisan, congressionally mandated National Defense Strategy Commission put it in 2018, America’s strategic “solvency” is very much at risk, with a growing gap between what the American military is required to do and its capacity to do it.

It might be that President Biden, facing the world as it is and committed to being more engaged internationally, will back away from cutting defense substantially. But avoiding major cuts or even keeping defense spending levels flat will not close a gap in military capabilities that has been building for years now. There are no technological “silver bullets” on the horizon to magically fix that problem; and even silver bullets cost money, especially in quantity.

Nor can we count on allies to fill the gaps absent American security leadership. If we’re not there in numbers and capabilities, allies and partners who are, at best, middle-range powers won’t be able to sustain the necessary levels of deterrence to keep the peace or defend themselves in a crisis without American military power.

There is no getting around the fact that money matters. An American military that is being challenged on both ends of the Eurasian land mass, and which still must deal with Islamist terrorists and deter North Korea and Iran, will inevitably be large and expensive if it is to meet those challenges successfully.

Gary J. Schmitt is resident scholar in strategic studies at the American Enterprise Institute and editor of the recent publication, A Hard Look at Hard Power: Assessing the Defense Capabilities of Key U.S. Allies and Security Partners (USAWC Strategic Studies Institute, 2020).