In his radio address to the nation Jan. 2, President Clinton announced his proposal for an increase in next year's budget of more than $12 billion for defense readiness and modernization. The White House said it was the first increment of a $110 billion increase to be spread over six years.
News reports touted it as the biggest jump since the Reagan era. Stan Crock, writing in the Washington Post, called it "a defense-spending spree." A dozen liberal Democrats, led by Rep. Barney Frank (D-Mass.), held a press conference to warn that the President was plunging the nation into "an arms race with itself."
Congressional oversight committees took a different view. As it turns out, the actual addition to the Fiscal 2000 defense budget is around $4 billion--not $12 billion-and a considerable part of the increase over the longer term is attributable to what Rep. Floyd Spence (R-S.C.), chairman of the House Armed Services Committee, calls "questionable assumptions and gimmicks." Furthermore, Spence says, the increase projected between now and 2005 falls about $70 billion short of requirements.
It is true that this is the biggest increase since the Reagan era, but that does not say much. Defense spending has been cut every year since 1985. It is also true that this budget, details of which were revealed Feb. 1, would relieve two problems that bear on declining personnel retention rates.
The proposal provides for a 4.4 percent raise in military pay, which had fallen far behind compensation in the private sector. It would also restore the traditional military retirement program, which was the No. 1 retention incentive before it fell victim to economizing measures in 1986. The service chiefs had declared these programs to be their top priorities.
Unfortunately, there is more to the story.
In testimony to Congress last September, the chiefs finally acknowledged that the armed forces were in financial trouble. They said that their unfunded requirements for readiness and long-delayed force modernization-not counting any personnel program costs-came to $17.7 billion a year: $5 billion for the Army, $6 billion for the Navy, $5 billion for the Air Force, and $1.7 billion for the Marine Corps. They stood by those numbers at House and Senate Armed Services Committee hearings in January.
The cost of closing the pay gap and restoring the retirement system is estimated at $7.8 billion a year, which would bring the unfunded total to $25.5 billion annually, or $153 billion over the course of the six-year budget plan.
Examination of the budget numbers for next year shows why Spence and others in Congress are upset. Of the nominal $12.6 billion increase--which is well short of the requirement stated by the chiefs-only $4.1 billion is additional funding. The rest is from internal realignments of the defense budget and assumptions that the rate of inflation and the cost of fuel will remain low.
The increase is further offset by a budgeting change in which $1.8 billion for operations in Bosnia is incorporated into the regular defense program rather than being handled, as it was previously, as emergency funding.
The $268.2 billion in defense budget authority for next year is more than the President intended to request, but when inflation and the various assumptions and adjustments are considered, the real increase melts away. After inflation, the projected total for next year is below the level of this year's program by half a percentage point.
Of the nominal $110 billion increase between now and 2005, the actual addition is $84.3 billion, and the biggest part of that is not due until well after the turn of the century. It is, in effect, an IOU written on a future administration.
Nevertheless, the budget proposal could be a political success. Stephen Rosenfeld of the Washington Post says the President's action is a "realistic middle course," that makes defense a non-issue and satisfies all except the "big defense spenders." Objections voiced by the liberals reinforce the perception that the Administration has moved out boldly on defense.
The sad fact is that unfunded defense requirements go beyond the readiness shortfall numbers stated by the chiefs last fall. In October, Secretary of Defense William Cohen told the Senate that the level of risk associated with the nation's ability to carry out the national military strategy is "moderate to high."
Under questioning by the Senate in January, Army Gen. Hugh Shelton, Chairman of the Joint Chiefs of Staff, who had spoken emphatically in support of the President's proposal, said the net effect was to stop the decline in readiness so that "the nose of the airplane comes back up."
The new budget does not address a number of major and urgent requirements, such as the multibillion dollar cost of new capabilities in space, which conventional wisdom regards as affordable within the present limits only by massive diversions from other elements of the already strained Air Force budget.
The defense budget shortfall is real, and it is serious. The significance of the President's proposal is that the shortfall will not be as bad as it would have been otherwise. The most harmful outcome of it may be that the nation is led to believe that the substance of the problem has been solved, and that is far from the case.
The next Daily Report will be Tuesday, Feb. 19, due to the Presidents Day holiday.
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