Budgeting for Defense: Maintaining Today's Forces Section 3 of 5
September 2000

Chapter One

Introduction

With the end of the Cold War, strategic balances worldwide shifted radically, and the threats faced by the United States diminished. The collapse of the Warsaw Pact and the dismantling of the Soviet Union left the world looking different from the way it did when the Soviets dominated much of Asia and Eastern Europe. In response to those shifts, U.S. military forces have also undergone profound changes. The missions for which they train and plan have been substantially altered. And their numbers have been greatly reduced.

Throughout much of the 1990s, the funds U.S. policymakers allocated to national defense followed a similar downward trend, as budgets fell along with forces (see Table 1). In 1998, the defense budget reached a 20-year low. In 1999, policymakers halted that decline and provided regular and supplemental appropriations that constituted real (inflation-adjusted) growth in the resources available to support national defense activities. In particular, funds for procuring new equipment and weapons, which had shrunk by a larger percentage than had the total defense budget, began to receive significant, real boosts.
 


Table 1.
Funding for National Defense and Personnel for the Department of Defense in Selected Fiscal Years, 1989-1999

  1989 1993 1997 1999 Percentage
Change,
1989-1999a

Budget Authority (In billions of 2000 dollars)
 
Department of Defense  
  Military personnel 109 93 78 73 -33  
  Operation and maintenance 116 99 99 109 -6  
  Procurement 97 58 44 52 -47  
  Research, development, test, and evaluation 47 42 38 39 -17  
  Military construction 7 5 6 6 -20  
  Family housing      4      4      4      4 -11  
    Subtotal 380 302 269 282 -26  
 
Other Agenciesb      11      16      13      14 23  
 
      Total, National Defensec 391 318 282 296 -24  
 
DoD Personnel (In thousands)d
 
Active Duty 2,130 1,705 1,439 1,386 -35  
 
National Guard and Reserve 1,171 1,058 902 869 -26  
 
Civilian 1,107 984 786 704 -36  

SOURCE: Congressional Budget Office using data from the Department of Defense and the Office of Management and Budget.
a. The apparent discrepancies in CBO's calculations arise from rounding.
b. Covers defense activities related to atomic energy in the Department of Energy and national defense functions in other agencies.
c. Includes revolving and management funds, trust funds, and offsetting receipts. Excludes contract authority for the working capital funds because appropriations are used to liquidate that authority.
d. Strength measured at the end of the year.

That increased funding, however, has not eliminated questions about future defense budgets--in particular, about the level of funding necessary to sustain today's forces. (The "sustaining" budget that this study addresses is the annual funding that would be needed to retain U.S. military forces at their current size, modernize their equipment, and maintain current levels of readiness for operations.) Before policymakers can ask and answer questions about future defense budgets, however, broader issues require consideration. What threats does the United States face? What strategy is appropriate to respond to those threats? And what military forces are needed to implement that strategy?

A full examination of those questions demands a complex political and military analysis that would begin by appraising the role that the United States wants to play in the post-Cold War world and how specific foreign policy interests and objectives help determine that role. From those considerations would follow a national security strategy, one element of which would be the function of military force and the threat of force. Using that strategy as a basis, the missions that the military might assume could then be determined, the number of forces needed to perform those missions established, and their budgetary requirements calculated. A further consideration in that calculus, many observers now believe, is the increasing importance to policymakers of minimizing U.S. casualties in military operations. That attitude might significantly affect how missions are conducted as well as which forces are used. It might also affect the number of forces the military maintains, because many defense leaders believe that overwhelming superiority shortens wars and reduces U.S. casualties.

This study does not address the broader issues associated with the kind of examination detailed above. Although the study briefly discusses present-day threats to U.S. security, describes the nation's current military strategy, and reviews the structure of today's military forces, it does not analyze whether those forces are adequate in number and appropriately configured to support the strategy. Instead, this Congressional Budget Office (CBO) analysis accepts as a "given" the military forces that the Administration has decided to retain to implement its current strategy and assesses the budgetary implications of those decisions.
 

Current Threats to U.S. Security

With the breakdown of the Soviet Union, U.S. military forces are now the strongest in the world. Among all foreign powers, only China and Russia have armed forces and inventories of conventional weapons (broadly speaking, nonnuclear arms) that are close in size to those of the United States (see Figure 1). The Chinese People's Liberation Army is the largest army in the world, with almost 2 million troops. It has large stocks of conventional weapons, but most of them were developed in the 1950s and 1960s and are far less sophisticated than comparable U.S. versions. Russia also has substantial stocks of most conventional weapons, largely inherited from the former Soviet Union. Many defense analysts believe, however, that significant numbers of the weapons may be in very poor condition. Despite such shortcomings, the forces of those nations and of others could still threaten U.S. interests and be used to menace U.S. allies.


Figure 1.
Stocks of Major Weapon Systems Held by the United States and Selected Other Nations

Graph

SOURCE: Congressional Budget Office using data from International Institute for Strategic Studies, The Military Balance, 1999/2000 (London: International Institute for Strategic Studies, October 1999).
a. For Russia, stocks as reported on January 1, 1999, under the Treaty of Conventional Forces in Europe.
b. Includes aircraft carriers, surface combat ships, and amphibious vessels but excludes a number of other ships that the Navy counts as battle force ships.
c. Includes only Air Force planes and excludes training aircraft. The Military Balance provided no data for Iraq.

U.S. defense planning currently emphasizes preparing for threats posed by countries that may have less combat capability than Russia and China but that nevertheless still threaten the peace in their own regions. Of those powers, Iran, Iraq, and North Korea probably have the most significant military capabilities; consequently, wars in the Persian Gulf region and on the Korean Peninsula are the scenarios that for the most part drive the United States' plans for its military forces. Yet those countries have far less military equipment than the United States has and lack other advantages of U.S. forces--for example, aircraft that can penetrate enemy defenses without being detected in time to be shot down, large quantities of precision-guided munitions, better surveillance and reconnaissance, and more sophisticated command, control, and communication systems.

As U.S. military leaders have noted, however, the most worrisome threats to U.S. interests may not be the conventional forces of foreign powers. Instead, so-called unconventional threats to the United States and to U.S. forces overseas may pose greater dangers. Such threats range from nuclear, biological, or chemical (NBC) weapons to "cyberattacks"--assaults on the United States' computer infrastructure. (1) Unconventional threats are difficult to assess and, as a result, hard to counter. Attacks with such weapons may also require responses that are difficult to carry out because they go beyond the boundaries of standard military activities. (2)

Many of the same regional powers that U.S. planners worry most about facing in conflicts with conventional weapons also have NBC weapons. In the developing world today, about 20 countries are believed to have stocks of chemical weapons. Iraq, for example, used them extensively during its war against Iran in the 1980s. Almost 20 more countries are believed to have developed some type of biological weapon. And some defense planners suspect that Iran, Iraq, and North Korea are very close to developing their own nuclear arms--if they do not already have them. Not surprisingly, many of the countries that have or are developing NBC weapons are also developing the means--perhaps through ballistic missiles --to deliver them effectively.

Another potentially serious threat that has surfaced in recent years is attacks against military and civilian computer and communication networks. The risk of such assaults by individuals and groups seeking to disrupt U.S. warfighting abilities or critical elements of the U.S. economy and infrastructure has grown in the 1990s as the number of computers, computer networks, and Internet users has exploded. That aggression can take two basic forms: electronic attacks by hackers on computer networks themselves or physical attacks on critical nodes such as power supplies, switching stations, or satellite ground stations. The U.S. military has become more vulnerable to such threats as it relies increasingly on computer networks and comes to depend more and more on commercial communication satellites and systems. Civilian computer networks at the core of the nation's financial infrastructure and rail and air transportation systems, as well as communication networks, could also be vulnerable. (3)

Even if unconventional weapons were not used to attack the United States itself, they might restrict the U.S. military's operations overseas. The nation's superior conventional forces and weapons would be of limited value in a regional war if an enemy's threat of retaliation with NBC weapons deterred the United States from using its conventional arms. Moreover, if enemies with only modest conventional capabilities but stocks of unconventional weapons developed intercontinental ballistic missiles that could reach the United States, those nations could exert considerable leverage and pose a sizable threat.

As unconventional threats have multiplied, their claim on the attention of U.S. leaders and defense analysts has increased. Some officials have called for more spending on defenses against ballistic missiles. (4) Others advocate radically transforming the way the United States develops its strategies and structures its forces. Decisions on those kinds of issues are likely to be among the challenges that will face the new Administration and the 107th Congress.
 

Current U.S. Military Strategy

Following logically on the identification of threats to a nation would be the development of policies to counter those threats. In the United States, those policies constitute the national security strategy, which can be roughly defined as the nation's evolving plan for coordinated use of all of the instruments of state power to defend and advance the national interest. (5) Military force or the threat of force is a chief component of that plan. Because strategy determines the missions that the military services are expected to accomplish to counter national security threats, it also influences the levels and types of forces that the U.S. military requires and how modern and ready those forces need to be.

Today's military strategy calls for enough forces to fight two regional wars and to support peace operations. (6) Strategically, the goal of being able to respond to two major wars in different regional theaters (two major theater wars, or MTWs) that occur nearly simultaneously determines in large part the number of combat forces that the U.S. military maintains. The two-MTW metric was initially developed in the immediate aftermath of the Cold War, when the Department of Defense (DoD) first formulated its regional defense strategy. That strategy defined a base force--DoD's estimate of the minimum force required to accomplish U.S. national security goals during the post-Cold War period. (7)

DoD's 1993 Bottom-Up Review (BUR), one of the department's periodic assessments of the capabilities it needed to maintain or develop to carry out its missions, endorsed the two-MTW yardstick. (8) The BUR developed overall requirements for U.S. combat forces by taking the forces deemed necessary for the first conflict and doubling them to deter--or fight, if necessary--a second aggressor. The Congressionally mandated Quadrennial Defense Review (QDR) of 1997 basically endorsed the force levels that emerged from the BUR, but it made a few changes. (9) (For example, the QDR cut the Navy's requirements for surface combat ships from the force of 131 ships planned in the BUR to a force of 116.) The QDR planned for 2001 is likely to bring other changes as well.

Operations that the U.S. military conducts in peacetime also influence, to some degree, the forces DoD must maintain. The Clinton Administration's defense policy has heavily emphasized such peace operations as humanitarian assistance and civil-support and nation-building activities. That emphasis derives from the Administration's goal of shaping the national security environment to make it more positive toward U.S. interests. As a result, U.S. forces engaged in peace operations to a much greater degree in the 1990s than they did during the Cold War. Peace operations may require forces that have less relevance to combat--for example, units with personnel expert in helping nations develop civil institutions such as courts. Requirements for those kinds of personnel can drive up the number of such units that the military must maintain.

The military's operations in both war and peace also affect the pace at which it modernizes its weapons and equipment. During the Cold War, the primary impetus for U.S. military modernization was the perceived need to keep up with the development and fielding of new systems by the former Soviet Union. But modernizing solely to stay ahead of adversaries may no longer be as strong a rationale for allocating resources as it was in the past. As discussed earlier, most U.S. forces are already much more sophisticated or capable than the forces of countries that could oppose the United States in major regional wars. U.S. superiority is even more overwhelming compared with the capabilities of military forces in countries where the United States might participate in operations other than war. And it is unlikely that any of those countries will have the funds any time soon to modernize their forces sufficiently to gain parity with the U.S. military.

What arguments, then, would justify increasing funds for modernization, as occurred in 1999?

Some defense analysts argue that in the post-Cold War world, U.S. modernization efforts should have a different focus. They advocate basing modernization not on the capabilities of foreign powers but on the objectives that the United States wishes to accomplish and the capabilities that the nation wishes to develop or improve. (10) Under that kind of framework, modernization might relate more to producing weapons that were cheaper to operate than comparable weapons today or that accomplished missions that no current weapons could carry out. It might also include preparing to counter threats posed by technologies that are now available only to U.S. forces but that could be acquired by other nations in the future.

The basis that the military chooses for its modernization efforts is only one of a number of factors that affect how much money DoD ultimately needs to support its forces. The following section considers some of the major determinants of the defense budget.
 

What Factors Drive Budget Requests for Defense?

Several important factors determine in large part how much money is needed to finance the nation's defense activities. The size and structure of U.S. military forces and their readiness for combat strongly influence budget requirements, as does investment in weapons, equipment, and facilities. The military spends its appropriations to keep those factors at acceptable levels today and also to try to preserve acceptable levels in the future. (11)

Another major determinant of the defense budget is the cost and capability of the infrastructure that supports military forces and the efficiency with which support is delivered. DoD has estimated that spending on infrastructure support--which is found in all defense appropriations--represents more than half of the spending in DoD's overall budget. The level of that funding does not rise or fall automatically as Administrations change their strategy, forces, or plans for modernization. Thus, like large corporations, DoD must actively seek to minimize what it spends on support, from controlling the costs of operating its facilities to providing services to its personnel as efficiently as possible. But cutting infrastructure costs has not proved to be easy, and as a result, funding for infrastructure support may well have increased as a percentage of the total defense budget over the past decade.

Force Size, Structure, and Readiness

DoD divides its forces into two major categories: strategic (basically nuclear) and conventional (see Table 2). For strategic forces, common measures of size and structure include ballistic missiles and bombers. Metrics used for conventional forces include divisions (Army and Marine Corps), tactical air wings (Air Force, Marine Corps, and Navy), and battle force ships (Navy), which include all Navy ships involved in combat--for example, aircraft carriers, surface combat ships, and submarines--as well as certain other vessels.
 


Table 2.
U.S. Military Forces in Selected Fiscal Years, 1989-1999

  1989 1993 1997 1999 Percentage
Change,
1989-1999

Strategic Forcesa
 
Land-Based ICBMs 1,000 787 580 550 -45  
Heavy Bombersb 310 194 126 143 -54  
Submarine-Launched Ballistic Missiles 576 408 408 432 -25  
 
Conventional Forcesc
 
Land Forces  
  Army divisionsd  
    Active 18 14 10 10 -44  
    Reserve 10 8 8 8 -20  
  Marine Corps expeditionary forcese  
    Active 3 3 3 3 0  
    Reserve 1 1 1 1 0  
 
Naval Forces  
  Battle force shipsf 566 435 354 317 -44  
  Aircraft carriers  
    Active 15 13 11 11 -27  
    Reserve 1 0 1 1 0  
  Navy carrier air wings  
    Active 13 11 10 10 -23  
    Reserve 2 2 1 1 -50  
 
Air Forces  
  Tactical fighter wings  
    Active 25 16 13 13 -48  
    Reserve 12 11 8 8 -33  
  Airlift aircraft  
    Intertheater 401 382 345 331 -17  
    Intratheater 468 380 430 425 -9  

SOURCE: Congressional Budget Office using data from Office of the Secretary of Defense, Annual Report to the President and the Congress (various years).
NOTE: ICBMs = intercontinental ballistic missiles.
a. Forces with basically nuclear missions.
b. Includes some long-range bombers that do not have strategic missions.
c. Forces with largely nonnuclear missions.
d. Excludes separate brigades that are not part of a division.
e. A Marine expeditionary force includes a division, an air wing, and supporting forces for those combat elements.
f. Includes all Navy ships involved in combat--for example, ballistic missile submarines, surface combat ships, aircraft carriers, and amphibious craft--as well as some other vessels.

U.S. combat forces in 1999 were structured as follows:

The United States places considerable emphasis on keeping its military forces ready for operations. Indeed, some military experts feel that the readiness of forces is the most important determinant of their capability. Traditionally, readiness has been a measure of how well prepared forces are to fight when they are needed. Some of the questions used to gauge military readiness are, Is equipment in good repair? Do forces have enough spare parts, fuel, and ammunition to keep them operational? Are troops in good physical condition and highly trained?

Despite the military's emphasis on readiness, it is difficult to estimate exactly how much money is being spent on it. There is no specific appropriation for "readiness"; instead, the resources that support it are spread among a broad array of budget categories, or titles. Commonly associated with readiness are the two titles that pay for DoD's annual operations: operation and maintenance (O&M) and military personnel. The O&M budget funds many kinds of equipment-related items such as spare parts and repairs and many expenses related to training. The military personnel appropriations fund pay and benefits. But not all of the funds in those two titles support current readiness, and other titles also provide funding.

Evaluating the impact of the money spent on readiness can be as difficult as estimating the amount. Readiness is difficult to quantify, and to a certain extent, evaluations of it depend on subjective military judgments. As a result, DoD's measurements of readiness have serious limitations. In the past--specifically, in the late 1970s--the military services were willing to cut back on readiness in response to budgetary and other constraints. Today, though, defense leaders do not support cutting readiness to meet budget targets and instead place a high priority on maintaining it. Despite that priority, some defense officials believe that the readiness of U.S. forces has declined enough to be a basis for concern. Others believe that readiness remains at acceptable levels. Those varying opinions underscore the difficulties of reaching a consensus about readiness when objective measures are lacking.

Investment

As discussed earlier, most of the nations that might threaten U.S. interests today or in which U.S. forces might be called on to intervene in peacetime have weapons that are significantly less capable than the current generation of U.S. weapons. The military's investment in modernization, therefore, focuses on maintaining a significant level of superiority now and preparing for other threats, perhaps from unconventional sources, that might emerge in the longer term. Funds for modernization, which is a third major determinant of the size of the defense budget, are spread among the appropriations for research and development and for procurement of equipment and weapon systems. Funding for military construction and military family housing is also included under the rubric of investment because those two budget categories support purchases of buildings and facilities that last a long time. In general, funding in those categories is less directly linked to responding to threats than are funds in some other areas of the budget.

Research and Development. Funding for research and development pays for basic and applied research that explores new technologies (with possible military implications) and develops and tests new systems. Those activities are intended to enable the military to respond to emerging threats, take advantage of new technologies, and address other objectives, such as improving the mobility of U.S. forces or producing systems that are less expensive to operate. In the 1990s, funding for defense research and development was protected to a degree from cuts, perhaps reflecting the belief of policymakers that the continued superiority of the U.S. military required a strong technological foundation.

Procurement. How many new weapons DoD purchases and how much it upgrades and modernizes its existing stocks determine how much it spends on procurement. During the 1990s, as military forces were being cut, DoD halted or slowed purchases of a number of weapons. In addition, the services retired many pieces of equipment that had not yet reached the end of their useful lives because they were no longer needed to equip the military's smaller forces.

As purchases over the decade slowed or stopped, the average age of many classes of defense equipment rose. Trying to halt or reverse that trend, DoD has included more money for procurement in its recent budget requests. As noted earlier, appropriations have met or exceeded those requests, and DoD plans to increase spending on procurement even further over the next few years.

Military Construction and Family Housing. Funding for military construction constitutes a relatively modest share of the defense budget. Over the past decade, funding for new construction or for renovation of existing facilities may have been reduced to pay for the base realignment and closure process in which DoD engaged during those years. The smaller U.S. military of the post-Cold War period as well as budgetary constraints arising from the federal deficit led policymakers to conclude that the nation needed fewer military bases. Closing bases was expected to save money in the long run, but shutting them brought some up-front expenses. (Some of those costs were for environmental cleanup at the bases.) Thus, in the early to mid-1990s, expenditures related to base closures equaled as much as 19 percent of the funds appropriated for military construction. DoD has sought to reduce funds for military construction in the long run through additional rounds of base closure, but the Congress has not authorized further rounds.

Funds to construct new military family housing units, to renovate existing units, and to pay for the upkeep of facilities were also limited during the 1990s. As a result, DoD's stock of family housing is aging and deteriorating. Currently, DoD is seeking to increase private-sector involvement in modernizing its housing units.

For the above categories of the budget as well as others, DoD has sought to increase the funding it receives to support its forces and carry out its missions. But some experts and policymakers argue that funding for national defense is still not adequate to accomplish the military's objectives under the national security strategy and to ensure the readiness of U.S. forces. In the next chapter, CBO presents its estimate of the sustaining, or steady-state, funding needed for those purposes.


1. CBO uses the term "NBC weapons," but defense experts may use a variety of phrases for such threats. Some analysts use "weapons of mass destruction," which generally cover larger attacks and might also include conventional attacks using high explosives. Several recent studies have used "chemical, biological, radiological, and nuclear weapons" to focus attention on the potential for radiological attacks (for instance, poisoning people by wrapping conventional explosives in highly radiological materials). That term is used in the First Annual Report to the President and the Congress of the Advisory Panel to Assess Domestic Response Capabilities for Terrorism Involving Weapons of Mass Destruction, December 15, 1999 (available at www.rand.org/organization/nsrd/terrpanel/terror.pdf) and in Anthony H. Cordesman, "Defending America: Redefining the Conceptual Borders of Homeland Defense" (draft, Washington, D.C., Center for Strategic and International Studies, September 3, 2000), available at www.csis.org/homeland/reports/NMDfullreport.pdf.

2. In the event of an attack with biological weapons, for example, military forces might want to help local officials with law enforcement. But the Supreme Court has upheld laws that restrict the Department of Defense's (DoD's) involvement in certain domestic situations. Those constraints limit the assistance DoD can offer and place the burden of response on other federal, state, or local agencies.

3. Terrorists with unconventional weapons they have developed or stolen are a further threat that could be even more dangerous for the United States than a crisis involving a nation state, which might be deterred from acting by persuasion or the threat of force.

4. The Rumsfeld Commission--a panel charged with assessing the current and potential threat to the United States from missile attack and the capability of the U.S. intelligence community to provide timely warning--has added to concerns about those issues. The commission reported in 1998 that widespread foreign assistance and extensive efforts to hide missile development programs from Western intelligence have created conditions under which North Korea, Iran, and Iraq could, with very little warning, deploy ballistic missiles with ranges long enough to strike parts of the United States. See Commission to Assess the Ballistic Missile Threat to the United States, Executive Summary of the Report of the Commission to Assess the Ballistic Missile Threat to the United States, July 15, 1998, pursuant to Public Law 201, 104th Congress (available at www.fas.org/irp/threat/bm-threat.htm).

5. For a description of the Administration's current strategy, see the White House, A National Security Strategy for a New Century (December 1999). For a critique of the Administration's strategy, see National Defense Panel, Transforming Defense: National Security in the 21st Century (December 1997). See also United States Commission on National Security/21st Century, Seeking a National Strategy: A Concert for Preserving Security and Promoting Freedom (April 2000). That commission is at work evaluating the current strategy and may propose revising it. For an evaluation of all aspects of the strategy and proposed alternatives, see Zalmay M. Khalilzad and David Ochmanek, eds., Strategy and Defense Planning for the 21st Century (Santa Monica, Calif.: RAND, 1997).

6. CBO uses the term "peace operations" in this study to refer to military operations other than war, or MOOTWs. The Office of the Joint Chiefs of Staff, in the Joint Doctrine Encyclopedia, defines MOOTWs as follows: "Operations that encompass the use of military capabilities across the range of military operations short of war. These actions can be applied to complement any combination of the other instruments of national power and occur before, during, and after war." According to that encyclopedia, military operations in this category include peace enforcement, counterterrorism, shows of force, peacekeeping, noncombatant evacuation operations, counterinsurgency, counterdrug, and humanitarian assistance. (The Joint Doctrine Encyclopedia is available at www.dtic.mil/doctrine/jrm/ency.htm.) Another umbrella term that is sometimes used is smaller-scale contingencies. For a more detailed discussion of peace operations, see Congressional Budget Office, Making Peace While Staying Ready for War: The Challenges of U.S. Military Participation in Peace Operations, CBO Paper (December 1999).

7. General Colin L. Powell, Chairman of the Joint Chiefs of Staff, "The Base Force--A Total Force" (briefing prepared for the Subcommittee on Defense of the House Committee on Appropriations, September 25, 1991).

8. Secretary of Defense Les Aspin, Report on the Bottom-Up Review (October 1993).

9. Secretary of Defense William S. Cohen, Report of the Quadrennial Defense Review (May 1997).

10. See, for example, Glenn A. Kent and William E. Simons, "Objective-Based Planning," in Paul Davis, ed., New Challenges for Defense Planning (Santa Monica, Calif.: RAND, 1994), pp. 59-71.

11. For the amounts appropriated in each title in the 2001 budget, see Stephen Daggett, RL30505: Appropriations for FY2001--Defense, CRS Appropriations Report for Congress (Congressional Research Service, August 11, 2000).


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