The Real Story About Pentagon Spending and the Federal Budget

Posted December 7, 2009 at 1:55pm

It didn’t get the name until two years later, but what we know today as the Defense Department was created in 1947. Although the Navy was part of the new department from the beginning, lifers and veterans of that branch have often told me that they almost never think of themselves as being or having been part of the DOD. This included my late father-in-law, who, when the talk turned to politics after Thanksgiving dinner, would routinely rail against the Pentagon and go to great lengths to explain why the Navy was, is and should be separate from the rest of the military.

[IMGCAP(1)]Military spending proponents often appear to feel much the same way about the relationship between the Department of Defense and the rest of the budget. While they reluctantly recognize that what the DOD spends is recorded in the budget and determined through the federal budget process, they seldom, if ever, say that overall fiscal policy considerations should have any effect on the department and often insist that Pentagon spending should be separate from the rest of the government.

In other words, last week’s debate about whether the $30 billion to fund the additional troops requested by President Barack Obama for Afghanistan should be paid for or added to the deficit was anything but novel.

I first learned about the Pentagon-shouldn’t-be-subject-to-the-same-budget-considerations-as-everyone-else sentiment in the mid-1970s when I was doing research for my graduate school’s equivalent of a master’s thesis. While going through the stacks in the library, I came across committee testimony by a member of the Joint Chiefs of Staff that said U.S. military spending should be a fixed percentage of gross national product (the switch to gross domestic product happened more than a decade later). In response to questions, the general refused to give any credence to the notion that the size of the deficit and federal borrowing — which were much smaller but were still considered issues at the time — should have any bearing on the DOD funding decision. He also flatly refused to admit that a smaller percentage might be justified when the economy was growing quickly or that the amount of military spending should be related to the threat. Even if the world suddenly turned into a utopian place of total peace and harmony, he said at least a fixed percentage of the economy had to be appropriated each year.

Over the past two weeks, some of the supposedly fiercest deficit hawks in the House and Senate became the latest public adherents to the view that military spending and the deficit don’t mix. Even those who previously insisted that the federal budget problem would only be solved if everything was “on the table— not only took the $30 billion off the table before any discussions could begin, but took the table out of the room where the discussions might take place.

On a strictly fiscal policy basis, this was a mistake: A dollar spent by the Pentagon has the exact same effect on the deficit and national debt as a dollar spent by every other federal agency and department. The $30 billion that the White House said the troops will cost will increase the deficit no differently than if the spending is for a new jobs program by the Treasury.

But, as that general said 35 or so years ago, military spending is often divorced from fiscal policy and bottom-line considerations. By the end of last week, when the idea of increasing revenues to offset the increase in troops was slammed down, that seemed to be the case this time as well.

In some situations, not paying for increased military spending is understandable. As I said several weeks ago when I first paraphrased former Secretary of Defense Donald Rumsfeld, you go to war with the budget that you have rather than the one you want. At least in a country as able to borrow as the United States, sudden extreme military needs don’t typically depend on the government’s ability to pay for the activities out of cash flow.

But the fact that suddenly needed higher military spending may be required doesn’t mean that it can’t or shouldn’t be offset. They are, in fact, two separate issues. The United States has the ability to send the additional troops that the president is requesting regardless of whether taxes are increased or spending is cut to pay for it. Until or unless having the actual cash is a question, the only issue is whether we want to do so.

This is different from the budget treatment for routine Pentagon activities. Contrary to what many military spending proponents say, what the DOD does, including ongoing spending for a war that is multiple years old, has to be evaluated based on the same fiscal policy considerations as every other department.

The almost $1 trillion that has already been spent has had a material effect on Washington’s finances and made the job of bringing the deficit down that much more difficult.

If he were alive today, the general from my graduate school days probably would have said he didn’t much care either way because he was only concerned about the additional troops. Unfortunately for the rest of us, the decision is actually much larger and far more involved than the general was willing to admit.

Stan Collender is a partner at Qorvis Communications and author of “The Guide to the Federal Budget.— His blog is Capital Gains and Games.