Defense Spending: Safe Cuts are Possible

Benchmarking shows we pay too much for the security we want and need.

In our debates on military spending we miss the forest for the trees. Congress fights over upcoming cuts to the military due to budget sequestration, but these cuts would trim only 4-7 percent from defense budget. Procurement scandals continue: Last month, Americans were shocked to learn of a $17,000 oil pan made by a well-connected contractor.

These issues make headlines. But they distract us from important questions that both Congress and the media ignore: How much should we have to spend to keep America safe? Is the trillion dollars a year we spend way too much? Or way too little? Are our military contractors and armed forces efficiently delivering all the security we are paying for? Or are we overpaying for the security that we are getting?

The data say we pay far more than we should have to pay to keep America safe. The fault lies not in the brave men and women in uniform who put their lives on the line. The fault lies in our contractors, our political system, and our doctrine and strategies. We must set a target for a leaner, but still adequate military budget. We must hold government and contractors accountable for delivering the security we need for a reasonable price.

As we debate the cost and value of individual weapons programs, we fail to set realistic targets
for overall defense spending.

Benchmarking shows we overspend

In corporations, when a massive budget request comes in, the CEO asks for benchmarking. To benchmark a business operation means to compare it to another similar operation. Benchmarking shows who can do the job better, faster, and/or cheaper. Benchmarking forces us to ask the tough questions. It shows us the best practices, and challenges us to improve.

We can learn a lot by benchmarking our national defense spending against other countries. The United States spends about five times as much on defense as China, the country with the second highest military budget in the world. We spend more than twice the combined total of the countries with the four highest military budgets after ours. How likely is it that China, Russia, the United Kingdom, and France would all gang up on us?

(Source: http://www.sipri.org/research/armaments/milex)

Why isn't American ingenuity and entrepreneurship helping us here? We shouldn't have to spend five times what China spends to keep us safe, or twice as much as other leading powers combined. We should be smarter than that. It generally takes more resources to attack than to deter and defend. We should be able to maintain a good margin of safety for much less money.

The difference in spending can't be explained by the large size of our economy or economies of scale. If economies of scale were the issue, the United States would spend much less as a percent of GDP than other developed countries, but it turns out we spend more than most. (The few countries that spend more than we do as a percent of GDP are mostly in the dangerous Middle East.)

Overspending hurts America. We need a strong enough military to keep America safe, but we must buy our safety efficiently because it is very expensive. Defense costs about a fourth of the federal budget. Every dollar we save on defense is a dollar more we can invest in universities, schools, and research to make us more productive and healthy. The savings could be enough to restore America's leadership in patents granted, or the number of graduates in computer science and engineering.

The United States is a "high-cost producer" of security

In the business world, we speak of "low-cost producers" (companies that can produce things efficiently) and "high-cost producers" (companies that produce things inefficiently). China is a low-cost producer of consumer electronics, for example. America is a low-cost producer of social networking services.

The United States, it turns out, is a high-cost producer of security. We have to pay much more than the world average to keep ourselves safe. We have become very inefficient at providing security for ourselves.

Imagine that the United States were a corporation rather than a nation. The CEO would turn to the vice president of national security and say, "Your costs are too high. From now on, your budget is based on a multiple of what other countries spend. You can spend up to three times what our number two competitor (China) spends (not five times) or you can spend up to 100 percent of what the next three countries together spend. No more. Find a way to keep America safe at a price we can afford, and at a price that's competitive with what other countries spend." Then it would be up to the management of the Defense Department to get the job done for a reasonable price. They would figure it out.

America can no longer afford to spend without limit on defense. No other government department is given a blank check. All public and private sector efforts are being pressed for more accountability. We want to know what students learn in school compared to what schools cost. We want to know how well medical procedures work compared to what they cost. We can be just as a disciplined in holding defense contractors, military leaders, and policymakers to account.  

A time for goals and accountability

Defense budgets need to subject to the same intense competitive pressure of value-for-dollar as everything else in our economy. In particular, those who call for America to operate under more "business-friendly" rules should join the call for the defense department and its contractors to adopt business-style efficiency goals. That's how we can get the security we need at a price we can afford.

(A version of this was posted earlier at usnews.com)

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