The vice chairman
of the Joint Chiefs of Staff, General Hyten, recently made a rather insightful observation:
“Do you think any taxpayer in this country would believe that for $700 billion
a year, we can’t have a great defense? We should be able to, and it’s crazy
that we can’t.”

Only a general
on his way out (he is expected to retire in November) could make such an
obvious but potentially politically charged statement. His indictment of the
defense system to include the glacial pace of defense modernization should serve
as a profound warning, but in the current state of Washington politics his
comments will likely go unnoticed.

Still, General
Hyten outlined a condition that is now too big to ignore: Defense purchasing
power is so anemic that the Pentagon struggles to actually get any increase in defense
capability for all of that taxpayer money spent. Rather, the overarching effect
is that the US military has become in Arnold Punaro’s observation “The Ever-Shrinking
Fighting Force.” Even worse, as the Pentagon has now admitted, capability has
been eroded to the point that on a comparable basis of what it costs our
adversaries, they are now at parity with the US — and the situation is not getting
any better.

How could
this have happened? What is undermining the Pentagon’s productivity?

The answer of
course is in how we spend it. It is long past time to face a rather uncomfortable
fact that has been decades in the making. The defense budget has become predominately
a social program that only as an afterthought provides some residual defense
capability. The military’s purchasing power has been first eroded by hundreds
of billions of dollars in direct annual social expenditures embedded in the
defense budget and then more stealthily by indirect social mandates in acquisition
and personnel rules that add time and cost to everything the Pentagon does while
undermining and disincentivizing innovation. Some of these mandates might make sense
individually, but collectively they do not justify the exorbitant cost.

The
first factor was helpfully identified by Representative Anthony Brown, the vice
chairman of the House Armed Services Committee. In a recent plea to progressives
to not cut defense spending, he revealed that at least $200 billion of the defense
budget wasn’t really defense spending at all. The real effective Pentagon
budget is thus significantly less than advertised. Other agencies have been increasingly
subsidized by the Pentagon for expenditures more appropriately classified as
social spending that rightly belong elsewhere in the federal budget.

Even more damagingly,
the remaining budget that actually funds defense operations and buying weapons has
become encumbered by social mandates that have inflated costs and
inefficiencies across the board, undermining purchasing power. Defense contractors,
the military, and civilian workers have increasingly become the ideal social
experimentation platforms for Congress and the executive branch. Whenever a
social policy can’t be passed into law on a national scale, it is inevitably tested
on the military either through regulation, executive order, or a specific
provision in a defense bill. These mandates never go away and have acted as barnacles
attaching themselves to a sinking ship.

Personnel and
contracting policies have become larded up with every conceivable past good
idea, leading to ossification and more mind-numbing bureaucracy. Contractors
and government personnel focus on compliance with these mandates rather than
outcomes. Non-commercial government dictates to implement social goals, combined
with redistributionist procurement and appropriations practices, have a cost
that are hard to recognize in peacetime but become apparent as our adversaries
deploy capability at breakneck speed.

Those
looking for things to change will be disappointed. The Biden administration is
doubling down on more proposals for new labor, environmental, energy, protectionist
industrial planning, and diversity schemes. Very little of this will be able to
be passed into law at the economy-wide level, so advocates will eventually look
to exact them upon the Pentagon. New ruses are also sure to follow to more
efficiently raid the defense budget for non-defense research and operations.

General Hyten has raised a serious question but the remedies to fix the problem are not ones current policymakers will want to hear. Radical regulatory relief and management reforms, as well as significant new expenditures, will be needed to dig ourselves out of the hole we have created. Even under these best of circumstances, the US will be hard pressed to compete against a dedicated adversary, such as China, backed up by a newly emerging high technology economy. In the face of new threats, the time for treating the defense budget as a social program and a piggybank for other agencies has to come to an end.

The post The decline in defense purchasing power and the transformation of the Pentagon into a social program appeared first on American Enterprise Institute – AEI.