The tyranny of small percentages

Well, the Washington Post has misspoken again on defense.

Its editorial today brushes fact aside in its rush to endorse higher spending for defense by capturing 4 percent of U.S. gross domestic product (GDP) over the next 10 years. But the absence of clarity in the Romney tax platform, which makes the math for getting $2 trillion more for defense over the next 10 years difficult, is not the only part of the Romney defense plan that does not add up.

Have no doubt that the Romney commitment to 4 percent means an actual $2 trillion more. That's math, not speculation, though the Romney advisors tried to wriggle out of it earlier this week by saying it would be a slope to 4 percent of GDP. That's $2 trillion on top of the $5.7 trillion already projected for the defense budget by Secretary Leon Panetta, when he sent his budget to Congress in February. That's an increase of 35 percent.

And, pace the Post, that's a big number. Let's remember that the "supercommittee" couldn't agree to $1.2 trillion in budget savings. The Romney commitment would make that challenge pale by comparison. And meanwhile, the Post's editorial board tries to argue that 6 percent of U.S. GDP -- the average level of defense spending during the Cold War -- is not significant. Actually, they're right.

But calculating the share that defense eats of our economy is one of the most meaningless and deceptive arguments ever employed in talking about defense. It only tells you what it tells you -- the share of GDP. It says absolutely nothing about what we actually spend on defense, what we buy with the money, what capabilities we currently have, or what we might require. It's a nonsense number. And it is and always has been a nonsense number to foist on our allies. The real issues are capabilities and strategy, not the share of GDP.

The Post editorial simply runs away from a discussion of capabilities linked to strategy. It mindlessly endorses adding back the 100,000 ground troops currently leaving the force, despite the fact that they were only added to ease rotations in two wars, of which one is now over and the other ending soon. Ground forces always shrink after wars, and they should. The remaining U.S. ground force is larger than any nation's but China -- and China is frankly the last country we are going to invade with ground forces. (Remember the last ground war in Asia?)

Unless the Post's editors are endorsing a U.S. ground invasion in the Middle East (for which there is zero public support), there is precious little threat out there today that demands a large ground force, especially in the Pacific theater to which our attention is swinging. And even in the Middle East, the limits on what any U.S. ground force can accomplish have already been amply demonstrated.

The Post also mindlessly endorses the goal of buying 15 ships a year, despite the reality that we have not bought that many since 1986, not even during the George W. Bush years, not to mention that with the current prices of ships, such a goal is entirely unaffordable. Oh, but we need a 346-ship navy, the Post agrees, endorsing without analysis, the proposal of the Independent Panel on the Quadrennial Defense Review. The need for such a navy is highly debatable. The one we have today dominates far and away the navies of any other power, or any potential adversaries put together, including in the Pacific theater.

And though the Post asserts that this larger ground and naval force better fits current strategic needs than the Panetta projections, it provides no link between that force and any new strategic needs.

The reality is that, today, the United States has today the most dominant military capability on the globe. It flies, floats, and deploys everywhere and has global logistics, infrastructure, intelligence, communications, and transportation. The currently projected defense budgets, even a reduction from those budgets, would do very little to change that global dominance, as no other power, including China, even tries to maintain such a global capability.

There are far more pressing needs, in the civilian foreign policy world and, especially here at home, that could do vastly more to ensure our security than throwing another $2 trillion at the Department of Defense, on top of what is already the highest level of defense spending, in constant dollars, we have had since the end of World War II.

And the fiscal reality is that that defense budget is going to go down, whoever wins the White House in November. The challenge for either Obama or Romney is how to manage that drawdown sensibly. The experience of the 1990s, when the defense budget declined 30 percent in constant dollars, says it can be managed with no sacrifice to our national security. That's the debate we should be having on defense, not a phony argument about shares of GDP.

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National Security

The Fiscal Slide

Five reasons the Pentagon will avoid the pain of sequestration.

We are in the middle of a political and rhetorical donnybrook about the threat that falling off the fiscal cliff poses for our national security (to say nothing of what it would do to domestic discretionary spending). There will be some attention to this "crisis" in the last two presidential debates.

It is a crisis carefully engineered by the Budget Control Act, passed in August 2011: If the Super Committee failed, which it did, automatic cuts, which legislative language dubbed a "sequester," would be imposed January 2, 2012.

In September of this year, the Office of Management and Budget solemnly certified that these cuts would take 8.2 percent of FY2013 appropriated funds away from every "program, project, and activity" (PPA) in domestic discretionary spending and a whopping 9.4 percent from the "non-exempt" parts of the defense budget.

But does this mean the end of our national security (and domestic well-being), as the political debate suggests? A little careful noodling about the impact of a sequester on the Defense Department suggests it might not be the end of the world. In fact, it might be exactly the fiscal discipline DOD needs.

Let me get technical for a moment, so we can actually see what might go on. First, the law made it clear that the administration could exempt funding for troops and their benefits (including retiree benefits) from the fiscal cliff. The administration has done that, so the troops will be okay. (Their number is coming down anyway as a result of the end of the wars in Iraq and Afghanistan.)

Then, there is the matter of procurement and what some see as the almost cataclysmic level of devastation that such harsh cuts would impose on the defense industry. Except they won't. It turns out the industry is pretty healthy, it has been for a decade, and it is working on contracts that have been funded in prior budget years, which are exempt from sequestration.

As the director of defense procurement put it: "The vast majority of our contracts are fully funded, so there's no need to terminate existing contracts unless the product is no longer needed." Lockheed treasurer Ken Possenriede agreed that sequestration was not a near-term problem: "If sequestration happens, just based on our normal business rhythm, we're comfortable from a cash-on-hand standpoint that we'll endure that."

How about military operations, including the war? Well, the war budget, which has never really been separate from the non-war budget -- that's a political fiction the executive branch and Congress set up, but the funds are, in reality, mixed -- is included in a sequester, which might sound terrible for the troops in Afghanistan.

But, the reality is that the funds for DOD operations (war and much else) are very "fungible," as we budget wonks like to put it, meaning the funds can be moved around among programs pretty flexibly -- from training to education to base operations to the costs of operating troops in the field. And OMB and the Pentagon agree that "PPAs," in operations land, means "accounts." And accounts are things like Army Operations and Maintenance, which can cover all of the above activities. So, the service managers would have 9.4 percent fewer funds than the Congress gave them, but significant flexibility to move them around, setting priorities and making choices. Let's say they have a scalpel to work with, not a bludgeon.

So what about research -- the investments in the future of defense technology? Well, here, too, there would be 9.4 percent fewer dollars than appropriated. But R&D is what they call a "level of effort" area of funding -- you buy as much R&D as the money allows, but you don't have to cut items out of a production contract. And the Pentagon would have some flexibility as well, since most R&D "program elements" cover a variety of R&D projects, so fewer resources means setting priorities and making choices.

Beyond these technical flexibilities, DOD, like other departments, would also have recourse to reprogramming funds and using its general transfer authority. The flexibility here is pretty great; over the past decades some reprogram and transfer totals have been in the tens of billions of dollars. What it takes is making the same tough choices, many of them internal. A few, the transfers, would have to be communicated to Congress, where the senior leadership of the key authorizing and appropriating committees (who don't want to devastate defense) would be likely to agree, especially as they were the most anxious to protect defense.

And OMB could alleviate the short-term urgency by agreeing to hold off on taking the cuts until later in the year, by approving overall funding ("apportionment") at a higher level early in the year, and delaying the cuts until later, when planning in DOD was complete.

It is not a pretty picture; no management expert would say this is the way to do defense (or any other) budgeting. But it is not doomsday. In fact, it might be discipline -- exactly the kind of budgetary discipline the Pentagon has not had for the past decade. Good management, priority-setting, and greater efficiency might be the result.

And since the sequester would be a one-off, setting a lower baseline for future defense growth, our national security might just be as safe as it ever was.

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