Magazine article National Defense

Fiscal Storm on the Horizon

Magazine article National Defense

Fiscal Storm on the Horizon

Article excerpt

One of the Washington cliches du jour in 1999 was "defense budget train wreck." It described what was then viewed as a dicey situation facing the Defense Department: its budget was estimated to be too small to pay for the services' ambitious weapon replacement programs and to fund worldwide military operations.

"A DOD train wreck could occur sometime during fiscal years 2002-2007," predicted a study by the influential Center for Strategic and International Studies. Analysts at the time estimated the defense budget was short by about $100 billion.

Five years later, defense spending has grown by more than $100 billion--not by design but by the necessities of war. All the while, a new chorus of alarming forecasts reverberate in Washington, predicting yet another "train wreck." This time, however, the problem is not that the administration is under-funding defense, but that the nation's soaring budget deficits will leave future administrations--whether they are Republican or Democrat--no choice but to cut defense.

Another popular catch phrase, not surprisingly, has come along to illustrate the looming crisis: a "perfect storm." At the epicenter of this perfect storm is a clash of unsustainable military spending, ballooning deficits, and expected shortfalls in Social Security and Medicare accounts. The proverbial storm will leave behind what one lawmaker called a "fiscal morass."

CSIS Senior Fellow Pierre A. Chao has warned executives in recent months that defense industry may soon find itself "in the eye of a perfect storm." The undercurrents feeding the storm are forceful: Iraqi war costs, the price tag for the replacement of aging weapon systems, yearly U.S. federal deficits expected in the $400-billion range and $17 trillion in estimated retirement costs for the baby boomers.

No one with certainty can predict how long the defense buildup can be sustained before the national debt reaches unacceptable heights. But an emerging consensus among experts is that defense is heading for a downturn. According to a congressional estimate, defense and war-related spending alone will generate $885 billion in deficits during the next decade. A lawmaker recently groused that U.S. military spending is likely to be financed by Chinese investors, who are buying up our debt faster than any other country. "If foreign countries start dumping our securities, the economy will implode," he bemoaned.

But if defense spending in fact is to become a target on Capitol Hill, lawmakers should reassess priorities, cautions Dov Zakheim, the recently departed Defense Department comptroller. …

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