Why Does a "Half-War Plus" Strategy Require
a Cold-War Budget to Keep It Afloat? 

June 25, 2001

Comment: #414

Discussion Thread - Comment #s 169


The defense budget train is accelerating to warp speed as we plunge into heat of the summer. The recently announced budget amendment, if enacted, will result in a defense budget of $343 billion, if one includes the defense-related expenditures of the Energy Department. In effect, the FY 02 Amendment would place the United States on a 15 Power Standard, or a budget sizing rule by which the US spends as much as the next 15 largest nations combined.

Ironically, the adoption of a 15 Power Standard will be also accompanied by a reduction in strategic ambitions to what a cold warrior might call the "Half-War-Plus" Strategy.

The aim of this message is to place these changes into an initial context.


The following links will help you orient yourself to the recently announced increases of the defense budget. The first link puts these increases in a long-term perspective and the second provides some detailed backup information.

I. Here is a chart in constant dollars showing the defense budget from 1950 to 2002. The "Red" bars represent the supplemental in '01 and the amendment in '02. Note that this level of spending will be higher, after removing the effects of inflation, than in any peacetime period of the cold war, which the sole exception of the Reagan era spending spree.

II. Here is a chart that breaks down the FY 02 amendment and also contains a transcript of the Pentagon press briefing announcing the amendment

Bear in mind that the rising defense budget will pay for a far smaller and older military than a much smaller budget paid for in the 1950s, or in later decades (after removing the effects of inflation). The shrinking and aging phenomenon reflects the compound interaction of rising procurement costs and rising operating costs over the 50 years since the Korean War, but it is masked in its details by a corrupt accounting system [see Comment #169].

The long term results are clear, however: smaller and older force that is far more expensive to modernize or to operate and maintain in a high state of readiness and collapsing morale.

A quick look at the long-term effects of these rising costs can be found in the following charts:

For snapshots of the rising cost of operations see series of charts at charts/rising_cost_of_operations.htm, dds/33_rclr_af_ops.htmdds/39_rclr_army.htm, and dds/40_rclr_navy_ships.htm.

For a snapshot of the relation between shrinking forces and increasing age see here.

But there is another factor to bear in mind during the hot hazy days of summer: namely the Pentagon's return to a cold-war budget will be accompanied by yet another down-sizing of our defense strategy.

To understand this aspect of the Defense Death Spiral requires a little historical perspective. Between 1969 and 1990, the US strategy was to plan for "One and One-Half" wars -- the big one where NATO squared off against the Warsaw Pact on the plains of Germany and a "half war" somewhere else, like Vietnam, Korea, or Southwest Asia. (In the 1950s, we actually said we were planning for two and one wars -- two big ones against the Warsaw Pact and China, and a "half war" in Korea -- but the burden of fighting a real "half war" in Vietnam blew that fiction to smithereens.)

Then the Cold War ended suddenly in 1990, and the threat of a big war in Europe evaporated. Planners scrambled to adopt what a cold-war planner would have called a "2 Half-War Strategy." Of course, the post-cold-war planners could not call the new strategy by such a demeaning term, so they dignified it with the more impressive sounding "major regional war" or more recently, a "Major Theater Contingency" (MTW). The strategy was to prepare for two simultaneous MTWs against Iran or Iraq and North Korea.

If newspaper reports are correct, it now seems we are about to scrap that strategy in favor of what old cold warriors might call a "Half-War-Plus Scenario".

Perhaps the best contemporaneous description of the new strategic scenario, which is still a moving target, has been provided by Rowan Scarborough in the Washington Times on June 22, 2001 (Pg. 4).

According to Scarborough, unnamed Pentagon officials told him that the new strategy would probably be to prepare to win one major regional war (in cold war terms -- a half war), while holding off a second aggressor until the first war was won, and simultaneously being able to handle smaller conflicts/contingencies while providing for homeland defense (i.e., missile defense). This would replace the plan the fighting two regional wars simultaneously -- and voila! -- the strategy to fight two half wars simultaneously mutates into a "Half-War Plus" strategy paid for increasing the budget to a "15 Power Standard."

Pressure for a new strategy has been building for some time. Recall that Clinton Administration dabbled with a version of the "Half-War-Plus" strategy under the label of a "Win-Hold-Win," but with less emphasis on missile defense. But it was dropped for fear of upsetting the pro-defense big spenders in Congress.

Before judging the efficacy of a decision making process that recommends a "15 Power Standard" to pay for a "Half-War-Plus" Strategy, I urge you to read the following article by Dave Wood of Newhouse News. Wood, one of the ablest defense reporters in Washington, describes the most basic reason why any new strategy and its supporting Quadrennial Defense Review are probably for headed for the dust bin of history, just like their predecessor.


Pentagon's Unreliable Bookkeeping Stands as Obstacle to Bush Reforms

By DAVID WOOD June 12, 2001 c.2001 Newhouse News Service [Re-printed with Permission] 

WASHINGTON -- The Bush administration's ambitious plan to rebuild the U.S. military, already beset by doubts about strategy and the availability of funds, now faces a new problem: the growing conviction that the Pentagon's bookkeeping is so unreliable as to be almost useless.

Recent audits of the Pentagon books document what has long been ignored by all but a few noisy critics: The financial disarray inside the Defense Department is so severe that no one knows precisely what it has spent, what it has bought, or what it needs for the future.

For fiscal year 2000 alone, auditors for the Pentagon's Inspector General's Office found $1.1 trillion in bookkeeping entries that could not be tracked or justified.

Officials weighing critical long-term decisions are finding there are no reliable figures for current or projected costs of weapons or manpower. Nor can they accurately estimate Pentagon liabilities, thought to be huge and growing, for future medical costs or environmental cleanup.

Although this is not a new problem -- for fiscal year 1999 the Pentagon Inspector General reported $2.3 trillion worth of untraceable accounting entries -- the budget mess is prompting critical attention even from defense hawks.

And with such powerful Democratic critics as Sen. Robert C. Byrd of West Virginia taking key positions in the Senate, the Bush administration's plans for a significant boost in defense spending are likely to face considerable scrutiny in Congress.

"There is widespread agreement that the Department of Defense finances are a shambles," says a report released last week by Sen. Fred Thompson, R-Tenn., who until recently was chairman of the Governmental Affairs Committee. The Pentagon, the report said, "wastes billions of dollars each year, and cannot account for much of what it spends."

Defense Secretary Donald Rumsfeld, during his confirmation hearings in January, acknowledged that the problem is "terrifying" and "monumental," adding that "it's going to take a period of years to sort it out."

Some critics urge that now, with the United States in no imminent danger, is a good time to pause to straighten out the books. But the Bush administration has signaled there will be no letup in defense spending.

On June 1, Rumsfeld asked Congress to add $5.6 billion to the current $296 billion defense budget. The administration is expected to request that $20 billion be added to its proposed 2002 budget of $310.5 billion.

And in January, the 2003 budget request will include sizable increases for modernizing the armed forces, accelerating work on missile defenses and other projects, Pentagon officials say.

Bush took office vowing to shake the defense establishment out of what he termed its "Cold War thinking." Rumsfeld has presided over a series of studies aimed not just at modernizing the forces but reorganizing them under a bold new strategy.

The unveiling of the new strategy has been postponed several times, reportedly because of strong opposition within the Pentagon. Meantime, the $1.35 trillion tax cut signed by Bush last week, together with the weakening economy, has raised questions about whether there will be enough money for the massive new defense budgets a swift modernization program would require.

It is in this context that new attention is being paid to the Pentagon's bookkeeping problems and their repercussions.

One senior congressional aide who has watched this process for years describes it as a series of "doctored budget analysis, spending gimmicks, bogus program cost estimates and legislative maneuvers designed to conceal."

The aide, writing in a new book on defense spending, "Spirit, Blood and Treasure," is identified only as "Spartacus" to avoid political retaliation.

"The effect of these activities is to present to the outside world the appearance of a serious debate that is not, in fact, occurring, and to enable individuals to pursue narrow, self-serving agendas," he wrote.

Others concur.

"It's preposterous!" said Byrd, who now chairs the powerful Senate Appropriations Committee. "I seriously question an increase in the Pentagon budget in the face of the department's inspector general's report.

"How can we seriously consider an increase," Byrd demanded in a recent Senate hearing, "when DoD's own auditors say the department cannot account for $2.3 trillion in transactions in one year alone?"

That figure, Byrd told his colleagues with reasonable accuracy, "would amount to $2,300 per minute for every minute since Jesus Christ was born."

Pouring more money into the Pentagon's accounting systems will only magnify the problems, experts say.

"The budget is supposed to be a road map into the future, a five-year plan, so that decisions made this year have future consequences that are accurately weighed," said Franklin C. Spinney, a senior program analyst at the Pentagon. "But the numbers are so Gomered up, the budget has no meaning at all, it's just hanging out there in thin air."

Spinney referred to the bumbling Marine Corps Private Gomer Pyle, a 1960s sitcom character.

It was Spinney, testifying in 1983 to a packed hearing of the Senate Armed Services Committee, who detailed how inaccurate and misleading the Pentagon books had become. But management "reforms" over the years never solved the problems, he said.

This year, for the fourth year in a row, the General Accounting Office reported that "no major part of the (Defense) Department's operations has passed the test of an independent financial audit because of pervasive weaknesses in the Department's financial management systems."

The GAO is a nonpartisan congressional agency that monitors and investigates federal government spending.

Without being able to accurately track past costs, the GAO said, the Pentagon is unable to accurately project future costs. Yet the Pentagon continues to invest in ambitious weapons programs "based on optimistic assumptions" that are not backed up by hard data, the GAO said.

The result is a steady progression of programs for which Pentagon officials must either make cutbacks, such as the F-22 fighter, or appeal to Congress for more money. The F-22 program was slashed from an original intended purchase of 750 aircraft to 339, due in part to unanticipated cost increases.

In another example of the cost of bad information, the Navy in 1996 budgeted $9.5 billion to design and build its first four Virginia class submarines. Now it says it needs another $1.2 billion for the job.

Most of the added expense is for material and labor that cost more than the Navy had predicted, two admirals told Navy Times, an independent newspaper. Two of the subs are already under construction.

A more costly problem has arisen with the effort to build a strategic missile defense system. The Defense Department is thought to have spent some $70 billion on missile defenses since 1983 without having a workable system or even a design to show for it.

The reasons are varied -- costly experimentation, stop-and-go political direction, inevitable technical dead ends. But the lack of reliable centralized accounting systems means that no one can say precisely how much has been spent, or on what. And without that information, no rational decisions can be made to increase efficiencies the way most commercial corporations do, the GAO said.

The Pentagon's accounting mess carries other costs.

-- The Army's central accounting system lost 56 airplanes, 32 tanks and 36 Javelin missile launchers, a General Accounting Office study found when it audited the Army's fiscal year 1999 books. That meant the Army couldn't accurately plan missions, because it didn't know it had those assets.

-- In one five-year period, 1994-99, the Pentagon made $1.2 billion worth of simple errors in paying bills, such as paying the same bill twice or misreading the amount due. That's about the same price tag as two squadrons of F-16 fighters, or five giant troop-carrying C-17 aircraft, or one high-tech guided missile destroyer.

-- The Army and Navy together lost during shipment almost $4 billion worth of equipment, the GAO reported in June 2000, including what the GAO said were "some classified and sensitive items."

-- The well-documented shortage of spare military parts, which has left jet fighters grounded and warships tied up in port, turns out to be caused in large part by faulty Pentagon record-keeping -- rather than inadequate defense spending, as President Bush charged during last year's campaign. For instance, the Pentagon is storing nearly $32 billion worth of equipment and parts it no longer needs, GAO investigators found. Logistics officers could not easily tell what they had on hand and what they needed, nor could they project what they'd need in the future, the GAO said.

-- Pentagon auditors noticed that the annual estimate for the Pentagon's environmental cleanup bill was rising or falling each year by billions of dollars. The reason was unreliable numbers. But the annual estimate, which the Inspector General's Office said "could not be verified," made its way into budget planning anyway.

Last year the environmental cleanup estimate was $63.2 billion; the year before, it was $79.7 billion.

"The problem of not being able to get good data is that it makes projecting real funding requirements very difficult," said Steven M. Kosiak, a veteran defense budget analyst at the private Center for Strategic and Budgetary Assessments in Washington. "The best you can do is get ballpark estimates."

But like the budget documents published by the Pentagon and Congress, Kosiak's analyses do not carry a warning that the data are based on unreliable numbers.

"That's a world unto itself that I've tried to avoid," Kosiak said.

(David Wood can be contacted at )

----------------[end Wood essay]--------------------

Wood ends with one of the biggest conundrums facing the think tanks in the suburbs of Versailles on the Potomac: namely that the tax-deductible wonks dispensing advice would have nothing to write about if they openly acknowledged the intellectual and moral abyss that is the bookkeeping crisis.

Self Styled Futurists, for example, would look like fools, charlatans, or hucksters if they juxtaposed exact predictions of what a revolution in military affairs will look like in 20 years with an open admission that we can't even audit the mundane budget books today.

They might have to answer the obvious question: How could they possibly claim to know where to go, if they don't know where they are? Better to bury the dilemma in the vapid ether of "policy analysis" about an unknowable future, like the oracles mocked by Edward Gibbon in the Decline and Fall of the Roman Empire -- that is why the wonks in the think tanks avoid discussion of the bookkeeping shambles as if it were the plague (at least Kosiak was being honest about it in his interview with Wood, but he works for a think tank that claims omnisciently to know the future, not mention the exact nature of creativity and innovation.)

The bottom line is that Job 1 is to fix the books, then planners in the Pentagon would have the wherewithal to think before they spend.

Who knows, with reliable information, and some hard decisions, they might even evolve a healthy pathway into the future -- one that doesn't start a budget war with the old folks on social security and medicare.

The Adobe acrobat file attached to this comment lays my plan for teaching the Pentagon how to think before it spends.  Attached (1.7 KB PDF file)

This proposal may not be the only way to solve our problems, or even the best way, but at least it meets one standard: it is grounded in an analysis of the root causes of the Defense Death Spiral.

Chuck Spinney

[Disclaimer: In accordance with 17 U.S.C. 107, this material is distributed without profit or payment to those who have expressed a prior interest in receiving this information for non-profit research and educational purposes only.]

Constitutionality, Fixing Financial System, Supplemental Budgets, and QRR