Problems at the Pentagon
While Americans should be grateful for the Pentagon’s first-class military services and emergency response capability, these capacities come with a high price tag, and irresponsible spending may be threatening streamlining and efficiency to boot. The United States is the top military power in the world, spending more on defense than the next 7 countries combined. In fiscal year 2015, defense spending was about 20% of the federal budget at $598 billion, a level that declined modestly but is expected to increase again.

The Defense Budget in a Nutshell

There are four major categories of funding in the Department of Defense’s budget that accounted for nearly 94% of defense spending in 2013: operations and maintenance, military personnel, procurement, and research and development. Operations and maintenance cost $260 billion and included compensation for civilian DOD employees, the majority of defense health programs, and daily operations of the Department of Defense. The military personnel category includes compensation for military personnel and housing and subsistence allowances and cost $150.8 billion. The $114.9 billion spent on procurement went to purchase equipment, such as vehicles, weapons, and ammunition. Research, Development, Test & Evaluation spent $66.9 billion to invest in future capabilities for the Department of Defense. The rest of the budget includes funding for military construction, family housing, atomic energy activities, and various other defense-related programs.

Overseas Contingency Operations

In addition to the base defense budget, the federal government also allocates additional funds for overseas contingency operations (OCO). Since the September 11, 2001 terrorist attacks, the OCO budget has been used to mostly fund the wars in Iraq and Afghanistan. These expenses have decreased (from a high of $168 billion in 2008) as military operations have wound down, but still cost $92 billion in fiscal year 2014 and $64 billion in 2015. The problem with OCO funds is that they are not subject to annual appropriations, meaning they can be increased without limit. Historically, wars have been paid for with increased revenue via war bonds or taxes dedicated to war spending. Unfortunately, the US has not imposed any sort of war surtax and the engagements in Iraq and Afghanistan have been largely funded through debt. Harvard University’s Kennedy School has calculated that the wars in Iraq and Afghanistan accounted for approximately 20 percent of the increase in national debt between 2001 and 2012 and could end up costing as much as $6 trillion.

Shadow Money: Why we Need to Reduce the Pentagon’s Bottom Line

Laws passed in 1997 demanded that every department in the federal government submit their finances for an annual audit, but the Pentagon has consistently been unable to fulfill that obligation. Moreover, Defense Department officials have said that their books won’t be ready for an audit until 2017. When one of every 5 federal dollars goes to the Pentagon, citizens must be able to know how that money is being spent — particularly given the numerous examples of the Pentagon itself attempting to cut costs but continuing to get funding for struggling programs. While of course some financial statements must be classified for national security reasons, there are numerous procurement boondoggles and questionable overhead costs that must be scrutinized. The mission and role of America’s military in the world can and should be vigorously debated, but the Pentagon should not get special treatment in terms of upholding its responsibilities to hard working taxpayers.

Solving the Problem

The government needs to be more realistic about the goals of the military. Military leaders often understand that in a changing world, cost-cutting and streamlining is simply necessary, yet perverse incentives drive Congress to keep funding programs the military itself doesn’t even want. Options abound for trimming spending where appropriate and modernizing America’s fighting forces to continue to provide security for American citizens.