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Federal Budget Policy and Defense Strategy

Authored by Dr. Dennis S. Ippolito.

February 15, 1996

31 Pages

Brief Synopsis

Defense economist Dennis S. Ippolito dissects Federal budget practices over the past several decades, with a particular focus on sources and trends in our national deficit spending syndrome. Underlying his message is an unsettling truth, that no matter how the current debate over balancing the budget turns out, future cases for the Army Budget are going to have to be made in an even more challenging spending environment as discretionary spending margins shrink.

Army professionals, now more than ever, need to be articulate advocates of landpower for the 21st century. But before articulate and reasoned arguments can be made for the kind of force that will ensure that the nation does, indeed, build and maintain the world's best Army (or Navy, Air Force, or Marine Corps), one must take into account the realities of the Federal budget.

SUMMARY

The debate over future U.S. defense strategy is not easily separated from misunderstandings and confusion about Federal budget policy. In particular, some defense analysts now contend that the capabilities required under the 1993 Department of Defense Bottom-Up Review are too costly. The deficit control efforts that appear certain to constrain Federal spending for an indefinite period, they argue, mandate a less demanding and less expensive strategic option.

The realities of budget policy trends, however, are more complex than this argument acknowledges. The structural deficit problem that policymakers are struggling to solve has, in fact, very little to do with discretionary spending, whether for defense or for nondefense programs. Instead, the key to serious deficit reduction is found in entitlement policy cutbacks, primarily in retirement and health programs. Unless the extremely high rates of growth embedded in existing entitlements are dramatically reduced, structural deficits cannot be controlled.

Over the past three decades, the budgetary and economic significance of defense budgets has greatly diminished. Today, the Federal budget is dominated by mandatory spending programs, primarily entitlements, and these programs will absorb even larger shares of future budgets. Thus, strategic compromises that reduce defense budget requirements cannot have more than a marginal impact on deficit control. The damage to important, enduring military capabilities, however, could be extremely serious and, given the declining flexibility in spending policy, difficult to reverse. The purpose of this monograph, then, is to provide an accurate fiscal perspective for a critically important strategic policy debate.


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