Data taken from Military Balance 2010 : The Annual Assessment of Global Military Capabilities and Defence Economics
I. North America – THE UNITED STATES OF AMERICA :
Although incoming US President Barack Obama took office in January 2009, within weeks of his election victory in November 2008 he had indicated that Dr Robert Gates would continue to serve as defence
secretary. Soon after the inauguration, Obama acceded to the recommendations of Gates, General David
Petraeus and other key officials in revising the Iraq plan that had been central to his presidential campaign.
Rather than remove all US combat forces within 16 months of the inauguration, Obama decided to take
19 months, to proceed slowly in drawing down troops throughout 2009, and to plan to retain the equivalent of five combat brigades in Iraq after the drawdown was complete. (Those brigades, called Advisory and Assistance Brigades, are modified versions of traditional combat formations with trainers and advisers, though retaining significant combat capability.)
Afghanistan has been a focus of some of the key defence debates in the new administration. On 27 March, the president unveiled a strategy that required roughly a doubling of US combat forces, agreeing with
Pentagon recommendations to replace General David McKiernan (the original architect of the plan to bolster US forces as part of a transition to a more traditional counter-insurgency approach) with General Stanley McChrystal. McChrystal’s ‘Initial Assessment’ on assuming command of the International Security Assistance Force (ISAF), made public in September 2009, served to sharpen the debate, with its stress on the need for additional resources. In April, and continuing the attention on procurements noted in The Military Balance 2009, Gates announced several major changes in Pentagon policy. These included cuts or cancellations of some major weapons platforms such as the Army’s Future Combat System (FCS), the F-22 aircraft, and several missile-defence systems, and at least modest increases in other programmes, notably the F-35 Joint Strike Fighter.
Doctrine and policy
The context for current decision-making has in some ways been set by Gates’s actions since assuming office in December 2006. As of November 2009 the National Defense Strategy of August 2008 remained the most recent major US document on defence doctrine. Even when the next Quadrennial Defense Review (QDR) is completed and submitted (possibly in conjunction with the release of the 2011 budget request to Congress in February 2010), Gates’s 2008 strategy will continue to have a powerful legacy. The National Defense Strategy emphasised the centrality of the counter-terrorist campaign, saying that ‘for the foreseeable future, winning the Long War against violent extremist movements will be the central objective of the U.S.’. While some analysts reported that the document may have met resistance in some quarters of the military (with willingness to support large standing forces, and the purchase of systems such as mineresistant ambush-protected vehicles (MRAPs) over longer, more-established programmes perhaps being less than wholehearted), Gates pushed back against such ideas. Nonetheless, when Gates delivered his statement on the defence budget in May 2009, after Obama’s five-year budget plan for the military suggested capping future Pentagon budget growth at roughly the rate of inflation, there was minimal criticism from the uniformed services. This was a reflection of Gates’s credibility, the fact that these proposals had already been aired in his April budget recommendation statement, the firm White House support that he clearly enjoyed and perhaps also his willingness to deal strongly with those deemed unsuccessful in post. Gates’s initial plan, prior to the QDR, to cut back on a number of weapons systems included many specifics. He proposed to halt further production of airborne laser aircraft, a key element of American missiledefence architecture. He would end procurement of the C-17 transport plane. He would end procurement of the DDG-1000 destroyer with the third vessel. He would defer development of a new bomber, while cancelling the so-called Transformational Satellite Communications programme as well the VH-71 presidential helicopter. Gates had already cancelled the FCS ground-vehicle programme.
But under his proposals Gates is not aiming to slash the defence budget, curtail modernisation or under fund conventional capacities. According to Deputy Secretary of Defense William Lynn, the ‘budget is
about 10 percent for irregular warfare, about 50 percent for traditional, strategic and conventional
conflict, and about 40 percent for capabilities that span the spectrum’. Funding for war efforts would
remain robust. In addition, even after the planned cuts, missile-defence funding would remain roughly
50% larger than under President Ronald Reagan in inflation-adjusted terms, and the scope of some
ground-based elements of the programme would be increased. Furthermore, Gates plans to prolong the
DDG-51 destroyer programme and accelerate the F-35 programme. He plans to slow down aircraftcarrier
production, resulting in an eventual reduction of the fleet from 11 to 10 carriers, but not until 2040.
Total weapons-acquisition spending for the United States – that is, procurement plus research, development, testing and evaluation – will continue to be substantial, with annual price tags for these investment purposes remaining around US$200 billion. But while the administration may have hoped to limit budget growth over the next five years roughly to the rate of inflation, the measures proposed by Gates will not be sufficient to achieve this, so the QDR will have to find more savings or the defence-budget top line will have to increase. For 2010, at least, the effective real growth rate is closer to zero, since some of the apparent increase is due to bringing some functions that had been in supplemental appropriations during the Bush years back into the base budget.
While the higher priority for near-term operations in Iraq and Afghanistan than for hypothetical
hegemonic competition undoubtedly plays a role in prompting these proposals, the QDR will further develop the conceptual framework behind the Obama administration’s defence vision.
Undersecretary for Defense Michèle Flournoy said in August 2009, after a discussion of existing strategic
challenges and key trends, that the US must ready its forces for irregular warfare as well as
‘high-end asymmetric threats’. Initial indications are that the Department of Defense (DoD) will give
some emphasis in the QDR to countering the challenge from hybrid threats or high-end asymmetric
threats, or enemies (both hostile states and non-state actors) that could employ a blend of irregular and
asymmetric and futuristic techniques, perhaps in conjunction with more conventional military capabilities and operations. There are also moves towards examining capabilities based on a
grounded projection of likely threats in the near future rather than focusing on ‘leap-ahead’ capabilities
often associated with concepts of ‘defence transformation’ noted in previous defence plans.
But these leap-ahead capabilities are still envisaged as an integral part of the overall force mix. As noted
in The Military Balance 2009 (p. 14), ‘while the need for state-of-the art systems would not fade, [Gates
has] wondered whether specialised, lower-cost, low-tech equipment suited to stability and counterinsurgency operations were also needed’. Another feature of Obama-administration thinking could perhaps be a move away from casting US defence strategy in terms of operational ambition, such as
the ability to conduct two wars, one and a half wars, or other formulations. For the DoD, as Flournoy
noted, ‘the greatest priority, for the next few years, should be given to dealing with the emerging asymmetric challenges clustered at the middle and high end of the spectrum’. The QDR may result in a less
catchy slogan to capture its core strategic essence than previous efforts, though perhaps what it will
sacrifice in pithiness it will make up for by more accurately diagnosing the wide array of security
challenges faced by the US and its allies.
Gates has stated that the US administration has to consider ‘the right mix of weapons and platforms
to deal with the span of threats we will likely face. The goal of our procurement should be to develop
a portfolio – a mix of capabilities whose flexibility allows us to respond to a spectrum of contingencies’.
The QDR ‘will give a more rigorous analytical framework for dealing with a number of these issues’;
this is one reason why Gates has delayed decisions on the ‘follow-on manned bomber, the next generation
cruiser, as well as overall maritime capabilities’. ‘But where the trend of future conflict is clear,
I have made specific recommendations.’ These views inform his bid to reform the procurement process
(see The Military Balance 2009, pp. 15–18), which has, according to some analysts, been shaped by his experience in having to procure many MRAP vehicles outside normal Pentagon procurement channels. In his April budget statement, Gates said that the challenges of contemporary battlefields and changing
adversaries required ‘an acquisition system that can perform with greater flexibility and agility’ and ‘the
ability to streamline our requirements and acquisi tion execution procedures’. There needed to be a shift
away from ‘99 percent “exquisite” service-centric programs’ towards the ‘80 percent multi-service solution that can be produced on time, on budget and in significant numbers’ (see The Military Balance 2009, pp. 14–15).
The US military is still under severe strain, notwithstanding all the resources that have been devoted to it,
and the attention that Gates has devoted to personnel issues. US forces are substantially larger than those
of America’s allies, and the army, for instance, is expanding, but they are still suffering some personnel
strains given the myriad burdens placed upon them, particularly continuing operations in Iraq and the war in Afghanistan. Despite contentions that US forces are near breaking point, data suggest that, though readiness is fragile and continues to exact a heavy toll on individuals (which may inform future decisions on force allocations and aggregate overseas deployments), it seems to be reasonably good across the force.
The stress of continuous operations also, of course, takes its toll on equipment. Although the majority of
equipment has not been deployed on operations, the amount that has, as well as the number of specialist
platforms employed in particular theatres, means that equipment-reset tasks are of key and continuing
Gates has argued that the US does not face an urgent readiness crisis. That is to say, US forces continue to
perform impressively on the battlefield in Afghanistan, and Iraq, suggesting that they are tolerating current strain reasonably well, even at high levels of individual sacrifice. And America’s residual airpower
and naval power constitute potent deterrents against possible aggression or conflict in Korea, the Persian
Gulf or the Taiwan Strait. But the greatest concern is that soldiers and marines will start leaving the force
because of excessive deployments; the impact would be amplified if those in question were experienced
NCOs and junior officers. The substantial funding allocated to personnel and family issues in the 2009
budget proposals are undoubtedly designed to forestall such trends (Gates noted ‘$9.2bn in improvements in childcare, spousal support, lodging, and education, some of which was previously funded in the bridge and supplemental budgets’), as are moves by Army Chief of Staff General George Casey to address soldiers’ deployment schedules. Currently, soldiers spend a year deployed and then a year and a half at home before their next rotation. According to Secretary of the Army John McHugh, Casey’s plan is to reach a 1:2 ratio in the next few years and, ideally, a 1:3 ratio for the active force and 1:5 for the reserve force in the long term. The Army’s high-school graduation figure for new
recruits for 2005 dipped to 83.5% and, according to analysis by the National Priorities Project, the figure
continued to decline to just over 70% by 2007. The situation improved in 2008, with figures exceeding
80%, as tougher economic conditions combined with improved battlefield trends helped recruiting, and
this upward trajectory continues. That was also the third straight year that the active-duty army met
its recruiting goals – admittedly in part because of a worsened general economy, coupled with more
bonuses and recruitment waivers on matters such as age and misdemeanour criminal records. In October
2009 Gates was able to report that the army had eliminated most waivers, and was on track to exceed
90% for the proportion of recruits with high-school diplomas for the year. Yet there are also disturbing
trends. Suicide is a significant problem for the military, and a tragedy for many troops and their families.
The suicide rate rose from 9.1 per 100,000 soldiers in 2001 to 17.3 per 100,000 soldiers in the US Army in 2006, although that was close to the age- and genderadjusted average for the US population as a whole
(for males, for example, the rate was 17.6 per 100,000), and on 30 January 2009 the Washington Post reported that the rate reached 20.2 per 100,000 in 2008. In one group of soldiers surveyed in 2008, among those who had been to Iraq on three or four separate tours, 27% displayed signs of post-traumatic stress disorders (after one and two tours the figures were 12% and 18.5% respectively). In mid-2009 the Army launched a study group in conjunction with the National Institute of Mental Health and four academic institutions in a bid to better understand the underlying causes of suicide. An early recommendation was reported to be an increase in the time troops spend at home relative to that deployed. But General Peter Chiarelli, the Army’s vice chief of staff, noted that, ‘unfortunately, in a growing segment of the Army’s population, we’ve seen increased stress and anxiety manifest itself through high-risk behaviors’.
For US forces in general, the combat burden in the near term may lighten a little, though perhaps not
dramatically. As of November 2009 it seemed likely that the combined Iraq–Afghanistan requirements for 2010 and 2011 would keep up to 15 brigade combat teams (BCTs, each 3,000–4,000 strong), plus many support units, engaged and deployed, in contrast to more than 20 at the height of the Iraq War surge, and 17 or 18 in 2003–06. These levels, coupled with an increase in military personnel and overall BCT numbers, mean US ground forces will likely settle into roughly a 1:2 ratio, matching General Casey’s
Most soldiers and marines still have little time to do anything other than deploy to Iraq or Afghanistan,
return, rest and then prepare to go back (see The Military Balance 2009, p. 15), and training other
than for the current conflicts is necessarily being neglected. Indeed, recent efforts have been aimed
at improving preparation for these current missions through improved coordination across agencies
and other refinements of training and operations (as reflected, for example, in the US government’s
Counterinsurgency Guide released in January 2009).
Over time, however, the ground forces will need to consider how to balance their development of
The Counterinsurgency Guide is an attempt to devise a whole-of-government approach to an area of operations that had hitherto been addressed in scholarly literature or in single-service or departmental
doctrines. The guide says it is the ‘first serious U.S. effort at creating a national counterinsurgency framework in over 40 years’ and is designed to prepare policymakers for the kinds of tasks they might have to carry out if the decision were taken to engage in a counter-insurgency. The guide is an example of the many doctrines being developed in the US military, some in reaction to the lessons that have been drawn from current operations and likely future contingencies. January 2009 also saw the release of a Capstone Concept for Joint Operations (CCJO), which discusses broad potential threats to US security through reference to the ‘Joint Operating Environment 2008’ and how US joint forces should operate in response to such threats. The CCJO ‘envisions a future characterized fundamentally by uncertainty, complexity, rapid change, and persistent conflict’, a theme which has also been echoed in the work that the US Army’s Training and Doctrine Command has been carrying out to produce a new Capstone Concept
entitled ‘Operational Adaptability – Operating Under Conditions of Complexity and Uncertainty in
an Era of Persistent Conflict’. This Capstone Concept is intended to provide guidance to senior leaders as
they seek to balance the current army so that it can prevail in current conflicts, while also shaping the
army of 2016–18 so that it can address a ‘combination of hybrid threats, adaptive enemies, and enemies in complex operating environments’. The document is intended to build on the 2005 Capstone Concept,
which retained substantial focus on manoeuvre operations and network-enabled capacities, as well as
the other documents noted above. In this document, assisting foreign security services is highlighted as
a key requirement, while there is emphasis on the need to produce a force that can operate effectively
under conditions of uncertainty, with the concept arguing that the way of improving this is to reinforce
the importance of understanding situations in depth, decentralisation under the concept of mission
command, and the ability to ‘develop the situation through action’. The concept also emphasises the
importance of leader development and education.
The army is also fielding concepts derived from the lessons of recent campaigns. One example is
the Advisory and Assistance Brigade (AAB). These brigades, according to Gates, have ‘three main functions: traditional strike capabilities, advisory roles, and the enablers and command and control to
support both functions’. Some are already deployed in Iraq, after the Combined Arms Center dramatically
reduced the doctrinal cycle, and developed and fielded the AAB doctrine in only a few months. (The
intent is that they will comprise the entire US Army operation in Iraq by the end of 2010.) Much of the
army’s doctrine is now in ‘wiki’ format so those with recent operational experience can access and update
the relevant manuals.
The Military Balance 2009 noted the on-going debate over aspects of the FCS programme, with
General Chiarelli saying that the army needed to ‘better explain the revolutionary potential’ of the
FCS ground-vehicle segment. As noted, this component, including eight manned FCS vehicles and the
non-line-of-sight cannon, was cut in Gates’s budget proposals. The army has adapted to this change by
speeding the migration of FCS capacities to infantry soldiers, including tactical and urban unattended
ground sensors, the non-line-of-sight-launch system, the Class I UAV, the small unmanned ground vehicle and network kits for the HMMWV. While the budget proposals speeded the deployment of FCS spinouts to BCTs, much of the rest of the programme is transitioning to a BCT modernisation strategy, with Chiarelli keen to ensure that the FCS programme’s network developments in particular are fielded.
While the FCS ground-vehicle programme was cut, MRAPs have continued to arrive in large numbers
in Afghanistan. In October 2009, the M-ATV, a mineresistant all-terrain vehicle designed for operations
in southern Afghanistan, arrived in Kandahar. According to the army, the M-ATV weighs around
25,000lbs (11,000kg), compared to the original MRAPs at around 60,000lbs (27,000kg). Gates has
reiterated that he is committed to the army’s groundvehicle modernisation programme, ‘but it has to be
done in a way that reflects the lessons we’ve learned in the last few years about war in the 21st century,
and that incorporates the [DoD’s] nearly $30billion investment in MRAPs’.
The Military Balance 2009 (p. 16) also highlighted some of the debates under way over US Air Force
modernisation programmes. The decision to end production of the F-22 and C-17 gained much
attention, but the budget also proposed increasing procurement of the F-35 Joint Strike Fighter, with
Gates saying in April that the US would purchase 513 F-35s over the five-year defence plan, with
an eventual total of 2,443. The planned fielding of such a large number of advanced fighters led Gates
to cast doubt on what some critics perceived as a looming fighter gap after the US retires some 230
aircraft as part of its modernisation programme. These aircraft, together with legacy platforms and
growing numbers of UAVs, will, according to Gates,‘preserve American tactical air supremacy far into
the future’. But there remains attention within the DoD (as noted above) on the possibility, raised by
Gates in 2008, of employing larger fleets of lowercost, lower-tech aircraft in situations where the
US has air dominance. The MC-12 Liberty, a multimission turboprop containing advanced capacities
for intelligence, surveillance and reconnaissance (ISR) duties and deployed to Iraq in June 2009,
is perhaps a case in point and, according to a mid September speech by Gates, the air force is ‘considering
bringing online a fleet of light fighters and cargo aircraft – inexpensive, rugged platforms that
can also be used to build local capacity in lift, reconnaissance, and close air support missions, and are
also usable and affordable by local partners’. In the same speech, he announced that source-selection
authority was returning to the air force for the KC-X tanker (see The Military Balance 2009, p. 16), meaning that, while the procurement process for this aircraft has restarted, the air force will have to maintain its existing, and ageing, KC-135 fleet. Meanwhile, Global Strike Command, announced in October
2008, was activated in early August. Headquartered at Barksdale air base, the new command combines
the air force’s bombers and intercontinental ballistic missiles (ICBMs) under a single commander. 20th
Air Force, with the ICBMs, came under the new command in December 2009, with the 8th Air Force
(and the bombers) due to follow in April 2010. The new command was due to reach initial operating
capacity in early August 2010.
The budget proposals to restrict the US Navy’s DDG-1000 programme to three ships gained much
attention, though the rising costs of the platform and dwindling projected buy were perhaps as responsible as questions over the future strategic value of the platform. The QDR will likely address some
of the strategic assumptions underpinning naval programmes and employment strategies and will
consist, in the words of Secretary of the Navy Ray Mabus, of ‘a major examination of our strategy, [and]
how we design and deploy our forces’ – this coming two years after the navy released A Cooperative
Strategy for 21st Century Seapower. Mabus also said that the navy will prepare for irregular warfare and
hybrid campaigns as well as maintain conventionalwarfare capacities. But Gates started the process,
and indicated some of his preferences, with the DDG-1000 decision, the move to keep the DDG-51
programme (with its known costs and proven capabilities), accelerating LCS purchases, delaying the
navy’s CG-X cruiser programme, and delaying amphibious-ship and sea-basing programmes. In
the latter two cases the objective behind delaying the programmes was to revisit overall requirements.
Future threats were also a major factor behind the establishment of Fleet Cyber Command in October
2009. To be operated by a reconstituted 10th Fleet, this command will be a subordinate unit of the new US Cyber Command, announced by Gates in June, and which will itself report to US Strategic Command.
Cyber Command is intended to better coordinate defence of the DoD’s vast range of military networks
(15,000 networks administered by 90,000 personnel; 7 million computers and IT devices used by about
Nuclear arms control, missile defence and global zero
The key military decisions of the Obama administration are not all being made by the Pentagon. On his
first trip to Europe as president in April 2009, Obama gave a major speech in Prague committing himself to the vision of a nuclear-free world. Acknowledging that it might not happen in his lifetime, he nonetheless chose to demonstrate his resolve in pursuing the agenda. Precisely how this will happen remained to be seen, with the Pentagon’s nuclear posture review (like the QDR) still incomplete. But, for the time being, Obama has restored some momentum to traditional US–Russian arms control, making offensive arms cuts a priority of his administration, adjusting the structure and deployment of the European missile-defence system planned for Poland and the Czech Republic by the Bush administration, and preparing for a possible effort to pursue ratification of the comprehensive nuclear test-ban treaty (CTBT) in the Senate in 2010. Meanwhile, the US and Russia announced an intention to work towards a legally binding agreement to replace the Strategic Arms Reduction Treaty (START I), which was due to expire on 5 December 2009. At the time of writing no agreement had been announced. US Secretary of State Hillary Clinton said in October that ‘the nuclear status quo is neither desirable nor sustainable. It gives other countries the motivation or the excuse to pursue their own nuclear
options.’ While pursuing the 67 votes needed for ratification of the CTBT, the administration will also have
to finesse the issue of whether to plan on building a lower-yield replacement warhead for ageing
American nuclear weapons. This is a matter on which Gates and Obama are believed to disagree, at
least in part. Gates’s view that some kind of replacement warhead will be necessary over the long term is
on record, dating at least to an October 2008 speech just before the presidential election. He agrees with
Obama that no such warhead should require testing, and seems to agree that it should not represent a
meaningful upgrading or ‘modernisation’ of the arsenal with any new capabilities such as greater
earth-penetration capacity. Given that the existing warhead inventory is holding up better than many had expected, with plutonium pits or cores ageing less quickly than originally feared, no immediate production of new warheads would seem necessary, even if Gates’s general view carries the day. The long-standing stockpile-stewardship programme, with an annual cost exceeding US$5bn, has focused on tracking trends in the arsenal to detect any early signs of problems. To date none have emerged that could not be redressed through straightforward methods such as component replacement within the warheads and refreshing tritium stocks in warheads as that element decays radioactively.
But the administration has still to resolve its doctrinal position and establish a long-term plan.
Obama’s new Afghanistan strategy is the most important national-security concept of his first year in
office. It emphasises classic counter-insurgency principles – protect the population, train and strengthen
indigenous institutions – while following the ‘clear, hold, build’ concept of operations that was ultimately
so successful in Iraq during the surge. In fact, Obama’s thinking on Afghanistan is not radical. Gates was promising more US troops for the war in summer 2008, and General McKiernan, before being replaced by General McChrystal, was developing a new counter-insurgency-oriented strategy for Afghanistan even before election day. Obama increased the US military presence in Afghanistan to 68,000 uniformed personnel for an indefinite period, with the possibility of further modest increases thereafter. (The number reached 41,000 shortly after the policy was announced, with 15,000 assigned to ISAF and the other 26,000 part of the Operation Enduring Freedom mission; the total reached about 58,000 in June and just under 68,000 by the end of the summer.)
The United States is leading a strong NATO effort to reinforce the south and east of Afghanistan; more
specifically, the United States will have what amounts to a ‘3+2+2’ plan by late 2009: roughly three brigades in the east, two in the south, and two more dedicated to training Afghan security forces. The forces added during Obama’s first year include a combat aviation brigade and a Stryker brigade for Kandahar province, a Marine Expeditionary Brigade (with associated airpower of its own) for Helmand province, and the fourth brigade of the 82nd airborne division to join the existing 48th National Guard Brigade with the Combined Security Transition Command-Afghanistan (CSTC-A) to train Afghan security
forces. At most points prior to 2008, in contrast, there were virtually no US forces in southern Afghanistan, and only around 1,000 before the Obama plan was announced; it is also significant that the combat aviation brigade roughly quintuples the airpower available in the area of operations. In December, Obama announced a further 30,000 troops would deploy in 2010. The strategy has ‘the protection of the Afghan population’ as its core objective with the accelerated training of Afghan national security forces as its key mission. It also aims to enable a phased drawdown of US forces from 2011.
DEFENCE ECONOMICS – UNITED STATES
Over the past year the US economy experienced the worst financial crisis since the Great Depression and
plunged into a severe and protracted recession. In the second half of 2008, the collapse of investment bank Lehman Brothers and the forced rescue of US mortgage giants Fannie Mae and Freddie Mac signalled the start of a rapid deterioration in economic activity that saw GDP decline by 6.25% in the fourth quarter and a further 5.5% in the first quarter of 2009. In response to these shocks, US macroeconomic policy shifted to a war footing with the introduction of a broad range of emergency measures led by the Troubled Asset Relief Program (TARP) which provided an initial US$700bn of capital to stressed financial institutions. TARP was accompanied by a swift cut in interest rates to 0% and followed by a fiscal stimulus of more than 5% of GDP, support for the housing market, the introduction of quantitative easing and a host of other measures.
In February 2009, the authorities introduced a Financial Stability Plan that included further support to the housing market, up to US$1 trillion in consumer and business lending, a US$1tr Public–Private Investment Fund and a number of initiatives to improve financial stability, including stress tests to assess banks’ resilience and a requirement for increased balance-sheet transparency. The combination of massive macroeconomic stimulus and financial-market intervention succeeded in stabilising financial and economic conditions and in the third quarter of 2009 growth had returned, officially bringing the recession to an end. However, inventory restocking is a significant factor in this pick-up in activity and the economy at large remains weak, with unemployment in October 2009 rising above 10% of the workforce. In the medium term, the IMF believes that economic activity will remain subdued in the US as continuing financial strains weigh on investment, unemployment continues to rise, and growth in partner nations is modest.
The fiscal legacy of this crisis will be a high and rising debt that, according to the IMF, could become
‘unsustainable without significant medium-term measures’. The government is projected to record a budget deficit of over 10% of GDP in both 2009 and 2010 and US national debt is forecast to jump to nearly 110% of GDP by 2014. The debt situation created by the crisis would be troublesome enough
without the additional fiscal challenge posed by the looming retirement of the ‘baby boomer’ generation,
who began collecting Social Security and Medicare benefits in increasing numbers from 2008. The need
to make significant budget adjustments in these circumstances is clear; however, under the George
W. Bush presidency government expenditure on non-defence discretionary spending had already fallen near historic lows, suggesting that if any future reductions in overall debt levels are to be achieved then attention will shift to the current high level of defence spending.
Even before the onset of the economic slowdown, the future trajectory of US government finances in light of the forthcoming demographic ‘shock’ had already contributed to a debate about the appropriate
level of defence spending. Between 2000 and 2009, the US defence budget rose by around 75% in real terms, and jumped from 3.1% to 4.9% of GDP. However, the Congressional Budget Office has regularly warned that future demographic developments suggest spending on discretionary programmes over the long term will come under sustained pressure. While much of the increase in defence spending can be attributed to additional spending on the wars in Iraq and Afghanistan, the Government Accountability Office has repeatedly criticised the DoD for its acquisition process, describing it as ‘broken’ and adding unnecessary billions to the cost of already-expensive military equipment. Senator Obama added to the debate during the 2008 presidential election campaign when he pledged to trim the defence budget of any excesses and promised a review of all existing programmes to root out waste. In January 2009, Gates gave a glimpse of his thinking when he told the Senate Armed Services Committee that painful choices between defence spending priorities were needed. He complained that, for too long, the Pentagon had emphasised long-term projects to develop near-perfect high-end weapons systems at the expense of being effective at the lower end of the spectrum, adding that he wanted to change this mindset and institutionalise a counter-insurgency focus in the acquisition process which would necessitate awkward decisions about existing programmes and processes. The problem of spiralling procurement costs has occurred at the same time as the decision by the Bush administration to substantially boost military end strength. Additional armed-forces personnel not only raise the immediate salary bill but lead to additional outlays on training, health care and housing and intensify the need for other maintenance
and operational expenditure, putting pressure on investment accounts. In the past, a budget squeeze
that pitted spending more on weapons programmes against additional outlays on personnel could be
resolved by simply increasing defence spending, but in view of the government’s dire fiscal position quite
how far it would be able to go in that direction was debatable.
In April 2009, Gates laid out a vision for the US military taking into account that in the future the Pentagon will not be able to rely on unlimited resources with which to fight every kind of war. In short, he proposed a measured shift away from a historic emphasis on equipment programmes necessary for the US to fight conventional wars against peer competitors in favour of investment in the sort of equipment and capabilities necessary to fight insurgencies of the type in Iraq and Afghanistan. He made a number of bold proposals that were later confirmed in Obama’s FY2010 defence budget request, including:
• Cancelling the VH-71 presidential helicopter.
• Postponing the plan to build a new longrange bomber until more is known about the ‘operational requirements’ for it.
• Cancelling the Transformational Satellite programme, and buying two additional extremely high frequency communications satellites instead.
• Capping the DDG 1000 programme at three ships, while restarting production of DDG 51 vessels and delaying the CG-X cruiser initiative.
• Cancelling the long-stalled CSAR-X searchand-rescue helicopter and cancelling a second airborne-laser aircraft.
• Cancelling the Future Combat System Manned Ground Vehicle programme.
• Cancelling the multiple-kill vehicle component of the missile-defence programme.
• Halting the procurement of any further F-22 or C-17s.
• Reducing the aircraft-carrier fleet to ten by 2040.
• Increasing purchases of the F-35 from 14 in FY2009 to 30 in FY2010.
• Increasing resources for intelligence, surveillance and reconnaissance assets.
In another affirmation that the defence budget could not continue growing at the pace of recent years,
Gates also refused to align himself with the Joint Chiefs of Staff, who during the presidential election
campaign had called for an additional US$450bn to be earmarked for defence during the next administration, noting instead that he expected the budget to grow by no more than the rate of inflation in coming years. Less noticeable among all the headline-programme adjustments was the action Gates took to deal with the informal ‘unfunded requirements’ process by which the services seek to increase their budgets outside of the formal budget-planning system. Every year, the Senate Armed Services Committee invites each service chief to submit a letter telling the committee what they wanted from the regular budget but did not receive. This opaque arrangement had grown over time so that by 2008 the air force submitted a request for ‘unfunded requirements’ amounting to US$20bn. Whilst Gates did not ban this system outright, he asked for all correspondence to be first reviewed by him, and revealingly in 2009 the air-force request dropped to less than US$2bn.
Despite these cost-saving initiatives, however, a deep imbalance remains in medium-term defence funding. In August 2009, the DoD confirmed Gates’s suggestion that future budget growth would be
limited when it instructed military planners to prepare for zero budget growth between FY2011 and FY2015. David Ochmanek, deputy assistant secretary for defense for force transformation and resources, went further when he revealed that work on the 2010 Quadrennial Defense Review had uncovered
a deficit of US$60bn between the likely level of funding over the next four years and current spending commitments, even before the massive cost of withdrawing troops from Iraq and possibly Afghanistan was factored into the equation. The non-partisan Congressional Budget Office calculated that to balance its books the Pentagon would need its non-war-related spending over the next 18 years to average 6% more than the amount sought in the FY2010 budget request. Consequently, service chiefs were told to make further cuts over and above the 50 major programme adjustments announced by Gates in April. Given that there appears to be little ‘lowhanging fruit’ left, though, their room for manoeuvre is limited.