The bipartisan budget deal sealed by Congress in the early hours of February 9 was a win for the Pentagon—but not as big a win as it might initially appear. Having jacked up the defense top-line for this fiscal year and next, defense hawks in Congress will be tempted to congratulate themselves for “solving” America’s crisis of military austerity. In reality, the deal does give the Pentagon some much-needed budgetary stability and relief for the next 18 months, but it may also set the stage for an even more agonizing defense crunch down the line.
To be clear, there is some authentically good news here. America has been careening toward strategic insolvency in recent years, as China, Russia, and other rivals have built up their capabilities and the Pentagon has significantly built down from the peak of post-9/11 defense spending in 2010. According to the Stockholm International Peace Research Institute, real-dollar U.S. defense spending fell from $759 billion in 2010 to $596 billion in 2015, and the Pentagon was frequently forced to operate on short-term budget resolutions that made long-term planning nearly impossible.
At the very least, the budget deal pulls the Defense Department out of this self-defeating cycle. Assuming the details can be hashed out over the coming weeks, Congress will fund the Pentagon at levels significantly higher ($700 billion) than those initially requested by the White House for Fiscal Year 2018. It will also fully fund the Pentagon’s budget request for Fiscal Year 2019 at $716 billion, thus enabling the department—in the short-term—to support the defense strategy rolled out by Secretary of Defense James Mattis in January.
In particular, this funding surge will allow the military to begin addressing its readiness crisis and will constitute a down-payment on critically needed—and much-delayed—modernization efforts. Just as important, this deal gives the Pentagon a respite from both crippling, short-term continuing resolutions and the threat posed by the potential return of the sequester mechanism created by the Budget Control Act of 2011 (BCA). Not least, there is the symbolic value. This agreement demonstrates that America’s leaders recognize the increasingly competitive and dangerous world that has emerged and are willing to spend more to preserve the nation’s safety and strategic advantage.
The bad news is that there are two critical issues the present deal not address. First, this agreement does not make clear what happens after Fiscal Year 2019. Both Mattis and General Joseph Dunford, chairman of the Joint Chiefs of Staff, have testified that the Pentagon requires sustained annual growth of 3-5 percent above inflation over the next five years in order to execute U.S. strategy and stay ahead of great-power challengers. Whether Congress will actually appropriate that money in the years beyond Fiscal Year 2019, or whether the budget will essentially flatten out, remains unresolved. Add in the fact that the BCA remains in place through 2021, and there persists the possibility that spending caps and even the across-the-board cuts budget could return absent another bipartisan agreement.
A second and more fundamental problem is that this deal may actually increase downward pressure on defense spending over the longer-term. America’s fiscal situation is such that the United States will probably only be able to sustain higher levels of military spending (or even maintain current levels) if it gets a handle on federal budget deficits that are driving the national debt steadily higher. Yet U.S. policy is headed in the opposite direction.
The tax reform bill passed late last year is projected to add $1.4 trillion to federal deficits over the coming decade; the current budget deal accumulates still more red ink by adding $300 billion in mostly unfunded spending (defense and domestic) over the next two years. In the short-term, adding to the deficit to pay for a stronger defense is surely warranted, because of the increasing challenges America faces in upholding its global security obligations and keeping its various rivals and adversaries in check. Over the longer-term, however, this is a recipe for trouble.
In mid-2017, the Congressional Budget Office was already projecting that the federal deficit would grow to 5.2 percent of GDP by 2027, which would carry publicly held debt to 91 percent of GDP. The combination of the tax reform and budget deal will make matters worse, returning the country to annual deficits approaching (and even exceeding) $1 trillion. Meanwhile, the entitlement reforms necessary to curb rising deficits appear to be off the table; tax increases seem just as politically unfathomable
All this spells long-term danger for defense. Several years ago, my former colleague at Duke University, Donald Taylor, wrote a book called Balancing the Budget Is a Progressive Priority, the idea being that unconstrained deficits would eventually squeeze out the domestic programs that liberals favor. Something similar goes for defense hawks today. If Congress and the administration do not rein in entitlement spending, if they decline to generate additional revenues by raising taxes, and if deficits and debt continue to spiral upward, eventually the United States will find itself in an acutely perilous fiscal position. It will have to choose between accepting levels of publicly held debt that are widely deemed dangerous to economic health and stability, and cutting back dramatically on other types of spending. And if entitlement reform or tax hikes are not considered options, the most obvious target for deficit reduction will be defense.
In other words, this deal is a double-edged sword. It purchases near-term gains for the Pentagon at the price of heightened long-term risk. If, by some chance, it serves as prelude to another bipartisan agreement to address the nation’s growing fiscal challenges, it may help achieve on a sustained basis the defense the nation needs. If not, it may well hasten a sharper fiscal crisis, from which America’s military capabilities are unlikely to emerge unscathed.
Hal Brands is Kissinger Professor at the Johns Hopkins University School of Advanced International Studies and senior fellow at the Center for Strategic and Budgetary Assessments. His most recent book is American Grand Strategy in the Age of Trump.