Value for the Money? The Defense Budget Blackhole

Near the end of a recent piece by Fred Kaplan, he wrote in Slate that:

The United States has the world's most powerful military. This military consumes more money (adjusting for inflation) than it did at the height of the Cold War. Not counting the costs of the two wars, it spends as much on the military as the rest of the world's countries combined. And yet, despite all this money and global reach, the U.S. Army finds itself unable to sustain more than 150,000 or so troops in Iraq and Afghanistan.

Pentagon leaders want us to spend even more, but as Kaplan makes clear, even with our current grotesquely large defense budget, we're having trouble fighting wars against relatively low-tech insurgencies in two medium-sized countries (both Iraq and Afghanistan have populations of around 30 million).  God forbid if we actually have to fight a real war against a near peer (which is being touted as China which has 1.3 billion people and high-tech).  More money is not the answer. 

Some of the problem is what we're buying (i.e. do we have the appropriate military for the conflicts we're in and likely to face?) and how we're buying (i.e. the acquisition process which includes contracting) and how efficiently the contractors we pay with taxpayer dollars develop and produce weapons.  The former two issues are well worn, the third is taken for granted, but shouldn't be.  In the commercial world, industry constantly delivers higher quality products at significantly reduced prices.  In the defense industry, the opposite is true.  It is easy to argue that we pay much more even relative to the increase in quality. 

Winslow Wheeler at the Center for Defense Information describes what may be the pre-eminent case study of this.  In Defense News, Wheeler wrote:

...if we adjust for inflation, weapons today should cost — very roughly — what they cost in 1945, at most 30 percent more. Of course, the advance in technology should bring a vast improvement in performance.
   
    Now, let’s run the price comparison for fighter aircraft. The newest thing in 1945 was the Lockheed P-80 jet, the most ex­pensive fighter Harry Truman could buy. In 1945, the P-80 cost $110,000. Using the OMB index to convert the dollars, we get $1,309,000.
   
    Today’s F-22 is a little pricier.
   
    The 184 F-22s the Air Force is now buying will cost $65.3 billion in contemporary dollars. That’s $355 million per copy. That’s not exactly in the price neighborhood of the inflation-adjusted P-80. In fact, it’s in a whole different universe. It’s a multiple of 273.
   
    We should not pretend that free market inflation and technology improvement is an excuse for to day’s huge defense budgets. While commercial prices have barely grown in inflation-adjusted terms and brought gigantic performance improvements, military prices have grown astronomically.
   
    A defense process so grossly in efficient that it can run up weapon costs 273 times faster than inflation reeks not of the commercial market but of socialism and bureaucracies that breed incestuously ad infinitum.
   
    And what about performance improvements? Does the cost of the F-22, even if astronomical, really help the Air Force win? A 273 fold improvement in capability is unreasonable to expect, but is it worth buying?
   
    On the purely technical level, the F-22 can fly more than three times the speed of the P-80 and al most twice as high. It has other special characteristics (a reduced signature against some radars at some angles and long-range sen sors and missiles, and more) that the P-80’s creators were incapable of designing.

One major reason we're paying so much more is the lack of competition in the defense industry due to mergers.  Another is the government often does not bargain well with its contractors.  Funding instability and massive billion-dollar projects which are sold on rosy, snake oil claims of cheap, easy leaps in technology play a major role too.  The political game of spreading out defense contract work to facilities and subcontractors in as many political districts as possible both politically protects defense programs and makes them more expensive (i.e. it is harder to coordinate hundreds or thousands of subcontractors dispersed over a vast geographical expanse, also each company has to take its cut in profit).

With the money the U.S. is spending we should demand better.  But it's more than about money; if we don't clean up the defense budget mess, we may not even be able to afford to fight wars anymore even if we need to.

-- Nick Schwellenbach