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Hidden defense costs add up to double trouble

By David R. Francis / February 23, 2004



To measure actual spending by the United States on defense, take the federal budget number for the Pentagon and double it.

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That's the "rule of thumb" advocated by economic historian Robert Higgs.

Early this month, President Bush requested $401.7 billion for the Department of Defense (DoD) for fiscal 2005. So doubling that would make total defense/security spending close to $800 billion out of a total federal budget of $2.4 trillion.

In his budget message, Mr. Bush repeatedly notes the "war on terror" in referring to defense, though most of those outlays have little to do with that, according to Mr. Higgs, editor of the Independent Institute's quarterly review.

Like other defense analysts, he adds to the Pentagon cost number the nuclear-weapons activities of the Department of Energy, including cleanup of radiation-contaminated sites. Bush wants Energy Department scientists to develop nuclear "bunker busters" and other new weapons. Energy's total defense spending: at least $18.5 billion, reckons Higgs.

An oft-noted omission from the DoD's 2005 budget is the extra costs for activities in Afghanistan and Iraq. For fiscal 2004, a supplemental appropriation last November provided $58.8 billion for that purpose. The Defense Department hasn't yet put a number on 2005 costs, arguing before Congress that it was unknown.

"They wanted to avoid sticker shock prior to the election," says Christopher Hellman, an analyst with the Center for Arms Control and Non-Proliferation.

But the White House's Office of Management and Budget indicates the 2005 cost would be about $50 billion. Monthly defense expenditures in the two nations - the "burn rate" - are running between $3.5 billion and $4.5 billion per month.

There are more hidden defense costs. Higgs includes some $4 billion in "foreign military financing" plus other foreign aid made with defense goals, rather than economic development, in mind. For example, the US offered Turkey $6 billion to defray the cost of an Iraq war if American troops were allowed to pass through the nation - a deal the Turkish parliament rejected.

Higgs estimates the State Department and international assistance programs "arguably related" to defense add at least $17.6 billion to defense costs.

Other defense-related costs include care of veterans - hospitals, nursing homes, disability payments, pensions, etc. The Bush budget calls for $67.3 billion for the Department of Veterans Affairs in 2005.

Another cost Higgs sees as a matter of defense is the Department of Homeland Security. Bush wants $31 billion allocated here next year.

The largest item noted by Higgs is interest on the national debt related to defense spending. Higgs calculates that the proportional amount for every year from 1916 - when the debt was nearly zero - through 2002 comes to 81 percent of the total debt held by the public. The interest charges he attributes to defense came to $138.7 billion in 2002.

With many numbers still unavailable, Higgs hasn't finished his calculations for fiscal 2004. But doubling the DoD budget request won't overstate the truth by much, he says.

The unwillingness of the Bush administration to ask Congress for extra money for Iraq will have "real consequences," says Winslow Wheeler, a visiting fellow at the Center for Defense Information. To cover additional costs, DoD will "raid" its operations and maintenance accounts. He says that will mean less training for troops and poorer maintenance of military equipment.

Some troops in Iraq lack sufficient body armor and equipment needed to storm buildings, says Mr. Hellman. Soldiers have also reportedly asked families to buy expensive night-vision goggles for them.

Mr. Wheeler terms the Higgs numbers "a legitimate exercise to calculate all conceivable costs of national security."

Other defense analysts don't go along entirely with Higgs's accounting methods. Yet they do agree that the true cost of defense is many billions more than the DoD budget. It's "far in excess of what is formally acknowledged," says Loren Thompson, an analyst at the conservative Lexington Institute in Arlington, Va.

The US is "last of the big-time spenders" on defense in the world, notes a table from Hellman's Center for Arms Control and Non-Proliferation.

At the moment, Petter Stålenheim at the Stockholm International Peace Research Institute figures the US will account for between 45 and 50 percent of the world's military spending in 2003. The US boosted spending by 6 percent last year; Britain raised defense spending 1 percent; France 1.8 percent, and Russia 14 percent, says Mr. Stålenheim. Germany cut spending a little. Italy fell 8 percent. The Bush budget for 2005 calls for a 7 percent hike in DoD spending.

Right now, Wheeler says, the defense budget is "gigantic ... compared to any potential foe."

Though US defense costs are high, Democrats are not likely to push for cuts in an election year when polls indicate the public perceives Republicans as stronger than Democrats on defense issues.

Critics charge that defense spending includes too many wasteful "cold war legacy" programs. Here, says Mr. Thompson, critics tend to agree with Defense Secretary Donald Rumsfeld. He has been pushing for "transformation" of defense spending by closing unneeded bases and shutting down weapons programs unsuited to today's wars or threats.

With huge budget deficits, the nation can't afford such out-of-date weapons systems and programs, Hellman says.

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