Record U.S. defense spending, but future budgets may decline

The Pentagon is asking for the biggest defense budget ever, but senior officers and analysts fear the days of big defense spending may soon be over.

The emerging reality: As supplemental war-funding streams dry up, the amount of overall defense money will probably decrease. "We in uniform all recognize that the budget will come down," says one senior officer in the Pentagon.

Since the terrorist attacks of 2001, the defense budget has ballooned about 35 percent in real terms. Much of that rise can be attributed to the wars in Iraq and Afghanistan, which have cost the US about $691 billion so far.

For the 2009 fiscal year, the Defense Department is asking for $515 billion and a separate $70 billion to cover war costs into the early months of a new administration. Those amounts combined would represent the highest level of military spending since the end of World War II (adjusted for inflation). Already, defense spending hovers around 4 percent of gross domestic product (GDP), a level that would represent the new floor for defense budgets if many in the Pentagon have their way. Defense Secretary Robert Gates and other senior officials believe that that floor is the minimum needed to fund the department and the war on terrorism more broadly, regardless of operations in Iraq and Afghanistan.

That's much higher than many US allies. Britain, France, and Australia spend an average 2.4 percent of their GDP on defense. Germany spends 1.5 percent. But Secretary Gates says the US spent far more of its GDP on past wars.

Some US military officials say the "4 percent argument" lacks enough specifics to carry much weight until it can be tied to specific acquisition programs, because so much of it was spent on the Iraq and Afghanistan wars and therefore did not receive a high degree of scrutiny from Congress.

The next administration and Congress will have to take a hard look at defense spending, analysts say.

The services, especially the Army and Marine Corps, require billions of dollars to help them "re-set" their equipment stocks after several years of war on terror. Many believe the "long war" will require attention – and funding – in other parts of the globe for years to come.

But other challenges – a potential recession, a huge budget deficit, and rising entitlement spending – threaten to elbow defense priorities aside.

"There are just too many competing demands for resources and an unwillingness to raise taxes for an overall increase," says Vincent Reinart, a resident scholar at the American Enterprise Institute, a think tank in Washington.

Also, government auditors still rate the Defense Department as one of the most wasteful spenders of taxpayer dollars.

The defense budget itself seems to hint that military spending may be at its peak, says Steven Kosiak, a senior budget analyst at the Center for Strategic and Budgetary Assessments, another think tank in Washington.

"Under this plan, between fiscal year 2010 and 2013, [the Defense Department's] base budget would be cut by 1.5 percent," he says. "Thus, the administration is proposing that the buildup, begun in earnest after the terrorist attacks of September 2001, should come to an end in fiscal 2010."

Much of the debate will center on the way the government spends defense dollars, analysts say.

Lawmakers have pushed to eliminate supplemental funding of the wars in Iraq and Afghanistan, saying the separate funding streams require less congressional scrutiny than regular Defense appropriations, mask the true cost of the war, and offer a "back door" to weapons acquisition.

"The president has also declined to provide a full funding request for the two wars," says Rep. Ike Skelton (D) of Missouri. "The law requires that he submit a funding request, along with full justification materials, at the same time he submits his regular budget. It is unacceptable that he has not done this."