Dr. James Jay Carafano
Before the House Budget Committee
Nussle, Ranking Member Spratt, and other distinguished Members of
the committee, thank you for the
opportunity to discuss homeland security and defense spending. I
want to make three points today. First, we are spending the right
amount on defense and homeland security. Second, even though we may
begin drawing down forces in Iraq, we need to maintain defense
funding levels to prevent returning to the hollow force of the
1970s. Third, Congress needs a set of strategic principles to
create a comprehensive approach to homeland security spending,
instead of wasting money in a scattershot approach to
A Short Review of Federal
With the recent
delivery of the President's budget request to Congress, it is time
to consider what defense and homeland security funding levels
should be. But first, it is important to consider some budget
The federal government has expanded
substantially during the past century. One of the best measures of
the burden that the federal government, as a whole, imposes on the
national economy through its spending policies is the percentage of
GDP taken up by outlays. During the nation's first 140 years, the
federal government rarely consumed more than 5 percent of the GDP.
In accordance with the U.S. Constitution, Washington focused on
defense and certain public goods while leaving most other functions
to the states or the people themselves.
The Great Depression brought about
President Franklin Roosevelt's New Deal, a program that expanded
government in an attempt to relieve poverty and revive the economy.
President Roosevelt created the Social Security program in 1935 and
also created dozens of new agencies and public works programs.
Although the economy remained mired in depression, the federal
government's share of the GDP reached 10 percent by 1940.
World War II pushed the United States
into the largest war mobilization effort the world has ever seen.
From 1940 through 1943, the federal government more than quadrupled
in size-from 10 percent of GDP to 44 percent. The enormity of this
34 percent government expansion cannot be understated: An
equivalent expansion today would cost $3.9 trillion, or $37,000 per
household. Even with a top income tax rate of 91 percent, the
nation could not fund World War II on tax revenues alone. The
nation ended the war with a national debt larger than the GDP
(which is three times the size of today's national debt). Following
the war, Washington's share of the economy fell back to 12 percent
of GDP in 1948.
In the long decades of federal expansion
from the end of World War II to former President Ronald Reagan's
election, Washington expanded into several new policy areas,
creating the Departments of Health, Education and Welfare (in 1953;
eventually becoming Health and Human Services), Housing and Urban
Development (in 1965), Transportation (in 1966), Energy (in 1977),
and Education (in 1979; it had been a part of Health, Education and
Federal spending generally fluctuated
atjust over 20 percent of GDP throughout the 1980s and early 1990s.
However, in the last few years spending has sharply increased again
as the war on terrorism collided with domestic spending.
Changes in the Composition of
Over time, the composition of federal
spending has evolved as well. Between 1962 and 2000, defense
spending plummeted from 9.3 percent of GDP to 3.0 percent. Nearly
all of funding shifted from defense spending went into mandatory
spending (mostly entitlement programs), which jumped from 6.1
percent of GDP to 12.1 percent during that period.
The importance of
this evolution cannot be understated. For most of the nation's
history, the federal government's chief budgetary function was
funding defense. The two-thirds decline in defense spending since
1962 has substantially altered the make-up and structure of the
U.S. national defense.
After 28 consecutive years of budget
deficits, the 1998 fiscal year ended with a $69 billion budget
surplus. These budget deficits, which had reached 6 percent of GDP
in 1983, were eliminated by a combination of three factors: First,
real defense spending plummeted by 30 percent in the 1990s as a
result of winning the Cold War. Second, tax revenues reached their
highest level since World War II as a result of the economic boom.
Third, legislative gridlock between Democratic President Bill
Clinton and the Republican Congress doomed most new spending
initiatives and allowed spending growth to slow to a
The arrival of budget surpluses,
however, saw federal spending accelerating once again. These
spending increases went mostly unnoticed because tax revenues
continued pouring in at a pace rarely seen in American history,
culminating in a $236 billion budget surplus in 2000.
Between 2001 and 2004, wars with
Afghanistan and Iraq were funded by a 48 percent increase in
defense spending. Homeland security spending, which had not even
existed as a category before September 11, leapt from $16 billion
to $33 billion.
The low defense spending that helped bring balanced budgets in the
late 1990s was over.
Appropriate Spending Levels
Although not quite reaching the levels
it did under President Lyndon Johnson, federal spending during the
war on terrorism has more closely reflected the Vietnam-era
spending binges than the spending restraint of World War II and the
Korean War. Spending not related to defense and 9/11 increased by
an average of 5 percent per year from 2001 through 2003. That
two-year, 11 percent increase in non-security spending represents
the fastest growth in a decade.
At a time when defense and homeland security priorities require
especially tight non-security budgets, lawmakers have not made
necessary trade-offs, and in fact, have accelerated
non-security spending growth.
Budgets are about setting priorities, and the
central priorities of the federal budget are to defend the American
people from external threats and to protect individual's paychecks.
We should learn the lessons of the Eisenhower presidency and stick
to the economic strategies mapped out by the Bush Administration
after 9/11. This requires appropriate funding for defense and
homeland security while keeping taxes low. In doing so,
policymakers must deal with two truths:
Defense and homeland security spending are
critical elements of our nation's future. The world has changed and
so must America's security budget. Although defense and homeland
security costs dropped to 3 percent of GDP in the 1990s, they have
since rebounded to 4.4 percent of GDP-representing a $160 billion
increase. Given the long-term dangers posed by transnational
terrorist groups-as well as the proliferation of weapons of mass
destruction and other dangers that might arise from aggressor,
enabler, or slacker states-American security spending must likely
remain at this higher level indefinitely.
Preventing Another Hollow Force
As the Iraqis begin
patrolling their country, there will be pressure to cut the
military's budget. Congress should maintain funding levels for
defense or we risk returning to the hollow force we had after
After Vietnam, Congress
moved quickly to downsize the military and cut funding. The Army
became a "hollow force" with inadequate troops, training and
equipment. By the end of the decade, Army Chief of Staff Edward
"Shy" Meyer told President Carter that only four of the service's
16 active divisions stood ready for battle.
The Reserves were even
worse off. Recruiting plummeted after the war. Nearly one out of
every two volunteers for the new post-draft "all-volunteer force"
was a high-school dropout or scored in the lowest category on the
Army's intelligence test.
I was a lieutenant in the
hollow force. When I was commissioned from West Point, our class
was told, "It's an OK Army." In a way, this was correct. There was
no money to modernize weapons and equipment. That task had been
deferred to pay for the war, and units didn't have enough people to
train on the equipment, anyway. Even if they had the people to fill
the ranks, there wasn't enough money to pay for training and
maintenance. It was all OK -- as long as we didn't actually have to
In the 1980s, an adrenalin
shot of funding from the Reagan administration saved the services.
Some parts of the force, such as the National Guard, still never
got the resources they needed, but by the end of the Cold War,
after a decade of investment, it again was an Army to be proud of.
In 1991, as the operations officer of an artillery battalion in
Germany, I sent part of my unit to support Operation Desert Storm.
I never worried about them for a minute. They were terrific kids,
well-trained and well-armed.
The post-Cold War drawdown
took its toll on the military. Defense spending as a percentage of
GDP sank to its lowest levels since the outbreak of World War II.
The Clinton administration took a prolonged procurement holiday and
cut the force to the razor-thin minimum needed to get
One presidential term,
particularly with all the demand for military forces in the war on
terror, wasn't enough to get us the military we needed for the 21st
century. And Iraq is making transforming even tougher. Operations
are straining the force. Helicopters are wearing out at five times
their anticipated rate. Trucks are going into overhaul five times
faster than anticipated. America's military is serving the nation
well, but it's becoming a tired warhorse.
After Iraq, it'll be 1973
all over again. There will be pressure to balance the budget on the
back of defense cuts. Pentagon proposals for trimming spending are
already floating around Washington like inauguration-parade
Cutting funding levels
before resetting the military for its next mission is a bad idea.
The military has been stretched, and it shows. The National Guard
alone has had to transfer more than 74,000 soldiers from one
command to another just to fill the ranks deploying overseas. Since
9/11, the Army has transferred more than 35,000 pieces of equipment
from non-deploying units to forces in Iraq, leaving the stay-behind
commands lacking more than a third of their critical equipment.
Thus it is critical to maintain sufficient funding levels so the
Defense Department has time to refit the force.
Principles for Defense Spending
There are areas where
chronic under funding hinders the armed services. For instance,
there have been shortages for such programs as vehicle armor,
military construction, aircraft survivability equipment, and
ballistic missile submarine communications. Sustained budgets are
necessary to ensure that America's forces are prepared for the
Principle #1: War Spending
Should Be Separated from the Regular Defense Budget
Until the drawdown in Iraq
begins, Congress must provide timely supplemental funding. There
are multiple reasons for separating war costs from the regular
defense budget. First, a war cannot be run on the budget's
schedule. It takes over two years to develop and pass the defense
budget. Given the long planning stage, the potential for hold ups,
and the inconsistency between the war's schedule and the budget's,
it is prudent to bifurcate war spending from regular defense
spending. Second, inserting war costs in the regular budget could
eat away at critical programmatic funding, thus weakening the
military and preventing transformation. Third, by keeping the costs
of the war separate from other defense requirements, it will be
easier to track just how much we as a nation are spending on the
war. Finally, the costs of prosecuting the war have not yet become
stable, so it would be very difficult to do the longer range cost
projections needed for the budget.
Principle #2: Keep Defense
Spending at about 4 Percent of GDP
The United States can
reasonably afford to dedicate up to 4 percent of GDP to defense--a
level of spending that would be well within historical norms. Given
a focused and well-balanced modernization strategy, this level of
spending would be adequate to maintain a force capable of
protecting U.S. territory and interests today, as well as to field
an adequate force in the future.
Principle #3: Provide
Adequate Money for Training and Readiness, Modernization, and
By definition, a hollow
military is one which cannot support training, modernization, and
current operations. To avoid returning to that type of military,
the Defense Department needs a steady stream of funding at today's
levels to allow it to revitalize the nation's forces. If funding
cuts begin in conjunction with the draw down in Iraq, the military
will not be able to prepare for future operations, restock and
update its equipment, while maintaining current
Principles for Homeland Security Spending
Merely disbursing funds to
meet many demands risks spending a little on everything and not
providing much security for anything. Investing in the wrong
priorities can be equally troubling. Congress cannot address
homeland security funding in a piecemeal fashion. They must wade
through a maze of proposals without losing sight of the big
picture. Congress and the administration should agree on a set of
strategic guiding principles that will allow smart spending to
replace more spending.
#1: Build a National Homeland Security System
The first and highest
priority for federal spending must be investments that assist in
creating a true national preparedness system--not merely
supplementing the needs of state and local governments. Dollars
that might be needed to equip every state and U.S. territory with
sufficient resources to conduct each critical homeland security
task could run into the hundreds of billions. Although the federal
government has a responsibility to assist states and cities in
providing for homeland security, it cannot service every one of
their needs. Indeed, state and local governments are having
difficulty absorbing and efficiently using the federal funds that
are already available.
Federal funding should
focus on programs that will make all Americans safer. That includes
providing state and local governments with the capability to
integrate their counterterrorism, preparedness, and response
efforts into a national system; and expanding their capacity to
coordinate support, share resources, and exchange and exploit
information. In addition, the federal government must enhance its
own capacity to increase situational awareness of national homeland
security activities and to shift resources where and when they are
#2: Prepare for Catastrophic Terrorism
The age when only great
powers could bring great powers to their knees is over. Long before
9/11, national security experts argued that modern technology and
militant terrorist ideologies are creating conditions that increase
the potential for catastrophic attacks--risking tens of thousands
of lives and threatening hundreds of billions of dollars in damage.
Catastrophic threats will overwhelm the response capacity of any
state or local government.
The federal government
must be prepared to fund the lion's share of response preparation
to these threats. Priorities must be: detecting smuggled nuclear,
radiological, chemical, and biological weapons; improving
decontamination and medical responses to such dangers; ensuring the
protection of critical infrastructure whose destruction might
result in catastrophic damage; and harnessing scientific knowledge
and tools for counterterrorism efforts.
Assistance on the state
and local level should focus on medical surveillance, detection,
identification, and communication so that problems can be
identified quickly and regional and national resources can be
rushed to the scene. Meanwhile, federal programs should be
exploring innovative solutions for increasing national surge
capacity. Appropriators should support Administration efforts to
shift resources from hospital-preparedness grants to more relevant
national biomedical-preparedness programs.
#3: Get the Biggest Bang for the Buck
Congress should also
direct funding toward programs that provide the greatest
contribution to supporting the critical mission areas established
by the homeland security strategy. Getting the "biggest bang for
the buck" is a worthwhile criterion for guiding spending
No area deserves more
attention than the challenge of maritime security. Estimates for
enhancing support security run into the billions of dollars.
Lobbying efforts are underway to demand dramatic increases in
federal port grants--as much as $400 million per year. On the other
hand, the Administration has proposed limiting port grants in FY
2005 to $50 million. The government's restraint is appropriate. The
infrastructure at U.S. ports is so vast that providing resources
for other than the most critical of needs may not be prudent. On
the other hand, grant programs have proven far more effective when
federal money has been used to encourage public-private
partnerships that adopt sustainable and effective port-security
To address the
considerable vulnerabilities of maritime infrastructure, the
greater share of federal dollars might be more effectively used by
investments in effective intelligence and early warning, domestic
counterterrorism, and border and transportation security programs.
These could help to reduce risks by limiting the opportunities for
terrorists to reach U.S. ports.
#4: Watch Information Technology Spending
Congress needs to pay
particular attention to homeland security programs with significant
IT components. The federal government's track record in developing
IT networks is checkered at best. Programs that lack senior leader
involvement, well-developed enterprise architectures, appropriate
management and contractual oversight, and effective risk-mitigation
strategies often find that results fail to meet expectations or
that IT costs balloon out of control--crowding out funding for
other critical operational needs.
The Department of Homeland
Security is no exception. The DHS Inspector General has already
warned that IT management represents a major challenge for the
department. Congress must watch these efforts closely.
#5: Fund Human Capital Programs
Human capital programs,
training, professional development, and career management
initiatives often receive far less attention than big-dollar
acquisition programs that buy expensive, high-tech equipment. Yet
human resources are often far more critical to the long-term
development and success of an organization. This dynamic is
particularly true for the Department of Homeland Security, which
has to wed the culture and skills of over 180,000 personnel from 22
different agencies, activities, and programs into one cohesive,
versatile, and effective workforce.
#6: Consider Non-Homeland Security Funding
A final concern that must
be carefully addressed by Congress is ensuring that homeland
security and non-homeland activities covered by the same
appropriation are not placed in competition with one another. About
one-third of the DHS budget, for example, funds non-homeland
security related activities. Additionally, within the department's
accounts, many appropriations fund both homeland security and other
missions. In some cases, it is virtually impossible to
differentiate personnel costs and other general expenses supporting
specific activities. Thus, under-funding non-homeland security
missions or unnecessarily burdening DHS with non-essential
activities could significantly detract from the department's
capacity to perform its domestic security tasks.
In conclusion, defense and
homeland security spending is at a proper level. That level needs
to be maintained in the future, once we pull out of Iraq, to allow
the military to recover from its recent operations or face creating
another hollow military. Finally, homeland security spending should
be targeted towards the areas where it will be able to have the
Once again, thank you, Chairman Nussle and the
rest of the Committee for holding this hearing and for inviting me
to participate. I look forward to answering any question you might