Image: U.S. soldiers in Afghanistan
Rafiq Maqbool  /  AP
U.S. soldiers on patrol north of Kabul, Afghanistan. Pay and benefits for active-duty military service members have grown by 45 percent since 1998, after adjusting for inflation, according to the Congressional Research Service.
By Tom Curry National affairs writer
updated 3/10/2009 7:20:55 AM ET 2009-03-10T11:20:55

President Barack Obama and Congress are facing several years of painful trade-offs on national defense — a debate that in many cases will boil down to manpower vs. weapons.

“One thing we have known for many months is that the spigot of defense funding that opened on 9/11 is closing,” Defense Secretary Robert Gates told the Senate Armed Services Committee in January.

With pay and benefits for the troops costing more, and with daunting expenses to repair or replace equipment worn down by operations in Iraq and Afghanistan, the Pentagon will have to do without some new weapons and hardware.

But which ones? And in the midst of the deepest recession since 1982, how many jobs will be lost when Congress cuts back on weapons purchases?

Cutting military spending
Obama’s fiscal year 2010 budget blueprint would cut military outlays by an average of about 1 percent a year over the next five years, with defense spending falling from $673 billion in 2010 to $631 billion in 2015.

By contrast, he would trim non-defense discretionary sending (outlays excluding Social Security, Medicare and other mandatory programs) by an average of only 0.2 percent annually for five years.

Meanwhile, Social Security, Medicare and other mandatory spending would grow by an average of 3 percent annually over five years.

The anticipated cuts in defense expenditures have fueled a debate both inside and outside the Pentagon, where more money is being spent on attracting and retaining people in uniform.

Even without war-related spending, the Defense Department’s base budget grew by 43 percent above inflation since it reached its lowest post-Cold War level in 1998, according to Stephen Daggett, a defense specialist at the non-partisan Congressional Research Service, who testified before the House Budget Committee last month.

Cost driver: personnel and benefits
The biggest reason, he said, is that “a big, big part of the budget is driven by the cost of people.”

Slideshow: On the front lines in Afghanistan The cost of an active-duty military service member “shot up like a rocket after about 1999. By my numbers, a military service member in 2009 is 45 percent more expensive, in addition to inflation, than in 1998,” Daggett said. (This doesn’t include the cost of medical care for service members or veterans’ benefits.)

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The increase was due to pay hikes and “very big increases in the basic allowance for housing to eliminate on-base versus off-base discrepancies in housing costs,” he said.

There were also increases in retirement benefits, especially for Tricare, the military’s health care plan.

But the higher pay and better benefits may well mean buying fewer destroyers and F-35 fighter aircraft, eliminating jobs from Bath, Maine, to El Segundo, Calif. And some critics say that also could pose risks to national security.

A squeeze on buying new weapons
“By expanding some of the benefits, you are squeezing procurement and research and development,” said Dov Zakheim, the Defense Department comptroller during the Bush administration. “There’s going to be a squeeze on procurement and it isn’t just ships, it’s aircraft. How many F-35s are you going to buy?”

“Retirement benefits for our military — particularly in the health field — are fantastic,” Zakheim said. “Military veterans who work for state governments, for example, are encouraged by the state governments to use Tricare so that the state governments don’t have to pay for their health benefits.” Private employers do this as well, he said.

“You’re draining funds” from current military needs “in order to fund people who are healthy, who are working in jobs right now, and who could be covered by other health care programs,” Zakheim said.

Cut costs by cutting personnel?
One solution: fewer people in uniform. “If you think the budget is going to be tight for the foreseeable future… you're going to have to look at the size of the force,” Daggett advised the House Budget Committee. “If you're going to draw down the size of the force in the future, the sooner you decide to do it, in a way, the better, because then you save resources in the interim for other investments.”

But instead of reducing the size of the armed forces, Congress has done the opposite, planning to increase the Army by 65,000 and the Marine Corps by 27,000 in the next few years.

This decision was driven partly by public concern over extended deployments in Iraq and Afghanistan and the strains they placed on spouses and children.

Daggett cited another pressure: the cost of weapons’ operation and maintenance.

“Newer generations of weapons systems are more expensive to operate and maintain,” which, he said, “is at odds with the trend in the civilian sector,” where new technologies often decline in cost as they gain market acceptance and are built in large volume.

And the aircraft, ships and other hardware being built today are far more expensive than the models of 20 years ago.

For example, Daggett said, the cost of the new F-35 fighter aircraft is now projected to be $83 million. “In 1985, the low-cost fighter for the Air Force, the kind of equivalent of the F-35, was the F-16. In today's prices, in 1985 the F-16 cost about $30 million apiece.” And that near-tripling in price “is not atypical of trends in weapons costs,” he told the committee.

“There certainly is a rationale for spending more on weapons over time, because you get more capability in return,” Daggett said. But he asked, “Has the trade-off between the number of systems you can buy and the capability gotten to a point of diminishing returns?”

How big a part of the budget?
Where do the Virginia-class submarines fit into this picture?

In percentage terms, they are a small part of the military’s budget. If the Navy were to spend about $17 billion annually on shipbuilding over the next several years — a reasonable forecast according to analyst Robert Work at the non-partisan Center for Strategic and Budgetary Assessments — shipbuilding would account for only about 2.5 percent of total annual Pentagon spending.

Each Virginia-class sub costs about $2.4 billion in current dollars. That amounts to only about one-third of 1 percent of a year’s Pentagon spending. It’s a small number in the large budget landscape, but an important one for the workers who build the subs.

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