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REPORT: Reshaping Pentagon Spending and Capabilities: Setting Priorities for the Future

To read the full report, click here.

By Bill French
March 2013

A NEW PHASE of the debate over Pentagon spending is on the horizon. On March 1, sequestration went into effect as mandated by the Budget Control Act (BCA) and as modified by the American Taxpayer Relief Act. Under sequestration, Pentagon spending is to be reduced by approximately $500 billion over the next decade. But whether or not sequestration is the mechanism of reductions, what the Pentagon needs now are choices about U.S. strategic priorities in order to guide allocating resources.  Therefore, whereas the debate prior to sequestration focused tightly on budgetary considerations, the next round of debate over funding for the Department of Defense (DoD) will likely focus on the connection between resources and strategy.

Since the passage of the BCA, an approach to reducing the Pentagon’s budget and setting new defense priorities has emerged from various research institutions that can be named “strategic reshaping.” The goals of strategic reshaping are to draw down Pentagon spending while also better preparing the military to meet future challenges by setting forward-looking priorities to guide funding choices.[i]

This paper contributes to the growing body of work on strategic reshaping by presenting a particular progressive-realist[ii] approach that has tacitly evolved in the literature but has not yet been explicitly articulated. From this point of view, the key questions that should guide reshaping the Pentagon are:

1. What changes in the security environment most affect U.S. national security interests?
2. How should the military adapt to protect U.S. interests and what are the top funding priorities to ensure the capability to do so?
3. What funding tradeoffs within DoD should be made to enable these changes while also reducing overall Pentagon spending in keeping with the difficult fiscal environment?

In answering these questions, this paper focuses on challenges in the security environment that have thus far gone under-addressed and call for broad changes in budgetary priorities. It then outlines how current priorities should be adjusted to meet those challenges.

First, of the changes in the security environment, the rise of the Asia-Pacific and the increasing capabilities of foreign militaries have the greatest implications for U.S. interest. Both trends increase the risks of interstate conflict and coercion, holding America’s interests in a peaceful and prosperous global system at risk in the midterm. These risks have gone significantly under-addressed over the past decade focused on counterterrorism and nation building. But there are also new opportunities, especially for shared prosperity.

Second, to adapt to these changes, the U.S. military should place a renewed emphasis on deterring conflict and coercion between states. This renewed emphasis will require prioritizing capabilities that respond efficiently to the gains being made by foreign militaries. However, deterring conflict and coercion will depend primarily on diplomatic and economic tools with DoD playing a supporting role.

Third, these priorities are compatible with reductions of $500 billion to the Pentagon’s base budget (pre-sequestration) over the next decade if they are made strategically. Nonetheless, implementing such reductions while also ensuring adequate funding for priorities will require tradeoffs in less-critical areas of military capability and cost-saving reforms.

This discussion does not provide a full defense strategy in the sense of a comprehensive treatment of ends, ways and means. But the priorities outlined can guide the way forward towards such a comprehensive assessment. By adjusting strategic and budgetary priorities in the way outlined above, Pentagon spending can be sizably reduced while better preparing DoD to meet future challenges as part of a more balanced whole of government approach to security policy. The result is strengthened economic and national security that is sustainable, affordable and forward-looking.