The Military Might Have To Economize for Once

Defense stocks tumbled this week, reportedly on fears that Democrats are going to win a sweeping victory in the upcoming midterm elections, and Donald Trump is not going to get the $500 billion increase in military spending that he has asked for. Will no one think of poor old Raytheon?

There is a deeper issue, however. Even on the off chance that Trump does get some large one-off military budget boost, the Pentagon is not going to get the tacit blank check it has enjoyed for the last several decades. The reason is this: Just as Trump has blown a half-trillion-dollar hole into the military budget, his catastrophic governance has put more pressure on the American capacity to spend than it has faced in decades. If the Pentagon wants to return to fighting trim anytime soon, it may have to finally address the epidemic of waste and inflated prices at all levels of the armed forces.

It’s quite the change. The American military has been swimming in resources for nearly 80 years. Before the Second World War, the standing American army had been relatively small—thanks in part to the Founding Fathers’ well-earned suspicion of such institutions—but in 1947, President Harry Truman inaugurated the age of permanent, globe-spanning American armed forces with a new “Truman doctrine,” calling for communism to be contained in the developing Cold War with the Soviet Union. That meant a military that could fight on two fronts at once, against peer nations.

That immense and permanent military spending naturally inflated a large economic sector behind it, particularly because the bulk of weapons and equipment production was performed by private companies. This was also a change from the prior norm. As economist J.W. Mason points out, from the 19th century through 1945, about half of all American naval ships were built directly by the government. After the war—in part because of conservative worries that the immensely successful government-led war production would be an inconvenient example—all the shipyards were sold off into private hands. All Navy vessels have since been built by private contractors.

The Vietnam War did lead to some serious budget and inflation pressures, but after that, our gigantic military has been maintained without too much trouble, despite chronically epic waste and budget overruns from military contractors and the Pentagon’s inability to pass eight straight financial audits. The United States was rich, had the global reserve currency, and its cheapskate welfare state meant more budget headroom for aircraft carriers and fighter jets. It maintained its military edge by developing ever more technologically sophisticated and expensive munitions that required fewer soldiers, and above all, fighting only the state equivalent of helpless invalids. The governments of Iraq and Afghanistan could be toppled with contemptuous ease—though the subsequent occupations were a different story—and various terrorist groups could barely even take potshots at the drones circling overhead.

Enter Donald Trump. He picked a fight with Iran for no coherent reason, which actually can throw a serious punch in the form of cheaply made drones and ballistic missiles, and made no preparation or plan whatsoever for what to do if his Pearl Harbor-style sneak attack failed to topple Iran’s government. Secretary of Defense Pete Hegseth has spent the following seven months running the Navy’s carrier battle groups ragged and shooting off 30 years’ worth of stockpiles of precision-guided munitions and missile interceptors like a drunk with a pickup truck full of illegal fireworks. American forces, terrified of an Iranian strike, are on the retreat from Bahrain to Britain.

One general even warned that America was short of munitions before the war even started; naturally, Hegseth fired him this April.

Meanwhile, Trump’s trade war, large tax cuts for the rich, and generally hyper-erratic governance have driven up inflation and therefore interest rates. His tax cuts have also skyrocketed the rate of borrowing, which, combined with high interest rates, means that interest payments on the national debt are now more expensive than the Pentagon. For the first time in decades, in other words, America is facing a serious budgetary constraint.

These interceptors and munitions typically run in the seven- or eight-figure range, and take months or even years to produce. A single SM-3 interceptor—whose stockpile is more than half depleted—costs roughly between $10 and 30 million, depending on the specifications, and takes about 36 months from order to delivery. Simply getting back to where the military was before Trump’s war will require years and hundreds of billions of dollars, at least with the current defense industrial base.

The defense economics experts at the Center for Strategic and International Studies are happy to explain in great detail how the Pentagon can restructure its budgetary outlays to get more bang for the buck, some of which it has already started to do. Some of the suggestions make good sense, like pivoting away from hyper-sophisticated weapons toward ones that are less effective but much easier to produce at scale, so Hegseth will lose fewer shot exchange battles by two orders of magnitude, shooting down $20,000 drones with $2,000,000 interceptors. Settling on a few designs and placing large, consistent orders would also help with manufacturing capacity and unit prices. 

Other issues are outside the scope of defense experts, however. One obvious problem, for instance, is single-source contracts. Many sophisticated weapons or parts of weapons have only one supplier, which naturally leads to extremely high prices. (While this has been a problem for decades, as ProPublica recently reported, it has gotten much worse under Trump, as many of these contracts are now going to administration cronies.) One company, TransDigm, has made an entire business model out of rolling up small parts for aircraft private-equity style and then jacking up the price.

Insofar as these items are really necessary, the government needs to split these companies up so there can be competition in the bidding process, or they must be forced to license their technology, or the company should be nationalized outright and production brought in-house, just like pre-1945 status quo. And if a budget increase is so necessary, the case for it ought to be argued in public and paid for with a tax increase on those most able to pay rather than borrowing.

But those ideas are politically sensitive, and highly unlikely to be considered by the Trump administration, which is the core of the problem. The easiest way to avoid burning through your entire munitions stockpile is to not start wars of aggression for no reason—a lesson Vladimir Putin is also learning, incidentally. A strong military is, alas, a necessity in a dangerous age, which is all the more reason not to elect a delusional warmonger as president. War and peace are too important to be left to Republicans.