Gunning for defense.

'CONTRARY to the conventional wisdom, the Pentagon is not underfunded; the United States spends far more on the military than does any other nation in the world." This, from the libertarian Cato Institute, echoes the rhetoric of liberal groups. Their common assumption: the peace dividend has been squandered on items we no longer need.

In truth, while the military's objectives are far more modest now than during the Cold War, cuts already enacted jeopardize the ability to meet them. Real defense spending fell 25 per cent between 1990 and 1995, and is on course for another 15 per cent decline by 2000. When measured as a share of GDP, our defense commitment is the lowest it has been since 1950. The Pentagon's latest budget request reflects a shift in strategy. Instead of a global conflict, the U.S. military is now supposedly geared to wage -- and win -- two medium-sized wars simultaneously. The cuts make that unlikely, however. Secretary of Defense Perry acknowledged late last year that one-quarter of the Army's active-duty combat units are not fit for battle.

President Clinton, like his last Democratic predecessor, Jimmy Carter, has vowed to halt the defense slide. Last December Mr. Clinton requested an additional $25 billion for the Pentagon over the next six years. Unfortunately, this is but a fraction of the $150 billion which the non-partisan General Accounting Office says is needed to meet even the scaled-down military objectives.

Worse still, Clinton's plan does not put money where it's needed most. Its prime focus is on "readiness," or the military's ability to fight police actions such as Haiti and Somalia. It would buy more spare parts and ammunition, overhaul and maintain existing weapons systems, intensify training, and raise military pay. But weapons procurement, already sunk to levels not seen since the Korean War, would continue to plummet. The Army would not be able to buy a single new tank or helicopter for the rest of this century. Naval aircraft, one of our prime means of power projection, would be frozen at current levels and models.

Readiness sans weapons puts the military in a very dangerous box. When procurement levels fall, increased readiness invariably uses up weapons for which there are no replacements. Meanwhile, many highly specialized defense contractors go out of business. Eventually the country loses both the engineering expertise and the industrial capacity to defend itself. To avoid this trap the Pentagon must shrink the 50 per cent of its budget allocated to overhead, items ranging from auditors and accountants to the costs of conducting security clearances. The Office of Management and Budget has estimated that the government saves nearly $10,000 per worker when such functions are contracted out.

New weapons aren't cheap, but like any investment they can reduce future operating costs. Take the B-2 (Stealth) bomber, a $1-billion plane. Some military analysts insist that that money would be better spent developing precision guided "smart" bombs. But the Stealth bomber can, under many circumstances, penetrate close to ground zero. That makes it possible for it to use bombs that cost about $100,000 each. By contrast, if a B-52 is attacking a heavily defended site, it must release its payload hundreds of miles away, using cruise missiles that cost at least $1 million each. Each plane carries the same number of bombs (16), so that after 100 sorties the cost of operating the B-52 is $1.6 billion, versus $160 million for the B-2. The moral? New weapons are more expensive only if you think you'll never have to use them.

A PERILOUS TREND: DEFENSE OUTLAYS

(Billions of Constant 1995 Dollars)
           Total Spending                   Selected Categories
                    As %       Procurement  Maintenance   Personnel
         Bil. $     of GDP
1970   $345.6      8.3%         $90.9         $91.3       $122.6
1980    245.9      5.1           53.1          82.1         75.0
1985    342.9      6.4           95.5          98.3         92.1
1990    358.3      5.5           97.0         105.7         90.4
1995E   271.6      3.9           54.7          90.1         70.8
2000E   230.6      2.9           42.3          80.6         63.2
Source: Office of Management and Budget