The Cost of the Army

A year after Hurricane Katrina swept over the Gulf Coast and devastated the city of New Orleans, the United States is still calculating ithe damage and cost to the regional and national economies. Today, unemployment in New Orleans remains higher than before Katrina, and the local workforce is about 190,000 people smaller. Many estimate that insured and uninsured damages will top $200 billion. That figure does not cover the cost of diverting federal, state and local resources from other uses to hurricane recovery; nor can it account for the loss of more than 1,300 people.

Everyone knew the 200-year storm, as Katrina has been dubbed, was a possibility-even a probability. Why then has the toll been so terrible from this one storm? Among the factors that contributed to this outcome was a persistent funding problem. For decades, civil works projects that could have softened Katrina's impact were not given adequate resources. In each budget cycle, the Army Corps of Engineers received less money than it needed, despite the risk. There was always next year to tackle the problem.

The Katrina experience offers an important lesson that can be applied to the Defense Department and the Army: Consistently underfunding legitimate requirements can lead to disaster. In the case of the military, not providing enough money holds terrible implications for national security and national survival. Resources must match our security strategy. Anything less is a compromise the nation cannot afford.

So, how much should the nation spend on Defense? That is the proverbial $64,000 question. Why isn't there a quick, easy answer? Until recently, none of the military services had done an accurate assessment of its true cost. Determining true cost goes beyond looking at the balance sheet at the end of the year to see how much was spent. For a variety of reasons, that figure is not representative of the real cost. Cost estimates produced to date take everything everyone wants-what sometimes are erroneously labeled as requirements-and throw it all into a model generator, which eventually spits out a number. Though done in good faith, model-driven estimates never capture reality.

How should real costs be established? By ascertaining the amount of resources necessary to fulfill the U.S. security strategy. The 2006 Quadrennial Defense Review (QDR) sets the capability baseline for executing that strategy. For the Army to meet the QDR's requirements, it must maintain 70 brigade combat teams: 42 in the active component and 28 in the National Guard. Eighteen of these teams must be ready to deploy at any time, and another 18 must be sufficiently prepared to surge almost immediately after the first 18. Of course, these units, as well as all of the needed support elements, must be fully staffed, equipped and trained.

With these capabilities as the driver, the Army this year produced a reasonably accurate cost figure for itself. The Army needs $130 billion annually in fiscal year (FY) 2006 dollars to accomplish the mission laid out in the QDR. This amount, of course, excludes any and all unplanned and contingency activities, including prosecution of the global war on terrorism. Various entities, including the program evaluation groups and outside observers, have reviewed this assessment and concluded that the $130 billion requirement is correct.

The FY 2007 budget request for the Army was $112 billion. Compare the cost of the Army to the funding sought and a strategy-resources mismatch appears. Add in the incremental costs of fighting the global war on terrorismapproximately another $67 billion per year-and the mismatch becomes even starker.

This disparity is dangerous and cannot continue. Already, Army readiness is declining and it will drop further as long as the status quo remains. Eventually, the lack of adequate funding will have an impact on the Army's ability to recruit and retain an all-volunteer force. We as a nation thus have an incredibly significant choice to make: Should costs drive policy or should policy drive our costs? If we elect the former, then the QDR strategy must be revised and we must rethink today's operational reality. If we decide upon the latter, then we must direct more financial resources toward the Army, and probably the Marine Corps, as well.

The Defense Department's 200-year storm is coming. The global war on terrorism will continue for quite some time. A major contingency operation is not out of the question; in fact, the United States likely will face a significant conflict against a more traditional adversary sooner than the general public would imagine. The United States must be prepared not only to manage such a situation diplomatically but to prevail militarily.

The amount of investment required is moderate, and even quite small when viewed in proportion to Gross Domestic Product (GDP). The United States is putting the equivalent of 3.9 percent of GDP toward national defense. The Army only receives the equivalent of 1.1 percent-and that figure includes supplemental appropriations, which have equaled about two-thirds of the Army's baseline budget requests. Without supplemental, the Army's budget amounts to just slightly more than one-third of one percent of GDP. At these levels, defense spending as a percentage of GDP is at its lowest point in 60 years-despite operational conditions that have not been seen since World War II.

To cover the base cost of the Army in FY 2008, the nation must provide $139 billion, a $27 billion increase above the initial request for FY 2007. This boost is not small, but failure to meet the requirement would come at an even greater price. Do we dare take the gamble that we will have another year-and maybe another and another-to get it right, as happened in New Orleans? Or do we lower our risk as much as possible and ensure our ability to protect the United States' security, prosperity and future? The choice is ours.

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