The Top Six

It's no secret that defense spending has grown exponentially over the past eight years. The cost of fighting wars in Afghanistan and Iraq, coupled with force modernization efforts and supplementary spending, have pushed the Pentagon budget past $600 billion a year.

But much of that growth has been in programs not related to current operations, or new military hardware. Personnel costs represent the second largest "piece" of the budgetary pie; DoD plans to allocate $125 billion for personnel this year, roughly 20% more than it will spend on acquisition.

While increased pay and bonuses account for some of that increase, the real growth has been on the health care side. According to Michael Fabey of Aviation Week, the Pentagon's health care budget has grown 144% since 2001. As you might expect, a portion of that growth reflects combat medical costs in Afghanistan and Iraq. But according to defense analyst Loren Thompson of the Lexington Institute, most of the increase can be traced to "the constantly escalating costs of routine medical services."

In other words, the Pentagon is paying more to operate its own medical facilities and for TriCare, the DoD-sponsored health insurance program for military personnel, retirees and their dependents. That should come as no surprise, since other, government-run medical programs have experienced similar increases over the same period.

But it does create problems for future Pentagon budgets. By various accounts, President Obama wants to trim defense spending by 10%, or roughly $60 billion a year. Our gradual withdrawal from Iraq will achieve some savings, but there's no guarantee that we can reduce troops levels quickly enough to hit budget targets.

More importantly, the downsize-to-save approach carries grave security risks. If our gains in Iraq become jeopardized, plans for a major withdrawal would (presumably) be put on hold, negating projected cost savings. Besides, the troops will still get paid--and need health care--whether they're deployed or at home station. The only way to achieve savings in those areas are by limiting benefits or downsizing the force--both equally improbable.

Instead, the Obama Administration is (reportedly) taking a hard look at various procurement programs. By some accounts, the White House may adopt portions of an "alternative" defense acquisition plan, issued by the Congressional Budget Office last fall. The CBO program calls for dramatic decreases in key weapons programs (cutting F-35 purchases by the Marine Corps and Air Force, for example) and the cancellation of others, including the next-generation tanker project.

Following the CBO outline, Mr. Obama could save more almost a trillion dollars over fifteen years, by cutting various acquisition programs. But that would be tantamount to a second "procurement holiday," akin to what the Pentagon suffered under Bill Clinton. During the eight years of his presidency, Mr. Clinton deferred or cancelled major weapons purchases. It was a nice budgetary trick that saved billions, but it's also a reason that the Air Force (and other services) are stuck with large numbers of aging aircraft.

We'll get a better idea about the president's defense spending priorities in the coming days. Mr. Obama is expected to make a decision on continuing production of the F-22 fighter, beyond the 183 currently on order. Keeping the Raptor line open would preserve thousands of American jobs--and help assure our air dominance for decades to come.

But with the president vowing to cut the federal deficit in half by 2012--and looking for programs to cut--there's no guarantee that the Air Force will get the additional F-22s that it's looking for. The rising cost of military health care will put even greater pressure on the budget, making the request for more Raptors even more problematic.