There's a big debate in Congress right now about how to fix the way the Pentagon buys weapons. Legislators in both parties believe that if the military got smarter about the way it defines requirements and deals with contractors, it could save vast amounts of money. But here's a curious thing about the debate: many lawmakers don't seem to have a clear idea how much is actually spent on weapons. Neither do many of the pundits who comment on the subject or reporters who cover it.
They're all good at finding shocking stories about how the Pentagon overpaid for hammers and toilet seats -- many of the stories turn out to be untrue on close inspection -- but almost nobody involved in the debate of reform measures ever makes the effort to put weapons spending in some sort of coherent context. Like explaining what portion of the economy or federal budget is spent on military hardware. Or how it compares with the cost of similar items in the commercial world.
The truth of the matter is that the Pentagon hasn't spent heavily on weapons since Ronald Reagan was president. Back then, 30 years ago, the buying power of the Pentagon's procurement budget was twice what it is today, in an economy only half as big. The Air Force, for instance, was buying 180 F-16 fighters every year, not to mention two different bombers at the same time. Today, the entire production run of military aircraft programs often doesn't reach 180 planes. We haven't built a new bomber in two decades.
It's hard to have an intelligent debate about "acquisition reform" when you don't know what you're spending. So here are a few numbers to put the price of Pentagon weapons programs in perspective. The White House has requested $178 billion for military hardware in the fiscal year beginning October 1 -- about $70 billion to develop warfighting systems, and $108 billion to produce them. There are some additional drips and drabs in the special account for war funding, but $178 billion is the amount requested for what the military calls "modernization."
This M1A1 tank operated by the Marine Corps cost about $5 million. So does Caterpillar's 797 haul... [+]
That is a miniscule portion of the $19 trillion in output that the economy will produce next year -- in fact, less than 1%. And it is only 4% of the $4 trillion in outlays that the federal government will generate during 2016. If you divide that $4 trillion by 365 days, you discover that all of the money the Pentagon will get to preserve America's edge in warfighting technology during fiscal 2016 adds up to a mere 16 days of federal spending -- about one pay period for a typical federal worker.
Here's another way of looking at the same number: the Pentagon's total request for military hardware next year is barely equal to the amount interest on the national debt will increase if rates rise 1%. But maybe you're thinking this just shows how out of control the whole federal budget is. So let's do some comparisons with private-sector spending.
The Pentagon's entire base budget next year -- weapons, readiness, compensation -- will be no bigger than WalMart's projected sales for 2016 (about $500 billion). And the $178 billion sought for military technology won't come close to the amount of revenue Apple generates, which according to ValueLine will be somewhere in the vicinity of $236 billion.
If you look at consumer spending habits, it appears Americans are already spending more on beer and cigarettes each year than the Pentagon spends on weapons. The brewed beverage market is over $100 billion annually -- about the size of the requested military procurement budget -- and the $80 billion spent on cigarettes in 2014 is much more than the requested R&D budget. Incidentally, the RAND Corporation calculates Americans spend about $100 billion annually on illegal drugs too.
So maybe you're ready to concede that Pentagon spending on weapons isn't all that imposing. But that doesn't mean specific programs aren't overpriced, right? Let's look at a few of them, starting with the F-35 fighter. The F-35 is often described as the biggest weapons program in history, because it is replacing the Cold War tactical aircraft of three different military services. Must be a real budget buster, right? Actually, the $10.6 billion the Pentagon has requested for 57 F-35s next year represents less than one day of federal spending at current rates.
But that still works out to $185 million per plane. Isn't that too much? Well, yes it is -- which is why the joint program office is driving down the cost of the planes in each new production lot (the Air Force version will soon dip below $100 million each). But do you know what a commercial jetliner sells for? Boeing's 787 Dreamliner lists for $250 million per plane. The latest Airbus widebody lists for as much as $350 million. And nobody expects those planes to survive in hostile air space or conduct cyber warfare the way an F-35 can.
To take another program, the Army recently canceled a next-generation troop carrier called the Ground Combat Vehicle. A key sticking point on Capitol Hill was that the vehicle had a projected price-tag of $10 million each. But how many lawmakers questioning the program knew that Caterpillar sells its biggest haul truck, the 797, for $5 million? The Ground Combat Vehicle would have been able to do a lot more than haul rocks.
And then there's the Navy's Ford-class aircraft carrier, at $13 billion in procurement costs for the lead ship the biggest-ticket weapon system in the whole budget. That number has attracted considerable attention in Congress, even though members know that the lead vessel in a new class of warships always costs much more than later ships. But the Navy only buys one carrier every five years, and the total procurement cost of the lead carrier represents less than 30 hours of federal spending at present rates. Is that too much to sustain unrivaled sea power?
The point here isn't that $13 billion is trivial. You could buy a lot of elementary schools or food stamps with that kind of money. The point is that in the total scheme of things, the Pentagon just doesn't spend much on weapons. That may explain why so much of the military's arsenal still consists of combat systems bought in the Reagan years. Or why policymakers are increasingly concerned that countries like China are closing the gap in military technology with America.
There's always room to improve a system as complicated as the one the Pentagon uses to buy weapons. But if you think savings from acquisition reform are going to have a material impact on the nation's budget deficits, guess again. The only way to get that kind of outcome is to stop being the world's policeman. And right now, voters are sounding pretty unhappy about the consequences of recent U.S. military pullbacks in Europe and the Middle East.
