Transatlantic Security Task Force Series

November 2013

Policy Brief

Summary: For the first time in more than a decade, defense budgets are declining on both sides of the Atlantic. This article argues that in order to prevent the burden-sharing debate from escalating between transatlantic partners in times of economic crisis, the United States and Europe need to rethink their respective defense capabilities and promote more regional cooperation and specialization. The authors also present key priorities for NATO members to help frame the debate on the future of transatlantic defense cooperation.

The U.S. Defense Budget and the Future of Alliance Burden-Sharing
by Nora Bensahel and Jacob Stokes

German Marshall Fund of the United States-Paris 71 Boulevard Raspail 75006 Paris T: +33 1 47 23 47 18 E: infoparis@gmfus.org

Introduction For the first time in more than a decade, defense budgets are declining on both sides of the Atlantic. They have been declining in Europe for many years, which has caused many NATO members to reorganize their military forces, cut end strength, and postpone or cancel procurement and modernization plans. But U.S. defense budgets are now declining as well, as more than a decade of war in Iraq and Afghanistan draws to a close and U.S. policymakers increasingly focus on the domestic issues of government spending and the national debt. These two trends are intersecting in ways that are stressing U.S. support for NATO. Many Americans believe the United States carries a disproportionate burden for the alliance, and that it should not continue to do so when many of the European allies are not willing to invest in their own defense. In order to prevent this burden-sharing debate from escalating into a crisis, all of the NATO members must work together to improve critical capabilities that strengthen the overall capacity of the alliance.

Sequestration and its Consequences The U.S. defense budget will decline considerably in the coming years. Some of this is natural as the United States emerges from more than a decade of war, but most of the downward pressure on the defense budget comes from the 2011 Budget Control Act (BCA), which includes a sequestration mechanism that will cut almost $1 trillion over the next decade or so. Although the Department of Defense (DOD) had hoped that Congress might repeal at least parts of the sequestration mechanism, current political dynamics make this unlikely any time soon. Already the total U.S. defense budget — base spending plus war spending — has declined 21 percent, adjusting for inflation, from its peak in 2010. If the BCA remains in effect through 2021, its final year, and war spending winds down by that time, the defense budget will have fallen by 33 percent in real terms.1 This percentage is roughly in line with the past few U.S.
1 This paper draws heavily on Jacob Stokes and Nora Bensahel, “NATO Matters: Ensuing the Value of the Alliance for the United States” (Center for a New American Security, October 2013); and Todd Harrison, “Defense Cuts Conundrum: Weighing the Hard Choices Ahead,” ForeignAffairs.com, September 29, 2013.

Transatlantic Security Task Force Series

Policy Brief
military drawdowns,2 but the internal costs of running DOD have escalated so significantly in recent years that they have deeply eroded the buying power of the defense dollar. These escalating costs — in areas such as basic pay for personnel, military retirement benefits, and military health care benefits — are increasingly crowding out spending for core defense priorities, such as end strength, force structure, and procurement.3 Since Congress has also shown little interest in addressing the causes of internal cost growth, the effects of the sequestration cuts on core combat capabilities will be more severe than the total amount of defense spending might suggest. Furthermore, because of the structure of the BCA, defense cuts will be deeper in fiscal year 2014 than in any other year during the 10-year period. Deep cuts to modernization and procurement accounts are therefore likely, since these are among the very few budget lines where savings can be realized quickly. These cuts raise a critical question, which DOD identified in the recent Strategic Choices and Management Review but did not answer: How heavily should DOD keep investing in today’s force, versus taking greater risk now while shifting investment toward future capabilities? 4 This will be one of the crucial questions for the upcoming Quadrennial Defense Review, which will be released in February 2014. Prioritizing future capabilities may require additional cuts to current U.S. force structure, end strength, and readiness — all of which will increase calls for more equitable burden-sharing within NATO. Moreover, the relevance and utility of remaining U.S. headquarters, bases, and forces in Europe will be exposed to even more critical scrutiny. The U.S. Perspective on Burden-Sharing Most Americans still support NATO,5 but their concerns about the proper level of burden-sharing within the alli2 The U.S. defense budget declined by 43 percent after the Korean War, by 33 percent after the Vietnam War, and by 36 percent after the Cold War. Clark A. Murdock, Kelley Sayler, and Ryan A. Crotty, “The Defense Budget’s Double Whammy: Drawing Down While Hollowing Out from Within,” Commentary, Center for Strategic and International Studies, October 18, 2012. 3 David Barno, Nora Bensahel, Jacob Stokes, Joel Smith, and Katherine Kidder, “The Seven Deadly Sins of Defense Reform,” (Center for a New American Security, June 2013). 4 See David W. Barno and Nora Bensahel, “Decisions Deferred: Balancing Risks for Today and Tomorrow,” (Center for a New American Security, August 5, 2013). 5 In a recent poll, 55 percent of those surveyed said that NATO is “still essential” to U.S. security, a number that has held more or less steady since 2002. German Marshall Fund of the United States, “Transatlantic Trends: Key Findings 2013” (September 2013), 28.

Prioritizing future capabilities may require additional cuts to current U.S. force structure, end strength, and readiness — all of which will increase calls for more equitable burden-sharing within NATO.
ance have grown considerably during the past decade. European defense budgets have been declining ever since the end of the Cold War, a trend which shows no signs of abating. Most NATO members perceive few, if any, direct threats towards their territories or existence, and have prioritized domestic expenditures, especially the needs of aging populations, over military force structure and capabilities. This has been compounded in recent years by the eurozone crisis, since economic stability has become one of the highest priorities for all eurozone members. Today, the United States accounts for nearly 75 percent of NATO’s military spending, up from 63 percent in 2001. Alliance members remain committed in principle to spending 2 percent of their gross domestic product (GDP) on defense, but only four countries met that goal in 2012 (down from five countries in 2007).6 Many European capabilities continue to shrink as well. This imbalance continues to result in recriminations across the Atlantic and within the alliance. 7 NATO’s recent operational history also leads many Americans to conclude that many of the European members lack the capabilities, the political will, or both, to conduct significant military operations outside their own borders without extensive help from the United States. While many European allies view operations in Afghanistan as a good example of sustained allied cooperation and commitment, many observers — including in the U.S. defense establishment — believe otherwise. To many, operations in Afghanistan demonstrate that only a handful of European
6 North Atlantic Treaty Organization, The Secretary General’s Annual Report 2012 (2013), 11. 7 See, for example, Steven Erlanger, “Shrinking Europe Military Spending Stirs Concern,” The New York Times, April 22, 2013.

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Transatlantic Security Task Force Series

Policy Brief
countries are able and willing to participate in real combat operations, while the rest imposed harmful national caveats that, according to one recent assessment, “diminished the alliance’s overall effectiveness and created resentment within the coalition.”8 The mission in Libya in 2011 provides another good example. For alliance specialists, that mission constituted a modest success in terms of drawing on existing capabilities and showing NATO’s practical utility to policymakers. Some argue that all the capability gaps the mission laid bare were previously known. However, for many Americans, and for many in the defense community as well, the mission in Libya also represented a cautionary tale about burden-sharing, or more accurately, the lack thereof. Much of the coverage focused on the lack of capabilities — and thus the operational staying power — among the European allies. Knowing about capabilities gaps does not make those shortfalls any less painful when it comes time to fight. While some viewed Libya as a “new model” for U.S. intervention where the United States plays an enabling role for its allies, such a model can only work to the extent that allies have capabilities for the United States to enable. Improving Key Alliance Capabilities There are three key ways in which the NATO members can help ensure that the alliance remains relevant and effective, while promoting a more useful debate about contributions to the alliance. • Preserve the interoperability gained in Afghanistan through a robust exercise program. After more than a decade in Afghanistan, alliance command and control (C2) and interoperability are higher than they have ever been — but that interoperability will be short-lived unless it is exercised regularly. NATO’s C2 interoperability also serves a role beyond the alliance, since alliance members depend on it for virtually every multinational military operation, whether it involves the NATO command structure or not. Preserving C2 interoperability is the single most critical task for the alliance — a “foundational task” — in the coming decades. • Encourage role specialization, especially within regional clusters. The alliance’s Smart Defense Initia8 Stephen M. Saideman and David P. Auerswald, “Comparing Caveats: Understanding the Sources of National Restrictions upon NATO’s Mission in Afghanistan,” International Studies Quarterly, 56 no. 1 (March 2012), 67-84.

For many Americans, and for many in the defense community as well, the mission in Libya also represented a cautionary tale about burden-sharing, or more accurately, the lack thereof.
tive aims to facilitate role specialization within NATO so alliance member capabilities are complementary rather than duplicative.9 NATO can achieve progress toward that goal without a formal plan by encouraging the creation of regional clusters based on common interests. For example, the Nordic countries have greatly increased their defense cooperation since 2007, including establishing a formal organization, adopting some joint procurement processes, and increasing shared capabilities in a number of areas, such as tactical airlift.10 Other possible regional groupings include the United Kingdom and France and the Visegrad countries (Czech Republic, Hungary, Poland, and Slovakia). • Expand the 2-percent metric to include more qualitative assessments of contributions. For decades, the 2-percent metric has been used as a proxy for military capability, but GDP is actually a poor indicator of how much defense capability any member state can contribute to alliance missions.11 Instead of continuing to pressure the NATO members to reach a spending target that few have met or are likely to be able to meet, NATO should instead focus on ways that the allies can get more capability for the money that they do spend. Being able to bring capability to bear in opera9 For more on the Smart Defence Initiative, see North Atlantic Treaty Organization, The Secretary General’s Annual Report 2012, 2, 13-15. 10 Denmark, Finland, Iceland, Norway, and Sweden established Nordic Defense Cooperation (NORDEFCO) in 2009. Although Finland and Sweden are not members of NATO, the common capabilities may be used for both NATO and EU operations. See www. nordefco.org; and Juha Jokela and Tuomas Iso- Markku, “Nordic Defense cooperation: Background, current trends and future prospects?” Note no. 21/13 (Fondation pour la Recherche Stratégique, June 2013), 2, 5-8. 11 For a critique of measuring defense capability by GDP in the United States, see Travis Sharp, “Tying U.S. Defense Spending to GDP: Bad Logic, Bad Policy,” Parameters 38 (August 2008), 5-17.

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Policy Brief
tions makes a difference when it comes time to fight, and member states should be encouraged to deliver that capability while spending less money — through resource pooling, efficiencies, and other creative initiatives.
About the Authors
Dr. Nora Bensahel is deputy director of studies and a senior fellow at the Center for a New American Security (CNAS). Her research interests include U.S. military strategy, stability operations, and coalition and alliance operations. She is also an adjunct associate professor in the Security Studies Program at the Edmund A. Walsh School of Foreign Service, Georgetown University, where she teaches masters’ level classes and received the Alumni Leadership Council Teaching Award. Jacob Stokes is a research associate at CNAS, where his research focuses on U.S. national security strategy and defense policy. Prior to joining CNAS, Stokes served as a policy analyst at the National Security Network, where his work focused on the rise of China, defense budgeting and strategy, and Afghanistan. 

About GMF
The German Marshall Fund of the United States (GMF) strengthens transatlantic cooperation on regional, national, and global challenges and opportunities in the spirit of the Marshall Plan. GMF does this by supporting individuals and institutions working in the transatlantic sphere, by convening leaders and members of the policy and business communities, by contributing research and analysis on transatlantic topics, and by providing exchange opportunities to foster renewed commitment to the transatlantic relationship. In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 as a non-partisan, non-profit organization through a gift from Germany as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has offices in Berlin, Paris, Brussels, Belgrade, Ankara, Bucharest, Warsaw, and Tunis. GMF also has smaller representations in Bratislava, Turin, and Stockholm.

Contact
Dr. Alexandra de Hoop Scheffer Director, Paris Office German Marshall Fund of the United States Tel: +33 1 47 23 47 18 Email: adehoopscheffer@gmfus.org

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