Getting America’s exploding deficits and debt under control isn’t just an economic and political imperative, it’s also vital for U.S. national security. America’s military strength and leading role in international affairs rest on the foundation of a dynamic, growing economy. To the extent that runaway public debt undermines prospects for growth and compromises America’s economic sovereignty, it also endangers American security.

Let’s be clear at the outset: defense spending is not driving the fiscal crisis. True, the wars in Iraq and Afghanistan have contributed to the debt, but that’s because President Bush, in a break with wartime precedent, declined to raise taxes to pay for them. The good news is that as the overseas deployments wind down, future military spending is set to naturally shrink.

The structural causes of America’s escalating national debt are the unsustainable cost growth of federal entitlements—Social Security, Medicare and Medicaid—and historically low tax revenues (which reflect both subpar economic growth and the Bush tax cuts). But it has become apparent that as America’s political leaders shirk tackling tax and entitlement reform, the burden of debt reduction threatens to fall disproportionately on domestic discretionary spending, including defense.

The first shoe has already dropped. On August 2, President Obama and Congressional Republicans struck a deal that would cut spending by $2.1 trillion over ten years in exchange for raising the debt ceiling. Among other cuts, the compromise takes an initial bite of $350 billion from defense spending. The deal also created a Joint Select Committee on Deficit Reduction or “supercommittee” to come up with an additional $1.2 to $1.5 trillion in federal savings by the end of the year.

If the committee fails, it will trigger a “sequester” that automatically cuts domestic and defense spending across the board. That could mean an additional $500 billion—if not more—cut from the military.

All told, defense spending could be reduced from $850 billion to $1 trillion over the next decade. Cuts of this magnitude are simply too large. They would jeopardize America’s ability to successfully conclude the wars in Afghanistan and Iraq, conduct global counterterrorism operations, and hedge against the rise of new threats—both state and non-state actors—to U.S. security and international order. Absent corresponding reductions in America’s global commitments, such large cuts portend exactly what Walter Lippman warned against—foreign policy “insolvency,” in the sense that America’s commitments far exceed its means.

Nor would deep cuts in national defense solve the country’s fiscal problems. America’s national debt now exceeds $14 trillion and is growing rapidly. Since 2004, it has zoomed from 40 percent to about 70 percent of gross domestic product (GDP), and is on course to exceed 100 percent in the coming decade. There is wide agreement among fiscal experts that policymakers need to cut at least $4 trillion over ten years just to stabilize the debt at 60 percent of GDP. So even if the new “supercommittee” succeeds in cutting $2.1 trillion, there’s still a long way to go.

Yet the Pentagon should not escape scrutiny, either. The fiscal task before the country is monumental, and President Obama has rightly called for “shared sacrifice” in crafting a bipartisan solution. This means everything—entitlements, tax revenues, domestic spending and defense—must be on the table.

The military must contribute its fair share to deficit reduction, but it must not be made to pay for America’s leaders’ inability to grapple with the country’s fundamental fiscal challenges. Beyond marginal adjustments, the basic level of defense spending should be set by America’s strategic needs, not by a game of fiscal chicken.

Moreover, how defense spending is cut matters almost as much as the cut’s size. Across-the-board caps or freezes—as proposed by some leading bipartisan groups—are convenient for political budget cutters, but they are a bad way to wring savings out of national defense. The fact is that not all Pentagon programs are created equally: To en- sure that reductions in the military’s budget don’t disrupt current missions or impair the U.S. mili- tary’s ability to sustain qualitative technological superiority over the long term, policy makers need to make strategic trade-offs among competing security priorities.

That’s because while keeping Americans safe is the federal government’s first responsibility, America’s military power also underpins its diplomacy and anchors strategic alliances in Europe, the Middle East and Asia. The military cements America’s position of world leadership, which rests on the United States’ will and capacity to defend liberal democratic values and strengthen global institutions for collective problem solving. I see no evidence that the American people are clamoring for a retreat from these responsibilities.

For all these reasons, heedless cuts in military spending have no place in a progressive strategy for restoring fiscal discipline. In this Policy Brief, I offer pragmatic answers to these questions:
The post-Cold War benchmark of three percent of GDP constitutes a floor beneath which defense spending should not be allowed to sink. This decade, a range of 3.0–3.5 of GDP is more realistic. This suggests that the military’s budget should be cut by no more than $600–650 billion—or about 10 percent—by 2021.

How much should the Pentagon contribute to defense spending reductions?
And how do policymakers realize these savings?

I answer those questions by examining defense spending in an historic and current budget context, break down Pentagon spending by category, distinguish between one-off war spending and on-going military missions, and contrast spending proposals from the political left, right and center. I conclude with a series of strategic guidelines for how much and where to trim the defense budget.

Based on this analysis, I believe military spending can safely be reduced over the next decade towards the “post-Cold War benchmark” achieved in the late 1990s: After a series of exhaustive strategic re- views, military spending slowly declined through- out the decade and eventually settled at around three percent of GDP by 1998. During peacetime and absent a major nation-state military competi- tor, this range was deemed sufficient to handle two regional conflicts while maintaining the U.S. military’s high-tech edge and global reach.

Of course, this formula cannot be applied mechanistically because the United States is not at peace and faces a different slate of threats than in the 1990s. Therefore, budgeteers must build in some leeway above three percent of GDP to accommo- date the following realities: America must con- clude the wars in Iraq and Afghanistan; maintain a vigorous, global counterterrorism campaign; assure its qualitative military superiority over po- tential rivals, such as China; continue to invest robustly in advanced technology; and be prepared for unanticipated contingencies.

That’s why the post-Cold War benchmark of three percent of GDP constitutes a floor beneath which defense spending should not be allowed to sink. This decade, a range of 3.0–3.5 of GDP is more realistic. This suggests that the military’s budget should be cut by no more than $600–650 billion— or about 10 percent—by 2021.

In achieving these savings, policymakers should be guided by five rules:
1. Don’t let fiscal politics trump U.S. strategy.
2. Cut over time.
3. Focus on personnel costs.
4. Avoid radical surgery to military procurement and research & development.
5. Set a floor beneath defense cuts.

Read the entire memo.