Policy Analysis No. 171                 May 24, 1992


by Jeffrey R. Gerlach

Jeffrey R. Gerlach is a foreign policy
analyst at the Cato Institute.

Executive Summary

The fall of the Berlin Wall and the subsequent collapse
of communism represent a clear-cut victory for the United
States in its four-decade struggle against the USSR. As the
Soviet threat has disappeared, many Americans have been
calling for a cut in military spending--the so-called peace
dividend. The Bush administration has recently released its
proposed strategies for the defense of the United States in
the post-Cold War world. Statements by President Bush, Sec-
retary of Defense Richard B. Cheney, Chairman of the Joint
Chiefs of Staff Gen. Colin L. Powell, and other officials
allege that the military fully understands the implications
of the end of the Cold War and has responded by presenting a
budget proposal that is much leaner than previous budgets.
The figures are based on a new strategy designed to replace
the doctrine of containment that has served as a blueprint
for U.S. planning since the late 1940s. Despite the rhetoric
of the administration, however, it is clear that the propos-
als represent very little new thinking. Instead, they simply
redirect U.S. efforts at global containment to a variety of
regional contingencies.

The DOD Numbers

The administration has gone to some lengths to argue
that the current cuts in military spending are significant
and represent an adequate peace dividend. In his State of
the Union Address, Bush warned Congress that the cuts would
be "this deep, and no deeper." The statistics presented by
the administration are worthy of close examination. The
proposed fiscal year 1993 defense budget calls for spending
$281 billion. Military spending remains roughly constant
through 1995, then rises to $290.6 billion in 1997, the
final year considered.(1) Essentially, the Bush administra-
tion plans to reduce military spending in real terms by
about 4 percent per year through 1997 instead of the 3 per-
cent it originally projected after the events of 1989. The
revised budget figures represent a cumulative real decline
of 35 percent between 1985 and 1997.

Department of Defense statistics show that defense
spending as a proportion of federal outlays has declined
consistently since the 1950s (except during the Vietnam War
and the Reagan build-up of the early and middle 1980s), a
trend that will continue in the 1990s. The DOD presents
statistics showing that defense outlays as a share of the
nation's gross national product have declined (with the same
exceptions). That percentage is currently around 5 percent,
and it is scheduled to fall to 3.5 percent in 1997.(2) The
DOD also points out that national defense--unlike payments
to individuals, the principal component of domestic spend-
ing--is becoming an ever-smaller portion of the federal

The military intends to effect the cuts by making a
number of structural changes. Manpower is being reduced
throughout the defense sector. From its post-Vietnam peak
of 2.2 million in 1987, the active duty force is scheduled
to fall to 1.6 million by 1995, a reduction of about 25
percent. Reserve and civilian personnel are to be reduced
by about 20 percent. A number of major weapons programs--
including the B-2 bomber, the Minuteman III intercontinental
ballistic missile, the Seawolf submarine, the Comanche heli-
copter, and the air defense anti-tank system--have been
scaled back or eliminated. The DOD has also implemented a
new approach to acquisitions that is designed to save money
and maximize the effectiveness of weapons. More time will
be spent developing and evaluating weapons. Fewer systems
will go into full-scale production, but those that are de-
veloped should, in theory, be the most efficient possible.
Upgrading current weapons, instead of developing costly new
systems, is stressed when appropriate. Research not tied to
specific programs, however, will continue, thus providing
the United States with a strong base from which to introduce
new systems. Those changes are designed to allow the mili-
tary to reduce expenditures yet maintain the ability to
carry out its strategic mission.

Numbers the DOD Does Not Mention

All of the statistics previously cited are either mis-
leading or largely irrelevant to a meaningful discussion of
military spending. Attention has been drawn to the fact
that defense expenditures are becoming a smaller portion of
both GNP and the federal budget. Neither fact is pertinent
to determination of the defense budget. The GNP statistic
reveals only the burden placed on the U.S. economy by mili-
tary spending; it tells nothing about the amount of money
that should be spent on defense. Proper levels of spending
can be determined only by examining America's security in-
terests, evaluating the potential threats to those inter-
ests, and striking a balance between the nation's resources
and commitments. Under some conditions, the United States
might need to devote a large percentage of its GNP to ensur-
ing its security. Under other conditions, a small percent-
age would suffice. Thus, it is irrelevant that military
spending as a percentage of GNP is falling. A military
budget must be developed on the basis of the nation's secu-
rity needs, not the size of its economy.

Furthermore, the decline of military spending as a
percentage of GNP reflects primarily the tremendous growth
of the American economy since 1960. The GNP of the United
States in 1960 was $1,655.3 billion (constant dollars) com-
pared with a 1989 GNP of $4,117.7 billion.(3) Given that eco-
nomic expansion, it is not at all surprising that military
spending has fallen as a percentage of GNP. Indeed, it
would have been astonishing if such a decline had not oc-
curred--despite the spending appetites of Pentagon offi-

The DOD does not provide what is perhaps the most use-
ful indicator of the size of the current military budget.
According to the Congressional Budget Office, measured in
real terms, defense spending is roughly the same now as it
was in the early 1960s, at the height of the Cold War (Fig-
ure 1). If approximately $280 billion was sufficient when
the United States faced an adversary of great size and
strength, it surely exceeds U.S. security needs now that the
Soviet Union has collapsed.

The comparison of military expenditures with total
federal outlays is equally meaningless. Federal expendi-
tures in 1960 totaled $92.2 billion, in contrast with $1,323
billion in 1991.(4) Defense spending simply declined as a
percentage of that spending because other portions of the
federal budget soared. Similarly, the DOD's assertion that
the ratio of defense spending to federal payments to indi-

Figure 1

National Defense Outlays

Source: "The Economic Effects of Reduced Defense Spending,"
Congressional Budget Office, February 1992.

(Graph Omitted)

viduals has decreased is irrelevant. Although the DOD is
technically accurate, it neglects to mention that, in real
terms, transfer payments to individuals have increased dra-
matically over the years. The United States spent $87.8
billion (1987 dollars) in 1960 on payments to individuals;
that figure soared to $542.6 billion in 1991.(5) Again, the
Pentagon's statistic demonstrates only the explosive growth
in payments to individuals, not a reduction in military
spending. The latter merely increased at a less egregious
pace than did domestic spending.

Another flaw in the DOD statistics is that the analysis
on which they are based covers a time period that was care-
fully chosen by the Pentagon. To demonstrate that the de-
fense budget is indeed falling, the DOD uses either FY 1985
or FY 1987 as the base year for most of the raw numbers.
That is inherently misleading since the early and middle
1980s witnessed a tremendous increase in military spending.
Spending for defense and international programs rose from
$146.7 billion in 1980 to $293.6 billion in 1987 (current
dollars).(6) In real terms, the Reagan administration's de-
fense budget for FY 1987 represented more than the United
States had previously spent in any one year, even at the
height of the Vietnam War.(7) As the Bush administration
moves military spending to more "normal" levels, the appear
ance is created that drastic cuts are being made. In es-
sence, however, the United States is simply returning to
business-as-usual Cold War figures.

The statistics are skewed at the other end of the time
period as well. DOD projections end in 1997, when the bud-
get would be $274.6 billion (1992 dollars), but the Congres-
sional Budget Office has released a study that examines
probable military spending through the year 2010, and its
analysis shows a very different outcome. The CBO estimates
the amount of money that will be needed to maintain the Base
Force concept, which will serve as the guide for future de-
fense spending. It assumes that military manpower will
remain roughly constant and that weapons systems will be
maintained and modernized. The study concludes that "sub-
stantial increases in funding could be required in the years
beyond 1997 to maintain and modernize the Base Force under
the administration's plans."(8) According to the CBO, by the
middle of the next decade, annual military spending (1992
dollars) will exceed 1997 levels by $20 billion to $65 bil-
lion (Figure 2).

Figure 2

Budgetary Implications of the Administration's Plan
(National Defense Budget Authority)

Source: Fiscal Implications of the Administration's Proposed Base
Force," CBO Staff Memorandum, December 1991.

(Graph Omitted)

The main reason for the increases would be the need to
replace aging equipment. Much of the savings in the 1993-
97period is derived by postponing modernization and replace-
ment. During the next decade, the CBO argues quite convinc-
ingly, both modernization and replacement must occur. The
$20 billion estimate assumes that acquisition costs will be
similar to those of the recent past. The $65 billion esti-
mate, on the other hand, assumes that costs of weapons re-
search and development will rise. The CBO suggests that the
latter is the more likely because increasingly sophisticated
weapons tend to be increasingly expensive. Thus, even the
meager peace dividend outlined in the Bush administration's
current proposal will be very short-lived. If the Base
Force concept is adopted, costs will rise significantly
after 1997. The result is likely to be military budgets
similar to those of the 1980s--only this time during a peri-
od in which the United States has no serious military com-
petitors. It is no wonder that the DOD chooses to use 1997
as the final year in its studies.

The Burden of Defending the World

Since the early days of the Cold War, the United States
has built a series of alliances to combat global communism.
That alliance structure has resulted in America's bearing a
greater burden of the costs of military protection than do
its allies. During the Cold War era, Washington's concern
with containing Soviet power perhaps justified such expendi-
tures, but the far-flung network of U.S. military commit-
ments is now without an enemy, save the nebulous ones of
instability and the unknown. Even with the downsized mili-
tary proposed by the Bush administration, the United States
will incur high costs to defend an array of allies against a
nonexistent enemy. For example, the United States will
spend an estimated $90 billion to $100 billion this year on
its NATO commitment to defend Europe.(9)

That is a tremendous expenditure, especially when one
remembers that the original purpose of NATO was to deter the
Soviet Union and its Warsaw Pact allies, a danger that has
evaporated. Furthermore, our European allies spend rela-
tively less on defending themselves than we do. Figure 3
shows that, on a per capita basis, in 1990 the French spent
$759 on defense, the British $670, and the Germans $550,
whereas an American was required to ante up $1,208.(10)

Although the Soviet Union spent an enormous percentage
of its GNP on the military, defense spending in the Common-
wealth of Independent States is expected to fall to 6 per-
cent of GNP, less than half of previous Soviet levels.(11)

Figure 3

1990 per Capita Defence Expenditure (U.S. Dollars)

                U.S.            1,208
Norway 844
France 759
U.K. 670
Germany 550
Denmark 508
Netherlands 497
Belgium 474
Italy 430
Canada 425
Greece 375
Luxemborg 262
Spain 243
Portugal 165
Turkey 87

Source: Tom King, Statement on the Defence Estimates: Britain's
Defence for the 90's (London: Her Majesty's Stationary Office,

Even in the unlikely event that the Russian Republic were
able to reassert central control over the empire, Moscow
would find it very difficult to mount a conventional attack
against Europe. The main threat under such a scenario would
be nuclear--a concern best dealt with by continuing to as-
sist in the dismantlement and destruction of Soviet weapons.
Cold War-sized U.S. defense budgets would have little impact
on that process.

Signs of disarray within the military of the former
Soviet Union suggest that the conventional threat has large-
ly disappeared. The CIS army, 4 million strong in 1989,
will probably number 2 million within the year.(12) In addi-
tion, there are clear signs that the CIS may not maintain a
unified force. Col. Gen. Pavel Grachev, President Boris
Yeltsin's top defense aide, has recently announced a long-
term plan that will reduce Russia's military force to be
tween 1.2 million and 1.3 million personnel, a smaller force
than the U.S. Base Force.(13) Those troops would be assigned
defensive positions, a major shift in strategic thinking.

Morale is low among the remaining troops, training has
been reduced, and equipment is in disrepair. Desertion and
draft evasion are reported throughout the nations of the
CIS.(14) In addition, the military budget has been cut by as
much as 80 percent for weapons and supplies and up to 30
percent for research and development. Such factors explain
the statement made by Lt. Gen. James Clapper, head of the
Defense Intelligence Agency, that the former Soviet Union
"will have no capability to directly threaten the United
States and NATO with large-scale military operations."(15)

U.S. defense spending in the absence of an identifiable
global threat is particularly disturbing when the expendi-
tures of other countries are examined. The United States
pays much more for defense than does any other modern indus-
trial state (about 5 percent of GNP). That disparity is
strikingly clear if one examines the defense expenditures of
the two countries whose economies are the second and third
largest in the world, Japan and Germany. The Japanese spent
about $32.9 billion on defense in 1991, a figure that repre-
sents barely 1 percent of gross domestic product.(16) The
German military budget is about $34.4 billion, or 2 percent
of GDP.

It is particularly interesting that Germany is imple-
menting significant cuts in defense expenditures and Japan
is contemplating such reductions. The German government has
approved a plan to reduce the size of the Bundeswehr from
495,000 to 370,000.(17) That reduction involves eliminating 4
of the army's 12 divisions and 20 of its current 48
brigades. In addition, the air force's Alpha Jet fighter
bomber will be taken out of service, and the navy will be
reduced from 180 to 90 "seaborne units." Forty-six thousand
civilian defense jobs will also be eliminated. The expected
savings arising from those cuts is DM 43.7 billion (about
$27 billion) between now and the year 2004. Such reductions
in a military that is already vastly smaller than that of
the United States should put to rest the notion of a rearmed
Germany's threatening anyone militarily in the foreseeable

Similarly, Japanese prime minister Kiichi Miyazawa has
announced that cuts in defense spending are being consid-
ered.(18) Japan has already reduced planned increases in mil-
itary expenditures, and next year's defense budget is ex-
pected to rise by 3.8 percent, the lowest increase in over
30 years. Those changes are the result of the end of the
Cold War. According to Miyazawa, the current military bud-
get, formulated in late 1990, fails to reflect recent chang-
es in the international situation. America's two main com-
petitors in the economic arena are either cutting defense
spending or planning to do so, which suggests that a mili-
tary threat from either country is highly unlikely.

National Military Strategy

As defense analyst Earl C. Ravenal points out, "A de-
fense budget represents a view of the world and of the place
and role of a nation in that world."(19) Thus, it is impor-
tant to examine the assumptions underlying U.S. military
expenditures. Washington's military strategy is moving away
from the global focus of the Cold War toward a new regional
emphasis that assumes the United States must be prepared to
counter a variety of local threats instead of a worldwide
communist enemy. According to the Joint Chiefs of Staff's
"National Military Strategy" (1992), "The United States must
maintain the strength necessary to influence world events,
deter would-be aggressors, guarantee free access to global
markets, and encourage continued democratic and economic
progress in an atmosphere of enhanced stability."(20) Stabil-
ity is the overwhelming theme of the new doctrine and repre-
sents the Bush administration's answer to uncertainty in a
rapidly changing world. "The threat is instability and
being unprepared to handle a crisis or war that no one pre-
dicted or expected."(21) According to the administration's
policy assumptions, the United States must be prepared to
thwart aggression in every situation that threatens the
"vital" interests of the nation. Unfortunately, those vital
interests are defined very loosely.

The "National Military Strategy" details the four main
components of U.S. military planning: Strategic Deterrence
and Defense, Forward Presence, Crisis Response, and Recon-
stitution. The centerpiece of the new concept of strategic
deterrence is the Global Protection Against Limited Strikes
(GPALS) system that represents a shift in Strategic Defense
Initiative planning to meet a regional, not a global,
threat. The new system is designed to protect the United
States and its allies from limited strikes, not from a mas-
sive nuclear exchange. The United States would also main-
tain a significant number of strategic nuclear weapons,
although substantial cuts in the arsenal are being dis-
cussed. Forward Presence refers to the need to continue
deploying U.S. troops in key regions of the world. That
presence would allow the United States to respond to threats
to stability from any area of the globe. Crisis Response is
an even broader mission that suggests that the United States
must be prepared to respond to any contingency anywhere in
the world. In addition, the DOD recognizes that aggression
might not be limited to just one area of the planet; thus,
the United States must have adequate forces to counter a
number of potential adversaries simultaneously. Reconstitu-
tion refers to the necessity of maintaining U.S. ability to
develop a much larger military force should another expan-
sionist superpower arise and threaten the world.

Those components of U.S. military strategy are predi-
cated on the goal of maintaining stability in a dangerous
world. There are, however, a number of fundamental problems
with the new regional outlook. One of the more significant
flaws is the loose definition of areas that are "vital" to
U.S. interests. The regional strategy appears destined to
lead the United States into conflicts that clearly involve
no more than peripheral U.S. interests. Generally, the DOD
is quite vague about areas of possible conflict. In classi-
fied documents leaked to the media, however, Pentagon plan-
ners detailed seven scenarios for regional conflicts.(22)
Perhaps the most dangerous involved a resurgent Russia's in-
vading Lithuania and being repulsed by a U.S.-led NATO coun-
terattack. The clear implication is that Lithuania is an
area of vital interest to the United States. That assump-
tion is extremely dubious when one considers that Lithuania
was totally dominated by the Soviet Union for 50 years--a
tragic situation for the Lithuanian people, but one that did
not seem to impair vital U.S. interests. Although it is
certainly preferable that Lithuania be a free and indepen-
dent state, that objective is not central to the security of
the United States. Lithuanian independence is not worth the
risk of a major conflict between states heavily armed with
nuclear weapons. Taking such a risk would be both illogical
and dangerous.

A number of the other scenarios suggest equally dis-
turbing assumptions. Pentagon planners imagine the possi-
bility of a rearmed Iraq's invading Kuwait and northeastern
Saudi Arabia. That scenario assumes that Iraq would pur-
chase major amounts of military hardware and become, once
again, the dominant power in the region. The DOD ignores
the financial and logistic difficulties of rearmament and
apparently dismisses both the Saudi military and the mili-
tary might of other states in the region as factors that
would inhibit Iraqi expansion. The Saudis maintain a small
but high-tech military that would certainly challenge the
invading Iraqis. Other states in the region, notably Isra-
el, Turkey, Egypt, and Iran, would be unlikely to allow Iraq
to dominate the Arabian Peninsula. Even if Iraq were able
to rearm, there would be ample warning of its intentions.
Justifying enormous military expenditures to counter an
Iraqi threat, or similar threats, is highly problematic.

"Defense Planning Guidance for the Fiscal Year 1994-
1999," another document recently leaked to the media, fur-
ther clarifies DOD intentions. That study asserts that the
U.S. role in the new world order should be to ensure that no
rival superpower emerges. The key to achieving that goal is
to "sufficiently account for the interests of the advanced
industrial nations to discourage them from challenging our
leadership or seeking to overturn the established political
and economic order."(23) The two main objectives inherent in
the plan are to prevent the emergence of a new global rival
and to address "sources of regional conflict and instability
in such a way as to promote increasing respect for interna-
tional law, limit international violence, and encourage the
spread of democratic forms of government and open economic

The first objective is easily achieved for the near
future since the powers that have the industrial base to
challenge the United States militarily are in disarray or
uninterested in territorial expansion. It is clearly not a
goal that requires nearly $300 billion a year in military
expenditures. Achieving the second objective--preventing
regional conflicts--requires much more effort. Although the
planners explicitly state that the United States will not be
the "world's policeman," the document outlines precisely
that role. The elaborate system of alliances and military
guarantees built up over the last four decades to combat
communism sets the stage for U.S. involvement in virtually
every area of the world. Indeed, the DOD argues that
threats "are likely to arise in regions critical to the
security of the United States and its allies, including
Europe, East Asia, the Middle East and Southwest Asia, and
the territory of the former Soviet Union. We also have
important interests at stake in Latin America, Oceania, and
Sub-Saharan Africa."(25) In other words, potential challenges
await the U.S. military on every continent with the excep-
tion of Antarctica.

The central problem with linking defense spending to a
quest to deter instability is that there is almost no limit
to the number of potentially destabilizing situations in
which the United States might feel obligated to intervene.
During the Cold War, the intelligence agencies provided
estimates (of questionable accuracy) of the strength of the
Soviet Union and its client states. Those estimates, how-
ever flawed, allowed military planners to come up with spe-
cific requirements for countering the Soviet threat. Under
the regional strategy, the only limit to sources of poten
tial instability is the imagination of Pentagon officials.
Every region of the world has its ethnic and territorial
disputes. To achieve stability throughout the world, the
United States must be prepared to intervene repeatedly to
halt conflict and maintain the status quo. That is a task
that goes well beyond legitimate American security require-

By making stability a major goal of U.S. security poli-
cy, the administration seems to be suggesting that change in
the international arena must occur only on American terms.
If changes are in conflict with perceived U.S. interests,
the United States will presumably seek to prevent or reverse
them. Throughout history, however, change has occurred in
the international system, and there is no reason to believe
the system will be any different in the future. Further-
more, changes have typically been accompanied by turmoil and
upheaval, not order. U.S. foreign policy must have the
flexibility to accommodate various transformations in inter-
national politics. A policy based on an obsession with sta-
bility is particularly ironic in an era of transition. In
the new international system, it will be impossible to main-
tain order throughout all regions. Furthermore, instability
already reigns in many areas of the globe where ethnic
conflicts, border disputes, insurgencies, terrorist threats,
and other potentially destabilizing forces persist. The
U.S. commitment to stability suggests that the nation must
be prepared to intervene in many instances to maintain the
status quo even though change of one kind or another is
inevitable. That is a dangerously short-sighted policy.

Congressional Alternatives to the Bush Proposal

Some members of Congress do not support the Base Force
strategy as it is currently outlined. A number of prominent
congressional leaders have called for defense budgets that
are lower than that envisioned by the president. House
Armed Services Committee Chairman Les Aspin (D-Wis.), for
example, has presented a number of alternatives to the Bush
proposals. The scenarios envisioned by Aspin range from a
military budget of $295 billion ($15 billion savings though
1997) to a significantly smaller one of $231 billion ($208
billion savings through 1997). He personally favors a $270
billion proposal that would save approximately $91 billion
over the five-year period.(26)

Although his alternatives represent significant cuts in
comparison with the Bush administration's proposal, Aspin
clearly relies on the same strategic policy. The threats to
American security delineated in his defense alternatives are
quite similar to those outlined by the Bush administration.
Aspin, after clearly dismissing any conventional threat from
the CIS in the near future, defines the new mission of the
armed forces as countering regional aggressors, combatting
the spread of nuclear and other weapons of mass terror,
fighting terrorism, restricting drug trafficking, keeping
the peace, and assisting civilians.(27) Though worded some-
what differently, those are the same goals described in the
1992 "National Military Strategy." His plan is intended to
achieve the same ends as the administration's plan--by using
supposedly more efficient methods. Aspin suggests cutting
the overall number of military forces but strengthening the
means of projecting a "leaner" military overseas. For exam-
ple, he would allocate more resources to the military's
sealift capability.

Though the savings associated with his proposal would
certainly be beneficial, Aspin offers no alternatives to
current military strategy. There seems to be an automatic
assumption that the United States must be prepared to inter-
vene throughout the world to ensure that Washington's con-
cept of "stability" is maintained. Aspin's preferred pro-
posal, for example, would allow U.S. forces to "fight anoth-
er Persian Gulf War, assist South Korea in repelling an
invasion by North Korea and support 'a simultaneous third
contingency' similar to, say, the 1989 invasion of Pana-
ma."(28) Even the leaner Aspin alternative to the Bush de-
fense budget, then, embraces the policy of global military

Sam Nunn (D-Ga.), chairman of the Senate Armed Services
Committee, has proposed a reduction that is less dramatic
than Aspin's.(29) Senator Nunn's plan would cut defense
spending by $85 billion over the five-year period. While
not fully articulated, Nunn's proposal is aimed at maintain-
ing the Base Force with less money. "By eliminating these
redundancies and streamlining the support and overhead
structure of the Defense Department, it will be possible to
maintain the combat capability of the base force at lower
budget levels."(30) The Nunn plan calls for scaling back com-
mitments to Europe and reducing operating expenses, such as
those of ship deployments and flying time for military air-

Nunn's alternative would maintain next year's spending
at the level proposed by the Bush administration. He op-
poses further cuts in the FY 1993 defense budget because of
the effect on military personnel and defense workers, and he
suggests that any savings beyond those afforded by the Bush
plan should be achieved after 1993. Though the details
appear somewhat different from those of Aspin's proposal,
the overall thrust is quite similar.

The congressional plans differ from the White House
plan, however, in their insistence that the United States
can achieve its goals more efficiently and at less expense.
Such proposals would still require a large military budget,
even if it were somewhat smaller than the Bush administra-
tion would prefer.(31) Changes in the overall thrust of U.S.
military strategy, despite the supposed recognition that the
Cold War has ended, are not even being considered in estab-
lishment policy circles.

Furthermore, Congress has been reluctant to adopt even
minor reductions in the defense budget. Paralyzed by con-
cern that deeper cuts would adversely affect the economy
during a recession (and election) year, the Senate rejected
an amendment by Sen. J. James Exon (D-Neb.) that would have
reduced military spending by about twice as much as the
president's proposal.(32) That vote means that the Senate has
basically endorsed the Bush administration's defense budget.
The House adopted a budget resolution that would reduce
military expenditures to $275 billion, slightly less than
the $281 billion requested by the administration. While the
exact figure is still to be worked out, it is clear that
defense spending will not be reduced by any significant
amount in FY 1993.

A Real Alternative

The Bush administration's proposal for reducing defense
expenditures simply brings military spending back to "nor-
mal" Cold War levels. It does not represent a decrease that
is commensurate with the collapse of the Soviet empire, the
main antagonist of the United States for over four decades.
Even the modest reductions that have been proposed will end
in a few years as spending to maintain the Base Force in-
creases after FY 1997. It is ludicrous for the United
States, in the post-Cold War era, to continue to spend sig-
nificantly more on defense than all of its G-7 allies com-

The underlying problem of profligate U.S military
spending is a national security strategy that commits the
United States to maintaining stability throughout the world.
Once that premise is accepted, large military expenditures
must inevitably follow. Most alternative proposals decrease
projected budgets somewhat more than President Bush intends
but accept the basic strategy outlined by the Pentagon.

In some respects that approach can be more dangerous
than the administration's strategy. Ravenal argues that the
funding levels suggested in many recent proposals, from both
Congress and various think tanks, will not support the
forces they are meant to.(34) Such military plans are apt to
leave the United States with substantial commitments but a
hollow force incapable of carrying out its mission. If the
United States is to enjoy a legitimate peace dividend, the
current strategic vision must be revised. A revision will
not only provide substantial savings, it will eliminate the
risk of becoming involved in peripheral conflicts for which
U.S. forces are not prepared.

A fundamental feature of a new security policy should
be renunciation of the reflexive desire to intervene mili-
tarily whenever crises arise. The policy of intervening in
areas of dubious value to the United States has been costly
and often counterproductive, as events in Vietnam and Iran
(the CIA-directed coup that temporarily restored the Shah to
power) demonstrated. The alternative to that approach is to
strictly define the security interests of the United States.
To be a threat to a vital interest, an external development
must be truly life threatening to the Republic.(35) The emer-
gence of a global military power with an expansionist ideol-
ogy would constitute such a threat. A threat to vital in-
terests could also take other forms, but currently the only
challenge of that magnitude would come from hostile states
armed with nuclear weapons. However, that menace is best
met through development of the GPALS system and multilateral
efforts to control nuclear technology and weapons prolif-
eration. An enormous standing army will do little to pro-
vide a credible deterrent to a renegade party armed with
nuclear weapons.

A strategy based on a rigorous definition of vital
interests would mean that the U.S. military would intervene
only where critical threats developed. Such a policy would
allow the United States to reduce security commitments
throughout the world.

There is also an alternative to a strategy of global
intervention for dealing with regional aggressors that do
not threaten vital interests. The United States need not
draw back into complacent isolationism. A political and
diplomatic approach would encourage regional solutions to
regional problems. If a local power threatened its neigh-
bors, the United States could encourage the formation of
coalitions to counter the aggressor. That policy would not
require massive U.S. military assistance; instead, it would
rely on traditional theories of international relations that
suggest countries will band together to face an aggressor.
Instead of perpetuating inflexible alliances that lock the
United States into defending particular countries, the poli-
cy would be much more flexible, allowing for change and
adapting to specific situations that arose. Other diplomat-
ic approaches could include multilateral efforts to control
arms sales to the regions considered most dangerous.

Trade and commerce can have a great influence on inter-
national relations. Access to U.S. markets can be extremely
important in the development in other countries of a stable,
entrepreneurial class sympathetic to American ideals.
Though economic development does not necessarily lead to
democracy, it is a significant catalyst. Thus, an expansion
of economic contacts with other countries would help the
United States to prosper and encourage those foreign ele-
ments that are most likely to promote liberal values abroad.

U.S. policymakers must realize that force, whether it
be military or economic, is becoming more and more costly as
a foreign policy option. The political fragmentation after
the fall of the Berlin Wall, and the concomitant resurgence
of nationalism, has raised the price of military interven-
tion. As states become increasingly independent and asser-
tive, they are much more likely to resist foreign military
intervention. The growth of economic interdependence has
also raised the price of intervention. Though the impact on
the foreign country would be immense, an economic embargo
against a major industrial power would be potentially devas-
tating for the U.S. economy. A trade war between the United
States and Japan, for example, would be terribly destructive
for both sides.

In formulating a long-term foreign policy strategy, the
United States should rely on means other than force to get
other countries to do what it wants. Harvard political
scientist Joseph Nye differentiates "soft" or co-optive
power from the hard power of military or economic coer-
cion.(36) He defines the former as the ability of a country
to get others to want to do what it wants them to do. Cul-
ture, ideology, and the influence of international institu-
tions are becoming increasingly important in foreign policy.
In addition, the value of world public opinion, which the
United States can certainly help to shape, should not be
overlooked. Actors on the world stage are clearly influ-
enced by public opinion. Amnesty International, for exam-
ple, has demonstrated that an organization with no ability
to impose military or economic sanctions can alter the be-
havior of governments.

American ideology--especially the image of the United
States as a symbol of democracy, limited government, and
individual rights--is quite potent. For example, it is far
more likely that the Chinese students erected a replica of
the Statue of Liberty in Tiananmen Square because of their
belief in the ideal of freedom rather than any expectation
of U.S. military intervention. The same was true in the
nations of Eastern Europe during the revolutions of 1989-90.

Perhaps the single most important thing we can do to
influence others through soft power is to strengthen the
appeal of our own ideology. Massive government deficits,
dissatisfaction with political leaders, economic recession,
failing schools, urban violence, and other serious problems
detract from the image of the United States a "city on a
hill." If the United States is to serve as an example to
others, such issues will have to be addressed. A $300 bil-
lion Pentagon budget will do little to increase U.S. soft

A world in which most of the actors believe in democra-
cy and liberal economics would be a less threatening place.
International agreements such as the General Agreement on
Tariffs and Trade, though certainly not perfect, tend to
embody those shared values. The United States, through its
influence in such organizations, can help to shape the in-
ternational agenda.

American culture, for better or for worse, is enormous-
ly attractive to people throughout the world. The exporta-
tion of American pop culture has grown tremendously in re-
cent years. U.S. movie studios, for example, earned $1.7
billion in 1990 from film rentals in overseas markets, up
from $620 million in 1985.(37) Similar trends exist in tele-
vision programming, music, books, and magazines.

Cultural forces may seem weak compared with military
power, but that is not necessarily the case. The Iranian
government newspaper Salaam, for example, warned recently
that trade in videocassettes was "the means by which America
is trying to kill our revolution."(38) Commenting on the pow-
er of culture to influence others, political scientist Ben-
jamin R. Barber writes: "Culture has become more potent than
armaments. What is the power of the Pentagon compared with
Disneyland? Can the Sixth Fleet keep up with CNN?
McDonald's in Moscow and Coke in China will do more to cre-
ate a global culture than military colonization ever
could."(39) Regardless of what one thinks of McDonald's or
Disneyland, it is clear that ideas have great power. The
United States can certainly bring to bear significant influ-
ence without resorting to military intervention. However,
strategies based on soft power require a long-term commit
ment to foreign policy goals, not simply a reflexive desire
to intervene in every development in the international
arena. The challenge for policymakers is to devise creative
and effective policies that foster a restrained vision of
the national interest.

The United States could achieve a real peace dividend
if the current emphasis on military intervention were dis-
carded. Military spending levels, designed to counter a
global enemy, could be significantly reduced. The United
States could reduce defense spending by about one-half over
the next several years and more than adequately protect
national security interests.(40) Military expenditures of
approximately $150 billion (1992 dollars) would support a
force of 1 million personnel including 6 Army divisions, 2
Marine divisions, 11 Air Force tactical air wings, and 6
carrier groups with 5 air wings. In addition, a credible
nuclear deterrent could be maintained and funding for GPALS
and other research programs continued. An appropriate bud-
get would also include funds for the intelligence services,
albeit at a reduced level. A $150 billion U.S. military
budget would still be over four times larger than that of
any other industrial power. It would allow the United
States to guarantee its territorial integrity, maintain its
place as the world's dominant naval power, and continue the
development of new technology as a hedge against a resurgent
global threat.

The proposed reduction would require disengaging from
many of our overseas commitments and demobilizing U.S.-based
forces designed specifically to fight Soviet aggression on
foreign soil. Deployment of massive numbers of American
personnel in Europe and East Asia to counter an enemy that
has disappeared is an obsolete tactic. Weapons developed to
counter the Soviet threat, such as the Seawolf submarine and
the B-2 bomber, would also be eliminated. The resulting
peace dividend could be returned to those who paid for the
U.S. share of the Cold War in the first place: the American
people. Resources would be allocated to economically pro-
ductive uses instead of unproductive military spending.(41)
Dollars not spent on obsolete submarines or missiles, items
that do not contribute to further economic development,
would go to economically productive areas such as investment
or consumption. The result of a reallocation would be a
dramatic upsurge in the U.S. economy, the true foundation of
American power.(42)


The United States has an opportunity to achieve a real
peace dividend. Cuts in military spending, however, must
reflect a new vision of defense strategy. Washington must
curtail its reflexive desire to intervene in disputes that
do not threaten vital interests of the United States. Mili-
tary expenditures will have to remain roughly constant if
the nation intends to play the role of world policeman. If
spending is cut dramatically while commitments remain the
same, the United States runs a serious risk of becoming
involved in costly conflicts for which it is not adequately

There is a real alternative. The United States can
reformulate its national military strategy to reflect the
demise of the Soviet threat. Without a global military
competitor, the United States would not need to intervene in
every local dispute. Regional powers would be allowed to
provide for their own security as they saw fit. The United
States would remain the predominant military power, but its
focus would be on directly protecting U.S. vital interests.
That new military strategy would produce a legitimate peace
dividend and vastly reduce the chances that the United
States would be drawn into a conflict that was peripheral to
its national interests.


(1) Figures are drawn from Steven Kosiak and Paul Taibl,
"Analysis of the Fiscal Year 1993 Defense Budget Request,"
Defense Budget Project, Washington, D.C., March 11, 1992.
The numbers (in current dollars) represent budget authority
for the Department of Defense, the Department of Energy, and
other defense-related activities.

(2) DOD statistics from Richard Cheney, Statement before the
House Foreign Affairs Committee, March 4, 1992.

(3) U.S. Bureau of the Census, Statistical Abstract of the
United States: 1991, 111th ed. (Washington: U.S. Government
Printing Office, 1991), p. 431. The numbers represent con
stant 1982 dollars.

(4) Budget of the United States Government: Fiscal Year 1993
Supplement (Washington: U.S. Government Printing Office,
1992), part 5, p. 216.

(5) Ibid., part 5, pp. 135-36.

(6) Ibid., part 5, p. 218.

(7) John Lancaster, "Defense Budget Debate: Truth Cuts Both
Ways," Washington Post, February 5, 1992, p. 17.

(8) "Fiscal Implications of the Administration's Proposed
Base Force," CBO Staff Memorandum, December 1991, p. 11.

(9) Earl C. Ravenal, Designing Defense for a New World Or
der: The Military Budget in 1992 and Beyond (Washington:
Cato Institute, 1991), p. 51; and Robert L. Borosage, "We're
Keeping Europe Safe from Ghosts," Los Angeles Times, January
30, 1992, p. 11.

(10) Tom King, Statement on the Defence Estimates: Britain's
Defence for the 90s (London: Her Majesty's Stationery Of
fice, 1991), p. 54.

(11) John Lloyd, "Russians Struggle to Control Budget Defi
cit," Financial Times, March 13, 1992, p. 2.

(12) Les Aspin, "An Approach to Sizing American Conventional
Forces," Press Release, February 25, 1992, p. 4. See also
John J. Fialka, "Armed Forces of Former Soviet Union Are
Fast Falling Apart," Wall Street Journal, April 13, 1992.

(13) Eric Schmitt, "Russia Is Said to Plan for a Smaller
Armed Force," New York Times, April 2, 1992, p. A-10.

(14) John Lloyd and Chrystia Freeland, "Desertions Throw
Struggling CIS Army into Disarray," Financial Times, March
19, 1992.

(15) Aspin, p. 5.

(16) The Military Balance (London: International Institute
for Strategic Studies, 1991).

(17) Quentin Peel, "Bundeswehr Set for Radical Cutback,"
Financial Times, February 20, 1992, p. 3.

(18) "Japan's PM Announces Further Defence Review," Financial
Times, January 31, 1992.

(19) Ravenal, Designing Defense for a New World Order, p. 7.

(20) Joint Chiefs of Staff, "National Military Strategy,"
1992, p. 2.

(21) Ibid., p. 4

(22) Patrick E. Tyler, "Seven Hypothetical Conflicts Foreseen
by the Pentagon," New York Times, February 17, 1992, p. A-8.

(23) Patrick E. Tyler, "U.S. Strategy Plan Calls for Insuring
No Rivals Develop," New York Times, March 8, 1992, p. 1.

(24) Ibid.

(25) "Excerpts from Pentagon's Plan: Prevent the Emergence of
a New Rival," New York Times, March 8, 1992, p. A-14.

(26) Patrick E. Tyler, "Top Congressman Seeks Deeper Cuts in
Military Budget," New York Times, February 23, 1992, p. A-1.

(27) Aspin, p. 6.

(28) John Lancaster, "Aspin Seeks to Double Bush's Defense
Cuts," Washington Post, February 27, 1992, p. A16.

(29) John Lancaster, "Nunn Proposes 5-Year Defense Cut of $85
Billion," Washington Post, March 25, 1992.

(30) Ibid.

(31) Another relevant point is that Aspin's projections for
military spending are based on the 1993-97 period. They do
not account for the CBO study, which suggests significant
spending will be necessary to maintain the U.S. military at
the proposed levels. Yet the possibility that expenditures
may have to be significantly increased in the next century
is critical to the military spending debate.

(32) Eric Pianin, "Senate Rejects Bid to Cut Military Budget
Below Bush Proposal," Washington Post, April 10, 1992,
p. A-10.

(33) Ted Galen Carpenter, "The Case for Strategic Indepen
dence," Cato Institute Foreign Policy Briefing no. 16, Janu
ary 16, 1992, p. 2.

(34) Earl C. Ravenal, "A Choice of Worlds: America's Prospec
tive Foreign Policy," Paper presented at Cato Institute
conference, "The New World Order and Its Alternatives:
America's Role in the 1990s," March 31, 1992.

(35) Ted Galen Carpenter and Rosemary Fiscarelli, "America's
Peace Dividend," Cato Institute White Paper, August 7, 1990,
p. 13.

(36) Joseph S. Nye, Jr., "Soft Power," Foreign Policy 80
(Fall 1990): 153-71.

(37) Stephen E. Siwek, "The Dimensions of the Export of Amer
ican Mass Culture," Paper presented at the American Enter
prise Institute conference, "The New Global Popular Culture:
Is It American? Is It Good for America? Is It Good for the
World?" March 10, 1992.

(38) Chris Hedges, "Iran Is Unable to Stem West's Cultural
Invasion," New York Times, March 28, 1992.

(39) Benjamin R. Barber, "Jihad vs. McWorld," Atlantic,
March 1992, p. 58.

(40) The numbers given here are drawn from Ravenal's Design
ing Defense and Carpenter and Fiscarelli. A number of other
studies have advocated cuts of a similar magnitude. William
W. Kaufman and John Steinbruner suggest a "cooperative secu
rity" system that would require a military budget of $146.8
billion in Decisions for Defense: Prospects for a New Order
(Washington: Brookings Institution, 1991), pp. 67-76. Their
preferred option would consist of a multilateral agreement
among the major powers to limit military capabilities and
regulate arms exports. Kaufman and Steinbruner believe such
an agreement would eliminate many of the dangers inherent in
the international system. The Center for Defense Informa
tion argues that all of the goals of the Pentagon's National
Military Strategy can be met for $212 billion; "Defending
America: A Force Structure for 1995," Center for Defense
Information, February 21, 1992. Joseph S. Nye advocates a
budget of about 2.5 percent of GNP ($150 billion) that he
suggests would fulfill the Pentagon's numerous missions;
Cato Institute conference, "The New World Order and Its
Alternatives: America's Role in the 1990s," March 31, 1992.
William Colby and Paul Warnke of the Coalition for Democrat
ic Values have called for a 50 percent cut in defense spend
ing in "Restructuring Our Military," Coalition for Democrat
ic Values, Silver Spring, Maryland, March 19, 1992. They
argue that by paring down the antiquated U.S. commitment to
Europe, other goals such as intervening in regional con
flicts and civil wars, preventing nuclear proliferation,
thwarting terrorism, and halting genocide and brutality can
be met much more efficiently than the administration con

(41) Lloyd Jeffry Dumas, The Overburdened Economy: Uncovering
the Causes of Chronic Unemployment, Inflation and National
Decline (Berkeley: University of California Press, 1986),
p. 149; and Seymour Melman, The Permanent War Economy: Amer
ican Capitalism in Decline (New York: Simon & Schuster,

(42) Carpenter and Fiscarelli, pp. 55-64.

Published by the Cato Institute, Policy Analysis is a
regular series evaluating government policies and offer-
ing proposals for reform.- Nothing in Policy Analysis
should be construed as necessarily reflecting the views
of the Cato Institute or as an attempt to aid or hinder the
passage of any bill before Congress.
Contact the Cato Institute for reprint permission.
Additional copies of Policy Analysis are $4.00 each
($2.00 in bulk). To order, or for a complete listing of
available studies, write to: Policy Analysis, Cato In-
stitute, 1000 Massachusetts Avenue NW, Washington, D.C. 20001.
(202)842-0200 FAX (202)842-3490 E-mail cato@cato.org World Wide Web http://www.cato.org.

| Hot Topics | Policy Analysis Series | Cato Home Page |