ANALYSIS-Iraq drawdown may raise pressure on US defense budget

Mon Aug 30, 2010 8:00am EDT


* Pentagon wants to grow spending, despite record deficit

* Presidential commission may take aim at defense spending

By Phil Stewart

WASHINGTON, Aug 30 (Reuters) - The end of the U.S. combat mission in Iraq may increase pressure on the Pentagon to trim spending, giving ammunition to lawmakers who have long wanted to take aim at the massive defense budget.

The United States will formally end its combat mission in Iraq on Tuesday, ahead of a scheduled withdrawal of all U.S. forces next year. President Barack Obama also aims to start withdrawing U.S. forces from Afghanistan in July 2011.

Given mounting concern over the giant U.S. budget deficit, those drawdowns could be potent political arguments for advocates of making defense cuts part of the overall effort to trim federal spending.

Tackling defense spending has been a politically taboo topic since the Sept. 11, 2001, attacks on the United States, but that may be changing, analysts say.

"We're about to enter into a glacial shift in thinking about the size of the defense budget. And the wars (are) no longer the iron-clad protection that the budget increasers had," said Winslow Wheeler, director of the Straus Military Reform Project at the Center for Defense Information.

The Pentagon fiercely opposes cuts and is pushing for at least 1 percent real growth in coming years in its "top line" budget, the total amount spent on non-war operations. While spending on the Iraq war is declining, costs for the Afghan war are reaching record highs.

Defense Secretary Robert Gates, who has voiced concern that Congress may attempt to trim defense spending, has pre-emptively unveiled job cuts and the closure of an entire military command. But savings from such "efficiencies" would be reinvested elsewhere within the defense budget.

Proponents of reducing overall defense spending include many Obama Democrats, who are increasingly wary about the cost of the unpopular, nine-year-old Afghan war and who are applauding Obama's attempts to bring the Iraq war to an end.

But even some conservative Republicans, mindful of the deficit, are taking a close look at military spending, which has roughly doubled in real terms since the Sept. 11 attacks. Congress has appropriated more than $1 trillion on the two wars alone since 2001 while spending has also skyrocketed in the core defense budget.

Republican Senator Tom Coburn told Reuters that the Pentagon was wrong to think it would be immune to broader efforts to reduce federal spending and tackle the deficit, steps he said were needed regardless of the Iraq drawdown.

"There's no question of waste at the Pentagon," Coburn said. Asked about Pentagon hopes to dodging the budget ax indefinitely, Coburn said: "Well, that isn't going to happen... you better be prepared because it isn't going to happen."

Obama's budget for 2011 called for $548.9 billion for the Defense Department's base budget, a real increase of 1.8 percent in purchasing power over the sum appropriated in fiscal 2010 for activities excluding Iraq, Afghanistan and other hot spots.

DEBT IS TOP SECURITY THREAT

The issue has broad implications for the Pentagon's largest suppliers -- Lockheed Martin Corp (LMT.N), Boeing Co (BA.N), Northrop Grumman Corp (NOC.N), BAE Systems Plc (BAES.L), General Dynamics Corp (GD.N) and Raytheon Co (RTN.N).

It is also political dynamite, exposing Obama to accusations of being soft on defense should he choose to take aim at the Pentagon budget, or that he is irresponsibly spending taxpayer dollars if he doesn't.

A presidential commission charged with finding ways to cut the deficit may partly target the defense budget when it delivers its recommendations to Obama in December -- well after November congressional elections, in which the deficit and the debt have become major issues.

The top U.S. military officer, Admiral Mike Mullen, last week called the $13 trillion-plus U.S. debt "the single biggest threat to our national security."

"We are going to pay interest on the debt, I think it's in 2012, of close to $600 billion. That's one year's worth of defense budget," Mullen, chairman of the U.S. military's Joint Chiefs of Staff, told an audience in Detroit.

"We are a considerable percentage of the discretionary spending in the government. So I think we have to gird ourselves for some pretty significant challenges given the national security challenges we have, as well as the responsibility to steward every dollar that we have."

The Defense Department accounts for 19 percent of U.S. federal spending and roughly half of the country's non-mandated, discretionary spending.

Privately, Pentagon officials caution against making too much of milestones in Iraq and Afghanistan. Iraq is still volatile and could ask for a longer U.S. military commitment, beyond the end-2011 deadline to pull out troops, they say.

Likewise, the start of the U.S. drawdown in Afghanistan next July, if it happens, could be very, very small.

Gates has been front-and-center with a warning that the end of military campaigns should not be used as opportunities to gut defense spending, even in tough times.

"My greatest fear is that in tough economic times that people will see the defense budget as the place to solve the nation's deficit problems," he said earlier this month.

"As I look around the world and see a more unstable world, more failed and failing states, countries that are investing heavily in their militaries ... I think that would be disastrous."

(Additional reporting by James Kelleher in Detroit and Jim Wolf in Washington; Editing by Jackie Frank)