Growing concerns about Pentagon’s ability to fund America’s global responsibilities

The great myth of the “end of history” following the collapse of the Soviet Union promised an unencumbered and enduring period of American Peace. However, the rapidly evolving world order – driven by the rise of the Indo-Pacific, resurgence of potential peer competitors, and complacency of US allies – is challenging the once unassailable position of the US.

While Australia has long sought to balance the paradigms of strategic independence and strategic dependence – seemingly limited by a comparatively small population and industrial base – the pendulum has always swung more heavily towards a paradigm of dependence. However, the changing nature of domestic and global affairs requires renewed consideration.

The growing combination of both conventional and hybrid/grey-zone capabilities of peer and near-peer competitors – namely Russia and China – combined with the growing modernisation, capability enhancements and reorganisation of force structures in the armies of nations including India, Indonesia, Vietnam and Thailand, all contribute to the changing balance of economic, political and strategic power in the Indo-Pacific.

This perfect storm of factors, swirling like a maelstrom across Australia’s northern borders, has largely gone unnoticed by the Australian public, beyond the odd port visit by American or, as recently happened, Chinese naval vessels that seem to cause momentary flurries of concern. Meanwhile, Australia’s strategic and political leaders appear to be caught in an increasingly dangerous paradigm of thinking, one of continuing US-led dominance and Australia maintaining its position as a supplementary power.

Recognising the increasing confluence of challenges facing enduring US tactical and strategic primacy, the University of Sydney-based United States Studies Centre (USSC) study, titled Averting Crisis: American strategy, military spending and collective defence in the Indo-Pacific; combined with a recent ASPI piece, The Pentagon's budget can't fund America's global commitments; and the US Congressional Budget Office (CBO) study, Long-Term Implications of the 2020 Future Years Defense Program, all combined to serve to paint a rather confronting picture for Australia and other allies in the region.    

The very real limitations of US power

Costly engagements in Afghanistan and Iraq, combined with longstanding attempts to denuclearise Iran, have served to draw American and allied focus, while draining “blood and treasure”, eroding the domestic political, strategic and economic resolve and capacity to respond to the resurgence of totalitarian regimes and peer competitors in both China and Russia.

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Further compounding these issues is the growing instability in the US, particularly given the increasing unpredictability and transactional attitude towards alliances by US President Donald Trump – combined with allegations of complacency by NATO allies and the ongoing trade and strategic disputes with China, renewed territorial aggression by Russia and the ever-present threat of conflict with Iran.

It is important to recognise that for the first time, America has a true competitor in China – a nation with immense industrial potential, growing wealth and prosperity, a driving national purpose and a growing series of alliances with re-emerging, resource-rich great powers in Russia, and supported by a growing network of economic hubs and indebted psuedo-colonies throughout the Indo-Pacific and Asia.

Unlike the Soviet Union, China is a highly industrialised nation – with an industrial capacity comparable with, if not exceeding that of, the US, supported by a rapidly narrowing technological gap, supporting growing military capability and territorial ambitions, bringing the rising power into direct competition with the US and its now fraying alliance network of tired global allies.

Recognising these challenges, Matilda Steward, Brendan Thomas-Noone and Ashley Townshend highlighted the growing conundrum faced by the US and policymakers in their recent article for ASPI: “The United States is facing a serious crisis of strategic insolvency in which the ends of its expansive strategy for building the liberal order outstrip the budgetary and military means at Washington’s disposal. Without hard choices by America’s political elite to spend more on defence or scale back the country’s global commitments, the Pentagon will continue to be left with insufficient resources to single-handedly maintain a favourable balance of power in the Indo-Pacific.”

Further to this, like all national budgets, America’s defence expenditure is not separated from broader national budgetary responsibilities, each of which have a dramatic impact on the US and its long-term capacity to support military modernisation, recapitalisation, research and development and ongoing operations, with the US Congressional Budget Office (CBO) raising questions about the capacity of the US to maintain its qualitative edge and key strategic and tactical advantages over emerging peer competitors in the Indo-Pacific region. 

“In CBO’s estimation, those costs would reach $776 billion (in 2020 dollars) by 2034, an increase of 13 percent in real terms over the 10 years following 2024. The key factors that would lead to increases in DoD’s costs are as follows:

• The costs of compensation for military personnel would continue to increase at historical rates, growing faster than inflation;
• The costs of operation and maintenance (O&M) would continue to increase at historical rates, growing faster than inflation; and
• The costs for the acquisition of weapon systems would meet the department’s modernization objectives and maintain the current size of the force.

“Of the increase in annual costs that CBO projects from 2024 through 2034 ($88 billion), about 18 percent ($16 billion) is for the cost of military personnel; 43 percent ($37 billion) is for O&M costs; and 38 percent ($33 billion) is for costs to develop and purchase weapon systems,” the CBO study identified. 

Personifying this growing funding conundrum, the increasing cost blow outs and project delays of major US defence acquisition and development programs, including strategic programs like the F-35 Joint Strike Fighter, the Gerald R Ford Class of aircraft carriers, B-21 Raider strategic bomber, combined with ballooning US government debt and domestic political and societal challenges, serve as unique and important challenges, limiting America’s enduring ability to project presence. 

In response, Steward, Thomas-Noone and Townshend issued an important rallying cry for regional American partners, stating: “These pressures present a considerable challenge for defence officials who are working hard to train, equip and posture the joint force for conventional deterrence in the Indo-Pacific. Novel efforts are underway to address these shortfalls, some of which involve new technologies or changes to US military posture in the region.

“For now, though, the defence budget is unlikely to meet the needs of America’s global strategy. Australia and other allies need to start contemplating the requirements of collective defence.”

Declining US capability sees a need for greater allied and Australian capability 

One of the core challenges facing the US in the Indo-Pacific and, more broadly, key allies like Australia, Japan and South Korea is the growing atrophy of America’s armed forces in the region, and the report cites a number of contributing factors directly impacting the capacity of the US to wage war, particularly as China, a peer competitor, presents an increasingly capable, equipped and well-funded array of platforms, doctrine and capabilities.

“America has an atrophying force that is not sufficiently ready, equipped or postured for great power competition in the Indo-Pacific – a challenge it is working hard to address. Twenty years of near-continuous combat and budget instability has eroded the readiness of key elements in the US Air Force, Navy, Army and Marine Corps. Military accidents have risen, ageing equipment is being used beyond its lifespan and training has been cut,” the USSC study identified.

“Military platforms built in the 1980s are becoming harder and more costly to maintain, while many systems designed for great power conflict were curtailed in the 2000s to make way for the force requirements of Middle Eastern wars – leading to stretched capacity and overuse.”

The USSC spells out the one thing few of Australia’s strategic policy thinkers and political leaders seem willing to come to terms with, beyond the radical fluctuations between doom and gloom scenarios: some of which range from a complete retreat by the US, leaving Australia and other regional allies alone, or a semi-retreat and focus on limiting risk to key American assets in the region.

In doing so, the USSC recognises that for the first time, America has a true competitor in China – a nation with immense industrial potential, growing wealth and prosperity, a driving national purpose and a growing series of alliances with re-emerging, resource rich great powers in Russia, and supported by a growing network of economic hubs and indebted psuedo-colonies throughout the Indo-Pacific and Asia.

Whether consciously recognising the potential of this challenge or not, the US President’s direct, often confrontational approach towards allies belies domestic concerns about America’s ability to maintain the post-Second World War global order. Andrew Davies of the Australian Strategic Policy Institute (ASPI) highlighted the importance of recognising the limitation of US power in a recent piece for ASPI, saying, “The assumption of continued US primacy that permeated DWP 2016 looked heroic at the time. It seems almost foolishly misplaced now.”

Australia emerged from the Second World War as a middle power, essential to maintaining the post-war economic, political and strategic power paradigm established and led by the US – this relationship, established as a result of the direct threat to Australia, replaced Australia’s strategic relationship of dependence on the British Empire and continues to serve as the basis of the nation’s strategic policy direction and planning.

The nation is uniquely located, straddling both the Indian and Pacific Ocean at the very edge of south-east Asia, enhancing the nation’s status as the key regional ally for the US – with Australia increasingly dependent upon the economic stability and growth of major established and emerging economic, political and strategic Indo-Pacific powers, namely China, Japan, India, Korea and smaller nations.

Recognising this, Australia’s security and prosperity are directly influenced by the stability and prosperity of the Indo-Pacific, meaning Australia must be directly engaged as both a benefactor and leader in all matters related to strategic, economic and political security, serving as either a replacement or complementary force to the role played by the US – should the US commitment or capacity be limited.

Questions for Australia 

Despite Australia’s enduring commitment to the Australia-US alliance, serious questions remain for Australia in the new world order of President Donald Trump’s America, as a number of allies have been targeted by the maverick President for relying on the US for their security against larger state-based actors, which has seen the President actively pressuring key allies, particularly NATO allies, to renegotiate the deals.

Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia. Shifting the public discussion away from the default Australian position of “it is all a little too difficult, so let’s not bother” will provide unprecedented economic, diplomatic, political and strategic opportunities for the nation.

However, as events continue to unfold throughout the region and China continues to throw its economic, political and strategic weight around, can Australia afford to remain a secondary power or does it need to embrace a larger, more independent role in an era of increasing great power competition?

Get involved with the discussion and let us know your thoughts on Australia's future role and position in the US alliance structure and the Indo-Pacific more broadly in the comments section below, or get in touch with This email address is being protected from spambots. You need JavaScript enabled to view it. or at This email address is being protected from spambots. You need JavaScript enabled to view it.