Growing concerns about inflation pressure on US defence budget

Despite impeachment proceedings progressing to the Senate, mercurial US President Donald Trump has sought to capitalise on a surging US economy to pass yet another increase for the US defence budget – expected to see the Pentagon receiving US$738 billion for FY2020. 

While the figure is less than the US$750 billion President Trump called for earlier this year, the US$738 billion figure will still see a major ramp up in the modernisation, recapitalisation and expansion of the US military at a time of increasing great power rivalry. 

Ranking Republican lawmaker on the House appropriations defense subcommittee Ken Calvert welcomed the US$20 billion increase over the preceding 2019 budget, explaining: “The bill increases funding for operations and maintenance and procurement for the next generation of equipment to ensure our men and women in uniform always have the tactical advantage.”

This was reinforced by Senate appropriations committee chairman Richard Shelby of Alabama, who stated the deal would see “robust investment in rebuilding our military and secures significant funds for the President’s border wall system”.

The 2020 National Defense Authorization Act will see a number of major acquisition, organisational restructures and modernisation programs to support America’s shift away from decades of conflict in Afghanistan and the Middle East, with a US$15 billion increase in the procurement budget, bringing the Pentagon’s total acquisition budget to US$146 billion. 

On the back of this, it would seem that the US Armed Forces are in a prime position to respond to the myriad of tactical and strategic challenges facing the global reach of the United States. However, growing concerns about inflation raise important questions about whether the expenditure will be enough. 

Indeed, concerns regarding the impact of inflation on current budgetary projections for the US military have been raised continuously since 2017 – with then defense secretary Jim Mattis and then chairman of the Joint Chiefs of Staff, General Joe Dunford, testifying to Congress that the annual budget would need to have a 3-5 per cent buffer beginning in 2023. 

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GEN Dunford explained to the Senate armed services committee in June 2017, “We know now that continued growth in the base budget of at least 3 percent above inflation is the floor necessary to preserve just the competitive advantage we have today, and we can’t assume our adversaries will remain still.”

This growing concern places renewed pressure on the existing acquisition and modernisation programs currently underway within the US Armed Forces as they seek to rebound from nearly two decades of conflict in the Middle East and prepare for a greater focus on great power rivalry and tactical and strategic competition. 

Declining US capacity spells need for greater Australian capability

This concern comes on the back of the recent report from the University of Sydney-based United States Studies Centre (USSC), titled Averting Crisis: American strategy, military spending and collective defence in the Indo-Pacific, which paints a concerning picture of the US military and the need for greater allied capability. 

“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 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 report stated. 

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.

Additionally, 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. 

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. 

Stepping into the breach 

Responding to these challenges requires an approach that recognises each of these factors are all part of national security policy.

This includes a dedicated focus on developing a robust economic and industrial capacity – devoid of dependence on any single source of economic prosperity – while focusing on developing a robust and independently capable tactical and strategic military capability, supported by Australia’s enduring diplomatic goodwill and relationships in the region.

These responses do not hinder Australia’s economic growth or strategic stability, rather, if developed, communicated and implemented correctly, they support the economic growth, diversity and development of the nation, building on a record period of economic growth and prosperity, providing flow-on benefits for Australia’s strategic capacity to act as an independent strategic benefactor.

The USSC highlights a suite of suggestions for Australian strategic policy and its political leaders to consider to position Australia as an increasingly capable and invaluable ally committed to supporting and defending the global and, more specifically, the Indo-Pacific’s rules-based order:

“A strategy of collective defence is fast becoming necessary as a way of offsetting shortfalls in America’s regional military power and holding the line against rising Chinese strength. To advance this approach, Australia should:

• Pursue capability aggregation and collective deterrence with capable regional allies and partners, including the United States and Japan.
• Reform US-Australia alliance co-ordination mechanisms to focus on strengthening regional deterrence objectives.
• Rebalance Australian defence resources from the Middle East to the Indo-Pacific.
• Establish new, and expand existing, high-end military exercises with allies and partners to develop and demonstrate new operational concepts for Indo-Pacific contingencies.
• Acquire robust land-based strike and denial capabilities.
• Improve regional posture, infrastructure and networked logistics, including in northern Australia.
• Increase stockpiles and create sovereign capabilities in the storage and production of precision munitions, fuel and other materiel necessary for sustained high-end conflict.
• Establish an Indo-Pacific Security Workshop to drive US-allied joint operational concept development.
• Advance joint experimental research and development projects aimed at improving the cost-capability curve.”

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. 

Your thoughts 

Australia cannot simply rely on the US, or Japan, or the UK, or France to guarantee the economic, political and strategic interests of the nation. China is already actively undermining the regional order through its provocative actions in the South China Sea and its rapid military build-up.

To assume that Australia will remain immune to any hostilities that break out in the region is naive at best and criminally negligent at worst.

As a nation, Australia cannot turn a blind eye to its own geopolitical, economic and strategic backyard, both at a traditional and asymmetric level, lest we see a repeat of Imperial Japan or the Iranian Revolution arrive on our doorstep.

It is clear from history that appeasement does not work, so it is time to avoid repeating the mistakes of our past and be fully prepared to meet any challenge.  

There is an old Latin adage that perfectly describes Australia’s predicament and should serve as sage advice: “Si vis pacem, para bellum” – “If you want peace, prepare for war”. 

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