U.S. Defense Spending: The Value of Spending Rather Than Its Amount

The American Enterprise Institute (AEI) recently released a report that estimated the People’s Republic China’s (PRC) true military spending as $710.6 billion, which is three times larger than PRC’s self-reported totals and several billion dollars higher than estimates from the U.S. intelligence community.

This report has been interpreted as good news as it demonstrates the Chinese Communist Party’s (CCP) assertions about how much it spends on the People’s Liberation Army (PLA) cannot be trusted.  While this aspect of the report is true, it misses the most important point—the obvious indictment of the U.S. defense acquisition community, whether acquisition officials in the Department of Defense or the “Big Five Primes” of the private sector—that the PRC continues to outproduce the U.S. in military hardware.

For instance, if each side is spending roughly the same on defense, then the critical issue is what is each side getting for money spent on research and development, manufacturing, training and maintenance, personnel, and equipment.  In this regard, fundamentally, the PRC is more efficient in its military spending and thus has been able to alter the military balance of power not just in the Indo-Pacific but increasingly around the globe.

Yes, U.S. spending on defense is substantial, the largest in the world, but this fails to appreciate the age-old wisdom that it is not what is spent that matters most, but what a nation gets in return for those dollars that are spent.  For the PRC, which spends Renminbi, the fact of the matter is that they get much, much more return on their investment than the U.S.  In real terms, the PRC is producing much more military might than the U.S., regardless of what Washington spends.

One obvious metric is the number of ships that each nation has built and commissioned into operational service.  For most of the past decade, the PRC has produced five warships for every one ship that the U.S. produces.  When applied to other metrics, such as tonnage or numbers of battle force weapons, the PLA Navy has enjoyed similar advantages.

Unfortunately, the problem isn’t just that the PRC gets more “bang for the buck,” it is about the failure of the U.S. system to be more productive.  The scope and scale of the difference in productivity in the naval arena is alarming.  For instance, in April, the U.S. Navy released a statement regarding major delays for nine key shipbuilding programs that are behind schedule, some up to three years.

Examples are many, but consider that in the past four years, the PLA Navy has commissioned three Type 075/Yushen-class 40,000-ton amphibious assault ships, while the U.S. Navy has produced one, had one burn-up at the pier in San Diego (the USS Bonhomme Richard) and had one return to port just 10 days into a six-month deployment to the Arabian Gulf (the USS Boxer) due to material readiness issues.

The maritime service is also rife with failures in design, development and performance with classes like the Littoral Combat Ship (LCS), the Zumwalt-class cruiser, and finally, the new aircraft carrier USS Gerald R. Ford, which is not just years behind in getting to the fleet but at a cost of $13 billion, is 30% more than originally forecast…and is still having problems with its first-of-a-kind Electromagnetic Aircraft Launch System (EMALS).

This later example is most alarming, given the PRC has also produced its own EMALS-capable aircraft carrier, the Chinese Navy Ship Fujian, which has just completed its first sea trials this past week.  Remarkably, the PLAN has skipped an entire generation of aircraft launch systems and steam catapults and has been able to develop and field an EMALS in a period of time much shorter than the U.S.

Three steps may be taken to correct this travesty. First, the U.S. needs to acknowledge that there is a problem within the U.S. Department of Defense and the Five Big Primes.  The evidence is in and these institutions have failed and must face transformative change that will eliminate the inefficient system of weapons procurement that has existed since the end of the Cold War.

Second, the U.S. needs to re-orient defense spending away from a land-centric only posture to a balanced naval-air-land capable force, as the U.S. had for much of the Cold War. Given that America has neglected and diminished naval power for much of the past 40 years, this would mean a dramatic reallocation of defense spending to the Navy.  No longer can the services be treated like equals and thus have an equal share of the defense budget.

Third, given America’s sea power is on the verge of being swamped by the PLA Navy, the U.S. needs to increase spending on major programs like ship building.  In 1940, the U.S. Congress, led by Carl Vinson, passed the Two-Ocean Navy Act, which dramatically infused the American shipbuilding industry with the resources necessary to build the Fleet that was necessary to defeat the Imperial Japanese Navy.  Today the U.S. indigenous shipbuilding industry is on life-support, so the challenge is doubly as arduous.  That reality should not dissuade an all-hands on-deck effort to rebuild American naval power that could deter a PRC invasion of Taiwan…or be able to defeat a PLA Navy fleet that will inevitably continue its eastward expansion.

The general quarters alarm is sounding, and it remains to be seen whether there is an adequate response.

James E. Fanell and Bradley A. Thayer are authors of Embracing Communist China:  America’s Greatest Strategic Failure.