Speaking at the Eisenhower Library in Kansas on May 8th, Secretary Gates stated the following: “Given America’s difficult economic circumstances and parlous fiscal condition, military spending on things large and small can and should expect closer, harsher scrutiny.”

Left unexamined, Secretary Gates’ statement would lead the average American to conclude that it is defense spending that is bankrupting the federal government and threatens to bankrupt the country. In fact, it is Secretary Gates’ statement that deserves closer, harsher scrutiny. While the fiscal condition of the government, as Secretary Gates contends, is parlous, it is wrong to assume that the defense budget is the source of this problem. From the historical perspective, the share of both federal spending and the overall economy committed to defense activities is down significantly from the levels seen in the 1950s, 1960s, 1970s and 1980s. Despite the fact that the nation is engaged in two larger-scale conflicts as part of the larger war against the forces of terror, one in Afghanistan and the other in Iraq, the defense budget is only marginally higher relative to federal spending and the overall economy than its low point in the 1990s.

Viewed prospectively, it is entitlement spending on health care and retirement that is estimated to absorb 100 percent of federal revenues by roughly the middle of this century. The federal government can and should devote marginally higher shares of its budget and the overall economy to defense than what is in President Obama’s longer-term budget projections. This is because these investments are necessary to maintaining an overall military that is large enough, manned by capable service personnel and technologically advanced enough to defend the American people and meet America’s security commitments around the world.

This is not to say that Secretary Gates is wrong when he asserts that there are places within the defense budget that savings should be realized in order to meet more important defense priorities within marginally higher defense budgets. It is just that Secretary Gates points to the wrong places.

He laments the level of spending on new weapons and equipment, but modernization spending is a lower share of the overall defense budget, compared to spending on operations and manpower, than in earlier periods. He rebels against the excessive bureaucracy in the Pentagon, but asks for acquisition reform legislation from Congress that only adds to the oversight functions within the acquisition system. Most discouraging, Secretary Gates asserts that military health-care costs “are eating the Defense Department alive.” This is clearly so, but the Secretary fails to recommend the kind of systemic reforms that would produce large and long-term savings that could be plowed back into building a more modern and capable military.

In reality, the defense budget is suffering from the same ailments affecting the larger federal budget, only to a lesser degree. It is the driving force of the entitlement mentality. Military in-kind and deferred benefits continue to grow on a per capita basis and constitute a far larger share of compensation than what is found in the private sector. The Department of Defense should permit growth in cash compensation and look to transform defined benefit programs into defined contribution programs under the concept of “continuum of service” so that military personnel can build health care and retirement nest eggs over the full expanse of their professional lives.

The Obama Administration’s projected defense budgets are inadequate. These investments should be increased. This is not to say, however, that there is no room for internal reform in the defense budget. It is just that these reforms will be misplaced if the savings are not reserved within the defense budget and used to strengthen the longer-term military posture of the United States.