WASHINGTON, Oct. 16 (UPI) -- The current financial crisis, spiraling government deficits and the ballooning costs of war in Iraq and Afghanistan are creating growing pressure on U.S. military spending, which has risen at historically unprecedented levels since 2001, according to career defense officials and experts.
The pressure is likely to place the incoming administration in a difficult position as it puts together its own spending plans next year and is forced to contemplate politically tough cuts to the defense budget, say analysts.
"There is a lot of pressure on defense budgets going forward," Assistant Defense Secretary Michael Vickers told United Press International in a recent interview.
Vickers said the structural pressures of U.S. entitlement programs like Social Security -- "demographics and baby boomers," as he put it -- would combine with the cost of recapitalizing a military strained by seven years of ongoing war in Afghanistan and Iraq, while simultaneously transforming it to meet new threats.
"We're using a lot of our current equipment at very intense rates, so there's a need to reconstitute the military that we have right now for near-term challenges," he said.
At the same time, the military has to "deter rising conventional and strategic threats, like ... China or rogue nuclear powers," which require the "modernization of existing capabilities" like the nuclear arsenal and U.S. air and naval fleets, "while you're fighting this war on terror and getting better at irregular warfare," he said.
"It's the coming together of investment challenges and strategic challenges," he concluded.
"Even absent the recent financial crisis, you were looking at a serious budget problem for the next administration" on military spending, said Kathleen Hicks, a former senior career policy official in the defense secretary's office.
Hicks, who left the Pentagon in 2006 after 13 years and is now at the Center for Strategic and International Studies, said the budgetary "crisis" would have an upside.
"In some ways, it's a good thing," she said. The Department of Defense "has not had a governor on its (spending) demands for some time."
The incoming administration would not have a complete government-wide budget for the next fiscal year from the outgoing Bush administration, but the Defense Department had been told to build a spending plan for fiscal year 2010 that was essentially a wish list, she said.
"Rather than give them a top line … the guidance (from Defense Department senior leadership) said build in what you need into" budget projections, she said.
These spending requests inevitably would become "the baseline against which any incoming administration will surely have to cut," she said.
In fiscal year 2008, which ended Sept. 30, total U.S. defense spending was nearly $695 billion -- $515 billion in the base budget and another $180 billion in so-called emergency supplemental appropriations for the wars in Iraq and Afghanistan. That is more than twice what it was in 2000.
There has been a "very long and very robust biggest buildup in military spending," said Steven Kosiak of the Center for Strategic and Budgetary Assessments, saying the base budget had risen by an average of more than 5 percent above inflation every year since 2000. "The only historically comparable rise in (military) spending was the one under (President Ronald) Reagan in the 1980s."
"Even before the current financial crisis, the good bet was that would flatten out" after this year's budget request, he said.
Experts say it is hard to tell exactly where the ax is likely to fall. Big-ticket high-technology procurements with an uncertain contribution to current counterinsurgency conflicts, like the Air Force's F-35 or the Army's Future Combat System, have come under fire for ballooning costs; but such programs are often protected by the "sunk costs argument," in which officials make the case that cutting now will mean money already spent on them has been wasted, said Hicks.
Critics of congressional oversight charge that lawmakers often make room for such programs by shortchanging spending on current conflicts by cutting the Operations and Maintenance budget.
"There's a very close and unhealthy relationship between those programs and the O&M budget," said Hicks.
"What typically happens is we muddle through," said Kosiak, by canceling some programs and funding others.
But figures released this week by the U.S. Treasury show that the federal budget deficit for fiscal year 2008 was a record $455 billion, nearly three times the previous year's -- and that does not include the $700 billion price tag for the financial bailout approved by Congress and the administration this month.
The additional pressure the bailout package will bring to bear on budgets is still unclear, said Kosiak.
"It is too early to tell … and there is too much uncertainty about the eventual cost," said Kosiak. "You have to be humble when predicting these things."
But he added, "The perception at the moment is that it is a major cost and a long-term cost."
Jeremy Potter, a senior analyst for federal industry with the government contractor consulting group INPUT, told UPI that the full impact of the bailout's cost would not be felt until fiscal year 2010.
He said Congress already had passed appropriations legislation for the first half of the current fiscal year, 2008 -- effectively setting U.S. spending through March 2009 -- and that policymakers were "likely to do nothing too drastic" in the second half of the fiscal year.
But in FY2010, "defense program managers are going to be scrambling to get their programs funded," he said. "There'll be intense competition to get new dollars for projects."
"We've heard both campaigns promise to be tough on defense spending," he said. "We expect a harder line on (Department of Defense) spending, no matter who wins" the election next month.
One way in which the new administration likely will toughen up is in what the military is allowed to count as emergency spending -- outside the budget caps for regular defense funding. Critics for years have said that the administration was including tens of billions of dollars of foreseeable, planned wartime expenditures in its emergency supplemental appropriation requests, thus evading congressional limits on overall government spending -- and removing the need for potentially tricky decisions about what to cut to make room for the additional dollars.
"Part of the overall (defense budgeting) crisis is you're going to have to bring that spending into the base budget somehow," said Hicks.
"There are plans to do that," confirmed Vickers.
He said "one way you try to square that (budgetary) circle" was to adopt what military planners call a "portfolio approach."
"These challenges are very different, and so rather than have a single joint force which is optimized for theater warfare … against regional powers," each of the armed forces would need to consider what its priorities were.
"Our air and naval forces bear the principal burden of the high-end strategic threats" -- like nuclear attacks and wars with what the military calls peer competitors -- other powerful armies. This was their priority, said Vickers, and although they also had to offer more to the counterinsurgency mission, the brunt of that should fall on ground forces and special operations forces.
"They are focused more intently on the irregular war challenge. Again, they have to be able to do conventional campaigns as well.
"It's a question of emphasis, balance and a little more specialization than you had in the past," Vickers said.
"You can do this," he concluded. "But not if you say everyone has to do everything."