Summary: Three long-term trends are threatening to bankrupt America: the burgeoning costs of waging the war on terrorism, the U.S. economy's increasing reliance on foreign capital, and rapid aging throughout the developed world. Washington must understand that committing the United States to a broader global role while ignoring the financial costs of doing so is deeply irresponsible.

Peter G. Peterson is Chairman of the Council on Foreign Relations, the Institute for International Economics, and The Blackstone Group. He served as Secretary of Commerce in the Nixon administration. This article is adapted from "Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It," published by Farrar, Straus, and Giroux, LLC. Copyright © 2004 by Peter G. Peterson. All rights reserved


COSTS OF BEING A SUPERPOWER

President George W. Bush has called terrorism the United States' greatest national security threat since World War II and has declared that the war on terrorism must be waged "for years and decades, not weeks or months." Most Americans agree with this assessment and with the need to pay whatever price is necessary to wage this war. But what is the price? And how will the United States pay for it?

It now seems nearly certain that the aging of America's population--which would pose a massive fiscal challenge over the next few decades itself--will unfold in an era of large additional commitments to our national security agenda. Two other issues, in addition to security costs, require attention because of their profound connections both to U.S. national security and to U.S. fiscal and economic performance: the United States' growing financial dependence on foreigners, and the extreme aging overtaking the rest of the developed world.

To paraphrase the poet John Donne, no nation is an island, least of all a superpower with such manifest responsibilities as the United States has in a newly dangerous world. But to commit America to a broader role while remaining blindly ignorant of the ultimate cost of doing so is sheer folly. Clearly, there are long-term tradeoffs to be faced: between economic security and national security, between retirement security and national security, and between today's taxpayers and tomorrow's taxpayers. As yet, however, the leaders of the two major political parties have hardly mentioned these tradeoffs, much less discussed them seriously. When it comes to the long-term fiscal and economic future, U.S. leaders are mute not only on domestic challenges but on global challenges too.

FIRST GLOBAL CHALLENGE: THE WAR ON TERRORISM

In September 2003, with bombs still raining down on Baghdad, President Bush made an emergency war-spending request for $87 billion. It was the largest such request since the opening months of World War II. The cost details arriving from the battlefield were riveting. For patrolling the "Sunni Triangle" in Iraq, the Army wanted 595 extra Humvees, at a price tag of $250,000 each. Another 60,000 troops needed three-piece body-armor suits: $5,000 each. Every day, the logistical needs of the forces in Iraq required dozens of 30-truck convoys from Kuwait and Turkey, carrying everything from half a million bottles of spring water to countless electronic modules, all provided by 6,000 civilian contractors. Sun and sand, meanwhile, did more damage to the equipment than did ambushes by insurgents. Every Bradley fighting vehicle in Iraq needed new tracks every 60 days, at $22,576 each. Apache attack helicopters, in perpetual need of maintenance, single-handedly devoured an amazing $1.3 billion in spare parts in fiscal year 2003. Engineering and construction costs were (and still are) billions of dollars over their original estimates.

In short, the stunning effectiveness of the U.S. armed forces has come with an equally stunning price tag. For most of U.S. history, going to war was like organizing a large federal jobs program, with most of the work done by inexpensive, quickly trained recruits. Today, it is more like a NASA moon launch, entailing a massive logistical tail supporting a professionally managed and swiftly depreciating body of high-tech physical capital. Just keeping two divisions engaged in "stability operations" in Iraq for one week costs $1 billion; keeping them engaged for a full year would cost the entire GDP of New Zealand.

Since September 11, moreover, the U.S. military has been planning to invest even more in its war machine to overcome some of the remaining weaknesses: slow reaction time to crises in remote regions and inexperience in dealing with unconventional, so-called "asymmetrical," threats, such as terrorism, guerrilla war, and weapons of mass destruction (WMD). Even after scrapping certain old weapons plans (such as the Crusader artillery system) and scaling back some other purchases, the total net cost of this military transformation will be large.

Weapons procurement, which fell to a post-Cold War low of about $50 billion a year in the mid-1990s, is scheduled to rise to over $100 billion a year by 2010--more than its previous (real dollar) peak in the mid-Reagan years. On the drawing board are lightweight Stryker brigades, state-of-the-art stealth warships, super-fast low-profile watercraft for coastline combat, and all the science-fiction paraphernalia of the Army's next-generation "Objective Force." These weapons will include non-line-of-sight cannons, electromagnetic "rail guns," robotic mules and assault vehicles, long-endurance unmanned tactical aircraft, loitering attack missiles, and total digital integration of fire and sensor systems.


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