Riding for a Fall

Peter G. Peterson

From Foreign Affairs, September/October 2004

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 (c) 2004 by Peter G. Peterson. All rights reserved

Although the Bush administration incorporates an estimate of these new costs into its projections for defense outlays, most budget experts believe that it seriously underestimates the total future cost of the war on terrorism. To begin with, the administration refuses to make any projections for future military operations; it plans to procure all such funds through emergency appropriations. Also, much of the new technology is still under development and thus sure to experience cost overruns.

The Congressional Budget Office recently recalculated the administration's projections assuming, first, ongoing but diminishing operations in Iraq, Afghanistan, and elsewhere; and second, a historical rate of cost overruns for all new procurement. The results are eye-opening: total defense outlays over the next decade may cost 18 percent more than the administration's official projection. Including interest costs, this excess amounts to $1.1 trillion in new spending, a budgetary surcharge higher than the cost of the first decade of the new Medicare drug benefit.

Even this number does not reflect the cost of any new military operations abroad, which three of every four Americans believe are "very likely" in "the next few years," according to a Gallup poll. Nor does it reflect any permanent increase in active-force troop strength, which Congress may insist on even over administration resistance. With ongoing peacekeeping missions around the world, not even help from worn-out reserve and National Guard units can prevent the armed forces from being stretched dangerously thin should a new threat emerge. In December 2003, only two of the Army's ten divisions were both uncommitted and in a high state of readiness. That same month, 54 of the 61 members of the House Armed Services Committee, joined by the top Republican and Democrat on the House Intelligence Committee, signed a letter to President Bush urging him to enlist more troops.

Whatever they may feel about Iraq, most Americans seem to agree with the president's premise that in the war on terrorism, the best defenses are a good offense and forward deployment. Along with augmenting the capabilities of its armed forces, the United States is sharing intelligence with friendly governments around the world and training and equipping their antiterrorist forces as needed. Sea-and land-based ballistic missile defenses, long under development, are now being deployed at a growing cost ($10.3 billion in the fiscal year 2005 budget).

But sometimes the best defense is a good defense. No matter how effective the United States is at global preemption and deterrence, it must also take effective measures to prevent terrorism within U.S. borders. Here, too, there is an especially large gap between the resources needed and those allocated in official projections.

Most CIA analysts predict that there is a high probability of a serious terrorist attack with WMD on U.S. soil over the next several years. Granted, there is no conceivable price at which the United States could make itself totally secure against such an attack. Yet it is possible, at reasonable cost, to take extra steps that would make the country significantly less vulnerable to future attacks, which could cause catastrophic human or economic losses. Thus far, the government has not taken many of these steps, nor does it plan to. It is only a matter of time before American voters will, or at least should, insist that more be done. Indeed, this insistence may crystallize overnight come the next serious terrorist scare.

Yet doing more to bolster homeland defense will, of course, cost more money. What follows are just a few of the areas that need action.

More dollars need to be spent on equipping first responders: the fire, police, and other emergency personnel who are first to act after a terrorist strike. Only one-tenth of all fire departments currently have the capacity to respond to a building collapse, only a third of firefighters on any particular shift are equipped with breathing apparatuses, and only half possess radios (a deficiency that directly contributed to the high fatality rate among New York City firefighters on September 11). Moreover, biochemical and radiation sensors are lacking; urban search and rescue is spotty; the 911 emergency phone system is still not available nationwide; and emergency communications are not interoperable. The estimated cost to rectify these deficiencies and prepare first responders for a non-nuclear attack is $62 billion over five years.

America's health-care system is also under-resourced. During last winter's flu season, health clinics had to turn away patients when vaccines ran out--not a good sign that the United States is ready to handle a major biological terrorist attack. Acute-care hospitals have few quarantine or decontamination facilities and very little "surge capacity" in beds. Vaccines for major biological threats (most notably, smallpox) remain understocked. National Guard and reserve personnel and even many professionals in the public-health network have little or no training in responding to a nuclear or biological emergency. The minimum estimated cost to improve health-care capabilities over the next five years is $36 billion.

Reducing the threat posed by cargo containers will require another large injection of government funds. Only two percent of the roughly 20,000 cargo containers arriving each working day at 300 U.S. commercial ports are ever inspected by federal authorities. One recent study concludes that the current odds of detecting a shielded nuclear weapon inside a container are only about 10 percent. Closing all U.S. ports for more than a month in response to the mere threat of smuggled WMD would throw the U.S. economy into recession. The minimum estimated cost to remedy these security flaws--including the introduction of measures such as globally monitored packing, tamper-proof seals, and satellite tracking-would be $20 billion upfront, with an unknown yearly investment needed after that.