How astronomical war budgets threaten U.S. National Security.

• Author: Erwin, Sandra I.
• Position: DEFENSE WATCH

The war in Iraq ignited a defense spending boom that continues unabated. A slew of staggering estimates released in recent weeks reveal it could cost more than a trillion dollars to keep troops in Iraq until 2017.

It is safe to assume that defense budgets will stay high as long as U.S. forces remain in Iraq, and then they will fall. Based on historical trends, the defense budget always takes a dive after a major war. But this time around the defense spending boom may suffer an unparalleled bust.

This could be really bad news for the Pentagon and for the nation's long term security, says Robert D. Hormats, vice chairman of Goldman Sachs International. After Iraq, "the military is going to face the most challenging environment to obtain budget resources than it has had in the last 100 years, with the possible exception of the isolationist period just before World War II," he says.

Hormats, a former member of the White House National Security Council, is the author of "The Price of Liberty: Paying for America's Wars," in which he paints a strikingly sobering picture that shows how the financial cost of the war ultimately could weaken U.S. national security.

"After every major war, particularly wars that turn out as badly as this one, there is a reaction to cut the defense budget," he says. But unlike previous wars, this one has been accompanied by an extraordinary set of circumstances--tax cuts, increases in domestic spending, emergency supplemental appropriations to fund the war, and unprecedented levels of borrowing from foreign countries.

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These conditions, coupled with a gradually rising discontent among Americans about the war, will set the stage for a national backlash against defense spending and a political environment where even legitimate pleadings from the Pentagon for funds will fall on skeptical ears. One of the most serious consequences of the Iraq war, says Hormats, is that it has taught Americans all the wrong lessons about the price of security.

"Even during Vietnam, only one-fifth of the war was funded through supplementals," he says. "We had a normal budget process for most of that war." The war in Iraq has been financed by IOUs--60 percent of Treasury bills are sold to foreigners. By 2006, the United States was more dependent on foreign capital than at any time since the nation's founding. Americans clearly have not been engaged in the process of paying for this war, laments Hormats.

"This leaves a...