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Standard Form 298 (Rev. 8-98)

Prescribed by ANSI Std Z39-18 
William B. Ruger Chair

of National Security Economics Papers

Number 1

A Nation at War:

Reconciling Ends and Means

Proceedings

Naval War College Intersessional Conference

Newport, Rhode Island

7–8 March 2005

Richmond M. Lloyd, editor

William B. Ruger Chair of National Security Economics

Naval War College

Newport, Rhode Island
The Naval War College expresses appreciation to the Naval War

College Foundation, through the generosity of the William B. Ruger

Chair of National Security Economics, in the preparation and presentation of this conference.

The views expressed in the William B. Ruger Chair of National Security Economics Papers are those of the authors and do not necessarily

reflect the opinions of the Naval War College or the Department of

the Navy.

Correspondence concerning the Ruger Papers may be addressed to

Richmond M. Lloyd, William B. Ruger Chair of National Security

Economics, Naval War College, 686 Cushing Road, Newport,

RI 02841-1207; by telephone at 401.841.3669; or by e-mail at

richmond.lloyd@nwc.navy.mil. Our website is www.nwc.navy.mil/

nsdm.

ISBN 1-884733-34-4

Printed in the United States of America
Contents

Agenda......................................

Opening Remarks

Dr. Richmond M. Lloyd,

William B. Ruger Chair of National Security Economics .........

Rear Admiral Jacob L. Shuford, USN, President, Naval War College...

Global Challenges and Choices ..........................

Dr. Richard N. Cooper, Maurits C. Boas Professor of International

Economics, Harvard University

Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Panel I—Competing National Priorities: Strategic and Resource Choices. . . . . . 

Opening Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Dr. J. Michael Gilmore, Assistant Director for National Security,

Congressional Budget Office

Guns and Butter: A False Choice . . . . . . . . . . . . . . . . . . . . . . . 

Mr. C. Lawrence Greenwood, Deputy Assistant Secretary,

International Finance and Development,

Bureau of Economic and Business Affairs, Department of State

What Is to Be Done with U.S. Predominance?

Grand Strategy Choices and Challenges . . . . . . . . . . . . . . . . . . . 

Dr. Andrew L. Ross, Research Professor,

Strategic Research Department, NWC

Panel I Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . 

Confronting the Challenges to National Security

Mr. Walter Russell Mead, Henry A. Kissinger Senior Fellow in

U.S. Foreign Policy, Council on Foreign Relations . . . . . . . . . . . . 

Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Panel II—Global War on Terrorism, Homeland Security, Defense,

and Intelligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Homeland Security To-Do List . . . . . . . . . . . . . . . . . . . . . . . . 

Dr. James Jay Carafano, Senior Research Fellow, Defense and

Homeland Security, Davis Institute, The Heritage Foundation

Strategy and Threat: The Problem of Language . . . . . . . . . . . . . . . . 

Dr. David H. McIntyre, Director, Integrative Center for

Homeland Security, Texas A&M University
Soft Power and the Terror War . . . . . . . . . . . . . . . . . . . . . . . . 

Dr. Carnes Lord, Professor of Military and Naval Strategy,

Center for Naval Warfare Studies, NWC

Panel II Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . 

2005 Quadrennial Defense Review: Taking Stock and a Way Ahead . . . . . . . . 

Ms. Michèle A. Flournoy, Senior Advisor, International

Security Program, Center for Strategic and International Studies

Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Panel III—2005 Quadrennial Defense Review: Issues and Options . . . . . . . . 1

The 2005 Quadrennial Defense Review:

Matching Resources with Requirements . . . . . . . . . . . . . . . . . . . 1

Mr. Steven Kosiak, Director of Budget Studies,

Center for Strategic and Budgetary Assessments

Future Wartime Scenarios for Defense Planning . . . . . . . . . . . . . . . 1

Dr. Michael E. O’Hanlon, Senior Fellow in Foreign Policy Studies,

The Brookings Institution

Ten Potential Navy-Related Issues for the QDR . . . . . . . . . . . . . . . 1

Mr. Ronald O’Rourke, Naval Analyst,

Congressional Research Service of the Library of Congress

Panel III Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . 1

Closing Remarks

Rear Admiral Jacob L. Shuford, USN, President, Naval War College . . 1

Participant Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ii
Agenda

Intersessional Conference

A Nation at War:

Reconciling Ends and Means

March 7–8, 2005

Monday, 7 March

0815 Convene in Spruance Auditorium

Dr. Richmond M. Lloyd,

William B. Ruger Chair of National Security Economics, NWC

0830 Welcome and Opening Remarks

Rear Admiral Jacob L. Shuford, USN, President, Naval War Colle

0845 Global Challenges and Choices

Dr. Richard N. Cooper, Maurits C. Boas Professor of Internationa

Economics, Harvard University

0945 Break

1000 Panel I—Competing National Priorities: Strategic and Resource Choic

Dr. J. Michael Gilmore, Assistant Director for National Security,

Congressional Budget Office

Mr. C. Lawrence Greenwood, Deputy Assistant Secretary,

International Finance and Development,

Bureau of Economic and Business Affairs, Department of State

Dr. Andrew L. Ross, Research Professor,

Strategic Research Department, NWC

Moderator:

Dr. Richmond M. Lloyd

1130 Lunch

1300 Confronting the Challenges to National Security

Mr. Walter Russell Mead, Henry A. Kissinger Senior Fellow in

U.S. Foreign Policy, Council on Foreign Relations

1400 Break
1415 Panel II—Global War on Terrorism, Homeland Security, Defense,

and Intelligence

Dr. James Jay Carafano, Senior Research Fellow, Defense and

Homeland Security, Davis Institute, The Heritage Foundation

Dr. David H. McIntyre, Director, Integrative Center for

Homeland Security, Texas A&M University

Dr. Carnes Lord, Professor of Military and Naval Strategy,

Center for Naval Warfare Studies, NWC

Moderator:

Dr. Thomas Nichols, Chairman, Strategy and Policy Department, NW

1545 Break

1600 Seminar Session

1700 Adjourn

Tuesday, 8 March

0830 Reconvene in Spruance Auditorium

Dr. Richmond M. Lloyd

0835 2005 Quadrennial Defense Review: Taking Stock and a Way Ahead

Ms. Michèle A. Flournoy, Senior Advisor, International Security

Program, Center for Strategic and International Studies

0945 Break

1000 Panel III—2005 Quadrennial Defense Review: Issues and Options

Mr. Steven Kosiak, Director of Budget Studies,

Center for Strategic and Budgetary Assessments

Dr. Michael E. O’Hanlon, Senior Fellow in Foreign Policy Studies

The Brookings Institution

Mr. Ronald O’Rourke, Naval Analyst,

Congressional Research Service of the Library of Congress

Moderator:

Dr. Kenneth Watman, Dean, Center for Naval Warfare Studies, NW

1130 Closing Remarks

Rear Admiral Jacob L. Shuford, USN, President, Naval War Colle

1145 Adjourn

2
Opening Remarks

Dr. Richmond M. Lloyd

William B. Ruger Chair of National Security Economics

Good morning, ladies and gentlemen. On behalf of the Naval War College, we welcome yo

our March Intersessional Conference.

We are especially honored by the presence of over 100 guests who are joining us from acr

the country.

We wish to express our appreciation to the Naval War College Foundation (85 members 

here today), through the generosity of the William B. Ruger Chair of National Security E

nomics, for the financial support in the preparation and presentation of this conference.

“The premise of the William B. Ruger Chair is that national security and economic prospe

are inextricably linked. To secure its existence in the international system, a state must m

strategic choices in both peace and war. To implement a strategy, the state must have acces

adequate economic resources. Ultimately, it is impossible to separate economic power and 

litical power. Whatever enhances the commercial, financial, and industrial power of a state 

creases the military potential of that state. Thus, there is a compelling and recipro

relationship between economic prosperity and military power. But the reverse is also true. E

nomic well-being and prosperity do not occur in a vacuum. As Thomas Hobbes observ

there is no production without security. Insofar as military forces provide security, they und

write prosperity.”1

The primary focus of the William B. Ruger Chair of National Security Economics is to supp

research and study of the interrelationships between economics and national security.

Thus, it is only fitting that the first Naval War College conference supported by this chair sho

focus on a most timely and very important theme: A Nation at War: Reconciling Ends and Mea

We are at war. We are fighting the global war on terrorism, conducting counterinsurgency 

stability operations in Iraq and Afghanistan, and protecting the U.S. homeland from direct 

tack. These operations come at considerable cost. Last October, Steven Kosiak, one of our p

elists for tomorrow, estimated that since 9-11, over $500 billion has been spent over and ab

inflation-adjusted budgets on the war on terrorism, homeland security, and defense. About 

of this is very large supplemental appropriations to conduct our war efforts. The proposed 

fense budget for FY06 is before the Congress at $419 billion, a 41 percent increase over 

2001 proposed Clinton budget. And the FYDP calls for annual increases of about $20 billion

We have not just added more resources, but also we have adjusted our national security st

egy, conducted a Quadrennial Defense Review in 2001, explored operational concepts to m

operational challenges, and have changed organizations to better align with our strategy 

meet the challenges to our national security. For example, we stood up a new Departmen

Homeland Security combining over 22 agencies, and very recently we have established a n

National Intelligence Director.

While our economy is growing, we have been spending more than we produce to meet 

competing national priorities. Due to low national savings, we have been borrowing, especi

3

1. Description and purpose of the William B. Ruger Chair of National Security Economics, October 15, 2002
from abroad, which aggravates our trade deficit. Federal budget trends, which a few years 

forecasted budget surpluses, now project increasing budget deficits. We also are aware that 

ginning in the 2010 decade significant numbers of our population will be placing increasing 

mands on the Social Security and Medicare programs.

Thus, it is most timely that we as a nation take stock of where we are today. How have we d

in meeting our competing national priorities? Where should we be heading for the future? 

our ends and means aligned, or do we need to make adjustments? Do we have our strat

right and our resources properly allocated to implement our strategy?

We will approach the issue of reconciling ends and means in a top-down fashion with three set

speakers and panels. The speaker and panel for this morning will focus on Competing Natio

Priorities: Strategic and Resource Choices at the federal budget level. This afternoon the spea

and panel will address Confronting Challenges to National Security and, specifically, the glo

war on terrorism, homeland security, defense, and intelligence at the interagency level.

We will conclude the conference this afternoon with a seminar that is intended to provide 

opportunity for our guests and students to continue a strategic conversation.

Tomorrow morning our speaker and panel will focus on the 2005 Quadrennial Defense 

view, which is currently underway. They will explore what they consider to be the issues 

options that should be addressed within the Department of Defense.

We ask that when asking a question or making a comment, you use the microphone on 

back of the seat in front of you. We will not be able to hear your question if you do not use 

microphone, and we also are recording the entire conference.

All outside guests will be provided with a monograph of the conference proceedings a

later date.

It is now my pleasure to turn the podium over to Rear Admiral Jacob Shuford, President, Na

War College.

4
Opening Remarks

Rear Admiral Jacob L. Shuford, USN

President, Naval War College

Good morning. It is a real pleasure to welcome our many distinguished guests, our stude

and our faculty to what I am sure will be a very thought-provoking conference. Whenever 

entire college community fills this great hall, I feel energized and empowered by the trem

dous intellectual capital in the room!

When I speak of the greater college community, I include, of course, the members of the Na

War College Foundation, who selflessly contribute their time, effort, and resources to help 

achieve our corporate strategic goals. This conference is a particularly good example of the 

our Foundation plays in enabling our good work. Dr. Rich Lloyd, the conference director, is 

chair holder of the William B. Ruger Chair of National Security Economics.

This chair was fully endowed last year by the estate of the late William B. Ruger, Sr., 

founder and chairman of Sturm, Ruger & Company, the largest firearms manufacturer in 

United States. [Photo of Ruger on screen] A legend in Ameri

industry, Bill Ruger is widely recognized as one of Ameri

greatest gun designers, and he had a hand in the original des

and time-honored styling of every firearm his company produ

for over a half-century. He continued to work on new creations 

until his death in July 2002, at the age of 86.

According to firearms historian R. L. Wilson, “Ruger was a t

firearms genius who mastered the disciplines of inventing, des

ing, engineering, manufacturing, and marketing better than a

one since Samuel Colt. No one in the twentieth century so cle

dominated the field.”

Mr. Ruger’s association with, and strong support for, the Na

War College goes back many years. He was a Founder Mem

of the Naval War College Foundation, joining in 1972 as on

176 inaugural members. Four years later, Sturm, Ruger & Co

pany became one of the Foundation’s earliest Corporate M

bers and remains a Corporate Member today. Bill Sr. served 

Trustee of the Foundation from 1980–1987 and is one of only twenty members to receive 

Foundation’s highest recognition, the Meritorious Service Award.

Endowing this National Security Economics Chair is a significant commitment, and it rep

sents the largest gift ever received by the Naval War College Foundation. This gift has fore

changed the Naval War College by providing the first fully funded academic chair that will e

in perpetuity; and this conference is the first of many academic events and research proj

planned with the intent of impacting on the strategic conversation of the Navy on a broad ra

of topics. . . . To fuel the debate, and to create new knowledge! This goal is realistic becaus

the generosity and foresight of Bill Ruger.

Let us turn now to the event at hand. I can think of no topic that has more relevance for our 

tion, at this point in time, than the issue of reconciling the ends we hope to achieve and 

means that we must apply to the effort. America is at war, with a vicious and determined 

emy. Certainly all of us in this room, and most of our fellow citizens, are painfully aware of 

tremendous cost, in blood and treasure, of the Global War on Terrorism. America 

5

William B. Ruger, Sr.

Used by permission
unquestionably, a very wealthy nation. This wealth has been accumulated through two cen

ries of hard work and good investment, and it is one product of a free and democratic society

share of this wealth, in the form of taxes, is allocated by our government leaders to address 

common needs of the population, not the least of which is national security. However, natio

security is but one of many expenses that must be funded by the federal budget. Which bri

us to the heart of the issue for this conference, and to the subject of the great national deb

which is now—more than usual—filling the halls of Congress, on campuses across the coun

and even in local diners in Middle America. What are the broad political, economic, and secu

issues that must be considered when establishing the priorities for allocating the substantial, 

certainly not unlimited, resources of the country? Similar discussions have occurred before, 

we have all probably been involved in impromptu “guns-versus-butter” debates in the p

What we hope to do over the next two days is to raise the level of the debate with the help 

some of the world’s experts on the complex issues that underpin the arguments. You will h

the opportunity to listen to knowledgeable speakers, to engage with noted panelists, and 

cuss the proceedings in small-seminar format. I encourage you to stay engaged, to ask 

tough questions, and to challenge the conventional wisdom.

I know some of the students in the audience are down to the point where they have calcula

the numbers of hours remaining until graduation. What a fitting capstone piece this confere

is to the finest education of its type in the world!

6
Global Challenges and Choices

Dr. Richard N. Cooper

Maurits C. Boas Professor of

International Economics, Harvard University

Thank you very much for that kind in

duction. I’m pleased to be here. Until a 

days ago, I was on your program as a p

elist. I was asked only recently to open 

conference, because my boss, Larry Su

mers, was unable to come. He’s otherw

occupied. I have little doubt that he wo

prefer to be here this morning than do

what he’s doing.

I take it my task is to provide an overall e

nomic context for the deliberations wh

you will have during the next couple 

days, to provide therefore some comme

on the American economy in a global setting that set the backdrop for the choices that will h

to be made in the coming years.

Let me start out by saying that I am extremely high on the American economy. To us

nineteenth-century term from Henry Adams, the U.S. economy is a dynamo. In its most fun

mental dimensions, by which I mean its innovative capacity and its capacity for adjustmen

adaptation to changes and shocks, it is unrivaled. I’m not a scientific specialist, but I try to 

attention to what’s happening. As I see it, in area after area the innovation pipeline is simply 

for the next decade or two. It’s hard to tell what will happen after that—one new idea after 

other tumbling out of the laboratories and the classrooms and into the marketplace and 

proving people’s lives in the next generation, not only in this country but around the world. A

its high capacity to adapt to shocks big and small: the financial system lost hardly a beat after 9

and the collapse of the Twin Towers in Manhattan. It took the airline industry longer to reco

because that affected demand for travel. Other shocks: three years ago, oil was priced un

twenty dollars a barrel. Now it’s over fifty dollars a barrel. We complain about it, properly, 

we are in the process of adapting to it. So at the fundamental level, to say the American ec

omy is in good shape is a serious understatement. It is, as I say, to use Henry Adams’s term

dynamo—a very robust economy.

At the same time, we have some problems. By conventional standards, Americans are liv

beyond their means. In the year 2004 they spent 5 percent more for all things than they p

duced. And that came to a total of around 600 billion dollars, a little more than 5 percent of 

gross domestic product, which I’m going to refer to frequently as GDP. I assume you all kn

that is the economist’s standard measure of the total output of any national economy. Furth

more, this is not a new phenomenon. Americans have been living beyond their means for 

last twenty years, since the early 1980s, although not on the scale of last year.

How can that be? How can a country spend more than it is producing for two decades, with 

end in sight? The answer is that the rest of the world is providing the difference. Indeed, the 

7

The above is an edited transcription of Dr. Cooper’s address.
hundred billion dollars to which I referred is what economists call the current account deficit of 

United States. That’s the sum of all of our imports of goods and services and the payments 

make to foreigners on their investments in the United States, less our exports of goods and 

vices and the earnings that Americans receive on their investments abroad: the current acco

deficit. How can it last for so long? A deficit of over $100 billion a year for well over a decade, 

now over $600 billion. And the answer is that Americans pay for this excess spending by sel

paper claims on the U.S. economy: stocks, bonds, real estate titles, even greenbacks.

How long can it go on, this process of selling claims on the United States? The answer to tha

we do not know. Many people, including Pete Peterson—I know that you got his Foreign Aff

article in your readings—claim that it is unsustainable. The current situation is unsustaina

As Herb Stein, the chairman of the Council of Economic Advisors under President Nixon, o

said, if something is unsustainable, it will stop. But how will it stop? Pete Peterson says in his 

ticle that almost all economists believe that it’s unsustainable. I think that I am responsible 

that qualifier, “almost.” And I want to come back to the question of sustainability, because I 

of a different view from the majority. I think that it is sustainable. I want to distingu

sustainability from desirability. Those are two different concepts. But I will come back to t

Before I come back to the current account deficit, I want to talk about another way in wh

Americans are living beyond their means, and that has to do with the federal government. T

budget deficit for fiscal ’04, the year just closed last September 30th, was $412 billion. It wo

have been even larger—$570 billion—if the off-budget Social Security surplus were 

counted as part of the comprehensive unified budget. And this budget deficit is projected 

continue, not quite on this scale, but for many years in the future. For example, our Congres

nal Budget Office has just done a ten-year projection of President Bush’s submitted budget 

the next fiscal year, ’06. CBO calculates that there will be a cumulative deficit over the next 

years—which is the horizon of their forecast, out to the year 2015—of 2.6 trillion dollars. Th

the federal government budget deficit. That means the government is spending more than 

revenues, and, like Americans in their relationship with the rest of the world, the governmen

covering the difference by selling paper claims, treasury bills and bonds, which add to the o

standing public debt and have both to be serviced in the future and have to be eventually eit

repaid or continually rolled over in the future. The 2.6 trillion dollars that I’ve mentioned does 

include privatization of Social Security, which would add another x, where x is a large num

probably seven hundred or eight hundred billion dollars. We don’t know because we have 

yet seen a concrete proposal. I will come back to the Social Security issue later in my remar

Now, people talk about the twin deficits, the current account deficit—that’s our relations a

country with the rest of the world—on the one hand and the budget deficit, the federal bud

deficit, as if they were inevitably paired. And indeed there is an accounting relationship 

tween them in the national accounts, the GDP accounts of the country. But the accounting r

tionship between them is a very loose one. Not so many years ago, in ’98, ’99, in the year 20

the federal government was actually running a surplus in its accounts, and yet we had the

large and rising current account deficit. So while there is a relationship between the budget d

cit and the current account deficit, it is by no means automatic or one-to-one.

Let me talk, then, briefly about the sustainability of the current account deficit, a few words ab

its desirability, and then come back to its link to the budget deficit and the budget outlook.

I am by background and training and inclination an international economist. So I like to 

things that Americans don’t normally do, which is to look at the U.S. from a rest-of-the-w

perspective, or at least try, as far as an American can do that. And so I ask how this big U.S. 

rent account deficit looks from the rest-of-the-world point of view.

8
Let me say first that this number dominates the world economy at the present time. It is po

ble, although not in fact the case, that every other country in the world could have a surplu

its international accounts, the U.S. deficit is so large. In fact, a few other rich countries —Brit

Australia, New Zealand, all Anglo-Saxon in origin—and some very poor countries have curr

account deficits also. Most other countries in the world have surpluses. But just because so

thing is big and unprecedented is not the same as being unsustainable. I want to look at 

question of “unsustainability.”

Savings in the world outside the United States these days is around seven trillion dollars and 

ing, of course, from year to year as the world economy grows. The United States accounts 

someplace between 25 percent and 33 percent of the world’s output. It depends on where 

change rates are at the moment, but roughly a quarter to a third of the world economy is in 

United States. It is, as I’ve suggested, a very robust economy. Furthermore, about half of 

marketable financial assets—stocks and bonds—are in the U.S. market. In a world that is g

alizing as rapidly as our journalists tell us it is, I ask the question, is it inconceivable that fr

now and indefinitely into the future foreigners would want to put 10 percent of their savi

into the U.S. economy, which, as I say, is between a quarter and a third of world output and 

of liquid financial assets, stocks, and bonds?

Furthermore, the U.S. provides high rates of return in real terms to capital compared to 

other rich parts of the world, Europe and Japan, and returns that are both more reliable—

always higher, but more reliable—and certainly more secure than returns to investmen

many of the emerging markets of the world, where property rights are not well establish

We’ve just seen an example recently in Russia, where a productive oil enterprise has been 

up and sold arbitrarily, it seems, by the government. Argentina is insisting on only partial p

ment on its defaulted bonds. One can find less prominent examples in other countries.

The question that I just posed—is it inconceivable that foreigners would want to put 10 perc

or let’s say 15 percent—because Americans are also investing some abroad—of their savi

into the United States, whether they’re sitting in Sidney or Buenos Aires or Zurich or Singap

or wherever you are in the world? My answer to that question is no. It’s not inconceivable at 

Indeed, when you allow for the fact that the two biggest countries of the world in populatio

China and India, both of which are growing at handsome rates these days and with high sav

rates in both countries, especially in China—both of those countries maintain tight exchange c

trols on their residents. Their residents are not free to invest abroad without permission from t

authorities. As one looks out five to fifteen years, gradual relaxation of the exchange contro

those countries—many newly well-to-do Chinese, many newly well-to-do Indians, would w

come the opportunity to put some small but significant fraction of their wealth into the U

economy, assuming the U.S. economy continues to be robust over this period of time.

So my conclusion is that this deficit, even though it is unprecedentedly large and indeed a do

inant feature of the world economy, is not unsustainable. These savings are going to grow. T

desire to invest in the U.S. economy, I believe, will also continue to grow.

There’s another side of it, which has to do with the technicalities of debt dynamics within 

United States. The counterpart of our current account deficit is foreigners buying U.S. ass

They’re buying claims on the United States, and of course there is a maximum amoun

claims that can be owned by foreigners—namely, 100 percent. That puts a conceptual limi

foreign investment in the United States. The detailed numbers make a difference here. I d

want to go to the blackboard with the equations, but let me just say that if one were to flat-

the $600 billion deficit indefinitely into the future, the foreign share of ownership of U.S. as

would continue to grow for roughly fifteen years. At the end of that fifteen years, net fore

claims would reach about half of the U.S. GDP and then—because the U.S. econom

9
assumed to be growing during this period of time at roughly 5 percent a year in nom

terms—would begin to recede thereafter. There’s nothing unsustainable about that. That d

not reach explosive debt dynamics. Some numbers can reach explosive debt dynamics. 

they’re not the ones I’m talking about. So on neither account—debt dynamics nor disposi

of foreign savings—do I see this deficit as unsustainable.

Is this large deficit desirable? Well, in some abstract sense, no. It’s not desirable that Ame

should be selling such a growing fraction of its claims on the U.S. economy to foreigners 

that Americans are saving as little as they are saving relative to the investments that we make

I want to note in passing that the investment ratio in the United States is among the lowest in 

world, and yet despite that, we continue to grow at a nice rate, leaving aside the recessions 

we have from time to time. I’m talking about long-term trends. We have been for the 

half-century and remain the economic pacesetter for the world. We’re moving the technolog

and economic frontiers outward. We have such a low rate of investment because we get s

good return to newly invested capital in the United States, compared with other parts of 

world. So we’re a relatively low investor, but we generally use our investment productively.

We are an even lower saver, and we in effect draw savings from the rest of the world to sup

ment low U.S. savings. So in some abstract sense it would be nice if Americans saved m

The fact is, although we’ve tried many times, we do not know how to raise private savings. 

only know one way for certain to increase the national savings rate in the United States, 

that is to reduce the federal budget deficit. The government and the private sector are b

dissaving, and the differences are being made up by this investment from the rest of the wo

In the United States we have tried all kinds of gimmicks. No doubt many people in this ro

have entertained one or another of them—IRAs, ROTH IRAs, Section 529 accounts, etc. 

have all kinds of tax gimmicks to increase private savings. None of them have worked in the 

gregate. Americans are smart enough to shift their savings around to take advantage of wh

ever tax incentives there may be. But they have not succeeded in increasing aggregate priv

savings in the United States. We only know one way to increase aggregate national savin

which is the combination of private savings and government savings, and that is to reduce 

budget deficit, as the government was dissaving at the rate last year of four hundred plus 

lion dollars.

But policy is not in the business of comparing reality with abstract desirables. Policy ha

make choices among feasible alternatives. Apart from reducing the budget deficit—I’m goin

come back to that—we don’t know how to increase the savings of Americans.

Furthermore, if you look at the rest of the world, there is excess savings there. In spite of 

ageing that’s taking place rapidly in Europe and Japan—the other rich parts of the world—t

continue to save at quite a high rate, at a rate much higher than they can invest domestic

profitably. So their excess savings come, directly or indirectly, mainly to the United Sta

where investment returns are better than they are at home. China has a very high investm

rate—too high, according to the Chinese authorities, last year and in 2003. But China also 

a very high savings rate and a very poor capital market. Given the option, as I’ve suggested, 

sure there are many Chinese who would be happy to diversify a portion of their savings by 

vesting in the United States if they had the opportunity of doing so.

So there’s excess savings in the rest of the world. Unless the excess savings finds some plac

go, it would produce a world recession—at its worst, even depression. This is the lesson of Jo

Maynard Keynes’ writing in the 1930s that excess savings without attractive investment opp

tunities is a depressionary factor in an economy. So one way to think about it is that the pr

gacy of the American consumer, as many Europeans put it, is actually saving Europe—

other parts of the world—from a serious recession.

10
So desirability depends on what the feasible alternatives are. With the exception of some thi

we can do here in terms of the magnitudes involved, I see the U.S. current account deficit c

tinuing on a large scale—not necessarily a six-hundred-billion-dollar scale, but on a large sc

— indefinitely into the future. It is not, in my judgment, going away soon, no matter how m

articles Pete Peterson writes for Foreign Affairs.

Let me turn, then, to the U.S. budget, which is the one area of policy where, at least in princi

we can make some changes. I’ve already said that the president’s budget just submitted a 

weeks ago has been priced out by the CBO. It has well-defined rules for doing that. It can

change government policy. So the CBO takes the so-called mandatory components of the b

get and does its best job of estimating what they will cost in the coming years, and then it 

rules for carrying forward the discretionary components of the budget.

Let me remind you of the main components, at a high level of generalization. I know we h

many non-Americans in the room. The United States is a federal country, and we—all Am

cans—are taxed by at least three levels of government: the federal government, our state g

ernment, and our local government. States and municipalities both tax and spend. The fo

I’m going to put is on the federal government deficit.

The main component of interest to this group is the defense budget, which is mainly the 

fense Department but includes a bit of the Energy Department, $454 billion in fiscal 2004. T

final figure includes the spending from the supplemental that was passed, insofar as they 

sulted in outlays in fiscal ’04.

The biggest item of the budget at this high level of generalization is not quite twice that. It’s ca

“income security.” It was $818 billion in the year 2004. Now what is that? It is, overwhelmin

pensions: our Social Security system, which is the national pension system—rather stingy by 

standards of Europe and Canada, but nonetheless a comprehensive national system. It inclu

government employee pensions. It includes military pensions. And it includes a number of ot

smaller, income support items, such as food stamps for people who are eligible for food stam

and so forth. Eight hundred and eighteen billion dollars—we’re going to hear a lot about 

major component of that item this year. That’s the Social Security system, and I’m goin

come back and make some remarks on that in a moment.

The second biggest component is health care—$527 billion in 2004. This is the most rap

growing component of the budget. It doubled over the last decade, and there’s no sign of its 

continuing to double in the coming decade. So it now exceeds—which it didn’t a decade ag

the defense budget.

The fourth item (counting defense as the third item) is “other discretionary” items in the bud

That is essentially all government other than defense and other than the income security, 

pension systems and the federally financed healthcare systems—$387 billion. Less than the 

fense budget. The entire U.S. government, putting aside health and pensions, spends less 

non-defense than on defense these days, which is remarkable and, with the exception of a 

countries like Israel, unique in the world.

Finally, since we have accumulated deficits in the past, we have to pay interest on the outsta

ing public debt, $160 billion in 2004. Interest rates are exceptionally low at the present ti

That number can be expected to grow. Given the continuing deficits that I’ve mentioned, 

number can be expected to double in less than ten years, to over three hundred billion, e

without a dramatic increase in interest rates.

As many of you know, but some of you may not know, every year the president presents ess

tially a one-year budget to Congress, and Congress typically appropriates one year at a ti

11
The one-year budget has to be embedded in a five-year notional budget, and that in turn ha

be embedded in a ten-year economic framework. The Congress is not appropriating for ten 

even five years. It only appropriates for one year. But the framework that the Bush budget u

for revenue purposes is GDP growth of 4.9 percent over the next ten years. Defense spend

rises over the next five years at 3.4 percent, nondefense discretionary spending at 1.2 perc

and most of that—well, all of it—is for homeland security. Defense is up for FY ’06. Nondefe

discretionary spending is down in nominal terms. And since, while we have low inflation, 

not zero, that means an even more severe cut in real terms than the cut in nominal terms.

In spite of that, we have cumulative budget deficits, as I mentioned, of 2.6 trillion running ou

2015. Most of that budget deficit is due to the extension of some tax cuts that we had passe

2001 and 2003 and which are scheduled at varying times to expire. President Bush would 

to make those tax cuts permanent, and that’s the main factor that produces the continuing d

cit. It does not count future supplementals, which we know we will have to have. And it d

not count another major President Bush initiative. Privatizing Social Security is not counte

that figure.

Only President Bush’s loyalest acolytes believe that his 2006 budget will pass Congress in 

current form. Too many programs that are congressional favorites are slated to have abso

cuts—sometimes modest cuts, but nonetheless absolute cuts in spending. Congress is made 

of five hundred and thirty-five willful individuals—for the most part with reasonable discip

in the House of Representatives, but with little discipline in the Senate. A reasonable objec

forecast is that after the budget is massaged by Congress, it will not emerge unscathed, an

particular it will not emerge with very tight screws that the president has proposed on discreti

ary nondefense spending. But the CBO is not permitted to speculate about what Congress 

do. The CBO’s forecasts do not take into account what I’m saying will occur, which is that so

of those cuts that have been proposed in the budget will not actually take place.

Now let me talk briefly about the two biggest items in the budget, which is pensions and he

care. There will be a lot of talk in the United States this year about the crisis in the Social Se

rity system, which is America’s national pension system, and how we need to resolve that cr

and how the president’s proposal, which is to privatize a portion of the scheme, will help. T

Social Security system as it exists today has some problems, but in my view they are mana

able problems. Let me just remind you of a few relevant historical facts about the Social Se

rity system and its future, which we’re now talking about.

The Social Security system was introduced in 1935, and the retirement age of 65 was set in 

year. That was seventy years ago. At that time, male life expectancy at birth was under 

years. Sixty-five was the retirement age. Today male life expectancy at birth is about 77 ye

It’s grown by twelve years in the intervening seventy years, more than one year a decade. T

is a worldwide phenomenon. It’s one of the remarkable characteristics of our time, what is h

pening to health and longevity. Contrary to what you sometimes read, these are healthy ye

The World Health Organization has a concept of healthy longevity, as distinguished from lit

birth to death. And while it is true that the last few years of life are pretty unpleasant for m

people, that was also true seventy years ago. Remarkably, it turns out, speaking of the U.S. 

the other rich countries, Europe and Japan, disability in age was worse seventy years ago t

it is today. So these are not only longer lives, they’re healthier lives. Until some years ago in 

United States, and still in most other countries, 65 is the retirement age. It is an amazing p

nomenon. A number that was set seventy years ago in the U.S. in a very different envir

ment—and in Germany in the 1880s, where under Bismarck the original national pens

scheme was introduced. Age 65; life expectancy at that time was about 55. The only peo

who could expect to earn their retirement income under the Bismarck scheme were 

long-lived senior civil servants. It was a skillful con job to placate a newly industrialized la

force, is the best way to put it.

12
We have begun to make an adjustment in this country, and as many of you probably know

existing legislation we have raised the retirement age to 66, and in about two decades to 

That is where it stops. In my view, we should continue this process, one year a decade, at le

until age 70. We don’t have to make these decisions now for all time. Maybe three deca

from now they can extend it further. But starting in 2030, I would raise it to 68; starting in 20

to 69. The advantage of doing this in the long lead time is that you’re not violating anyon

contract. New people coming into the labor force know what’s ahead of them.

Furthermore, this increase in retirement age, which is consistent with the healthy longe

which we’re experiencing, does not even necessarily mean a longer working life, because 

other thing that’s happened over the last seventy years is that the average school-leaving 

has also increased. The average school-leaving age in the 1930s was around 15. Now it’s o

20. These are averages. So we spend more time in our young years in schooling. And we sp

more healthy years in our old years. So my concept is to recognize that reality in our pens

system and essentially shift the pension system measured in chronological age—shift it forwa

It makes a big difference to the economics of the pension system. The Social Security Admi

tration is bound by law to follow existing government policy. So its projections out to 207

the ones that tell you that it’s going to be “bankrupt or insolvent” in 2042—all assume 

change in legislation, because that’s the rule under which government agencies operate.

Another assumption is made that’s quite remarkable. If we had time I would run a poll am

this group: What do you think immigration assumptions are? This is a country of immigra

We have to make some immigration assumptions. We can only follow extant law. So the So

Security Administration, when it does these projections, assumes, decade after decade, flat 

migration of eight hundred thousand a year. That is about three hundred thousand below 

level of legal immigration that we’ve had in the last several years. So they actually project a 

cline in immigration from today, and of course it makes no allowance for illegal immigrat

which we estimate on the order of four hundred thousand a year. Immigration of eight hund

thousand a year, in the context of assumed declining birthrates, so that the labor force by lat

this period is growing only at two-tenths of a percent a year, compared with roughly 1.1 perc

a year over the last four decades. These are dramatic changes in the nature of the growth of 

U.S. labor force, and in my view—but I’m not bound by the government rules that bind gove

ment agencies in making forward projections—in my view there’s a deep inconsistency in th

assumptions. If the demographics turn out to be as they are assumed to be, taken from the C

sus Bureau forecasts of population growth, then the immigration assumptions are surely ba

wrong. We will have immigrant levels probably twice, maybe three times the levels that are 

sumed. It may be that the demographic assumptions turn out not to be correct. One of the in

esting features of the modern world is that birth rates have fallen in all of the rich countries of 

world, but they’ve fallen much less dramatically in the United States than they have in Eur

and Japan. We have various explanations, but fundamentally we don’t understand why th

so. So the Census Bureau, in making its forward projections, is engaging in some speculat

necessarily far into the future.

By making these two policy adjustments—in the retirement age and in immigration—mak

them more realistic, the Social Security problem goes away. It simply goes away. Now eac

these is a big issue. We have a big public debate on them. There are things that we can do, 

would be sensible to do. The Social Security “crisis” would simply go away.

Privatization of Social Security, in my judgment, not only does not solve the problem but a

ally could make it worse. I say “could” because we don’t know. The president has not put 

ward a concrete proposal. He’s put forward a concept, but he has not put forward a propo

In these financial matters, the details of any action are very important. But anyway, in som

its variants that are discussed by some of the think tanks, the privatization of Social Secu

13
actually makes the financial structure of Social Security worse. It does not improve it. It may 

a good idea, but we should debate it on its merits, not in the context of saving Social Security

The part of the budget that in my assessment is not manageable at the present time is 

healthcare budget. It is out of control, and we have no concept for bringing it back into cont

It is a hugely sensitive issue, and for that reason no politician wants to discuss it, and theref

we ignore it until it’s going to slap us so hard financially that we cannot ignore it anymore. T

numbers that I’ve given you do not include an important component of federally funded he

care, which is of special interest to some people in this room, and that is the military healthc

system and the veterans’ healthcare system. Those are in different parts of the budget. T

have both doubled over the last two years. The Defense Department last year spent $26 bil

on health care alone for its active duty members and their families. The healthcare cover

has been extended to reservists and their families. Every time Congress gets into the act, we 

crease the financial exposure rather than reducing it. We did that when we extended Medic

to cover prescription drugs.

The good news is that medical science—it’s part of the innovation that I mentioned earlie

talking about the U.S. economy—is producing one fantastic thing after another as the years 

by. The problem is that as new diagnostic and therapeutic treatments become available, Am

cans think that they have a right to them but not an obligation to pay for them. Somebody 

can pay for them. This is becoming impossibly expensive. It used to be said that there are o

two certainties in life, death and taxes. But with the advances of medical science that we’re h

ing, death is actually becoming an option. Yet it’s a very expensive option. We do not wan

deal with it because it’s going to be an extremely unpleasant debate, but it’s a debate that 

need to have, over what are the reasonable bounds to put on public obligations for health c

in the United States? It is a debate that is beginning to take place in some states but not at 

federal level. So when it comes to serious disagreeable choices, this is the area that I wo

point to more than any other single area in the budget.

It’s implicit in what I’ve said about Congress that I think that we run grave risks in squeezing 

discretionary nondefense part of the budget too much. That is to say, ordinary governmen

the highway and port system, the law enforcement system, the court system, and so forth

being squeezed too much. We went through a similar episode in the early 1980s, you may 

member. President Reagan looked favorably on the Defense Department but generally had 

animus against government spending. We squeezed nondefense spending. Among the folks 

we squeezed were financial supervisors. One result was the savings and loan crisis, which cost 

American public, in the end, a hundred and thirty billion dollars, a totally unnecessary cost 

came about through mistakes both of omission and of commission that took place in the e

1980s, arising, among other things from this animus against nondefense government spendin

You all know the clichés. Bureaucrats are lazy. They don’t work. They get in the way of the s

ous business of the economy, and so forth and so on. And that may actually be true of some 

reaucrats, but I have not found any such bureaucrats in my admittedly limited experien

which had to do with State, Treasury, OMB, and the Antitrust Division of the Justice Dep

ment. Bureaucrats may be doing some things that turn out to be unwise, but we ought to 

bate the wisdom of what they’re doing, not whether they should exist or not.

I spoke longer than I planned to. I just want to say two more things. You’re going to talk late

the day about defense. Part of our problem with the defense budget is that we are falling 

tween two stools. We have a strong legacy in the military services that came out of the Cold W

era. We are having great trouble putting that legacy behind us. It has a tremendous amoun

inertia. And the inertia involves expenditures. At the same time, we’re engaged in the proces

transformation, some of which, I don’t have to tell people in this room, is entirely rhetori

some of which is re-labeling things we were doing anyway—but some of which is real beca

14
the world for the next three decades will be very different from the world it was three deca

ago. And we’re trying to do both, which is one reason why the defense budget has jumped 

percent in the last five years. We need to be much more hard-nosed than we have been ab

our priorities.

We ought to go back to threat-based budgeting. We need some imagination in defining 

threats. That’s okay. But the current capabilities-based budgeting essentially, conceptua

places no limits on the level of spending in the Defense Department. But you will talk m

about defense later today.

Let me close by saying that the GDP of the United States is going to pass twelve trillion dol

this year. The per capita GDP will be above forty thousand dollars. We are unbelievably r

My grandfather, who was born in 1881, could not imagine what our world would be like tod

how well off we are. And yet Americans think of themselves as poor. It’s a paradox. We’re 

believably rich, both by our own historical standards and by global standards. Only a handfu

countries, Norway and Luxembourg, are up there in the same league. And yet we act as tho

we’re poor.

Among rich countries, along with the Japanese, we are the most lightly taxed country. Am

cans—taking all levels of government now, not just federal but also state and local—pay 29 p

cent of GDP in taxation. Japan is slightly lower. European countries range from 33 percen

Switzerland, which is a highly decentralized country, to 50 percent in Sweden. Canadians, 

neighbors to the north, tax themselves at about nine percentage points more relative to their 

come than Americans do. The percentage of personal income that goes into personal inco

tax is actually lower today than it was in 1960. The tax revenues, of course, are higher, beca

incomes are very much higher than they were.

The U.S. economy has grown in real terms by about a factor of four since 1960, over the 

four and a half decades. Americans have, and have had historically—this is not new—a str

aversion to taxation. I think that we need to have in this country serious debates—not ph

debates, but serious debates—over what programs we want, and which ones we want in 

private sector and which ones we want in the public sector, and then tax ourselves to pay for 

programs that we collectively decide that we want.

When our budget deficit was much smaller, the claims we were selling to foreigners—or, to 

it more accurately, the claims foreigners wanted to buy in the United States—were cla

largely on the private sector, not exclusively because a lot of government bonds were p

chased too. On the whole they went into investment. When we can invest capital in this cou

to yield over 10 percent, say, before taxes, in social return, and we pay on the pieces of pa

that foreigners have bought say 8 percent, that’s a good deal all around. Foreigners are be

off compared with what they could earn at home, and Americans are better off getting the m

gin between what we can invest capital at and what we pay the foreigners for it. But when w

producing government pieces of paper that in general—there are a few exceptions, such 

R&D— do not add to the productive capacity of the country, we are simply putting a lien on 

ture generations by selling those claims to foreigners.

For the reasons I’ve given, I don’t see the current account deficit going away for a long time, 

I do think we do need to do something serious about the budget deficit, something we ca

principle do. It’s a political problem. It is not an economic problem. We can certainly aff

more than we now pay for the public services that we’ve demonstrated that we want.

Thank you very much.

15

Dr. Richard N. Cooper

Questions and Answers

Now I understand we have fifteen or twenty minutes for questions and comments from 

floor. Yes, sir?

Q. Dick, good to see you. A two-part question: one, did I understand you to 

that in the five-year estimate from the Bush administration the GDP grow

was projected at 4.9 percent?

A. I think that’s the ten-year projection, yes.

Q. That’s the ten-year projection.

A. Yes.

Q. How realistic would you judge that based against historical standards, an

we were to vary that assumption to some extent, just simply to reflect histor

patterns of growth, what would that do to some of the estimates that are mad

A. Let me say two things. First, in these projections, recessions are not forecast. So this is a 

of capacity. You know, nobody is trying to say that we’re not going to have another re

sion in the next ten years. That would be historically anomalous, actually, to do that

these are growth and capacity projections. They reflect some recovery still remaining fr

the 2001 recession and then steady-state growth. And I think that as a ballpark numbe

in the right ballpark. If you were to ask me, it’s actually a shade on the low side. Remem

this is nominal growth. This is nominal growth, so it includes a little bit of inflation in th

You know, I’m not professionally in this business. But I try to pay attention. I would h

said maybe 5 percent, to choose a round number, rather than 4.9 percent, and ma

even 5.1 percent. And that will reduce the budget deficit—all other things equal, that wil

duce the budget deficit somewhat, because taxes, particularly income taxes and corpo

profit taxes—well, and sales taxes, do respond to the total growth in the economy. S

would not say—contrary to what has been the case in some past budgets, I would not 

that the administration has padded the growth assumptions of this budget. And the C

actually agrees with the growth assumptions in the budget. Yes?

Q. How, if at all, do you anticipate the organization of the Europeans and th

Common Market to affect our economic future?

A. Well, the conventional view with respect to the current account deficit, as I’ve said, is 

it’s unsustainable, and how are we going to get out of it reasonably gracefully? W

again the conventional view is, we probably need—we’ve had a substantial deprecia

of the dollar against many currencies, and the conventional viewers will probably h

some more modest depreciation of the dollar and more growth in Europe and Jap

These are the other big parts of the world economy. China is growing very rapidly. 

China, it’s worth keeping in mind, in real purchasing power terms is still only a quarte

the size of Japan. So it’s coming along nicely, but it’s not yet a big player in the w

economy as a whole, except in some particular commodity markets—copper, for ex

ple. So, to come to your question, what are the prospects for Europe in particular, a

actually don’t think they’re very good. The first thing to say is that Europe is actually v

diverse, and the periphery of Europe—that means Ireland, Portugal, and now 

17

The above is an edited transcription of Dr. Cooper’s question-and-answer session.
Central European countries—Slovakia, Hungary, Poland—are actually doing quite w

And I think in growth terms and, I think, can be expected to continue to do well. But 

core of Europe, which means Germany, Italy, and France—Britain, as usual, is an isl

in the middle of the Atlantic; I mean it is written, as you know, as a member of the Eu

pean Union, but it is not a member of the European currency area. And the British ec

omy has been—also Sweden, which is not a member of the currency area—have b

doing markedly better than Euroland, as it’s called, the twelve countries in Euroland. 

speaking of Euroland, I do not see good near-term prospects. I note with interest that 

International Monetary Fund in its semiannual forecast has just reduced sharply their 

pectation for this year for European growth. And Germany is the dominant natio

economy. France and Italy are next in size. These countries are hobbled by their own 

ulations. They are hobbled by high levels of taxation. I talked about the low levels of ta

tion in the U.S. I want that not to be misunderstood. I do not recommend going 

continental European levels of taxation. But there is actually a lot of room in betw

where we are and where the Europeans are, which is typically over 40 percent. Germ

is 45 percent of GDP in taxation. Schroeder—well, all of the governments exc

Berlusconi are trying serious reforms, and it’s an uphill fight politically. And they are s

ceeding. But they are succeeding at about a fifth the rate at which they should be mov

And then on top of all of that, and that’s of course motivating some of the reforms, the 

mographics are quite unattractive, especially in Italy, Spain, but also Germany, and th

are economies which are not nearly as flexible as the U.S. economy is. And I think tha

absolute decline in the growth of their labor force, which is what they’re moving into st

ing this year, is going to reduce the flexibility even more, because the most flexible pa

the labor force are the new entrants. First, they have the most up-to-date education. T

don’t have the experience, of course. But people in their twenties—they have 

up-to-date education. And they’re mobile. They’re certainly mobile [among sectors], 

they’re more likely to be geographically mobile than more established workers are, es

cially in Europe. And so the continental European economies, for demographic reaso

are losing, I think, an important element of flexibility. Now they remain important sou

of ideas and technological developments. So I am not one to look to Europe to bail us 

of our current account deficit. I don’t think we’ll see that robust growth in Europe.

Q. Sir, a lot of our arguments seem to be based on—sustainment seems to 

based on the robustness of the American economy. So my question 

what’s your estimation of the American economy to be able to sustai

truly cataclysmic event and by that I mean something—orders of magnitu

larger than 9/11, like a biological terror attack or some natural disaster 

the order of the Indonesian tsunami?

A. Well, it’s very difficult to answer that kind of question in the abstract. One needs to 

into particulars, and then what are the particular problems that are created and how 

do we deal with them. I am much less pessimistic about a biological attack than so

public discussion would have you believe. One can imagine many things, of course. 

if one tries to put some discipline on the imagination and talk about something that is 

likely but feasible, my guess is that after some early serious stumbles—because we 

not, as I understand it, not now well prepared to deal tomorrow with a big attack—but 

guess is that after some early serious stumbles, we would actually bring it under contr

think the greatest damage that such an attack would do would be through the psychol

cal impact that it would have rather than the actual devastation that it created. And 

possible that a psychological environment could be created which would lead us to 

some really stupid things. I mean, you can’t rule out—it’s very hard to predict that. 

barring that, if people keep cool heads and keep to their jobs, my guess is that we co

handle that kind of attack very, very well. Now there are folks who would say th

18
tsunami of the Indonesian type off the coast of southern California would be a net ben

to the United States. I’m not one of those, but it is worth noting. Yes, sir?

Q. Just two things: you seem to have indicated that discretionary spending 

undergoing sort of a draconian reining in, and I gather your solution wo

be to raise taxes somewhat. Well, in the first place, discretionary spend

has been growing at very high rates in recent years. I mean some years

percent, 8 percent, 9 percent. Why is it so draconian that after that buil

rate of increase we try to slow it to 1 percent or 2 percent? It would seem 

me that there’s plenty of spending that has taken place in order to take c

of all kinds of contingencies. And as far as raising taxes is concerned, is

there—I mean, you described the American economy as a dynamo. Is

there a high degree of correlation between our low rates of taxation and 

fact that we are a dynamo economy, and don’t we risk upsetting that if 

raise the taxes too much?

A. Well, the key words in your sentence, in my view, are “too much.” I don’t want to r

taxes too much. I would certainly not deny that there is a relationship between the 

bustness of the American economy and the fact that we don’t tax people excessiv

But I would like to remind you that the two countries that have tax rates closest to 

U.S. level—that is, Japan, marginally lower, Switzerland, a bit higher—are not rob

economies at the present time. So low taxes do not by themselves assure robustn

That’s the first—just an analytical point. And secondly, whereas I do think that the 

levels in some of the continental European countries are seriously harmful to their e

nomic performance, as I said, there’s a big difference—about sixteen percentage po

of difference—between where we are and where they are. So there’s—and every 1 p

cent in the United States raises a hundred and twenty billion dollars worth of revenu

today’s level of GDP. So relatively modest increases in tax rates, I think, could be do

Taking us back to where we have been in the past actually could be done—I mean

put it gently—without devastating the U.S. economy—in fact, I think, could be d

[without harm]. Now on your first point, it is absolutely correct, and it’s remarkable an

little-remarked fact that nondiscretionary government spending between 2003 

2004, which, I remind everyone, was a presidential and congressional election y

went up remarkably quickly. There was a big increase particularly in that year betw

2003 and 2004 in a lot of programs. President Bush has not vetoed a single piec

legislation, as far as I know. He’s given Congress its head. And in the United States

alluded to the five hundred and thirty-five congressmen. Many of these individuals 

smart, well educated, well motivated; but as a group, they are undisciplined. And t

cannot be disciplined as a group. We rely—the American system, in my view, relies 

the president to provide fiscal discipline. That’s his job. And I think Bush in the first 

ministration actually failed in this important component of his job, what I consider 

president’s job description. He failed to provide budget discipline. He’s now tryin

the second administration. And I give him credit for that. I didn’t want to suggest tha

program should be cut, but every program outside of some of the component

homeland security goes down in—it depends on how you classify them, but at a cer

level of generalization—goes down in nominal terms. It looks almost like it’s an acr

the-board cut. That is not a sensible way to do budgeting, and it’s not a realistic wa

do budgeting. I mean the White House is smart enough politically to know which p

grams can be cut at least with presidential discipline and which programs Congres

just not going to allow to be cut. And so in that respect—and that’s what I meant to s

gest—it’s an unrealistic budget. It’s an unrealistic budget.

19

Panel I

Competing National Priorities:

Strategic and Resource Choices

Moderator:

Dr. Richmond M. Lloyd

William B. Ruger Chair of National Security Economics

Naval War College

Dr. J. Michael Gilmore

Assistant Director for National Security, Congressional Budget Office

Mr. C. Lawrence Greenwood

Deputy Assistant Secretary,

International Finance and Development,

Bureau of Economic and Business Affairs, Department of State

Dr. Andrew L. Ross

Research Professor, Strategic Research Department

Naval War College

Panel I moderator Richmond M. Lloyd (far right) leads Andrew L. Ross, C. Lawrence Greenwood, and J. Mic

Gilmore in a discussion of competing national priorities.

Opening Remarks

Dr. J. Michael Gilmore

Assistant Director for National Security

Congressional Budget Office

The following is an edited written statement summarized by

Dr. Gilmore in his opening remarks.

The Congressional Budget Office (CBO) has examined pressures on the federal budget o

the coming decades and the kinds of policy choices that lawmakers face as they consider w

to alleviate those pressures. If current policies continue, rapidly rising health care costs and 

aging population will sharply increase federal spending for entitlement programs, such as 

cial Security, Medicare, and Medicaid. In its December 2003 report on The Long-Term Bud

Outlook, CBO presents illustrative scenarios for federal spending and revenues through 2

and describes the implications of those scenarios for the economy. In accordance with CB

mandate to provide objective and impartial analysis, CBO provided no recommendation

conjunction with its analysis.

As health care costs continue to grow faster than the economy and the baby-boom genera

nears eligibility for Social Security and Medicare, the United States faces inevitable decisi

about the fundamentals of its tax and spending policies. CBO has examined a range of poss

paths for federal spending and revenues over the next 50 years and combined them into v

ous hypothetical scenarios. Analysis of those scenarios suggests the following conclusions:

• Driven by rising health care costs and an aging population, spending on entitlem

programs—especially Medicare, Medicaid, and Social Security—will claim a sha

increasing share of the nation’s economic output over the coming decades.

• Unless taxation reaches levels that are unprecedented in the United States, curr

spending policies will probably be financially unsustainable over the next 50 years. 

ever-growing burden of federal debt held by the public would have a corrosive 

potentially contractionary effect on the economy.

• As the U.S. tax system is currently configured, revenues will increase as a share of gr

domestic product. Under current law, taxpayers will face higher rates, with detrime

consequences for work, saving, and economic growth.

• Fiscal policy could be financially sustainable if the growth of health care costs slow

significantly from historical rates. But even in those circumstances, tax revenues wo

probably need to be higher than they have been in the past.

• If taxation is restricted to the levels that prevailed in the past, the growth of entitlem

spending will have to be substantially reduced. Restricting the growth of outlays 

defense, education, transportation, and other discretionary programs would not 

enough to ensure fiscal sustainability.

• Likewise, economic growth alone is unlikely to bring the nation’s long-term fi

position into balance. Moreover, issuing ever-larger amounts of debt or dramatic

raising tax rates could significantly reduce growth.

Before examining the longer term in detail, consider first the budget outlook over the next ten ye

This past January, CBO released its annual projections for federal revenues and spending (or 

lays) in The Budget and Economic Outlook: Fiscal Years 2006 to 2015. (Those projections h

23
recently been updated as part of CBO’s March 4, 2005, Preliminary Analysis of the Preside

Budget for 2006.) CBO’s projections are not predictions of future budgets; rather, they serve 

neutral benchmark that Congress can use to measure the effects of proposed legislation.

CBO’s January projections, which by law assumed no changes to current policies and enac

legislation, indicate deficits averaging about $200 billion a year continuing through fiscal y

2011. Over the period from 2012 to 2015, CBO projects surpluses averaging about $100 

lion a year due primarily to the expiration of tax reductions enacted in 2001 and 2003. (T

President’s Budget for 2006 proposes that several of those reductions be extended, resultin

projected deficits averaging about $260 billion a year over the period from 2006 to 2015.) A

percentage of annual gross domestic product (GDP), the deficits in CBO’s January and m

recent projections, which average somewhat less than 2 percent of GDP, are within histor

experience over the last forty years (see Figure 1).

Because they were based on current law, CBO’s January projections assumed the followi

• Tax reductions enacted in 2001 and 2003 expire in 2010.

• No changes are made to the Alternative Minimum Tax.

• No additional supplemental funding is appropriated for military operations in Iraq 

Afghanistan.

Consistent with CBO’s preliminary analysis of the President’s Budget, extending tax deducti

beyond their currently mandated expiration dates or indexing the thresholds for the Alterna

Minimum Tax would increase projected deficits over the long term. The need to fund military 

erations in Iraq and Afghanistan or other operations associated with the global war on terror

could increase deficits over (at least) the shorter term.

For much of its history, the United States devoted only a small fraction of its resources to the 

tivities of the federal government. But the second half of the twentieth century marked a per

of sustained higher levels of federal peacetime spending. For the past 50 years, federal out

24

Figure 1
have averaged about 20 percent of GDP—about 2.4 percentage points above the average 

the 1950s. In 2003, those outlays totaled $2.2 trillion.

Not only has the level of spending grown, but its composition has changed dramatica

Spending for mandatory entitlement programs has increased from less than one-third of total 

eral spending in 1962 to more than one-half in recent years (see Figure 2). Most of that gro

has been concentrated in Social Security, Medicare, and Medicaid. Together, those progra

now account for about 42 percent of federal outlays, compared with 2 percent in 1950 (be

the health programs were created), and 25 percent in 1975. The share of the budget associa

25

Figure 3

Figure 2
with discretionary spending—appropriations that must be enacted annually by the Congres

has been declining steadily. Defense constitutes about one-half of discretionary spending.

Over the shorter term, projected deficits as a share of GDP are consistent with historical exp

ence—but what about the longer term?

CBO’s analysis of long-term budget trends considers six scenarios composing three potential o

comes for federal spending—high, intermediate, and low—and two outcomes for revenue

higher and lower. This paper displays the results for four of those scenarios—the low spend

lower revenues and low spending/higher revenues cases are omitted (see Figures 3 and 4).

The high spending cases assume that so-called “excess medical cost growth” (growth over 

above that in gross domestic national product) consistent with historical experience contin

to affect Medicare and Medicaid costs. The intermediate spending cases assume excess 

growth slows to 1 percent. The low spending cases not displayed assume no excess cost grow

The lower revenue cases assume that federal revenues compose 18.4 percent of GDP—the 

erage over the last thirty years—beginning in 2012. The higher revenue cases assume that 

eral revenues grow to 24.7 percent of GDP by 2050, roughly consistent with expiration of 

2001 and 2003 tax cuts and no action to change the Alternative Minimum Tax.

The high spending/lower revenue scenario is most consistent with historical experience and ex

ing law. Compared with federal spending of 20 percent of GDP currently, spending in that 

nario (scenario 1) rises to more than 50 percent of GDP by 2050. What drives those increases?

The retirement of the baby-boom generation portends a significant, long-lasting shift in the 

profile of the U.S. population, which will dramatically alter the balance between the working-

and retirement-age components of that population. The share of people age sixty-five or old

projected to grow from 12 percent in 2000 to 19 percent by 2030, while the working-

26

Figure 4
population is expected to fall from 59 percent to 56 percent. As a result, the Social Security tr

ees project that the number of workers per Social Security beneficiary will decline significa

over the next three decades: from about 3.3 now to 2.2 in 2030. Unless immigration or fert

rates change substantially, that figure will continue to decrease slowly after 2030. The inte

tion of that growth in the retired population with the current structure of the program leads C

to project that the cost of Social Security benefits will rise from 4.2 percent of GDP now to 

percent in 2030 (see Figure 5).

The growth of future costs for Social Security, however, pales next to the likely increase

costs for the government’s major health care programs. Rising health care costs are boos

spending to a greater degree than can be explained by the growth of enrollment in those p

grams and general inflation alone. Since 1970, those factors as well as policy changes h

caused annual costs per Medicare enrollee to rise 3.0 percent faster than per capita GDP

average—a difference referred to as “excess cost growth.” If that growth remained high—

example, 2.5 percent, as some of the scenarios presented here assume—the federal gove

ment’s spending for Medicare and for its share of the joint federal/state Medicaid progr

would together exceed 21 percent of GDP by 2050, compared with 3.9 percent in 2003. T

Medicare trustees assume that excess cost growth will decline to 1 percent above the growt

per capita GDP. However, even at that rate, the federal costs of Medicare and Medicaid wo

climb to 11.5 percent of GDP in 2050 (see Figure 6).

The long-term scenario most consistent with historical experience (scenario 1) projects an 

nual deficit in 2050 of about 35 percent of GDP, about 10 times greater than historical exp

ence over the last 40 years (see Figure 7). Under scenario 1, accumulated federal debt wo

exceed 200 percent of GDP; federal debt since 1790 peaked at about 110 percent of GDP d

ing World War II.

Thus, in CBO’s long-term projections, growth in discretionary spending—about 40 percen

total federal spending, with defense composing about one-half of that 40 percent—does 

have a significant effect on the projected outcomes for overall federal spending. Thus, c

straining discretionary spending, even substantially relative to experience over the last 

27

Figure 5
years, would not substantially affect the outcomes in CBO’s long-term scenarios. In those 

narios, defense spending composes a steadily declining share of GDP (see Figure 8).

The 2004 Future Years Defense Program (FYDP) and CBO’s projection of its long-term impl

tions is the basis of scenarios 1 and 4. Last summer, CBO updated that projection to accoun

28

Figure 7

Figure 6
the 2005 FYDP—the results are very similar to the earlier projection used in scenarios 1 an

What are the features of CBO’s most recent projection for defense spending over the long term

Defense obligations grew rapidly between the early and mid-1980s, reaching a peak of $4

billion in 1985 (all funds are in inflation-adjusted 2005 dollars; see Figure 9). Obligations t

29

Figure 9

Figure 8
generally declined during the late 1980s and into the 1990s, reaching about $285 billion 

1997. DoD’s obligations began to rise thereafter, reaching $326 billion by 2001. Obligati

have grown even more rapidly in recent years as U.S. forces have become engaged in ope

tions in Afghanistan and Iraq. In 2004, DoD’s obligational authority reached $481 billion

cluding $68 billion in supplemental funding and $25 billion provided as part of the fiscal y

2005 Department of Defense Appropriations Act.

The 2005 FYDP anticipated that defense resources (excluding supplemental appropriatio

would rise from $402 billion for 2005 to $455 billion for 2009. If the program in the 2005 FY

was carried out as currently envisioned, the demand for defense resources, excluding resour

for contingencies, would average $485 billion a year between 2010 and 2022, CBO project

or about $83 billion more than the 2005 request.

CBO also made “cost-risk” projections (shown by the dashed red lines in Figure 9). CBO p

jects that resource demands including cost risk will average about $498 billion a year thro

2009 and about $553 billion between 2010 and 2022. Those values are about 16 percent 

14 percent higher, respectively, than the amounts without cost risk. Assumptions underly

the cost-risk projections include the following:

• Costs for weapons programs grow as they have since the Vietnam War; and

• The United States continues to conduct military operations overseas as part of the glo

war on terrorism.

30
Guns and Butter: A False Choice

C. Lawrence Greenwood

Deputy Assistant Secretary

International Finance and Development

Bureau of Economic and Business Affairs

Department of State

The following is an edited written statement summarized by

Mr. Greenwood in his remarks.

As we examine the challenges that guest speakers have mentioned today—the war on ter

post-conflict reconstruction of failed states, the implications of the rise of China and India, 

continuing poverty around the globe—we do not face a classical choice of guns or butter, o

Peter Peterson puts it in his article in the September/October 2004 issue of Foreign Affair

choice of “weapons or walkers.” Rather, economic and security objectives are interdep

dent—both are vital to our freedom and must be pursued in tandem. We must ensure that 

economy remains strong so it can support our security requirements. As a corollary, we m

recognize we cannot remain strong economically and militarily by ourselves—we can only 

main strong by being open to the world.

September 11th marked an important change in our national objectives. The president has m

it clear that protecting Americans from nonstate and state-sponsored terrorism here and abroa

our top national goal. Our security, however, is not simply a function of our military strength 

the amount of resources we put into national security, though these endeavors are vital.

National security is just as significantly a function of the openness, efficiency, and competit

ness of our economy and that of the world.

First, our security depends on our ability to generate revenue, including through taxes, to m

the required investment in our defense and security to keep us free and secure. One impor

reason we won the Cold War was because we had an economic model that allowed us to sp

more and spend it better than the Soviet Union. A critical difference between the two models 

our strong commitment to the marketplace and to limiting the government’s role in busines

Second, to keep our economy strong we must keep it open. As we are the world’s largest expo

foreign customers increasingly fuel our growth—exports are equal to about 10 percent of our G

and account for over 15 percent of our growth. When exports and imports are combined, our tr

in goods, services, and investment income flows equals 30 percent of our GDP. Trade has crea

16 million new jobs since 1970, at wages 18 percent higher than in non-trade-related areas.

On average, some $200 billion of foreign direct investment inflows into the United States ev

year builds factories, employs about 5 million workers, and deepens our technology base. F

eign investors also fund most of our government deficit. It is ironic but true that China’s mas

buying of U.S. securities has helped us maintain and increase government spending, includ

for defense budgets, by keeping borrowing costs down.

Third, open trade and investment have helped ensure our competitiveness and prosperity 

facilitating efficient allocation of resources. Trade barriers and investment restrictions lead 

distortions in the economy, including excessive investment in protected areas and less inv

ment in areas of relative competitive advantage. Protecting domestic firms from internatio

31
competition also leads to complacency and poorer performance. For every trade barrier 

have in place, we lower the national welfare and make ourselves that much weaker.

No matter what the rest of the world does, openness of our own economy benefits us. H

ever, we are far better off if the rest of the world is open as well. It is well understood tha

open, vibrant global market that promotes the free flow of goods, services, and capital cre

new customers and business opportunities for Americans.

But it is less appreciated that an open global economy makes us safer. The link between p

erty reduction and the fight against terrorism is a critical one. Poverty does not create terror

but terrorists use failed states as bases for operations and, more importantly, often find wil

recruits among the disaffected, unemployed, and often relatively highly educated youth w

can see the benefits of globalization but live in corrupt and dictatorial societies that canno

will not deliver those benefits to their people. The sense of being left behind economically 

politically can deepen historic grievances and a sense of powerlessness that is grist for the 

rorist mill.

Thus, among the president’s highest priorities are promoting democracy and econo

growth around the world, using an aggressive agenda of trade and investment liberalizat

a fast-growing program of development assistance, and our influence with internationa

nancial institutions.

To turn to the topic of the conference, in looking at competing national priorities as we pon

our budget choices, I believe the choice posed between guns and butter to be a false one 

several reasons.

First, the global payments imbalances and aging of the major economies of the world, wh

Peterson rightly notes are among the biggest challenges facing our nation, were problems 

fore 9/11 and continue to be major problems regardless of the added costs of the war aga

terrorism. What 9/11 and the war on terror have done is to make resolution of these broa

demographic challenges even more vital and urgent. We are not faced with a choice of pick

between our security and caring for our aged, but rather it is now more urgent to do the r

thing and address the economic and social issues related to our demographic changes. 

have less luxury than we did before 9/11 to ignore those challenges.

That is why the president is so serious about addressing the looming crisis of social security 

health care costs. That is why the president wants to ensure that we do not tax our people 

heavily that we stifle innovation, hard work, and growth. In addressing the implications of 

mographic changes, the president believes that taxpayers’ dollars should be spent wisely. A

that is why he recently sent Congress a budget that would cut the deficit in half by 2009 w

meeting the essential need to protect and defend the American people.

Second, some say we face a new guns or butter choice after 9/11, arguing that we cannot aff

to be as open and free as we used to be. They argue that more controls are needed on who 

its the U.S., how goods and services enter our borders and move within them, and who ow

and runs our corporations.

We indeed must do what is necessary to ensure that our immigration, trade, and investm

policies are consistent with our security priorities. However, there can be no trade-off 

tween security and our openness to the world. If we are not open, our economy cannot 

main dynamic and we cannot achieve our growth potential, and that means fewer resour

to devote to our security.

The terrorists want us to choose between being secure and being free. We must reject that cho

32
Fortunately, we can do both, pursue freedom and security. That will require achieving two 

portant objectives: better use of new and existing technologies and new ways of coopera

domestically and abroad.

For example, as we develop and adopt new screening and tracking technologies to ensure s

trade, biometric standards to better ensure safe movement of people, and sophisticated m

ern financial controls to monitor money laundering, these same technologies can be used 

improve the speed and efficiency of commerce, travel, and finance. The progress we are m

ing on the Canadian border is an example of what can be done around the world.

Examples of improved cooperation include increased intelligence sharing among U.S. gove

ment agencies and with trusted allies, new international standards for maritime secu

adopted by the International Maritime Organization, new forms of customs exchanges, as 

have seen in our Container Security Initiative, and increased international cooperation 

tween finance and enforcement officers to stop the flow of money to terrorists. It is not eas

change bureaucratic patterns and develop new bonds of trust needed for true cooperation, 

it can be and has been done.

Finally, the “guns and butter” metaphor does not explain the complementary dynamic 

tween our foreign affairs and defense budgets. There is no competition, if only because of 

huge disparity in size between the two. The foreign affairs budget of the U.S. is a bargain. 

about 1 percent of the total federal budget, we conduct diplomatic efforts around the wo

provide the largest amount of development assistance of any nation, facilitate American b

ness, promote democratic and economic reform, resolve disputes, prevent wars, and prov

humanitarian aid, as we did recently in the case of the tragic Indian Ocean tsunami.

We need to continue to make this modest investment to ensure the critical output that is vita

our freedom and security.

33

What Is to Be Done with U.S. Predominance

Grand Strategy Choices and Challenges

Dr. Andrew L. Ross

Research Professor

Strategic Research Department, NWC

The following is an edited written statement summarized by

Dr. Ross in his remarks.

The United States today is still without a grand strategy. Instead, it has a grand debate, one 

has gone on for a decade and a half now. All three post–cold war administrations have iss

some form of a national security strategy. However, none of the three, including the present 

ministration, have been able to develop broad public and bipartisan political support fo

strategic approach.1

The debate, of course, was set off by the end of the cold war and the subsequent fall of the 

viet Union. Essentially, the question that initially drove the debate was, “What do we do no

During the course of the 1990s, as the reality of America’s strategic position as the sole sup

power sank in, the question became “What is to be done with U.S. predominance?” Not e

9/11 and the subsequent declaration of a global war on terror and the Afghan campa

brought closure to the contemporary grand strategy debate. Neither did the Iraq campaig

anything, events since 9/11, particularly a preventive war against Iraq that was viewed by m

as a diversion from the war against al-Qa‘ida and its supporters, only served to intensify the 

bate. The debate on America’s role in the world even emerged in 2004 as a central and hig

contentious issue in a presidential election, something that hasn’t happened since the U

withdrawal from Vietnam.

Five distinct alternatives have emerged in the U.S. grand strategy debate:

• Neo-Isolationism;

• Selective Engagement;

• Liberal Internationalism;

• Primacy; and

• Empire.

Advocates of these alternatives provide different answers to the question “what is to be d

with U.S. predominance” and focus on different challenges.

Neo-Isolationism

The neo-isolationists would have the United States resist temptation and husband or conserve 

power upon which its predominance is founded. America would pull back from entanglemen

35

1. These remarks draw, and build, upon my work with two colleagues, Barry Posen and Peter Dombrowski. 

Barry R. Posen and Andrew L. Ross, “Competing Visions for U.S. Grand Strategy,” International Security

Vol. 21, No. 3 (Winter 1996/97), pp. 5–53; and Peter Dombrowski and Andrew L. Ross, “The Contempor

U.S. Grand Strategy Debate: Bringing Economics (Back) In,” a paper presented at the ISAC/ISSS Annual

Meeting, Washington, D.C., 29–30 October 2004 (currently under revision).
the world’s affairs. Its obligations are to itself, not to others. Those obligations do not require adv

tures abroad; indeed, those adventures serve only to undermine the country’s security.

For the new isolationists, the greatest challenge facing America is the imperial temptation po

by its preeminence. The United States must, above all, resist yielding to that temptation.

America’s preeminence is both its greatest asset and its greatest vulnerability. It is the sourc

America’s security and its insecurity alike. As we have seen recently, the neo-isolationists arg

America’s preeminence enables it to go abroad in search of monsters to slay. And monste

has found. Activism abroad—prodding, poking, shaping, intervening, supporting and topp

regimes—is only asking for trouble.

In the view of the neo-isolationists, 9/11 is the result of that activism. If the United States had 

been mucking around in the affairs of the Greater Middle East and the broader Islamic worl

would not have set itself up as a target for the likes of al-Qa‘ida. Neo-isolationists would h

responded to 9/11 by taking out al-Qa‘ida and its Taliban host; they would then have brou

U.S. forces home. They would not have declared a broader global war on terror; nor wo

they have engaged in a preventive war against Iraq.

Selective Engagement

The advocates of selective engagement would also have the United States resist temptat

Unlike the neo-isolationists, however, they would actively use America’s predominance. 

they would do so discriminately.

According to selective engagers, the international order is dominated by states and is shaped 

the leading states—the major powers. It is conflict and cooperation, particularly war and pea

among those major powers that must be the primary focus of U.S. grand strategy. Theref

their attention is drawn to conglomerations of power, particularly those found at the two e

of Eurasia.

As a result of its preeminence the United States is, at the least, first among equals. But th

are no guarantees that this fortuitous situation will endure indefinitely. For selective engag

the primary challenge is managing the rise—diplomatic, political, economic, and, part

larly, military—of great power rivals. Today, that is generally thought to mean China. Ro

states must be kept in line, but it is China that is of central concern. Thus a critical quest

arises: Will the United States deal with the rise of China the way a preeminent Britain d

with the nineteenth- and early-twentieth-century rise of the United States or the way Bri

dealt with the rise of Germany?

The central economic challenge for selective engagers is maintaining access to resourc

particularly energy resources. That means the Greater Middle East must be added to 

two ends of Eurasia as the parts of the world that matter most. It also means that nons

actors, namely terrorists, as well as states must be dealt with. Unfortunately, it is not c

that its realist focus on states has left selective engagement well equipped for dealing w

nonstate actors.

Selective engagement’s proponents remind us that resources are scarce. Even a preemin

United States does not have unlimited resources at its disposal. That sense of limited resou

is tellingly evident in the response of selective engagers to 9/11. They argue, first, that 

United States should not have declared war on all terrorists with global reach and their s

supporters, but on al-Qa‘ida and its supporters—those responsible for the 9/11 attacks. S

ond, the United States should not have diverted its attention to Iraq.

36
Liberal Internationalism

Liberal internationalists2 would neither hoard U.S. predominance nor be unnecessarily spa

in their use of it. They would have the United States invest, share even, its predominanc

would be used for distinctly liberal ends—much as it actually has been, not just since the en

the cold war but since the end of WW II. Liberal internationalism holds out the promise of po

cal and economic liberalism for all—if not immediately, at least in the long run. In principl

least, all three post–cold war administrations have been committed to building a liberal w

order. During the Clinton era, for instance, “engagement and enlargement” was about enla

ing the democratic community of free market economies.

The challenge for liberal internationalists is not only harnessing U.S. preeminence on behalf of t

ambitious project but doing so without turning the liberal world order into an American imperia

der. They seek to avoid that risk by employing an approach that is distinctly collective and colla

rative. The cooperation that multilateralism and international institutions facilitate is the founda

upon which an enduring world order can be constructed. The transatlantic democratic secu

community, a community whose origins date to the height of the cold war, is the model for the 

eral project. If such a community could be built during the cold war, why can it not be further de

oped and reproduced in other parts of the world now that the cold war is long past?

Liberal internationalists add nontraditional, transnational challenges and threats to the tr

tional, state-centric challenges and threats emphasized by selective engagers. Foremost

course, as demonstrated by 9/11, is terrorism. Not far behind is the proliferation of weapon

mass destruction. Of particular concern is the prospect of terrorist acquisition and use of WM

This and other transnational challenges such as drought, famine, disease, environmental de

dation, and global warming cannot be dealt with by the United States on its own. Concerted 

ternational collaboration is required. America’s immediate response to 9/11—the Afg

campaign—would not have been constrained by liberal internationalism. Any broader assaul

the scourge of transnational terrorism, however, would have had a more distinctly multilateral 

vor. Regime change in Iraq, if attempted, would not have been entered into without meanin

international support and sanction. And a secretary of state’s hoped-for Adlai Stevenson mom

would not have become a “Roseanne Roseannadanna” moment instead.

Globalization is one of the greatest of the post–World War II success stories. Broadening, de

ening, and managing globalization is central to liberal internationalism. Today’s relativ

open, liberal economic order wasn’t brought about by the functioning of market forces. It 

created by states, with the United States in a leading role. Now globalization must be manag

Just as the United States took the lead in the construction of the post–WW II economic orde

must play a central leadership role in its management—and in its broadening and deepen

As the indispensable liberal power, the United States cannot retreat from this responsibility

Yet the United States is not to go it alone. It continues to require the help of others. That he

best sought through the international institutions and regimes established since WW II. Lib

internationalists argue that the principles, norms, rules, conventions, and processes embed

in the institutions and regimes established to constrain state behavior are neither quaint nor 

solete. They are at the heart of international governance.

Liberal internationalists, like selective engagers, recognize that national resources are limi

America’s resources must therefore be pooled with those of others in collaborative effort

meet transnational challenges and exploit transnational opportunities.

37

2. Full disclosure: The author is a card-carrying liberal internationalist. For the numerically challenged: “Libe

is not a four-letter word.
Primacy

For the advocates of primacy, the answer to the question, “What is to be done with U.S. p

dominance?” is easy: Keep it—and use it! Being first among equals may be good enough for 

lective engagers, but the advocates of primacy simply want the United States to be firs

diplomatically, politically, economically, and, of course, militarily. America’s interests are b

served by American hegemony. The United States must be without equal; the greater the ca

bilities gap (military or otherwise) between the United States and others, the better.

The primary challenge, consequently, is the preservation of U.S. preeminence. What was o

nally thought to be a “unipolar moment” must be perpetuated. That requires preventing 

emergence of a peer, or even a near-peer, competitor. Primacy therefore shares with selec

engagement a realist concern with major power rivals, whether China, the European Unio

resurgent Russia, or, perhaps further into the future, India. It also regards with suspicion any 

dication of major power collaboration that smacks of balancing against the United Sta

Rogue states are to be kept in line. Other than proliferation and terrorism, the nontraditio

threats highlighted by liberal isolationists are of little concern to the advocates of primacy.

The immediate U.S. response to 9/11—the Afghan campaign that eliminated al-Qa‘ida’s 

uge in Afghanistan and toppled the Taliban—was on the mark. Primacy would not necessa

have required either the declaration of a broader global war on terror or a preventive 

against Iraq, however. Both were discretionary. But neither would have required internatio

support beyond a “coalition of the willing.”

The maintenance of U.S. economic hegemony and prevention of the emergence of an e

nomic rival is no less important than the maintenance of U.S. military dominance. Ameri

economic hegemony means American leadership. It is U.S. leadership that is responsible 

the relatively open, even liberal, economic order that exists today. Leadership by the wor

indispensable hegemon is required to maintain and manage that order. Multilateralism and 

stitutions can be exploited to preserve U.S. preeminence and used to rally the support of oth

when it is desired.

Empire

In at least some quarters, empire is all the rage today. It has made a remarkable comeback. 

that long ago, revisionist historians and their fellow travelers employed the term “empire

their critiques of America’s cold war foreign policy. The term was also featured in cold war ch

acterizations of the internal and external Soviet realm. Today it has been resurrected by a m

ley crew of assertive nationalists and neoconservatives out to transform the world. “Empi

for its proponents, is a term that has shed negative historical connotations; it is now a term, 

a reality, to be embraced, even celebrated. After all, America’s empire, unlike the bad emp

of old, is exceptional, liberal, and benevolent. As Max Boot, the Council on Foreign Relatio

unabashed neocon imperialist, has asserted, “U.S. imperialism has been the greatest cause 

good in the world during the past century.”3

For the advocates of American empire, the answer to the question “what is to be done with U

predominance?” is obvious: Build on it and use it. Whether intentionally or accidentally, 

United States emerged from the cold war atop an empire—not simply as the sole superpowe

hegemon, but an imperial power. This is not mere primacy; it is primacy on steroids—and 

fensive realism and hegemonic stability theory gone wild.

38

3. Max Boot, “American Imperialism? No Need to Run Away From Label,” USA Today, May 6, 2003, p. 15
The challenge for the United States is to acknowledge (rather than deny) its imperial status 

to embrace the responsibilities and burdens of imperial leadership and the maintenance 

world order. With great power comes great responsibility. America’s is an indispensable 

pire. Of course, maintaining world order means maintaining the American empire. For the n

imperialists, the new world order is an American order. What is good for America cannot bu

good for everyone else. There is no real distinction between U.S. interests and the interest

the rest of the world.

Globalization is revealed to be Americanization. Its management is the management of im

rial order. Its broadening and deepening is the broadening and deepening of imperial rule

ternational economic cooperation amounts to the rest of the world following America’s lea

The array of principles, norms, rules, conventions, and processes beloved by liberal inter

tionalists and intended to constrain the behavior of states are fine for others. But they canno

allowed to constrain the United States. America must be free to do what is right. Sometimes 

will mean standing alone and acting alone. If that is what is required to advance the caus

freedom and liberty, so be it.

For the advocates of empire, the post-9/11 Afghan campaign, declaration of a global war 

terror, and preventive war against Iraq are all of a piece. Small wars and imperial policing 

what empires do—and they don’t need anyone’s permission.

By Way of a Conclusion

As even this brief survey reveals, U.S. predominance would be employed quite differently 

the proponents of the five contending grand strategy visions. These strategic options are 

formed by divergent conceptions of U.S. national interests, priorities, and values, the c

lenges and opportunities confronting the country, and the resources that are, or should 

available. The quite evident disagreements about the wisdom of declaring a global war on 

ror and initiating a preventive war against Iraq in the wake of 9/11 especially should serv

dispel any lingering doubts that the choices entailed in the continuing U.S. grand strategy 

bate have practical, real-world consequences—consequences that can be measured in treas

and blood. Different choices lead to different courses of action and different outcomes.

During the 1990s, the Clinton administration less than coherently triangulated among selec

engagement, liberal internationalism (its preferred alternative), and primacy. It managed 

muddle through. Under the cover of liberal internationalist rhetoric, the Bush administra

may well be muddling through primacy into empire, despite what initially appeared to be its 

lective engagement inclinations. The advocates of primacy and empire alike would have 

United States embrace the challenges of leadership, the challenges of hegemonic or impe

responsibilities and burdens. But they have underplayed, if not neglected, the challenge of 

assuring the rest of the world. The United States is a superpower unconstrained by the e

tence of another superpower. It doesn’t miss the Soviet Union (nor should it). Howeve

shouldn’t want the rest of the world either to come to miss the Soviets or hope for, and supp

the rise of a countervailing power (or powers).

39

Panel I

Questions and Answers

Moderator [Dr. Lloyd]: All right, it’s now the opportunity for you to ask questions. You can 

rect them in general to the panel, or you can ask specific panelists your question. You can a

make a speech, if you wish. Over there—yes?

Q. Professor Cooper mentioned towards the end of his talk about shifting back 

a threat-based strategy as opposed to capabilities-based, and based on the p

jections that we saw from the CBO and his discussion, do we need to do th

Is that really more cost-effective, by doing that sort of approach to defe

funding? I guess that’s an open question to the panel.

A. [Dr. Ross] I’ll go after this one. It’s sort of a pet peeve of mine. This administration 

talked a great deal since it came into office about the importance of shifting fr

threat-based planning to capabilities-based planning. And now this is a new paradi

A couple of things to say about that. First, I think the point that Richard Cooper m

earlier this morning—with threat-based planning, there’s a way of finding out h

much is enough. When we had the Soviet Union, we did all these wonderful comp

sons between Soviet power and U.S. power. Within Europe we did NATO–War

Pact comparisons. All of us—or most of us, at least—are familiar with that and rem

ber those things. There was always a way to figure out how much we thought 

needed, making various kinds of assumptions about whether it would be in the offe

or defense and the kinds of capabilities you need to take on the Soviet/Warsaw P

especially in the central front in Europe. Even after the Cold War ended, we 

threat-based metrics to use. And we called it regional contingencies whether it was m

jor theater wars or major regional contingencies. We said we wanted to be able to 

usually two of these nearly simultaneously, and yes, you could argue or quibble ab

what “nearly simultaneously” meant. But again, that was threat-based force plann

And again, you could tell, since we had just fought a regional contingency in the e

1990s against Iraq, you could roughly tell how much was going to be enough. With 

pabilities there’s no metric that tells you how much is enough. More capabilities are 

ways going to be better. But a larger point, I think, needs to be made. We haven’t re

left threat-based planning behind because even—how do you know what kind of ca

bilities you need unless you’re thinking about the kinds of threat or challenges that 

might see in the future? And we still talk about threats. We talk about proliferat

They’re just more generic than they used to be. It’s no longer the Soviet Union. It’s 

longer Iraq or maybe North Korea under capabilities-based planning, but we talk ab

generic threats. And we still talk about regional challenges. We talk about rogues, ri

and axis of evil out there. Well, those were the old regional contingencies. We’re 

talking about them. So it does make a difference for resources, because capabilit

based planning is open-ended. Threat-based force planning—it’s possible to figure 

how much is enough. And that’s what defense planning is all about in the end, de

mining how much is enough because you don’t have unlimited resources.

Moderator: Next question.

Q. [inaudible].

A. [Dr. Ross] My sense, we’re probably arguing over both the size of the pie and how it’s 

vided. And within the building of the Pentagon and across the services you’re certa

41

The above is an edited transcription of the Panel I question-and-answer session.
arguing about how the pie is divided. For me, though, I think you’ve got to go bac

grand strategy, the alternatives I was just trying to run through. This goes back to 

U.S. role in the world: how ambitious we want to be. These grand-strategy alternat

have resource implications. If you’re a new isolationist, you don’t need a very large 

fense budget. Four percent is way too big, probably four times bigger than it needs to 

because you’re going to pull back. You’re not going to restructure foreign bases. Yo

not going to have foreign bases. You pull back to CONUS. For selective engagem

you’re going to be a little bit more ambitious, but you’re still not necessarily going to 

spending at 4 percent. That means my main defense resources either don’t have to 

spent at all or they can be reallocated to domestic priorities. The other alternatives I tal

about, liberal internationalism, primacy, and especially empire, are all much more am

tious. Empire especially—you’ve got to fight imperial wars. You’re going to be enga

in imperial policing. And the advocates of empire will say that’s exactly what we’ve b

doing since 9/11—fighting imperial wars and engaged in imperial policing, and the

going to be a lot more of that, and it doesn’t come cheap—especially imperial polic

It’s not clear that we have an army that’s big enough to do the job. Forty thousand m

might not be enough to do imperial policing over the long haul. We’re stretched thin w

just two contingencies, even though we’ve greatly reduced our presence in Afghanis

Iraq is really pushing it for us. So I think we’re both talking about the size of the pie 

the allocation of resources within the pie. And I think that’s important to keep in m

and I don’t think you can leave these sorts of big-picture grand-strategy questions ou

that mix.

Moderator: Over there.

Q. I was really interested to hear Mr. Greenwood allude to a couple of issues 

like to hear him address in more depth, and that is, first, specifically the m

lennium challenge fund as a public investment in national security, a

second, the idea of phase-out of subsidies as a private-sector investmen

national security.

A. [Mr. Greenwood] Thanks. For the millennium challenge account, which was initiated 

the president, I guess, now two and a half years ago in Monterey, Mexico, but only jus

cently funded, I guess, last year—and we’re still hopefully very close to putting out 

first program of that. I think it does relate to our national security. But for those of 

who are not familiar with it, it is a new form of assistance which is based on the per

mance of the developing countries getting the assistance. A country is not eligible unle

meets and can pass certain criteria that we selected from the World Bank and other t

parties—nothing that we ourselves determine, but using third-party objective criteria w

regard to governing justly, investing in people—that is, what kinds of the percentag

GDP go to education, health, and an efficient running of the economy. And essent

countries compete for this money. The idea is to ramp up to five billion dollars. R

now, for this year we’ve asked for three billion. We got a billion—a little bit under a bil

the first year, and a little bit over the second. And what we hope to get out of this, it’s b

cally assistance which is being targeted to and used as a catalyst for growth, and what 

want to try to get away from is the old “throw money at a foreign policy problem” and 

stead have at least one very large part of our development assistance be exclusivel

promote growth in developing countries. And the reason that’s important is that it g

countries an incentive to improve their governance, and improve their accountabilit

their people. And as I mentioned before, I think that’s one of the major problems we h

with terrorism. Poor people don’t become terrorists automatically. I mean in fact, as 

know, most of the hijackers from 9/11 in fact came from middle-class families and were fa

well to do. Obviously bin Laden himself is a millionaire. It’s not poverty per se. It’s the sens

42
historical grievance. It’s the sense of frustration, a sense of powerlessness in their socie

which feed terrorism, and through growth and through development of both econom

as well as governments that are responsible to their people, we hope to address that, 

so it does very much relate to the president’s agenda for fighting terrorism. Phasing 

subsidies is an issue, because it goes to the efficient allocation of resources here in Am

ica and our ability to keep our economy vibrant. It’s a very sensitive political issue.

And we’ve chosen to protect [some industries], and that’s a democratic choice that 

country has made. But it does mean that we have to use resources for that. It takes 

sources. We have offered in the global round of trade talks—what’s called the D

Round, because it was launched in Doha about two years ago—to cut our agricult

subsidies quite significantly. This is essentially a twofer for us. One, we get the efficie

that comes from less subsidies, plus, obviously, less of a taxpayer load or burden, plus 

use it as a lever to get other countries—the EU and Japan, Korea, all have very high s

sidies for agriculture, as well as trade barriers—as a lever to get them to reduce their tr

barriers and to reduce their subsidies so that we have more efficient trade. And that 

helps for development, because developing countries tend to be better in agricult

And right now one of the constraints on their development is, first, the lack of market 

cess in many areas because of trade barriers, as well as trying to compete against 

countries who can subsidize their farmers. And so again, that’s both an economic ben

as well as a benefit for development, and through that to our national security.

Q. Dr. Ross, back at the Current Strategy Forum in 2001, the whole thing w

based on national missile defense pretty much at that point, and the disc

sion of U.S. hegemony seemed to be very specifically appreciated as a giv

stated fact. Then in the Current Strategy Forum 2002 obviously things w

very different. National missile defense was on the back burner. It was 

about global war on terror and homeland defense and security. Do you 

lieve there really is the same degree of U.S. hegemony now as there was 

that time? And where do you project we go forward in the grand scheme

A. [Dr. Ross] I think if you look at the indicators of what I’ve called U.S. preeminence or U

predominance, I don’t think you’re going to see a whole lot of difference between 2

and 2001 or 2002. During times of the Current Strategy Forums you’re talking abo

don’t think the U.S. is any less predominant now. I think what you see with things like 9

and earlier efforts of al-Qa‘ida to go after U.S. assets and U.S. citizens in various way

whether it’s embassies or U.S. ships—is implicit acknowledgment, explicit acknowle

ment that these adversaries, a nonstate terrorist actor, can’t take the U.S. on directl

has to go at it indirectly, and the military calls this an asymmetric threat. And that’s 

surprising. Empires over time, hegemonic powers over time, major powers over t

have dealt with these kinds of threats. These asymmetric threats are not new threats. 

weaker power or actor is going to take you on where you’re strongest. So it’s going to 

to determine what vulnerabilities there might be and go after those vulnerabilities, or p

haps create vulnerabilities. And one of the things we’ve been doing, obviously, since 9

is trying to address those vulnerabilities. We created a Department of Homeland Secu

So I don’t think that 9/11 and what’s happened since is an indication that the U.S. is 

less predominant. What we’re seeing is simply yet again an example of how a m

power is targeted by those who are discontented but can’t take on that major po

directly.

Q. This question is for Mr. Greenwood. It appears, and critics say, that in 

last decade or two diplomacy has taken far less of a role in forming our p

icy toward the world. I’m asking if you think that the 16 percent of our b

get we spend on military will be more effective if we spend not 1 percent 

43
2 percent of our budget on diplomacy in the State Department. Asked 

other way so that the answer is specific, how would the State Departm

spend an additional 1 percent of the national budget?

A. [Mr. Greenwood] We’ve got some old embassies to rebuild, so that will be one plac

start. Actually, to address the first part of your question, I think because of the variou

actually, let me take one step back, because it goes to these categories that Andy 

laid out. This president has decided to use the American influence that comes fr

both—well, in particular from the projection of military power in a very forward-lean

way. I mean, he wants to use American leadership in order to both protect our intere

which he sees as tied to making the world a better place, but it fundamentally com

down to protecting our national security interests. And I raise that only because I’m 

sure where that fits in here. I mean we’re obviously—if it wasn’t for the word liberal, 

eral internationalists would have been a great word that I could have aspired to. T

liberal part bothers me. But where this administration is very internationalist and wil

to use our leadership around the world, that does definitely make it different from 

previous administration, in particular the first Clinton administration, in which 

were—I mean in the post–Cold War period—clearly a hegemonic power and, but 

really that interested in using that leadership internationally, much more intereste

the domestic issues, and that was the choice they made. Nine/eleven obviously ha

lot to do with the change, but I think that even as—this president even came into off

even before 9/11, with much more of a sense of a leadership role that we had to pla

the world. And we played that not just through military operations. I mean, we’ve ha

very vibrant and a very aggressive diplomatic effort from the beginning. The way tha

for example, I mean, Asia, which is what I know the most, and our relations with Ch

have developed, have really fundamentally been—particularly after the spy plane i

dent—had been diplomatic in nature and have taken a relationship which was v

rocky and made it a much more sound relationship. That I have to give Secre

Powell almost full credit for. I mean he was the one who did that. And so it was, agai

diplomatic effort. In terms of whether we can use more budget, of course the answe

yes. Whether we need a doubling of our budget, I mean I’d have to say no. I don’t th

we could spend twice as much as we spend now. We would like to see more deve

ment assistance. We have, as I mentioned, a five-billion-dollar target for MCA. W

less than that now, partly because of slowness in getting—we’re still ramping up 

program. But at some point we’re going to want to see the five billion per year, and 

will be an important increase in the foreign affairs budget. And that will be importan

our fulfilling the promise that we’ve made to developing countries—that if you do 

right thing, we’ll be there with the financing for you to help you make this happen. A

that’s the pledge we made to them, and we need to keep that—and then in other ar

that I’m not as familiar with, nonproliferation programs and things, again, very vital 

we’re going to need to continue to fund. But I don’t think a huge reorientation of 

scale of magnitude of 1 percent versus 16 percent is really the change. And that’s w

don’t see it as this is a competing priority. We need to do better with what we have, 

we need some increases, but we don’t need a change of a scale of magnitude of 

sort.

Moderator: Thank you. In the far corner there?

Q. Thank you. I will address my question to the first speaker. It’s hard to 

your name, sir, from this angle, and I apologize for that. It is not that unco

mon a point of view, at least throughout America’s adversaries, that 

United States is defending external oil resources. I know that many of 

distinguished guests over here have traveled throughout Europe, and ma

44
of them have completed their service or deployments within Europe. In 

face of globalization, if we just theoretically made an experiment and 

creased the price of gas in America, just to the European level, which 

roughly speaking just twice, could you speak a little bit about how it wo

impact both internal affairs in states and currently related to world securi

Thank you.

A. [Dr. Gilmore] First of all, I have to warn you I’m the only assistant director in CBO w

isn’t an economist. Some people think it’s a good thing, and some people not. So 

not as well equipped to answer that question as some of my colleagues might be. Th

are budget options that CBO has published every couple of years for the last few ye

that consider increasing—put forward the idea of increasing taxes, for example, on 

troleum products. Now all these options are not recommendations. They’re just opti

for people to consider, and they’re argued pro and con. Maybe the most direct wa

address the question is to note that the projections that I showed you—the long-t

projections that I showed you didn’t capture the increase in oil prices that have 

curred recently, but the more recent ten-year projection that I showed you does

though it assumes that over the long run prices will decline somewhat, based on wh

going on in some of the futures markets now. But the long-term projections th

showed you really wouldn’t change noticeably at all if we captured the recent increa

in oil prices, which were quite significant relative to where they were at a couple of ye

ago. So I guess it goes back to this point that Professor Cooper was making. There

lot of resilience in the economy, and there are a lot of adjustments that are made, 

yes, there would be the potential for somewhat higher revenues; but that kind of 

crease in taxation or that kind of increase in oil prices really wouldn’t affect that sig

cantly on most of the projections that I showed you. So that’s sort of an indirect wa

answering your question. That’s about the best way that I can do it.

Q. A question for both Mr. Greenwood and Dr. Ross: can you talk about wh

we are if the current administration is more towards either primacy or e

pire; where the UN fits in at this point? Where the United Nations fits 

where the U.S. is with the United Nations?

A. [Dr. Ross] The administration spokesman defers to—what—all he knows is a critic, 

that’s all right.

A. [Mr. Greenwood] I want to come in after.

A. [Dr. Ross] I know. It’s always—I can still get the last word. Where does this adminis

tion fit in? I think that’s an interesting question. And to put that into context, let me 

back to the previous administration. I think the Clinton administration came in wan

to be liberal internationalist. And for the most part they didn’t call it liberal internat

alist, but that’s the term. Wilsonian, perhaps, might be a term that they’d prefer, b

think Tony Lake, especially, came in wanting to do that; there were domestic obstac

and there were international obstacles to the U.S. playing a liberal internationalist 

during the 1990s. And there were resource constraints domestically. And there w

political restraints, because they lost Congress. And that made it more difficult to fol

a liberal internationalist agenda, which is a very ambitious agenda, like this adminis

tion’s. But remember, for them, for the Clinton administration, what Tony Lake 

others talked about was building a community of free-market democracies. And th

what U.S. strategy was all about. It actually sounds a lot like the Bush administrat

The means, however, I think were somewhat different. The Clinton administration 

pursuing much greater emphasis on multilateralism than I think that we see now—

that we left it behind, but I think more emphasis on that during the 1990s than we h

45
now. The Clinton administration, despite its predilections towards liberal internatio

ism, had to be selective about it, but also at the same time talked about what amou

to primacy. The U.S. was the indispensable nation, according to Madeleine Albri

And a great deal of emphasis on U.S. leadership—i.e., U.S. primacy.

This administration—I think that we’ve actually seen a shift, and I think 9/11 did mak

difference. It’s allowed people within the administration—sometimes they had b

characterized as a sort of nationalist. Sometimes they’re characterized as n

conservatives. And I don’t want to get into a debate about what those terms mean. 

clearly we’ve seen this administration, especially since 9/11, be very assertive about 

U.S. role in the world. I don’t think that’s what they came in wanting to do. Remem

during the campaign, then-governor Bush talked about a very—the U.S. pursuin

humble foreign policy. If you take a look at some of those things that Condi Rice tal

about and wrote about—she had a foreign affairs article before the administration t

office. It sounded a lot like selective engagement with a dash of primacy. Since 9/

think that you’ve seen a very assertive administration, quite willing to stand alone. 

clearly primacy, and some critics I think will say that we’re tending in the direction 

empire. Or if not imperialist behavior, at least imperialist behavior in the way we

dealt with especially—you asked about the UN; I’ll finally get to it—especially in h

we’ve dealt with the UN.

Again, critics of the administration would say that in the run-up to the Iraq war—s

Bush and especially Colin Powell went to the UN, to the UN Security Council for s

port. But look at how they went to the UN. We went saying we’re going to take do

Saddam Hussein. We’re going to deal with the WMD programs that we think are th

Colin gives a long presentation before the UN laying out what we thought was the 

dence of existing ongoing WMD programs. But the message all along was, “This is w

we’re going to do. This is why we’re doing it. We’re going after Iraq. We’re going to t

down Saddam Hussein; do you want to come along for the ride? Fine. But we’re do

it with or without you.” And there’s been a lot of this sort of you’re either with u

you’re against us. And to some extent maybe that’s justified after 9/11, but you’ve 

to be careful about, I think, how the rest of the world is reacting to this. The U.S. is 

only superpower, ever since 1989 after the Soviets went away—the only superpow

We’re really happy about that. We don’t miss the Soviets. And it seems to me we’ve 

to be careful about not letting the rest—not putting the rest of the world into the posi

where they might miss having another superpower around.

A. [Mr. Greenwood] Just two points. One is—and you mentioned that the current adm

istration is somewhere between U.S. primacy and empire building. And I would disp

that, and that’s why I mentioned this earlier, is I’m not sure where you put the admi

tration. Certainly somewhere between liberal internationalist and U.S. primacy in 

view. I guess the major distinction, though, is that, at least as Andy described it, the i

of U.S. primacy and the idea that a government would be working hard to keep 

primacy—it’s not the primacy per se which the president and administration c

about. It’s the fact that since we have that primacy, we have a responsibility both to 

own people and to the world to fulfill. And it’s not the primacy itself that’s the end. 

how you use that and how you use American leadership around the world. And I th

that the current administration does differ, but I don’t want to get into partisan sin

worked for both administrations very happily. But there was, I think, a difference of 

weight of the foot, in terms of the two administrations on that point. In terms of the U

I think we have wanted to work with the UN. We still want to work with the UN. We 

work with the UN. In Iraq, just to keep in mind, we did work with the UN for twelve, t

teen years, you know, of resolution after resolution, all of which Saddam Huss

46
ignored. And it wasn’t a sudden decision to take care of the situation the way we 

And so we did—we tried to work with the UN on that. As was said, this is an adminis

tion that is willing to stand alone when they think that it’s the right thing to do, and s

this particular case that’s—we didn’t stand alone; we had a very large coalition. But 

did go without the UN’s final blessing, although as you know we believe that earlier 

resolutions covered our military operation.

But looking at today, we are working with the UN and with our partners in a numbe

areas. First, partners—North Korea—we’re working very closely in the six-party ta

Look at the Iran nuclear talks. We’re working very closely with the Europeans—in f

letting the Europeans take the lead; in North Korea, letting the Chinese and the So

Koreans take the lead. So we are—we aren’t doing things unilaterally all around 

world. We are working with our friends and partners to take care of very serious pr

lems. With the UN I think the most recent example is tsunami relief. We’ve wor

hand-in-hand with the UN and the humanitarian relief part of that. We worked v

hard to put them in a leadership role in coordinating that, even brought them and 

military forces together to coordinate the humanitarian relief effort. It’s just kind 

very concrete way of working very closely with the United Nations.

A. [Dr. Ross] [inaudible] [To follow up] just a second. Not to get the final word, but to r

force, I think, your point—obviously we had differences about Iraq with a lot of ot

countries around the world within the context of the UN, and the UN Security Cou

and our NATO alliance relationship. But I think that even while we had those disag

ments on Iraq, within the UN system we continued to work with other countries o

whole range of issues. And we continued to work with the French and the Germa

our toughest critics on Iraq, on a whole range of other issues even while we disagr

strongly on Iraq. And I think that’s to the administration’s credit. And also the admi

tration to some extent, I think, is just recognizing reality—that to solve some of the ot

issues that we care about, we have to work with these countries even though we 

agree on something that’s very important to us.

Q. Thank you, just one quick follow-up question. Do you think we would be be

off in the world if there was another superpower, sort of as a balance and buffe

Moderator: There’s several other hands up, so I think we’re going to pass by that one 

now. Way in the back, can you use a microphone by grabbing one?

Q. My question is to Mr. Greenwood. And my question is regarding an is

which concerns the U.S. economy as well as the economy of my country a

. . . other emerging economies, and that is the issue of outsourcing. Now, 

tensibly, outsourcing seems to be an activity which results in loss of U

jobs and loss of U.S. revenue, but the competing school of thought sta

that since outsourcing is taking place on jobs at the low end of the sp

trum, hence actually it’s freeing up funds for the U.S. companies to 

those funds in R&D and for ultimately the U.S. to gain the technologi

edge which it has. So the question is, how does your outsourcing jell i

the U.S. economic focus? Is this trend likely to continue? And second

this beneficial for the U.S. economy and for other economies? I mean is 

win/win, or is it a win/lose situation?

A. [Mr. Greenwood] The last part of your question is the easiest to answer, because I th

it is a win/win. The information technology revolution has obviously changed lot

things and has been a huge benefit for the United States—the major reason we’ve 

very large productivity increases through the nineties and into this century. And it 

47
continue to be important. And part of the information technology—one of the thi

that has come out of the information technology revolution is the ability to outsou

services such as call centers and accounting and even software writing. This is not n

essarily a new thing. In fact, I remember even twenty years ago, when we used to 

translations of UN documents—I was working in the UN—with a UN organizatio

the time. And they would send the translation. They would send it into another t

zone as time zones went around the world so that you could complete a meeting 

day, and then the next morning you would have a completed translation done b

number of translators around the world. And by—those were fax machines. So this i

necessarily a brand-new thing. But obviously information technology makes it a 

cheaper. It makes it a lot more efficient to do that kind of thing. And it’s obvious

huge benefit for countries that have high levels of education, have good governa

and companies looking to take advantage of that, and India is one of those count

that’s been very successful in doing that. A number of entrepreneurs have been q

successful in getting into that business. And so it’s, I think, just one of the ways that 

economies are becoming more integrated. We’re not—it’s a market phenomenon. 

not—this government is not out there promoting outsourcing. We wouldn’t do that

just simply a market phenomenon that I think overall leads to greater influence—

sorry, greater efficiency and growth. I would say that of course America benefits fro

lot of in-sourcing because the same revolution, of course, means that we also do 

kind of work using the information technology, using the Internet and using new in

mation technology, of course, as service exports from America. And of course our 

vice export—that, unlike our account in goods, is in surplus. We export more than 

import in terms of services. So where this is something that we’re good at, we hav

comparative advantage in, I don’t think we are under threat.

Moderator: Over here?

Q. Yes, I’m wondering if any of the panelists would want to comment on w

I’m going to call the repackaging of American strategy that has been evid

in the initial weeks and months of President Bush’s second term. I am v

struck by the fact—and several journalists with whom I’ve spoken to lat

have acknowledged this as well—that the White House almost never ma

reference anymore to the National Security Strategy document of Septe

ber 2002. It was a very maximal document. It talked about enormous d

gers to the United States and so forth even as it also made reference to so

possibilities about amicable great-power relations. So my question wo

be, (a) what happened to the national security strategy in the United Stat

Does it apply in other cases? And if it doesn’t, what is the alternative? 

cause the fundamental question, it seems to me, is that in President Bus

inauguration speech, in Condi Rice’s confirmation testimony, reference w

clearly made to those that were regarded as part of a legitimate order

trend towards democracy and freedom. It’s all well and good. The quest

becomes, under what circumstances and how do you deal with the variety 

those that you deem outside the pale? Because, to be frank, as I have look

at the world, as I understand it, the only case I can identify of where sta

formerly regarded as rogues are now regarded as states with whom you c

deal fully are two cases where the United States overthrew foreign gove

ments—that is to say, in Afghanistan and then in Iraq rather. And then y

know, with some argument about Libya—although, frankly, Libya, ot

than giving up a few chemical weapons and bits and pieces of nuclear te

nology not really in the weapons program—is now free to go about its bu

ness as it would have wanted to before, except now it can sell its oil. 

48
what applies here as a grand strategy for the United States, which may s

gest some constraints on what we do, but it’s not clear to me.

A. [Mr. Greenwood] To accomplish what we’ve set as our national foreign policy ob

tives—obviously national security, War on Terrorism—and as part of that, we are pu

ing for and promoting democracy, economic growth around the world. And I gu

I’m—we don’t have as the number-one tool that we pull out of our pocket military in

sion. I mean that’s a very unusual situation, and it’s not a tool that we used very m

in the past, and we probably won’t be using it that much in the future. The main way 

do this is the way we do most of our work, which is the president, the secretary of st

and the rest of us go out and we try to push people to do these things. And we have p

grams, and a good example is what we’re trying to do in the Middle East now. We h

something called the Broader Middle East and North Africa initiative, BMENA. 

something that the president launched in [inaudible] at the G8 meeting last year. An

is aimed at trying to promote democracy, market economies, growth in the Mid

East, and—the greater Middle East, which includes—we include Pakistan, Afghanis

and North Africa in that definition. We’re doing it with a number of, again, traditio

tools of diplomacy and assistance and dialogue. And you say we may not have succ

in doing that. But I don’t think I would agree. I mean, it’s just only beginning. We

seen Libya. We’ve seen—I mean, look at the Middle East today. And it’s really quite 

markable. Now, maybe—I don’t want to overstate what’s happened, because the

obviously a lot of events that happened in a very short period of time, and you 

over—you can exaggerate the significance of it. But that’s a fact—and the prog

that’s being made between Israel and Palestine and the progress that’s being mad

improving the governance of the Palestinian Authority. You have the assassinatio

Hadidi and what’s happening between Lebanon and Syria. Again, it won’t 

straight-lined, but it certainly is improvement. You have Mubarak announcing n

more open elections in Egypt. Again, these aren’t all linked to us. This is a lot of wh

happening in the region. But we’re trying to be a positive force, pushing and help

those countries move forward. And I think that’s leadership, and I think that’s what 

president means when he talks about promoting democracy and growth around 

world.

A. [Dr. Ross] I think that’s an interesting set of observations and questions [posed in 

question]. And I think only time is going to tell whether this repackaging is rea

whether it’s simply a repackaging. At this point, it sounds like a kinder, more gentle U

primacy than what we saw, especially with Iraq during the run-up to Iraq and the c

duct of the Iraq war. And I think you pointed out yourself that the national security st

egy reads as if it was written for Iraq. How many more cases like this are we goin

see? Well, you know, thus far we’re handling North Korea very differently than we h

dled Iraq. And we’re actually—the papers this morning—there’s evidence of the fal

of how we handled Iraq coming to the forefront already. And the Chinese have co

online saying, well, we’ve got questions about your intel on North Korean nuclear 

pabilities. That’s not too surprising after we didn’t find a whole lot in Iraq, which we 

viously laid out as a primary justification for going into Iraq. I read the repackaging 

sort of a kinder, more gentle U.S. primacy and maybe a recognition that, yes, the U.S

a superpower unconstrained, but existence of no other superpower—we like that. 

don’t miss the Soviet Union, and the administration is beginning to recognize that 

shouldn’t want the rest of the world to miss it, either.

Moderator: We’re now coming to the end of the time for our first panel.

49

Confronting the Challenges

to National Security

Walter Russell Mead

Henry A. Kissinger Senior Fellow in

U.S. Foreign Policy, Council on Foreign Relations

Thank you for the invitation. It is an ho

to be invited to address a group like this 

at a place associated with Admiral Mah

who set the gold standard for strate

thinking in an American context. It’s a l

intimidating as well. I want to express h

grateful I am that you’ve decided to r

Power, Terror, Peace, and War right bef

the paperback comes out. Had you o

waited a few more months—but no, you 

bought the hardcover edition.

What I thought I would do today is giv

quick tour of the big picture of what 

United States is trying to do in the world, how I see where we are in that in some of the big ar

and then in the Q&A we can get a little bit more specific. So I’ll try and move through this 

picture introduction as fast as I can.

It’s interesting to try to think about what the American project in the world is, what our fore

policy is about and what we’re trying to do. For one thing, it’s interesting because we seem 

be trying to do a lot of different things, and the answer you’ll get about what we’re trying to 

will be very different depending on whether you ask Amnesty International, the Republi

Senate Caucus, or the Marine Corps. And the fact is, we’re trying to do a lot of things simu

neously, because we are a complicated country. Microsoft is trying to do one thing in the wo

the Department of Defense is often trying to do three or four things of its own; the State Dep

ment has a project that may or may not cohere. The same moment we’re trying to be real n

to Pakistan to gain their cooperation on the War on Terror, we might be releasing our ann

report on human rights that calls them dirty evil dogs. So our foreign policy is extremely con

dictory. Looking at American foreign policy is a little bit like trying to look at the track of a 

nado across a landscape. But I think there is a method in our madness, a kind of pattern to w

we do even though we have all these contradictions.

Some people say we’re trying to build an American empire. You can use that word, but I thin

creates as much confusion as it does clarity. I sometimes like to call our American project La C

Nostra—our thing that we’ve been working on. And the thing about our thing, La Cosa Nostra

we got it from the English. What we’re basically doing in the world is taking over the old busin

of the UK at being what Colonel Edward M. House called the gyroscope of world order.

Britain used to try to maintain this international system. We are doing the same thing in mor

less the same way. We’ve altered it somewhat so that it fits the new times of the twenti

twenty-first century. And it fits our own values and interests in a way that Britain’s didn’t. 

51

The above is an edited transcription of Mr. Mead’s address.
still, if you look at the world today, what you would see is a kind of Anglophone Order vers

2.0. And so, what are the clear pieces of this?

First, the foundation of American strategy is and remains strategic dominance in the West

Hemisphere. We just do not want to be dealing with great-power rivals in our own hemisph

And that gives us much more freedom of action in dealing overseas.

The second keystone element of what we try to do under Republicans and Democrats in 

nineteenth century and today is to maintain a balance of power in the chief geopolitical thea

of the world, or what we believe to be the chief theaters. That would be the fringes of the E

asian landmass—East and South Asia on the one hand, Europe on the other—and then the 

patch in the middle. They are seen as vital interests of the United States, and we do not wan

see a rival power or coalition gain control of any one of these. We can dominate them if ne

sary, because we can be trusted, and we know that. But we have our doubts about other p

ple. You look at American foreign policy in Asia, and you can see going back practically to 

War of 1812, we’ve had a balance-of-power policy there. First we didn’t want England to g

ble up China and the rest of East Asia the way it had already gobbled up India. So we star

working with the Thais, with the Chinese, and with the Japanese. This is why Commod

Perry went to Japan. He wasn’t just wandering over there and got lost. We had a foreign po

reason for him to be there. And when Secretary of State Daniel Webster decided he should 

that, there were reasons. And it was that we wanted to encourage these Asian countries to 

velop, to open up, to become more powerful, and to modernize so that the British couldn’t t

them over. And then, when Japan rose to be the strongest, we started balancing against th

When, after the end of the Second World War, we didn’t have to worry about balancing aga

Japan, we started balancing against the Soviet Union. Now our central concern is pursuin

balance-of-power policy with China. It’s a very consistent explanation of what we’ve been 

ing, and my guess is it’s what we’ll continue to do.

Now this second element, the balance-of-power objective, requires a basic force structur

means that we have to have the ability to project force globally. In order to do that, we hav

have a secure command of sea and air supply lanes. And that has certain consequences, b

in our diplomatic strategies and in our priorities for military planning. Again, I think this g

back pretty far. But those are the first two elements.

The third element is a little bit different. Once we have this balance of power in all these pla

and once we’ve kept the Western Hemisphere safe from any great-power rivals, then we s

thinking about building a global economic and trade system that will keep us rich enough so 

can afford the military investments that are required to maintain the system. We try to hav

system that pays for itself in that way. And again, this is what the British did. Their rule over 

sea gave them command of world trade, which made Britain rich and enabled it to keep 

navy big, until finally the whole thing grew a little bit too big for the British to keep up.

The fourth thing we do is use the trading system as an element in international politics, hav

built it ourselves. And we do this in two ways. In peace, we use the system to seduce and ent

gle other countries into accepting our system. For example, take China: when China th

about, “Do we want to challenge the United States for world domination?” they’ll conclu

“Well, you know, maybe later, we’re getting richer now. This economic system is working 

us.” And at the same time they’ll understand, “If we had a confrontation with the United Sta

we would instantly have mass unemployment in China, and all of our factories would close 

cause we would have no one to sell all this stuff to. Our entire economy would be disrupte

On the one hand, this economic system that works for other countries as well as it works fo

gives them positive incentives to cooperate and maintain a peaceful world, and it also g

them negative incentives not to break with us.

52
But there’s another element to this exercise of power as well. Should other countries go 

route of confrontation, we deny them the access to the raw materials and to the markets 

they are used to and, to some degree, have grown to depend on. If you look at German 

Japanese strategy in the two world wars, much of it was about access to oil. And a lot of the 

strategic choices that both countries made, including the attack on Pearl Harbor, had to do 

mately with questions about oil. Having integrated these countries into an economic sys

where they were used to depending on the flow of goods, investment, and raw materials, Am

ica used that system as a weapon of war by cutting them off while maintaining its own acces

such necessities.

This is one of those Anglo-Saxon power secrets that the British passed on to us. This An

American system has been producing steady victories since the late seventeenth century, w

the British went to war with the French in 1689, after the Glorious Revolution.

Finally, you bubble-wrap the whole thing in soft power. That is, you have a kind of an ideolo

You make the system attractive to other people. One fine day, everybody wakes up in the mo

ing ready to hate America. Then they look at a bunch of Iraqis waving purple fingers for the 

cameras and dancing in the street, and they just can’t hate America quite as well as they could 

day before, even though they want to. You try to wrap this all up in an ideology that appeal

other people. And we’ve done it in terms of institutions. We’ve done it in terms of promo

goals of shared prosperity. One of the very important things that the U.S. did after World W

was, we said, “Hey, we’re not like the Europeans; we don’t believe in colonies; and we wan

the European countries to decolonize; and we support independence for developing countries

It’s a very simple foreign policy, in a way. It’s just five things. We’ve been doing it, and the B

ish have been doing it since about 1689, and I think we’ve been getting better at it through 

years. I don’t think this is going to change, certainly not through the end of my career. I susp

not through the end of most careers here. I think we are going to continue to do this thing

our thing in the world.

So that’s our project. What’s the state of it? What are the threats to it? What are the vulnera

ties that we face? What are the assets that we have? Now obviously I’m not going to be abl

go through this in tremendous detail up and down the line. But I’ll try and touch on a few of 

main features. And then we can get into more of a discussion.

First of all, let’s look at a kind of balance of power. Or let’s look at the first two elements, L

America and the balance of power. Latin America I don’t see for the foreseeable future a

threat, in the classic sense of another great power coming in. There are some things we hav

keep our eyes on in Latin America. I don’t like what’s going on in Venezuela. I certainly d

like what’s going on with the general social, economic, and political morass associated with 

war on drugs and the disorder that we’re seeing in parts of the region. But Latin Americ

some degree is a watched pot that never boils. And if we can just remember to watch the 

and make the kinds of policy interventions that are necessary, we can keep this thing from ca

ing a crisis. But we do need to do a little bit more than we’re doing there.

Now let’s go into the balance of power. Obviously the first area we’re worried about today, 

first priority that any of us have strategically in the near term, is the Middle East. And how 

we doing there? It seems to me that we are doing reasonably well. There are a lot of proble

there. The cost has been very high. With the benefit of twenty-twenty hindsight, I think all o

could make a list of things we could have done better. They might all be different lists, but 

could all make a list of things we could have done better since September 11th. But in gen

we seem to be doing a little bit better now. The best news out of the Middle East is that our 

ology is working there, in a part of the world where anti-American feeling is stronger than 

about anywhere else; where there are people who are so angry at the United States, they

53
become almost rabid when you talk about the subject. And I know, because I’ve been in disc

sions. I’ve done a lot of public diplomacy for the U.S. State Department all over the Mid

East, and I’ve spent long dinners with Arab nationalist intellectuals who had a lot to say ab

the foreign policy of the United States. But even in this kind of audience, the notion of dem

racy and that the American system is something that promotes the idea that you should ge

decide who rules you in a transparent process has had remarkable success. Who would h

thought in Afghanistan, Palestine and Iraq—now it’s looking like Lebanon also is headed 

way—that these ideals would have such power, but they do.

And that is the best news for us. It does not mean that everything is going to work out beautif

and we’ll soon be able to wash our hands of the region and go back to sleep. Anybody w

thinks democracy—bringing democracy to a troubled part of the world—is a recipe for Am

can popularity just has to go to France and find out how well that works. But nevertheless

an extremely good sign.

The worst news for us in the Middle East right now is that their ideology hasn’t stopped work

Well, one of theirs has. Our enemies in the Middle East have two ideologies. One is the kin

secular fascism of someone like Saddam Hussein, who really wanted to unite all of the Ar

under him in one party—one state with an iron will. And I think that kind of pan-Arab natio

ism is coming to a halt. In some ways it was the weakness of this ideology that helped open 

door for the Islamic resurgence throughout much of the Arab world. It’s been tried. It ha

worked. These latest failures are just drawing a line under that.

But religiously based fascism is very much alive—and by the way, it’s not just in Islam that 

can have fascist movements in the world of religion. Think of Spain and how Franco tried 

justify his regime as kind of the ultra-Catholic regime. It’s not just Islam that produces this mo

ment. But you have an Islamic fascism. It has a lot of appeal. It can cause people to form 

works of opposition. There’s a real danger in places like Saudi Arabia that this ideology co

take state power, and that would have dramatic consequences.

But the second piece of good news is that American power in the Middle East is now seen 

greater than it was before we invaded Iraq. There are a lot of people who said America is n

bogged down. We’ve lost our moral prestige in the Middle East. We’re going to be weake

the Middle East. They’re going to pay more attention to Europe, and so on. It’s just not work

out that way. You look at Condi Rice—she takes Egypt off her list of places she’s going to v

on her next diplomatic trip, and suddenly Mubarak is rewriting the country’s election law. T

there are the events in Libya. There’s Syria’s having to move toward withdrawal in Leban

People in the Middle East, whether they like us or not—and a lot of them do not like us—

that it is more necessary now to listen carefully to what we are saying. Our power has not we

ened in this region. It has to some extent strengthened.

And then people will tell you we’re committing a lot of resources there, and that as a result 

could be overstretched. I say, at least we’re committing resources in a part of the world 

matters to us. One of our problems in Vietnam was, we were making a major investment of 

sources into what was essentially a peripheral part of the geopolitical struggle. And it was o

ously peripheral in that when we left Vietnam under the most humiliating poss

circumstances, almost nothing happened in the balance of power in Asia in terms of our p

tion. In fact, to some degree it got a little better. But Iraq, Saudi Arabia, and Iran are vital to 

United States. If you’re going to have to spend resources and strength, these are the kind

places where you want to do it.

Looking ahead, the biggest threat that I see in the Middle East would be Iran. We are very 

from resolving that situation. I don’t see much chance for the current round of negotiation

work. I’m reminded of something Teddy Roosevelt once said about diplomacy. He s

54
diplomacy is the art of saying “nice doggie” while you feel around behind you for a stick. A

see a lot of that as we engage both Iran and North Korea—“nice doggie, nice doggie.” S

don’t think these situations are anywhere near to working themselves out yet.

People look at Europe and say, “Isn’t there a tremendous vulnerability there?” They believe 

Europeans are going to build this new powerful European Union, and they’ll be the superpo

of the twenty-first century. I don’t think so. And I don’t think so partly because of demograph

the population is going to be shrinking. I look at their economic situation, and I don’t see a lo

appetite for greater military spending. I look at their talk of a common European foreign po

and I’m very impressed, until I realize that the Germans are saying, “Well, we need another G

man seat on the Security Council.” I would argue if there’s going to be one European foreign 

icy, why on earth do you need a seat on the Security Council to just repeat what everyone 

will be saying? Then what they will tell you is that it’s ridiculous to expect Europe to agree on 

foreign policy any time soon, and so Germany does in fact need to have its own seat.

When you scratch beneath the surface, a common European foreign policy is not going to h

pen any time soon. In terms of what we need to do in Europe, we need to stop irritating them 

necessarily. I’m glad to see the president, secretary of state, and even the secretary of defe

saying that the ways of the old Bush administration are over. There are some people in the Eu

pean elite who would like to use public anti-Americanism as a way to whip up support for try

to build an anti-American Europe. I don’t think it’s our business to make their job easier.

Then I think we should also continue to urge expansion on our friends. And I think Ukra

should join Turkey in the queue to the European Union. I don’t mind talking to the Algeri

about the possibility that their country might want to follow the path of Turkey into NATO 

then into the European Union.

There exists a classic balance-of-power problem in the Far East, the geopolitical theater that 

gages us all the most in the long term. We’ve got a single large state with ambitions for some kin

hegemonic role. It’s not clear how far the Chinese themselves will want to push it. However, the

not raising their defense spending 12 percent per year because they’ve completely written of

geopolitical ambitions. We have to think about that and prepare for various eventualities. The d

ger is that China’s preparations may force us into preparations that make conflict more likely

vice versa. We would clearly both lose if it went to confrontation, so we want to avoid that.

What do we do? Fortunately for the United States of America, we do have a hole card in A

and the name of the hole card is India. My view—and I think the view of many people who l

at American foreign policy—is, if you’re going to have nuclear superpowers in Asia with po

lations of more than one billion, it’s better that you have two of them rather than only one. A

while I don’t think the United States or India is ready for a formal military alliance, I think p

moting India’s economic development and working cooperatively with India on matters of m

tual interest is a vital interest of ours. One of the big differences in the politics of the twent

century and the twenty-first century will be that, in the twentieth century, the Washington–N

Delhi relationship counted for almost nothing in world affairs; in the twenty-first century, the 

lationship between Washington and New Delhi has the potential for being one of the great 

ots of history. We need to get it right. And in response to all of those people who worry ab

outsourcing to India and call centers in Bangalore, I would say it is a little bit late for that. O

we’ve allowed China to develop toward great-power status by access to our markets, we sim

have no choice. We must go ahead and give India the same opportunity to develop. I think 

a national security interest that we do this. And again, if you think about it, India is a cou

that has two geopolitical nightmares. One is Islamic fanaticism uniting the Middle East and t

trying to export that ideology to new territory. India has already been conquered once by 

Muslims. That’s what was happening when the British came in and interrupted the conqu

55
The other Indian geopolitical nightmare is that China would become a hegemonic powe

Asia. By an odd coincidence, those are our geopolitical nightmares.

Finally, I want to talk about the trade and economic situation. Remember, we tried to bui

trade and economic system that allowed us to afford the military expenditures that made our 

sic geopolitical project possible. Are we getting into such economic trouble that we are losing 

edge there? Here I have to say I am relatively optimistic. Debt is not necessarily a sign of we

ness. Joe’s Pizza Hut might owe five thousand dollars at the bank. Microsoft, at any given m

ment, might have a twenty-billion-dollar line of credit to the bankers. Who would you rather 

Bill Gates or Joe? The relationship between debt and strength is a fairly complex relations

Look historically. In the nineteenth century, the United States was a debtor nation. And yes, th

were times it caused problems. But during that same period when we were a debtor nation, w

politicians and economists and experts wringing their hands over the disaster that would ens

we steadily rose to become a world power. The same phenomenon occurred in South Korea d

ing the last fifty years. South Korea became a tremendous debtor nation as it moved from a s

vation-level economy to almost first-world levels of affluence. Debt is not so simple.

And there are a lot of reasons to believe that much of the debt that we have now is not the 

debt but the good debt—investors putting their money in America because we know what to 

with money. Our corporations, our businesses know how to use money, to invest it. Now so

people would say, “Look at our very high consumption rate and our very low savings rate. 

saster is at the door.” I look at these national consumption statistics with great skepticism. 

one thing, if you send your child to Harvard Medical School and pay forty thousand dolla

year tuition, national economic statistics will call that a consumption expenditure. They 

look at you as if you’d just wasted forty thousand dollars on a bad weekend in Las Vegas. T

same thing applies with health care. But a lot of our health care is about making people m

productive longer. So the fact that heart attacks were killing off a lot of well-educated Ameri

males in their fifties thirty, forty years ago and aren’t now—that’s investment. When you 

yourself treated or cured of a condition that formerly would have made you less capabl

working, you are making an investment in human capital. And when you have a society wh

has a lot of investments in human capital, that society will be productive. It will be flexible. It 

know how to use financial capital well. If you go back and look closely, education and he

care are two of the elements in our consumption that are rising faster than GDP. I think we n

to separate Harvard Medical School tuition from Las Vegas lost weekends. And then we can 

about where we stand and how we compare to other people. And the fact that much of Ameri

health care and education are in the private sector, while in other countries they’re in state 

tors, affects both the amount we spend, what we get for it, and how statistics are calculated

Some of you are probably old enough, like me, to remember the eight years of Reagan’s pr

dency, when the deficits—the hundred-billion-dollar trade and the hundred-billion-dollar bud

deficit—were going to ruin the country. And you remember those awful nineties, when we p

for the binge of the Reagan years with the longest economic expansion in American history

The other thing to remember about our deficit position in the world is our need for foreign 

vestment. It is important that we stay a good place for other countries to invest. In compa

the dollar to the euro and the yen—the other alternative reserve currencies—one thing to 

member, as they say on the plains of the Serengeti, is, you don’t have to be faster than the lio

You just have to be faster than one other zebra. And if you look at the yen, it’s a tremend

currency, but how much can you invest in Japan? The country remains committed to a zero 

terest rate policy. The stock market is around one-fourth of what it was sixteen years ago. T

total number of males in Japan is shrinking year by year, and the national birth rate is declin

as well. They can’t absorb immigrants. You’re not going to be able to put a lot of money into 

yen long-term and receive significant return.

56
The same applies to Europe in regard to demographics and stagnation. While Slovakia is gr

ing, Germany has been essentially stagnant for ten years. And they don’t seem close to res

ing this. You look at their pension liabilities. You look at their medical liabilities, and long te

they dwarf anything we’ve got, because we’re still having children in this country. And we 

absorb and assimilate immigrants.

If you think about it long term, the United States of America is going to be the only place in 

world where investors can find a combination of first-world transparency, regulation, and 

bility. It won’t be like lending money to Argentina, where every ten years they steal all 

money anyone has invested and wait a couple of years until the investors come back. Yes

the third world you get high returns, but you have high risks. And then in the first world 

have low risk, but you’ll get low return in Europe and Japan.

Does this mean that we should just carelessly print money and not worry about Medicare 

Social Security? No, it doesn’t. But it means if we arrive at good policies for sound econo

growth, it’s likely that things will work out for us.

I look at this whole pattern and believe the pillars of our national strategy are basically soun

doesn’t mean there aren’t dangers. Homeland security, dirty bombs going off in New York

can think of many more dangers. But it does mean that structurally this foreign policy that 

been working for about three hundred years appears to be working reasonably well toda

certainly as well as it’s been working through much of history.

That doesn’t mean that I don’t worry though. What do I worry about? If we were a stable, s

nant society like ancient Egypt, Rome, or China—the empires that dominate their immed

space and then last for centuries— I’d say we have found the secret. But we’re not that kin

society, and the system that we build isn’t a stable system. This is the essence, in some respe

of our capitalistic system—free markets, invention, change and development. If we’re do

our job, that’s what we’ll do as a country. We will generate new technologies. Others in this 

namic global world that we are building will also generate new technologies and find new w

of doing things. That creates social change. It creates technological change, and this has h

effects on foreign policy.

In order to build a nuclear weapon sixty years ago, it took a measurable fraction of the GDP 

the United States of America, the richest country in the world. And it took a group of top-le

scientists from all over the world. Today, with all due respect to the country of Pakistan, a co

try that is not at the forefront economically and socially, using a team of scientists many 

whom could probably not get tenure at a good research institution, can not only put toget

nuclear weapons but do it in ways that escape international surveillance. This is the triump

capitalism, rising productivity. It’s because science and technology are moving forward 

people, including bad people, can do things that they used not to be able to do. Our succe

create problems for us.

On September 11, 2001, we saw one example of the worst thing that someone could do. In lo

ing ahead one hundred years to September 11th, 2101, what will a nonstate actor be capabl

then? A hundred years from now it is almost certain that kids working with their high sch

chemistry set will be able to accomplish biological feats that today Nobel Prize winners can’

with the entire resources of a national laboratory. Let’s not even talk about what well-funded 

rorist groups with years to operate can do. The world is going to be getting more dangerous 

unstable to the degree that we’re successful. And furthermore, as we are successful at creatin

world that is open to market forces and open to new political ideas, social change will be acce

ating as well. People will find their lives in upheaval with old certainties falling away. There wi

social distress and a rising ability of distressed actors to cause problems. We will have our work 

out for us. There’s no guaranteed success. There’s no assurance of failure.

57
My guess is, we are going to continue with this strategy, as it is hard-wired into the way 

country is and how we work as a people. And it has worked for us for a long time. We’re not 

ing to deny it. We’re not going to change it lightly. But we will find that the unanticipated con

quences of our successes are going to be the greatest sources of our difficulties.

58
Walter Russell Mead

Questions and Answers

Walter Russell Mead: Let’s go to the Q&A. Sir.

Q. Colonel Mead—

A. Thank you, thank you.

Q. It’s commonly taught that there are four broad instruments of natio

power. And one that you don’t hear an awful lot about is the informatio

element of national power. And at the start of this afternoon’s talk, y

talked about maybe the schizophrenic way that we accomplish some of 

foreign policy goals. How might we better harness the informational elem

of power in pursuit of our goals?

A. Well, I mean there are a lot of aspects to that. One of them is better intelligence to 

out what everybody else is up to so we can act proactively more effectively. But I 

think—I had some interesting conversations with some of the top people in the adm

istration last summer about what, in their view, were the lessons learned from the 

few years. You had to phrase that very delicately. You couldn’t say to some of th

folks, what mistakes did you make? You have to be very elaborate and say, well, 

know, it’s a long learning curve. No one has ever fought a war like this since Septem

11th. You must have learned something that now, if you’d known it then, blah, b

blah, blah, blah. But what they said basically was, public communication and public 

plomacy was an area where they really felt they had failed and needed to learn wha

do. And I think we’ve seen, actually, in the second term, a very conscious and focu

effort to deal with these problems. It has not succeeded yet. It’s always such a mistak

shoot an Italian journalist, I find. And we don’t have so many allies that we can go 

of tossing them overboard that quickly. But basically turning it from American impe

ism and so on to spread of democracy is very important. We are clearly going to hav

go back. Public diplomacy is so complicated, getting people to understand us and d

with us, because there’s this basic inequality in international relations. We’re stron

than other people. Other people care more what we think than we care what they th

as a general rule, most of the time. I remember the toughest question anybody has e

asked me was when I was in Bulgaria in, 1989, 1990. This kid asked a question at 

end. He says, “Mr. Mead”—he didn’t know about my being a colonel—“Mr. Mead,” 

says, “who is the American people’s favorite Bulgarian politician?” I’ve never been 

flummoxed by a question. But the point is, all over the world people have their favo

American politician, or perhaps currently their least favorite American politician. A

they have their favorite American rock star and favorite American movie. We d

know very much about them, and we don’t care. As a people, I mean—personal

care about all of them a great deal. And we need to find ways—in the sense of ma

CNN or somebody else should be doing a news show where kind of American 

perts are responding to questions—some way of engaging us, getting our attenti

making the relationship feel less unequal, I think is a part of this. But it’s a very co

plex question. I can only give you a gesture in the direction of an answer. I’m so

Other questions? Yes?

Q. Sir, more appropriate, Colonel. I’ll keep that trend going. My question 

You have your five pillars. However, what about failed or failing states t

59

The above is an edited transcription of Mr. Mead’s question-and-answer session.
may not fit into being in—very succinctly, into one of those categories; 

example, Afghanistan in the nineties, Somalia today, some others—

Horn of Africa, Central Asia—that are potentially going to be the sources 

the global national or global terror, and how do we address that? How d

that fit into your five pillars?

A. All right, yes, this is a real problem. It’s been a problem. The British had their own pro

lems in Sudan. Anybody who has ever seen that movie [Khartoum, about] Gordon Pa

[General Charles George Gordon] would know. But it’s going to be a bigger probl

And I actually wouldn’t use some of those countries as much as I would use Nige

Here’s a country that has something like 25 percent of all the people in sub-Saharan 

rica. We may be getting up to 20 percent of our energy imports from Nigeria. It’s 

vided almost equally into Christian and Muslim halves. They don’t like each other v

much. Complicated religious, tribal, and other reasons—fifty thousand people h

been killed in the last five or six years in Christian-Muslim rioting and fighting in Nige

Virtually the entire government is corrupt from top to bottom—and clearly we are go

to be drawn in there more and more because all of the social pathologies are all be

in a way, driven and empowered by this massive flow of oil money into a very corr

system—sort of like Louisiana in the old days. And we all know what happened th

When I was in Louisiana, it was when Edwin Edwards, the governor that is now in 

once said he could survive anything in Louisiana except being found in bed wit

dead woman or a live boy. Otherwise he was okay. Since then I’ve noticed in Ma

chusetts you can get away with both. I’m sorry, I was making a point somewher

that. So there is no easy solution to this, and we are going to have to develop new to

and new kinds of interventions to do it. And this is part of what I mean about our o

success is going to empower our troubles, because if you think about Nigeria, fifty ye

ago no one really had to care about what was happening in Nigeria, because 

would be fairly sure that the only thing they could do—they couldn’t even get you w

an e-mail fraud fifty years ago. But now you could well imagine a little chemical or b

logical weapons lab out there in the jungle, powered by a little generator, and so 

creating something that could screw up the whole world. So we are in a new era. A

we are not going to just be able to just say, well, this is what Lord Nelson would h

done, and that’s the end of our foreign policy. Each generation is going to have to 

better and figure out new ways to do it, and it’s going to be a challenge, which is w

you guys earn the big bucks I think that you do. And I’m sure you do, right? Sir?

Q. In talking about soft power, your use of the term “sort of bubble wrapp

ideology” seems to suggest that there’s no real underlying sincerity abou

I mean, many historians will point to the missionary element in Americ

policy, going back to the nineteenth century and Wilsonian idealism, a

the fact that a genuine commitment to it made it a powerful element. I w

der whether or not I’m misinterpreting your view. Or is that y

perspective?

A. Well, I was speaking quickly and casually. You know, of course I’m sincere. Look, 

thing is, when you think about American foreign policy as a whole —and remem

that in my view it’s made simultaneously by a lot of people with a lot of different m

tives. So you actually have some people, powerful people in Washington—like, for 

ample, our president, who really does believe all the stuff, I think, about democra

You know, they gave the list of movies that he’d seen in the last year, and one of a v

short list was Hotel Rwanda. You know, so here’s the president of the United States

a very limited amount of free time, going to kind of mourn victims of genocide. It’s r

And our commitment to democracy is real. We’re quite sincere. But at the same ti

60
our oil companies are there. One of the great stories for me about American fore

policy or Americans abroad is on the docks of China in 1840. You had one group 

people, organized by American missionaries, protesting the opium trade and tryin

boycott the opium merchants. But then you had the opium merchants, who were a

Americans, trading the opium. So what you’ll see is, our impact on a society at 

given moment—no matter what a particular president or whatever may intend—is 

ways going to be a mixed picture. It’s part of what’s confusing about the whole th

for others as well as for us. And for others it’s very easy to say, well, you’re hypocriti

We’re more double-minded than hypocritical. But what I suggest to you is that neit

the sincerity nor the cynicism will ever depart from the arena of American foreign p

icy. Yes.

Q. Sir, the U.S. national security strategy or policy has been shaped especia

after 9/11. Now we’re seeing more preemptive measures and going af

threats instead of waiting for them in this new world order of post–Cold W

You mentioned to keep an eye on Latin America. My first question: can 

expect the U.S. to diminish or increase their efforts to fight against origi

threats like immigration and drug trafficking? Because it sometimes 

Latin America looks like, the perception is, that the U.S. is more concern

overseas than in the region of North-Central-South America. My seco

question: the current U.S. administration’s free trade of the Americas

this a starting point for a more cohesive continent, more cohesive Americ

continent, similar to the European Union? In your personal opinion, is t

feasible? And more important, what can the U.S. do to accomplish this 

jective? Isn’t a stronger Latin America better for the U.S. if these countr

can deal with their problems successfully? And they won’t have these pr

lems with immigration or drugs. We have democracy in Latin America—

perfect, but we have it.

A. Well I think one of the big disappointments I’ve had with the Bush administration 

that I thought one of the most promising initiatives at the beginning of the adminis

tion, before September 11th, was actually sort of building a new historic relations

between Mexico and the United States. And I think President Fox and the kinds of 

forms that he was associated with in Mexico created a tremendous historical oppo

nity. And I wish that the Bush administration, while still fighting the War on Terror 

responding to September 11th, had found a way to keep that from almost falling off 

table. But that’s the past. It’s happened. I think we have to now be looking to, how 

we begin—how do we think through some of these issues? And I think immigratio

an important—I would say that trying to make NAFTA, rather than the free trade a

of the Americas, maybe throwing in CARICOM—the Caribbean region—into this; 

ing to promote some more integration there is a good thing. The president has ta

some heat in the U.S. for being willing to have a guest worker program. But I’d lik

see, actually, some more things. I’d like to see, for example, Americans who retire be 

lowed to use, be reimbursed for using, medical facilities in Mexico and Central Am

ica, as a way to promote more U.S. retirement abroad. Americans could live m

cheaply and therefore live better abroad. It would create a lot of jobs, facilitate a lo

economic development there. You know, I’d like to see some things like that. And 

maybe have time for one more question. Yes, sir?

Q. You didn’t mention the word “Russia” once. I wonder whether you wo

comment on that.

A. All right, well—comment on Russia or comment on my not mentioning Russia earlie

61
Q. Comment on our relationship with Russia.

A. Well, I think, you know, it is interesting. A lot of Russians think that America is think

night and day about how to weaken and counter Russia. The fact that I didn’t men

it should suggest that actually we’re not spending a lot of time plotting against Russi

anything, from the American standpoint the danger that Russia is too weak and likel

implode is a more serious danger. But you know, Russian-American relations ar

problem. In some ways Russia is like super-France; that is to say, a country whose a

bitions—you know, it can’t live up to its own ambitions. It sees the U.S., rightly 

wrongly, as having blocked it. And it’s deeply bitter about it. And it’s very hard for u

deal with that. And it’s bitter, suspicious, given to paranoid thinking, in the best of tim

anyway. But on the other hand, for Russia, the fact is it has two tremendous geopolit

weaknesses—which is to say, on the south there’s the fear to be nibbled at by radica

lam and sort of fall apart, and then in the Far East there’s China. There’s really only 

country in the world that can help Russia in a serious way with both these proble

That’s the United States. So it’s a relationship. There’s a lot about them we don’t l

There’s a lot about us they don’t like. And yet this sort of iron logic of our national in

ests forces us both to limit the kinds of disagreements that we have. So if I didn’t m

tion Russia, it’s really, in a sense, because it looks to me like it’s one of the more fi

stars, in the sense right now that we and they are both trapped into a fairly narrow ra

of possible alternative attitudes to each other. It’s something there—it is, I think. A

hope things go better for them. I really do. It’s in the American national interest for th

to be a strong Russia. A strong and prosperous Russia is very much in the American 

tional interest; and as I understand it, a lot of our criticism of Putin is not based on w

afraid that his strong authoritarian leadership is going to make a great Russia as m

as we are afraid that this kind of dictatorship will choke the possibility of a Russian 

tional revival. Well, it looks to me like we’ve about run out of time. Thank you for y

attention and your patience.

62
Panel II

Global War on Terrorism, Homeland

Security, Defense, and Intelligence

Moderator:

Dr. Thomas Nichols

Chairman, Strategy and Policy Department, Naval War College

Dr. James Jay Carafano

Senior Research Fellow, Defense and Homeland Security

Davis Institute, The Heritage Foundation

Dr. David H. McIntyre

Director of the Integrative Center for Homeland Security

Texas A&M University

Dr. Carnes Lord

Professor of Military and Naval Strategy

Center for Naval Warfare Studies, Naval War College

Panel II moderator Thomas Nichols (far right) leads Carnes Lord, David H. McIntyre, and James Jay Carafano 

discussion of the global war on terrorism, homeland security, defense, and intelligence.

Homeland Security To-Do List

Dr. James Jay Carafano

Senior Research Fellow

Defense and Homeland Security

Davis Institute, The Heritage Foundation

The following is an edited written statement summarized by

Dr. Carafano in his opening remarks.

Now isn’t the time for complacency—while much has been done to protect the United St

from the threat of transnational terrorism, much remains to be accomplished. A review of h

the federal government has responded to the challenges of homeland security since the terro

attacks of September 11, 2001, suggests that additional organizational reforms are needed 

improve legislative oversight, the operations of the Department of Homeland Security, and 

operation among federal agencies. At least five key reforms should be on the table, though 

prospects for implementing them in the near term appear unlikely without greater support fr

the president and congressional leaders.

Lessons from the Cold War

The global war against terrorism will likely be a long war. The onset of another long war, 

Cold War, offers valuable lessons for thinking about the difficulties of organizing for a p

tracted conflict.

First, it takes time. History argues for patience. The National Security Act of 1947 crea

America’s premier Cold War weapons, what eventually became the Defense Department 

the CIA. But it still took about a decade to figure out how best to fight the Russian bear and 

velop instruments like NATO, nuclear deterrence, and international military assistance.

Second, now is the time to get it right. If there is one constant in Washington, it is how gove

ment works. Once our government is set on a course, change is very difficult—usually impo

ble. Momentum is Washington’s greatest industry. Thus, bad habits get carried into the fut

as determinedly as successful policies and programs. In the debates over the 1947 act 

again as president, Eisenhower lobbied for more integration of the services. He lost. It was 

until the passage of the Goldwater-Nichols Act in 1986 that Congress addressed its failure

1947. Fix it at the beginning or live with the mistakes for a long time.

What needs to be done next?

Reform #1: Improve Congressional Oversight

Among the organizational reforms yet to be adequately addressed for fighting the global wa

terrorism is appropriate congressional oversight of the Department of Homeland Secu

(DHS). Established by the Homeland Security Act of 2002, the department is charged w

leading the nation in preventing, responding to, and recovering from terrorist attacks, but ov

sight of the department remains fragmented.

Congress’s inability to address its homeland security responsibilities was conspicuously no

in the 9/11 Commission’s final report. Among the commission’s priorities for enhancing the 

tion’s capacity to protect itself against terrorist threats was a pointed recommendation that b

the House and Senate must establish single committees with complete oversight responsib

65
over all matters pertaining to DHS. Both chambers responded by creating permanent ho

land security committees. These committees, however, do not have jurisdiction over all 

homeland security activities of the department.

Reform #2: Reorganize the Department of Homeland Security

The purpose of creating the DHS was to integrate critical homeland security missions in a sin

department to ensure unity of purpose, coordinated action, and effective integration of 

border, transportation, and emergency response operations. The first years of the departme

operations have revealed both its strengths and flaws in accomplishing these tasks. The we

nesses are significant.

The current organization of DHS must be reformed because it hampers the secretary of Ho

land Security’s ability to lead our nation’s homeland security efforts. The organizatio

weighed down with bureaucratic layers, is rife with turf warfare, and lacks a structure for str

gic thinking and policymaking.

Any overhaul of the department should include:

• Strengthening the secretary of Homeland Security’s policymaking function by crea

an Undersecretary for Policy.

• Empowering the secretary by establishing a flatter organizational structure through 

consolidating and strengthening agencies with overlapping missions; (2) elimina

middle-management (directorate) layers over border and transportation secu

preparedness and response, and information analysis and infrastructure protection; 

(3) having the agencies report directly to the secretary via the deputy secretary 

Homeland Security.

• Merging Customs and Border Protection and Immigration and Customs Enforceme

• Consolidating preparedness and protection activities in a single undersecretary.

Reform #3: Strengthen the Homeland Security Council

The Homeland Security Council (HSC) was established by presidential directive after the S

tember 11 attacks and later codified in the Homeland Security Act of 2002. The 9/11 Comm

sion called for folding the HSC into the National Security Council (NSC).

While eventually it would make sense to address the coordination of security issues in a hol

manner, eliminating what are often artificial distinctions between domestic and overseas se

rity challenges, such an initiative is probably premature.

At present the president should focus on strengthening the HSC staff and promoting effec

cooperation with the NSC. The ongoing joint HSC/NSC effort to draft a presidential direc

on maritime security and develop a national maritime security strategy should serve as a mo

for other joint efforts. In the long term, perhaps in a few years when homeland security p

grams and policies are more fully developed, this issue should be revisited.

Reform #4: Improve Intelligence and Information Sharing

Improving the national capacity to share information and intelligence regarding terrorism 

been one of the highest post-9/11 priorities. Since its creation, however, the role of DHS 

IAIP (Information Analysis and Infrastructure Protection) in intelligence sharing has been sig

icantly marginalized.

66
The current arrangement leaves no one person or agency in charge of all these related ac

ties, and it makes DHS little more than an end user, competing with other agencies for int

gence support. DHS currently lacks the experience, personnel, and facilities to act as a t

domestic intelligence integrator. Without the responsibility, organization, and resources to p

form this mission, the DHS is unlikely ever to be able to fulfill its congressional mandate.

Rather than marginalizing the DHS intelligence role, it should be strengthened, including put

the department in charge of the Terrorist Screening Center (TSC), which is responsible for c

solidating terrorist watch lists. In addition, other intelligence integration centers within D

such as the Customs and Border Control’s National Targeting Center (NTC), which ident

high-risk international cargo for inspection, and the Immigration and Customs’ Law Enfo

ment Support Center (LESC), should be integrated into one entity. Together, these organ

tions should form the nucleus of an effective information-sharing center under DHS leadersh

Reform #5: Enhance Interagency Operations

Clearly the area of interagency cooperation that needs most attention is between the Ho

land Security and Defense departments. Frankly, the relationship between these departmen

very immature. The Defense Department’s (DoD) effort to create a doctrinal distinction 

tween “homeland defense” and “homeland security” has served more to create gaps betw

the two organizations and allowed DoD to narrowly define its role in homeland security.

There are three areas where DoD and DHS should cooperate much more closely.

First, DoD and DHS should work much more closely on developing future capabilities for m

time security, particularly in enhancing maritime domain awareness (MDA) and preparin

confront a range of unconventional threats, from small boat attacks to cruise missiles.

The second area where DoD needs to play a larger role is developing the capacity to respon

catastrophic threats, providing forces that are properly organized, trained, and equipped to 

spond to the worst kinds of terrorist attacks. In this area only scant progress has been ma

DoD’s U.S. Northern Command (NORTHCOM) has begun to examine scenarios that m

define future force requirements for these missions. In addition, the National Guard is under

ing restructuring efforts that will produce some forces that will have a greater utility for ho

land security. None of these initiatives, however, appear adequate to address the challeng

catastrophic terrorism.

The third area where more cooperation is called for is the development and acquisition of 

ture technologies that are mutually critical to defense and homeland security. Research s

gests there are significant opportunities for collaboration. On the other hand, few initiat

appear under way. Much current cooperation is through the Technical Support Work

Group, but these efforts focus on commercial off-the-shelf technologies, not long-term resea

and development.

67

Strategy and Threat:

The Problem of Language

Dr. David H. Mcintyre,

Director, Integrative Center for Homeland Security

Texas A&M University

The following is an edited written statement summarized by

Dr. McIntyre in his opening remarks.

One of the reasons that we find it so difficult to articulate an American strategy 

counterterrorism, and for national and international activities as a whole, is that many of 

key terms are used and abused in multiple ways. Clear thinking requires clear and car

language.

For the purposes of this conference, perhaps no word is more important than “strategy.” E

understanding that words can have multiple definitions—and setting aside the misuse of 

term by nonprofessionals when they really mean “tactics,” or “operations”—we still encou

too much confusion from the multiple uses of the term by experienced scholars, strategists, 

national leaders. What we need for clear thinking is more discipline in our selection of term

One way to promote precision in our terminology is to examine a well accepted case where 

meaning of “strategy” is clear. The “Containment Strategy,” set as national policy by NSC

in 1950, provides such a case.

As a national strategy, “Containment” was, first and foremost, a concept of cause and eff

Given that the Communist system focused primarily on redistribution and did not create as 

ciently as the West, the strategic concept employed was to cut off Communist nations fr

gaining new resources by expansion, leaving them to waste away. Here then is the great il

trative example of a national strategy in a nutshell: “If the Communists could be denied new 

sources, then they would collapse from their own internal inefficiencies and contradiction

If-Then. Cause and Effect.

This strategic concept was implemented primarily by encircling the Communist bloc with 

lies and forward deployed military forces, resourcing those forces as required, and mob

ing the will of the American people to provide the necessary support. This require

constant balancing of means and ends at the national level for as long as the strategy wa

effect. For example, planners and legislators every year balanced domestic priori

against international priorities, education monies against defense expenditures, carr

against tank divisions, state department initiatives against military modernization. With 

fundamental strategic concept set, this balancing became the primary strategic endea

for two generations, and many have come to think of balancing ends and means as the 

mary aspect of making strategy—some even equate balancing with the definition of st

egy itself.

But this idea was proven false at the end of the Cold War, when strategists found balanc

ends and means all but impossible in the absence of a strategic construct of cause and effec

number of farsighted strategists have attempted to fill the void by posing a debate over “gr

strategies.” These they generally identify as: Neo-Isolationism, Selective Intervention, 

gagement, Primacy, and Empire. These approaches are quite useful as descriptive Strate

Visions—end states—but they do not really explain how the visions are to be achieved. To 

69
useful in a prescriptive sense—as strategies—intellectual constructs have to explain what i

be done and why—cause and effect—just as Containment did in 1950.

Absent a strategic concept as compelling as Containment, many in DoD focused for the p

decade on the internal balancing of means, even in the absence of agreed upon ends. This 

ation of capabilities without a clear concept of how they would produce a strategic outco

was called the Revolution in Military Affairs (RMA) until the late 1990s, and Transforma

since then. It is today the focus of DoD’s most intense activity. Its outcome will determine 

military capabilities available to the nation, and the ability of the United States to accomp

certain strategies in the future. It is an important activity. But Transformation is not a strate

nor is the establishment of “full spectrum dominance,” which it is supposed to produce. Its 

sult is a status, not a strategy.

The administration has actually offered a comprehensive strategic concept in its National St

egy for Combating Terrorism (February 2003):

• If we defeat the terrorists and their organizations,

• Deny them sponsorship, support, and sanctuary,

• Diminish the underlying conditions that terrorists seek to exploit, and

• Defend U.S. citizens and their interests at home and abroad

• Then the numbers of terrorists and the dangers they pose will be reduced.

But this strategic concept of cause and effect has not been accompanied by a sustained effo

balance means and ends by prioritizing resources. And it is difficult to identify in the DoD Tra

formation process any direct reflection of means specifically developed and matched to achi

these ends. The Strategy has produced actions and results—but none of the resource balanc

required to support the concept of cause and effect over the long term.

What we are still missing is an integrated program that connects national strategic vision to s

tegic concept, to strategic allocation of resources, to strategic development of means requir

to strategic balancing of those means against the ends desired. We are talking about strat

piecemeal, because we have not demanded discipline and precision in the terms we use.

Strategic leaders and educators would do well to use these different terms with care. What we 

ally need is a focused dialogue among strategists to help us clarify and standardize these term

we craft a strategy for the future. Perhaps this conference will help advance such a dialogue

A second example of the import of clear speaking to clear strategic thinking is the use of 

word “threat.”

Testimony before Congress on February 16 of this year provided a unique overview of 

threats facing the United States for the foreseeable future, and the National and Homeland 

curity Strategies now envisioned as a response.1 Tasked to provide a description of the sp

trum of threats to the United States and its interests, and to assess the probability, immedia

70

1. On February 16, 2005, the following officials testified before the Senate Select Committee on Intelligence

concerning Security Threats to the United States: Admiral James Loy, Acting Secretary of Homeland Secu

Mr. Peter Goss, Director of Central Intelligence; Mr. Robert Mueller, Director Federal Bureau of Investigati

Thomas Fingar, Assistant Secretary of State for Intelligence and Research; Vice Admiral Lowell Jacoby,

Director, Defense Intelligence Agency. Additionally, on the same date, Mr. Donald Rumsfeld, Secretary of

Defense, testified on the current and future state of U.S. armed forces before the House Armed Services

Committee.
and severity of the resulting dangers, the senior leaders of the U.S. intelligence community 

pressed a striking vision. Their statements generally agreed on the following points:

• Both the greatest dangers and the most likely threats to the United States, its citizen

home and abroad, and its vital interests, along with those of its allies—both today an

the future—come from nonstate terrorist actors, rather than from hostile states.

• The chief among such actors is al-Qa‘ida.

• Al-Qa‘ida may be morphing from a somewhat centrally directed organization t

decentralized model, centrally inspired by bin Laden and others but depending m

upon local initiative than in the past.

• The potential unity and cooperation between bin Laden’s organization and Al Zarqa

would be especially dangerous, as would the involvement of Hezbollah and other kno

terrorist groups.

• Whatever their origin and motivation (and opinion may differ a bit here), these ho

actors are most likely to attack the United States with advanced conventional weapon

extremely powerful and sophisticated car and truck bombs, and explosives used to in

a maximum number of highly visible casualties.

• Even with the best intelligence, preventing all such attacks will be extremely difficul

• Protecting all citizens and critical infrastructure in a nation “awash” with such targe

impossible.

• Attacks using Chemical, Biological, Radiological or Nuclear weapons are less likely, o

because the weapons are harder to acquire. But al-Qa‘ida and other terro

organizations are actively seeking such weapons.

• And if they acquire them, they will use them.

The good news, as Thomas Fingar at the Department of State points out, is that the Un

States is virtually free of state opponents, because no one is willing to challenge the ackno

edged supremacy of American force of arms. The bad news, Peter Goss of the CIA and all 

other leaders point out, is that terrorist attacks with enhanced conventional techniques 

likely, and the use of weapons of mass destruction against Americans on American soil m

well be “inevitable.”

The upshot of these separate statements is a remarkably coherent vision of the threat—an

curious gap concerning the U.S. response. Both the Secretary of Defense and the Acting Se

tary of Homeland Security describe the extensive organizational and procurement actions 

shaping their departments. But neither describes anything like the massive prepara

required if the nation is to rapidly respond to and recover from the threat the intelligence 

perts uniformly fear the most—a terrorist attack using WMD.

I suggest that this lack of clear action on what the intelligence community considers its grea

concern, can, like the lack of clarity in strategy formulation, be traced to a certain ambivale

in our use of language.

No one in World War II would have described Japan or Germany as cold, distant, and dis

bodied “threats.” We understood that they were “enemies”—active, deadly, creative, 

sourceful, and seeking the destruction of our nation and our people. Our national response 

not bureaucratic or organizational, but passionate and engaged, seeking immediate soluti

and willing to make sacrifices to achieve them.

71
Preparations to respond to and recover from an attack on the scale envisioned by our senior 

telligence personnel will require a similar engagement by the American public. We will not g

erate the required sacrifice by the public or action by the bureaucracy if we insist in describ

our challenge as a “threat”—to be prioritized with other government “threats” like unemp

ment, an aging population, and annual forest fires.

Our strategic confusion and operational lethargy in preparing for the “worst case” that the le

ers of our national intelligence community most fear is explained by our imprecise use of 

guage. Our security challenge is a thinking enemy, learning and adapting as he seeks to strik

series of horrific blows against civilian targets. Nothing short of precise and direct language 

convey that reality—or energize the required response.

72
Soft Power and the Terror War

Dr. Carnes Lord

Professor of Military and Naval Strategy

Center for Naval Warfare Studies, NWC

The following is an edited written statement summarized by

Dr. Lord in his opening remarks.

Is there one instrument of American statecraft that, more than any other, holds the key to 

tory in the global war on terror? And if so, is this fact sufficiently recognized in Washington, 

is this instrument adequately funded and organized and effectively wielded by our natio

leadership? The answers to these questions are yes and no. The instrument, of course, is pu

diplomacy.

It is not difficult to see that the global war on terror cannot be won by military force, and th

are reasons for thinking that the use of force may even prove counterproductive under so

circumstances by increasing the flow of new recruits to the terrorist cause. The other traditio

instrument of American hard power, money, certainly has its uses, but no one yet has step

forward to claim the rewards we have placed on the heads of bin Laden and Zarqawi. Ter

ism can be stopped in the long run only by changing the minds of potential recruits as we

those who support or tolerate terrorist activity, and by enlisting allies who will act to root ter

ism out of their own societies in ways and with methods not open to us. And changing mind

what public diplomacy is all about.

Not long ago, Harvard professor Joseph Nye coined the useful term “soft power” to describ

dimension of national power and influence that is too often neglected. American soft power 

tends well beyond the actions of the United States government. Probably its most impor

component is the idea of America itself, land of liberty and constitutional democracy. T

events of the last several months in the Middle East are stunning testimony to the power of 

idea of democracy to transform political realities. This has been an enormously hopeful de

opment for the region and for the prospects of eventual victory in the terror war globally

course, our government has taken steps to promote the idea of democracy, notably in the pr

dent’s remarkable inaugural address, but the dynamic at work here is a much larger one. T

key question is how we as a government can best take advantage of this new set of circu

stances. This requires a fresh look at how the U.S. government communicates with audien

abroad, which is to say, American public diplomacy.

So much for the good news. The bad news is that American public diplomacy is broken. Th

is remarkable unanimity on this point in the national security community today—on right 

left, among realists and neoconservatives, in the cottage industry of official and semiofficia

ports on this subject of recent years, and now on the part of our new secretary of state. In 

Senate confirmation hearing, Condoleezza Rice said that public diplomacy would be a “top 

ority” in the second Bush administration. The president himself echoed this thought in a l

press conference. Recent efforts by the president and Secretary Rice to burnish the Ameri

image in Europe seem to reflect this new shift. Unfortunately, such efforts can take us only so 

in the absence of real organizational capability to conduct sustained public diplomacy p

grams and campaigns, which, sadly, is our current situation.

In the aftermath of September 11, our elected leadership summoned the political will to m

the most far-reaching changes in the national security bureaucracy in more than half a cent

by creating the Department of Homeland Security. At present, a similar national commitm

73
to institutional change seems to have emerged in the area of intelligence. No such commitm

exists in the public diplomacy area. There are several reasons for this. Not only is there no 

consensus among practitioners or critics of American public diplomacy about what needs to 

done to fix it, but the pathologies at work here are themselves not well understood.

What accounts for the present condition of American public diplomacy? It is easy enough 

blame the end of the Cold War, and the widespread sense it brought that the tides of hist

were flowing in our direction and that the United States needed to do little to explain itself 

world in which liberalism and democracy were suddenly the norm. During the 1990s, U.S

ternational broadcasting was scaled back significantly, and the flagship public diplom

agency, the United States Information Agency (USIA), was in effect dismantled in a merger w

the State Department. In 1960, there were probably three times as many government pers

nel working in public diplomacy as there are today.

In fact, however, the problems facing public diplomacy today have much deeper roots. Even d

ing the Cold War, public diplomacy never fully lived up to the initial expectations held out for i

many, and it remained for the most part at the margins of American grand strategy. The proble

limiting the effectiveness of public diplomacy then and now may be grouped under three gen

headings: the definition and scope of the subject; the difficulty of organizing the national secu

bureaucracy to carry it out effectively; and what might be called its cultural toxicity.

Public diplomacy is unique as an instrument of American statecraft. At any rate since the 

mise of USIA, it alone among the elements of our national security policy lacks a core inst

tional base, an established infrastructure of education and training, a stable cadre of person

an operational doctrine, or roles and missions that are understood and accepted by nationa

curity or political elites or, for that matter, the general public. Further, public diplomacy op

ates in a uniquely challenging domestic environment, one centrally shaped by the fundame

hostility of the commercial media and much of the general culture to any government invo

ment in the management of information. This environment is reflected in the perennial 

cromanagement of public diplomacy programs by the Congress, as well as in the bureaucr

culture of our public diplomacy organizations, heavily populated as they are by journalist

those sympathetic to their allergy to government management of information. Not coincid

tally, it lacks high-level political support and tends to be chronically underfunded. (Today, 

United States spends a little over a billion dollars on public diplomacy—about the same as B

ain and France each do; many observers think this could easily be tripled.)

The problems begin with defining the meaning and scope of public diplomacy. What may se

a merely semantic issue has for long been a fateful source of controversy and confusion in 

euphemism-prone field. The key issue today is the relationship between public diplomacy 

the traditional public affairs function, increasingly blurred and politically contentious in the c

temporary global information environment. There is also an important question concern

how the Defense Department plays in this arena and, in particular, what the relationship i

ought to be between public diplomacy and military psychological operations. A good case 

be made for a serious rethinking of the Pentagon’s role here in the larger context of national-le

public diplomacy in support of the terror war.

As far as organization is concerned, the case for fundamental reform seems strong. Givin

the State Department primary responsibility for public diplomacy may have been an exp

ment worth trying, but it is one that has plainly failed. The central problem here is one that p

lic diplomacy shares with intelligence. Both are policy support rather than policy functions, 

hence cannot be fully independent of the policy agencies they serve; at the same time, they 

quire a specialized expertise that is not well understood or valued by these agencies and 

only be nurtured in a separate bureaucratic environment. Hence the compelling logic of rec

stituting USIA or its equivalent. At the same time, contrary to what many seem to assume, 

74
should not be seen as an either-or proposition: the State Department should continue to pla

key role, and, indeed, in some ways a stronger one than it does at present.

Many of the critics of American public diplomacy see as the critical organizational fix the 

ation of a “czar” in the White House to energize and coordinate public diplomacy activ

across the executive branch. The track record of White House czars is hardly a brilliant one; 

yond that, however, public diplomacy is uniquely difficult to manage in a centralized 

top-down fashion. What is really needed, it can be argued, is a revitalization of the public dip

macy function throughout the key agencies and its closer integration with policy at all lev

Still, the White House will have a key part in overseeing this revitalization effort. It could a

play a valuable role by creating a new organizational structure for “soft power” more genera

one that would align public diplomacy more closely than in the past with entities such as 

Agency for International Development and functions such as the promotion of democracy 

human rights, humanitarian affairs, and education assistance.

Important as they are, these sorts of organizational fixes by themselves will not solve the lar

problem. The larger problem is our continuing cultural allergy as Americans to governmen

volvement in the information business. Perhaps nothing can be done about this at the end 

the day. But perhaps the time is ripe to open up a national debate on this issue, of the kind 

have recently seen in the intelligence area, and move beyond the simplistic slogans that ten

dominate our current thinking on this important subject. Short of that, we will continue o

course which, just conceivably, could snatch defeat in the terror war from the jaws of victo

75

Panel II

Questions and Answers

Moderator [Dr. Nichols]: One of the things I was curious about when you talk about how m

we spend on public diplomacy: I wonder how much of that really includes the concept of Ho

wood itself. We have a kind of big engine of public diplomacy for good or for ill. And the rea

I thought of this: Recently, I found out that there’s a kind of cult in Iran around Baywatch. An

just struck me . . . the totalitarian reign of the Ayatollahs falls because of Yasmine Bleeth. 

Public diplomacy raises an interesting question—broaden it, especially the engine of entert

ment we have.

Why don’t we take two or three questions at a time from all of you and then let the panel w

through them. I think that way we can interact with more of you than if we go back and fo

around the room.

With that, let me open it up to questions. Yes, sir?

Q. Carnes Lord, I would like to carry on a little further. I think you’ve rea

touched the nub of it. I personally have visited some schools in the Mid

East other than the ones run by the government, and I’ve seen some horri

things and so forth, and I believe that education and what forms this coun

seems to really thrive on education as this school is a great representative 

that thought. What programs could we have to go into countries that wo

have us come in? I realize it is somewhat of a problem to educate the peo

on reading, writing, arithmetic, and not religious fanaticism.

Moderator: Thank you; other questions?

Q. You mentioned that it’s going to be a long war on terrorism. And you u

the Cold War as a basis for that theory. I think everything, technology a

everything in our society is moving faster, so I’d like you to address how y

do the Cold War faster.

Moderator: Okay, we’ll start with those two. We have two questions. One is about p

grams for education abroad that could perhaps snuff out some of these more radical edu

tional establishments. Cary, you want to start with that one?

A. [Dr. Lord] Yes, well, I totally agree. I think educational assistance is one of the ar

with the biggest payoff and one that we haven’t really tried to do in a very system

way in the past—I mean partly because it actually falls between bureaucratic sto

This is one area, in fact, where the USAID has done a lot, kind of rather unpubliciz

recently but over many years, particularly in the Middle East. DoD—in fact you may 

call the ill-starred Office of Strategic Influence that was set up in 2002 and within D

One of the components of that, in fact, was technical assistance to the madrassas in 

kistan, largely to try to introduce training and computers and to try to kind of b

these schools a little bit into the modern world and, as you say, move them away fr

purely religious education. And I think there’s a lot of readiness out there in these M

dle Eastern countries to go that route. But there’s a lot we can do—but it’s obvious

delicate issue, you know, telling other countries what they should have in their sch

curricula. But I think there are ways we can work through third parties and through 

vate organizations, universities and so forth, you know, to pursue that.

77

The above is an edited transcription of the Panel II question-and-answer session.
A. [Dr. Carafano] Yes, I’d actually like to tie both questions together, the long-war qu

tion and the public diplomacy issue. I think that’s part of the silliness that we need to 

over. The notion that this is anything but a long war and somehow it should be ove

the 6:00 news is absolutely silly. That’s what we really need to disabuse people of, 

a lot of our initial effort really was done with this kind of silliness in mind. You know

perfect example: they threw billions of dollars at state and local governments, mo

which is very, very transitory in its effectiveness. You buy a guy a mask, and a mas

there for a couple of years, and then it’s gone. But it took five years to plan the 9/11 

tacks. It took three years to plan the Madrid bombings. The next great terrorist attac

this country may come five years from now, six years from now, seven years from n

So the fact that I helped pay some patrolman’s overtime for the next six months, 

bought him a widget that lasts for two years, is interesting but irrelevant. It’s not re

sustainable security. So it’s sustainable security that’s really important, so those are 

actly the kinds of—the notion that we can solve this thing very quickly is exactly 

kind of thing we need to put out of our heads. I think this perfectly goes over to the p

lic policy issue, because if you can win the war in twenty minutes, why do you hav

waste time doing public diplomacy—and the answer is, you don’t. But you have to 

public diplomacy because you can’t win the war in thirty minutes. And you know, 

like Cary, I’m not so sure what all the right answers are. But I know what needs to 

done. I mean, we actually had four parts in our Winning the Long War book. One lo

at security. One looks at the economic—many issues that we talked about this morn

How do you keep sustained economic growth? The other looks at the civil liberties 

diplomacy, but we also had a chapter on the ideological struggle. And we say you re

have to do four things. First you have to understand the enemy and the target au

ence, because you can’t do public diplomacy unless you understand those two thin

The second is, you have to delegitimize the enemy. You have to convince the target 

dience that killing people is not the best way to get their political agenda done. The th

thing you have to do is, you have to give them an alternative. You have to prov

somebody an option for solving their problem in a way other than being a terrorist. A

the fourth thing you have to do is, you have to demonstrate a will to prevail. You h

to convince both the target and the enemy that you’re not quitting, no matter how l

this takes. And so you really need to pull all four of those things together. Now the pr

lem I’m really struggling with, with some of the things that they talked about—let’s 

create USIA, and some of these other things in terms of a good long-war strategy—is, 

world is changed. I mean the global information environment today is very, very dif

ent. It’s very diverse. There’s lots of ways for people to get information. The abilit

governments to dominate that is simply disappearing. And the problem is, the p

ple—the best people to make the case to do those four things—is not the U.S. gove

ment. The U.S. government is not going to be perceived as a legitimate voice in 

ideological debate over whether Islamic terrorism is a good idea or not. And so so

how you have to mobilize the natural constituents in that part of the world that nee

make this argument, and that’s women, the business community, secular leaders, 

religious moderates. They’re the ones that have to go out there and make the case. T

question is, how do you really mobilize that? I don’t think creating a federal agenc

going to do that. I think you can do an awful lot with outsourcing, you know, giv

people—organizing people and giving them information and resources to do that. 

none of that is going to get done in fifteen minutes.

Moderator: Do you have anything to add?

A. [Dr. McIntyre] I’m concerned that the core of this, again, is the question of understa

ing or misunderstanding the enemy. I agree with pursuing public diplomacy. It’s ju

think we have to do it a different way. And the core of the Cold War—the truth is 

78
the Marxists and the West in some respects had a commonality of vision. We both w

talking about what’s best for people. The argument was what economic system and

extension, what political system, and by extension from that, what moral system b

serves that purpose. And eventually what we did was demonstrate that the system 

the West best served that purpose by cutting them off and allowing the econo

stresses internally to collapse. That’s not the argument we’re in with these other gu

We aren’t in a question about what best serves humans here on Earth. They have 

entirely different question: In what way can man best serve God here on Earth? And 

the louder and harder and better we put our position forward, the more we prove 

Laden’s case that this is a war on his ideas, that we are moving aggressively to purge 

philosophy from the Earth—read what he says. I just can’t say that enough. It’s onl

Go read it. Nobody looks at it. He’s right. What he is saying about us is right. We see

change the fundamentals of his way of life, of his belief. We want to give right

women. Well, we’re not going to do that by getting him to understand better what 

mean by rights to women. So the fact is, there’s a hard nut core here that we’re sim

going to have to kill, and then a large number of other people that we can convince 

cause that hard nut didn’t work—that’s, to my mind, the core of how we’re goin

have to fight this over a longer period of time. As Jay says, demonstrate that their 

proach doesn’t work. And then you’ll be able to open the door a little wider. Finally, 

question of moderates—why aren’t there more moderates? Why don’t the moder

speak up? Because as long as the radicals seem to be winning, you’d be an idio

speak up as a moderate. We’ve got to give them enough cover to demonstrate so

sort of victory against the radicals, and at that point you can expect to see mode

voices kick in.

Moderator: I want to pursue this issue, for a second, of ideology because I think this is

think all three of you have touched on something really important, which is, this is not just a 

with an enemy. But it’s with an enemy who has a very specific—and this is where I think 

Cold War analogy does hold and why it will be a long war—you have an enemy who has a v

specific ideology. The thing that always drives me crazy—maybe you guys want to commen

this—the thing that always drives me crazy is, why do they hate us? What did we do? And 

one place that—Dave, I guess I take issue with you for a moment and say it’s not so much 

we’re an aggressive force eradicating bin Laden’s way of life as everything we are is offensiv

bin Laden. The fact that we exist in the form that we do, the fact that women walk around w

out wearing a burka and that we’re not stoning homosexuals in the public square and that 

television movies are permissible: It’s fundamentally—in fact, I think it was Zarqawi who, 

before the Iraq elections, said democracy is a form of heresy in and of itself. And I guess at 

point I find myself agreeing with you that there’s just a tough nut there that you have to get 

of, but our fundamental philosophy is, we would leave you alone if you leave us alone. But 

Communists and these guys don’t seem to have that live and let live—

A. [Dr. McIntyre] But we’re not leaving them alone. We’re not leaving them alone fr

their perspective, and your point about Baywatch and Iran is exactly to the point. If 

had a large number of American young people who were suddenly taken with the 

ology of Islam, we would be alarmed. And if we matched—if our politics and our 

gion were the same, we’d really be alarmed. And that’s where he is. You know, he i

a wild-eyed madman. Read the books by—was it Scheuer—Mr. Anonymous?

Moderator: Scheuer, yes.

A. [Dr. McIntyre] And he lays out the things that bin Laden has asked for. And there’s s

ply things that we can’t give him. Get out of the Holy Land. Abandon Israel—

Moderator: Everyone in America convert to Islam.

79
A. [Dr. McIntyre] And what he says is—even a little more sophisticated than that—w

he says is, look, you guys are supporting corrupt regimes worldwide; quit suppor

those corrupt regimes. Let them fall. Remember that Saudi Arabia was singled ou

the State Department last year for being virtually the least tolerant of religious intoler

nations in the world. And they’re being attacked by al-Qa‘ida for being too libe

You’ve got to get your mind around that fact to understand what we’re up agains

Moderator: Go ahead.

A. [Dr. Lord] I may have a slightly divergent view. I mean, I think the analogy with 

Cold War is vital to pose. One obvious difference is, just why was the Cold War cold

was because there were reasons we didn’t want to come to blows with the Soviet Un

in a hot war. And the whole idea of containment, of course, was to use particularly 

ideological appeal and our public diplomacy programs to rot the enemy from wit

and the strategy worked brilliantly, but it took, you know, forty years. I’m not sure 

quite the same with the War on Terror I mean partly because it’s a hot war, too. A

we’re chipping away at them on many different fronts at the same time—you kn

drying up their finances, killing them, and also bombarding them with public dip

macy. What that suggests is, maybe this won’t be such a long war. I think another p

worth keeping in mind before we assume that somehow bin Laden and company 

ten feet tall—I don’t think they are ten feet tall. If you read some of the books, part

larly by a couple of French students of the radical Islam, who’ve written rather conv

ing accounts—it’s a book called The Failure of Political Islam, which goes back to 

Algerian crisis ten years ago, or whenever it was where the National Salvation Fr

there in Algeria—the Islamists made a try for political power, and they were massac

in a kind of a bloody civil war. But beyond that there’s been a kind of reaction in 

Arab world, the Islamic world, wherever radical Islam has seemed to approach polit

power, that, well, maybe we really don’t want these guys running our country. So w

is the appeal exactly now of bin Ladenism, and what’s the relation between that 

the intrinsic appeal and just the current wave of anti-Americanism in the region beca

of Iraq? I mean, those are tough questions. But I think one could make the argum

for example, that every poll shows that Americans are more unpopular now than eve

all of these countries, 1% or 2% opinion polls will say they like America. But this may b

transient phenomenon. Go back to Vietnam days. We took a bath in public opinio

Europe and elsewhere for Vietnam, and we rebounded once we got out of Vietnam

again, just kind of a contrarian’s view that perhaps this thing could be over more tidily 

quicker than a lot of us now think.

Moderator: Jim?

A. [Dr. Carafano] Yes, I just agree with Cary. I just want to make a slightly different po

which is, really there’s two ideological wars or information campaigns going on h

And I agree with them about the nature of—Gilles Kepel’s Jihad,the book you are t

ing about, which is actually a fabulous book, basically said, Look, political Islam fai

And actually in part you can explain the rise of bin Laden because the political age

simply failed. They couldn’t get a hold anywhere, and so they became terrorists. 

having said that, you don’t need many people to be a successful terrorist. And 

you’ve got to go out and break the linkage between the terrorist and his target from 

people that he is seeking to recruit and fund-raise from if you ever want to get that m

ageably down. But it is a good reminder that these guys are not ten feet tall. This 

very, very defeatable enemy. As a matter of fact, George Kennan’s “Long Telegram

infinitely worth rereading, not for the stuff on containment, which I really think is 

overblown. Containment is not the beginning or the end, and I don’t actually think 

ever practiced the strategy of containment during the Cold War. But the most impor

80
part of Kennan’s letter is the last three hundred and fifty words, and I’m misquo

him, but what he says is, he does this whole analysis. He says, at the end of the day, 

know what? He said, we’re going to win this war. We’re stronger than these guys. W

smarter than these guys. We’re better than these guys. We’ve got better ideas. W

going to beat them. He said our greatest danger is that in the process of coping with 

enemy we don’t become the enemy. And his greatest strategic caution was, you’re 

war that you know eventually you’re going to win anyway. Your greatest danger is 

you’re going to destroy yourself by doing something that’s self-defeating. And that’s

think the second war of ideas is, you have to convince the American people not to 

stupid things. You know, I wrote a piece called—somewhere—it’s “After the Next 9/1

which is, there’s going to be another terrorist attack. And let me tell you the five stu

things people are going to say we need to do, like throw all the Muslims out of the co

try, spend billions of dollars more—you know, nuke a country or something. You h

to—and Americans got this. Just very, very quickly: you know, Americans had a pr

lem with the Cold War. It started in 1947 [inaudible] pick a date. Americans really di

care. Americans assumed that the elites were taking care of that until the outbrea

the Korean War. The Korean War brings the Cold War home to Main Street. Americ

get serious about this stuff and say, oh my gosh, we could actually die in this thing. A 

of angst, a lot of good sci-fi movies about robots that are really communists and ra

tion. And then after a couple of years Americans realize that they’re not all going to 

murdered in their beds, and Americans just go back to living their lives. That’s kin

what we’re going through now. We’re in this period—first it’s the Cold War ended, 

we said, okay, our elites are going to take care of all of this foreign policy stuff. T

9/11 happens. Now Americans are fearful in their beds. If there’s another 9/11 the

be even more fearful in their beds, but eventually we’re going to get the security sys

up and running in place. And once it’s up and running in place, Americans are goin

trust us to kind of take care of them. So we’ve got this terrible thing. On the one h

you have to convince people that they need to take this seriously, make the investme

and put these fundamental systems in place, whether it’s public diplomacy or ho

land security, to fight these guys over the long term. But on the other hand you wan

convince the Americans that they can’t be doing stupid things like burning the Const

tion or throwing every foreigner out of the country. So that’s the dilemma that we h

right now.

A. [Dr. McIntyre] I concur with Jay. I certainly agree they’re not ten feet tall. The poin

that there only have to be a few of them. That’s the core of the problem. The issu

how do we keep this ratcheted down is a very serious one. If we were to have an att

tomorrow on a train, a bomb were to go off and kill ten people on an Amtrak train, I 

you, what do you think would be the effect in the United States? Well, that happe

three weeks ago. It was a screwball with an SUV that blocked a train and killed ten p

ple, and it didn’t make any difference at all, did it? But I tell you, if someone puts on

a backpack, we’re going to get that twenty-four/seven until we change the entire 

system in the United States. So how do we beat that? We’ll come to that; maybe n

question I’ll tell you the one thing I think is missing.

Moderator: Well, before we turn it back to the audience, I’ll just throw a couple of thi

out. One is—a little too much happy talk, so I’ll be the gloom-and-doom guy. I feel like we’

little bit off-track. I don’t think anybody on this panel is really worried that twenty years fr

now we’re going to lose this war and we’re all going to be with our wives in burkas and pra

mats. I don’t think anybody is concerned that we’ll lose in that sense. I mean, I think there’s 

a concern of how many more people can these guys kill before—I mean, fascism is to m

good example—let’s leave aside communism. People thought when fascism arose in the tw

ties and thirties—gosh, this is the way to the future. We had all this utopian literature ab

81
future fascist states and all that stuff. And fascism was destroyed effectively and quickly, but 

cost of sixty million lives. I don’t think anybody—anyway, so I don’t think I ever worried ab

us losing the Cold War in the sense of I would be addressing Comrade Admiral and lecturing 

Marx at the Naval War College, but I think—in that sense, but I do think the sort of human 

and the cost for ourselves is worth thinking about. One last thing is that perhaps instead of 

ology, I’ll just throw you something that President Putin of Russia sort of floated as an idea. 

said, look, instead of making this a war about Islamic fundamentalism or Chechen separat

or whatever it is—this was in the wake of the Beslan tragedy where something like two or th

hundred children were killed. He said, look, why don’t we just make this a war on anybody w

would use these methods, regardless of what their beliefs are. I don’t care if they’re—he di

say this obviously. But he said, I don’t care if they’re Chechen terrorists or Islam fundamen

ists or spelling reformers or vegetarians or whatever they are. Anyone who would use purpo

ful killing of the innocent is the enemy in this war. And I sort of find something attractive ab

that. But maybe it’s something we should discuss. Other questions, comments.

Q. [inaudible]

Moderator: Okay, other questions, comments—yes, also way in the back.

Q. [inaudible]

Moderator: Okay, let’s take one or two and hear from you folks some more, and then w

bring it back to the panel. Captain, when you said that—I have a poster in my office. It was 

new recruiting poster for the Navy. It said, “Life, Liberty and the Pursuit of All Who Threa

It.” I thought that was a sort of effective public campaign. Other questions? Yes, sir?

Q. I was wondering what you think the likelihood of the sort of War on Terr

ism between America and al-Qa‘ida at the moment might become an 

lamic versus Christian war; and should that happen, what would be the U

position, or what position should they choose?

Moderator: Okay, let’s take one last one, and then we’ll come back to the panel. Yes, 

Q. This question a minute ago said there was—he had a question about the st

egy of the United States and this War on Terrorism. I would say that the N

tional Security Strategy and the National Strategy for Combating Terrori

address that strategy. However, I think that it is a hundred and eighty degr

out from where it needs to be, and based on saying that it’s not an ideologi

war. It’s not based on religion. It’s not based on these things that have be

brought up to date. And I was just wondering, gentlemen, if you had any id

how we could rectify the language or the concepts to bring those things—

bring that—our stated position as a government to where maybe it should be 

better fight this war or to win the war.

Moderator: Okay, can you clarify just what you say is a hundred and eighty degrees 

from where it needs to be?

Q. Yes, sir, because when you read the National Security Strategy and the St

egy for Combating Terrorism, it says that—it clearly states that it is not a w

against a particular ideology. It is not a war against religion; where, if y

read Osama bin Laden—one or two of the many things that he’s written a

said—you will see that he considers it a war against religion or a war of ide

ogy, just based on what he says. So I just think those two things are 

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together and maybe our assessment of the war initially maybe needs to 

refocused.

Moderator: You know what, let me suggest that we take the first and fourth questi

together since they’re about strategy. And if I can, I think, tweak the lieutenant’s question just a 

tle bit, it seems to me that one of the questions that comes out of what the lieutenant was ask

is, what does it look like to win? I mean, if we’re talking about ends and means here, how do 

know when we’re done? Jim, you want to start?

A. [Dr. Carafano] Yes, well, he’s wrong, and he’s wrong.

Moderator: Okay, so are there any other questions?

A. [Dr. Carafano] You know, I mean I actually do think we have a strategy that’s evolv

I don’t think necessarily you can find it clearly when you read all the fourteen differ

strategic documents we have, but basically it is respectful of the principles I tal

about. I mean, it does have a security component respect. It promotes econo

growth. It respects civil liberties and privacy, and it’s basically very simply—it’s go

offensive component. Go out, find the terrorist networks, destroy them, and kill th

guys; and it has a defensive component, which is, provide a layered security syst

and it’s respectful of the things that make this country what it is, principles of federal

and free markets. And that is the fundamental strategy. And you know what? I think 

kind of about right. I think we’re kind of where we were in about 1951, ’52, where th

was this emerging consensus or bipartisan consensus of what we think we’re do

Where I think we’re short is in the—what I talked about at the end of my talk. It’s the 

tual instruments to actually do this, to oversee it, to run it, to actually spend the f

hundred and fifty billion dollars effectively. That’s where there’s still a lot of work to 

done. So we can’t be complacent. And winning is actually very simple. Winning is if 

morrow looks like today. I mean, that’s essentially what winning was in the Cold Wa

wasn’t that the Soviet Union collapsed. Winning in the Cold War was, every day 

got up in the Cold War, your life was like it was the day before. You could go out; 

could get a job; you could go to school; you could marry somebody; you could th

about what you want. And every day we did that, we won. We won the Cold War no

1989. We won the Cold War in 1945 or 1946 or ’47—pick a date—when we deci

that we were going to stay who we were and protect that. And we did that through

the Cold War and afterwards. So that’s what winning is.

Moderator: Dave?

A. [Dr. McIntyre] Jay and I can agree on a lot of things. I don’t think tomorrow is goin

be like today, though. The problem is that the threat is in some ways fundamentally 

ferent, and dealing with security at home is in some ways fundamentally different fr

dealing overseas. I do agree we have a strategy and that we are pursuing it. Why doe

it appear that way? There are a couple of reasons. One is that we haven’t put any s

ous intellectual horsepower against the issue of homeland security and terrorism. T

are still being treated as sort of extra issues. There is virtually no tenured professo

any university in the United States that is interested in these issues. There is no univ

sity in the United States that has stepped forward and created a course or departm

Let me tell you what all the deans tell me. And I don’t mean just in my school, beca

my school has been very forward-leaning in this. What the deans tell me is, I hav

know that there’s going to be a profession here before I take in a student. And I hav

know that there’s going to be something long-term worthwhile here before I encour

faculty members to write on this subject, because maybe they can’t get tenure. So 

me to create a department of homeland security or central courses in homel

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security, I’ve got to see that that student coming in is going to be well served. That 

take three years. I’ve got to see they can get ten years later—that’s seven years fr

now. It’s going to be ten to twelve years before I know that there’s something to 

homeland security stuff so I can start encouraging people to come into the pipeline. 

created an industry in security studies in the 1950s. We started with international r

tions and went to the issue of how do we balance what we’re spending, what do 

want to achieve. We created the language for strategy. That has not begun to happe

the field of homeland security in the United States. The closest I’ve seen come is w

we’re doing at A&M, which is to create a distance learning course with six courses i

And I can’t find anybody else who’s doing that. Why is nobody doing that? Beca

there’s no money or incentive system to do that. The budget for Department of Ho

land Security next year for the homeland security–related issues—not rescue by 

Coast Guard, not retirement—homeland security–related issues is twenty-seven bil

dollars. The Department of Defense budget is four hundred and nineteen billion d

lars. Where would you invest your money if you were Lockheed or Boeing? Mo

poured into security studies and political science in the 1950s and hard science R&D

has trickled into homeland security issues. And until we decide that we’ve got a fun

mental problem and put fundamental money against it, we’re not going to get any f

damentally different way of doing business than what we’re doing right now.

Moderator: I think one thing, as you were talking, I think is interesting—Sputnik 

launched in 1957. Eisenhower—just to give you some sense of this; students will remember 

factor from lecture. Eisenhower loses twenty-two points off his job rating in a week becaus

Sputnik. And then within a couple of years we’ve got the NDEA. We’ve got Russian langu

funding. We’ve got guys going to Caltech. Rockets are flying all over the place.

A. [Dr. McIntyre] Our core failure so far has been in our own education, I think. Hey, 

can’t get everything right. Jay’s right. We’ve done a lot of hard work. Look, go to 

braska Avenue, where the headquarters is for the Department of Homeland Secu

4:00 in the morning, and the parking lot is full of cars. And go back at 11:00 at ni

and the parking lot is full of cars. People are working hard on this. I think our core 

ure has been to accept that this is a long-term issue which is going to require long-t

intellectual assets and then marshal those assets.

Moderator: It is sort of amazing that one rocket goes up, and pretty soon there’s nine mil

kids studying Russian. Three thousand people die, and there’s still not a scholarship to st

Pashto or Arabic or whatever. Cary?

A. [Dr. Lord] I guess on the strategy issue—one thing that we haven’t mentioned is the s

really, away from the kind of Cold War strategy of containment and the kind of defen

mode that that entailed, to the kind of preemptive, preventive, more offensive mode 

is really called for—I simply believe—by the phenomenon of contemporary terror

plus the potential connection to WMD. So I mean that really has been a very distinc

feature of this administration’s approach, and I mean that also should be, I think, c

nected to the public diplomacy issue, because public diplomacy is, after all—it’s an of

sive weapon. And it makes perfect sense to couple that in a larger package with th

other—the more kinetic approach. But it’s—again, these are very fundamentally dif

ent strategies that we’re pursuing. On the question of ending the thing, I think, again

shouldn’t be too gloom-and-doom about this. Historically, if you look at other terro

movements, there is a history of terrorism being totally crushed in countries. I mean, th

of the Italian Red Brigades, for example, you know, thoroughly penetrated the—a lo

them changed their minds, the pentiti. They gave themselves up because they ceased 

lieving in the cause. So these movements can implode and be totally wiped out after 

that many years. So again, something like that could conceivably happen to al-Qa‘

84
but probably not, because of the nature of the inspiration for it. On the other hand, 

could reduce that to a pretty low, and really, annoyance level. I think it’s quite conc

able within, say, five to ten years.

Tom, maybe I could just go ahead and respond on the one question on the marit

component. Well, I think there are a couple of things the Navy could do. And I’m 

thinking of platforms, but really it has to do with Navy education but also career pa

and specialties. I mean, it seems to me that—I mentioned psychological operati

briefly a minute ago. The Navy has essentially no psychological operators. The N

also has essentially no foreign area specialists. It seems to me that you can mak

pretty good case for the Navy being able to make a real contribution in that are

won’t pursue that, but it’s a thought.

Moderator: Jim, you want to make a comment on the previous issue? Go ahead.

A. [Dr. Carafano] I just want to make one quick alibi to answer the question. I think 

chances of a Muslim-Christian war is zero. And the reason for that is, I teach students in 

tional Defense University. They come from Jordan and Iraq, Indonesia, Malaysia, and 

these countries, and they’re very critical of U.S. foreign policy. And they tell me everyth

we do wrong, and I really appreciate that, for their help for that. But they have no intere

having bin Laden come in their country and set up a fascist dictatorship. So, you kn

these guys—I agree with Dave. They’re very, very dangerous people. They need to 

stopped. They can do a lot of terrible things. They’re going to find some people that 

them credible and do the things, but the vast wealth of the Islamic world doesn’t think th

fascist empire is such a cool idea. And so it only becomes a religious war when we liste

bin Laden and let him tell us it’s a religious war and then take his word for it.

Moderator: Let’s move to that question, because it seems to me one of the scenarios that 

Laden was looking for out of 9/11 was to turn it into—the idea being that they would do a 9

we would freak out. We’d basically start blasting everything that moved. I think the first kin

cold chill that went up the terrorists’ spines was when we just sat and said—you know, right a

9/11 people said what are you going to do, and we said we’re thinking. But I think the expe

tion—I mean, this is at least one version of it that I read, is that we would go nuts. We would s

nuking everything in sight. This would lead to demonstrations all over the Islamic world; in pa

ular, the government in Pakistan would fall. Bin Laden would then be invited to come in as so

the spiritual leader of a nuclear-armed Islamic fundamentalist state, and then we really wo

have this kind of clash of civilizations in a very real way. I mean, what do the rest of you th

about that? Likely? Possible?

A. [Dr. McIntyre] I think you got it about right. As long as we keep our head, I think we’l

all right. The issue again, to my mind, is not the rising of a billion people against a bil

people. The issue is a small number of people being armed with very terrible weap

and then influencing those people by either—by their success. And what we want to 

is influence that large number of people by their failure. So I agree with you. I th

that’s what he was about. I think we’ve avoided it thus far. I think it can be avoide

the future. But it’s not going to be avoided by making nice and thinking that if we 

find ways to satisfy them, they’ll come into the camp. You know, this is not “if o

those guys would come see who we are,” like dealing with the Soviets, they’ll like 

better. They’ve been here. They saw us. They don’t like it at all. And that’s the c

people we have to deal with.

A. [Dr. Lord] I kind of doubt that bin Laden really thought he was going to provoke us 

some overreaction. I think it was quite the contrary, that he thought he would back us 

And there would not be any strong reaction. But maybe others have a different view

85
Moderator: Again, I don’t have any sort of cool inside info on this. This was a British 

count that I read that apparently they’d pieced together. But the idea was, the Cole wa

enough. Bombing in Kenya and the embassy bombings in Africa weren’t enough. And n

that this was going to really kind of provoke an Islamic versus Christian kind of Armageddon

mean I just don’t know whether that’s true. But I think there was a—

A. [Dr. McIntyre] Well, what’s important about bin Laden is this. He’s not a mil

miles—you’re right, he’s not ten feet tall. But it is important to understand what’s dif

ent about him. Nineteen ninety-eight is when bin Laden declared war on the Un

States. And what makes him different from the others who had been dissatisfied 

coming out of the al-Qa‘ida experience and Afghan experience was his decision to f

the far enemy instead of the near enemy. So there had been Islamic governme

around the world that were already having to deal with rising terror. What makes 

different is his decision to go after the United States. And I have also seen those 

counts, and they make good sense to me, that he was looking to provoke some sor

backlash. I just don’t know whether that’s true or not. What I do know is that he has n

moved from being a leader to being an inspiration. And what we have to worry abou

not just bin Laden somewhere pulling the strings. The guys that attacked [with] bom

that attacked the trains in Madrid, made their plan within about a ninety-day period

if we had penetrated their organization, you know, and been watching them for ye

unless we had been in on that—they didn’t know each other a long time before t

That’s the problem that we’re going to face in the future, is this sort of get-together: he

a good idea; let’s do it.

Moderator: We’ll turn back to the audience, but I’ll just throw out one more statistic her

sort of torture this Cold War analogy to death, because Jim and I probably agree on it, and C

and I don’t. But this issue of small numbers causing a lot of problems—I mean, when you th

about the number of Bolsheviks that were involved in the actual takeover of the Russian 

pire, I mean it was literally a handful of men; and at no point during the Cold War did the m

bership in the Communist Party of the Soviet Union ever get more than 11% of the a

population. And as we quickly found out around 1991, most of those weren’t buying it, eit

especially if they happened to be Kazak or Ukrainian or Uzbek. They weren’t really signed o

the project completely. But it’s amazing what a small number of people managed to hold the w

at bay under the threat of nuclear annihilation—boiled down to maybe a couple hundred Rus

males in Moscow. We have some more time for some more questions, so, please? Yes, sir?

Q. Would the panelists like to comment on the projections for troop streng

given everything that’s being said in terms of the duration of the global W

on Terror? I read a lot of what you send out from Heritage Foundation, 

Carafano, but I’m curious, from everybody, in terms of what your views 

on troop strength.

Moderator: And there was a question right behind you—yes, sir?

Q. Gentlemen. Globalization has created—to borrow from Thomas Friedma

the super-empowered individual along the lines of Zawahir or Usama 

Laden, the single individual who has the ability to affect global policies a

actions. I’d be interested in the panel’s thoughts on initiative or ways to cu

vate the super-empowered individual for the good guys, for the good side 

the force, and how that may or may not be a good idea.

Moderator: Okay, did everybody get that question?

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Q. My question is a little different, reflecting both back on 9/11 which—an

don’t want to say this to sound cynical, but that was the day that Americ

discovered terrorism. It’s not as if it was a phenomenon that didn’t ex

well before 9/11. So one thing that would be a concern for me when we try 

think about what would be the operational definition of winning, if you w

is a kind of indeterminate outcome. In other words, if we do the defens

side right, and I realize we’ve got a lot of work to do—and I think severa

you commented on that—I could imagine an outcome where we—may

we’re lucky. Maybe we’re skilled. But where we avoid additional instan

of catastrophic terrorism in the United States. But they do oc

elsewhere—you know, other Madrid bombings, things of that sort. In ot

words, is there a risk or a danger that in some context we could decide it 

comes somebody else’s problem if we do well enough here over a lo

enough period of time?

Moderator: Okay, and let’s take one more.

Q. I’d like to have the panel take a quick look at this from the enemy’s persp

tive. What are their ends and means? Get an understanding or appreciat

for what we’re facing and maybe how to approach it.

Moderator: Thanks, I think one question we can maybe dispose of fairly quickly is just p

jections on troop strength. Jim, you want to start us off?

A. [Dr. Carafano] Yes, I’ve written a lot of this—I think the future is going to be a s

curve, not a straight line, which means I think that—of course, ground troop stren

being the big variable—it’s going to go up and down. It’s going to wax and wane m

like it did in the first ten years of the post–Cold War era. And so what that says to m

that permanently ramping up active duty troop strength is not a good investment. W

you’re better off [doing] is having a large dependable reserve component that you 

call on when you need to ramp up. And the other argument, I think, is that there’s 

an awful lot of inefficiency in the force structure left over from the Cold War. And 

reason why it’s there is because it was politically difficult to deal with, and now we h

an opportunity to do difficult political things, like get rid of force structures that we d

need, and we ought to not just ramp up troop strength. We ought to take the oppo

nity to take things out of the force that we really don’t need and redirect that tr

strength where we do need it. So I would vote for not a large permanent increase in 

active duty troop strength, particularly in the Army. I would vote for sustaining a la

reserve component, and I would vote for doing things like BRAC and global repositi

ing and eliminating some force structures that maybe we don’t need anymore.

Moderator: Dave?

A. [Dr. McIntyre] I don’t know what we want to do, and because I don’t know what 

want to do, I don’t know what kind of force structure we need to do it with. The disc

sion at lunch, following lunch, about we’re really kind of an Anglo-American—we

had a kind of Anglo-American vision—I think is half right. I think we’ve also sort of 

an Anglo-French vision. We’ve seen ourselves sort of as the inheritors and the pas

outers of the French Revolution, and those two things are at odds. One of them says 

manage the world. And the other one says we change the entire world. So I don’t kn

I can’t figure out what it is the United States wants to do. I can tell you this. You c

buy a Cadillac and pay for a Volkswagen. You’ve got to pick one of those two thin

And I don’t think—Jay and I had this discussion. It’s one thing we disagree on. Loo

live with the reserves down where I live. I don’t think we can draw on them much m

87
They are about tapped out. I spoke to the doctors here in the northeast about th

weeks ago. Some of them were on their third tour overseas. Now it’s not three ye

They go for ninety days at a time. Why? Because their experience is, you go f

months, you lose your practice. I think we’re about tapped on the reserves. So I th

institutions like this need to go back and look at people like the Romans, who ha

similar problem. We’re trying to defend over there. We’re trying to defend at home. 

we do it with forward deployed forces? Do we do it with raised levies? Do we do it w

our officers and their people? Do we train them? Do we bring in immigrants and g

them citizenship, which is what the Romans ended up with? We’ve got to figure 

what we want to do and then look at ways it’s been done in the past. I don’t know what 

answer is—how many troops—until I can figure out what the United States wants to 

Moderator: This question about the super-empowered individual—let me piggyback o

the officer’s question and say, do we really want that? I mean, do we want to get into sort of 

eling charismatic figures? You know, you have bin Laden, but we have—yes, Da

Hasselhoff. I mean, I think I understand your question, but I mean, don’t democracies sor

purposely mitigate against that?

A. [Dr. Lord] I’m not sure what “super-empowered individual” is supposed to mea

don’t see how bin Laden particularly falls in that category. I mean, he’s a revolution

leader. But, no, I mean I don’t see the American analogue particularly.

Moderator: What about the question of becoming somebody else’s problem? The first th

I thought when that was asked, is terrorism divisible? It seems to me that it’s hard to look 

that way. It seems to me if you strike the nest, you’re snuffing out the incidents wherever t

occur. Aren’t you?

A. [Dr. Carafano] In part that’s already happened. I mean, you can make an argum

that things like the Madrid bombing and the increased activity in Europe and the ac

ity in Iraq is in large part because it’s hard to get in America. It’s expensive, good se

rity. And virtually all the stuff that we have on—if you look at everything that al-Qa

has done since 9/11, it’s all been trying to reconstitute the network, trying to recruit, 

ing to do fundraising, and to do that you have to prove that you’re in the game. And 

you go wherever you can play. So if it’s Bali, you go and play in Bali. So I think yo

right. One of the byproducts of us doing a better job in defense is they go and st

someplace else, because it’s a war. We’re not stupid people.

But the one point I did want to make in all this discussion is—and actually go back 

question this morning. The question is, how big of a terrorist attack do you have to 

before you really change a society, and the answer is, pretty damn big. I mean, I w

back and tried to find, well, what’s catastrophic terrorism? I mean, something that re

just rocks a society on its heel. And it’s really, really hard to find something—even if 

go back into the influenza of 1917, even that really didn’t—if that had bee

bioterrorist attack, it really didn’t fundamentally change the long-term outlook. And 

the answer is, you almost have to get into the hundreds of billions of dollars and ten

thousands of casualties to really give a country and economy like the United State

jolt. So the answer is, are you going to lose? And the answer is no, because nobod

short of a nuclear war, nobody is ever going to be able to do that in a sustained w

against you. On the other hand, you can suffer these things.

And so the one thing that we didn’t mention—and my nightmare is not bin Laden. 

not the enemy I know. It’s the Aum Shinrikyos. It’s the enemy I don’t. I mean ev

body has forgotten about Aum Shinrikyo. These guys had a billion dollars in ass

And if they didn’t have some of the stupidest [inaudible] on the planet they actu

88
would have been able to field the weapons that they wanted to, because they sure 

enough money to do it and enough equipment. And they would have actually b

able to conduct biological strikes against the United States. You couldn’t have b

Aum Shinrikyo with a public diplomacy. I mean, these guys are just—it’s a fre

nutcase cult. You know? And it was a small number of people. And they weren’t 

anybody’s radar screen. And the fact is, you’re never—if winning the War on Terror

means no more terrorist attacks, then you’re never going to win. You’re always goin

lose, because there is always going to be terrorist attacks. Winning doesn’t mean 

you never take casualties and you never have battles. And so we have to steel ourse

to the fact that there are going to be terrorist attacks, some large, some small, so

sooner, some later. Some of them might be quite terrible, from enemies that we ne

anticipated. That doesn’t—because that happened doesn’t necessarily mean 

America still isn’t going to be the country that it wants to be and still—and the world i

going to still move forward. But I think the key point there is that winning the war on 

rorism is not about eliminating terrorism, because that is simply an unreachable go

A. [Dr. Lord] I think [faculty] raises an interesting question, because it sort of points to, 

way, the much greater vulnerability of Europe to Islamic terrorism than the Un

States, and what would happen if the focus really of the Islamists were to shift to Euro

drawing on all the... Arabs from various countries that live there now. I mean, it co

be a real nightmare. And how would that affect U.S.-European relations? It’s an in

esting question. You know, I don’t think anybody has really thought about that. 

you know, I don’t think—it . . . may be a certain—schadenfreude, I think, is the tech

cal term. I think it would probably help strengthen the U.S.-European relationshi

don’t think we’d abandon them. I mean, I can’t envision that kind of scenario offhan

A. [Dr. McIntyre] In one respect we’ve already done what you suggest. That respect is 

the war we declared, this global war on terrorism, is actually a war on terrorists w

global reach, if you look at the language very carefully. So we have not included in 

local terrorists who are attacking local governments. We said, yes, we’ll exchange in

mation, but what we have consistently said we are irate against and gone after is th

that we say have global reach, which largely is defined as those that could reach 

here, which is why, for example, we haven’t spent a whole lot of time working aga

the Chechens. But we have spent a considerable amount of time working against p

ple in that area who might come here. We’re about done. I have one thirty-sec

point I’d like to make. We’re about to wrap up. Let me tell you one thing we could 

that I don’t think we are doing yet and something you could undertake here. Wha

the thing that worries me the most? The thing that worries me the most is what 

talked about, a single cataclysmic event. We do not yet have our minds around wh

means to have a hundred thousand dead, three hundred thousand casualties, a th

sand fires out of control, no water, no bridges, no communications. We do not have 

hands around what a nuclear weapon in a port would look like. Now, I don’t thin

would require a gazillion dollars to begin to tailor regional forces that could fall in o

superstructure to respond to that. It’s not entirely unlike what we contributed to in 

sponse to the tsunami. I think that would be a very good case study, for somebod

take a look at. What did naval forces do to respond to the tsunami? And underst

that you’re not going to go in and be in charge. You’re going to go in and respond 

the county sheriff and to the mayor and to the governor of the state, just as we did in 

donesia. So I think one thing we could do is take a good solid look at that as a c

study from a naval perspective.

Moderator: We didn’t get to your question about means and ends, but let me just put 

plug for the curriculum at the Naval War College and tell you that one of the things that we d

89
the course that I chair here is, we have a case study on terrorism where we leave aside al-Qa

for the moment. We go back and we look at Russian terrorists, the IRA, the Algerians, and 

Shining Path terrorists in Peru. And we do exactly what you’ve suggested. We say, why are t

choosing this? What’s the point? What are their goals? Why is this means something 

they’ve chosen? We try and think about it to get sort of inside the terrorist mind-set, beca

that’s the most effective way, we think, that you can start coming up with alternatives and s

tions for defeating that mind-set. So I’m sorry we didn’t get to your question on the panel, 

just so you know, and folks know, we actually do tackle that question in the curriculum at 

Naval War College, directly from the kind of perspective you’re talking about. But I really w

to thank you guys for a great panel, Carnes Lord, Dave McIntyre, Jay Carafano.

90
2005 Quadrennial Defense Review:

Taking Stock and a Way Ahead

Michèle A. Flournoy

Senior Advisor, International Security Program

Center for Strategic and International Studies

Actually, I hate to say it, Rich, but you 

glected to mention the most important 

dential that I have to speak to this audien

and that is, I’m a Navy wife. It’s reall

pleasure to be back at the Naval War C

lege and to be able to speak to you ab

such an important topic.

As Rich mentioned, I served in the Pen

gon from 1993 to 1998. And during 

time, I had the privilege to serve un

three different secretaries of defense. A

all of them understood that part of their 

was to be the president’s representativ

the Pentagon, to ensure that the U.S. military was being used in support of the president’s pr

ities and policies. But few understood what I think Bill Perry taught me and taught many o

who served under him. And that is, the secretary of defense is also the civilian steward of 

U.S. military. And part of his or her job is to make sure that the U.S. military is stronger, hea

ier, more vital, more suited to the challenges of the future when he leaves the department t

when he or she first comes in. And in a sense QDRs, Quadrennial Defense Reviews, are re

all about stewardship. It’s about using the opportunity of a strategy and capabilities review 

leave the military in a much stronger posture and position than where you found it.

Let me start by saying a few words about why I think this particular review is so important

give you at least four reasons. The first is that Secretary Rumsfeld is at a point in his tenure w

he’s starting to think about his legacy. He wants his legacy to be more than Iraq, more than 

operations that we’ve been involved in. And so this will be a QDR that’s really owned by 

secretary of defense and by the senior leadership of the department, and that actually increa

its potential impact.

The second reason why I think this has the potential to be very important is that since 9/11 

recent operational experiences in Afghanistan and Iraq, I think there’s been a real increas

the desire for transformation, a real increase in the commitment to transformation across 

department, specifically shifting the focus of investment and effort from traditional threats 

challenges to more nontraditional challenges. And I think you’ve seen that shift begin in 

most recent budget submission to Congress.

The third key reason: there are very real fiscal pressures on the Department of Defense that 

going to force DoD leaders, both civilian and military, to grapple with some very hard choi

There is a clear sense that the days of the blank check post 9/11 are over for DoD. The grow

deficit has increased competition for limited national security resources and the sense 

choices in the QDR should be “resource neutral.” That’s the phrase being used inside 

91

The above is an edited transcription of Ms. Flournoy’s address.
department right now. Now, absent any tax increases, even administration officials today 

admitting that the projected increases in the defense budget that they had once hoped for 

not sustainable. So budget pressures are the third reason I think this review may be v

important.

The fourth is building pressures inside the defense program itself. In essence, we have wh

call the makings of the perfect storm inside DoD. On one hand we have runaway person

costs—healthcare, retirement benefits, housing. The share of the DoD budget that’s goin

personnel continues to rise in a somewhat uncontrolled fashion. Secondly, we are startin

experience—and I think this will be getting worse—growing difficulties in recruiting and ret

tion, especially in the Army. We are going to have to pay more in the future to attract and k

the quality of people we want in the U.S. military. At the same time, we’re experiencing 

tremely high operations and maintenance costs due to current operations. And the recapital

tion bill for the force is rising as the OPTEMPO increases wear and tear on equipment 

actually shortens the service life of systems that are currently in the force. At the same time, 

erybody is aware of the need for transformation, and the investment accounts are somew

underfunded. So all of these pressures are coming together to create some very, very diffi

trade-offs that could potentially come to a head in this QDR. This is all about making cho

about where are you going to minimize risk? And where are you going to accept or manag

degree of risk? If you don’t have the resources necessary to cover all of your priorities, it com

down to questions of allocating risk. And that’s what this QDR should really be about.

I want to spend some time going through the administration’s approach to this QDR. T

have terms of reference that are, I think, on the secretary’s desk to be signed. That’s a classi

document. I’m going to talk to you based on public statements that administration officials h

been making in the last couple of weeks, sharing aspects of those terms of reference.

The first point about the administration’s approach is that this is going to be different from p

reviews in that it’s really not a strategy review. It’s a capabilities review. Remember, this is 

administration in its second term. We have a sitting secretary of defense who’s already b

through a previous review and who has his strategy in place. You all recall that in coming ou

the 2001 QDR, we had a defense strategy of assure, dissuade, deter, and defeat: assure ou

lies, dissuade potential adversaries, deter conflict, and ultimately defeat adversaries who c

lenge us. This is a strategy that’s been refined over the last several years. The most rec

iteration of this came out just last year. So going into this review, the administration’s feelin

look, we have our strategy in place. We don’t need to rethink it. This is about figuring out w

mix of capabilities we need to actually implement that strategy.

Second basic point about their approach—they have a thesis going into this review. The basic 

sis is that DoD has unsurpassed capabilities to meet traditional war-fighting challenge

force-on-force, military-on-military, conventional war fighting. But DoD lacks the capabilitie

needs to deal with a number of nontraditional threats. Some of you may have seen what’s n

known as the famous quad chart which details three nontraditional types of threats: irregular thr

like terrorism, like insurgencies, like internal conflict in civil war; catastrophic threats like WMD 

tack on the U.S. homeland, or an attack on global markets, or the loss of a strategic ally somewh

in the world; and disruptive threats, meaning technological developments, say a breakthroug

biotech or nanotechnologies or cyberspace or directed energy—some disruptive technological 

velopment that would call into question many of our capabilities and perhaps some aspects of 

strategy. So the principal task of this QDR as this team sees it is to really rebalance the mix of U

capabilities and investment to improve the capacity of our forces to adapt to these nontraditio

challenges. Adaptability is going to really be the watchword and main theme of this review.

Now, to actually bring that down to a level that people can work with, they’ve articulated f

key challenges that they want to focus the bulk of this review on. The first is the challeng

92
defeating terrorism on a global basis. The second is being able to defend the U.S. homel

against the full spectrum of attacks. The third is to influence the choices of key countries at s

tegic crossroads. And this one takes a little bit of interpretation. Here we’re looking at ot

great powers—both rising powers and declining powers. For example, China and India, 

even the EU, as examples of rising powers; Russia as an example of a declining power. But h

do we influence the choices of other key players on the world stage? The fourth challenge is 

feating weapons of mass destruction not only on the battlefield, which has been the focus 

WMD for the last decade or so, but in the context of instability, in the context of terrorism. T

are using the phrase “in the hands of undeterrables.” Now, some may debate whether ro

states or terrorists are truly undeterrables, but they’re interested in the whole question of W

in the context of nonstate actors and in the context of instability.

Now, the strength of focusing on four fairly narrow, if representative, challenges is that this 

focus senior-level attention on a finite set of issues, and it really creates the opportunity to m

substantial movement forward in those four areas. The weakness of this approach is that it 

ally doesn’t represent the full range of challenges that the U.S. military is faced with in the co

ing years. And it risks not giving enough senior leader attention to equally important issues, 

I’m going to talk about what I think some of those are in a few minutes.

Another aspect of the administration’s approach is that they want to take the capability insig

and the capability mixes that come out of this focus on these four challenge areas and then 

them against a much broader range of defense planning scenarios. These span the gamu

potential operations, from high-end war fighting to failed states and to loose nukes and 

forth—trying to represent the full range of operations that we might have to confront in the n

ten to twenty years. Now, again, this is absolutely the right approach in theory, but in pract

there are some problems.

The first problem is that the scenarios are still being developed, and we’re already beginning the 

view. This is one of those preparation tasks that should have been happening for the last yea

eighteen months, and based on the fact that the scenarios will be introduced so late, I think it’s go

to limit the depth of the analysis that can be done, both as to the requirements of individual scen

ios and also the different challenges that are posed when you mix them in different combinatio

Because we’re obviously very interested not only in what it takes to do one operation but also w

happens when different operations occur in overlapping timeframes, and you have to make fo

allocation choices and risk allocation choices across that range. So I’m concerned. I think the 

proach is correct, but I’m concerned that we’ve gotten a very late start analytically and that 

won’t have the knowledge that we need to make intelligent choices coming out of this proces

Now, as decisions are made, the administration is talking about being explicit about risk, 

ancing risk in four key areas—force management or force sustainability; operational risk; fut

challenges, the ability to meet future scenarios; and also institutional risk. And this was, I th

very much building upon some work that we did at NDU in the run-up to the 2001 QDR. A

again, I think the good news is that you want decisions in a QDR to be based explicitly on 

question of risk allocation. The bad news is that the approach that’s being taken relies alm

exclusively on senior leader judgment without really adequate analytic support. Overall, I th

analysis really isn’t likely to play a critical role in this review, or at least not as important a rol

this review as in the past. There’s not been a lot of analytic preparation for the review, 

there’s been a tendency of several civilian leaders involved to downplay and, I would say, 

dervalue the utility of analysis in informing senior leader judgment about the issues.

The last thing I’ll highlight about the administration’s approach that’s a bit of a departure is 

final deliverable—what’s going to come out of this review. In the past, reviews have yiel

clear guidance for building the defense program. And the senior administration officials 

time around are talking about the end product being capabilities guidance, not necessa

93
specific programmatic decisions. And they’ve introduced the concept of a rolling QDR, me

ing that the decisions will be made over time, during and after the review, as things become 

for action. And that means, I think, in practice that some of the most contentious issues, 

trade-offs on platforms and the investment portfolio may not actually be clear until we get to 

next budget submission in early 2006.

Now that’s a description of how the review is being approached by Secretary Rumsfeld and 

team. Let me step back and give you a sense of what concerns me about what’s missing in 

approach, and there are a number of critical issues that I think should be central to the rev

but are not central to this review as it’s been outlined so far.

The first is the need to put DoD operations in the context of interagency operations and to re

use the QDR as a mechanism for pushing for interagency reform. Every operation we cond

today, every operation we’re going to conduct in the future, is fundamentally interagenc

character. And when we are experiencing operational failures or we’re experiencing succe

that are much more costly than expected, as in Iraq, this tends to be due to lack of interage

planning, lack of interagency unity of effort, lack of rapidly deployable interagency capab

from outside of DoD. So I think we’re in a position where, to really create success on 

ground, we need to be thinking in terms of interagency concepts of operations, clear divisi

of labor among agencies for key mission areas, strengthening integration mechanisms at 

strategic, operational, and tactical levels and so forth. And it’s of great concern to me that th

not really on the table at this point.

The second key issue that’s missing, in my mind, is a focus on the metrics that we’re going to 

for sizing and shaping the U.S. military in the future. This administration says this review is ab

capabilities-based planning, which I actually think is a very positive development. But at the 

of the day, even after you’ve done capabilities-based planning, you still have to answer the qu

tion, how much is enough? And it gets, again, back to the question of, where am I going to m

mize risk, where am I going to accept or manage risk? In the last QDR, the administration put 

a metric called 1-4-2-1 to size and shape the U.S. military. One referred to having the capabilit

defend the U.S. homeland. Four referred to being able to deter forward in four critical region

the world simultaneously. Two referred to being able to conduct two swift defeats of aggress

meaning go in, defeat the aggression, roll it back, and then come right back out. And the last 1 

ferred to a decisive win, meaning regime change, postconflict reconstruction, and so forth—w

ning the peace and in a particular war fight. So that was the metric coming out of the 2001 Q

Now, everyone outside and inside the administration agrees that that has pretty much been o

taken by events with Afghanistan, which was not even in one of the four critical regions identif

and by the experience of Iraq. So the obvious question is, what is its successor? What types of 

erations should we size and shape the force for? How many should we be prepared to conduc

multaneously? And with what level of risk in different areas? And yet when you talk to peo

involved in the review, they say that’s not a key focus. We’re not planning on putting a lot of 

ergy into coming up with what that metric should be for the future.

The third key missing issue, in my view, is a look at the appropriate roles and missions of the 

serve component and the division of labor between active duty forces and reserve and Gu

forces. The current utilization of the reserve component is creating enormous strains on part

the force, especially the Army Guard and reserve, and, I think everyone agrees, is unsust

able over a long period of time. There is a de facto shift taking place. We are taking a force 

was really structured to be a strategic reserve, and we’re now using it as an operational rese

So I think there is some attention that needs to be paid to the question of what are the appro

ate roles and missions of the various reserve components in major combat operations

homeland security, as part of the rotation base for long-duration stability operations abro

and so forth? We need to also reevaluate the basic contract between the citizen soldier and 

U.S. government and look at the rules governing their employment, from the mobiliza

94
construct to tempo guidelines—how often we feel we can call people up without having th

leave the force—to compensation benefits and equity issues. We also need to ensure that 

reserves are properly organized, trained, and equipped to support the challenges of 

twenty-first century. This is a critical issue, again, that is just not on the table in this review

A fourth key issue is the future challenges associated with conducting stability and reconstr

tion operations. Even though that is what’s giving us the greatest challenge right now in 

and elsewhere, and even though these kinds of challenges are likely to arise in the fut

whether it’s in postconflict operations or in the event of a state failure, this is not one of the 

challenges that the QDR is focused on. I think there are a number of key questions that nee

be addressed here. What is the right balance between active and reserve? What’s the right 

pability mix for conducting these operations now that we understand that they’re not neces

ily lesser included cases of high-end war fighting? Do we need a larger Army and Marine Co

to handle the rotational requirements of these very long-duration operations? If you look at 

projected force, even the transformed force with plans for Army modularity and so forth, 

you look at the projected level of demand, and you look at our stated PERSTEMPO policie

you know, we want to try to get to a situation where we’re not deploying reservists more t

once out of every five or six years. We want to get to a point where we actually let active d

people stay home two years between each deployment at a minimum. If you look at those th

factors, you cannot square the circle. You cannot meet the PERSTEMPO guidelines with 

planned force at the projected level of demand. To me, that is the elephant sitting in the room 

this QDR, and it’s not on the table to be addressed, if you are to believe the terms of refere

that are about to be signed out by the secretary.

The fifth key challenge is allies and partners. Just as everything we do is going to be interage

in the future, everything we do in the future is also going to be either with allies or coalition p

ners. We need to look at the capabilities that allies and partners can bring to the table m

more closely, and to look also at what kinds of integration mechanisms we have in place to 

ally create unity of effort, not only at the interagency level but at the international level—ag

another key issue that seems to be on the sidelines of this QDR.

The last one I’ll mention, and there is a longer list here, but I’m going to try to restrict myself to a 

dozen in the interests of time. But the last big issue that I see that’s not necessarily going to be 

dressed is the role and requirements for nuclear weapons. In the past, nuclear issues have been 

amined in a separate parallel review to the QDR, called the Nuclear Posture Review. This team 

decided they don’t want to do another Nuclear Posture Review. The secretary is literally abou

make a decision sometime this week on whether or not nuclear issues should be integrated into 

QDR. Now if you go out to STRATCOM and you talk to folks there, they will tell you that they n

another look at nuclear issues. They need some additional guidance on where we’re going w

things nuclear in the future. What size should the stockpile be? What should our force posture 

What kind of infrastructure do we need to keep in place to hedge against future threats and to 

tain the force? Do we need modernization or not? Do we need nuclear testing or not? All of thos

sues need to be addressed, and again, right now there isn’t a foothold for those issues in the QDR

Let me turn now to say a word on the process, and this is a particular challenge for this QDR

truly successful QDR requires buy-in from some key stakeholders. The first set of stakeholde

the military leadership inside the department. These people are going to have to take y

guidance and write it into their program and budget submissions. The second set of key sta

holders are members of Congress who are going to have to vote to appropriate funds to im

ment whatever plan the administration submits to the Hill. Now this means that part of 

QDR has to be intensive outreach to those stakeholders—the military internally, the Cong

externally. The track record of this administration—I’m trying to be diplomatic here—but 

track record of this administration, and this secretary in particular, on engaging stakeholders 

side the Pentagon and particularly on engaging stakeholders on the Hill has not been goo

95
date. I am always willing to hope that things can change. But I think if Secretary Rumsfeld re

wants this QDR to establish his legacy, he has a lot of missionary work to do, both inside 

building, with his military counterparts, and outside the building, on the Hill—particularly 

the Hill. When you walk in the Pentagon today, there is a sense of urgency. We are a natio

war. We have more program than budget. We have hard choices to make. How are we goin

do this? When you go up to the Hill, when you talk to even the authorizers and the defense 

propriators, there’s not a sense of urgency. Maybe there’s some with regard to reserve com

nent issues because they’re hearing from constituents. But there is not a general sense 

urgency about the state of affairs and the military. That is a problem. If you’re putting togeth

QDR, you want to get it through Congress, and there is no shared sense of urgency.

Before I conclude, I want to say a few things about the way ahead as I see it. And this is wh

think we should be doing, not necessarily what I think we will do.

The first point is that we should not solve the deficit problem on the back of national secu

spending, and DoD in particular. We are a nation at war. We need to revisit our tax polic

this country and ensure that we have the resources necessary to reduce risk to acceptable le

across the national security accounts, not only within DoD but in other areas like homeland 

curity and resources for deployable capacity in the civilian agencies.

Second, we need to broaden the debate to include not only what the SecDef wants to focus o

this review, those four challenges, which are very important issues and deserve a lot of attent

but we need to broaden the discussion to include the full range of issues that the secretary ne

to focus on if he is going to be a responsible and wise steward of the U.S. military for the future

The third key point is that we need to think bigger than DoD in designing solutions to future 

tional security challenges. We need to tackle this question of interagency reform. We need 

tackle this question of building operational capacity in the civilian agencies to partner w

DoD—and it may end up being a lot more cost-effective to build some of that capacity up-fr

than it is for the military to suffer perpetual mission creep and longer-than-necessary missi

in places like Iraq over the longer term.

The fourth key element of my way forward is to put much more focus on incentive structu

What kind of incentive structures do we have in place in the department, and in the national se

rity structure more broadly? And here I go back to the original Goldwater-Nichols legislatio

think one of the most powerful elements of that was the creation of the joint service officer mo

Essentially it flipped the incentive structure for rising military officers on its head. It used to be 

joint service was a detractor: You leave your service, you’re less likely to get promotion, less lik

to rise to the top. Now everyone understands that if you want to make flag, if you want to m

general officer, you’ve got to get that joint duty somewhere. You’ve got to get the kind of joint 

ucation that many of you are engaged in here. So, we need to think hard about incentive st

tures. Sometimes those are the most powerful changes that can be made, coming out of a rev

like this. How do we want to incentivize rather than discourage greater jointness across the in

agency? How do we want to incentivize a healthy competition of ideas and constant innova

within the department to increase performance? How do we want to incentivize our military le

ers to give their best advice and counsel to the civilian leadership even when that advice 

counsel may not be popular? How do we want to incentivize the best and brightest to actu

sign up to serve in the U.S. military? So, incentive structures—I think they’re subtle. They’re h

to get right, but they can be extremely powerful if you do get them right.

Let me just conclude by saying that I think this review does have the potential to be very imp

tant in terms of its impact on our defense program and on the future direction of the U.S. m

tary. But I also want to leave you with a note of caution: The same was said of past reviews 

produced only modest results. QDRs typically inspire very high hopes in the beginning 

96
almost always some disappointment as they conclude. They seem never to live up to their 

tential. But given the challenges we face, I would argue that the nation needs this QDR to be 

ferent. It needs this QDR to break the mold, and it remains to be seen whether this review 

actually successfully take on, not only the four challenges that have been identified, but the 

range of challenges that are really on the U.S. military’s plate going into the future. So let 

stop there and thank you and take your questions.

97

Michèle Flournoy

Questions and Answers

Michèle Flournoy: Thank you. I’ll take your questions. Yes, sir.

Q. As I listened to your talk, one thing that struck me, when they leave items 

for consideration, do you get a sense that that’s in order to keep things 

the budget? I mean they seem to have a propensity to be doing that. Is th

a strategy? Would you just comment on that?

A. I think that keeping certain issues off the table stems from a range of motivations. Y

there are some issues that they would rather not have to address. I think this adminis

tion is very disinclined, for example, to increase the size of our forces’ end strengt

the Army and the Marine Corps, for example, structure in the ground forces. And so 

way of keeping that debate at bay is to simply define a fence around the issues and k

that outside the fence. I think in other places they recognize that there are importan

sues, but there’s only so much you can ask one review to do, and they’ll deal with th

other issues in the normal sort of budgetary cycle in a more incremental fashion. Yes

the back.

Q. Yes, hi. Two questions: Do you believe that the draft will be necessary, a

are we going to give up the Abrams Doctrine? And the other question 

when you’re talking about joint operations, how far down the pike doe

have to go? We have had experiences even in New Hampshire of air guar

men, truck drivers, going over to Iraq and doing force protection for Ar

truck drivers, and that created more problems than was anticipated beca

of the cultural differences. So is jointness really a higher up, or does it go 

the way down to the individual soldier?

A. Both good questions. I personally hope that we don’t get to the point of having to 

consider the issue of the draft. But I do think we have to consider the question of gr

ing the all-volunteer force if we believe that the level of demand is not going to dissip

any time soon, over the next several years. My concern is that if we leave the ques

of growing the all-volunteer force too late, we will foreclose our options to do that in 

ordered and smart way, and we may end up having to look at a draft even when 

was a direction we preferred not to go in. So that’s my concern. This takes so

proactive action on the part of the administration. If you leave it too long, you m

have to face the question of a draft, which I think would be counter to where we wan

go. On the question of jointness at what level, I think you raise a very important po

And I think ideally, I mean, the real focus of jointness should be at the level of, part

larly, command structures and so forth, and maybe down to the unit level opera

side by side. I think it’s a lot to ask for every single member—individual member of 

force, active and reserve, to be fully able to operate jointly. I think that’s a very high b

And while I think it’s wonderful when we achieve it in some cases, I think where we re

want to focus jointness is on ensuring that units can work together when necessary. 

your example raises exactly—goes back to the question of why are we sending 

Guard folks to go do force protection for Army units. It’s because of a more fundam

tal shortfall that we’re not addressing on the ground force side. Yes.

Q. Ma’am. You were talking about, I guess, arguing more than 50 percent 

our TOA is manpower accounts. And it is going to take some significa

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The above is an edited transcription of Ms. Flournoy’s question-and-answer session.
reform to push those numbers down. The draft is one, obviously, beca

you don’t have to pay people that you conscript as well. There’s been so

talk by some authors with regard to longevity of service in order to qua

for a greater benefits package. The healthcare benefits are migrating 

Medicaid. Can you discuss some of the options that we have to reduce t

burden?

A. I think that—I personally believe that the dollars we spend to pay for our truly pro

sional force are worth it. I think the biggest single item driving up personnel cos

health care. And this is not a problem just for DoD. This is a national problem for ev

one in this country. But I think we have to look at much more creative solution

health care to try to drive down those costs. In my view, there’s very little reason 

DoD should try to own and operate a healthcare system for military members. I th

DoD wants to ensure a certain level and quality of care to everyone who serves, b

think that could be done with contractual arrangements with much great efficiency 

at lower costs. And there have been a number of studies showing this. This is a polit

question that we need to address. I think, relatedly, we also have to address the qu

tion of what kind of health care are we going to provide to returning reservists, to ve

ans in general, and I don’t think we’ve worked through those issues adequately fr

either an equity standpoint or from a cost management standpoint. But if I were go

to focus my attention, I would focus first and foremost on the healthcare question, 

cause that’s really the long pole in the tent. I would also ask you to re-ask the ques

when Steve Koziak is up here, since he has done a study on military compensation 

benefits and might have some other ideas. Yes, way in the back.

Q. [inaudible]?

A. Well, I think you have to strike a balance. I’m not saying contract all health care out, 

cause I do think you need a certain medical capacity that’s operationally deployabl

the field inside the U.S. military. And you also need—for whatever is on active duty 

tus, you need viable jobs for them when they’re not deployed. So I don’t think you 

completely contract everything out in the healthcare arena. What I’m simply sayin

that I think we can go farther than we have in that domain. Yes?

Q. Yes, Michèle. I want to push you a little farther on the virtues of capabilit

based planning because if the presumption is that strategy is about cho

and tradeoffs, and you’ve emphasized that it’s essential in this revie

capability-based planning is a guarantee that you don’t make choices, t

you leave the future open, that it’s a little bit of all of the above. How do y

reconcile those two possibilities, particularly in terms of, as you poin

out, the lack of a metric? Absent a metric, what are the decisions you

making?

A. I think what capabilities-based planning is useful for is to ensure that you are lookin

a fully representative broad range of scenarios and challenges, that you’re not trea

things as lesser included cases that really shouldn’t be treated as lesser included ca

So I think that is the strength of it. But once you go through this process of looking at 

ferent scenarios and different combinations, I agree, you have to come up with so

judgment, either about the threat or a threat-based judgment about where you’re go

to accept risk. You have to say, okay, at the end of the day I am going to be prepare

be able to handle aggression in one theater of the world, in two theaters of the world 

multaneously. I want to be able to conduct two medium-size or one large-scale stab

operation at the same time. I want to be able to defend the homeland at all time

mean, you have to make some judgments about how much of a certain type 

100
operation you want to be able to conduct simultaneously with other activities. And 

gets to this risk allocation question. If I’m absolutely taxed and I have to give up so

thing somewhere, where am I going to give it up? Am I going to give it up at the h

end? Am I going to give it up at the stability operations end? Am I going to hope 

some part of the homeland security mission really doesn’t come to me and I’m goin

count on civilian agencies to do that? I mean, you have to make those choices, or els

the end of the day you don’t have the basis for making the hard trade-offs you hav

make. So the sort of purist approach to capabilities-based planning I don’t buy. I th

at the end of the day you have to come back to some judgments about numbers, typ

combinations of operations, and how you’re going to accept or manage risk. Yes.

Q. Along those same lines, you talked about the delay in the scenario testi

which is kind of like the acid test, I think, of the capabilities. What fact

cause the delay you mentioned, is point one. Point two, as you said, 

seem to be missing metrics in this second go-round. What metrics wo

you suggest we use?

A. Good question. The delay in the scenarios—I think it comes from a couple of thin

One is, it wasn’t clear a year ago whether this secretary would really put much emph

on this QDR, whether he would see it as a primary vehicle for sorting out his legacy 

not. Another thing is, we are a nation at war. People are pretty busy in the Pentag

worried about the here and now. And that’s always going to detract attention fr

where we want to go in the future. There is a understandable emphasis on current o

and a lot of our analytic capability has been refocused on how do we survive the 

rent demands, if you will. So that’s understandable in some way. But I think anot

reason for this is that in some ways this secretary and this leadership know a lot ab

where they want to go in this QDR. And this goes back to my point that when I ask p

ple the same question, they say, you know, analysis is overvalued; analysis tends to 

you down in the status quo. It becomes a defensive position for every service to def

their parochial interest. We think senior leader judgment is a lot more important. 

that’s where we’re going to put the emphasis in this review.

In terms of the metrics, what I would use—I actually think 1-4-2-1 is a good plac

start and then say, where do we change that? Obviously, defending the homel

against the full range of attacks—that has to stay in. I believe—I mean I’m the per

who used the forbidden word “shape” in the ’97 defense strategy. It was shape, 

spond, prepare. I believe that it’s enormously powerful to have U.S. military forces 

there in the world in peacetime, engaging, influencing, shaping the security envir

ment. And so I think you want to keep a number of—you do want to be able to be p

ent in shaping in a number of critical regions in the world at the same time. I think 

global power with global interests we also, we can’t be a one-theater force. We hav

be able to defeat aggression in more than one theater at a time, or else we’re goin

set ourselves up where one adversary takes us on and another sees that as the wind

of opportunity for him to make trouble, too. So I do think we need a two-theater forc

I think the real issue comes in this question of decisive win. There is a current on the 

vilian side of the Pentagon that the answer to future stability operations is “Never ag

We’re just not going to do Iraqs the way we did Iraq again. And that’s the answe

agree that this particular war we had choices about whether to do it and when to d

and how to do it. I don’t believe that’s going to be true in every future case. I beli

there will be times—for example, what if Pakistan were to become a failed state? P

stan with nuclear weapons, with Islamic extremists inside the country with nuc

weapons. I mean, that is a nonoptional—we’re going to have to do something ab

that situation. I’m not telling you what the operational concept is. I’m not arguing to 

101
in and occupy the country. I’m just saying that is a situation where any president is 

ing to have to respond. It’s not going to be an optional situation. You can think of o

ers. Instability in Cuba, with waves of Cuban immigrants coming into Florida—th

going to create a domestic crisis for a president. He’s going to have to do someth

Will it be a military response? I don’t know. But our job in DoD or their job now i

create options for the president. And we need to be able to think—we can’t assu

away the problem of stability operations. We have to assume that in some cases ou

tal interests will be involved, and we need to have the capacity to deal with those sit

tions. So I think that’s where I would put more time and attention, to thinking thro

what combination of those do we really think we want to be handling at the same ti

And what does that mean in terms of where you accept or reduce risk? Yes?

Q. Your juxtaposition of the decisive win idea and your earlier comme

about force size raise an interesting point, because a previous instan

where our country was in a long-term conflict or at the end of a long-te

conflict, we had to decisively win in essentially two theaters and have a r

ular rotation that was sustainable for half a century in both the Pacific a

in Europe. Are we looking at a force size? Does that suggest a force size

your opinion, that would be comparable to what we had to sustain that?

A. I think if you get to that point, you are in an equivalent of a world war. And at that po

I think you need to think about a draft, mobilizing national resources beyond what’

the professional military, if you’re really trying to do that level of operation. I think th

a bridge too far, just in terms of even recruiting an all-volunteer force that large. So 

think there is—but I think, again, that’s something that should be talked about, thou

through. You know, where is that point where we’ve got to go beyond the all-volun

force to actually mobilize on a much more national basis? But that’s not part of the c

versation right now. Yes, sir?

Q. Ma’am, with the major threat that we have today, with small threats sc

tered all over the globe, do you ever see the possibility in the near future 

contracting out some of these operations so that we can concentrate on 

homeland? Is that a possibility that could be considered in the near future

A. When you say contracting out, what do you mean?

Q. Yes, find a security company, contract out a job, a mission, give them 

mission—take out these terrorists in Pakistan, or something of that natur

A. I would certainly hope not. No, I mean, I think, again, what you’re getting at is this p

that we can’t treat the global war on terrorism, we can’t treat dealing with insurgenc

we can’t treat dealing with instability as a lesser included case of war fighting. We h

to think through the demands that those, the steady-state demands, if you will, 

those types of activities—which I agree will likely be a decade- or decades-long acti

for the U.S. military—we need to think about how to size and shape the force to sus

that activity over time. And I don’t think there is any serious discussion. I’m glad to 

there’s not serious discussion of contracting that out. Where I thought you were go

with this is that I do think the U.S. needs to put much more investment in terms of wo

ing with coalition partners and allies to build up their capabilities to handle som

these threats in their region. And one of the reasons we’re plowing more resources 

our special operations community is not only for the global manhunt, if you will, of 

ing after terrorist organizations, but also trying to increase our capacity to work w

other militaries and ensure that they have the capabilities they need to deal with lo

threats and to establish a degree of stability in their AOR. Yes?

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Q. What is the mechanism, or how are your analyses being passed onto the 

fice of Secretary of Defense, and are they listening?

A. Well, no. I mean, to be fair, we have a big study, called Beyond Goldwater-Nichols, 

has had multiple phases. And to the credit of the department, they have been very o

in terms of—we’ve briefed the study in the tank many times with the Joint Ch

We’ve had several sessions with Secretary Rumsfeld and Secretary Wolfowitz, so t

have been very receptive of outside analyses, to their credit. My experience, to 

frank, is that it’s—that you can have a very positive session, but you don’t always kn

sort of what happens after you walk out. There are a number of recommendations 

were very well received that I heard with my own ears the secretary give guidance to 

staff: Let’s do this. And a year later, you know, we’re still waiting for that implemen

tion. Now, that could be that we really weren’t as smart as we thought we were, and 

really a bad idea upon examination, or it could be that they’re having trouble actu

moving from the decision-making point into the execution phase and making thi

stick. So I do think they’re open to outside analysis. I think they’ve struggled with 

implementation piece in making decisions stick. Yes?

Q. Ma’am, has any thought been given to creating a group to study incentiviz

structures? You mentioned about incentivizing structures. I believe 

QDR is an excellent avenue for bringing it to the table. But when speak

about interagency-type operations and using all the elements of natio

power, would it make sense to have a group, a working group, under the N

tional Security Council, or something to the effect where the Departmen

Defense is a player alongside other elements?

A. We’ve got it. I’ll do a little unpaid advertising here. CSIS is just bringing to conclus

the phase two of its Beyond Goldwater-Nichols effort, which has a huge focus on in

agency issues. And we are putting forth a sort of integrated package of recommen

tions that would do several things. First is, strengthen integration mechanisms 

planning and oversight at the Washington level, at the sort of COCOM regional le

and at the field level. Second is, create funding mechanisms that actually enable peo

on the ground to have the flexibility to create momentum early in these operati

rather than waiting six months for the AID money to start flowing. That’s a critical w

dow of opportunity. We don’t currently have the sort of flexible funding mechanism

really make change happen in that key period. A third element is going to be crea

operational capacity outside of DoD—specifically, a cadre of civilian experts, a cou

of hundred that would be rapidly deployable to an operation, as well as the idea of a 

vilian reserve where you have former ambassadors, former AID team leaders, for

people with experience who could be called upon to come and lend their expertise 

particular operation. And the last piece is, we’ve developed what we think is the in

agency analogue to the joint service officer model, which creates a career path for 

servants and foreign service officers that ties promotion to SES to interagency edu

tion experience that gives them opportunities for better pay and benefits, accelera

promotions, and all kinds of incentives to get that interagency experience and to cre

the human foundation for interagency jointness. So take a look at what we roll out n

month, and if we haven’t done a good enough job, then call for another taskforce. Y

Q. Ma’am. It kind of spins off that question. To make this interagency rev

actually happen, you said that that was your first item that is off the tab

What is it going to take to look at the interagency seriously, and maybe ev

institutional reform? You know, the Hart-Rudman Commission came 

with some proposals, and not too much has happened in there, either.

103
A. Right, we were joking before the session started that it seems that in Washington 

have to have at least five outside groups recommend a reform before it gets seriousl

we’re hoping to be the fifth group to recommend interagency reform, because it star

with the Commission on Roles and Mission. It went through the Hart-Rudman Co

mission. It went through a number of others. And we are still banging on the table 

the same issue. I think what it really takes—I mean DoD can play an extremely us

role on the Hill, calling for this, because there’s a tremendous reluctance in Congres

build any capacity in government outside of DoD. I remember back to the nine

when the Congress was cutting IMET funding. The State Department could not get t

tion on the issue. It was only when all—they were then called CINCs. All of the CIN

with Denny Blair in the lead role, marched up to the Hill en masse and said we w

you to give more money to the State Department for IMET funding because it helps 

U.S. military. Congress completely did a hundred-and-eighty-degree about-face 

increased funding as requested. So I think it’s tremendously valuable to have the U

military saying we need partners. We need capacity to work with us, so we don’t exp

ence mission creep, so we don’t get bogged down within our next exit strategy. A

when you make that link in the minds of the members of Congress, that will help. T

said, DoD cannot lead this process. I mean, this is an issue that has to be taken on 

presidential priority, and it has to be a process that’s led within—from the NSC 

down. Or it has to be imposed from the outside, as Goldwater-Nichols was. But ag

my reading of Congress is, there is not that building sense of urgency to underpin an 

ternal reform effort. So it’s got to come from within, inside. And again, my readin

this administration is that it’s not—they’re working the issue on the margins, tryin

get better integration here and there. But they’re not sort of taking a big picture of, h

do we reorganize this system to work better for the future? Yes?

Q. The Reserve Forces Policy Board about two years ago, and also Herit

Foundation and other organizations, have advocated mandatory serv

rather than just draft to your mandatory service, sort of like the Isra

model. Do you have a view on that and position, in terms of how it g

along with QDR and where we’re going as a nation, and not just within 

military, because the interagency is basically a military-civilian interact

on a continuum.

A. I’m glad you asked. I do have a view on this. Right after September 11th, a team 

CSIS came together, and we thought that what we could do—we wanted to do so

thing to help. We thought what we could do is kind of look over the horizon and tr

develop a campaign strategy for what we thought would be a very protracted conflic

challenge. One of the key recommendations of that effort was called To Prevail: 

American Strategy for the Campaign Against Terrorism—was recommending a 

tional service. And we weren’t talking just about military service. Military service wo

be one option within that category, but we felt that part of the long-term strategy 

prevailing in this conflict is to mobilize the American people, to make them feel that 

ery single person has a role to play in making this country safer and transforming the 

ternational security environment over the long term, and so forth. And that natio

service was one key outlet for that. There is no reason that you should have the FBI 

CIA switchboards flooded with people who have linguistic capability, who have r

vant cultural knowledge, area experience, and so forth, and have the majority of th

be turned away, frustrated that they can’t figure out how to plug into the system. 

need some program for national service to enable people to be a part of what is goin

be a very long and protracted campaign. So I’m all in favor of that—not just mili

service, but national service more broadly. Yes, sir?

104
Q. I don’t normally do this, because you know my story about the micropho

But one question, since you’re on the issue of the interagency piece. And 

chatted a little bit about this before we came in this morning. How do y

see the interagency interdisciplinary work evolving in the education 

main? We’ve talked about the thinness of the agencies and their ability to 

in all the different places that they need to be experientially, and when 

add education to that agenda, it just seems like a bridge too far. What 

some of the notions that are currently being discussed? What are some 

the critical impediments that you see there?

A. Let me deal with education and training separately. On the training part, in the ph

one report of our study, we actually recommended the creation of an interagency tr

ing center, a sort of center of excellence. It could be jointly run, for example, by 

tional Defense University and the National Foreign Affairs Training Center. That wo

be a place that would provide training to people who were involved in the planning 

oversight of interagency operations at all levels, could provide predeployment train

for interagency teams who are going over to a specific operation, could be a reposit

for lessons learned and best practices so we don’t reinvent the wheel at the interage

level every time we go into an operation, and so forth. So it’s creating a center of gra

that would do training, lessons learned, collection dissemination at the interage

level. I think that’s a very important piece. Beyond that, I think there is a broader edu

tional component. I was relating a story to the admiral before we came up here abo

dear friend who I’ve known since he was a major, lieutenant colonel. And he’s no

division commander overseas. And you know, six weeks before he was taking his d

sion over, he realized that a huge part of his job was going to be dealing with in

agency and coalition matters, and he was smart enough to know what he didn’t kn

He had gone through all of the normal PME processes. He had never had a real fo

or any real education to prepare him for this responsibility he was about to take 

Now, the good news is, the U.S. military is full of very smart, entrepreneurial peo

who know what they don’t know and know how to go plug that gap for themselves

he created for himself a six-week crash course on postconflict operations and in

agency issues and coalition management and all of this, and he went over very p

pared. But that was only because he prepared himself. The system did not serve 

support him adequately, given the responsibility it was assigning to him. So I think 

have to address that. I also think that if you take a very long view of this, you’re bre

ing down the cultural stovepipes between agencies, encouraging better understand

development of standard operating procedures, common ways of doing business—

of that has to rest on a foundation of education. One of the big critical challenges 

have right now is, what do you train people to? What do you educate them to? W

lacking interagency doctrine, interagency concepts of operations, interagency way

doing business. I think that’s one of the things we’ve called for creating, so that 

have some standardized approach that doesn’t change from administration to admi

tration on basic ways that we’re going to operate together. Then you can start get

some traction in educating leaders for future contingencies. Thank you.

105

Panel III

2005 Quadrennial Defense Review:

Issues and Options

Moderator:

Dr. Kenneth Watman

Dean, Center for Naval Warfare Studies, Naval War College

Mr. Steven Kosiak

Director of Budget Studies,

Center for Strategic and Budgetary Assessments

Dr. Michael E. O’Hanlon

Senior Fellow in Foreign Policy Studies,

The Brookings Institution

Mr. Ronald O’Rourke

Naval Analyst,

Congressional Research Service of the Library of Congress

Panel III moderator Kenneth Watman (far right) leads Ronald O’Rourke, Michael E. O’Hanlon, and Steven Kosi

a discussion of the 2005 QDR.

The 2005 Quadrennial Defense Review:

Matching Resources with Requirements

Steven Kosiak

Director of Budget Studies

Center for Strategic and Budgetary Assessments

The following is an edited written statement summarized by

Mr. Kosiak in his opening remarks.

U.S. funding for defense has increased dramatically over the past five years. Including the 

of ongoing military operations, the country now spends nearly $200 billion more a year on 

fense than it did in 2000. In 2005, even adjusting for inflation, funding for defense will exc

the level reached in 1968, at the height of the Vietnam War and in 1985, at the height of 

Reagan buildup. Moreover, under the Bush Administration’s newly released budget requ

funding in the Defense Department’s regular, annual appropriations bills is projected to 

crease in real (inflation-adjusted) terms through 2009.

Notwithstanding today’s near-record defense budget levels and projections of contin

growth, however, a central focus of the Defense Department’s ongoing Quadrennial Defe

Review (QDR) is likely to be—or at least should be—the question of how best to scale bac

plans. This is because the Defense Department’s current long-term plans are unafforda

within likely future budget levels.

At $419 billion, the fiscal year 2006 Defense Department budget request includes a slight reduct

of about $3 billion, compared to the projected 2006 level in last year’s plan. Altogether, some 

billion less would be provided over the 2006–09 period than was included for those same year

last year’s plan. This represents a reduction of about 1 percent compared to the old plan. The 

gest cuts are focused on a range of acquisition programs. Among other things, the new plan calls 

buying fewer F/A-22 fighters, DD(X) destroyers, LPD-17 amphibious ships, Virginia-class at

submarines, and V-22 tilt-rotor aircraft than previously projected.

Just how real these cuts are is debatable. Even with these proposed reductions, the new p

still calls for increasing procurement funding over the long term, from about $78 billion in 2

to $119 billion by 2011. Moreover, many of the proposed reductions in planned weapons p

chases are projected to occur only toward the end of the decade. The fact that the adminis

tion is requesting funding in its $82 billion 2005 emergency supplemental for some program

such as the Army’s modularity initiative—not directly related to the war in Iraq and other m

tary operations also makes it difficult to discern just how seriously to take the topline reducti

(compared to last year’s plan) included in DoD’s latest plan.

All that said, it is difficult to escape the impression that things are likely to get considera

tighter for defense, and weapons acquisition programs in particular, over the next sev

years—and especially over the longer term. Two factors, at least, suggest that substantial ad

tional cuts will have to be made in coming years.

First, growing concerns over the size of federal deficits are likely to take a toll on defense spe

ing. Over the past four years, the long-term fiscal picture has dramatically deteriorated. In Ja

ary 2001, the Congressional Budget Office (CBO) projected federal budget surpluses tota

about $5.6 trillion over the FY 2002–11 period. By comparison, CBO now projects that 

federal government will run deficits totaling some $855 billion over the coming decade. And

CBO acknowledges, its “baseline” projection makes a number of assumptions that may 

109
unrealistic; for example, that tax cuts currently set to expire in 2010 will not be extended. P

jections based on more realistic assumptions about tax cuts and other factors suggest that t

deficits could total some $4–5 trillion over the next 10 years.

It seems unlikely that Congress will cut the administration’s defense budget request for 

2006. However, over the longer term, once a decision is made to address the ballooning 

eral deficit, history strongly suggests that cuts in defense spending—or at a minimum slo

rates of growth in defense spending—will be part of the solution adopted. The 12 percent 

reduction in defense spending that occurred between FY 1985 and FY 1990, before the en

the Cold War, in large part reflected a bipartisan effort to begin reducing deficits.

Second, even if DoD were able to achieve the funding levels projected in the administratio

new plan over the next six years and could sustain those funding levels in the face of balloon

federal deficits, DoD would probably not be able to execute its very ambitious moderniza

efforts and other plans. If history is any guide, DoD’s major weapons acquisition programs 

unlikely to meet projected cost goals. Similarly, operations and support activities (e.g., mili

pay, health care, and a wide variety of operations and maintenance functions) are likely to 

more than anticipated.

Under the administration’s new plan, Defense Department funding is projected to reach $

billion by 2011. However, estimates by the CBO and others suggest that executing exis

plans could require substantially higher DoD funding levels, perhaps an additional $50 bil

or more a year over the long term. Since growing deficit pressures seem likely to preclude s

ply buying our way out of this problem, further cuts will almost certainly need to be made

The good news is that the United States may be able to adequately meet its security requ

ments with more affordable plans than are currently projected. Doing so will likely only be p

sible if the Defense Department—through the QDR and other measures—pursue

combination of four different options.

First, the Defense Department must expand its efforts to seek efficiency savings. This me

continuing its outsourcing initiatives, the new round of base closures set to begin this year, 

a range of other initiatives aimed at improving the Defense Department’s business operatio

But it also means improving the military’s compensation and personnel management syste

to make them more effective and cost-effective.

Military personnel costs have increased dramatically in recent years. Over the past six ye

military compensation per active duty service member has grown by some 33 percent in 

terms. A substantial increase in compensation was probably appropriate, given the stress un

which U.S. forces, and especially U.S. ground forces, have operated in recent years. Howe

as implemented, these increases were much less cost-effective than they could have been

Notwithstanding strong evidence that cash benefits, and especially targeted cash increases, 

the most cost-effective forms of compensation, more than half of the increase in compensa

provided since 1999 has been provided in the form of noncash benefits—primarily for mili

retirees—and less than 10 percent of the increase has been targeted. Nothing is more critica

the effectiveness of the U.S. military than its ability to attract and retain quality personnel. H

ever, unless the Defense Department changes its approach to military compensation it is lik

to end up with the worst of both worlds—continued high growth in personnel costs and con

ued, or perhaps worsening, problems with recruitment and retention.

Second, the Defense Department will have to scale back its modernization plans. CBO e

mates that to implement current modernization plans—assuming historical rates of 

growth—the Defense Department would need to increase procurement funding to an aver

110
of some $125 billion a year (in 2005 dollars) over the next two decades. Among other thin

given the extent to which the effectiveness of current-generation weapons platforms can be 

proved through the addition of new precision-guided munitions, sensors, and communicati

equipment, it seems likely that the U.S. military could afford to take a more selective appro

to modernization than it is projected to do under current plans.

Third, the Defense Department will have to begin making some cuts in the size of the milit

Changes to the military compensation and personnel management systems could help slow 

rate of growth in military compensation. And some substantial reductions in acquisition p

grams should be possible. However, depending on efficiency savings and cuts in acquisi

programs to generate all of the savings the Defense Department is likely to need to make 

plans affordable would be risky and unrealistic. Some reductions in force structure will a

likely be needed.

It will clearly be impossible to reduce the size of the Army and Marine Corps while U.S. fo

are heavily engaged in Iraq and elsewhere. However, some cuts in the Navy and the Air Fo

may be possible in the near to medium term. Looking back historically, the U.S. military has 

ten used cuts in the size of the military to help it finance its modernization plans. The result 

been that the U.S. military has become progressively smaller over time, but nevertheless m

more modern and effective.

Fourth, the U.S. military must be transformed to more effectively and cost-effectively meet 

rent and future security challenges. In addition to scaling back some existing moderniza

plans and force structure elements, the U.S. military must increase its investments in other ar

that offer the promise of more cost-effective capabilities. More than anything else, perhaps, 

QDR must attempt to better define, and resource, those areas.

111

Future Wartime Scenarios

for Defense Planning

Dr. Michael E. O’Hanlon

Senior Fellow in Foreign Policy Studies

The Brookings Institution

The following is an edited transcription of

Dr. O’Hanlon’s opening remarks.

Thank you, it’s nice to be here. Steve did a great job talking about budget realities and p

sures, and I know Ron is going to do the same thing in a minute on the Navy. So let me take 

liberty of doing something slightly different, and especially because we’re at the Naval War C

lege, which is known historically for thinking big thoughts and thinking the future. And we’r

a time where it’s very hard to do that with the QDR, because we have too much pressure fr

the Iraq and Afghanistan missions. If I did not have these two fellow panelists doing such a go

job with the immediate issues of force structure, personnel, and modernization, I would 

obliged to do the same myself—and following Michèle, who’s done a great job as well.

But I want to lay out some of the scenarios we should not forget about as we think about 

post-Iraq period in our military force structure and force planning. And I don’t suppose 

these issues or these scenarios are going to be the main things on planners’ minds in this pa

ular QDR. But perhaps your service in speaking to a crowd that’s mostly Navy—perhaps 

Navy will continue the tradition it’s maintained for so long of being able to do a little bit of t

in the sense that you’re not quite as involved in the day-to-day drudgery in Iraq. I know yo

still playing an important role there and in Afghanistan, but somewhat less intensively than 

ground forces in particular; and so in a way we’re depending on you, and I want to encour

the process and try to help provoke it a little to keep thinking about longer-term issues as 

deal with the immediacy of the current operations.

So what I’m going to do in my remaining eight minutes is a clockwise tour of Eurasia. And I w

to throw out six or eight scenarios, about one minute apiece, that I don’t have detailed force st

ture recommendations for in terms of how to fight them or how to deal with them; but I th

they’re the sort of scenarios we need to start at least getting on our intellectual radar scree

don’t expect they’re going to guide the QDR in any detail this time around. But for one thing, 

for example, we need to have some sense about how large a ground force capability we th

we’ll need after Iraq as we wrestle with the debate about whether to increase the size of the A

now or not. I do support increasing the size of the Army now, above and beyond where it’s 

ready being increased by the current Pentagon, but I think when you go through that intellec

exercise, you need to have some image about what scenarios may occur after Iraq before you 

cide to make this kind of important decision. So let me again do this quick tour.

I’m going to start with Russia and the Baltic states, work around to Siberia, Korea—not so m

the current Korea civil war problem, but the long-term challenge of China and a reuni

Korea—Indonesia, collapsed Indonesia, Taiwan Strait, South Asia, and the Persian Gulf, a

the seven minutes I have left. So this is going to be as much opinion as analysis obviously. 

let me just throw a few on the table.

First of all, I don’t believe that we need to worry or should worry any longer about Russia re

ing the Baltic states—not because the scenario is totally crazy, but because even if it happen

I don’t think it would be our smartest strategic choice to try to reverse it, at least not in a di

113
military way. There’s just too many things stacked up against us geographically. And while 

might be able to prevent that invasion, when dealing with a nuclear power like Russia, I th

we’d be better advised to think about the longer-term sorts of tools we used in the Cold W

That’s all I’m going to say about that. We can come back to it if you want, although ever si

Paul Wolfowitz stepped down as under secretary of defense for policy in January 1993, I d

think this scenario has been very much at the center of Pentagon planning anyway. So ma

we don’t need to spend too much time on it. But as you think about the future, you’ve o

ously got to be creative and open-minded. If there’s one thing the last four years taught us

don’t assume you won’t fight in some funny faraway place just because nobody has been p

ning to fight there for quite a while. Afghanistan should have corrected us of that poten

misimpression three and a half years ago.

Now I want to go around to an Andy Marshall favorite, speaking of long-term thinkers. A C

nese invasion of Siberia—and this scenario—again, these scenarios really aren’t totally cr

when you think about the expansion of NATO, because we have already added the Ba

states to NATO, and if we also add Russia someday, as a number of individuals advocate, 

would mean an Article Five commitment to its defense. In other words, if Russia someday com

into NATO, you would have to talk about the possibility of an Article Five commitment to 

fend Siberia from a Chinese invasion pursuing the resources of that area. And so we’ve s

NATO do things that wouldn’t have been thinkable even a short time ago, like what I just m

tioned, and so we do have some Article Five commitments we wouldn’t have expected to h

with some of the small states, the former Warsaw Pact states. We may see that extended, 

we may also someday see Russia in NATO.

Okay, what if China decides to go and grab Siberia, which only has six million Russians, a

all, and it seems a little bit surprising that Russia should hold onto this land. Andy Mars

thinks that—and he’s talked about this scenario—is one that might govern some of our 

ger-term thinking. Well, I think that the chances of this scenario occurring are very low, 

again, when I put on my Kissinger mind cap, I say—the realist in me says that’s too difficult 

scenario to plan for. It’s not the strategic place we want to pick a fight with China, even if 

conflict should occur. It’s not a very likely scenario. But to the extent you want to do any p

ning about it, I would say think about that as a scenario where you respond asymmetrically 

blockading China, by putting embargoes on China, not by counterinvading. I think it’s too h

militarily.

So I would not recommend that U.S. ground forces be sized to take back the Baltic states fr

Russia. I would not be recommending that we have ground forces large enough to protect S

ria from a Chinese invasion, and nor would I recommend that we have ground forces la

enough to protect or reunify Korea from China in some hypothetical scenario in 2015 or 20

I don’t think China has a realistic claim on Korea. I don’t think it’s going to be able to justify s

ing Korea. I think the cultural and historical differences are too great. And while I hope 

maintain a strong security alliance with Korea even after eventual reunification, which I v

much hope for someday, I don’t think we have to plan on that particular scenario. There 

other scenarios that could involve China that I’m about to get to that I think are much m

credible and the more appropriate way for us to think about our future planning in East A

Okay, so I’ve thrown out three scenarios that I don’t want to do. But here are a few that I th

we do have to be able to conduct.

It’s no surprise to people in this room that Taiwan Strait scenarios are very difficult, very imp

tant, and have to be more visible and more central in our force planning. And this is true eve

like me, you think that China is making tremendous progress liberalizing, handling itself v

well in the international arena for the most part. And even if you’re more nervous in some w

about Taiwan’s behavior in the future than China’s—even if you feel that way, as I do, you 

114
have to recognize the possibility that something could spin out of control here and we co

wind up very plausibly in various kinds of conflict scenarios in the Taiwan Strait. And we’ve 

been reading the newspapers in the last few days, the antisecession law passed in the PRC—

know full well that this could happen. So how should we handle it if indeed it did happen

Well, my own back-of-the-envelope for planning exercises tell me you’re going to need so

where in the range of four to six aircraft carrier groups, probably dozens of additional surf

combatants, probably a couple dozen submarines—quite a large force to handle this. But ap

from the force planning implications—and by the way, I was honored to be involved in a 

bate with two of your colleagues here in the journal International Security on some of the 

namics that could result in this kind of a conflict, and what kind of losses we could incur, and 

forth. I think that kind of debate needs to be more visible. And Ronald O’Rourke and oth

have sometimes kept this debate alive, but they haven’t had much company in the U.S. 

fense planning apparatus. We need to have this kind of scenario at least as visible in our fut

thinking as Iraq and North Korea have been for the last decade.

On the Taiwan Strait, I think we have to think hard about not only how big of a military we n

for that region but what kind of war planning do we do, and how do we escalate enough to ass

dominance and victory but escalate slowly enough to prevent great-power, all-out war aga

China. This is a huge dilemma. There has not been nearly enough literature on this in the pu

arena. We really could fight this war—again, as I think people in this room appreciate, but mos

the country does not. I think if you ask most Americans, “Could we really fight China over T

wan?” they would think of it as some scenario that sounded familiar from their history bo

from Eisenhower, but would be surprised to hear it’s a real concern today. And yet there h

been a few missiles launched here and there in the last ten years, but really nothing to worry 

much about. There’s so much economic integration. Isn’t that going to prevent war?

Well, I think those who study this region know that there is at least a modest, and hopeful

percent—no more than that—5 percent, 10 percent chance, but still a real chance, that 

could occur. And if it does, there is no way that the United States will stand by and watch T

wan be conquered. We may take our time getting involved. We may not fire our first shot r

away. We may try to convince China to back down. If it’s a blockade scenario, we may al

Taiwan to take a few losses on its own before we get involved. There are a lot of questi

about the dynamics of this scenario, but no doubt in my judgment that we would ultima

make sure that Taiwan was not conquered. And therefore we have to think through these 

narios, not only in terms of force structure and force planning, but in terms of the dynamic

how you use force and how you escalate. Not nearly enough has been done on that. Unfo

nately, I can’t do more now.

Indonesia—it really could collapse. And if it collapses, it could raise questions about how 

protect the Indonesian Straits—but even more importantly, how we help a very important M

lim country deal with the threat of terrorism internally, make sure it remains a beacon for a 

of moderate version of Muslim church-state relations, and a sort of a symbol of how the Mus

world can be part of the broader international community. This is not a country we want to 

fail. There’s just too much riding on the line at a time of such broad structural conflict betw

the U.S. and Islamic worlds. If something happened in that country and the governm

wanted our help and needed our help and asked for our help, and large parts of its territ

were destabilized, I think we’d have to seriously consider getting involved.

But as much as that scenario troubles me, the one that really worries me in terms of large-sc

stabilization missions has to do with Pakistan. Actually, there are two scenarios here, and m

of you have thought about this as well, but let me still remind you, and let’s keep these on 

radar screens as we do long-term defense planning. There is the issue of what if Pakistan it

collapses and its nuclear weapons are no longer easily vouched for. How do we make sure 

115
a central government that could be losing its grip on that country is able to keep control o

nuclear arsenal? If Pakistan begins to collapse, it will be the most serious direct threat to 

United States and its security at least since the worst of the Cold War; maybe since the C

War, I believe. In an age of radical terror, with so much of that radical terror network existin

this part of the world, loose nukes in Pakistan—even though it’s ten thousand miles awa

would be the most direct threat to the American homeland perhaps since the Civil War. I 

lieve this would be absolutely a no-brainer—that we will—if there’s any intelligent way to 

involved, we will. We will have to. There’s no two ways about it.

There’s another scenario that could occur in South Asia, which is a war over Kashmir, India 

Pakistan coming up to the brink of nuclear exchange, finally agreeing to international me

tion, and maybe an international trusteeship for Kashmir where a NATO-led force might p

vide the stabilizing capability until heads could cool and we could have a referendum.

One last scenario and I’ll stop. And this one again is a fitting one to talk about at the Naval W

College. And I was talking about it with my very kind escort from the airport this morning, wh

been thinking about it himself, which is the scenario about Iran blockading or blocking the S

of Hormuz. What does it take for the U.S. Navy and the U.S. Air Force and perhaps other p

of the military to deal with that scenario, and how do you prevent all-out war from escala

out of that? And here I think we obviously have a somewhat smaller potential adversary to d

with than in the China case, but a part of the world that’s economically even more importan

us, where we would have to act very quickly—in the Taiwan Strait you may be able to 

slightly more patient in how soon you break the blockade. In the case of the Persian Gulf, 

potential adversary may be smaller, but the time urgency is greater. And I think this is a scen

that some people like Andy Krepinevich have written about, but it hasn’t really stayed on 

radar screens very much as we’ve been so focused on the War on Terror in the last few years

So the overall theme of this, whether you’re talking about new NATO members that used to 

part of the Soviet Union or potentially future NATO members, Korea, Taiwan Strait, Indone

Pakistan, Iran—there are a lot of scenarios, some of which are maybe too speculative and not 

ficiently threatening directly to American interests that we have to be able to get involved if ne

sary, others of which we might very well. And we’ve got to maintain the tradition of the Na

War College and keep some of these longer-term ideas on our radar screen even as we deal w

the near-term immediate demands of Iraq and Afghanistan and the War on Terror. Thanks

116
Ten Potential Navy-Related Issues for the QD

Ronald O’Rourke

Naval Analyst

Congressional Research Service of

the Library of Congress

The following is an edited written statement summarized by

Mr. O’Rourke in his opening remarks.

Thank you for the invitation to speak here today. I should note at the outset that the views 

pressed here are my own and not necessarily those of CRS or the Library of Congress.

With regard to the Navy, a fundamental condition, going into the QDR, is that there is no curr

officially approved, unambiguous plan for the future size and structure of the Navy. That’s b

true since at least February 2003, if not earlier, and the Navy’s latest testimony on potential N

force structure ranges does relatively little to change the situation, since the ranges are fairly bro

their status as official DoD planning goals is uncertain, and the composition of these force ran

by ship type is not specified.

Although ambiguity in N

force-structure planning can 

convenient in some ways 

Navy and DoD officials, it 

also pose potentially signific

difficulties for them, and for C

gress and industry as well, whi

can talk about in more detail la

if you like.*

When asked about required nu

bers of Navy ships and aircr

Navy and DoD officials have 

gued that under capa

ties-based planning, numbers 

ships and aircraft are not as 

portant as the total amount of 

pability represented in the fl

That’s true insofar as what yo

after is a Navy that can do w

you want it to, and not simply 

that happens to include a cer

number of ships and aircraft. 

that’s not the same as saying 

a Navy with a desired set of ca

bilities cannot be described 

one having certain numbers 

ships, aircraft, and other thing

While current force-planning 

sues may take some time to w

through, eventually it sho

117

*For the Navy, ambiguity concerning required numbers of Navy

ships provides time to resolve uncertainties concerning the applicability of new technologies and the Sea Swap concept to various

kinds of Navy ships. Navy (and DoD) officials may also find this ambiguity convenient because it permits them to speak broadly about

individual Navy ship-acquisition programs without offering many

quantitative details about them—details which they might be held

accountable to later, or which, if revealed now, might disappoint

Members of Congress or industry officials. This ambiguity may

also, however, make it difficult at some point for Navy officials, in

conversations with the Office of the Secretary of Defense (OSD), to

defend programs for procuring Navy ships in certain total numbers

or at certain annual rates because OSD officials might view alternative total numbers or annual rates as sufficient for maintaining a

Navy that falls somewhere within the broad ranges of total numbers

of ships that Navy officials have presented in their testimony.

Ambiguity concerning required numbers of Navy ships may make

it difficult, if not impossible, for Congress to conduct effective oversight by reconciling desired Navy capabilities with planned Navy

force structure, and planned Navy force structure with supporting

Navy programs and budgets. With the middle element of this oversight chain expressed in only general terms, Congress may find it

difficult to understand whether proposed programs and budgets

will produce a Navy with DoD’s desired capabilities. The defense

oversight committees in recent years have criticized the Navy for

presenting a confused and changing picture of Navy ship requirements and procurement plans.

Ambiguity concerning required numbers of Navy ships may make

it easier for industry officials to pour into broad remarks from the

Navy or DoD their own hopes and dreams for individual programs.

This could lead to excessive industry optimism about those programs. Ambiguity concerning required numbers of Navy ships can

also cause business-planning uncertainty in areas such as production planning, workforce management, facilities investment,

company-sponsored research and development, and potential

mergers and acquisitions.
become possible to translate desired Navy capabilities into numbers of platforms and syste

Those numbers might be expressed as focused ranges, and they might change over time as m

sions and technologies change, but to argue indefinitely that capabilities cannot be transla

into platform and system numbers would be to argue, in effect, that the Navy cannot meas

and understand the capabilities of its own platforms and systems.

Consequently, one outcome to hope for in the QDR would be a new, officially approved, 

ambiguous plan for the size and structure of the Navy.

With that as an introduction, I want to quickly go through 10 potential issues for the QDR 

lating to the Navy. Not all of them may be addressed in the QDR, and some might be fram

differently, but in one way or another, issues like these will likely be in the air while the QD

underway.

One potential issue is how the 1-4-2-1 planning framework from the last QDR, and the more 

cent 10-30-30 goal, should be modified, particularly in light of the new “4 challenges” fra

work for strategic thinking.

For the Navy, the 4 in the 1-4-2-1 and the 10 in the 10-30-30 are particularly important. If 

or both are relaxed, force structure requirements for maintaining day-to-day forward dep

ments could be reduced, perhaps substantially, which could mean that, for some categorie

ships, force-structure requirements for warfighting could become the longer pole in the ten

A second potential Navy-related issue for the QDR is how much of the Navy’s planned cost s

ings should be used to finance Army end-strength increases and the costs of the Army’s n

modular transformation plan.

The services, as an incentive for generating savings, are supposed to be able to keep them 

their own purposes. But in a situation of finite DoD resources, if one service—the Navy

planning to achieve significant cost savings, of which a lot would come from significantly red

ing end-strength, while another service—the Army—is facing end-strength pressures an

need to finance its new modular transformation plan, then what should DoD planners do?

The question could become: How much of the Navy’s cost savings could be transferred to 

Army without undermining the incentive for the services to find ways to reduce costs?

A third potential issue for the QDR is how to implement the new sea basing concept for laun

ing, conducting, and supporting expeditionary operations ashore. This concept has attracte

lot of interest, but its details are still being worked out, and fully implementing the concept co

prove to be an expensive proposition. Decisions on this issue could affect requirements 

Navy amphibious and MPF(F) ships, and for a number of other things, including possibly so

Air Force and Army programs.

A fourth potential issue is how new approaches for basing, crewing, and deploying Navy sh

such as Sea Swap, will affect requirements for Navy forces. Changes in this area could redu

perhaps substantially, the number of ships needed to maintain a given number forward-

ployed on a day-to-day basis in areas like the Western Pacific and the Persian Gulf. The deg

to which the Navy will implement these proposals, is not yet clear, because some issues nee

be resolved. If these measures are applied widely, though, force structure requirements 

maintaining day-to-day forward deployments in some cases could again drop below fo

structure requirements for warfighting.

A fifth potential issue concerns the Navy’s role in the overall missile defense architecture. M

has said that its missile-defense architecture will emerge over time through a process of sp

development. But that could put Navy officials in the position of having to estimate wha

118
eventual role in the architecture might be. If so, and if the Navy underestimates its eventual r

then performing its missile-defense duties could make it difficult for the Navy to perform ot

missions at desired levels. Conversely, if the Navy overestimates its eventual role, then 

could result in expenditures that might have been better spent on other things.

A sixth potential issue concerns how the global war on terrorism and irregular conflicts such as 

surgencies and civil wars might affect requirements. There has been much discussion of how 

issue might affect the Army and Marine Corps, but less discussion of how it might affect the Na

A seventh issue is how to balance requirements for nearer-term operational priorities aga

the requirements associated with the downstream possibility of significantly improved Chin

maritime military capabilities. Nearer-term operational priorities have led to a focus on cer

Navy capabilities, but preparing for a potential confrontation years from now with significa

improved Chinese maritime military forces might require putting more focus on other kind

Navy capabilities. Given the potential lead times involved, having these other capabilitie

place at a future date may require making certain kinds of investments today. If so, the is

would be to find the optimal mix of investments for meeting nearer-term requirements w

also positioning the Navy adequately for this downstream possibility.

An eighth potential issue is how new technologies will affect Navy capabilities in the future

the past, new technologies have often been used to increase the capability of individual N

platforms, which has often permitted a smaller number of on-station platforms to perform 

given set of missions. Some analysts, however, believe that today’s new technologies argu

favor of moving to a more distributed Navy force that includes a larger number of smaller sh

This is the position taken by the Office of Force Transformation in its recent report on alter

tive Navy fleet platform architectures.

A ninth potential issue is whether the mix of ship designs that the Navy currently plans to 

quire is affordable in the numbers that might be desired, particularly given the recent growt

shipbuilding costs. If the mix is deemed not affordable, one or more of the designs might n

to be modified, dropped, or replaced with less expensive alternative designs. Some options 

less expensive designs for various kinds of ships have recently emerged.

And a tenth potential issue is how concerns for the industrial and technological base should 

factored into the analysis. Navy plans could affect the number of shipyards that will be regul

involved in Navy shipbuilding, the number of public- and private-sector yards involved in ov

hauling and repairing Navy ships, the ship design and engineering base, and supplier firms. 

the Navy at least, concerns for the industrial and technological base could add considera

complexity to a situation already made complex by the previous nine issues.

Thank you, and I look forward to the discussion.

119

Panel III

Questions and Answers

Moderator [Dr. Watman]: Let me open up for questions, again reserving the right to catego

your questions and sequence them in a way that keeps us more or less on point. Questio

please.

Q. I want to compliment Michael O’Hanlon for imaginatively thinking ab

the future, however unpleasant that subject may be [inaudible]. But I’d l

to pose two questions [inaudible]. First, of the seven scenarios you m

tioned, six will involve either [inaudible]. In one case you have a scena

with two [inaudible] states, one that would be presumably adversary, o

that would [inaudible]. Do you have any clever ideas about how to [inau

ble]? Second [inaudible] what do we do if? What do you recommend that 

might think about doing over the next ten to [inaudible] years to make [in

dible]? Are there other ways to deal with it rather than having to [inaudibl

Moderator: All right, let me see if there’s anyone else who would like to build on those qu

tions, yes.

Q. [inaudible] talk about NATO, you didn’t see NATO doing anything m

tarily. So as we look at our force structure, should we really worry ab

interoperability, with those allies or any others, because that kind of dri

some of the modernization or things that we might choose to do or not do

Moderator: Okay, I think there’s critical mass here. We can begin. Michael, I’ll give you 

first crack at that, and then I suspect perhaps some of the other panelists might want to make 

incision into this stuff, too.

A. [Dr. O’Hanlon] I didn’t want to make my scenarios too easy, so I—unfortunately 

me, you didn’t make your questions very easy, either. I think that, first of all, on the 

sue of the fact that there are all these nuclear adversaries—one thing is that I’m p

pared essentially not to use military force in response to a couple of them, pa

because of what you’re talking about, although it’s also the conventional balance 

the geography, even to the point of essentially ignoring Article Five commitment to 

Baltic states and basically saying we’ll handle that. Of course Article Five isn’t quite 

formulaic as to say you must deploy this many divisions. But I would propose a m

asymmetric response there, and also if China were to invade Siberia. That’s part of h

I deal with the fact that some of these scenarios are too hard.

Another way is to say in regard to Taiwan Strait scenarios, we have to think very h

about escalation control. And frankly one of the reasons why I want to get this deb

about Taiwan Strait issues into the more public eye is that I’m worried that if we g

this job to twenty of the smartest people in this room, which I think is basically how 

problem has been handled so far, then it’s viewed primarily in military terms. How 

you make sure you win? And the way you make sure you win, of course, is to make s

that you destroy the other side’s assets before they can use them, and so you get into 

the dynamics about the need for preemption and rapid escalation that worried us in 

Cold War. I’m not sure that’s always the smartest way to handle Taiwan Strait scen

ios, because of the risk that, of course, China will itself escalate, and we could e

wind up in a nuclear exchange. So part of my concern with the Taiwan Strait scenar

121

The above is an edited transcription of the Panel III question-and-answer session.
figuring out ways to control escalation. And I don’t have great answers. I just wan

raise the subject at the moment. If we were talking about just that, I might try to sa

few more words. But I really would just be content to see the subject given the d

think it requires.

In regard to some of the other scenarios, let’s say—I’ll just mention one more, So

Asia—what I’m hoping in the event of a Kashmir scenario like the one I mentioned 

permissive environment. We basically have the two protagonists agree that they n

help, and a trusteeship with NATO perhaps stabilizing the operation. So there 

NATO role there, for example. It would be preferable to seeing them continue to fi

In Pakistan I would only intervene militarily if I thought it could work. There are a lo

scenarios for collapsing Pakistan where we couldn’t get enough force there in tim

make a difference. So I’m envisioning a scenario where the central government and 

military are gradually fractionating, but still holding together enough that a relativ

modest number of Western forces, and hopefully some allies, too, could get in there 

enough to make a difference.

On the issue of—so there’s a couple of thoughts on allies. And one last point I wo

make in regard to NATO is as many of these scenarios as we can get substantial h

with, the better. And I certainly think the South Asia and Indonesia stabilization m

sions that I’ve put forth would benefit greatly from having a lot of allied help. I d

know how much is realistic to expect, but I would certainly like to see more.

I’d also like to see us get serious about this program President Bush proposed expa

ing last year, and the Congress said no. It was building on a Clinton initiative to help 

rican militaries train and equip their forces much better. It was begun as the A

program in the Clinton administration. Mr. Bush changed it to ACOTA—an even ug

acronym than some of you have thought up in your careers—Africa Contingency 

erations and Training Assistance Program. And then I think he appropriately propo

increasing the funding to a hundred million a year. And then it didn’t happen. He did

fight for it very hard. Congress didn’t come through. So I like to see our thinking ab

allies extend not just to NATO but to some of the smaller countries and less develo

countries that are going to have to handle security problems in places like Congo, 

malia, et cetera.

And I guess that’s my last point, and I’m sorry to go on in such length, but to wre

with [faculty], your last question about how do we think more proactively about sh

ing the international environment, a word that Dr. Flournoy and others gave us in 

late nineties, and I think very appropriately so, how do we use military force in ot

than a reactive way. There are obviously a lot of dimensions to this. One of the thin

would propose is that in certain conflicts, like in Africa, we think of clever ways to h

mitigate the severity of the conflict without having to use our own forces. And th

where this training and equipping program, I think, could be very useful.

That’s one part of the answer. Another part of the answer is obviously to think eno

and talk enough about Taiwan Strait scenarios. Frankly, we keep our Taiwan E

friends a little bit scared that these scenarios can get out of control, because I think a

us in this room, or at least almost all of us, certainly admire Taiwan and think that it

great friend of the United States and a great model of new democracy. But it’s also a 

tle scary that Taiwan’s new democratic dynamics tend to stir and stoke the pot of in

pendence more than I think are prudent or necessary when the country is already 

percent independent for all intents and purposes. We don’t need a great-power 

over that last 5 percent. And Taiwan would be doing us a great disservice to caus

And I think Taiwan needs to be reminded of that, just as China also needs to 

122
reminded that we would never assent to Chinese control over Taiwan, especially 

long as China remains an autocracy. And the Taiwanese people don’t w

reunification.

So every one of these problems has to be handled separately, as you well know. 

that’s the sort of thing that reminds us whether it’s the 1-4-2-1 or the shape and enga

shape, deter, respond concepts that we’ve used before. We do need to keep think

about the shaping and the long-term proactive uses of our military, so I’m glad you 

that on the table as well.

A. [Mr. O’Rourke] Just two points to go over briefly first, for I think the question was in 

context of NATO, and I agree that the parts of the world we’re talking about, som

these scenarios possibly occurring are a very, very long way from the NATO countr

Those countries are finding it difficult to project significant amounts of military powe

far as the Persian Gulf. But if you’re talking about things in South Asia or Southe

Asia, that’s even further away, in which case the allies that we might most be interes

in in terms of ensuring interoperability are countries like Australia, which has sho

some willingness to take on a larger regional security role in that part of the world. A

the second point on interoperability in terms of navies, the U.S. Navy’s shift towar

more network-centric way of operating poses an interoperability challenge. If other 

vies invest in compatible technology, that could actually lead to higher levels 

interoperability than our Navy has enjoyed in the past with other navies. Howeve

these other countries choose not to invest in this network-centric technology, or cho

to invest in incompatible technology, it could drive an even larger wedge between 

Navy and other navies that we’ve operated with in the past. So the advent of netwo

centric warfare can create a bit of a fork in the road concerning our future potentia

operating effectively and efficiently—not just symbolically—alongside the navie

other military forces of other countries.

Moderator: Thank you, Ron. It really would be ironic, wouldn’t it, folks, to have—and 

not pronouncing one way or the other, but I think it would be a great historic irony to have 

dergone the rigors of the Cold War, which was an intensely nuclear time, and to get throug

amazingly enough, partly by good fortune and partly by good policy and restraint, only to e

into a nuclear crisis over matters like Taiwan with an upwardly mobile China. That would 

something I don’t think any of us really thought carefully about. Now this is this issue of the 

narios, and we’re talking here about the future strategic environment and what that means 

forces and the like. This is a rich vein, and I’d like to know if there are other questions that p

ple have focused in this area that they would like to raise right now. Yes, please.

Q. It seems to me that perhaps one of the things that we’re fighting structura

is half of the President Eisenhower admonition about being aware of the 

dustrial complex. It seems often in the last twenty or thirty years, that 

force structure decisions have been to match up with high-end gear that 

buy. You know, I think I read in the paper this morning that the F/A-22 

now going to do an antisubmarine warfare mission, and we’re paying th

hundred million dollars for an airplane. It seems to me that somebody n

is going to feel duty-bound to come up with force structure and strategy 

tions to be able to use that rather than figure out what we need to do a

then resource it.

Moderator: I’m going to ask Mr. Kosiak to comment on that. And then I’ll turn to 

O’Rourke second, please.

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A. [Mr. Kosiak] Well, I think that’s a real concern. I mean, I think it’s often phrased as 

of—and oversimplified so that we’re still sort of buying Cold War weapon syste

when we face a very different kind of world. I think that is one of the fundamental qu

tions we have to deal with and the QDR should be dealing with, and we have to d

with over the longer term, is what kinds of new systems really fit into the world we’r

now and what kinds of systems do not. I think TACAIR is sort of the classic case wh

we may have substantial overkill compared to what we probably need, and yet th

are other mission areas like long-range precision strike, where we probably have 

capability than we need in the future. So I mean that’s a fundamental question that 

have to grapple with.

Moderator: Steven, can you grapple with what I think is the nub of the gentleman’s qu

tion, which is the extent to which the industrial or technology tail is wagging the national dog

A. [Mr. Kosiak] Yes, that’s hard to say. Again, that’s sort of in oversimplified terms. Peo

can look at Congress and say that Congress is sort of this military-industrial comp

and Congress being part of that and preventing us from maybe doing what we re

want to be doing and should be doing. I guess it’s hard for me to say, you know, look

at it, who’s sort of in the driver’s seat in all this and who’s—I mean, when I talk to ind

try people, for example, they seem to be very eager to try to please the services and 

to come up with ideas that the services are going to find attractive. So I guess the b

tom line—I’m asking this very incoherently, but I think the bottom line is, it’s hard 

sort of tell who’s in the driver’s seat on all of these decisions. So I think it’s—I think 

can find weapon systems; it’s just they are clearly grasping to try to come up with so

new mission that sounds like it will be an important part of the future force, and ma

that’s not really the case. But sort of systematically looking at it, systemically lookin

it, I think it’s tough, for me at least, having viewed these issues and debates for twe

years, to really say what’s driving these decisions.

Moderator: Ron?

A. [Mr. O’Rourke] Just a couple of points—there’s clearly a concern in Congress right n

with Navy shipbuilding, the amount of it, and also the lack of clarity in Navy plannin

in the stability of Navy shipbuilding plans. I think it’s a long-standing dynamic for 

supporters of weapon systems, wherever they might be, to always survey the landsc

and see whatever missions there might be that might help justify that weapon. And 

can see various parties in various settings engaging in that. And that kind of acti

may have become more intense in recent years because of the downturn following 

end of the Cold War and the procurement part of the defense budget, and also beca

we’re in a sort of uncertain or less clear strategic planning environment. That gives p

ple a lot of maneuvering room to make a lot of different arguments. I’m not concer

per se about people coming up with new arguments for justifying weapon systems 

are already in the pipeline, because some of those arguments might be good. And 

Navy has a long and successful tradition of designing and building ships that turned 

to be very effective over their lifetimes for missions that their designers did not an

pate. So I’m not against the idea of people hunting around for missions and put

them up on the table and saying that Platform X might actually do this kind of miss

What I would hope is that once those arguments are on the table, they get a g

vetting and they’re not just accepted simply because somebody said them. So we

seen some mission drift in some of the arguments for various Navy or other DoD p

forms in recent years. And I agree with your observation on that. I don’t necessarily 

it as a bad thing, as long as there is a rigorous process for determining or assessing 

validity of those arguments.

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Moderator: Do you want to follow up? Do you believe your question was as answered 

could be at this point?

Q. [inaudible].

Moderator: All right. I’d like to volunteer one other hypothesis, which is that, at least fr

my own observations, it seems to me—and I haven’t systematically investigated this, but I th

it’s quite plausible to think that requirements per se actually do not originate much from the 

dustrial part of the military-industrial complex. I mean, obviously people talk to one anot

But I don’t think the services’ felt need for a particular weapon system arises very much from 

dustry rushing in to explain what they’re capable of building. Where I do think, however, ind

try becomes very influential and important is that once a program is in place, onc

requirement has been identified and the process of choosing the builder is in train and es

cially after it is in train, at that point I think weapons programs become remarkably stubb

and difficult to influence in big ways. I mean, certainly you can reduce them and so on. A

there, obviously, industry is active, I would suspect, in helping make that as difficult as it can 

Now, yes. Is your question on the scenario and the strategic future kind of issue?

Q. The question I’m going to ask is not intended to be antagonistic towa

U.S. but just how the world looks at U.S. So you painted the scenario—t

question is for Dr. Michael O’Hanlon. You painted the scenario where 

nukes fall into the hands of terrorists, and the incalculable consequences 

this sneaking into U.S. So if you go back into history in 1945, it was U

which invented the nuclear weapons. And that triggered off acquisition 

one country after another. So as to speak, it was U.S. which let out this 

nie from the bottle. And this genie seems to be out of control and haunt

U.S. much more than any other country. So with this kind of a backgrou

in your future defense planning of the strategic environment which y

talked about, is that also an element of introspection to say that? Stop 

venting any more spectacular weapons, because sooner or later they w

come back to harm you more than the benefit that they do in the short ter

Also, as to speak, do you intend to stop putting on the cork from the bottl

Moderator: Thank you. Michael?

A. [Dr. O’Hanlon] I thought you were going to collect a few questions at a time so I co

dodge that one by the end. Thank you for the challenging set of thoughts. A coupl

things: first of all, as you may know, I did not describe India as a potential adversa

actually think India is a great partner, and the last two U.S. administrations and the 

couple of Indian governments have made great progress, I think, in getting this relati

ship in the direction that it should be moving, because these are two of the world’s g

democracies. I am worried about Kashmir, but not in the sense of wanting to fight In

over it, simply in the sense that if we ever got to a scenario—this is not quite directl

response to your question. I’ll get to that. But if we got to a Kashmir scenario where 

two sides felt that they were so close to nuclear war that there was no plausible wa

reduce the risk except to accept some concept of trusteeship—sort of the way south

Sudan is now accepting this concept of postponing a debate on independence for a 

riod of time to let things cool. That kind of concept may or may not be useful. Scen

planning, of course, doesn’t have to predict the future. It simply needs to acknowle

a plausibility. And that’s what I was trying to do. As to what kinds of weapons we n

to avoid developing in the future, I share your worry. By the way, I was thinking of 

issue this morning. I know a lot of us probably read the obituary of Hans Bethe, on

the last great nuclear physicists, who just passed away this week. And certainly he w

tled with the question of whether the thermonuclear weapon was inevitable after 

125
atomic bomb was invented, and these are very hard questions. To me, the big issue 

the future has to do with biological and microbiological research and to what extent 

we running a risk here, that, in the pursuit of advanced biological treatments of a c

ian nature for various maladies, that we wind up developing technology that can 

dangerous. There is, I think—at least theoretically, you can make a very strong ar

ment that we should just stop microbiological research, because the danger of deve

ing tools that will allow for extremely dangerous pathogens over the next hundred ye

is extremely high. But frankly, I don’t know how to make that argument in a convinc

way. But it’s the only thing I can think of that gets to your question. This is the big n

area where technology is going to create capabilities that we may not be glad we 

ated in fifty or a hundred years. But frankly, I don’t know what to do about it.

Moderator: Yes.

Q. More for the Air Force and the Army than the Navy, probably—is ther

plan for the joint use of assets between the active and reserve componen

the same way on some of the large-platform Air Force transports, the sa

planes are used by the active component and at other times by the reser

so that if we have the sine wave of sort of force deployment that was talk

about by one of the speakers yesterday that you’d be able to have everybo

trained on the same model of the system rather than the complaint that 

often hear that the reserve components are using outdated equipment?

Moderator: Thank you for your question, but let me invoke my rule about trying to stay 

theme. I’ve got it written down. And—but let’s work through the themes that we’ve got, an

the end of that I’d be glad to return to your point. Are there any other questions here, relatin

the strategic future issue as articulated by Michael O’Hanlon or more expansively? Yes?

Q. . . . It’s hardly forty days that I have come from Pakistan, and there was 

signs of collapse of Pakistan in near future—unless U.S. desires it. [inau

ble]. My question is that Pakistan has been frontline in light of U.S. in 

history member of a foreign war. Thereafter it was left alone and all th

things happened. Again, knowing the global War on Terror, Pakistan 

again frontline alive. We have almost our seventy-five thousand troops in 

eas fighting our own people. Our ships are there in the coalition mariti

campaign plan. We are sharing intelligence as well. Still why Pakistan 

projected negatively? This is the first part. And the second part is, what 

the indicators that has led to the formulation of this scenario of the collap

of Pakistan in the future other than the joining hands with you? Thank you

A. [Dr. O’Hanlon] Very nicely put. Thank you for the question and the statement, an

think a lot of Americans—and I know myself—have been very grateful for Pakista

remarkable help in the last several years, and so again, letting out scenario—this 

delicate business. It’s part of why it’s better to have a think tank person do this than g

ernment officials, because as a think tank person you just speak for yourself, and if 

get into a little hot water, that’s part of intellectual life in the United States or in 

country like yours. But if you do it as a government official, you sound like you’re 

respecting your ally. I think as a scenario planner, you have to be capable of doing b

things at the same time, acknowledging the excellent state of this relationship right n

and the progress we’ve made and the important work we’re doing together, but still 

ognizing that there is some danger. Things could go badly. I don’t think it would 

through deliberate policy in Islamabad. I think it would be through potential tens

and discord within your own country, from certain parts of your population. My 

league at Brookings on this issue, Steve Cohen, assures me that the chances 

126
Pakistani collapse are small, and I’m glad to hear that you agree. And I certainly ten

myself. But I don’t think they are so small as to put this scenario off the agenda. Th

the simple answer that I’m just saying—to me the scenario looks like it’s 5 percent p

sible, and that’s 5 percent that’s worrisome enough that we should think about it. A

again, the scenario as I laid it out was potentially in a situation where in ten years y

sir, are the chief of staff of the Pakistani army or military, and you say, please come h

us; we are trying to hold on; we just need a little bit of help; we have a little bit of a pr

lem that we can’t quite address; we have a lot of capability; we can do most of it on 

own, but we could use a little bit of help in the short term, and it interests all of us to 

this problem right and get the country restabilized before things spin out of control

again, my scenario, even though it’s meant to be a worst case, and science fictio

you like, assumed the assent of the Pakistani government as a necessary prerequisit

the deployment of American forces. So that may not be a complete answer to y

question. It may not satisfy you. But that’s the way in which I think about this scenari

Moderator: Thank you, Michael. Let me ask the audience now to direct your collective 

tention, please, to the other two themes—the one being what I think is a very dire message 

Steven Kosiak delivered on the future, at least of the defense program as currently envisio

or at least as represented on paper, and the other being the future of the Navy both in the c

text of the QDR but more generally. So we’ll take questions along those lines for now, ple

Questions? Yes?

Q. Mr. Kosiak, you talked about efficiency in the defense budget. And y

talked a little bit about outsourcing. Could you give us recent examples 

how your organization looks at successful outsourcing in view of the f

that government financial statements don’t really meet an audited st

dard? And also in view of the fact that companies like Kellogg, Brown a

Root are being spun off by Halliburton in view that they’re not profitabl

A. [Mr. Kosiak] Well, I start off by saying we actually don’t do a lot of work in this area. T

reason I talked [about] the military personnel system a little bit was because I did jus

cently do a report on that. I think in general, though, most of the studies still show 

the Department of Defense can save some significant money by doing more outsourc

and that’s really holding competitions between public-sector, infrastructure workers 

private-sector workers. And most of the studies seemed to indicate that the savings 

possible in the order of 20 percent to 40 percent. I think there are some real questio

but there’s a lot of debate over the number of people you can actually outsourc

mean at the high end there’s a million personnel in active duty and civilian Departm

of Defense workers who work in infrastructure-related functions. Some people ar

you could consider outsourcing all of those. I think that’s absurd. But some peo

make that argument. I think what we’re talking about now is more in the range of s

eral hundred thousand workers. If it’s at that level, and you can get 20 percent savi

or something, you’re probably talking about savings on the order of five or six bil

dollars a year over the long term. I think that’s probably doable. But I’m not sure tha

think all of these areas where you’re looking for savings in terms of improving 

ciency, at least in terms of sort of business operations, are prudent things in general 

we should be pursuing. I think they are not a cure-all. I mean, we’re not going to el

nate the plans-funding mismatch by becoming more efficient in that sense, in the se

of sort of a narrow business sense. But I think it is an area where studies do continu

show that we can make some significant savings.

Moderator: Question from here, please?

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Q. I’m going to be leaving this fine institution tomorrow, but I would like to a

one question here. Ever since Ross Perot gave us his death by view graph 

whatever it was in his run, I’ve been a little skeptical of statistical 

proaches. But nevertheless the slide that we saw yesterday kind of show

that if you view defense expense as a function of gross national product t

we may not be in as bad a situation as you describe, in fact that we’re o

approaching the fraction that we spent during the Reagan buildup. S

guess my question is when you—what is the better metric? Is it looking a

in terms of inflation-adjusted dollars, or is it a fraction of GDP that’s m

useful in trying to determine what is a good fraction of our treasure that 

can afford to put towards national defense. Thank you.

Moderator: Great question.

A. [Mr. Kosiak] That’s a very good question. I think I did mention in my eleven minu

that, you know, we are a rich country, and we are spending now—even with the cos

the war, I think we’re spending a little over probably 4 percent of GDP on defense. B

in the—and that’s on average what we spent in the 1990s even. So we’re not even t

ing about the peak of the Cold War. The peak of the Cold War or the Vietnam War 

about 10 percent of GDP. At the height of the Reagan buildup it was 6.5 percen

GDP. If you look in that sense—and I think that is a useful measure and probably 

best measure of what it is in terms of a burden on the economy—there’s no ques

about it. Defense is much less of a burden today than it was ten years ago or certa

twenty or more years ago. So there’s two ways of sort of looking at defense spend

One is in terms of share of GDP. And another one is in terms of in absolute real doll

what are we spending? We’re spending a lot in real dollars today, but the econom

much bigger. It’s probably five times bigger than it was in the 1950s, for example. S

mean I think in that sense it is affordable. I think, though, where you realistically sor

run into some problems is, the fact of the matter is, if you look at historical trends—

then these are just historical trends in sort of precedent, and things could turn out dif

ently in the future. But if you just look at the history of the U.S. defense budget, du

the Cold War, even though the economy was growing a lot and we faced a threat 

was growing, the level of resources spent on defense stayed relatively constant. It so

fluctuated up and down, but it was around three hundred and seventy-five billion d

lars a year. So the fact that the economy grew didn’t mean we were spending more 

more on defense. If you look out into the future, I think you have to—the historical p

cedent would suggest that we’re not going to—even though you could in theory aff

it, it’s not going to happen. Also, we are in the, I think the eighth year now of a build

in defense spending; the ’06 request will be the eighth year of a buildup. That’s v

long by historical standards for the U.S. I mean, the longest sort of continuous per

was about ten years, from ’75 to ’85, more or less continuous period of buildup. A

then it was a significant decline after that. So again, if you look sort of at historical p

cedent, it just doesn’t seem likely that defense money is going to continue to grow, e

though in theory it could. Then, on top of that, you have to look at where are w

terms of the fiscal and demographic pressures compared to where we were through

much of the Cold War. And we’re in a very different place. I think one of the most tel

statistics is that during most of the fifties, sixties, seventies, eighties, even up until rec

years, we had four or five workers, people in the workforce, for every retiree. That, o

the next twenty or thirty years, is going to shift to having about two and a half work

for every retiree. And it’s also not a—I think we talk about the retirement of the b

boomers, and so this is a sort of tidal wave that happens, and then it goes away. It does

I mean this is basically because it isn’t just the baby boomers. It’s the fact that people 

decades now have not had nearly as many kids, and people today just don’t have 

128
many kids. We’re talking about sort of a permanent shift from having four or five wo

ers per retiree to having two or maybe three per retiree. And on top of that you have 

enormous growth in healthcare cost that is also causing a lot of pressure. So I m

there is no right answer to how much can we afford to spend on defense. I think yo

absolutely right that in theory you could afford to spend more. I think if you step b

and sort of look at what are the fiscal and demographic pressures that we face and 

of what’s historical precedent, I think the best way to bet is that we’re not going to c

tinue to grow at those rates in the future.

Q. This is the disadvantage of sitting on the front row. I’d like to follow t

question in an area that’s more specific that you highlighted, Mr. Kosi

The personnel cost piece—and you were talking about the enormo

amount that we spend in military compensation. And the Navy, as 

looked at the military personnel in training, individual training cost, 

were estimating—because we don’t know how much it is—around 65 p

cent of what we spend goes into recruiting, retaining, developing our hum

capital. And one of the notions that the CNO, our chief, has embraced—

deed, our secretary . . . as well—very, very strong advocates—is getting 

the efficiencies that are available if we are able somehow to allow mar

mechanisms to drive the apportionment, the identification of apporti

ment of our talent where it is best leveraged. What I’m talking about now

don’t know if you are aware of this in these terms—is Sea Warrior that l

the market come in and play. And in the ’03 National Defense Authorizat

Act—we were permitted in an experimental fashion to begin moving mon

away from the standard bonus system that we know does not work. It’s v

ineffective, very expensive and ineffective. And in compensation in gene

to a more tailored approach through assignment incentive pay. I don’t kn

if you’re aware of those terms, but working in the compensation field—h

any of the work you’ve done encouraged you that that is a potential answ

in terms of efficiency, if we can extrapolate from our early experimen

early success into a system that actually moves towards a free market me

anism for identifying and apportioning resources in the human cap

arena?

A. [Mr. Kosiak] Well, let me address that a bit. I would preface it by saying that I am rea

budget analyst, and I’m not a personnel management expert. And that’s a huge f

with a lot of very competent people in it. So I can’t directly talk, I think, to your poi

But I would say a couple of things. I mean, I think—in general, the way the military 

to go is to have more targeted increases, target more of their increases in pay in the 

ture, because what has been the case for decades, probably has always been the c

but has certainly been the case in recent years, even though overall pay levels are q

high by historical standards, you still have significant pockets of underpay in the m

tary. I think if you’re going to make this more affordable—you’re going to have to 

ways of targeting those increases in pay, and whether it’s bonuses—I mean the dev

sort of in the detail in this thing, because it’s not a simple thing to do. I mean, for exa

ple, [people] have talked about spending more money on bonuses. That creates pr

lems and has limitations. People have also talked about establishing a new pay ta

that has sort of a third dimension that doesn’t look just at longevity and rank but a

your specialty. That also has problems. So I’m not sure what the right answer is, 

what you talked about sounds like that’s sort of another interesting variant that m

work. And it may also be something that is service-specific, that you can do things 

ferently in different services because the services operate differently. But I think in g

eral just as an overarching conclusion—this is largely driven by the analysis I did. I th

129
we need to look at ways to focus our increases, our pay raises more on—compensa

increases more probably on cash rather than deferred kinds of noncash benefits. T

seems to be more cost effective. And also that we have to target on those particular s

cialties or classes of personnel in the military that are the most difficult to recruit and 

tain. And I think no one is talking here about—I mean, I think the military is still goin

need to have substantial increases in pay over time. But if you can make even a slight 

ference in sort of holding down overall compensation costs—I mean, you know, 0.5 p

cent a year in military compensation cost could by twenty years from now—and 

been working in this field for twenty years, so looking out twenty years doesn’t seem 

sane to me anymore—that’s ten or twenty billion dollars more in 2025 that you wo

have to spend on procurement or something else. And that’s a big chunk of money 

procurement. So I think if we can make some kind of incremental changes maybe al

those lines, that that would be important.

Moderator: Yes, in the back please.

Q. I’m certain that the hair was rising on the back of the neck of most of the 

val officers listening to Mr. Kosiak speaking—I suspect with many of the 

Force officers as well, when he talked about making cuts in both the N

and the Air Force to pay for the OPTEMPO problems with the Army with c

rent operations going on now. Not to minimize or trivialize that proble

that certainly is there and exists and is acknowledged. But the concern 

twofold. One is that certainly in the Navy, and I suspect in the Air For

there’s no lack of OPTEMPO and PERSTEMPO issues in those services, d

to the current commitments as well. In fact, I would say the FRP is actua

exacerbating that problem. Fleet Response Plan. And the second is, th

seem to be shortsighted in actually going opposite to where the defe

transformation is going, when you consider that particularly the Navy 

going to be your most expeditionary force, and has been and continues 

be, when you talk about being able to plug and play, as they like to say th

days. I realize there’s not a question in that, but I’d be interested in so

comments from the panel.

Moderator: Like Jeopardy, you can sort of stick a question mark at the end of it, I think. A

before we heap this on Steven, even though he threw the grenade, let me ask if either of the o

two panelists would like to comment on this question. And then I will ask Steven to comme

A. [Mr. O’Rourke] Well, in the spirit of trying to get things started, I’ll return to a point th

made in my opening presentation, that the Navy under Admiral Clark has been 

gaged in a huge efficiency drive. Admiral Clark is attempting to drive costs out of 

system in every way he can think of. And the Navy, I think, is probably doing mor

that regard right now, and has been for the last few years, than the other services. A

the issue it raises is, what do you do with the savings? I think the Navy embarked on 

efficiency drive largely in the hopes that it could rotate those savings into its own inv

ment programs and help pay for its own transformation and its recapitalization. But 

are in a situation now where, as a practical matter, DoD budgeters are under a lo

pressure to make decisions that, whether implicitly or explicitly, have the effect of tra

ferring some portion of those savings to meet near-term needs that are strongly alig

with Army operations right now. And for me that raises the question of how much 

service’s savings can you transfer to another service without all of the services get

the message that their savings initiatives may not pay off for them and for their o

programs the way they originally hoped. We first faced this issue, as far as I can recal

the early nineties when the Navy generated some internal savings and they were tra

ferred to one or more of the other services. The Navy felt burned at the time 

130
basically said never again. Well, that didn’t turn out to be the case. The Navy has, 

just mentioned, attempted to do that again over the last few years, and we are cond

ing an experiment right now to see how well that can work and what kind of messa

the services receive in instances where their savings are transferred in certain amou

to the other services. I don’t think that the answer has to be zero, that you can’t tran

any without endangering the incentive to save, but at some point above zero, I th

you get into that kind of a question. And I’m not sure where that line is.

A. [Dr. O’Hanlon] I’ll just say briefly that I agree with Ron that the Navy and the Air Fo

shouldn’t be punished, but I also have to take the opportunity to make one point, wh

is, as much as I admire the great sacrifice of your service and the Air Force, the comp

son right now in OPTEMPO frankly is overwhelming in the favor of the ground for

They are working, in my judgment, simply way too hard. You guys always work 

hard. They are working unconscionably too hard. As you well know—you know 

numbers. I don’t need to repeat them, but sending back the same units to Iraq rep

edly that have already been there—these people are not only doing a year in a ho

combat theater and risking their lives, they’re becoming strangers to their own fami

because they’re going back to Iraq a second time after just a few months at hom

have utmost admiration for everyone in the military. I think everybody in the Nav

working very hard today as well. But in terms of where the marginal resource goes r

now, I don’t mean to suggest the Navy should be punished. But to the extent we h

any marginal additional resources or to the extent we can migrate some money ou

some of the modernization accounts into some of the ground force force structure 

end strength accounts, I think we owe it to the soldiers and Marines who are doing 

much in Iraq right now. And again I say this with no disrespect and with complete ad

ration for the level of effort right now of the Navy and the Air Force. But it’s the grou

forces that are hurting. They are getting crushed by this mission. They are working

my opinion, in a way that’s unconscionably hard. And rather than talk about it in te

of stealing from Peter to pay Paul, I’d rather suggest that at least for now the countr

a whole does need to simply find the added resources to make the Army larger, an

there’s not a way to do that by reducing some of the Navy and Air Force and Army 

Marine Corps modernization programs, we simply need a larger top line. But in su

mary, it’s the ground force OPTEMPO right now that I think is really an emergency 

needs to be addressed in our military planning.

A. [Mr. Kosiak] I actually think—when I spoke briefly in my presentation, I don’t actu

think I did make the case that they should be shifting money to the Army, althou

think one can make that case. Actually what I was saying was that if you simply loo

the cost of each of the service’s plans, they are—the budget levels are unlikely to 

there to support those plans. That is, I think, the best guess. I mean, if you just sor

look historically and look at where we’re headed in terms of politics and the fiscal pr

lems we have and the demographic problems we have, I think it’s just unlikely that 

level of resources are going to be there to support those plans. So really the option 

again, you make the decisions as rationally as you can up front, relatively efficiently

you make them on an ad hoc basis over time, relatively inefficiently. So I think 

just—it’s not an easy decision, but I mean—I think if you’re looking realistic, real

budget levels is probably a decision you have to make. The other thing I would 

say—I think there is sort of a dilemma here. There’s a tension here between, on the 

hand I think you do want the services to be able to keep at least some significant por

of the savings they get, both because sort of on fairness grounds, but also becau

think that’s where you want to encourage the services to look for savings, and I th

they are in the best position to find those savings. And I think if they don’t have tha

centive, they’re obviously not going to be as likely to find those savings. On the ot

131
hand, this is all about the QDR that we’re talking about today, or long-term plann

Obviously part of long-term planning is deciding, are you going to shift—have thi

change? Are you going to shift resources from one mission to the next, to another

which case, obviously, you have to make those kinds of decisions? You know, som

those decisions are going to benefit some services more than the others.

Moderator: Our time is getting short, folks. And I want to direct your attention to the nu

ber of really provocative questions that Ron O’Rourke posed specific to the Navy, and there 

certainly a lot of Navy blue and Marine green uniforms out there. I’m not trying to ignore 

other services. But are there questions, as we close, about the future of the Navy? These can 

the issues that Ron raised or others.

Q. I was wondering if the panel could address if the QDR can or even sho

connect the dots from a focus review. I think the guest speaker this morn

mentioned four focus points providing capabilities-based recommendatio

as opposed to programming recommendations and then still coming up w

what the structure should look like—the force structure, given numbers a

that sort of thing?

Moderator: [inaudible].

Q. Yes, sir, this dovetails into that exactly, the context of sea basing. And 

question I have is, sea-basing concept, depending on where you’re looki

ranges from modest growth and expeditionary amphibious warfare to som

thing much larger than that, i.e., OIF without Kuwait kind of scenarios

the context of the four new security environments, I’d like to know the op

ion, specifically from Mr. O’Rourke, but the rest of the panel, on where y

think the sea-basing concept should fall to address those four environme

from a force structure strategic future of the Navy perspective.

Moderator: It’s really a great question.

A. [Mr. O’Rourke] Okay, there were two questions. One is the QDR, and I think the sp

of the question was the hope for capabilities-based results and whether those could 

translated, I think, into programs or force structures. As I said at the outset of my pres

tation, my own hope is that the QDR, among other things, can result in an agre

upon, officially approved, unambiguous plan for the future size and structure of 

Navy. The absence of this kind of a plan for more than two years now is beginnin

cause considerable difficulties. It’s causing difficulties for Congress in conducting ef

tive oversight of Navy programs and budgets, which is something that ultimately d

benefit the Navy even if the Navy doesn’t enjoy the process at the time; and it’s caus

considerable difficulty for industry. Businessmen have to make decisions ab

workforce management, production planning, facilities investment, company-sponso

R&D, and even mergers and acquisitions. And in the context of an uncertain plann

environment about what kind of a Navy we might be building toward in the future, t

have no basis for making those decisions with any security. It also may serve as a di

centive for the parent firms of these shipyards or these other Navy suppliers to inves

make certain key investments in modernizing those facilities.

In terms of sea basing, you ask a really interesting question, I think, about how sea b

ing should be defined in the context, I think you asked, of the four challenges. Was 

your question? I’m simply going to say I don’t know at this point. The sea-basing c

cept is very interesting. There’s a certain rationale behind it about avoiding the need 

establishing intermediary land bases that are fixed and possibly very vulnerable 

132
attack. The most important point for me about the sea-basing concept right now is h

undefined it is and how much variation there currently is in what it may wind up lo

ing like, and that means it is a source. It is one of the sources right now of uncertaint

Navy planning, because it can affect requirements for at least two different categorie

ships, if not also for surface combatants as well as a third category. I don’t know exa

how I would match up sea basing against those four challenges. I’d have to admit 

I’d have to sit down and think about that for a while. But that question and many oth

are the kinds of things that Navy and Marine Corps leaders, in conjunction with D

officials, I think, need to work their way through as soon as they can, and I would h

that those issues also could be closed, at least to some degree, as a result of the w

done in the QDR, because until we get those answers, we’re not going to have a f

basis for planning amphibious ships or maritime prepositioning ships, or possibly thi

like naval surface fire support requirements that can affect requirements for surf

combatants. So I think your question is well taken. I wish I had a better answer for 

at this point, but I think Congress needs to hear a better and more defined answe

soon as one can be made available by DoD.

Moderator: Thank you very much, Ron. We’re inside of one minute to go. So I will dec

that this casserole is sufficiently cooked at this point. I want to apologize to the gentleman w

asked the question about the active reserve issue. If you can nail down one of these guys a

the conference is over, by all means take your best shot. My compliments to you all for y

questions, and thank you very much to the panelists.

133

Closing Remarks

Rear Admiral Jacob L. Shuford, USN

President, Naval War College

Let me commend the panelists for a superb discussion of many of the key issues that are n

on the table as elements of the very important Quadrennial Defense Review. And I also wan

thank all of the previous speakers and panelists for leading us through a very enlightening se

of explorations of a tremendously complex subject.

Rich, you and your committee did a great job in putting this conference together, and I look 

ward to seeing the published report of the event, which will allow us to share some of 

week’s insights with a much broader audience.

The dialogue we conducted over the past two days has been useful in framing the issues, a

believe that we all leave here far better prepared to continue the debate in the classroom an

our workspaces, and, as I indicated yesterday, to have an impact on the strategic conversati

that are vital to arriving at enlightened decisions.

My thanks go out, again, to the Naval War College Foundation for their support of this eve

am sure that Bill Ruger would be pleased to see that we are putting his generous beques

good use.

Thank you all for coming. I wish you a safe journey home, and I look forward to seeing a nu

ber of you at tomorrow’s graduation ceremony!

135

Participant Biographies

Jacob L. Shuford

Rear Admiral, U.S. Navy

President, U.S. Naval War College

Rear Admiral Jacob L. Shuford was commissioned in 1974, from the NROTC program at 

University of South Carolina. His initial assignment was to USS Blakley (FF 1072), where 

served in the Operations department.

In 1979, following a tour as Operations and Plans Officer for the Commander, Naval Fo

Korea, he was selected as an Olmsted Scholar and studied for two years in France at the P

Institute of Political Science. He also holds master’s degrees in Public Administration (Finan

from Harvard and in National Security and Strategic Studies from the Naval War College

After completing department head tours as Operations Officer in USS Deyo (DD 9

and in USS Mahan (DDG 42), he commanded USS Aries (PHM 5). His first tou

Washington included assignments to the Staff of the Chief of Naval Operations and 

fice of the Secretary of the Navy.

Rear Admiral Shuford returned to sea in 1992 to command USS Rodney M. Davis (FFG 6

Battle “E” winner and part of the USS Independence Battle Group. He assumed comman

USS Gettysburg (CG 64) in January 1998, deploying to Fifth and Sixth Fleet operating area

Air Warfare Commander (AWC) for the USS Enterprise Battle Group. Gettysburg played a 

role in the Adriatic during the Kosovo crisis and the Persian Gulf during Operation Desert Fo

Returning to the Pentagon and the Navy Staff (N86), he directed the Surface Combatant Fo

Level Study (SCFLS), establishing numbers and types of combatant ships required by 

Navy. Following this task, he was assigned to the Plans and Policy Division (N3/N5) as Chie

Staff for the Navy’s Roles and Missions Organization, coordinating and defending the Nav

positions in response to the national-level Commission on Roles and Missions of the Arm

Services (CORM). He finished his most recent Pentagon tour as a Division Chief in J8—

Force Structure, Resources, and Assessments Directorate of the Joint Staff—where he wor

on Joint Warfighting requirement issues, primarily in the Theater Air and Missile Defense m

sion area. His most recent Washington assignment was to the Office of Legislative Affairs as 

rector of Senate Liaison.

In October 2001 he assumed duties as Assistant Commander, Navy Personnel Command 

Distribution (the Navy’s Head Detailer). Responsible for the assignment of more than 370,

Navy men and women, Rear Adm. Shuford played a lead role in the conceptual developm

and initial implementation of Project Sea Warrior. In August 2003 he assumed command of 

Abraham Lincoln Carrier Strike Group and served as Third Fleet’s Syndicate Lead and Ope

tional Agent for Theater Air and Missile Defense. He assumed command of the Naval War C

lege in Newport, Rhode Island, on 12 August 2004. He is the fifty-first officer to serve 

President.

His personal awards include the Defense Superior Service Medal, the Legion of Merit (

awards), the Bronze Star, the Meritorious Service Medal (three awards), the Navy Commen

tion Medal (three awards), and the Navy Achievement Medal.

137
Dr. James Jay Carafano

Senior Research Fellow, Defense and Homeland Security, Davis Institute, The Herit

Foundation

Dr. Carafano is one of The Heritage Foundation’s leading scholars in defense transformat

military operations and strategy, and homeland security. Recognizing that the war against 

rorism will be a protracted conflict, his research focuses on developing the national security 

the nation needs to secure the long-term interests of the United States—protecting its citize

providing for economic growth, and preserving civil liberties.

An accomplished historian and teacher, Dr. Carafano was an assistant professor at the U.S. 

itary Academy in West Point, N.Y., and served as Director of Military Studies at the Arm

Center of Military History. He also taught military and diplomatic history at Georgetown U

versity and Mount Saint Mary College and served as a fleet professor at the U.S. Naval W

College and a visiting professor at the National Defense University.

Dr. Carafano was a member of the National Research Council’s Committee on Army Scie

and Technology for Homeland Security. He currently serves on the National Defense Tra

portation Association’s Security Practices Committee and is a 2005 Senior Fellow at Geo

Washington University’s Homeland Security Policy Institute.

Publications:

• He is the coauthor of Winning the Long War: Lessons from the Cold War for Defea

Terrorism and Preserving Freedom. Looking at both history and the current policies 

waging the global war on terrorism, this study argues that a successful strategy requir

balance of prudent military and security measures, continued economic growth, and 

zealous protection of civil liberties. The book also highlights the ideological dimensi

of the struggle, describing how the United States can and must win the “war of ide

against terrorist ideologies.

• In addition, Dr. Carafano is the coauthor of the textbook Homeland Security, publis

in April 2005 by McGraw-Hill. Homeland Security is a practical introduction to every

life in the new era of terrorism. Numerous key details are addressed, from roles of 

responders and volunteers to family preparedness techniques to in-depth description

weapons of mass destruction. Chapters examine infrastructure protection and busin

continuity, along with operations, tactics, and weapons of terrorist groups.

• Dr. Carafano was also the principal author of the budget analysis in the 2

Independent Task Force Report Emergency Responders: Drastically Underfund

Dangerously Unprepared, published by the Council on Foreign Relations. He was als

contributing author to the National Academies Army Science and Technology 

Homeland Security 2004 report and codirector of the task force report DHS 2

Rethinking the Department of Homeland Security.

• His works on military history include Waltzing into the Cold War, published in 2002 

Texas A&M University; After D-Day, a Military Book Club selection, published in 2

by the Lynne Rienner publishing company of Boulder, Colorado; and Made in Amer

Technology and GI Ingenuity on the Battlefields of Normandy, forthcoming fr

Praeger (2006).

138
Expertise:

As an expert on defense, intelligence, and homeland security issues, Dr. Carafano has testi

before the U.S. Congress and has provided commentary for ABC, BBC, CNBC, CNN, C-SPA

Fox News, MSNBC, NBC, SkyNews, National Public Radio, and Australian, Austrian, Canad

French, Greek, Japanese, and Spanish television. His editorials have appeared in newspap

nationwide, including USA Today, the Washington Times, the Baltimore Sun, the New Y

Post, and the Boston Globe.

Dr. Carafano joined Heritage after serving as a senior fellow at the Center for Strategic 

Budgetary Assessments, a Washington policy institute dedicated to defense issues.

Before that, he served twenty-five years in the Army, rising to the rank of lieutenant colonel. 

areas of expertise included military strategy, joint operations, future combat systems, p

conflict operations, and nuclear weapons. During his service, Dr. Carafano served in Euro

Korea, and the United States and was head speechwriter for the Army Chief of Staff. Before 

tiring, he was executive editor of Joint Force Quarterly, the Defense Department’s prem

professional military journal.

A graduate of West Point, Dr. Carafano also has a master’s degree and a doctorate fr

Georgetown University and a master’s degree in strategy from the U.S. Army War College

Dr. Richard N. Cooper

Maurits C. Boas Professor of International Economics, Harvard University

Richard N. Cooper is Vice-Chairman of the Global Development Network and a member of 

Trilateral Commission, the Council on Foreign Relations, the Executive Panel of the U.S. C

of Naval Operations, the Aspen Strategy Group, and the Brookings Panel on Economic Ac

ity. He has served on several occasions in the U.S. Government, as chairman of the Natio

Intelligence Council (1995–97), Undersecretary of State for Economic Affairs (1977–81), D

uty Assistant Secretary of State for International Monetary Affairs (1965–66), and senior s

economist at the Council of Economic Advisers (1961–63). He was also chairman of the F

eral Reserve Bank of Boston (1990–92). As a Marshall Scholar, he studied at the Lond

School of Economics, and earned his Ph.D. at Harvard University.

Recent Publications:

• Boom, Crisis, and Adjustment (with others)

• Macroeconomic Management in Korea, 1970–1990 (with others)

• Environment and Resource Policies for the World Economy

• What the Future Holds (with others)

Ms. Michèle A. Flournoy

Senior Advisor, International Security Program, Center for Strategic and International Stud

(CSIS)

Michèle A. Flournoy is senior advisor in the CSIS International Security Program, where she wo

on a broad range of defense policy and international security issues. Previously, she was a dis

guished research professor at the Institute for National Strategic Studies at the National Defe

University (NDU), where she founded and led the university’s Quadrennial Defense Review (Q

139
working group, which was chartered by the chairman of the Joint Chiefs of Staff to develop inte

tual capital in preparation for the Department of Defense’s 2001 QDR. Prior to joining NDU, 

was dual-hatted as principal deputy assistant secretary of defense for strategy and threat reduc

and deputy assistant secretary of defense for strategy. In this capacity, she oversaw three policy 

fices in the Office of the Secretary of Defense: Strategy; Requirements, Plans, and Coun

proliferation; and Russia, Ukraine, and Eurasian Affairs. She was awarded the Secretary of Defe

Medal for Outstanding Public Service in 1996 and the Department of Defense Medal for Dis

guished Public Service in 1998. In addition to two edited volumes, Flournoy has published m

than fifty articles on a variety of international security issues. She holds a B.A. in social studies f

Harvard University and a Master’s in international relations from Balliol College, Oxford Univer

where she was a Newton-Tatum Scholar. She is a member of the Aspen Strategy Group, the In

national Institute of Strategic Studies, and the Executive Board of Women in International Secu

She is a former member of the Defense Policy Board and the Defense Science Board Task Fo

on Transformation.

Expertise:

Defense strategy and policy; war on terrorism; U.S. and coalition military operations; p

conflict reconstruction; nuclear, chemical, and biological weapons.

Publications:

• Chapter 6, “Dealing with Demons: Enhancing Justice and Reconciliation,” with Mich

Pan; Chapter 7, “Interagency Strategy and Planning for Post-Conflict Reconstructio

and Chapter 9, “Training and Education for Post-Conflict Reconstruction” in Winn

the Peace, Robert C. Orr, ed. (Washington, D.C.: CSIS Press, July 2004).

• “A Test of Leadership on Sea Island,” with Sam Nunn, Washington Post, June 8, 20

sec. A, p. 23.

• Black Dawn Scenario-Based Exercise Report, May 2004.

• Protecting Against the Spread of Nuclear, Biological and Chemical Weapons: An Ac

Agenda for the Global Partnership, with Robert J. Einhorn (Washington, D.C.: CSIS Pr

January 2003).

• “Dealing with Demons: Justice and Reconciliation,” with Michael Pan, Washing

Quarterly, Autumn 2002, 25:4, pp. 111–123.

• Chapter 10, “Strengthening Homeland Security,” in Transforming America’s Milit

Hans Binnendijk, ed. (Washington, D.C.: National Defense University Press, Aug

2002).

• “Quick-Stick Doctrine,” with Vinca LaFleur, Washington Post, June 18, 2002, sec. A

19.

• Revitalizing the U.S. Nuclear Deterrent, with Clark Murdock, Center for Strategic 

International Studies (Washington, D.C.: CSIS Press, 2002).

• To Prevail: An American Strategy for the Campaign against Terrorism, with Kurt 

Campbell, Center for Strategic and International Studies (Washington, D.C.: CSIS Pr

2001).

• “Weighing Bush’s Strategic Vision,” Christian Science Monitor, May 4, 2001, p. 11

• QDR 2001: Strategy-Driven Choices for America’s Security, Editor, NDU QDR 2

Working Group (Washington, D.C.: National Defense University Press, April 2001)

140
• Quadrennial Defense Review 2001, Report of the National Defense University, 200

• Nuclear Weapons After the Cold War: Guidelines for U.S. Policy, Editor (New Y

N.Y.: HarperCollins College Publishers, 1993).

Dr. J. Michael Gilmore

Assistant Director for National Security, Congressional Budget Office

Before joining the Congressional Budget Office (CBO) in 2001, J. Michael Gilmore was the D

uty Director for General Purpose Programs in the Office of the Secretary of Defense, Progr

Analysis and Evaluation. In that position, he was the principal staff adviser to the Secretar

Defense for issues regarding U.S. general-purpose forces and supporting programs. In 

eleven years in the Office of the Secretary of Defense, he began by analyzing strategic defe

and military satellite communications programs and later, as part of the Cost Analysis Impro

ment Group, directed teams of analysts in preparing estimates of the costs of defense progra

Prior to his career in government, he was a defense analyst for McDonnell Douglas Corpora

and a scientist at Lawrence Livermore National Laboratory, where he performed research 

nuclear fusion.

The CBO National Security Division analyzes budgetary issues related to national defense

ternational security, and veterans’ affairs. Its research focuses on defense budgets, mili

forces, and weapon systems, the demand for and supply of military personnel, the military’s 

dustrial and support facilities, and U.S. foreign assistance programs. The division examines 

budgetary effects of proposed legislation, the cost-effectiveness of current and potential defe

programs, and the impact on the private sector of legislative initiatives concerning defense

Mr. C. Lawrence Greenwood

Deputy Assistant Secretary, International Finance and Development,

Bureau of Economic and Business Affairs, Department of State

C. Lawrence “Larry” Greenwood, Jr., joined the Foreign Service in 1974 after graduating fr

the Fletcher School of Law and Diplomacy. After working on domestic politics and trade iss

in Manila from 1977 to 1979, he headed the economic section in the U.S. Embassy in Sene

from 1979 to 1981, where he worked on a range of development issues. During postings in 

State Department’s Economic Bureau from 1981 to 1985, he worked on international antit

issues and the Third World debt crisis, including staffing of the U.S. Government’s work 

Paris Club debt rescheduling.

Greenwood studied Japanese from 1985 to 1987 and served in the Economic Section of 

Embassy in Tokyo from 1987 to 1991, where he was responsible for trade and structural refo

talks that dominated the U.S.-Japan agenda at that time. He headed the combined Econom

Political Section in Singapore, where he helped set up the first permanent U.S. military p

ence in the city-state and helped handle the infamous Fay caning case.

Greenwood was chief of the bilateral trade office in the Economic and Business Bureau fr

1994 to 1996, where he worked on a host of trade issues from Canadian lumber to Japan

autos to global telecommunications talks. He then returned to Japan where, as Economic M

ister at the Embassy, he led efforts to open Japan’s insurance, telecom, retail, and energy m

kets and promoted incoming U.S. investment into Japan.

Greenwood became U.S. Ambassador to the Asia Pacific Economic Cooperation Group 

2000 and helped pioneer APEC programs in the area of information technology, struct

141
reform, anticorruption, microfinance, and counterterrorism. He managed the participation 

the President in three successful APEC Summits in Brunei, China, and Mexico.

Greenwood was appointed Deputy Assistant Secretary for International Finance and Deve

ment in July 2003, where he has been working on global financial issues, particularly post-c

flict assistance in Iraq and Afghanistan.

Mr. Steven Kosiak

Director of Budget Studies, Center for Strategic and Budgetary Assessments

Steven Kosiak is the Director of Budget Studies at the Center for Strategic and Budgetary 

sessments, an independent policy research institute established to promote innovative think

about defense planning and investment strategies for the twenty-first century.

Mr. Kosiak performs research and analysis of defense spending trends, force structure and we

ons systems costs, and the budgetary consequences of arms control measures, among other 

lated defense budget issues. He is the author of CSBA’s annual budget analysis and contribu

significantly to other publications on defense and security issues. His most recent publications 

clude Analysis of the FY 2000 Budget Request, Changing Military Pay and Retirement: Cong

Needs to Look Before It Leaps, Options for U.S. Fighter Modernization, and a cost series on 

Kosovo War. He is frequently cited in major national news articles and has appeared on netw

television and radio news programs. Mr. Kosiak contributes editorial perspectives in such pro

sional and public policy journals as the Bulletin of Atomic Scientists, Aviation Week and Sp

Technology, Armed Forces Journal, and Defense News.

Prior to joining CSBA in 1991, Mr. Kosiak was senior analyst at the Center for Defense Infor

tion, with responsibility for researching and writing on a wide variety of defense issues. He 

worked on Capitol Hill and in the Office of the Defense Advisor at the U.S. Mission to the No

Atlantic Treaty Organization.

Expertise:

Defense Budgets and Programs; Military Personnel and Readiness; Modernization Programs 

Trends

Current Projects:

Steven Kosiak is the author of CSBA’s annual defense budget reports and special budget st

ies concerning costs and possible savings associated with major acquisition programs, pers

nel, readiness, force structure, infrastructure activities, and arms control measures.

Education:

Steven Kosiak holds a B.A. from the University of Minnesota, an M.P.A. from the Wood

Wilson School at Princeton University, and a J.D. from the Georgetown University Law Cen

142
Dr. Carnes Lord

Professor of Military and Naval Strategy, Center for Naval Warfare Studies, U.S. Naval War Coll

Dr. Lord is a political scientist with broad interests in international and strategic studies, natio

security organization and management, and political philosophy. He has held a number of 

sitions in the U.S. government, including director of international communications and in

mation policy on the National Security Council staff (1981–83), assistant to the vice presid

for national security affairs (1989–91), and distinguished fellow at the National Defense U

versity (1991–93).

Dr. Lord has taught political science at Yale University, the University of Virginia, and the Fletc

School of Law and Diplomacy, and was director of international studies at the National Institute 

Public Policy.

Publications:

• He is the author of, among other works, The Presidency and the Managemen

National Security (1988) and The Modern Prince (2003).

Dr. David H. McIntyre

Director, Integrative Center for Homeland Security, Texas A&M University

Dr. McIntyre is a nationally recognized analyst, writer, and teacher, specializing in national 

homeland security. A thirty-year Army veteran, he spent the past seventeen years design

and teaching national and homeland security strategy for the most senior levels of governm

He is the former dean of the National War College and currently teaches homeland securit

Texas A&M’s George Bush School of Government and Public Service and at the Universit

Texas.

He recently received the “Silver Star Award,” an award for teaching excellence voted by 

students of the Bush School and presented by former President George Bush. He also par

pated in the 2003 Defense Science Board Study of Homeland Security.

As director, Dr. McIntyre oversees and administers the activities of the Integrative Center 

Homeland Security (ICHS). The mission of the ICHS is to establish and sustain a univers

based homeland security program that integrates the full spectrum of information services

search, development, evaluation, education, training, and field delivery of responder serv

that leads to a safer and better-prepared society. Dr. McIntyre sees both an external and an 

ternal focus for the Center’s efforts. “Texas A&M’s people and facilities really are world clas

the homeland security arena,” he said. “I will help get that word out to the agencies search

for new ideas and high quality research. . . . But beyond that,” he noted, “we have a unique 

portunity to build the curricula for an entirely new field of study that is going to touch every a

demic discipline, every citizen, and every American institution in the coming years. . . . My g

is to help faculty and students find ways to put their considerable skills to work improving 

security while maintaining our freedom at the same time.”

143
Mr. Walter Russell Mead

Henry A. Kissinger Senior Fellow in U.S. Foreign Policy, Council on Foreign Relations

Walter Russell Mead is the leading interpreter of the history of U.S. foreign policy and Ameri

role in the world. He is the winner of the Lionel Gelber Prize for his book Special Providen

American Foreign Policy and How It Changed the World, and the author of Power, Ter

Peace, and War.

Expertise:

U.S. foreign policy; international political economy; domestic politics; religion and foreign pol

Experience:

Project director, religion and foreign policy, Pew Forum; project director, Working Gro

on Development, Trade & International Finance, Phase II; board member, New Ame

Foundation; project director, Study Group on History of U.S. Foreign Policy, Phase II (c

rent); senior contributing editor, Worth (current); contributing editor, opinion page, the 

Angeles Times (current); president’s fellow, World Policy Institute at The New Sch

(1987–97); contributing editor, Harper’s Magazine (1986–91).

Selected Publications:

• Power, Terror, Peace, and War: America’s Grand Strategy in a World at Risk (2004

• Special Providence: American Foreign Policy and How It Changed the World (200

named as one of ten notable nonfiction books of 2001 by The Economist 

nominated for the 2002 Arthur Ross Book Award

• Mortal Splendor: The American Empire in Transition (1987)

• Articles in Esquire, Worth, the New York Times, International Herald Tribune, the W

Street Journal, and The New Yorker.

Education:

B.A., Yale University

Honors:

Among several honors and prizes, Special Providence received the Lionel Gelber Aw

(which The Economist calls “the world’s most important prize for nonfiction”) for the best b

in English on international relations in 2002. The Italian translation won the Premio Ac

Storia awarded to the most important historical book published in Italian.

Dr. Michael E. O’Hanlon

Senior Fellow in Foreign Policy Studies, The Brookings Institution

Expertise:

Arms treaties; Asian security issues; homeland security; Iraq policy; military technology; mis

defense; North Korea policy; peacekeeping operations; U.S. defense strategy and budget

144
Current Projects:

Defense strategy and budgeting; homeland security; future of arms control; Iraq and North Ko

Policy

Education:

Ph.D. (1991), M.A. (1988), M.S.E. (1987), A.B. (1982), Princeton University

Background:

Current Position(s): Visiting Lecturer, Princeton University

Previous Position(s): Defense and Foreign Policy Analyst, National Security Division, C

gressional Budget Office (1989–94); Research Assistant, Institute for Defense Analy

Peace Corps Volunteer, Congo

Languages:

French

Selected Publications:

• Defense Strategy for the Post-Saddam Era (forthcoming, 2005)

• “Iraq without a Plan,” Policy Review (December 2004 & January 2005, no. 128)

• The Future of Arms Control, with Michael A. Levi (2004)

• Neither Star Wars nor Sanctuary: Constraining the Military Uses of Space (2004)

• “Reassessing National Security,” in Restoring Fiscal Sanity: How to Balance the Bud

Alice M. Rivlin and Isabel Sawhill, eds. (2004)

• “Gauging the Aftermath,” The National Interest, with Adriana Lins de Albuquer

(Summer 2004)

• “The Humanitarian Transformation: Expanding Global Intervention Capaci

Survival, with Peter W. Singer (Spring 2004)

• Crisis on the Korean Peninsula: How to Deal with a Nuclear North Korea, with M

Mochizuki (McGraw-Hill, 2003)

• Protecting the American Homeland: One Year On, with Peter Orszag, Ivo Daalder, I

Destler, David Gunter, Robert Litan, and James Steinberg (2003)

• Expanding Global Military Capacity for Humanitarian Intervention (2003)

• “Clinton’s Strong Defense Legacy,” Foreign Affairs (November/December 2003)

• “The Democratic Party and Foreign Policy,” World Policy Journal, with Dana Allin 

Philip Gordon (Spring 2003)

• “Estimating Casualties in a War to Overthrow Saddam,” Orbis (Winter 2003)

• “A ‘Master Plan’ to Deal with North Korea,” Brookings Policy Brief, (January 2003

• “The New National Security Strategy and Preemption,” Brookings Policy Brief, w

Susan Rice and James Steinberg (January 2003)

145
Mr. Ronald O’Rourke

Naval Analyst, Congressional Research Service of the Library of Congress

Mr. O’Rourke is a Phi Beta Kappa graduate of Johns Hopkins University, from which he 

ceived his B.A. in international studies, and a valedictorian graduate of the University’s N

School of Advanced International Studies, where he received his M.A. in the same field.

Since 1984, Mr. O’Rourke has worked as a naval analyst for the Congressional Research S

vice of the Library of Congress. In that time, Mr. O’Rourke has written numerous reports 

Congress on various issues relating to the Navy. He regularly briefs Members of Congress 

Congressional staffers and has testified before Congressional committees on twelve occasion

In 1996, Mr. O’Rourke received a Distinguished Service Award from the Library of Cong

for his service to Congress on naval issues.

Mr. O’Rourke is the author of several journal articles on naval issues and is a past winner of 

U.S. Naval Institute’s Arleigh Burke essay contest. Mr. O’Rourke has given presentations 

Navy-related issues to a variety of audiences in government, industry, and academia.

Dr. Andrew L. Ross

Research Professor, Strategic Research Department, U.S. Naval War College

Dr. Andrew L. Ross is a Research Professor in the Strategic Research Department (SRD) of 

U.S. Naval War College’s Center for Naval Warfare Studies. From 2002–2004, he was the 

rector of Studies in SRD. He served as Director of the Naval War College’s project on “Mili

Transformation and the Defense Industry After Next” and during the 2001–2002 acade

year served as the Acting Director of the College’s Advanced Research Program and 

Co-Leader of the College’s Strategy Task Group, one of four task groups established to supp

the Chief of Naval Operations in the global war on terror.

His work with the Strategy Task Group led to a Department of the Navy Meritorious Civi

Service award in September 2002. From 1989 to 2000, Dr. Ross served as first a Secretar

the Navy Senior Research Fellow and then a Professor of National Security Affairs in the C

lege’s National Security Decision Making Department, where he taught the College’s c

course on Strategy and Force Planning. His work on U.S. grand strategy, national security 

defense planning, regional security, weapons proliferation, and security and economics has 

peared in numerous journals and books.

Publications:

• Professor Ross is the editor of The Political Economy of Defense: Issues and Perspect

(1991) and co-editor of three editions of Strategy and Force Planning (1995, 19

2000). He is currently writing a book on military transformation.

Dr. Ross has held research fellowships at Cornell, Princeton, Harvard, the University of Illin

and the Naval War College; he also taught in the Political Science Departments of the Univ

sity of Illinois and the University of Kentucky. He earned his M.A. and Ph.D. at Cornell Univ

sity and his B.A., summa cum laude, at American University.

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