ndupress.ndu.edu SF No. 287 1 

On February 13, 1989, General Colin Powell, who was in a transition 

between National Security Advisor and Commander of U.S. Army 

Forces Command, addressed the reality of strategy: “All of the sophisticated talk about grand strategy is helpful, but show me your budgets and 

I will tell you what your strategy is.”1 What General Powell meant is that the 

definition of the U.S. role in the world and its strategic goals flow from budgets, not the other way around. This paper fleshes out General Powell’s observation by focusing on the means part of the ends, ways, and means of strategy 

in order to explain how austerity affects force planning and strategy. By first 

examining budget reductions as a general matter, the paper describes today’s 

austere U.S. budgetary environment. It concludes with the current strategic 

options that will likely characterize the contemporary discussion of strategy 

and force planning.

Decremental Spending

The defense budget system works most smoothly, of course, when budgets 

are growing, not shrinking.2 In the 63 years of Department of Defense (DOD) 

budgets, the budget grew in 49 of those years.3 With one year’s budget providing 

the base from which the next year’s increase takes off, increasing budgets do not 

demand strategic reassessments. Budget debates concentrate on where best to 

allocate any incremental increases. Decreasing budgets obviously are more challenging than increasing budgets. They require the articulation of a strategy, but that 

rarely happens, and even more rarely does strategy shape budgets. Rather, bureaucratic infighting tends to result in across-the-board, rather than tailored, budget 

cuts. With decremental spending, there is rarely an obvious reduction of strategic 

ends to guide the reduction in means. As budget expert Allen Schick explains, 

“Decrementalism diverges from incrementalism in at least three significant ways. 

Strategy and Force Planning 

in a Time of Austerity

By Michael J. Meese

Strategic Forum

National Defense University

About the Author

Brigadier General Michael J. Meese, 

Ph.D., USA (Ret.), is a Visiting 

Distinguished Research Fellow in 

the Center for Strategic Research, 

Institute for National Strategic 

Studies, at the National Defense 

University and is the Chief Operating 

Officer at the American Armed Forces 

Mutual Aid Association. An adapted 

version of this paper will appear in 

American Grand Strategy and the 

Future of U.S. Land Power (Strategic 

Studies Institute, forthcoming).

Key Points

◆ Force planning and defense 

budgeting processes that may work 

well with spending increases have 

significant problems with budget 

reductions under austerity.

◆ The current U.S. fiscal crisis 

and political polarization make 

strategic planning and defense 

decisionmaking difficult.

◆ As part of strategy, defense leaders 

need to engage in a credible 

dialogue about austerity, to 

include discussing fiscal policy and 

nondefense spending.

May 2014

Cent

e

r for Strat

egic ReS

EARCH
2 SF No. 287 ndupress.ndu.edu

Decremental budgeting is redistributive rather than distributive; it is less stable than incremental decisions; and 

it generates more conflict.”4

As a practical matter, budgeting in austere times 

is different because of the budgetary context in which 

decision are made. With an increasing budget, advocates of particular programs argue for increases to those 

programs from the overall increase to the budget. If 

successful, in the following year they can ask for still 

more funding; alternatively, programs that were not favored previously may receive additional funding in the 

following year’s increment to compensate for smaller, 

earlier increases. In contrast, with a decreasing budget, 

a reduction that is taken in one year may not insulate 

a particular Service or program from continued or increased reductions in the future. Quite the contrary, if 

a program survived with a 10 percent cut last year, the 

reduced level is the new starting point for next year’s 

budget negotiation. This places a premium on defense 

leaders understanding the long-term budgetary conditions as defining a reality in which, they hope, strategy 

can be made realistic. Strategy involves far more than 

budgets. But budgets consume attention.

Even if the budget system could be used to make relevant cuts, political, institutional, bureaucratic, and other 

factors can lead to continuing obsolete weapons, forces, 

bases, and concepts, even though they are likely not the 

most effective way to accomplish the ends of grand strategy with the means available. As Carl Lieberman states, 

“Decrementalism tends to apply cuts broadly, but often 

fails to establish clear-cut priorities for reducing expenditures. Moreover, in a period of decremental spending, 

powerful political forces are likely to seek exemptions 

from proposed reductions for their preferred agencies or 

programs.”5 In the extreme, austerity may cause political leaders to scramble to preserve constituent interests, 

military officers to fight to protect pet projects, and decisionmakers to placate the demands of competing groups, 

leaving no one to focus on the security needs of the Nation. Consequently, during a period of austerity, when it 

is most important to maximize the effectiveness of each 

defense dollar, billions can be diverted to goals that may 

not provide the most effective contribution to national 

security. In austere times, this political reality has a bigger impact on the Nation’s strategy than in periods of 

budgetary growth.

Today’s Austerity

The austerity in national security spending is a 

function of a drawdown from the wars in Iraq and 

Figure 1. U.S. Federal Spending and Revenue as Percent of Gross Domestic Product
ndupress.ndu.edu SF No. 287 3 

Afghanistan, the need to reduce all parts of the budget to address the Federal fiscal crisis, and a concomitant reprioritization of effort to support a new, 

albeit incompletely defined, strategy. The fiscal crisis 

largely stems from the often polarizing and challenging 

national debate concerning the appropriate size of the 

Federal Government. This debate implicitly concerns the 

U.S. role in the world as well. As figure 1 shows, the gap 

between spending (top line) and tax revenue (bottom 

line) represents the deficit, which has averaged about 2 

percent of gross domestic product (GDP) during nonrecession years.6

 The deficit expands during recessions 

(with spending up to maintain government programs 

and revenues down as fewer workers are paying taxes) 

and shrinks as the economy grows, even achieving surpluses, as it did from 1998 to 2001. On average, prior to 

the 2008–2009 recession, the United States was taxed 

at about 18 to 19 percent and had nonrecession Federal 

spending averaging about 20 to 21 percent. While not 

ideal, this 2 percent fiscal gap was manageable.

With the 2008 recession, leaders of both of the major political parties took significant and unprecedented 

action with the American Recovery and Revitalization 

Act in February 2009. This “stimulus bill” authorized 

$787 billion (5.67 percent of GDP) for infrastructure 

spending, need-based aid, and tax expenditures, increasing government spending to 25 percent of GDP and reducing taxes to 15 percent of GDP. This exacerbated the 

national debt, which has now grown to over 100 percent 

of GDP for the first time since World War II.7

The fundamental question of means that confronts 

the Nation is on the right side of figure 1. The 2013–2023 

lines reflect the Congressional Budget Office (CBO) 

projection for the Federal budget, optimistically assuming there is no recession in the future. The gap between 

19 percent of GDP in revenue and 22–23 percent of 

GDP in spending cannot be sustained indefinitely. Consequently, there is substantial need to reduce all forms of 

spending, including defense spending. To make matters 

worse, increasing numbers of the baby boom generation 

are over 65, living longer, and receiving Social Security 

and growing Medicare benefits. 

Over the past 50 years, Federal Government spending has seen an increase in the size of the social safety 

net (entitlements) and decrease in defense. In 1960, for 

example, 52 percent of the Federal Budget was spent on 

national defense and 21  percent was spent on entitlement programs. Today, the roles have more than reversed 

with defense comprising just 18 percent of the Federal 

budget and entitlement spending totaling 60 percent of 

Figure 2. Components of U.S. Federal Spending
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the 2013 budget. Consequently, as reflected in figure 2, 

as Federal spending on defense is reduced, the growth 

in individual payments or government healthcare spending will likely—and rapidly—absorb any reductions in 

defense spending.

The United States has had this problem before—

in 1983—when the Nation was in a significant recession, Social Security was rapidly becoming bankrupt, 

and the national deficit and debt were approaching historically high peacetime levels. The difference was that 

political leaders, primarily Republican President Ronald Reagan and Democratic Speaker of the House Tip 

O’Neill, found a way to solve the fiscal crisis through 

compromise, facilitated by a commission headed by 

Alan Greenspan and bipartisan cooperation between 

Senators Patrick Moynihan and Robert Dole, which 

significantly reformed Social Security and extended its 

solvency by over 50 years. Reagan and O’Neill had to 

accept higher taxes, lower benefits, and other reforms, 

but they solved the problem.8

Unfortunately, the political environment today is 

characterized by extreme polarization, which significantly limits the chances for coherent strategic choices 

to enhance national security. Instead of compromise, 

national leaders narrowly averted a debt ceiling crisis 

with the Budget Control Act of 2011, which prescribed 

sequestration. Sequestration was viewed as so draconian 

and antistrategic that it would force political leaders to 

compromise, but it failed to do so. As a result, the Nation 

faced a “fiscal cliff ” in January 2013, delayed sequestration until March 1, and then allowed budget formulas 

instead of coherent policy to dictate Federal spending. 

The government shutdown and the difficulty in extending the debt ceiling in October 2013 reflect the continuing political paralysis in Washington. The Murray-Ryan 

Bipartisan Budget Conference Agreement in December 

2013 forestalls an immediate crisis in 2014, but does not 

provide substantial movement toward a comprehensive 

solution in the future.

Without a national consensus on the systemic budgetary challenges, cuts in defense programs will have 

little impact on the national fiscal crisis. If cutting an 

Army or Marine division might save $5 billion per year, 

such savings would represent merely $5 billion in entitlement reform that would not be done, tax revenues 

that would not be raised, or domestic programs that 

would not be cut.

Under these economic and political circumstances, 

what should be done with regard to force planning? 

First, defense leaders need to engage in a credible dialogue about austerity as part of a grand strategy that 

includes seeking fiscal balance. As defense spending 

is cut, those savings should be used for deficit reduction—that is, to improve the Nation’s fiscal position 

and not for other political priorities. Second, defense 

leaders should not only notice but also focus on other 

parts of government because of their effects on national 

security. Arguably one of the greatest threats to U.S. 

national security is the unchecked expansion of entitlements without commensurate revenues, which leads to 

increased Federal debt, retarded national growth, and 

further austerity. While some might argue the military 

should not comment on domestic programs or entitlement spending, it is not only appropriate, but it is also 

essential that leaders provide their best judgment about 

the impact of those programs on economic security and 

national defense. Finally, within this context, defense 

leaders still need to make strategic choices with regard 

to national security priorities.

Current Challenges

Strategy in an age of austerity must carefully consider current defense spending and the levels from 

which proposed reductions begin. First, the historical 

approach to DOD spending has been for the Army to 

receive roughly 25 percent of the defense budget, nearly 

consistently, for the past 60 years. The exceptions have 

occurred when Army spending—as a percent of the 

overall DOD budget—increases in support of combat 

operations during wartime. The fiscal year 2014 budget 

reflects that return to the 25 percent level, as shown 

in figure 3.9

 As sequestration was imposed, it affected 
ndupress.ndu.edu SF No. 287 5 

all DOD budget accounts, except military pay and a 

few other programs, with a proportional reduction of 

spending.10 It was certainly not a strategic decision on 

how best to take the cuts. It was the easiest, albeit least 

thoughtful, method of imposing across-the-board reductions of the defense budget.

Understandably, defense leaders thought that imposition of cuts through sequestration was the absence 

of a strategy, and Secretary of Defense Chuck Hagel 

directed DOD leaders to conduct a Strategic Choices 

and Management Review (SCMR) “to help ensure the 

Department of Defense is prepared in the face of unprecedented budget uncertainty . . . [and] to understand 

the impact of further budget reductions on the Department and develop options to deal with these additional 

cuts.”11 In addition to identifying specific management 

reforms, overhead reductions, and proposed reductions 

to military compensation, the SCMR identified, but 

did not decide between, two broad options going forward, each of which would represent a distinct strategic 

direction. Secretary Hagel outlined these options in the 

following way:

Approach one concentrates on technology and acquisition and trades size for high-end capability:

◆ The Army would be reduced from the 490,000 

currently planned to between 380,000 and 450,000 Active-duty Soldiers for the future force.

◆ The Navy would be reduced from 11 carriers to 8 

or 9 carriers.

◆ The Marine Corps would be reduced from 182,000 

to between 150,000 and 175,000 Active-duty troops.

◆ Modernization would continue, especially against 

antiaccess/area-denial threats with long-range strike, 

submarine cruise missiles, Joint Strike Fighters, and special operations forces. 

Approach two concentrates on force structure and 

trades high-end capability for size:

◆ The Army, Navy, and Marines would generally 

retain projected sizes to sustain capability for regional 

power projection and presence.

Figure 3. Service Budget Shares
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◆ Modernization programs would be canceled or curtailed, with slower growth to cyber and other programs.

◆ Defense writ large, in effect, would take a decadelong modernization holiday. 

Such decisions dictate strategy, as General Powell 

noted in 1989. While Secretary Hagel made no decision between these approaches, these kinds of choices 

illustrate substantial tradeoffs among defense priorities and imply the Nation’s strategy. Either approach 

would be substantially different from the current cuts 

and represent a fundamental strategic choice. Mark 

Gunzinger of the Center for Strategic and Budgetary 

Assessments argues that the 1993 Bottom Up Review 

was “the last time the Pentagon created a new vision 

for how the U.S. military should prepare to meet the 

nation’s security challenges.”12 If adopted, either of the 

SCMR’s fundamental approaches would have a similar strategic impact on national defense to that of the 

1993 Bottom Up Review, which provided the general 

vision for DOD force planning over the past 20 years.

 For those looking for a strategic choice, the Quadrennial Defense Review (QDR) 2014 was disappointing. Instead of articulating a clear choice, it made the 

force smaller overall and emphasized the calamitous 

impact of continuing sequestration-level cuts. In an 

uncharacteristically blunt section of the QDR titled 

“Implications and Risks of Sequestration-Level Cuts,” 

the report concludes:

The return of sequestration-level cuts in FY2016 

[the current law] would significantly reduce 

the Department’s ability to fully implement our 

strategy. . . . [R]isks associated with conducting 

military operations would rise substantially. Our 

military would be unbalanced and eventually too 

small and insufficiently modern to meet the needs 

of our strategy, leading to greater risk of longer 

wars with higher casualties. . . . Ultimately, 

continued sequestration-level cuts would likely 

embolden our adversaries and undermine the 

confidence of our allies.13

In the QDR, DOD has forestalled making fundamental 

strategic choices and instead has declared to Congress 

and the public that if we follow the current law, we will 

have longer wars, more casualties, emboldened adversaries, and undermined confidence in our nation’s security. 

This statement of the consequences of budget decisions 

Figure 4. Annual Changes in Spending Components
ndupress.ndu.edu SF No. 287 7 

made without considerations of strategy could hardly be 

clearer. It appears to be falling on deaf ears.

When the Nation eventually does make a strategic 

choice, it is worth noting from a budgetary standpoint 

that approach two described by Secretary Hagel is more 

consistent with most of the defense decisions that have 

been made by the United States in previous postwar periods. The need for military engagement in the world 

as either a global superpower or the leader of the West 

during the Cold War has meant that procurement budgets either rose or fell much more rapidly than the overall defense budget (see figure 4) as Services relied less 

on always replacing the latest equipment. Instead they 

continued research and development and then procured 

equipment if and when funding became available.14

The contrast is clear as the procurement line in figure 4 

(dashed line) has much greater annual fluctuations (both 

up and down) than either the defense budget as a whole 

(red line) or military personnel spending (black line). 

Since it is unlikely that the Armed Forces will confront 

a technologically superior military competitor in the 

next decade, deferring fleet-wide procurement of new 

technology may be the best way to allocate scarce funding in the near future.

The best example of deferring modernization was the 

Army during the 1970s, which maintained its force structure of 16 divisions and 770,000 Soldiers, but had little 

money for modernization. General Creighton Abrams, 

Chief of Staff of the Army at the time, put the Army’s 

limited research and development funding into the “Big 

Five” weapon systems: the Abrams tank, Bradley fighting vehicle, Blackhawk and Apache helicopters, and Patriot missile. He also streamlined Army organizations, 

improved acquisition practices, and revitalized training. 

Then, when funding was available in the 1980s, procurement could be increased to provide the basic systems that 

remain the mainstay of the Service today. Some investment in research and development as a hedge against 

technological surprises is appropriate, but during this 

period of strategic uncertainty and fiscal austerity, largescale procurement should not be funded at the expense of 

forces that can shape the current international environment. And, as Russian expansionism shows, the international environment is neither static nor unthreatening.

Strategy and force planning concepts are fundamentally different in a time of austerity because the defense 

budgeting process that may work with spending increases 

has significant problems executing budget reductions. To 

make strategic choices effectively, leaders must understand the context of their decisions, which includes the 

current U.S. fiscal and political circumstances that make 

strategic planning extremely difficult. As a result, the absence of strategy was implemented through the sequestration cuts imposed by the Budget Control Act of 2011, 

which reduced spending across the board. There remains 

a chance for coherent strategic choices, and the Department of Defense has identified fundamental choices in 

the Strategic Choices and Management Review. But, so 

far, DOD has avoided making those choices in the 2014 

QDR, preferring to wait until there is greater relief from 

sequestration-imposed austerity. If a strategic choice is 

made, it may help resolve the connection between ends, 

ways, and means and be an important step forward in developing an effective U.S. grand strategy.

Notes 1

 Colin Powell, “The Changing Foreign Policy Environment,” 

lecture to the Woodrow Wilson School at Princeton University, February 13, 1989.

2

 For further insights into decremental spending, see Michael 

J. Meese, “Defense Decision Making Under Budget Stringency: 

Explaining Downsizing in the United States Army” (Ph.D. diss., 

Princeton University, 2000).

3

 Of the 49 years of growth, over half (32) included real 

(inflation-adjusted) growth and 17 included nominal growth. Calculations based on Department of Defense (DOD) Comptroller, National 

Defense Budget Estimates for FY 2014 (Green Book) (Washington, DC: 

DOD, May 2013), table 6-1, recording changes in Total Obligational 

Authority from fiscal years 1948 to 2013.

4

 Allen Schick, “Incremental Budgeting in a Decremental Age,” 

Policy Sciences 16 (September 1983), 1–25.

5

 Carl Lieberman, Making Economic Policy (Englewood Cliffs, NJ: 

Prentice-Hall, 1991), 19.

6

 Calculations based on data from Council of Economic Advisors, Economic Report of the President (Washington, DC: Government 

Printing Office, 2013), tables B-80 and B-1 for fiscal years 1970–2013 

(hereafter EROP); and Congressional Budget Office (CBO), Budget 
8 SF No. 287 ndupress.ndu.edu

The Center for Strategic Research (CSR) within the 

Institute for National Strategic Studies provides advice to 

the Secretary of Defense, Chairman of the Joint Chiefs of 

Staff, and unified combatant commands through studies, 

reports, briefings, and memoranda. The center conducts 

directed research and analysis in the areas of strategic 

and regional studies and engages in independent and 

leading-edge research and analysis in related areas.

The Strategic Forum series presents original research 

by members of NDU as well as other scholars and 

specialists in national security affairs from the United 

States and abroad. The opinions, conclusions, and recommendations expressed or implied within are those of the 

contributors and do not necessarily reflect the views of the 

Defense Department or any other agency of the Federal 

Government. Visit NDU Press online at ndupress.ndu.edu.

William T. Eliason

Director

NDU Press

Institute for National Strategic Studies

R.D. Hooker, Jr.

Director for Research 

and Strategic Support

Nicholas Rostow 

Senior Director

CSR

Projections—February 2013 Baseline Projections (Washington, DC: 

CBO, February 5, 2013), table 1.

7

 Calculations based on EROP, table B-79. The 2013 national 

debt is projected to be $16.7 trillion, which is 107.7 percent of gross 

domestic product (GDP). Of this total, $11.9 trillion (77.5 percent of 

GDP) is debt held by the public, and the balance is the portion of debt 

held by government agencies (such as trust funds).

8

 See Robert G. Penner, “The Greenspan Commission and the 

Social Security Reforms of 1983,” in Triumphs and Tragedies of the 

Modern Presidency: Seventy-Six Case Studies in Presidential Leadership, ed. David Abshire (Westport, CT: Praeger, 2001), available at 

<www.thepresidency.org/storage/documents/Greenspan_Commission_and_Social_Security_Reforms.pdf>.

9

 Calculations based on DOD Comptroller, table 6-13.

10 Sequestration could have also affected military pay, but 

President Barack Obama chose to exempt military personnel from the 

automatic reductions for both fiscal years 2013 and 2014. See Andrew 

Tilghman, “Military Pay to Be Exempt from Sequestration in 2014,” 

Army Times, August 9, 2013.

11 See “Statement on Strategic Choices and Management Review 

as delivered by Secretary of Defense Chuck Hagel, Pentagon Press 

Briefing Room, Wednesday, July 31, 2013,” available at <www.defense.

gov/Speeches/Speech.aspx?SpeechID=1798>.

12 Mark Gunzinger, Shaping America’s Future Military: Toward a 

New Force Planning Construct (Washington, DC: Center for Strategic 

and Budgetary Assessments, 2013), ii.

13 Quadrennial Defense Review 2014 (Washington, DC: DOD, 

2014), 53.

14 Calculations based on DOD Comptroller, table 6-8.