12 May 2016

*** Overseas Contingency Operations (OCO) and the Uncertain Cost of U.S. Wars

MAY 10, 2016

The United States has been involved in some form of warfare or conflict for most of the period since 1941, and has been continuously at war since September 11, 2001—nearly a decade and a half. The United States has never, however, come to grips with the reality of its involvement in such conflicts. Its official reporting on each conflict has been erratic at best, and has never really addressed the details of the cost of its wars, nor has it ever really addressed its strategies or how they were intended to be implemented. Furthermore, official U.S. reporting has not provided net assessments of the forces involved, nor has it provided a clear picture of the effectiveness of its military and civil efforts.

A new study by the Burke Chair at CSIS examines the cost of U.S. fighting in Afghanistan, Iraq, Syria, and other “wars” related to terrorism and extremism as it is reported in U.S. budget data on Overseas Contingency Operations. This study is entitled Overseas Contingency Operations (OCO) and the Uncertain Cost of U.S. Wars, and is available on the CSIS web site athttp://csis.org/files/publication/160510_OCO_US_Wars.pdf.

The study puts these cost estimates in the broader context of estimates of the past cost of U.S. wars, the relative size of U.S. military efforts compared to other powers, the overall burden that military spending puts on the U.S. economy, and how spending on U.S. wars compares to the overall levels of spending on defense. It shows that:
The cost of U.S. wars since 2001 has been substantial, and has been high relative to past limited U.S. wars as measured in constant dollars.

The United States still dominates global military spending in spite of recent cuts in U.S. spending, and spending on war has been a comparatively small part of that expenditure.

Both spending on war and total defense spending have steadily dropped as a burden on the U.S. economy in spite of the comparatively high cost of recent U.S. wars, and a steadily rising U.S. deficit and debt have been – and will be – driven by federal spending on civil 
entitlement programs like Social Security and medical programs.

Drawing on work by Amy Belasco of the Congressional Research Service, estimates that the total military and civil cost of Overseas Contingency Operations (OCO) in the Afghan War rose to $686 billion in FY2001/2002 to FY2015. These costs have dropped sharply since the United States withdrew most forces in 2014. Meaningful data are lacking on non-Defense OCO spending, but the planned Department of Defense portion of OCO spending has since risen by a total of some $83 billion in FY2016 and FY2017. This brings the direct cost of the Afghan war to a total of some $770 billion through FY2017.

The total military and civil cost of the wars in Iraq and Syria reached $815 billion in FY2001/2002 to FY2015. The OCO defense-only cost of returning to Iraq and the Syria conflict is reported to be $14 billion from FY2016 through FY2017. This raises the total cost to $778 billion, but these costs would almost certainly be over $790 billion if meaningful reporting were available on the civil portion of U.S. spending, including humanitarian aid.

These spending totals are not tied to any meaningful breakout of the size of the U.S military effort, and the full nature of U.S. support to Afghan, Iraqi, and U.S. forces. The cuts in U.S. military support have, however, been far sharper than the total cuts in OCO spending, and raise serious questions as to the adequacy of these efforts in allowing Afghan, Iraqi, and Syrian rebel forces to win.

Total civil and military OCO spending includes a wide range of additional efforts that include other fighting against terrorists and extremists, but also a wide range of other poorly defined programs. The civil costs of OCO efforts were $9 billion in FY2015, $15 billion in FY2016, and $15 billion in FY2017. The military costs were $64 billion in FY2015, $59 billion in FY2016, and $59 billion in FY2017. The totals were $73 billion in FY2015, $74 billion in FY2016, and $74 billion in FY2017.

The public reporting on OCO spending and budget is so limited, contradictory, and poorly defined that these estimates are questionable even as estimates of direct OCO costs. They often seem to include costs unrelated to the wars and they do not include the longer-term costs of military medical and pension payments coming out of the war, the full costs of replace combat equipment losses, and other costs. They also do not include politicized efforts to exaggerate war costs like opportunity costs.

There are no meaningful Executive Branch projections of OCO costs beyond FY2017. The data reported is little more than meaningful placeholder or straightline projection. More broadly, even baseline defense data through FY2021 seems unrelated to any meaningful Future Year Defense Plan or Program Budget. The projections that are available make no allowance for continued or new U.S. wars, and seem more of an effort to game limited increases in the Budget Control Act levels of spending than anything approaching real plans.

None of the previous costs include the full range of costs in the “war on terrorism,” which would have to include total cost of at least the federal portion of homeland security. An analysis by OMB shows that they totaled—or are planned to total—$71.8 billion in FY2015, $71.7 billion in FY2016, and $70.5 billion in FY2017.The OMB analysis indicates that many of these Homeland Defense costs are totally unrelated to Homeland defense, and consist largely of efforts to fund unrelated programs under the guise of the “war” on terrorism. OMB estimates that the portion being spent on “preventing and disrupting terrorist attacks” is only $41.5 billion in FY2015, $36.6 billion in FY2016, and $36.6 billion in FY2017.

If the total Homeland Defense budget is added to the total OCO budget, however, the total cost of U.S. wars rises to $144.8 billion in FY2015, $145.7 billion in FY2016, and $144.5 billion in FY2017.

The data supporting these conclusions are laid out in detail in the report, as are the source materials from which each table and graph is drawn. It is critical to note that the source material contained long warnings and explanation about the limits to the data and its uncertainty that would more than triple the length of the report if they were fully quoted. The reader should be aware that official U.S. reporting is anything but reliable and transparent, and sometimes borders on dysfunctional rubbish.

Fifteen Years of War Without Effective Official U.S. Reporting

The Department of Defense has issued reports on the conduct of the Iraq and Afghan Wars, and these have at some point covered the civil side of the conflicts. These reports have, however, always been retrospective, have never provided a clear picture of U.S. strategy, and have often failed to report negative developments in depth. The Iraq reports ended with the withdrawal of U.S. combat troops in 2011, and the Afghan reports have had increasingly limited detail and increasingly ignored negative developments, and failed to provide a clear picture of the overall course of the insurgency.

(For an example of the DoD report see Enhancing Stability and Security in Afghanistan, December 2015,http://www.defense.gov/Portals/1/Documents/pubs/1225_Report_Dec_2015_-_F... . The closes thing to a U.S. official report on the current Iraq and Syria wars is a site on the Department of Defense web page’s lit of top issues called Target Operations Against ISIL Targets,http://www.defense.gov/Portals/1/Documents/pubs/1225_Report_Dec_2015_-_F... . Interestingly, the afghan War is no longer a “top issue” and has been dropped from the list.)

The U.S. has established Lead Inspector General reports on the Afghan conflict (Operation Freedom’s Sentinel) and Iraq and Syria Conflicts (Operation Inherent Resolve) that attempt to integrate the views of the inspector generals from the Department of Defense, State, and USAID. These reports have slowly improved over time, but still focus on audits more than strategy and the course of the conflict, and provide little insight into the nature or effectiveness of U.S. and allied civil and military efforts.

Much of the rest of official U.S. reporting has consisted of press briefings on the immediate combat situation. These have provided some insight into the immediate course of the war, but—like the data on the Department of Defense website—they have often consisted of “spin” designed to justify the conflict and provide a favorable picture of U.S. and allied military efforts.

The U.S. Congress has held repeated hearings on the wars and strategy, but they have been largely political efforts focusing only on the broadest trends and aspects of strategy. They have had little substantive data, and have failed to examine the details of how strategy is being implemented, the cost-effectiveness of U.S. efforts, or net assessments of the course of the war.

Congress has established Special Inspector General’s for the Iraq and Afghan conflicts, but the Special Inspector General for Iraq (SIGIR) ceased to function after U.S. forces withdrew in 2011. Reporting by the Special Inspector General for Afghanistan (SIGAR) reporting has often provided major insights into the course of the war, the development of Afghan forces, and the effectiveness of given military and civil aid programs. SIGAR’s mandate, however, focuses on auditing U.S. military and civil aid to Afghanistan, and only indirectly on the overall conduct of the war.

(For the latest SIGAR report on the Afghan War, see April 30, 2016 Quarterly Report to Congress,https://www.sigar.mil/quarterlyreports/.

In spite of its mandate to examine and control the federal budget and spending, Congress has never publically focused on the steadily rising cost of given conflicts. The one major exception has been the work of Amy Belasco of the Congressional Research Service, who has attempted to cost the Afghan and Iraq Wars on the basis of the budgets for U.S. Overseas Contingency Operations Reports. These studies provide the core of official U.S. reporting on the cost of the wars through FY2014, but have not been regularly updated, and—as Ms. Belasco makes clear in her reports—face limits because of major limits and uncertainties in the official data.

(For the most recent publically available report by Ms. Belasco, seeThe Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, December 8, 2014,https://www.fas.org/sgp/crs/natsec/RL33110.pdf. )

The Cost of Past Wars

There is no agreed estimate of the cost of past wars, and no official Department of Defense estimate of such costs. The best generally available data seem to come from work by Stephen Daggett of the Congressional Research Service, which is often quoted by Department of Defense speakers.

(This publication is entitled Costs of Major U.S. Wars, is dated June 10, 2010, and is available on the web athttps://www.fas.org/sgp/crs/natsec/RS22926.pdf.)
Figures One to Three show the costs of wars before World War One. These wars took place when America was a radically different nation in every way, and it is important to note that these estimate do not include irregular wars between the United States Government and Native Americans. The civil war is the only war reflecting a massive U.S. effort, and one that placed a meaningful burden on the U.S. economy.

Figures Four to Six display recent and current wars, and displays a more accurate and relevant impact on the U.S. economy. These figures show that World War Two came as close to total war as the U.S. has ever come, although the percentages of economic effort must be strikingly lower than those of other major combatants.

The key message in these tables, however, is that the growth of the U.S. economy has steadily reduced the burden that limited wars are likely to place upon it.

The figure for the peak impact of the Iraq War only amounts to some one percent of the U.S. GDP. A cost of $784 billion in constant FY2011 dollars from FY2002 to FY2011 is still a massive amount of money, but it scarcely represented a critical burden on the U.S. economy, and—as the following Figures show—these costs have become far smaller now that the United States relies on air power and limited train and assist missions on the ground, rather than deploying major combat forces.

War and Defense Costs Relative to Other Powers

The limited cuts in U.S. baseline defense spending, cutbacks in military manpower to FY2000 levels, and the broader impact of the Budget Control Act have led to a number of commentaries about the decline in U.S. military power. Military spending does not necessarily buy power or war fighting capability. Military spending can buy waste and mistakes.

In broad terms, however, U.S. military spending is probably not less efficient that that of any other significant military power. The following figures use data from the International Institute of Strategic Studies (IISS) and Stockholm International Peace Research Institute (SIPRI) to show how U.S. military efforts compare to other leading powers, and they scarcely send message about American decline:
Figure Seven shows that the United States retains a massive lead in total military spending over its major rivals China and Russia, and that its key allies make major military efforts as well.

Figure Eight shows that the United States accounts for over a third of all global military spending. Its percentage is three to four times that of China and more than eight times that of Russia. Once again, U.S. allies make up a major portion of global military spending,

Figure Nine compares the fifteen largest spenders on military forces in the world in terms of their military spending as a percent of GDP. The United States is not on the list, and several U.S. allies are.

It is important to note that figures show that total U.S. military spending is now well under 4% of GDP and that the peak cost of all OCO spending was never more than a fraction of total U.S. military spending. The costs of projecting power in combat remain serious, but they have not dominated U.S. military efforts, have dropped sharply in recent years, and have always remained a relatively low proportion of total U.S. military spending.

The Declining (?) Burden of Defense Spending on the Economy

The political rhetoric surrounding military spending, budget debates, and given programs often leads to misleading statements about the impact of total military spending—which sometimes is conflated with the cost of war fighting.
Figure Ten shows a Congressional Budget Office (CBO) projection of the total trends in U.S. federal spending from FY2015 to FY2026. Such estimates are inherently uncertain, but the CBO has a better track record than most. Barring a major new war, it is mandatory retirement and medical spending (costs like Social Security and Medicare/Affordable Care Act) that will dominate federal spending and the continuing rises in the deficit and debt costs.

Figure Eleven breaks these costs out in more detail at key intervals from FY1966 to FY2026. U.S. military spending drops from 7.5% of the GDP in FY1966—near the peak of the Cold War and Vietnam—to 5.2% in FY1991 (just as the Cold War ended), only 3.2% in 2016, and an even smaller 2.6% in 2026. Other discretionary spending drops from 4.0% of the GDP in FY1966 to 3.5% in FY1991, 3.4% in 2016, and only 2.6% in 2026.

In contrast, Federal Spending on Social Security rises from 2.6% of the GDP in FY1966 to 4.4% in FY1991, 4.9% in 2016, and 5.9% in 2026. In contrast, Federal Spending on major health care programs rises from 0.1% of the GDP in FY1966 to 2.5% in FY1991, 5.5% in 2016, and 6.5% in 2026.

Health programs alone will rise from near zero in 1966 to well over twice the level of total military spending in FY2026, and neither the debt or deficit problems will have been addressed.
Figure Twelve highlights the CBO projection of the impact of U.S. military and OCO spending in the GDP. It shows that the recent costs of war have only had a minor impact on the economy relative to the rising cost of mandatory civil programs, and that both the OCO and other U.S. defense costs have dropped sharply since FY2010.

Figures Thirteen to Fifteen provide an OMB forecast of total federal budget spending in both budget authority and outlays by function for FY2015 to FY2021. They all project a continued major U.S. national security effort, but again they illustrate that the rising costs of federal programs will be in mandatory civil programs. This is highlighted in the constant dollar data shown in Figure Fourteen.

Figure Sixteen compares U.S. regular or “baseline” military spending with OCO spending, and the potential impact of the Budget Control Act (which does not limit OCO spending per se). It again highlights the limited impact of OCO spending, but it also warns that current projections assume a virtual end to today’s wars and no new OCO contingencies. Given the fact the United States has been at war most of the time since 1941, such assumptions have obvious problems.

Figure Seventeen shows the same data, but also spending by major category within the baseline levels. It warns that, quite aside from wartime or OCO spending, the cost of O&M, military personnel, RDTE&E and procurement all continue to rise sharply in constant dollars. This reflects the fact that the efforts to reduce cost and increase efficiency in the rest of U.S. defense spending have had an impact in selected areas, but little overall macro impact on U.S. military spending.

Afghanistan, Iraq, and Other Overseas Contingency Operations (OCO): 
FY2001 to FY2015

Turning to detailed estimates of OCO spending, it is possible to make estimates of both the total cost of OCO efforts and of individual wars.
Figure Eighteen compares the past and projected cost of all OCO efforts from FY2001 (which end roughly at the time of 9/11) to FY2017. It shows that OCO or equivalent spending rose from only $29 billion in FY2011 to a peak of $691 billion in FY2010 – when it was roughly 24% of all military spending. It has since dropped to $59 billion in FY2016 and FY2017 – or roughly 10% of total U.S. Military spending.

Figure Nineteen draws upon the work of Amy Belasco to analyze the constant of total OCO civil and military spending from FY2001to FY2015. It is important to read the text and the end of this section citing the limits to such estimates.

At the same time, Figure Nineteen is almost certainly correct in showing that concerns over spending on “nation building” have been exaggerated. State Department and USAID spending were heavily impact by security and facility costs, but still only amount to a total of $93 billion during the period, or 6% of the total of military spending. The military did spend some money on protecting aid workers and local aid projects, but much of its was civil spending in direct support of tactical operation and not on nation building. Given the fact that all current U.S. wars have had a major civil and counterinsurgency dimension, the U.S has—if anything—sharply underfunded the civil effort necessary to bring security and stability.
Figure Twenty covers the same time periods and shows how money was allocated by war. It indicates that the cumulative cost of the fighting in Iraq was $815 billion as of FY2015, and the same cost for Afghanistan was $686 billion. This totals $1.5 trillion. The other $27 billion for other contingencies, and $81 billion for “other” is often included in the cost of the two wars to get a $1.6 trillion total, but is not justified by Ms. Belasco’s analysis.

As later Figures show, the funding of both wars also include substantial other costs that were not directly related to either war. There is no public basis for estimating how many unrelated activities and expenditures were include in the totals for each war.
Figure Twenty–One shows an estimate of actual and planned U.S. force levels as of 2014. A close comparison of force levels to spending levels raises major questions about how resources were being spent, questions reinforced in detail by the SIGIR and SIGAR studies of the funding patterns by other major program and activity – which reflect constant program turbulence and instability, a lack of proper oversight and effectiveness measures, and delays in creating Iraqi and Afghan forces relative to U.S. planned withdrawals.

The President’s May 2014 plan for withdrawing U.S. forces from Afghanistan has since had to be delayed, but illustrates the degree to which U.S. plans and actions could become decoupled from real world OCO spending levels and military conditions on the ground.
Figure Twenty-Two shows the broader U.S. deployments in the Gulf region from 2000 to 2014. It illustrates the fact that the United States scarcely withdrew from the Gulf as it withdrew from Iraq. It also, however, raises questions about how many of the total U.S. forces in the region that were not directly involved in war fighting—and whose main function was to deter Iran and aid U.S. allies—had costs that became included in the OCO accounts.

The Delphic Mysteries of the FY2017 Overseas Contingency Operations (OCO): 
Budget Request

The various budget justifications of the request for OCO funding in FY2017 make up a significant amount of the request by the military services and the various Departments. The State Department/USAID request provides a host of small line item requests that add up to an unintelligible mess. The publically available data by the Department of Defense lacks consistency, does not really account for spending by war, and often has no practical value in explaining the rationale for the request.

These issues have been examined in detail in a separate Burke Chair study entitledThe FY2016 Defense Budget and US Strategy: Key Trends and Data Points, which is available on the CSIS web site athttp://csis.org/files/publication/150306_FY2016.pdf.

Even a cursory look at the budget requirements and related data, however, raises critical questions as to whether the data made public are accurate or relevant and whether the Congress is exercising any real review of the material that the Departments of Defense and State, and OMB, are sending to it.
Figure Twenty-Three provides a range of estimates of the cost of wars through FY2017 using a mix of data from the Belasco study, the Department of Defense and material provided by OMB. The only figures for FY2001-FY2017 that inspire any degree of confidence are the total Office of Civil Defense (OCD) data for the Department of Defense. Key data are missing or contradictory for all of the other categories, and while the data by war may be in the right ballpark, these data can be compiled from other sources to produce significantly different estimates. The fact is that there is no accurate way to cost given wars on the basis of unclassified data.

The CBO assessments of the shifts in FY2016 OCO accounts that follow Figure Twenty-Three illustrate the fact that continuing expenditure changes have been made after the budget request is made in any given year.
Figure 24 provides a more detailed breakout by war and mission in the Department of Defense’s FY2017 OCO budget request. It is clear from the text, however, that the total for the Afghanistan conflict is loaded with substantial spending that is not tied to the Afghan war. At the same time, some of this money almost certainly is needed to pay for operations in Iraq and Syria.

This OCO breakout also makes specific funding references to the European Reassurance Fund ($3.4 billion), Counterterrorism Partnership Fund ($1.0 billion, increases in counterterrorism activities in Africa ($0.2 billion), and Base to OCO requirements ($5.0 billion) that are not really explained or justified in the unclassified budget request data.
Figure 25 illustrates the fact that much of the other breakout data on OCD spending consists of largely useless data on spending by service or major category of line item input budget data like O&M, manpower procurement, etc. that is almost meaningless when applied to the entire OCO account.

Meaningless Projections of Overseas Contingency Operations (OCO) Spending

The Department of Defense has effectively stopped providing meaningful public program budget, Future Year Defense Program, and Net Assessment data. The DoD’s budget projections seem dictated largely by exploring the limits of Congressional tolerance in raising the levels in the Budget Control Act.

While the Department of Defense does outline a wide range of strategic issues and options in its budgets requests, these almost never provide any specifics as to how they will be implemented and funded. Like the Quadrennial Defense Review, strategy is all concept and no substance.
Figure 26 quotes a Department of Defense explanation of total and OCO spending from FY2018 onwards that makes the aforementioned statement all too clear.

Figure 27 provides an OMB projection of future defense spending that shows no OCO estimate or plan beyond FY2017 other than “placeholder” guesstimates, while providing yet another set of figures for non-defense OCO spending in FY2017.

Figure 28 provides a Department of Defense “Greenbook” estimate that show OCO data for FY2018 through FY2021, but again notes these are largely meaningless “placeholder” figures – this time will both BA and BO totals that do not seem to track with each other.

Figure 29 reinforces the extent to which planning seems to be dictated by the Budget Control Act and not by U.S. national security requirements.

OCO “Mystery Money” With Too Few Forces to Win?

These problems would be less important if it was clear that the budget funded military efforts capable of winning. The history of U.S. military efforts in Iraq and Syria since early 2014, however, has been a process of grindingly slow incremental increases in military effort that have consistently fallen short of the requirements revealed by the progress in the course of the fighting.

The situation in Afghanistan has been far worse. The President’s decision in 2014 that U.S. forces should leave the country has now had to be repeatedly slipped without any clear indication that the combination of the U.S. train and assist mission, use of Special Forces, and use of U.S. airpower is capable of winning.

These issues are explored in more depth in Costs of Major U.S. Wars, is dated June 10, 2010, which available on the web atThe FY2016 Defense Budget and US Strategy: Key Trends and Data Points, which is available on the CSIS web site at http://csis.org/files/publication/150306_FY2016.pdf .
Figure 30 , however, highlights some of the issues involved. First, it is unclear how this breakout of OCO spending can track with the breakout in Figure 24.

Second, the levels for the train and equip funds and ASFF seem too low for the level of combat in Afghanistan, Iraq, and Syria, and do not reflect the growing financial pressures on either Afghanistan or Iraq.
Figure 31 compares the trend in spending with the trend in OCO troop levels. It again highlights the rapid cuts in the manpower for train and assist efforts, although the President seems to have now authorized higher levels, and the levels shown disguise the fact that military personnel on limited tours of duty and physically stationed outside the country where fighting is occurring do not seem to be counted. The “fun with numbers” may disguise the number of “boots on the ground” but makes it difficult to determine what level of resources are really being provided, and no unclassified breakout by function is available.

Figure 32 provides more detail on recent and projected force levels, but raises two key issues. The totals for in theater support and in CONUS total some 71,678 military personnel for FY2017. The military in country total 9,767. This is a tooth to tail ratio of rough 8:1 in favor of outside support. It also does not seem to track with either Figure 30 or Figure 31.

Figure 33 and Figure 34 provide SIGAR data on the size of the U.S. aid efforts in Afghanistan. These spending data do not seem to track with the data in the OCO budget accounts whether in terms of numbers or in major function. They are yet another level of uncertainty to the OCO estimates.

The Other “War”: Homeland Defense

Finally, Figure 35, Figure 36, and Figure 37 show that there is another form of “war” that consumes major assets: The “war” against terrorism that is part of Homeland defense.

None of the previous OCO costs include the full range of costs in the “war on terrorism,” which would have to include total cost of at least the federal portion of Homeland Security.Figure 35 and Figure 36 show that these costs now exceed the total cost of U.S. wars overseas. An analysis by OMB shows that they totaled or are planned to total $71.8 billion in FY2015, $71.7 billion in FY2016, and $70.5 billion in FY2017.

The OMB analysis in Figure 36 indicates that many of these Homeland Defense costs are totally unrelated to Homeland defense and consist largely of efforts to fund unrelated programs under the guise of the “war” on terrorism. Figure 37 shows that the portion that OMB estimates is being spent on “preventing and disrupting terrorist attacks” is only $41.5 billion in FY2015, $36.6 billion in FY2016, and $36.6 billion in FY2017.

If the total Homeland Defense budget is added to the total OCO budget, however, the cost of U.S. wars rises to $144.8 billion in FY2015, $145.7 billion in FY2016, and $144.5 billion in FY2017.

No comments: