Testimony

The High Cost of NATO Expansion

By Ivan Eland
October 28, 1997
Committee on Foreign Relations
United States Senate

MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE, I AM PLEASED TO BE HERE TODAY TO TALK ABOUT THE REAL COSTS OF NATO EXPANSION. WHEN I WAS AT THE CONGRESSIONAL BUDGET OFFICE, I WROTE ITS COST STUDY ON NATO EXPANSION. I HAVE RECENTLY MOVED TO THE CATO INSTITUTE. THE CATO POLICY ANALYSIS THAT I AM SUBMITTING FOR THE HEARING RECORD PROVIDES A DETAILED CRITIQUE OF THE ADMINISTRATION’S COST ESTIMATE AND MAKES THE ORIGINAL CBO COST ANALYSIS DIRECTLY COMPARABLE TO IT.

I BELIEVE THE UNITED STATES WILL PAY A LARGE SHARE OF THE EXPENSES FOR EXPANSION, EITHER NOW OR LATER. AND U.S. COSTS WILL BE AT LEAST THREE TO FIVE TIMES AS GREAT AS THE ADMINISTRATION CLAIMS.

UNDER THE ADMINISTRATION’S DEFENSE CONCEPT OF PROJECTING FOUR DIVISIONS AND SIX WINGS EASTWARD TO REINFORCE THESE NATIONS IN TIME OF CRISIS, I PROJECT U.S. COSTS TO BE AT LEAST $7 BILLION, COMPARED WITH THE ADMINISTRATION’S $1.5 TO $2 BILLION ESTIMATE. THE WORDS “AT LEAST” ARE VERY IMPORTANT BECAUSE I BELIEVE, BASED ON MY WORK AT CBO, THAT THE $7 BILLION IS A CONSERVATIVE ESTIMATE. IF THE POTENTIAL NEW MEMBERS CANNOT AFFORD ALL OF THE $34 BILLION THAT WILL BE THEIR RESPONSIBLITY, U.S. EXPENSES COULD INCREASE DRAMATICALLY.

POTENTIAL NEW MEMBERS WILL PROBABLY BE UNWILLING AND UNABLE TO PAY THE $34 BILLION. THAT SUM AMOUNTS TO ROUGHLY A 60% INCREASE IN THEIR COLLECTIVE DEFENSE BUDGETS AT A TIME WHEN THEIR ECONOMIES ARE IN TRANSISTION. ALSO, BECAUSE THESE NATIONS REALIZE THAT PRESIDENT CLINTON HAS STAKED HIS PRESTIGE ON NATO EXPANSION AND IS UNLIKELY TO RETRACT THE OFFER, WE HAVE LOST MUCH OF OUR LEVERAGE IN GETTING THEM TO PAY A SIGNIFICANT AMOUNT. POLLS INDICATE THAT THEIR POPULATIONS DON’T WANT TO INCREASE DEFENSE SPENDING.

THE UNITED STATES IS LIKELY TO GET STUCK PICKING UP THE TAB FOR NEW MEMBERS BECAUSE KEY NATO ALLIES - SUCH AS FRANCE AND GERMANY - HAVE ALREADY INDICATED THAT THEY WILL NOT PAY MORE THAN THEY ARE NOW.

I AM ALWAYS STRUCK WHEN PEOPLE SAY, “I SUPPORT EXPANSION, BUT WE MUST MAKE OUR ALLIES PAY THEIR FAIR SHARE.” WELL, THEY ARE NOT GOING TO!!! EVEN DURING THE COLD WAR, WHEN THE SOVIET THREAT WAS SEVERE, WE COMPLAINED THAT OUR EUROPEAN ALLIES WERE NOT PAYING THEIR FAIR SHARE. I HAD ONE AIR FORCE GENERAL SAY TO ME ONCE, “AS LONG AS WE CARE MORE ABOUT EUROPEAN SECURITY THAN THE EUROPEANS DO, THEY WON’T PAY UP.” IN THE POST-COLD WAR WORLD, THEY WILL BE EVEN LESS LIKELY TO PAY UP. THE THREAT IS DRASTICALLY REDUCED, THE EUROPEANS ARE UNDER PRESSURE TO LOWER GOVERNMENT SPENDING FOR THE EMU, AND NATO EXPANSION WAS OUR IDEA. THEY WILL SAY AND ARE SAYING, “YOU PAY FOR IT.”

OF COURSE, SOME PEOPLE HAVE SUGGESTED PRIVATELY THAT WE SHOULDN’T WORRY THAT NOBODY WILL PAY FOR EXPANSION, BECAUSE WE CAN SKIMP ON MILITARY IMPROVEMENTS. AFTER ALL, THE THREAT ENVIRONMENT IS CURRENTLY RELATIVELY BENIGN. WE MUST CONSIDER WHAT WILL HAPPEN IF SOME YEARS DOWN THE ROAD A SIGNIFICANT THREAT APPEARS. AND I’M NOT TALKING ABOUT A RESURGENT RUSSIA. LET’S SAY SERBIA ATTACKS HUNGARY OR BELARUS BECOMES A PROBLEM FOR POLAND. IF EUROPEAN FORCES HAVE NOT BEEN AUGMENTED TO PROJECT POWER AND NEW MEMBERS’ FORCES AND INFRASTRUCTURE ARE STILL INADEQUATE, THERE IS ONLY ONE PLACE TO TURN.

THE UNITED STATES, OF COURSE. IT IS THE ONLY NATION WITH POTENT FORCES THAT HAVE THE TACTICAL AND STRATEGIC MOBILITY TO GET TO THE CONFLICT RELATIVELY QUICKLY. THIS UNILATERAL INTERVENTION WILL BE COSTLY IN AMERICAN LIVES AND DOLLARS BECAUSE MILITARY PREPARATIONS AND IMPROVEMENTS WILL NOT HAVE BEEN MADE. THAT’S WHY I SAY THE UNITED STATES WILL PAY FOR A LARGE SHARE OF THE EXPENSES FOR EXPANSION SOONER OR LATER. SO IF THE SENATE IS CONCERNED ABOUT THE U.S. PAYING TOO MUCH, IT HAS NO OTHER CHOICE BUT TO VOTE EXPANSION DOWN.

THE COSTS WILL ALSO BE MUCH HIGHER THAN THE ADMINISTRATION CLAIMS. THE ADMINISTRATION PROJECTS $27 TO $35 BILLION IN TOTAL COSTS, WITH $1.5 TO $2 BILLION ACCRUING TO THE UNITED STATES. SOME HAVE SAID THAT OTHER ESTIMATES ARE NO MORE RELIABLE THAN THE ADMINISTRATION’S. THAT’S RIDICULOUS!!!. THE ADMINISTRATION, UNLIKE CBO AND RAND, FAILED TO DO A BOTTOM-UP COSTING OF THE DETAILED MILITARY IMPROVEMENTS NEEDED FOR EXPANSION. IN MANY CASES, THEY SIMPLY CHOSE AN AMOUNT OF MONEY THAT THEY WANTED TO SPEND ON A BROAD CATEGORY OF ITEMS - FOR EXAMPLE, LOGISTICS IMPROVEMENTS. THEY OFTEN PICKED A NUMBER WITHOUT PROVIDING A MILITARY ANALYSIS OF WHAT WAS NEEDED OR MANY DETAILS ON THE IMPROVEMENTS MADE OR COSTS INCURRED. IN ESSENCE, DOD’S ESTIMATE IS NOT A REQUIREMENTS-BASED COST ANALYSIS BUT AN ESTIMATE OF WHAT IS AFFORDABLE - THAT IS, THE COSTS THE ADMINISTRATION BELIEVES THE CONGRESS WILL ACCEPT.

IN OTHER CASES, DOD USED VERY QUESTIONABLE ASSUMPTIONS. HERE ARE SOME EGGREGIOUS EXAMPLES:

  • EVEN THOUGH THEIR ANALYSIS STRETCHED 13 YEARS INTO THE FUTURE, TO LOWER THEIR ESTIMATE, THEY ASSUMED THAT EACH NATION WOULD PURCHASE THE OUTDATED I-HAWK AIR DEFENSE SYSTEM. THE I-HAWK, ORIGINALLY DEPLOYED IN THE LATE-1960S, IS BEING PHASED OUT BY THE ARMY AND WILL LIKELY BE PHASED OUT BY THE MARINE CORPS.
  • ANOTHER EXAMPLE IS TACTICAL AIRCRAFT. THEY ASSUMED THAT EACH NATION WOULD BUY ONE SQUADRON OF 18 WORN-OUT F-16s FROM THE BONEYARD. YET, OVER THE LONG-TERM, POTENTIAL NEW MEMBER COUNTRIES PLAN TO PURCHASE ALMOST 300 NEW AIRCRAFT.

DOD ANALYSTS ALSO ADMITTED TO ME THAT THEY FELT “CONSTRAINED” IN THE AMOUNT OF MILITARY INFRASTRUCTURE THAT THEY ASSUMED WOULD BE BUILT OR UPGRADED IN NEW MEMBER NATIONS. IT’S POSSIBLE THAT THEY FELT CONSTRAINED BY RUSSIAN SENSITIVITIES, OR EVEN MORE LIKELY, CONGRESSIONAL SENSITIVITIES TO COST. IN EITHER CASE, THEIR ESTIMATE WAS NOT BASED ON WHAT MILITARY IMPROVEMENTS WOULD BE REQUIRED FOR NATO EXPANSION.

FINALLY, DESPITE THE FACT THAT DOD IS HOLDING OUT THE POSSIBILITY OF GRANTS, DISCOUNT LOANS, AND FREE LEASES TO ENCOURAGE NEW MEMBERS TO BUY U.S. WEAPONS, THE DEPARTMENT DID NOT INCLUDE THE COSTS OF ANY U.S. SECURITY ASSISTANCE IN ITS OWN ESTIMATE.

IN SHORT, THE ADMINISTRATION’S ESTIMATE IS FLAWED AND SUBSTANTIALLY UNDERSTATES THE COST OF NATO EXPANSION. IN MY POLICY ANALYSIS, I MADE CBO’S ORGINAL STUDY, WHICH HAD FIVE OPTIONS FOR EXPANSION COSTING FROM $61 TO $125 BILLION, COMPARABLE TO THE ADMINISTRATION’S VERY SPECIFIC PLAN. THE ADMINISTRATION’S PLAN, WHICH PROJECTED FOUR DIVISIONS AND SIX AIR WINGS EAST TO REINFORCE NEW MEMBERS, DID NOT COMPARE EXACTLY WITH ANY OF THE FIVE CBO OPTIONS, BUT TENDED TOWARD THE LOWER END OF THE RANGE. FOR THE TOTAL COSTS OF THE ADMINISTRATION’S PLAN, INSTEAD OF DOD’S $27 TO $35 BILLION ESTIMATE, I PROJECT THE COST TO BE ALMOST $70 BILLION, OR AT LEAST DOUBLE THAT AMOUNT.

FOR U.S. COSTS, INSTEAD OF DOD’S $1.5 TO $2 BILLION, I PROJECT AT LEAST $7BILLION (WITH EMPHASIS ON THE “AT LEAST”). THEREFORE, MY ESTIMATE IS AT LEAST 3 TO 5 TIMES GREATER THAN THAT OF THE ADMINISTRATION.

I SPENT 15 YEARS AT GAO AND CBO EVALUATING GOVERNMENT PROGRAMS IN THE DEFENSE AND FOREIGN AFFAIRS AREA. THE VAST MAJORITY OF GOVERNMENT INITIATIVES COST SIGNIFICANTLY MORE THAN THEIR INITIAL OPTIMISTIC COST TARGETS. GIVEN THE FLAWED COST ESTIMATE OF THE ADMINISTRATION, COST ESCALATION IS ESPECIALLY LIKELY TO HAPPEN WITH NATO EXPANSION. AFTER ALL, THE CLINTON ADMINISTRATION’S ORIGINAL COST ESTIMATE FOR THE BOSNIA OPERATION WAS ONLY $2 BILLION. EVEN IF THE UNITED STATES PULLS OUT IN JUNE 1998 - WHICH IS UNLIKELY - COSTS WILL HAVE ESCALATED TO OVER $6.5 BILLION.

ALSO, THE TOTAL COSTS OF EXPANSION COULD INCREASE TO AS MUCH AS $125 BILLION, OR IN THE EXTREME CASE - $167 BILLION, IF RUSSIA AGAIN BECAME A THREAT.

FURTHERMORE, I AM PESSIMISTIC THAT THE CONGRESS WILL GET ANY BETTER COST NUMBERS FROM THE ADMINISTRATION OR NATO BEFORE THE RATIFICATION VOTE. CONVENIENTLY, NATO WILL NOT DECIDE HOW MUCH TO INCREASE ITS COMMON BUDGETS AND WHO WILL PAY FOR ANY INCREASES UNTIL JUNE 1998, MONTHS AFTER THE RATIFICATION DEBATE SET FOR EARLY NEXT YEAR. PERHAPS CONGRESS SHOULD DELAY THE RATIFICATION VOTE UNTIL THEN SO THAT IT CAN DEMAND A MORE RIGOROUS ESTIMATE OF COSTS FROM NATO AND GET A BETTER IDEA OF WHO WILL PLEDGE TO PAY THEM. OTHERWISE, CONGRESS IS BEING ASKED TO WRITE A BLANK CHECK FOR EXPANSION.

THE COST ESTIMATE THAT NATO IS CURRENTLY CONDUCTING WILL BE A POLITICAL DEAL. EVEN MORE SO THAN THE NEGOTIATED SETTLEMENT REACHED BETWEEN THE WHITE HOUSE AND DOD OVER WHAT ADMINISTRATION COST FIGURES THE CONGRESS WOULD ACCEPT.

THE UNITED STATES REJECTED THE ORIGINAL NATO ESTIMATE FOR ITS FAULTY ASSUMPTIONS AND COSTS THAT WERE TOO LOW. THEN ADMINISTRATION OFFICIALS REALIZED THAT THE EUROPEANS WOULD REFUSE TO PAY A LOT OF ADDED COSTS. SECRETARIES ALBRIGHT AND COHEN HAVE ALREADY BEGUN TO SAY THAT THE ADMINISTRATION’S ALREADY LOW ESTIMATE OF $27 TO $35 BILLION IS PROBABLY TOO HIGH. THEY ARE BEGINNING TO SOUND LIKE CONTESTANTS ON THE “PRICE IS RIGHT.”

LAST WEEK, THE SECRETARIES SUDDENLY FOUND THE MILIARTY INFRASTRUCTURE IN NEW MEMBER NATIONS TO BE BETTER DEVELOPED THAN THEY THOUGHT. WHEN I DID THE CBO STUDY, HOWEVER, I RECEIVED AN UNCLASSIFIED INTELLIGENCE BRIEFING THAT SAID THAT THE MILITARY INFRASTRUCTURE, THE ARMED FORCES, AND THE ROAD AND RAIL SYSTEMS OF THE NEW MEMBER STATES WERE IN TERRIBLE SHAPE. FINALLY, THE NATO ESTIMATE WILL LEAVE OUT THE SUBSTANTIAL COSTS TO CORRECT SHORTFALLS IN NEW MEMBER AND ALLIED FORCES. IN SHORT, DON’T LOOK FOR THE COST ESTIMATES TO GET ANY BETTER. IN FACT, IT LOOKS LIKE THEY’RE GOING TO GET WORSE.

BUT HIGH COSTS ARE NOT THE ONLY REASON THAT THE CONGRESS SHOULD REJECT EXPANSION OF THE ALLIANCE. EXPANSION IMPAIRS THE FLEXIBILITY OF U.S. FOREIGN POLICY IN AN UNCERTAIN POST-COLD WAR WORLD. WE COULD BE TIED DOWN IN EUROPE WHEN THE MAJOR CHALLENGES MAY COME IN ASIA. ALSO, WE MIGHT BENEFIT FROM RUSSIA’S HELP IF CHINA BECOMES A RISING, AGGRESSIVE POWER. WHY NEEDLESSLY ANTAGONIZE RUSSIA FOR ILL-DEFINED SECURITY GAINS IN A NON-STRATEGIC REGION OF EUROPE, WHEN WE MIGHT WANT ITS COOPERATION ON OTHER ISSUES THAT ARE MORE CRITICAL TO U.S. SECURITY. RUSSIA IS STILL THE ONLY NATION THAT CAN COMPLETELY DEVASTATE OUR HOMELAND WITH NUCLEAR WEAPONS AND NATO EXPANSION IS IMPEDING STRATEGIC ARMS REDUCTION.

IF THE NATO MILITARY ALLIANCE IS SO GOOD AT ENSURING STABILITY, AND THE REAL GOAL OF EXPANSION IS TO STABILIZE THIS PART OF EUROPE, WHY HAVE SO FEW PROPONENTS CONSIDERED ADMITTING RUSSIA. IT’S THE NATION WHICH IS THE MOST CRUCIAL TO STABILIZE; INSTEAD THERE IS EUPHEMISTIC TALK OF “CONSOLIDATING THE GAINS OF THE COLD WAR,” WHICH IMPLIES THAT EXPANSION IS REALLY AIMED AT A FUTURE RUSSIA THAT IS RESURGENT AND AGGRESSIVE. THIS PESSIMISTIC SCENARIO IS NOT A GIVEN. BESIDES, WHAT’S THE RUSH TO EXPAND? WE HAVE PLENTY OF WARNING TIME TO SPOT THE RISE OF A FUTURE PEER COMPETITOR.

FINALLY, AN ARTICLE 5 DEFENSE GUARANTEE TO NEW MEMBERS COULD INVOLVE THE UNITED STATES IN REGIONAL QUAGMIRES IN AN UNSTABLE AND NON-STRATEGIC AREA - FUTURE BOSNIAS. YET, WE ARE EXPANDING BOTH THE TERRITORY AND THE MISSIONS OF THE ALLIANCE AT A TIME WHEN WESTERN DEFENSE BUDGETS HAVE BEEN DECLINING.

THAT CONCLUDES MY PREPARED REMARKS. I WILL BE HAPPY TO ANSWER ANY QUESTIONS.