The High Cost of NATO Expansion

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MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE, I AM PLEASED TO BEHERE TODAY TO TALK ABOUT THE REAL COSTS OF NATO EXPANSION. WHEN IWAS AT THE CONGRESSIONAL BUDGET OFFICE, I WROTE ITS COST STUDY ONNATO EXPANSION. I HAVE RECENTLY MOVED TO THE CATO INSTITUTE. THECATO POLICY ANALYSIS THAT I AM SUBMITTING FOR THE HEARING RECORDPROVIDES A DETAILED CRITIQUE OF THE ADMINISTRATION'S COST ESTIMATEAND MAKES THE ORIGINAL CBO COST ANALYSIS DIRECTLY COMPARABLE TOIT.

I BELIEVE THE UNITED STATES WILL PAY A LARGE SHARE OF THEEXPENSES FOR EXPANSION, EITHER NOW OR LATER. AND U.S. COSTS WILL BEAT LEAST THREE TO FIVE TIMES AS GREAT AS THE ADMINISTRATIONCLAIMS.

UNDER THE ADMINISTRATION'S DEFENSE CONCEPT OF PROJECTING FOURDIVISIONS AND SIX WINGS EASTWARD TO REINFORCE THESE NATIONS IN TIMEOF CRISIS, I PROJECT U.S. COSTS TO BE AT LEAST $7 BILLION, COMPAREDWITH THE ADMINISTRATION'S $1.5 TO $2 BILLION ESTIMATE. THE WORDS"AT LEAST" ARE VERY IMPORTANT BECAUSE I BELIEVE, BASED ON MY WORKAT CBO, THAT THE $7 BILLION IS A CONSERVATIVE ESTIMATE. IF THEPOTENTIAL NEW MEMBERS CANNOT AFFORD ALL OF THE $34 BILLION THATWILL BE THEIR RESPONSIBLITY, U.S. EXPENSES COULD INCREASEDRAMATICALLY.

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

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

I AM ALWAYS STRUCK WHEN PEOPLE SAY, "I SUPPORT EXPANSION, BUT WEMUST MAKE OUR ALLIES PAY THEIR FAIR SHARE." WELL, THEY ARE NOTGOING TO!!! EVEN DURING THE COLD WAR, WHEN THE SOVIET THREAT WASSEVERE, WE COMPLAINED THAT OUR EUROPEAN ALLIES WERE NOT PAYINGTHEIR FAIR SHARE. I HAD ONE AIR FORCE GENERAL SAY TO ME ONCE, "ASLONG 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 EVENLESS LIKELY TO PAY UP. THE THREAT IS DRASTICALLY REDUCED, THEEUROPEANS ARE UNDER PRESSURE TO LOWER GOVERNMENT SPENDING FOR THEEMU, AND NATO EXPANSION WAS OUR IDEA. THEY WILL SAY AND ARE SAYING,"YOU PAY FOR IT."

OF COURSE, SOME PEOPLE HAVE SUGGESTED PRIVATELY THAT WESHOULDN'T WORRY THAT NOBODY WILL PAY FOR EXPANSION, BECAUSE WE CANSKIMP ON MILITARY IMPROVEMENTS. AFTER ALL, THE THREAT ENVIRONMENTIS CURRENTLY RELATIVELY BENIGN. WE MUST CONSIDER WHAT WILL HAPPENIF SOME YEARS DOWN THE ROAD A SIGNIFICANT THREAT APPEARS. AND I'MNOT TALKING ABOUT A RESURGENT RUSSIA. LET'S SAY SERBIA ATTACKSHUNGARY OR BELARUS BECOMES A PROBLEM FOR POLAND. IF EUROPEAN FORCESHAVE NOT BEEN AUGMENTED TO PROJECT POWER AND NEW MEMBERS' FORCESAND INFRASTRUCTURE ARE STILL INADEQUATE, THERE IS ONLY ONE PLACE TOTURN.

THE UNITED STATES, OF COURSE. IT IS THE ONLY NATION WITH POTENTFORCES THAT HAVE THE TACTICAL AND STRATEGIC MOBILITY TO GET TO THECONFLICT RELATIVELY QUICKLY. THIS UNILATERAL INTERVENTION WILL BECOSTLY IN AMERICAN LIVES AND DOLLARS BECAUSE MILITARY PREPARATIONSAND IMPROVEMENTS WILL NOT HAVE BEEN MADE. THAT'S WHY I SAY THEUNITED STATES WILL PAY FOR A LARGE SHARE OF THE EXPENSES FOREXPANSION SOONER OR LATER. SO IF THE SENATE IS CONCERNED ABOUT THEU.S. PAYING TOO MUCH, IT HAS NO OTHER CHOICE BUT TO VOTE EXPANSIONDOWN.

THE COSTS WILL ALSO BE MUCH HIGHER THAN THE ADMINISTRATIONCLAIMS. THE ADMINISTRATION PROJECTS $27 TO $35 BILLION IN TOTALCOSTS, WITH $1.5 TO $2 BILLION ACCRUING TO THE UNITED STATES. SOMEHAVE SAID THAT OTHER ESTIMATES ARE NO MORE RELIABLE THAN THEADMINISTRATION'S. THAT'S RIDICULOUS!!!. THE ADMINISTRATION, UNLIKECBO AND RAND, FAILED TO DO A BOTTOM-UP COSTING OF THE DETAILEDMILITARY IMPROVEMENTS NEEDED FOR EXPANSION. IN MANY CASES, THEYSIMPLY CHOSE AN AMOUNT OF MONEY THAT THEY WANTED TO SPEND ON ABROAD CATEGORY OF ITEMS - FOR EXAMPLE, LOGISTICS IMPROVEMENTS. THEYOFTEN PICKED A NUMBER WITHOUT PROVIDING A MILITARY ANALYSIS OF WHATWAS NEEDED OR MANY DETAILS ON THE IMPROVEMENTS MADE OR COSTSINCURRED. IN ESSENCE, DOD'S ESTIMATE IS NOT A REQUIREMENTS-BASEDCOST ANALYSIS BUT AN ESTIMATE OF WHAT IS AFFORDABLE - THAT IS, THECOSTS THE ADMINISTRATION BELIEVES THE CONGRESS WILL ACCEPT.

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

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

DOD ANALYSTS ALSO ADMITTED TO ME THAT THEY FELT "CONSTRAINED" INTHE AMOUNT OF MILITARY INFRASTRUCTURE THAT THEY ASSUMED WOULD BEBUILT OR UPGRADED IN NEW MEMBER NATIONS. IT'S POSSIBLE THAT THEYFELT CONSTRAINED BY RUSSIAN SENSITIVITIES, OR EVEN MORE LIKELY,CONGRESSIONAL SENSITIVITIES TO COST. IN EITHER CASE, THEIR ESTIMATEWAS NOT BASED ON WHAT MILITARY IMPROVEMENTS WOULD BE REQUIRED FORNATO EXPANSION.

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

IN SHORT, THE ADMINISTRATION'S ESTIMATE IS FLAWED ANDSUBSTANTIALLY UNDERSTATES THE COST OF NATO EXPANSION. IN MY POLICYANALYSIS, I MADE CBO'S ORGINAL STUDY, WHICH HAD FIVE OPTIONS FOREXPANSION COSTING FROM $61 TO $125 BILLION, COMPARABLE TO THEADMINISTRATION'S VERY SPECIFIC PLAN. THE ADMINISTRATION'S PLAN,WHICH PROJECTED FOUR DIVISIONS AND SIX AIR WINGS EAST TO REINFORCENEW MEMBERS, DID NOT COMPARE EXACTLY WITH ANY OF THE FIVE CBOOPTIONS, BUT TENDED TOWARD THE LOWER END OF THE RANGE. FOR THETOTAL 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 PROJECTAT LEAST $7BILLION (WITH EMPHASIS ON THE "AT LEAST"). THEREFORE, MYESTIMATE IS AT LEAST 3 TO 5 TIMES GREATER THAN THAT OF THEADMINISTRATION.

I SPENT 15 YEARS AT GAO AND CBO EVALUATING GOVERNMENT PROGRAMSIN THE DEFENSE AND FOREIGN AFFAIRS AREA. THE VAST MAJORITY OFGOVERNMENT INITIATIVES COST SIGNIFICANTLY MORE THAN THEIR INITIALOPTIMISTIC COST TARGETS. GIVEN THE FLAWED COST ESTIMATE OF THEADMINISTRATION, COST ESCALATION IS ESPECIALLY LIKELY TO HAPPEN WITHNATO EXPANSION. AFTER ALL, THE CLINTON ADMINISTRATION'S ORIGINALCOST ESTIMATE FOR THE BOSNIA OPERATION WAS ONLY $2 BILLION. EVEN IFTHE 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 RUSSIAAGAIN BECAME A THREAT.

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

THE COST ESTIMATE THAT NATO IS CURRENTLY CONDUCTING WILL BE APOLITICAL DEAL. EVEN MORE SO THAN THE NEGOTIATED SETTLEMENT REACHEDBETWEEN THE WHITE HOUSE AND DOD OVER WHAT ADMINISTRATION COSTFIGURES THE CONGRESS WOULD ACCEPT.

THE UNITED STATES REJECTED THE ORIGINAL NATO ESTIMATE FOR ITSFAULTY ASSUMPTIONS AND COSTS THAT WERE TOO LOW. THEN ADMINISTRATIONOFFICIALS REALIZED THAT THE EUROPEANS WOULD REFUSE TO PAY A LOT OFADDED COSTS. SECRETARIES ALBRIGHT AND COHEN HAVE ALREADY BEGUN TOSAY THAT THE ADMINISTRATION'S ALREADY LOW ESTIMATE OF $27 TO $35BILLION IS PROBABLY TOO HIGH. THEY ARE BEGINNING TO SOUND LIKECONTESTANTS ON THE "PRICE IS RIGHT."

LAST WEEK, THE SECRETARIES SUDDENLY FOUND THE MILIARTYINFRASTRUCTURE IN NEW MEMBER NATIONS TO BE BETTER DEVELOPED THANTHEY THOUGHT. WHEN I DID THE CBO STUDY, HOWEVER, I RECEIVED ANUNCLASSIFIED INTELLIGENCE BRIEFING THAT SAID THAT THE MILITARYINFRASTRUCTURE, THE ARMED FORCES, AND THE ROAD AND RAIL SYSTEMS OFTHE NEW MEMBER STATES WERE IN TERRIBLE SHAPE. FINALLY, THE NATOESTIMATE WILL LEAVE OUT THE SUBSTANTIAL COSTS TO CORRECT SHORTFALLSIN NEW MEMBER AND ALLIED FORCES. IN SHORT, DON'T LOOK FOR THE COSTESTIMATES TO GET ANY BETTER. IN FACT, IT LOOKS LIKE THEY'RE GOINGTO GET WORSE.

BUT HIGH COSTS ARE NOT THE ONLY REASON THAT THE CONGRESS SHOULDREJECT EXPANSION OF THE ALLIANCE. EXPANSION IMPAIRS THE FLEXIBILITYOF U.S. FOREIGN POLICY IN AN UNCERTAIN POST-COLD WAR WORLD. WECOULD BE TIED DOWN IN EUROPE WHEN THE MAJOR CHALLENGES MAY COME INASIA. ALSO, WE MIGHT BENEFIT FROM RUSSIA'S HELP IF CHINA BECOMES ARISING, AGGRESSIVE POWER. WHY NEEDLESSLY ANTAGONIZE RUSSIA FORILL-DEFINED SECURITY GAINS IN A NON-STRATEGIC REGION OF EUROPE,WHEN WE MIGHT WANT ITS COOPERATION ON OTHER ISSUES THAT ARE MORECRITICAL TO U.S. SECURITY. RUSSIA IS STILL THE ONLY NATION THAT CANCOMPLETELY DEVASTATE OUR HOMELAND WITH NUCLEAR WEAPONS AND NATOEXPANSION 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 THENATION WHICH IS THE MOST CRUCIAL TO STABILIZE; INSTEAD THERE ISEUPHEMISTIC TALK OF "CONSOLIDATING THE GAINS OF THE COLD WAR,"WHICH IMPLIES THAT EXPANSION IS REALLY AIMED AT A FUTURE RUSSIATHAT IS RESURGENT AND AGGRESSIVE. THIS PESSIMISTIC SCENARIO IS NOTA GIVEN. BESIDES, WHAT'S THE RUSH TO EXPAND? WE HAVE PLENTY OFWARNING TIME TO SPOT THE RISE OF A FUTURE PEER COMPETITOR.

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

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

Ivan Eland

Committee on Foreign Relations
United States Senate