America's endless wars are damaging its economic might

• Despite boasts by the Trump administration, the US economic outlook is not as rosy as it may seem.
• Growing defense budgets, the rising cost of overseas conflicts, and lawmakers' reluctance to rein in the Pentagon undermine the US's economic strength and, by extension, its military might, writes Defense Priorities fellow Willis L Krumholz.
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The White House is touting the strong US economy. But under the hood, all is not well. The Congressional Budget Office is now projecting that America will run more than a trillion-dollar deficit for at least the next 10 years. Because our economy is the basis for our military power, this situation threatens both.

We should stop squandering US prosperity on peripheral military interests. This is especially urgent because of emerging cracks in America's financial might due to fiscal profligacy and the fact that never-ending war contributes to these fiscal woes - making America less safe in the future.

Already, America's budget deficit topped $1 trillion for the 2019 fiscal year and will increase further in 2020. That's just the money we spend over what we take in every year. Overall debt is $23 trillion and rising.

Unfunded liabilities-meaning the cost of government promises to spend in the future, especially on entitlements, if left untouched - total $75 trillion. The interest cost alone on the national debt was a half-trillion dollars in fiscal year 2018, and larger still in 2019.

It's important to note that all this is happening when tax revenue is at an all-time high - because a strong economy generates more tax revenue. That means the deficit will get even worse during the next downturn, and it also means that America mostly has a spending problem, not a taxing problem.

Yet policymakers on both sides of the aisle have consistently refused to touch the spending and entitlements that primarily drive the debt. But continued overspending could force a fiscal crisis and bankrupt the American economy. Aside from the economic ramifications, this is a grave national-security issue.

Projections say that by 2023, the federal government will spend more on interest, or on servicing the national debt, than it spends on the national defense. That's significant because right now we spend almost $740 billion on defense every year.

In real, inflation-adjusted terms, that's higher than President Ronald Reagan's defense-buildup to win the Cold War.

Those dire projections may be too optimistic. The 10-Year Treasury, a good benchmark for government borrowing costs, is at about 1.8%. But 10 years ago, that rate was double what it is now, and 20 years ago it was triple. If inflation again structurally rises, so would US rates, which would cause the cost of servicing our debt to skyrocket.

As the cost of servicing the debt rises, US defense spending will come under increased pressure. That puts the US at a potential disadvantage against our strategic competitors, including China and Russia.

Right now, China spends about $250 billion on defense every year, and Russia spends at least $60 billion. China's national debt is about $5.5 trillion to $7.5 trillion (depending on what you count), with interest costs of about $175 billion. Russia's national debt is only $220 billion, with interest payments of only $13 billion a year.

Sure, these economies are smaller than America's, but GDP-adjusting the debt load, which compares the debt with a measure of the size of an economy, shows that Russia's debt-to-GDP is around 20%, China's is 50%, while America's is 100%.

Because of this, there's a risk that the US debt-servicing cost could vastly increase, which would crimp future military spending, even while less-indebted adversaries like Russia and China ramped up their defense spending. That's less of a problem if our current massive defense spending provides future value, but too much of current defense spending is wasted.

Yes, the US is investing in things like a new aircraft-carrier program. But the Pentagon wastes billions of dollars, and has little oversight or answers on where this wasted money goes. The Pentagon lost track of billions in Iraq, and last year spent almost $5 billion on crab and lobster alone. Despite the Pentagon's waste, it keeps getting more money.

Not only that, current American military power is stretched. Unbeknownst to most Americans, three Americans were recently killed in Kenya, and we are adding troops to the Middle East.

Out of the current defense budget too, at least 10% of this budget, or around $75 billion, is directly due to overseas "contingency operations." This includes our long involvement in Afghanistan, our presence in Iraq and Syria, and our increasing troop footprint in Saudi Arabia.

But the overall cost of these wars has been much higher. Not counting the Department of Homeland Security spending, the total cost of these wars has been over $5 trillion since 2001. That's 25% of our national debt.

What should policymakers do to rectify the situation? First, we need to end peripheral entanglements overseas that are outside America's core interests, and which stretch our forces too thin. This includes our involvement in Afghanistan, Iraq, Syria, and Saudi Arabia.

Second, to ensure the strength of future defense spending, policy makers need to stop treating the Pentagon as a sacred cow. Continued high spending on the Pentagon is leading to a culture of fiscal profligacy, which may lessen the impact that current spending has on future force capability.

Outspending Russia and China is a realistic goal, but we should ensure we can outspend tomorrow as well as today.

The enlarged Pentagon budget is becoming a third rail in Washington, keeping our representatives from dealing with other spending problems. Time and time again, Republicans have accepted higher domestic spending because Democrats have agreed to accept higher Pentagon spending.

This setup may be a win-win for the Washington swamp, but it's a lose-lose for future American prosperity. This election year, policymakers need to remember that the American people care about the future, not just the present.

Willis L. Krumholz is a fellow at Defense Priorities. He holds a JD and MBA degree from the University of St. Thomas and works in the financial services industry.