Defense Budget: Alternative Measures of Costs of Military Commitments Abroad

Defense Budget: Alternative Measures of Costs of Military Commitments Abroad

95-726 F
June 16, 1995
CRS Report for Congress
Received through the CRS Web
Defense Budget: Alternative Measures of
Costs of Military Commitments Abroad
(name redacted)
Foreign Affairs and National Defense Division
Summary
As of Sept. 30, 1994, about 286,594 U.S. active duty military personnel were
stationed overseas, including about 128,000 in European NATO countries, over 45,000
in Japan, and almost 37,000 in Korea.1 Under current plans, the number of U.S. troops
stationed ashore in Europe will decline to 100,000 by the end of FY1996, but other
overseas deployments will remain stable. The Department of Defense projects that it will
spend $16 billion in FY1996 to pay and operate forces permanently stationed ashore in
foreign countries.2
This $16 billion figure, however, reflects only one way of measuring the costs borne
by the United States for military activities abroad. Other definitions of costs are applied
frequently. In the 103rd Congress, where Members of Congress addressed defense
burdensharing issues on the floor of the House or Senate more than forty times, figures
cited for the costs of "defending our allies" ranged from $1 billion a year to $180 billion.3
The main source of this wide divergence is the very different definitions of overseas costs
being used. Commonly cited measures of overseas costs range from very narrow to very
broad, including (1) incremental costs of deploying forces abroad rather than in the
continental United States; (2) direct pay and operating costs of U.S. forces deployed
overseas; (3) total costs, including prorated shares of weapons acquisition, overhead, and
indirect support, of U.S. forces deployed abroad; and (4) total costs of U.S. forces
assigned to fulfill regional commitments. This report explains these measures and
analyzes some of the strengths and weaknesses of each.
1 Department of Defense, Washington Headquarters Service, Directorate for Information
Operations and Reports, Worldwide Manpower Distribution by Geographical Area, September
30, 1994.
2 Department of Defense, Defense Overseas Funding, FY1996/FY1997, February 1995.
3 See: Congressional Record, September 9, 1993, p. H6550 and Congressional Record,
May 18, 1994, p. H3539.
Congressional Research Service ˜ The Library of Congress

CRS-2
Incremental Costs of Forces Deployed Overseas
The narrowest way to measure the costs of U.S. overseas commitments is to
determine how much more (or less) it costs to operate U.S. forces abroad than it would
to operate the same forces in the continental United States (CONUS). These are referred
to as the "incremental" costs of overseas stationing. The elements of incremental cost can
be divided into three broad categories: (1) personnel pay and benefits, including stationing
allowances and moving expenses; (2) operation and maintenance related to the operational
tempo of forces; and (3) unit support costs, including community and family support
services and base operations.
While most costs are the same regardless of where military units are deployed, some
expenses vary with locale. The cost of acquiring weapons, for example, is equal for a unit
at home or abroad, but housing and cost of living allowances, permanent change of station
payments for moving personnel and dependents, transportation costs, and fuel and utility
costs are often higher for forces stationed outside the continental United States
(OCONUS). To the extent that host nations cover expenses such as salaries for foreign
nationals employed at U.S. facilities, utilities, and facility construction and maintenance,
some of these higher costs may be offset.4
If one assumes that U.S. military end strength would not shrink if forces were
withdrawn from overseas -- that the United States would retain in CONUS those units
presently stationed abroad rather than demobilize them -- then incremental cost is the most
appropriate measure of the additional burden borne by the United States to maintain forces
abroad. Determining incremental cost is difficult, however, requiring substantial
manipulation of budget accounts. DOD estimates that the costs of deploying U.S. forces
in Europe are between 10% and 20% higher than the direct costs of stationing the same
forces in CONUS. CRS analysis of budget data suggests that this is not an unreasonable
estimate. Using this as a basis for calculation, the incremental costs of U.S. forces in
Europe in FY1996 will be between $1 and $2 billion.5
Direct Costs of Overseas Operations
Estimates of direct costs of forces deployed overseas represent a somewhat broader
measure of the burden of commitments abroad. Direct costs include pay and benefits of
military personnel, operation and maintenance of units (including civilian pay),
construction of facilities, and construction and operation of military family housing. The
value of this measure of overseas funding is that it is a relatively straightforward
calculation with a clear meaning. Three shortcomings of the direct cost measure are worth
noting, however.
4 Defense officials sometimes claim that it is cheaper to deploy forces in Japan than in
CONUS because of Japan's large host nation support contributions. A CRS analysis, however,
found that this is not the case. See, (name redacted), Defense Burdensharing: Is Japan's Host
Nation Support a Model for Other Allies? CRS Report 94-515 F, June 20, 1994.
5 The incremental cost of OCONUS forces also appears to vary by service. For FY1992, a
preliminary CRS analysis showed that personnel costs (a major element of total incremental costs)
of forces stationed overseas were higher than those in CONUS by 8 percent in the Marine Corps,
13 percent in the Navy, 14 percent in the Army, and about 25 percent in the Air Force.

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One shortcoming is that cost figures cover only forces permanently deployed ashore
overseas and not the costs of forces deployed overseas afloat. This omission would be
difficult to correct, since naval forces at sea are not directly associated with any particular
allied country, and the costs of such forces can vary substantially from month to month.
The exclusion of naval forces afloat becomes problematic in trying to assess costs of
activities in different regions. Since U.S. forward deployed forces in the Pacific are
comprised mainly of naval forces at sea, while forces in Europe are comprised mainly of
Army and Air Force units based on land, direct costs for the two regions are not
comparable.
Second, DOD's method for allocating operation and maintenance costs to units
abroad is not fully consistent with its method for allocating costs to units in CONUS.
Specifically, some transportation costs are treated differently, and, more importantly, the
price of major depot maintenance of weapons is generally not charged to units abroad. As
a result, DOD's direct cost figures fail to provide a valid basis for comparison between
forces abroad and forces in CONUS.
Finally, the issue of host nation support contributions by allies complicates the
interpretation of the direct cost measure. Allies that host U.S. forces provide differing
amounts and kinds of host nation support. All major allies provide land free of charge to
the United States, most waive some taxes and fees, and some, such as Japan and Korea,
also provide relatively large amounts of more direct support, including pay of foreign
nationals working at U.S. bases, utilities, and construction of some buildings. In
determining what share of operating costs allies provide for U.S. forces deployed abroad,
DOD simply compares U.S. direct costs to the total value of allied host nation support.
Means of measuring the value of land and other indirect support vary from country to
country, however, and some allied direct contributions offset U.S. operating costs while
others do not. (Japan, for example, spends a large amount on noise barriers and other
environmental projects at U.S. facilities, but such contributions do not reduce U.S.
expenditures.) The direct cost measure, therefore, indicates how much the United States
is actually expending on forces in particular countries, but it does not clarify the extent to
which allied contributions may offset U.S. costs.
Despite these shortcomings, direct costs are the most commonly cited measure of
overseas basing costs. Since 1989, Congress has required the Defense Department to
report annually on the direct costs of forces deployed abroad. DOD's most recent report,
entitled Defense Overseas Funding, FY1996/FY1997, projects total U.S. funding for
defense operations overseas of about $16 billion in FY1996, including $10.0 billion for
troops in European NATO countries, $2.7 billion for troops in Japan, and $2.5 billion for
forces in Korea. Table 1 summarizes the direct cost data provided by DOD. Figure 1
illustrates the decline of direct overseas funding since FY1990.
Table Table 1. Defense Overseas Funding (Direct Costs),
FY1990-FY1997
(current year dollars in millions)
1990
1991
1992
1993
1994
1995
1996
1997
Germany

CRS-4
Personnel
7,738
7,254
5,647
4,138
3,612
3,209
3,190
3,170
Other
5,064
6,102
5,316
4,589
3,468
3,537
3,684
3,494
TOTAL
12,80
13,35
10,96
8,728
7,080
6,746
6,874
6,664
1
7
3
Italy
Personnel
503
500
512
386
454
451
459
460
Other
954
542
637
567
485
529
557
518
TOTAL
1,457
1,041
1,149
954
939
980
1,016
978
United Kingdom
Personnel
1,066
893
905
986
559
503
502
505
Other
710
937
629
595
528
510
469
472
TOTAL
1,776
1,830
1,534
1,581
1,087
1,013
971
977
Other NATO
Personnel
957
855
747
675
507
487
476
478
Other
1,330
1,519
1,206
1,065
824
746
712
716
TOTAL
2,287
2,373
1,953
1,741
1,331
1,233
1,188
1,193
Total NATO Europe
Personnel
10,26
9,501
7,810
6,186
5,132
4,650
4,627
4,612
4
Other
8,058
9,100
7,788
6,817
5,305
5,322
5,422
5,199
TOTAL
18,32
18,60
15,59
13,00
10,43
9,972
10,05
9,812
2
1
8
3
7
0
Japan
Personnel
1,746
1,596
1,636
1,718
1,449
1,399
1,397
1,397
Other
1,273
1,600
1,277
1,393
1,317
1,276
1,262
1,293
TOTAL
3,019
3,196
2,913
3,111
2,766
2,674
2,659
2,690
Korea
Personnel
1,281
1,417
1,389
1,285
1,486
1,462
1,488
1,495
Other
934
849
784
844
868
1,018
1,014
1,022
TOTAL
2,215
2,265
2,173
2,130
2,353
2,479
2,502
2,517
Other
Personnel
1,258
1,154
856
752
698
656
579
557

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Other
2,155
1,956
1,856
921
847
781
831
852
TOTAL
3,413
3,110
2,713
1,674
1,545
1,436
1,410
1,409
Total Overseas
Personnel
14,54
13,66
11,69
9,942
8,765
8,166
8,091
8,061
9
8
1
Other
12,41
13,50
11,70
9,975
8,336
8,396
8,530
8,366
9
4
6
TOTAL
26,96
27,17
23,39
19,91
17,10
16,56
16,62
16,42
8
3
7
7
1
2
1
7
Source: Department of Defense, Defense Overseas Funding, FY 1996/FY 1997, February 1995 and prior
years.
Note: The "other" category includes funding for operation and maintenance, military construction, and
family housing.
Figure 1: Defense Overseas Funding (Direct Costs) by Region
(current year dollars in millions)
Total Costs of Forces Deployed Abroad
Total costs of forces deployed abroad include direct personnel and operating costs
(as defined above) plus (1) indirect operating costs, (2) an allocated share of overhead
expenses, and (3) an allocated share of investment expenditures. Indirect costs include

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activities not charged to the overseas command, such as some equipment repairs, some
transportation costs, and some supply operations. Overhead expenses include
headquarters staffs, personnel recruitment and training, most medical care, and global
communications. Investment costs are comprised mainly of weapons development and
procurement funding.
In estimating total costs, indirect, overhead, and investment expenses must be
allocated to particular units based on a formula that is inherently somewhat arbitrary.
Analytically, the allocation process presents a problem because different formulas may lead
to very different estimates of total costs. Politically, the Defense Department has been
concerned that release of such figures may create a misleading impression that the
withdrawal of units from Europe or elsewhere would entail budget savings equal to the
estimated total costs of those units.6 As a result, DOD undertook such estimates only
when required to do so by Congress. The figures that DOD did prepare were normally
classified as secret. Occasionally, however, the Defense Department released unclassified
estimates of total costs of forces deployed in certain regions. A December 1991 DOD
paper reported estimated total costs of forces in Europe in FY1992 of about $50 billion,
more than double the then-current direct cost estimate of about $20 billion. Currently,
Congress does not require DOD to prepare data on the total costs of forces deployed
abroad, and no official figures are available. Costs are likely lower today because of troop
withdrawals from Europe and the decline of weapons procurement funding.
Total Costs of Regional Commitments
The broadest measure of costs of overseas commitments is the total costs of forces
assigned to particular regions. The distinction between the total costs of "deployed forces"
and the costs of "regional commitments" is that the latter includes costs of all forces
available to fulfill U.S. military commitments abroad, including those stationed in CONUS
as well as those stationed abroad. In this broadest measure of overseas costs, both
CONUS-based and overseas-based forces are allocated to particular regional commitments
(for example, defense of Europe), and the total costs, including direct, indirect, overhead,
and investment costs, of the assigned forces are calculated.
For fiscal years 1983 to 1992, Congress required DOD to report annually on the total
costs of forces available for the defense of Europe in the event of a war with the Soviet
Union and its allies. In this report, DOD also estimated the total costs of forces assigned
primarily to the Pacific and of contingency forces not assigned either to Europe or the
Pacific. DOD complied with the reporting requirement reluctantly, and it always included
an introductory essay explaining why the congressionally mandated structure of the report
was, in DOD's view, misleading. DOD argued that the report was flawed because (1)
forces assigned to Europe in the event of a global war were defending the United States
and not just European allies, (2) such forces were available for other missions as well as
defense of Europe, and (3) a reduction in forces assigned to Europe would not necessarily
entail budget savings as great as the estimated total costs. Data in each annual report were
classified as secret. Occasionally, however, DOD did mention data from the reports
publicly, and this was the source of frequently cited estimates that the U.S. commitment
6 See, for example, Caspar W. Weinberger, Annual Report to the Congress by the Secretary
of Defense, Fiscal Year 1984, Feb. 1, 1983, pp. 186-190.

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to Europe's defense typically amounted to 50% to 60% of the overall U.S. defense budget
-- i.e., $150 billion a year or more.
In the post-Cold War era, the Department of Defense has shifted away from a
strategy focused on a U.S.-Soviet conflict in Europe to one focused on two major regional
contingencies (MRCs). Given that all U.S. military forces are dedicated to fighting and
winning first one and then, if necessary, two MRCs, any measure of the total costs of
regional commitments simply would reflect DOD's top line -- a requested $257.8 billion
in budget authority in FY1996. Thus, setting aside the issue of flaws in the methodology,
in the post-Cold War era a calculation of total costs of regional commitments would
provide no additional useful input to the burdensharing debate.

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