With Osama bin Laden dead, can America go back to the days before terrorism and the big defense costs that came with it?
The Sept. 11, 2001 attack on the United States took place near the end of a fiscal year in which the federal government ran a budget surplus of $127 billion. Military spending that year amounted to $291 billion, or about 15 percent of total spending.
But the attack sent military budgets soaring. Defense outlays since 9/11 have increased, on average, by nearly 7 percent a year in inflation-adjusted terms. Military spending this year will be about $700 billion, nearly two-and-a-half times the level in 2001, and nearly 20 percent of total federal spending.
The new billions being pumped into defense, along with other factors, helped change the budget surplus of 2001 into the deficits that followed. This year's deficit will be close to $1.5 trillion, nearly 10 percent of gross domestic product, adding to growing fears of a debt crisis.
If operations in Afghanistan and Iraq came to an end, total defense outlays would be reduced by roughly one fifth.
Of course the Pentagon would still be spending hundreds of billions of dollars on pay and benefits for the troops, operations and maintenance, new weapons purchases, military construction, and housing for military families. The United States, for example, still keeps nearly 80,000 military personnel in Europe and 35,000 in Japan.
Room to cut spending?
As members of Congress return from recess this week to intensify their debate over the deficit and the debt, Osama bin Laden's death focuses attention on military spending and specifically on the $110 billion-a-year U.S. commitment in Afghanistan.
Until now, cuts in defense spending haven't played a dominant role in the budget debate. But if U.S. troops were withdrawn from Afghanistan — which President Barack Obama says he wants to begin doing by July 1 — and if voters don't see the need for continued outlays at post-9/11 levels, it could transform the budget debate.
Smaller military outlays might reduce the need for big cuts elsewhere in politically risky budget items like Medicare spending.
In his fiscal year 2012 budget proposal, Obama has already called for discretionary military spending (that is, not including spending on military retirement benefits) to be cut by 5 percent.Video: Will the president get a bump in the polls? (on this page)
Some argue that bin Laden's death opens the door to new spending cuts.
Richard Haass, the president of the Council on Foreign Relations who served as a top State Department official in the Bush administration, said Monday that bin Laden's death "raises questions about our strategy in Afghanistan."
While the successful "shows the continued promise of tactical counter-terrorism operations," he said, it also "reinforces also the question of whether the course we're on — which has a large element of nation-building and capacity-building and counterinsurgency within Afghanistan — can succeed, given the willingness of Pakistan to provide sanctuary for at least the Afghan Taliban, not to mention others."
Haass said bin Laden's demise "will very much play into a growing debate as we move towards July 1 about the proper trajectory of U.S. policy in Afghanistan — more specifically about the rate of drawdown in U.S. forces."
In other words, successful tactical counterterrorism — done in Navy SEAL operations or drone attacks from Yemen to Pakistan — might not require 100,000 U.S. troops in Afghanistan.
Gideon Rose, the editor of Foreign Affairs magazine and a former National Security Council official in the Clinton administration, said bin Laden's killing "might open space for the Obama administration to ease its way out of Afghanistan, if it so chooses, not because the threat will be dramatically less, but because they'll be able to (in the phrase attributed to Sen. George Aiken about the Vietnam War) 'declare victory and go home' — if they want to. We'll see whether they want to."
Lawmakers are divided about what bin Laden's death could — or should — mean for troop levels in Afghanistan.
In a campaign email, Rep. Chellie Pingree, D-Maine, urged her supporters to sign a petition to "send a strong message (to Obama) that people in Maine and around the country want the decade-long war to end, want our troops out of harm's way, and want to focus on the many pressing issues facing us here at home."
But a counsel of caution came from one of the Senate's hawks, Sen. Joe Lieberman, I – Conn., who told reporters Monday, "I've already heard a few calls that we quickly withdraw from Afghanistan because 'the war is over,' because bin Laden is dead. I wish we could say that."
But, he warned, "if we did that, we would repeat a mistake that we made once before when we pulled out of Afghanistan and that region after the Soviets did and that invited the Taliban and al Qaida into Afghanistan, and from Afghanistan they attacked us on 9/11."
Going after waste — and much more
Asked about military spending in the wake of the bin Laden killing, Senate Majority Leader Harry Reid said Monday that senators on the Armed Services and Appropriations Committees are "looking for any waste in the Pentagon. Secretary Gates is doing the same thing."
But there's far more at stake than waste. Despite battles with members of Congress and lobbyists over individual items such as an extra engine for the F–35 fighter, Gates is mostly trying to squeeze savings out of the Pentagon as a private-sector CEO would with an overgrown corporation: by shrinking headcount and cutting health care costs.
And, even when it comes to defense costs that would seem to be focused on guns and steel, it turns out that there's no escaping from the health care debate.
As Gates told the Senate earlier this year, "Sharply rising health care costs are consuming an ever-larger share of this Department's budget," growing from $19 billion in 2001 to $52.5 billion in the budget request for fiscal year 2012.
He has proposed what he calls "modest increases" to the fee charged for enrolling in TRICARE, the health care plan which covers uniformed service members, retirees and their families.
He said the Pentagon's current health care plan, "one in which fees have not increased for 15 years, is simply unsustainable, and if allowed to continue, the Defense Department risks the fate of other corporate and government bureaucracies that were ultimately crippled by personnel costs, in particular, their retiree benefit packages."
A shrinking military
Gates's cost-cutting also hinges on shrinking headcount.
In a speech at West Point last February, he argued that "the most plausible, high-end scenarios for the U.S. military are primarily naval and air engagements" and that "the prospects for another head-on clash of large mechanized land armies seem less likely."
When Gates first took office in 2006, in order to "relieve the severe stress on the force from the Iraq war as the surge was getting underway" he expanded the Army by 65,000 to a total of 547,000 and the Marine Corps by 27,000 to 202,000. He later added 22,000 more to the Army.
But, starting in 2014, Gates proposes that the military begin reducing the active duty Army by 27,000 and the Marine Corps by between 15,000 and 20,000.
He won't be around to carry out these plans: it will be up to his designated successor, Leon Panetta, or whoever might follow him, to do that.
Despite the cuts, this won't be a "peace dividend" of the magnitude of the 1990s.
During the Cold War, from 1947 to 1990, defense spending accounted for 40 percent of all federal spending. In President John F. Kennedy's first year in office, over half of all federal spending went to defense. By President Ronald Reagan’s final year in office, defense spending had dropped to 27.3 percent of federal outlays and by 1999, it had shrunk to 16 percent.
Measured as a percentage of gross domestic product, defense outlays shrank by more than a third between JFK and the end of Bill Clinton's presidency, going from 9.4 percent of GDP to only 3 percent of GDP. They now stand at about 5 percent of GDP.
The changes Gates is proposing are nowhere near as dramatic as those of the 1990s.
© 2013 msnbc.com Reprints