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Those who understand the free market will not be surprised that the years of uncertainty and low defense budgets caused capital and companies to merge or leave the defense business. That means fewer competitors, more sole-source contracts, less research, and therefore higher costs.

The reality is that there is no huge pot of money currently in the defense budget from which the necessary increase can be funded. It cannot come from reducing the number of service personnel because the military is already too small. Precisely because of budget pressures in the past, the service chiefs have already reduced force structure to dangerous levels. That is why the Navy is “cross-decking” sailors — helicoptering them from a ship returning home to one that is steaming out to sea — in order to man all its vessels. Nor can the money come from reducing the compensation we pay our servicemen and women. Apart from the fact that Congress would and should never reduce compensation in the middle of a war, the services must hire and retain high-quality people. The more modern the military becomes, the more skills it demands, and skilled people cost money. There is no such thing as a “grunt” in today’s military. The truth is that spending on personnel benefits is much more likely to increase than decrease. Total spending on defense health care, for example, increased from $17.5 billion in 2000 to $37 billion in 2006.

We can do it

The good news is that robust and consistent funding of the military is fully within America’s capability. Currently the U.S. spends only 3.8 percent of its GDP on the core defense budget, including the non–Department of Defense expenditures for national security. That is far lower than during the Cold War, and almost a full percentage point less than was spent even during the Carter years. America’s economy is so powerful that even after years of underfunding military procurement, the U.S. could still recapitalize and sustain its military strength by enacting the $34 billion increase I mentioned earlier, and maintaining defense spending at no less than 4 percent of GDP thereafter.

This program — called the “4% for Freedom Solution” by the Heritage Foundation — would send the clearest possible message to America’s friends and enemies that, whatever happens in Iraq, America will remain a force to be reckoned with. For some purposes, defense policy is foreign policy. Imagine the impact on China and North Korea, for example, of realizing that the U.S., by using only a small fraction of its economic resources, can guarantee an increased and highly capable naval presence in the Western Pacific for years to come.

The 4% for Freedom Solution would also have a positive impact on our long-term fiscal position. First, it would focus debate about the deficit squarely where it belongs: on the entitlement programs. Even a glance at the government’s budget shows that growth in entitlement programs, not in defense or other discretionary spending, poses the real long-term threat to solvency. If Congress reforms entitlement spending, there will be more than enough money for defense; if Congress fails to get entitlements under control, then funding defense on the cheap will not save the country from bankruptcy.

Second, assuring sufficient funding for defense would promote more efficient use of defense dollars. Capital would flow back into the defense industrial base, and the service chiefs could attempt what in Washington has heretofore been unthinkable: long-term planning. They could budget in a way that reduces costs over the life of new systems, instead of fighting each other for money every year, or maneuvering each budget cycle just to keep vital programs alive. President Bush’s proposed double-digit increase is welcome news; but large swings in defense funding always cost the taxpayer more than solid, consistent funding over time.

Finally, American power is an important stabilizing force in the world; by reassuring the financial markets about American strength, the 4% for Freedom Solution would help reduce risk within the international economy and promote economic growth at home and abroad. Even a small positive impact on the economy would more than pay for the additional investment in military capability. How much would it be worth economically, for example, to reduce the risk that China invades Taiwan, or Kim Jong Il is tempted to use his nuclear capability? The peace and prosperity of the 1990s, remember, were due at least in part to the Reagan defense buildup of the 1980s. The Reagan precedent is also the answer to those who are concerned about the short-term impact of the 4% for Freedom Solution on the deficit. It is true that military strength has its price, but as Jimmy Carter found out, there is a price to be paid for weakness, too.

President Bush’s recent defense-budget submission is the best news for American security in 15 years. The Democratic leaders should fully fund it, and the administration deserves credit for proposing it. But it would not have been necessary if the Clinton administration had not cut defense spending in the 1990s, or if the first George W. Bush administration had more robustly funded the needs that were clearly apparent even in 2001. By adopting the “4% for Freedom Solution,” our leaders can show that for once they have learned the lessons of the past. There never will be a war that ends all wars; history has shown that, even in years where threats do not seem immediate, the dangers remain — and only the reality and perception of American power can deter them from breaking out.