This past March Secretary of Defense Robert Gates announced that the spigot of increasingly large defense budgets had been turned off—as he proposed a FY2010 baseline budget of “only” $534 billion. The momentousness of that announcement, however, did not seem to match the number. While it’s true that the Joint Chiefs prepared a budget for the incoming Obama Administration calling for $584 billion in FY2010—$50 billion more than the Gates proposal and some $60 billion more than the Bush Administration had projected for that year—last year’s budget had been $518 billion, $16 billion less than the proposed FY2010 baseline.

The defense budget is a complicated document. Depending on which baselines, inflation adjustment estimates and supplemental items one includes, clever advocates can make the numbers say almost anything they wish them to say. But no amount of cleverness can obscure three basic facts. The first is that what the U.S. government spends on defense and how it spends it is aligned in no logical or coherent way with U.S. national strategy. (How else could the Pentagon slip items like the F-22 Raptor and V-22 Osprey into last year’s war supplementals when neither system has anything to do with the wars in Iraq and Afghanistan?) The second fact is that the defense budget is out of control, having roughly doubled over the past ten years—partly because the strategy process establishes no real definition of necessity. The third fact is that the inefficiency of defense spending is an ongoing scandal.

These three facts are connected. If a coherent process linked military assets to national strategy, we would not be buying expensive weapons we do not need. That would help set rational limits on the budget, which would force new efficiencies—not just in acquisition but also with regard to personnel and operations and maintenance (O&M). Unfortunately, we have not yet faced up to these three facts. Thus, while there was much discussion on the size and distribution of the FY2010 budget, in particular on Gates’s proposed cuts in some fifty major programs like the F-22 Raptor and the DDG-1000 destroyer, there was little focus on the process by which the Defense Department procures, buys, operates or maintains its weapons systems and personnel, which, as shown in the chart on the next page, currently accounts for more than twice as much as spending on weapons or modernization. In the long run, right-sizing the defense budget depends as much on getting the process right as it does on which weapons we buy.

In the past decade, defense investment funds—which consist of procurement and research and development—grew from $82 billion to $186.1 billion (the Defense Department’s FY2010 request), a jump of...