In Conversation | Amb. Doug Lute & Col. Jordan Becker

A deep dive on NATO burden-sharing, inputs vs. outputs, and outcomes of the Washington Summit

The views expressed on this podcast are those of the participants alone and do not represent those of the US Military Academy, the US Army, the Department of Defense, or any part of the US government.

Rick Landgraf:  Joining us today is Doug Lute, Lieutenant General US Army retired. He served six years in the White House during two administrations, first under President George W. Bush as the Deputy National Security Advisor for Iraq and Afghanistan from 2007 to 2009. He was the most senior White House official retained by President Obama, serving first as Coordinator for South Asia, and then as Ambassador to NATO from 2013 to 2017. Ambassador, thank you for joining the show.

Doug Lute: It’s good to be with you Rick.

RL: My second guest is Colonel Jordan Becker, US Army. He is an assistant professor of international relations at the US Military Academy in West Point. His research focuses on the political economy of European security, China-Europe-US relations, and transatlantic burden sharing. Colonel, welcome to the ties that bind.

Jordan Becker: Thank you, Rick. I'm happy to be here with both of you gentlemen.

RL: Today we're going to talk about burden-sharing with NATO, the history and contours of the debate over sharing the burden of European defense among NATO allies, trends in defense spending and investment, and where we are now in light of NATO's 75th anniversary summit held in Washington last month.

You two co-authored a piece titled, The Time for Europe to Step Up is Now, published by War on the Rocks back in the beginning of the summer in May, in which you argued that the time has come for the European NATO allies to step up and carry a larger share of the burden of European defense. Doug, I'd like to ask you first, what motivated and prompted you to write this piece at this time?

DL: Well, I think there were two significant dynamics. One was just the simple geostrategic challenges facing the United States with regard to looking both east and west at the same time. So the rise of China, in particular China's military potential, and troubling challenges to the international system and international norms has drawn American attention to the Pacific. Of course, this goes back at least ten plus years to the Obama period of a pivot to Asia. 

The second dynamic is domestic to the US, and that is simply an enduring reality that either major political party in the United States will expect, does expect, and will continue to expect a more responsible, equitable sharing of the burden for European security, especially as our European allies have moved forward politically by way of integration, but also advanced on the prosperity front with regard to economies.

So it's both geostrategic and domestic.

RL: Jordan, I'd like to turn to you now, that as far as the history of the burden-sharing debate, and Doug pointed to this, President Trump was possibly the most vociferous in calling out the allies, but he has not been the only US leader to do so. Where does this debate stem from and how far has it gone back?

JB: I mean, I think it really goes back to the birth of the Alliance. I have not seen any sort of clear documentary evidence that President Truman or his staff were concerned about European defense spending, but it certainly goes back to the Eisenhower administration.

There's evidence in each administration from Eisenhower to present, of concern with transatlantic burden-sharing and a desire for Europeans to do more. But the challenge has always been that it's difficult to ask allies to do more without relinquishing a little bit of control and authority over how the alliance functions. That's been the dilemma that the United States has faced, autonomy versus control in the burden-sharing context.

RL: And Doug, where do we stand now as far as what have the allies agreed to? There's a lot of talk about the Wales summit pledge. A lot of pundits, observers, politicians on both sides of the Atlantic cite the Wales summit pledge. What is that? Can you explain that a little bit to our audience?

DL: Well, in short, Jordan and I were both sort of present at the creation at the US mission to NATO in 2014 when NATO allies came together for a summit in Wales and agreed for the first time ever at the head of state and government level on a pledge for defense spending. And this is the now infamous 2 percent of GDP committed to defense spending and 20 percent of that committed to capital investment, new equipment, and so forth. There were also some pledges towards output measures that got less publicity. But the Wales pledge was largely 2 percent of GDP. 

And at the time of Wales in 2014, the wording is important. So it's important to actually go back to the source document here, which is the pledge itself, agreed by the then 28 leaders, including President Obama in the chair for the United States, and it says that allies agree to move towards 2 percent of national GDP committed to defense spending in ten years. So it was a ten-year program and it was actually quite modest because of that clause “move towards 2 percent.” 

I remember poignantly my German colleague, the ambassador from Germany who at the last minute in order to reach consensus and bring Germany into consensus with the others, had to insert that clause, “move towards,” as opposed to “be at” 2 percent in ten years. But nonetheless, it became the shorthand 2 percent of GDP committed to defense. And of course, the Washington summit in 2024 capped that ten-year period. So the decade from Wales to Washington was essentially the pledge period. And when the pledge was signed in 2014, I think there were only three allies who were at or above 2 percent. 

And ten years later at the end of the pledge period, if you will, at the Washington summit this July, there are now 23 of now 32 allies. So roughly three quarters of allies are at the pledge mark, which is a significant advance for a pledge that would actually cause you a close reading to suggest that it was a pretty modest pledge. But it had a pretty significant, pretty impactful outcome with 23 of 32 now there at or above 2 percent.

RL: So Jordan, a lot has been made about the Wales Summit pledge and how this is a focus on defense investment inputs, the 2 percent for overall defense spending, the 20 percent for capital investment. What's the crucial factor on focusing on inputs and how that affects outputs? What is more important in this debate, inputs or outputs?

JB: So that's a very critical question, Rick. And of course, at the end of the day, outputs are most important. The reason we have inputs is to achieve outputs, not just in defense investment, but in most things that we do.

The challenge in the debate, and I think we've come a long way in this debate, is essentially the relationship between inputs and outputs. So in those early days, during the negotiation of the pledge and immediately after the pledge at Wales—which I actually want to add that the language is actually even more mild than the two of you just discussed because it wasn't just move towards, it was aim to move towards, so it was highly caveatted, very, mushy language. What Ambassador Lute just said is actually, in my view, quite impressive that there's been so much progress despite the sort of mushiness of the language. 

But part of the debate then in those early days was about this relationship between inputs and outputs.

And there were some allies and some commentators who were indicating that, hey, this is just a very blunt instrument and it's all about efficiency of gaining, essentially minimizing costs and maximizing output, which is, you know, that briefs well. But the reality, which I think we show pretty well in the War on the Rocks article, is that outputs are exceptionally strongly correlated with inputs. The results of the econometrics are sort of an upside surprise to me or were when I first analyzed it.

I would have expected there to be a little more slip between the cup and the lip. That is to say, a little larger gap between what allies invest monetarily and what they get in terms of measured capabilities. But the correlations are remarkably tight.

And I showed that in the War on the Rocks piece that I wrote back in 2015 when this was sort of an open debate. And there's now some new data. A guy named Mark Suva at Florida State has quite a nice military capabilities data set that I used to do the work in the more recent War on the Rocks article that Ambassador Lute and I wrote with our colleague, Drew Webster.

So I think this is, I'm sure it is not going to remain a settled debate. I'm sure there will still be people who suggest that you know you can get more for less. But the headline for me, both intuitively and econometrically, is that actually you get what you pay for.

DL: You know, Rick, let me just add one thing here. Jordan's been at the forefront of making this provable connection between inputs and and outputs. But at the time of the Wales Summit, it was inputs that were achievable politically in terms of the pledge. 

And they were achievable only with this very modest language because the debate inside the alliance was unclear. And we didn't have full consensus. And of course, in order to be signed by the heads of state and government and Wales in 2014, you needed a vote of 28 to zero, right? You needed full consensus. 

So it's interesting that the critique comes from some who say, well, you're measuring the wrong thing, inputs, not outputs. But as Jordan and others have shown, there's a close correlation. And from others, a critique comes from, well, this is so modest, because a major European ally, for example, could abide by the Wales pledge and commit one euro more at the ten year mark or just aim to commit euro or more at the ten year mark and still be obeying the pledge. But in both cases, those critiques proved to be sort of not well informed and they didn't play out of practice because in fact today we're at 23 out of 32.

RL: I should say this is an opportune time to say that Colonel Jordan Becker's views are his own and do not reflect the views of the US Army or the Department of Defense.

DL: And for those who know and work with Jordan Becker, you'll appreciate that he has always been, that disclaimer has always applied to Jordan Becker, that his views are always his own.

JB: That is correct.

RL: And of course, this so that the article that we're talking about, the time for Europe to step up is now, was also co-written with Andrew Webster, and he's a US Army officer, a West Point instructor of economics. So we should say that Andrew had the pen as well.

Jordan, I want to press you on this just a little bit, because as an outside observer, it seems like measuring inputs is relatively straightforward. But as far as measuring outputs, is this simply counting tanks, counting missiles, or is it something more? How do you get at the effectiveness of outputs and capabilities when it comes to defense?

JB: There's a reasonably lively conversation among economists insofar as conversations among economists can be lively about the relationship between inputs and outputs. And this is not only a defense economics question, it's generally a public economics question.

But generally the place I would say that conversation is, is we talk about inputs, intermediate outputs, and outputs. So the inputs are the dollars we put into our defense budgets. It's probably important to note at this stage that those dollars are divided amongst different priorities. NATO and the EDA and various national defense ministries, sort of slice those into four big categories, which are personnel; equipment, which is end-items equipment; modernization; operations and maintenance, which is munitions, training, fuel, day-to-day expenditures; and infrastructure, which is like basing in facilities.

So those financial inputs are—if you imagine a continuum from left to right, from inputs to final outputs, those are the initial stage inputs. Then we have these things that we call intermediate outputs or that economists call intermediate outputs. And those are things like tanks, planes, bombs, trucks.

Those are the things that we can measure that we call outputs. There are also sort of non-material outputs that the European Defense Agency has endeavored to measure, things like the deployability of forces, sustainability of forces. But as you get less material, it gets less easy to measure. And then at the end of the day, the final outputs are very difficult to measure.

We can probably measure them as binary outcomes. It's a one if it happens and a zero if it doesn't happen, those are things like war and peace. Has my country been invaded by a hostile force? Have we maintained the territorial integrity of our national space? And then it can get even more nebulous: Are human beings living in my society safe and secure to live their lives as they please, et cetera. So basically as we move from inputs to final outputs, measurement becomes more and more challenging. And my argument is that up to the point where we can measure, which is sort of these material outputs that are sometimes called intermediate outputs, there is an incredibly strong correlation between inputs and outputs.

And I think historically, this is difficult to analyze econometrically. A lot of it is a judgment call on the part of elected officials. But generally, countries are safer, particularly from external aggression, if they have more capable militaries. And material capabilities generally translate into some level of security.

DL: You know, Rick, when you aggregate that question between inputs and outputs to the NATO level, so now collective security, I think the most important current output measure is the ability of NATO to resource its three newly adopted regional defense plans: plan north, plan center, and plan south, and the assignment of responsibilities in terms of military capabilities, so high-end air defense, combat brigades, transportation capabilities, long-range precision fire capabilities. Those responsibilities have been assigned to NATO allies for the three regional plans. 

And I thought what was missing at the NATO summit in Washington was a touch of transparency into how we're doing it about the two-year mark in meeting those assigned responsibilities.

Now, you can appreciate that NATO is not anxious to display this fully and publicly, because it might display or might reveal vulnerabilities, shortcomings and vulnerabilities.

And plus, for some, it might be embarrassing that responsibilities are not being met. But I would certainly hope that behind closed doors in the classified settings. For example, annually at defense ministers meetings defense managers are being shown the three regional plans and how we're doing with what I consider the most important output measures at this point, which is meeting national responsibilities for those three regional defense plans.

JB: Doug, I'm in complete agreement with you. What Ambassador Lute just said is really important. And I think it's a good segue into what the allies did at Washington. The thing that jumped out at me about the way these issues that we're discussing here and that we have thus far discussed in relation to the Wales Summit Declaration ten years ago.

The things that I really took note of in the Washington Summit is that there's a much more explicit and clear connection between threat assessments, operations and exercises, operational planning, and defense planning and resource allocation.

So those regional plans, to which Ambassador Lute was referring, will certainly figure into defense planning at the classified level and will affect capability targets. And that struck me as a very positive development in terms of language of the Washington Summit.

DL: And Rick, just to reiterate the main point, I mean, we're at a stage where the outputs of the allies when collected into NATO defense plans, like regional defense plans, north, center, and south, are I think the most important output measure. I'd like to see a touch of transparency with regard to how we're meeting those capability targets. So who's stepping up and who's yet to step up. And while we don't need to display this publicly, because of the potential for revealing vulnerabilities and exposing ourselves, I do think NATO needs to be a little more self-confident enough that it can in effect look in the mirror and judge how it's doing with regard to its own commitments, its own internal commitments. And I'd like to see more of that.

In an ideal world, I would set aside one session a year, across the three defense ministers meetings every year, that is committed to this question: How are we doing in terms of resourcing the regional plants? Because I think they remain the most significant output measure.

RL: I know that there's a requirement that no NATO ally would contribute more than 50 percent to a specific mission or requirement. How does that rule or or agreement factor into these three defense plans, if at all?

DL: Well, it's a long-standing sort of benchmark, not so much a hard and fast rule because if it's a rule, we've been breaking that rule for decades because the rough proportion of capabilities today is 70 percent, US, 30 percent, all others. So that's a long way from not more than 50 percent by any one ally. 

But to some extent, frankly, I was surprised when I got into the details at NATO to learn that the US is somewhat responsible for the fact that we've assumed such significant responsibility for European defense and if in effect let our European allies off the hook. 

And we did this by way of our participation in the defense planning process when let's say that the scenario planning back in the day called for six carrier strike groups right and there would be

a bidding going out to all NATO allies, well, who can provide the six carrier strike groups? 

And for years, the US answer is we got it. We'll provide all six. And of course, if that's the case, NATO feels self-assured that its defense commitments are being met. 

And the US really hasn't made any hard choices with regard to committing to Europe versus committing to the Asia Pacific. So we sort of distorted the NATO defense planning process by way of our generosity, right? And maybe our sort of bureaucratic ineptness. And we let European allies off the hook. I think those days are over. And we made much more explicit recently that the US is gonna make some hard choices with regard to these, especially these high-end enabling capabilities when it comes to what we are ready to pledge to NATO and what we're ready to keep essentially to ourselves for Asian Pacific contingencies.

RL: Jordan, now I wanted to ask you, going back to your work in this article a bit, about what motivates, what encourages allies to meet pledges like the Wales pledge.

Is it harsh language associated with President Trump and others, naming and shaming allies? Is it specific threat perceptions of individual ally countries? Or is it hard-won agreements like the one at Wales, or agreement at the Vilnius Summit? What are the roles of these different variables in getting countries to reach the 2 percent and beyond?

JB: That's another good question, Rick. All three of those things play a role. Threats from adversaries, threats from allies, and then ah you know institutional consensus, institutions and norms.

The evidence that I have looked at indicates that the harsh language by itself is useless and potentially worse than useless. So we did a computational analysis of language used by presidents going back to actually the Truman administration all the way up through the Trump administration. We didn't have data from the Biden administration because we did this sort of thing toward the end of the Trump administration, beginning of the Biden administration.

There's no evidence that just sort of harsh language by itself has any effect on allied behavior. There's some evidence that there is potentially even a long-term negative effect where allies maybe shift resources out of long-term investments and into short-term investments as a sort of palliative for angry American interlocutors.

The caveat to that is that that does not necessarily mean that all naming and shaming are ineffective because the agreements like the Wales pledge and like the Vilnius pledge have an undercurrent of naming and shaming beneath them, but it's consensus-driven naming and shaming.

It's all allies coming together, agreeing at the full measure of the alliance that these actions need to be taken. Then there's implicit naming and shaming involved in not taking them. Then when we publish, I can tell you now from publicly available information that there are six allies who are not spending over 0.4 percent of GDP on equipment. And all those six allies are below 2 percent of GDP on defense. That's publicly available information. We can say that in a sort of non-harsh, non-judgmental way in the hopes that those allies will be shamed into changing that behavior. So the relationship between harsh language and naming and shaming isn't a one-to-one relationship.

There is some evidence that external threat drives defense expenditures, but there's also evidence that that's kind of an attenuated relationship. And I think the easiest way to explain that for a radio format is the example of the two Nordic states who have joined NATO in the last two years, Finland and Sweden.

So Finland and Sweden ostensibly face the same sort of structural threat environment that the Nordic states that were in NATO in 2014 faced. That's Denmark and Norway. So they have North Sea, Baltic Sea coasts. Finland has a long exposed border to Russia. So if anything, Finland is more vulnerable from a material threat standpoint than any of the other Nordic countries.

But then 2014 happened. There were sort of real world events. Russia's invasion, illegal annexation of Crimea in eastern Ukraine suggested that Russia was a far more significant material threat than many allies and non-allies wanted to acknowledge at that time. The Wales pledge occurred just a couple months following that in September 2014. And Denmark and Norway quickly moved to spending more on defense. For Denmark, it took a year because they have a process wherein they agree defense plans across the parliament. But basically, we saw a fairly significant change in Danish and Norwegian defense spending. We did not see such a change in Finnish or Swedish defense spending. 

If material threat, bad behavior by Russia and proximity to Russia were all that was driving changes in behavior, we would have expected to see much more, particularly from Finland, but also from Sweden, and we didn't until much more recent years. So I think that's the best way to illustrate the sort of ambiguous effect of threat. And of course, threat is also a matter of perception, which is much more difficult to measure. But there are ways to do that, and I do that in my academic work. That's probably a little arcane to delve into in this conversation. So I'll just leave it there. The headline there is I would say that sort of hard-won consensus is generally more reliable than threats from either allies or adversaries.

DL: Well, let me just push back a little on Jordan. First of all, Jordan is much more a political scientist than I am. So maybe I'm a practitioner or a casual observer, but Jordan is the scientist on this podcast. But I'd also note that in 2022, the threat perception was so strong that Sweden and Finland actually reversed several centuries worth of national tradition and joined the alliance. And so it's pretty clear at that point in 2022, with the obvious large-scale conventional invasion of Ukraine by Russia, that threat perception did make a significant difference.

And also, just anecdotally, sometimes in public forums I'm asked, look, you were the ambassador to NATO in 2014 when the Wales pledge was signed, Obama's in the chair.

Obama's replaced by Trump. They had two very different styles in terms of holding allies accountable for defense spending. Who was more effective? Who's more accountable for the increase in defense spending across NATO? And now you've had ten consecutive years of real increases in other than US defense spending. So who's responsible here? Was it President Obama or was it President Trump? And my shorthand answer is you’ve got the wrong president. It was Putin who's most responsible for that ten-year pattern of increased European defense spending. So I lean a little more heavily than Jordan, perhaps, and perhaps more than the data actually shows. I lean more heavily on threat.

JB: So I can do something here that I often do, which is support Ambassador Lute's intuition with data. And I think what this is about is threat perception.

With threat perception, the data conceives of these things as continuous variables. It’s much easier to look at monotonic and linear relationships between variables. But I think the way threat perception works and what Ambassador Lute explained about President Putin—Finland and Sweden is a good example of this—threat perception really is kind of a threshold variable. It’s not the boiling frog. Countries experience rapid changes in terms of threat perception. And those two countries are a good example. They didn't see it until they saw it. And then when they saw it, there was a significant change.

So I don't think the data and Ambassador Lute's intuition are mutually exclusive. I think they support one another.

DL: Well, I think that's a good point. That's well put.

RL: And as far as where we are this summer, having the the Washington summit just in July, the NATO Secretary General Jen Stoltenberg at the time coming out before the summit and asserting that now two thirds of allies have fulfilled their commitment to at least 2 percent of GDP in annual defense spending, I think 23 out of 32 by the numbers.

Of course, we have in the Vilnius Summit Declaration last year in 2023 that the 2 percent would be seen now as a floor and not a ceiling of its defense spending. Ambassador, now the last question for you.

Now that we've had these hard-fought pledges, the Wales Summit pledge, the Vilnius pledge, which is relatively new, of course, and that it seems to be effective with more than two thirds of allies now meeting the 2 percent: Where do we go from here? Is it two and a half? Is it three? Should we not even be talking about input? Should we be talking about other things instead? Where do the allies collectively go from here in terms of defense spending and investment?

DL: Well, I think if your listeners take anything from this podcast, it's that inputs count. And so we shouldn't discard the power and maybe the domestic political power of a narrative that hinges on inputs, right? First of all, it's understandable. And as Jordan's research has revealed, it's actually closely correlated to output. 

The shift I would like to see, Rick, is the one I mentioned earlier. And that's a shift towards specific measuring of outputs, specific measuring of progress towards the assigned capabilities for the three regional defense plans. Now, the trick here is that this is unlikely to be done publicly because we don't want to disclose any potential capability shortfalls which translate into vulnerabilities. But I think NATO needs to be much more self-regulating, self-policing, and internally honest with itself with regard to these three defense plans. So as I mentioned earlier, what I'd like to see is defense ministers who take this on at face value and have a very hard and regular conversation about who's meeting their output measures with regard to the three defense plans.

RL: Ambassador Lute, Colonel Becker, thank you so much for being on the show today.