Thinking The Unthinkable: The Economist


DeM Banter: What could possibly go wrong? Interesting times ahead, that’s for sure… this should seriously cause Americans to lay awake at night and wonder, what should our Federal Government be responsible for? Defense? The decay won’t happen over night by any stretch…but like I often ponder…where will we be in 5-10 years? Thoughts?

The Economist
February 9, 2013
Pg. 69

The sequester and defence
Hopes of a reprieve for the Pentagon from $55 billion a year in cuts are fadingThe automatic cuts imposed by Congress’s “sequester” on America’s budget fall heavily on defence, which accounts for at least half of discretionary spending. Faced with 9% across-the-board reductions, Leon Panetta, the outgoing secretary of defence, stalled for time. Thanks to the “fiscal cliff” deal done on January 1st, the administration bought the Pentagon a couple of months for his successor to prepare for the worst. But little else has changed. Add to this the similarly sized cuts in the defence budget already agreed on in 2011, and Pentagon planners who two years ago thought they would have $600 billion to spend this year will now have to make do with about $486 billion. Service chiefs are already wailing about a “readiness crisis” and a “hollowing out” of the force.

The reality is even worse than the figures suggest. Military personnel costs, which absorb 34% of the Pentagon’s spending, count against the overall budget cap but are exempt from the cuts. Overseas operations are not exempt, but will be given priority. All other programmes and commitments will therefore have to be cut by around 15%, with little discretion over how and where the cleaver will fall. Another problem is that “continuing resolution” (CR) funding at 2012 levels could well be extended for six more months on March 27th. Just as the Pentagon rashly hoped that something would turn up to avert sequestration, it also gambled that CR would last for only half the fiscal year.

The short-term consequences of all this are draconian. Up to 800,000 Pentagon civilian employees will be put on a four-day week and reduced pay; almost every contract will have to be renegotiated to cover the next six months and possibly the next nine years (the sequester’s $55 billion-a-year defence cuts do not end until 2021). There will be heavier spending this year on things that are not wanted (for example, main battle tanks) while other programmes (such as the new aerial tanker) will be delayed. Senior officers in all three services are most worried about cuts in training and readiness that might jeopardise the availability of forces in possible crises next year and the year after.

The longer-term consequences are harder to judge. After this year, assuming that Congress can agree on a budget and the sequester remains in effect, the cuts can at least start to get a bit more astute. Todd Harrison of the Centre for Strategic and Budgetary Assessments says: “Large acquisition programmes are large targets.” They don’t come any larger than the F-35 Joint Strike Fighter. Michael O’Hanlon of the Brookings Institution, a think-tank, reckons that the Pentagon’s current order for 2,500 or so aircraft could be reduced by half. Mr Harrison thinks that given the rebalancing of forces to the Pacific, the army’s main programmes for new ground vehicles will also be “in trouble”.

Given that pay and benefits are absorbing an ever-greater proportion of the Pentagon’s budget (up from 30% in 2001 to 34% today) it would make sense, as the administration has argued, to try to curb rising costs. But Congress has shown no appetite for such restraint. The result will be a much smaller army, perhaps down to 400,000 from today’s 500,000, and a Marine Corps reduced from 182,000 to about 160,000. That would place in doubt the so-called “two-war standard” that has been the bedrock of American strategy for decades.

Although congressional hawks on both sides of the aisle are disturbed by what all this may mean for America’s standing in the world, so far they seem to be losing the battle with their colleagues to mitigate the sequester. For the Pentagon, lean years may lie ahead

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