Defence spending Squeezing The Pentagon: The Economist


DeM Banter: For a country that has produced some of the most incredible leaders in world history…and having only been around 200+ year…it is sad to see such a leadership fail.

The Economist
July 6, 2013

The wrong way to cut America’s military budget

WASHINGTON, DC — Some attacks come out of nowhere. Others arrive with plenty of warning. The 2011 Budget Control Act (BCA), also known as the sequester, was one of the latter. But for a long time the Pentagon ignored it, assuming that the cuts to defence spending it contained would never happen.

Those cuts — $500 billion over the next nine years, on top of $487 billion already under way — were designed to be so painful that they would force Republicans to do a budget deal with Barack Obama to avoid them. But it turns out that Republicans hate taxes even more than they love the armed forces. No deal was reached. On March 1st the sequester began.

Struggling to find savings of $37 billion in the rest of this fiscal year, the Pentagon is at last making serious plans. This month it is expected to produce a report outlining the impact of the $52 billion-worth of cuts that are heading its way for the next fiscal year, which begins in October.

The president’s 2014 defence budget request, published in April, made no concession to the spending caps demanded by the BCA. Unrevised, it would mean that the cuts would either be applied by Congress (highly unlikely) or imposed across the board. That would make it impossible for the Pentagon to set priorities: outdated programmes would be over-funded and vital new ones starved of cash.

Some in Congress hope for a deal to limit next year’s cut to 5% of the Pentagon’s budget. But that is improbable. The defence secretary, Chuck Hagel, would be wise to plan for the full 10% BCA cuts for years to come. And he must do so even as America’s changing strategic priorities — Mr Obama’s partial winding down of the “war on terror” and the new emphasis on “rebalancing” towards Asia — require a different kind of military.

By next year the Pentagon must deliver its Quadrennial Defence Review (QDR). The previous one in 2010, conducted while two big wars were raging, was almost deliberately unimaginative. The 2014 QDR, on which work has begun, will have to be more radical and reformist — qualities not always associated with the Pentagon.

How tight is the squeeze? Mr Hagel’s predecessor, Leon Panetta, said the sequester would “virtually devastate” national security. Others accuse the Pentagon of crying wolf. Defence spending, some lawmakers and pundits argue, will continue to grow (in nominal terms) despite the sequester. At worst, they say, it will return to the level of a decade ago, before George W. Bush opened the gusher to wage war on terror. In short, the sequester will be little different from previous retrenchments after wars have ended.

Neither is right. Whatever happens, America will remain the world’s pre-eminent military power, accounting for around 40% of global defence spending. Its allies will account for much of the rest. That said, if the sequester continues, it will be far from business as usual.

During previous wars, America vastly increased the number of men in uniform. During the current build-up, its forces barely grew at all, notes Todd Harrison of the Centre for Strategic and Budgetary Assessments (CSBA), a think-tank. “Rather than getting larger and more expensive over the past decade, the military just grew more expensive,” he says. That makes it much harder for the Pentagon to save money by shedding soldiers, as in the past.

Pay and benefits for each active-duty service member grew by 57% in real terms between 2001 and 2012, or 4.2% annually, says Mr Harrison. Overall personnel costs rose by 59% after inflation, even as the number of people employed rose by only 3%. What the Pentagon calls “operational and maintenance” costs per active-duty warrior also grew by 34% in real terms. This reflects a big rise in the number of civilian support staff and a failure to trim excess infrastructure (the Pentagon reckons it has 20% more bases than it needs).

If growth in these two areas continued unchecked, Mr Harrison calculates that by 2024 they would gobble up the entire defence budget. Even when budgets were growing, swelling personnel costs left less money available for buying new weapons and developing new technologies.

Clark Murdock of the Washington-based Centre for Strategic and International Studies (CSIS) estimates the real spending decrease (in constant 2013 dollars and based on current law) from the 2010 peak to the 2021 trough to be a hefty 31%. That is comparable to the drawdowns after the Korean and Vietnam wars. But combined with the Pentagon’s failure to tackle rising costs, he says, this is “a double whammy”.

Making matters even worse, the Pentagon’s procurement system groans under regulatory overload. The Federal Acquisition Regulation rule book — demanded by Congress in the name of fair competition and cost-effectiveness — runs to nearly 2,000 pages. The Government Accountability Office, an official watchdog, estimates that in 2012 alone $74 billion was squandered because of deficiencies in the procurement system. Senator John McCain rails against what he calls the “military-industrial-congressional complex”.

None of this bodes well for the next quarterly review unless both the Pentagon and Congress get serious about reform. This will be difficult: lawmakers hate cutting military pay or closing bases. Even the most obvious economies are hard to make. A recent attempt to save $1 billion a year by using Walmart instead of government-run commissaries to sell groceries to soldiers was stillborn when contractors protested.

Even if they think the sequester cuts too deep, many defence analysts believe that substantial cuts can be made fairly safely, so long as they are well-aimed and spread out over time rather than imposed as a straight 10% annually. In a new book, “Healing the Wounded Giant: Maintaining Military Pre-eminence while Cutting the Defence Budget”, Michael O’Hanlon of the Brookings Institution, a think-tank, argues for defence cuts of about $200 billion over the next decade.

He finds many savings without incurring great risks. He envisages an army and marine corps about 10% smaller than the administration’s current target of 490,000 and 182,000 people respectively. He would reduce the fleet by the same amount using “sea swaps” to allow rotation of crews to ships staying at sea for longer; halve the purchase of “stealthy” F-35 joint-strike fighters to 1,250; trim the nuclear “triad” of bombers, submarine-and ground-launched missiles; and, finally, squeeze military pay and benefits. However, Mr O’Hanlon cautions against radicalism based on the latest “strategic fad”: America cannot always choose the kind of war it wants to fight.

The CSBA’s Mark Gunzinger wants the next review to explain clearly what forces America will need to meet the challenges identified by the president’s new strategic guidance, published last year. Above all, that means being able to project power against foes with sophisticated “anti-access/area denial” weapons, (ie, those that might prevent American forces from going where they want, such as anti-ship missiles). The potential foes in question are China and, to a lesser extent, Iran.

Mr Gunzinger remarks that previous reviews have avoided radical change by simply adding missions rather than setting priorities. Admiral Gary Roughead (a former chief of naval operations) and Kori Schake of the Hoover Institution, a think-tank, say that part of the problem is that the Pentagon traditionally asks for equal budget shares for the army, the navy, the air force and the marines. That may foster inter-service harmony, they say, but it will leave America with an “overcapacity for land warfare and an undercapacity for emerging air, maritime and cyber challenges”.

In May the CSBA brought together teams from three other think-tanks — CSIS, the American Enterprise Institute and the Centre for a New American Security — to explore how to find the savings required by the sequester. All four concluded that only large reductions in personnel, primarily ground forces, were necessary. Three think-tanks recommended cuts in the active-duty army of around 75,000; the CSIS’s Mr Murdock called for cuts of 163,000 (albeit with a bigger reserve) because “that’s where the money is”. All four were willing to take some medium-term risks with readiness and the early retirement of ageing weapons systems in order to keep up spending on promising new technologies. Their priorities were cyber- and electronic warfare, long-range attack drones capable of penetrating sophisticated air defences, space systems hardened to withstand attack, and special forces.

Some hoped that sequestration might force the Pentagon and Congress to embrace change. But few expected this to happen. As Mr Murdock grumbles, “The system hasn’t had the internal fortitude to do it…for the last 20 years.” The sequester need not be a disaster for America’s armed forces. But it could be.

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