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Silver Lining Hard to See in Budget Chaos

January 1, 2014
By George I. Seffers
E-mail About the Author

Cuts could last much longer
 and go much deeper than expected.

  • Historical trends indicate that major defense programs like the Joint Strike Fighter could be endangered by deeper than expected budget cuts.
     Historical trends indicate that major defense programs like the Joint Strike Fighter could be endangered by deeper than expected budget cuts.
  • Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey, USA, appears before the Senate Armed Services Committee. Pentagon leaders have a short window of opportunity to reconcile strategy to the current budget realities, according to analysis by the Center for Strategic and Budgetary Assessments.
     Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey, USA, appears before the Senate Armed Services Committee. Pentagon leaders have a short window of opportunity to reconcile strategy to the current budget realities, according to analysis by the Center for Strategic and Budgetary Assessments.
  • U.S. Navy Landing Craft, Air Cushion 81 departs the amphibious dock landing ship USS Tortuga (LSD 46) during an joint exercise with Japan. Budget chaos could threaten plans to shift forces to the Asia Pacific region while maintaining a presence in the Middle East.
     U.S. Navy Landing Craft, Air Cushion 81 departs the amphibious dock landing ship USS Tortuga (LSD 46) during an joint exercise with Japan. Budget chaos could threaten plans to shift forces to the Asia Pacific region while maintaining a presence in the Middle East.

Historical trends during military drawdowns indicate that current Defense Department budget cuts could last for more than a decade. This situation could endanger major acquisition programs and negatively impact the ability of the United States both to pivot forces to the Asia-Pacific region and to maintain a presence in the Middle East, experts say. But the department may have a short window of opportunity to reconcile strategy with lower budgets.

Pentagon officials and military leaders have been working on the Defense Department’s longer-term budget and strategy to reflect the realities of sequestration. In the keynote address before the Center for Strategic and International Studies’ (CSIS) Global Security Forum, November 5, 2013, Defense Secretary Chuck Hagel said a needed realignment of missions and resources is being undertaken across the department that will require significant change across every aspect of the enterprise. During his first weeks in office, Hagel said, he directed a Strategic Choices and Management Review that over several months identified options for reshaping the force and institutions in the face of difficult budget scenarios.

But some experts say the department’s actions may be too little, too late. “The Defense Department is much more focused on the short-term consequences of budget cuts and sequestration in particular. They seem to be much more focused on the near-term readiness consequences,” says Todd Harrison, senior fellow for defense budget studies, Center for Strategic and Budgetary Assessments (CSBA), a Washington, D.C., think tank. “Those are important, but I don’t think they’ve done the serious long-term planning to understand what the consequences will be in 10, 15 or 20 years. They’re behind the curve on that kind of planning.”

The department’s Strategic Choices and Management Review conducted last summer, for example, considered three different budget levels, with the sequestration budget caps being the lowest, Harrison points out. “The planning within the Pentagon has been focused on the assumption that the budget caps are the floor.” Instead, the budget caps may be the ceiling, he says. “The Defense Department’s worst-case scenario is more likely to be the best-case scenario,” Harrison declares.

Furthermore, the Defense Department and both houses of Congress were planning 2014 budgets that did not even meet the caps. “Everyone’s been planning for something that can’t happen under current law. We need to bring planning in line with realistic budget expectations,” he states.

Harrison authored a recent CSBA study that assessed the current situation through the lens of previous budget drawdowns. The provocatively titled report, “Chaos and Uncertainty: The FY 14 Defense Budget and Beyond,” raises the possibility that future budgets could be even lower than the current budget caps, in part because this drawdown is an anomaly. “This drawdown is different because this buildup was different. Over the past decade, defense spending grew significantly both in war funding and in the base defense budget. But we did not see an increase in the size of the military. We have the same end strength now that we did in the beginning of the buildup,” Harrison points out.

Furthermore, the Defense Department did not recapitalize its major weapon systems during the latest buildup. The inventories of aircraft and ships are roughly the same as prior to the buildup, and ground forces are actually smaller, he asserts. “So, we’re starting this downturn in a bad position where we don’t have a force that grew in order to cut. We don’t have an inventory of newer equipment or greater quantities of equipment to afford cuts. We’re starting at a disadvantage in this downturn, and that’s going to make it much more difficult,” Harrison points out, adding that the increased budget was used for higher personnel compensation costs, higher operating costs and acquisition programs that were cancelled without equipment being fielded.

The past two downturns—post Vietnam and the 1980s—resulted in nearly identical acquisition budgets of roughly $62 billion in today’s dollars, according to CSBA’s analysis. “The worst-case scenario is that could happen again,” Harrison asserts. “It would not even be as steep a decline as we saw in the 1980s if it fell to $62 billion this time around. That is a decline of about a third from where we are today in procurement spending. It would be catastrophic for a lot of the acquisition programs planned over the next decade.” Although the worst-case scenario is not likely, it is plausible, he suggests.

Under the worst-case scenario, the defense acquisition budget would drop from today’s $99 billion to $62 billion. But the Joint Strike Fighter, the next-generation bomber, the Air Force’s new tanker program, the Navy’s submarine programs and the Army’s Joint Light Tactical Vehicle program all could be negatively impacted. “They can’t all fit in there at the same time if the budget is being cut by that much. Not that they will be outright cancelled, but that they’ll be chipped away at and delayed over time,” Harrison theorizes. “If the budget cuts are deep, if we’re closer to my worst-case scenario, then I don’t see how these programs survive in their current form.”

Additionally, the intended strategic pivot also could be affected. “Whether it’s the budget caps or that historical drawdown scenario, we’re going to have a hard time carrying out the pivot to Asia and trying to maintain our level of presence in the Middle East. Those two objectives are on a collision course,” Harrison indicates. “The steeper the drawdown, the sooner that collision will happen.”

Harry West, a former U.S. Army deputy comptroller and an associate with Burdeshaw Associates, a Bethesda, Maryland, consulting firm, agrees that the strategic pivot to the Pacific may be impacted, and he pinpoints personnel costs as a major factor. Those costs will likely double as forces shift to the Asia-Pacific, West says. He expresses confidence the Pentagon will find a solution, but says he is surprised the defense leadership hasn’t focused on the personnel costs sooner. “They’ll resolve it. They have to resolve it. There’s no option not to resolve it,” West says. “Secretary Hagel has just now started to talk about [human resources costs]. The Quadrennial Defense Review (QDR) is probably the best way to get the facts on the table so that there’s a good understanding of how quickly the migration of forces drives costs even higher. We get a double whammy there that they’re going to have to deal with.”

Hagel indicated in his CSIS address that the QDR will be used to prepare for long-term military readiness, which he says has suffered under sequestration. Harrison, meanwhile, describes the QDR as a narrow window of opportunity to coordinate the defense strategy with new budget realities.

Harrison also advocates submitting a fiscal year 2015 budget in line with the budget caps to illustrate for Congress the real effects that sequestration will have. The downside to that approach, he offers, is that it would be seen as conceding to sequestration spending cuts that defense officials would prefer to fight. “The effectiveness of the department in trying to argue against the cuts has been limited. They’ve not been successful to date, so I don’t know why they think they would be successful in the future. They would gain a lot more by actually having a plan in place to implement the cuts rather than stumbling into them year after year after sequestration,” Harrison says.

He adds that it is hard to find a silver lining in the current budget situation. The only bright side, he says, is that the argument in Congress really has nothing to do with defense spending. It is about revenue levels and spending levels for other programs such as Social Security, Medicare and Medicaid. “But that also means that defense is at the mercy of whatever compromise they can or cannot work out,” he concludes.

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