Press Call: Pentagon Budget

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Press Call: Pentagon Budget

Pentagon Budget: Insights into the NDAA

Wednesday, May 14, 2014
9:00 AM Eastern Time

The Pentagon Budget Campaign co-hosts press call with the National Security Network.

With the full House of Representatives preparing to consider the 2015 National Defense Authorization Act (NDAA), the experts on this call will provide insights into some of the contentious issues that might arise during the debate. The experts will also discuss questions surrounding the Overseas Contingency Operations account, and assess the impacts of sequestration on the Defense Department.


Gordon Adams
Professor of International Relations at the School of International Service, American University
Dr. Adams served as Associate Director for National Security and International Affairs at the Office of Management and Budget, from 1991 through 1997. In that position he was the senior White House official for national security budgeting in the Clinton administration. He appears frequently in the print and electronic media as an expert on foreign policy, and national security policy and budgets, and writes a regular column on national security issues for the web version of the Bulletin of Atomic Scientists.

Lawrence Korb
Senior Fellow, Center for American Progress
Dr. Korb served as Assistant Secretary of Defense from 1981 through 1985. In that position, he administered about 70 percent of the defense budget. Over the past decade Dr. Korb has made over 2,000 appearances as a commentator on such shows as “The Today Show,” “Face the Nation,” “60 Minutes,” and “The O’Reilly Factor.” His more than 100 op-ed pieces have appeared in such major newspapers as The Washington Post, The New York Times, The Wall Street Journal, The Washington Times, and The Christian Science Monitor.

Lt. Col. Tony Shaffer (Ret)
Senior Fellow, London Center for Policy Research
Lt. Col. Shaffer is a retired US Army senior intelligence officer, with over 30 years of experience in counterterrorism, counterintelligence, human intelligence and irregular warfare. He is a recipient of the Bronze Star and has commanded several key strategic units, and served in multiple capacities across the full spectrum of the US Defense and intelligence communities. Lt. Col. Shaffer is also the author of NYT’s bestseller Operation Dark Heart, and is a frequent guest on numerous news programs including Fox and Friends, MSNBC’s The Cycle and Fox News Radio’s Kilmeade & Friends.


John Bradshaw
Executive Director, National Security Network
Mr. Bradshaw previously served as the Executive Director of the Enough Project at the Center for American Progress, the Washington Director of Physicians for Human Rights, and the coordinator of the Human Rights Leadership Coalition. He is a former Foreign Service Officer and served in Venezuela, Brazil, and Burma, as well as in the State Department’s East Asia and Human Rights bureaus.


To listen to the press call, click here

Please note that the audio for the call starts at 00:22:58.



JOHN BRADSHAW:Good morning everyone. I am John Bradshaw, the Executive Director of the National Security Network. This morning we are hosting a call along with the Pentagon Budget Campaign to talk about the National Defense Authorization Act (NDAA). As you know this week there was a markup in the House Armed Services Committee, and next week the bill will be on the floor in the House.

Today we have three panelists. First we have Gordon Adams who is a professor of International Relations at the School of International Service at American University and is a former Associate Director for National Security and International Affairs at the Office of Management and Budget. By the way you should have more full bios of all of ourpanelist in the advisory that was sent around. Next we have Lt. Col. Tony Shaffer (ret.) who is a Senior Fellow at the London Center for Policy Research and a former U.S. Army senior intelligence officer with over 30 years of experience. Then we will have Larry Korb who is a Senior Fellow at the Center for American Progress and a former Assistant Secretary of Defense.

We will start with Gordon who will talk about how the House Armed Services Committee markup created a bill that defends pork over readiness and over sensible long-term defense planning. Tony will talk some about the readiness issue, also about the quadrennial defense review (QDR) and for structure issues. Then Larry will talk about how the markup stayed within the sequester limits, but at the same time undermines that with varies items that he will go into including the Overseas Contingency Operations (OCO) funds.

After the first presentations we will have Q and A when you do that please mention your name and the outlet you are with… When you are not speaking, both panelist and reporters please put your phones on mute. With that I will turn it over to Gordon Adams, go ahead Gordon.

GORDON ADAMS:Thank you very much. Thank you all for participating in this press event. I want to start by a quick context then say a little bit about what the House Armed Services Committee has done so far. The backdrop is that the defense budget has been coming down since 2010. We are in what I would describe as a classic defense builddown. It is not going away. It’s going to stay with us. It is being driven by things that are external to the Department of Defense: bigger politics on the Hill, serious concerns about federal spending and the deficit,and about the economy. Defense is not the issue it used to be and the budgets are not the budgets we used to have.

The Defense Department has taken itself a fairly long time to adjust to the reality that the budget is coming down. [Former Defense Secretary Robert] Gates made some adjustments, not enough. [Former Secretary of Defense] Leon Panetta worried a lot about sequester, did not make enough adjustments. And now [Defense] Secretary [Chuck] Hagel has come forth with what is really his own first real defense budget and it begins to make the adjustment, but not entirely. I think Larry is going to talk a little bit later about the degree to which even the Pentagon’s own budget request is above the amount of money that is likely to happen. It’sthe amount in the Budget Control Act for August 2011.And in my judgment that August 2011 sets the baseline for defense. We are in the era of flat and declining defense budgets. It looks like the same kindof drawdown that we have experienced after Korea, after Vietnam, after the end of the Cold War. Budgets are likely to go down. They are heading that way, towards about 30 percent decline from peak to troth in a drawdown. And in a drawdown you face exactly the same kinds of choices that every previous drawdown has faced. How big is the force going to be? What kind of equipment is it going to buy? How are we going to handle the costs for the pay of benefits to the force? What are we going to do about the Pentagon’s back offices? It’s the same four choices that every Secretary has always faced in a drawdown.

This department under Secretary Hagel has at least begun a process of recognizing some of this reality. We will instill in their projected budget be spending it at unprecedentedly high levels in constant dollars. But they have asked for a number of things that would help them to begin to manage some of those issues. They are bringing down the size of the Army. They are bringing down the size of the Marine Corps. They have made a number of requests about equipment, which I will come back to. They have made a number of proposals about pay and benefits. They have made a number of proposals about shrinking the size of defense infrastructures through another base closure round. I would say they have not fully tackled the problem of the largest infrastructure in the Department of Defense, but we are beginning to nibble away at it.

What is very striking about the House Armed Services Committee, which is the first Committee that has acted on this budget request, is in a sense of how old fashioned and irrelevant they have made themselves. While Chairman [Buck] McKeon (R-CA) said before the markup that he was going to instruct everyone to pay attention to the fact that budgets were flat and weren’t going to grow and that was going to be the reality, and they had an opportunity to begin to think sensibly about long-term defense planning. They reverted to form. They snapped right back into the form that most Armed Services Committees have always snapped back into.

Now keep in mind the Armed Services Committees don’t actually do budgets. They call it a budget, but the budget is really when the appropriators ask and the money is provided. So what the House Armed Services Committee did was hand off to both the Senate Armed Services Committee to try and fix it, and ultimately to the appropriators who are going to have to deal with the real money. The Committee’s mark in my judgment puts pork and hardware over readiness. It basically says we are going to bet on the come, hope that things get better in the future, we are going to keep stuffing programs into this budget and hope that it survives, we are going to deal with the pet projects of a lot of members of Congress – so they fully fund hardware accounts. There is basically nothing in the budgets proposal from the Pentagon on the hardware side that was touched or that was accepted, and things were put back in there or added that the Department hadn’t asked for.

Additional five EA-18G Growlers, saving the A-10 that the Air Force wanted to cancel – by a little trick by the way, by using an as yet unrequested Overseas Contingency Operations (OCO) amount of money to pay for keeping the A-10 in the force since that money hasn’t been asked for. [30:05] Senator [Carl] Levin (D-MI) has already saidthat I am not going there, that is just not fair. They have put the money back in to refuel the George Washington and keep the carrier force at 11. They have added money for the Tomahawk missile program that Raytheon makes. They have added money for three different helicopter programs. They have basically, did not lay a finger on the hardware side of the budget proposals of the Administration made.

The Administration had asked for the retirement of 11Ticonderoga-class cruisers out of the force, the Committee said no way. The Administration asked for the U-2 to be put to bed and to keep buying the unmanned aerial vehicles in place of it, the Committee said no way. The Administration asked for a base closure round, the committee said no way. The Administration in particular started the process of trying to tackle the gross growth in military pay and benefits by seeking a pay limit at 1 percent pay increase for the troops. The Committee said no way; we are going to pass 1.8 percent. The Administration asked for changes in basic allowance forhouse, the Committee said no way. This is kind of the no way Committee.

They live in the small box that Armed Services Committees live in. They imagine a parallel future where budgets are going to grow. Even Chairman McKeon voted for most of this stuffing of the budget that the Committee wanted to have in it. And the Ranking Member Adam Smith gave a press conference saying how unhappy he was. And the problem comes back to where I started. The reality is that the budgets are going to be flat or declining for as far as the eye can see. It has been going on in fiscal 11, 12, 13 and 14, it will continue in 15 because that was agreed to last year in the budget agreement that Chairman Ryan and Chairman Murray agreed to.

There is a wonderful opportunity here for both the Department and the Committees to seize the batonof planning for the future, and to look towards a proper resizing of the force, to downsize and eliminate equipment that we don’t need in the budget, to reform the pay and benefits architecture of the Department. And above all, something in my mind the Department and Committee have yet to fully tackle, to take on the expenses of the 42 percent of the defense budget that is committed to the back office, the administrative overhead in the Department of Defense. To deal with skinning down 700,000 private service contractors to the Department sitting desk-to-desk with civil servants in the Department of Defense. To skinny down the 340,000 people in uniform who are basically preforming commercial or civilian functions that were defined by the Defense Business Board a couple of years ago. To skinny down the 800,000 person civil service in the Department of Defense.

All of these things have roughly 1.8 million people supporting the work in the field of 1.1 million people in the military. Neither the Department nor the Committee has tackled that seriously. But the last thing the Committee did, which compromises that long-term planning, is to take more than$1 billion out of accounts that front readiness in the operations and maintenance arena and to make sure that funding supported things like the hardware programs the Committee wanted. The trend here is predictable, is inevitable, where the Committee has simply said ‘we are going to stand on a separate island and do our thing and we really aren’t going to pay attention to where the budget overall is heading.’

BRADSHAW: Thanks very much Gordon. We will now turn it over to Lt. Col. Tony Shaffer (Ret.). Go ahead Tony.

LT. COL. TONY SHAFFER (RET.): Thank you for having me on this morning. I would like to reinforce a couple of points that were just made, and also go in some directions which I think need to be examined in more detail regarding the entire construct of defense spending and defense strategy. Let me start with that.

This myth of the hollow force, much has been said about the cut back of troops. And just so you know, I am not a budget guy but I do talk to folks in uniform, general officers both currently serving and formerly serving. There is an understanding that the cuts are coming and there is a need to take the cuts. And if you talk to officers privately, they do understand that there is a great deal of depth still within our ranks. And as much as there has been a great deal about force structure and the hollowing of the force, we haven’t begun to actually get to the point where we are actually affecting any adverse way the overall bottom line number of troops.

And one of the things that has been noted and talked about slightly, but no one has really bought off on, and I think it is something we should note at least, is this potential return to the Cold War. This whole idea that now we have Europe potentially going into chaos because of the issues relating to Ukraine and everything going on with Vladimir Putin and the Russians. This is where I think we need to examine the need for a continuation of some sort of conventional force. Obviously, we have literally tens of hundreds of M1 Abrams tanks. I think we need to examine the needs of a conventional force, we cannot allow it to drive our thinking.

I think right now, from looking at what we have right now in a way of back bench, we still have huge reserve forces that could become to bearing any crisis. It is very critical to continue the drawdown, but at least at some level to have an eye on what we could do in a way of a sustainable return of forces to Europe. And at least Larry remembers this, something called a REFORGER (Return of Forces to Europe) back in the 80s where our political and military resolve to back up our allies. I think we need to maintain some level of credible – we can do it if we need to – regarding the return of forces, but again, to continue the drawdown of overall standing numbers of military forces.

My next point, I think everyone has probably read the Quadrennial Defense Review (QDR), I think we continue to have a science fictionalization of threat and threat issues. And this, the fact that we don’t have a clear strategy of what we are trying to do, what we are trying to achieve globally, this allows for, what Gordon just talked about relating to this over-abundance of focus on hardware not on performance. If you go to the second paragraph of Secretary of Defense Hagel’s opening cover letter to the QDR, it talks about defense structure based on pillars relating to defending the home and building global security by protecting U.S. influence in deterring aggression, and remaining able to win. But what actually does winning mean? Because we haven’t done anything to define these things more clearly this allows for Congress and others to go off the reservation and continue to focus on hardware. This is where I think we needed to man a better working size strategy of what exactly we are trying to do. Otherwise we will continue to see this overreliance, again these huge concepts of we just want to have force structure, we want to have hardware. I think we need to pin down these folks.

And arguably what goes into the QDR is all based on numbers which are built in a box. And I was talking to a senior leader about this, a general who was involved in this process, and he talks about the fact that the numbers that the Pentagon uses, they harvest from combat and command are completely unrealistic, they are based on force structure which exist nowand are designed basically to justify the existing force structures continued existence – completely insane when you think about it. So we have to look at how this can be brought into the light of based on realities which we wish to have. Again, if we want to maintain sea dominance, then just say that. Then try to come up with why we need to do that and how,other than this very diffuse idea that we have to be everywhere and do everything.

Let’s get to my last point, force structure and the economy of force. I think Gordon hit a number of good points, but I do disagree with him on the A-10 issue. The F-35, which is supposed to be the ostensible replacement of the A-10, will not be able to perform the A-10 mission. And again, when we are looking at the incredible capability to deal with the potential adversary in a very remote, operation, the Russians in some remote area and also low-intensive conflict, the A-10 has proven both time and time again that it is an adequate and effective weapon. One the Air Force wants to get rid of because it’s just not sexy. I think that we need to take a hard look at force structure, but with an eye on what will perform in this time that we are cutting back. And because we have not actually been able to boldly think about what needs to be done, again this allows for the Pentagon and Congress to both meander around and not actually address the big issues. I would put forth that we need to actually have a bold and effective set of thinking come forward. I would offer up that we need to think about collapsing whole pieces of the Pentagon while not degrading the capability of the Pentagon to fight.

Let me give you two examples. First, I think it is time to eliminate the Air Force. We need to collapse the Air Force back into the Army and parse out its mission elements to both the Army, give aerospace missions to NASA. The idea is, as Gordon put forth, we have this huge back office, huge numbers of headquarters which need to be reined in and eliminated.  I am not saying that we should get rid of air power. I am thinking we need to get rid of the Air Force. We need to figure out a way to make it work in the constructs of where it came from, which is the Army.

Also, the whole Army Reserve, the Reserve structure, the Air Force Reserve, these are all redundant and no Reserve headquarters ever goes to fight. They are redundant and not necessary and have layers of bureaucracy. The Reserves integrate into the Army if they go, then we have the National Guard.  I am proposing just give the entire Reserve infrastructure to the National Guard, so it can then be used in an existing headquarters. As well as, something that cannot be done now, reserve components cannot be used in times of natural disaster or civil unrest. The Guard has that mission under Title 32. I think this would be a far more effective use of force structure than it is now.

I am just arguing that we need to actually force the Pentagon and the Congress to start looking at much  broader, much bolder, ways of creating essentially effective force structure rather than allowing for this continued, again,consistent meandering into hardware and not having a clear strategy in actually knowing how to move us forward in the 21st century.

BRADSHAW: Thank you Tony for those bold and provocative proposals. Our next panelist will be Larry Korb of the Center for American Progress and after Larry we will open up the lines for questions from reporters. Go ahead Larry.

DR. LAWRENCE KORB: There’s not much left to say after those two! But let me make a few points. I think the Pentagon under Secretary Hagel is to be commended for submitting a base budget that conforms to sequestration. You may remember the last couple of years the Pentagon pretended that it wouldn’t happen, then of course when it did you had all the chaos, the furloughs and all the other things they had to cut back on. That is important. However, I think they have undermined the case. The Administration is because along with sending up the budget for Fiscal 15, which starts next October, that conforms to  the number agreed to by Ryan and Murray, which by the way gave them some relief from sequestration. They sent up what they call this opportunity growth and security extra, which is $26 billion, unlike Secretary Gates, Secretary Hagel allowed them to send up the unfunded requirements which was another some-odd $30 billion dollars and then over the 5-year program, they said they would really need to get another $115, but what that does is not only undermined the programs they set up, but it gives the Congress, like what we have seen with the House, an opportunity to add things.

The next thing I think is important to keep in mind when you are looking at thisis the influence of the three lobbies  – we all know the military-industrial, and Eisenhower originally wanted to call them the Congressional Complex, and that is one of the reasons they have added some of the weapons that my colleagues have talked about. But you also have a Veterans complex, which Bob Gates, if you read his books, talks about the Congress responds and these are his words have a pavlovian type thing to this which has prevented any reductions in personnel costs. And Gordon talked about the overhead, and obviously we should try and do that, but even if we do that we have to bring military compensation costs under control. If you don’t, as a lot of people have pointed out, in another decade you will be spending virtually all of your budget on compensation.

And the Pentagon missed a big opportunity last fall when Ryan and Murray talked about slowing the growth of military retirement for those under 60 or 62and at first they didn’t support it and I mean if you have Paul Ryan who was a Republican Vice Presidential candidate and the Republicanguru on defense things pushing for it, the if you don’t support then it becomes very hard to get some of the other things. And they kicked the can down the road and said, well we are going to have a Commission that is going to come up and that report is in February of 2015, which means it is too late for the 2016 budget, and so then you are talking fiscal 17 which will bring us into presidential election year and a new president. That again, we are not helping ourselves by kicking that can down the road. [45:03]

Then finally you have a Reserve complex. A Reserve and Guard because of the fact that they are in all these districts and a lot of them have civilian jobs. They are able to do things, and we can argue whether you should do the A-10 or not, or transfer the Apaches. But the fact of the matter is any time that you try and make reductions, particularly in the Guard component, you meet resistance and you saw all of those there.

Let me conclude, we are talking a little bit about the OCO account. The OCO fund that the Congress assumes is going to be just about $80 billion, $79.4 billion, if you take a look at it, it was that a couple of years ago that we had close to a 100,000 troops in Afghanistan that were going to be down to 30. And what that has become is a bill payer for adding things that you don’t want to pay in the regular budget. Last year Todd Harrison of the Center for Strategic and Budgetary Analysis, he pointed out that about $30 billion from the OCO account went into the base budget. Congress put about $10 billion in there and DOD transferred about $20 billion that had nothing to do with the war. In effect, they were able to beat the sequester account.

And let me conclude with this. Gordon talked about the reductions compared to what happened after the end of the Cold War and Vietnam this is nothing. If you take a look, because the war fund has been funded separately, if you take a look at the base budget here even with the sequester it basically stays flat and it is bound to, depending how you count 2005, 2006 levels, which I don’t ever remember anyone complaining about the amount then. I mean, after Vietnam we went down to way below where we were before we were in the war. And that drawdown at the end of the Cold War took us well below where we had been before the war started. I don’t really think it is that bad. If you manage it correctly and you can deal with these lobbies and some of the other concerns about overhead that you can more than adequately defend the country given where we are now.

BRADSHAW: Great, thanks a lot Larry. We will not open the call to questions from the reporters. Please state your name and the outlet you represent. Those that are not asking questions please keep your phones on mute. The lines are open; you don’t have to push any particular number to get into a queue so everyone can just take there turns.

BRENDAN MCGARRY (MILITARY.COM): Obviously we know what’s coming up next, at least with SASC. Can you comment a little bit on some difference you are seeing? I know Gordon mentioned how he had already signaled how the A-10 is raiding the OCO account to pay for A-10 is not something he will sign-up with.Any other tea-leaves there? Can you see some differences forming between HASC and SASC on some of these bigger ticket items?

ADAMS: I don’t see huge differences in the House side of things. I think there will be amendments on the floor, I don’t know if any of them will pass. I think this Committee in a sense has declared its irrelevance and the House is just going to go along with it. I don’t see big fights coming on the floor on this bill.

The key differences that I think you are talking about here are going to be on the Senate side. This Senate Armed Services Committee is probably not as far out in lala land as the HASC is, but they are going to stay within their box pretty much. I anticipate that they will not do the things on the readiness side that the House has done. I anticipate at least a different way of saving the A-10 from the version that the House did, as Larry was talking about, the OCO account to pay for saving the A-10 out of a nonexistent budget request from OCO. I am not so sure here, I disagree with Tony about the wisdom of cutting or saving the A-10, you are going to have a classic fight over a piece of pork here between the two Committees I think.

Other than that I expect mostly that the Senate Committee will try to save the carrier, I am not sure about the helicopters and the Tomahawk. I don’t expect the Senate to endorse a BRAC round, it would be nice if they did I think the Pentagon would love it, the services would love it. They might deal with cruiser issue and allowing the retirement of the cruisers, there could be a difference there as well. I don’t know the difference they will have over the pay limits, the pay raise as well. They said it might be more inclined to go along with the 1% request for pay raise that the House disagreed with coming from the Administration.

If past is precedent, I don’t see much in the Senate side coming in the way of accepting the Administration’s proposal to reduce the rate of growth in the amount for the Basic Allowance for Housing actually versus housing costs, which would fall below 100 percent per year out over the next 5-years. And the Administration’s request, I don’t know if the Senate is going to go along with that or not. Don’t expect huge differences, like all conferences the Senate is going to try and lay out some things that can become conferenceable with the House, but the differences do fall more or less in the areas I just described.

KORB: Well the one thing I know the Senate will do, given whom the Chairman is, they will do the A-1 Abrams upgrades. I’m sure those will stay in.

RICK MAZE (AUSA): I am wondering what the panelist think it’s going to take Congress to do anything about the pay compensation increases? It seems like no matter what case it is the Defense Department makes, Congress is always just reluctant to go along and only in a backwards way even in a lot of the pay cap last year. Is there something you can for see happening that would change their minds on that issue?

ADAMS: Larry might have a comment on that, my sense is that if I had to stack up the issues that Congress can deal with, this is where it usually comes out. The Committees will accept reductions in force size before they will accept changes in pay and benefits. The Committees will accept reductions in equipment purchases, stretch-outs, slowdowns, shrinkage of the program before they will touch pay and benefits. The Committee probably will probably not deal seriously with what I think is the big fiscal trade space that is the back office. And the Defense doesn’t know how to get their arms around it. They are reluctant to do it. When you get pay and benefits that is the last thing in my judgment that Congress is likely to change.

I agree with Larry that this is going to be crucial to the long-term planning of the Defense budget in the future and long-term planning for the forces. And the way you are going to have to do it is grandfather everybody that is in there now in the benefits area and change the benefits for the incoming structure of the force. This doesn’t give you savings in the near-term. So you need two things from the Administration. One, a comprehensive approach to what they are going to do on pay and benefits, not this piece-bill stuff;and two, imaginative ways of dealing with transition from one to the other largely through grandfathering. They haven’t touched the retirement piece here. The retirement piece is going to be a big fight.

Congress on its own is not likely to initiate pay and benefits changes. The big thing that has to come to make this politically possible is the Chiefs not only have to indorse it, but they go to the mattresses on it and push it hard, they have to speak to it all the time, they have to articulate an argument that the Committee will buy. And even then, this is the toughest hill for a budget changer or planner to climb on the defense budget.

KORB: Rick, I liked your thing that you just did on pay. I think, yes Gordon is right, the Chiefs and they are finally beginning to speak up. They are the ones who caused the darn problems. If you go back and look at the changes we made in the 80s where we reduced the retirement from 50-40 percent, they are the ones who over did that. They pushed for Tricare for life, which didn’t exist until 2001. I also think it has to be the President really has to do it. I don’t get any impression that the White House really stands up to this. If you look at the Ryan-Murray deal, the White House signed the bill then they didn’t come up and say, I am going to veto this thing if it stays in. I think that would have gotten people’s attention.

The other thing is if you grandfather it, that is not going to help us that much. You’re talking savings 20-years down the road. They are going to have to do something dramatic. I thought that is why I thought Ryan-Murray deal went into effect right away, the same way with the pay raises this year. I haven’t seen anybody point out that private sector pay didn’t go up very much, and there for you weight ahead of where you need to be. As I say, if you wait for this Commission reports and want to have a comprehensive thing, then you are talking about the next President has to do it. The problem gets worse before it gets better. But somebody has to come out strong, you know.

Hagel put it in there, but he needs to give a speech. Go speak to one of these veterans’ groups, American Legion, MOAA or something like that, and lay it out to get people’s attention. You can work with Congress, we transferred the unfunded liability out in return for cutting benefits, but somebody has to take the lead and do it. If you don’t, it is going to continue to get worse. And they ought to put out a fact sheet on all the myths that come out in terms of the claims that are made by these groups. I am a life time member of MOAA so I know, I get all this stuff. Basically when you look at it, it presents this one sided case. I don’t see anybody coming out to make the other side of the case. The final thing is we get more and more away from the wars maybe then people won’t be as sensitive to think that it is going to impact the men and women on the front lines.

SHAFFER: If I can add one last thing on that issue relating to the pay and benefits. On the benefits piece, Congress still has a great deal of politics involved in how they parse out the resources. And just let me say something that might get people riled up, but within the context of DOD and the Veterans Administration we have two functioning medical support systems – the Pentagon and DOD has its own medical system, Tricare For Life or… then you have the Veterans system. And dare I say something that may not be exactly applicable, you have basically two systems that are trying to provide care to our service members and one is separate but equal, so to speak. You have the DOD system that works, that support the current active duty force, and an “equal” one which supports the veterans that is clearly not equal which is coming to light regarding Arizona. I know Senator Cruz has now asked for the list of folks waiting for care at Florida.

One of things Congress could do to basically, I don’t know if it would fix it, but would help make resources more available is to consolidate the veterans’ health care system and the DOD healthcare system. We are again talking about massive overhead to run both separately, yet we have a hard time providing funding. And right now there is some legislation looking at how veterans could be exempted from the Obama Care requirements to help businesses. This is something I think Congress should look at seriously as something they can do to streamline now, not looking at off-sets or grandfathering people 20-years from now. This is something they could find a way to create, an economy of force looking at the way consolidation of the Defense healthcare system and the Veterans healthcare system, something that is both more functional and frankly less expensive regarding the overhead.

MAZE: Is there any way that you think that Commission will have any impact? Will the recommendations have any chance of being approved by Congress?

KORB: Rick, they would push the creation of it. I think they would.

MAZE: But they didn’t do that because they didn’t endorse it.

KORB: It depends. The other thing is why did they ask for another year? If it was up there now we could be talking about it, but they asked for an extra year and as I said, that gets you into the presidential election year.

ADAMS: This Commission was not structured to have a decisive impact. I believe from everything I hear the work they are doing will be great. The problem with the work they are doing and the outcome is that it is likely to reproduce everything that has been in prior Commission reports on the subject. Including the Defense Business Reform proposal and reformingthe military retirement system, including virtually every four year version of the Quadrennial Review of Military Compensation.

The agenda of what can be done, could be done and should be done has been known here for a good 20 years if not longer. The problem is the political heft. Nothing in the way that the Commission was set up will provide for the kind of thing a BRAC commission does for you, the changes that have to be voted down in order not to happen. It is advisory only, and advisory, as Larry is saying, at a point in time when we are hot in the middle of an election campaign and nobody is going to touch military compensation issues. I expect it may end up being another dead one.

MEGAN ECKSTEIN (Defense Daily): I have a question first for Dr. Korb then if anyone else wants to chime in. Looking at the plan that the House Armed Services put out, do you see any way DOD could salvage that through reprogramming or is it changing their plans beyond what they could fix on their own?

KORB: I think it will be very, very difficult because again, what it looks like is that they have taken money out of the Operations and Maintenance (O&M) account and maybe the OCO to pay for the things they want to put in. You can play games with the OCO, you might take more money out of the OCO account so you won’t have to cut readiness and in effect you get around the sequester. That is better obviously, if you are going to have to get these systems you didn’t ask for, then undermining readiness. I think we need to be well aware that Defense, in effect unlike other federal agencies, is not living within the sequester.

ADAMS: I just want to add an amendment to what Larry said, I agree largely with what Larry said. Your problem with the reprogramming to fix what a Congressional Committee did, is that the Congressional Committee Chair has to sign off on your reprogramming. You have an internal figure right here in budgetary terms, they are going to be asking the people that torqued their plan already to un-torque their plan. I don’t think it is likely.

JEREMY HERB (POLITICO): One of the things that Chairman McKeon talked about during the markup as they are putting everything back was the idea that if sequester is still here in 2016 all of this budget moving won’t be able to happen, they won’t be able to save the carrier. Do you guys buy that or do you think if we are sitting in this same spot next yearthey will find some way that they will actually save these programs if they spot the save every year?

ADAMS: Every Committee’s appropriators, especially the appropriators within, for this case, the Armed Services Committee as well works one year at a time. This is the way Congress works. Decades of trying to get two year budgeting for the Defense Departments to the Congress has been a dreadful failure largely because the appropriators and authorizers don’t want to have to deal with planning ahead two years and locking themselves in. They want to be able to make the changes year by year. What I see, and what HASC has done, is classic one year incrementalism. A classic case of pushing to the right the tough decisions, living a little bit in a parallel hypothetical universe and hoping for the rains to disappear and the skies to suddenly open up with sunshine in budgetary terms next year. They are just betting on the come.

KORB: I think Gordon is right. That is the problem, we have been doing this year to year and the Pentagon didn’t help this year by sending up their OSGI, whatever they call the money and the unfunded general requirements, which leaves things out there for them to say well the military supports this so therefor we can add.

One thing we haven’t gotten to that I think is really important here is the whole question of redoing the nuclear weapons, because that is a whole bill the Navy doesn’t want to pay for – the new ballistic missile submarines. And so the questions becomes where is that money going to come from if you have to stay within sequester.

SHAFFER: To back up what both of my colleagues have just said, there is a category of money that is available to your monies, the research and development (R&D) money, but fortunately there are very tight restrictions in how that is used. So I think as much as the Pentagon would like to have more effective planning in its future, as they stipulate, it is going to be a one year battle time and time again. If the will is there, the battle will happen next year. I see these programs, which are considered to be sacred, to be fought over every year until someone gives in. I don’t see changes here.

KORB: The one thing that could change is the Democrats get control of the House and Adam Smith becomes the Chairman, if you listen to what he has been saying about all this stuff it has been right on the mark.

BRADSHAW: Everyone on the panel touched a little bit on the bloated back office and the need to address that issue, the size of the civilian work force, the number of contractors, the number of military personnel that are also performing civilian functions. What are the obstacles to addressing those issues, if hardware, compensations and benefits are really tough nuts to crack, is there a prospect that this civilian side could be a place where more could happen?

ADAMS: I will start out on that since I am the one who put that out on the table. There are several difficulties getting a hold of the back office here. One, the services love it. 70 percent of the back office, if you will the administration of overhead, is in the services – in the Army, in the Navy, in the Air Force. It is not in the Office of the Secretary of Defense, but every time the issue comes up the services like to tell you that the problem is Defense wide. It is over there in Missile Defense Program and the Defense Logistics Agency, it is not in the services. Well, all that stuff is in the services. The services like it because it is money.

The second thing that is wrong with it is they like that kind of money. Back office money, which is largely in the Operations and Maintenance (O&M) accounts, is a general account for each of the services – Army O&M, Navy O&M, Air Force O&M, and Marine Corps O&M. It is fungible money. It is flexible money that the services can use to move around to meet contingencies, to meet needs. And it gives the services billets, it gives them jobs and slots to hold so they maintain budget sized. They love the O&M accounts. That makes the services very attracted to it. And it being fungible, one account fits all, the identification of the things that need to go is made doubly difficult. They don’t like to get into the hard work of digging down and cutting out in particular priorities and particular programs and so on. What we get instead in the O&M area is a mantra that says you can’t cut out Operations and Maintenance that is readiness. Some of it is and some of it isn’t, but it is a fungible account, so it is always hard to say.

Congressional Budget Office (CBO) has said for decades now that the services cannot draw a direct line between O&M dollar and military readiness. They have never been able to do it, they haven’t scarcely tried to do it. There is no question in CBOs judgment that approach in 40 percent of training and exercise has to do with readiness in a measurable way, but 60 percent of it, according to the CBO, is pure infrastructure. I don’t mean buildings and bases, I mean administrative infrastructure. That’s where the fat is, that’s where the problem is. The services don’t like to go there.

The Secretaries have tried to duck this for years, and I give Bob Gates a lot of credit for trying this. Hagel has given it so far lip-service in one 20 percent cut over 5-years, which isn’t much. Secretaries do like to come at this, but the services resist it. Then they get very hard to change, they make it very hard to identify. Then they roll out the mantra of readiness as an assertion that you can’t cut up Operations and Maintenance dollars. It is a morass to begin to, what that means is the services and the secretaries, the secretary of defense, CBO, and the Congress all deal with O&M by the blunt instrument approach.

The blunt instrument says I am taking the dollars. You guys go out and figure out how to become efficient. They don’t do a full scale review. They don’t do a build down from mission links to readiness, overlapping functions, duplicating functions, gaps that need to be filled. They don’t do that kind of analysis. They do basically a slice, they take a budgetary slice and then they throw it over the transom to the services to “find the efficiencies.” When you do that, I understand doing that budgetary, they did it in the 1990s, that’s how you get it done, that is how you get the dollars out. The downside is that then the services can then Washington Monument the consequences, as we saw in some degree in the sequester response the services did last year. They choose not to do the things that look most directly linked to readiness and declines in the capabilities of the force. That’s where they take the cuts because that way they can protect themselves in the future against cuts.

O&M is really hard and you either go about it systematically and you figure out what you need and don’t need and figure out what you’re going to do and not do, or you do the blunt instrument which is you take the dollars and you let the services cope with the consequences.

SHAFFER: I think we need to relook at Goldwater-Nichols because Goldwater-Nichols in the 80s created huge headquarters staffs, which then allowed for the bloating. My friend Tony Zinni, he was commander of Central Command, was commenting on how bloated it has become because of the justifications in Goldwater-Nichols. You have layers of general officers now basically briefing each other incessantly. I think that is one of the first places we need to look.

And alluding to what Gordon just said, I was a part of a budget cutting exercise in the Army a few years ago, and what happened in the services when it comes down to the services, the Pentagon, the services generally say if you are going to cut us we are going to cut these big effective programs. They always put those effect programs up there to try and dodge that bullet. What we need to do is have people who are smarter than the services ability to dodge this. And get involved and actually try and dive in and drive some of these cuts. But I think that is going to take some work.

KORB: The other thing, if you want to cut civilian personnel that are going to be tied to your bases, and to the extent you can do that… cut back on civilian personnel. I think I have, going back to my own days there, why didn’t the Pentagon just send up a list of bases we would close if we could? That is what I did and got the whole BRAC process started. Somebody has to do something dramatic, don’t ask for BRACs, write up the darn list. Then people would know exactly what we are spending on them in the overhead.

BRADSHAW: Thanks Gordon, Tony and Larry… I’d like to thank our panelist and all the reporters that were on the call.


For press inquires or questions concerning this call, please contact Kate Brown at


Press Call: A-10 Thunderbolt II at Barksdale Air Force Base, La. [U.S. Air Force photo by Senior Airman Micaiah Anthony, 4/9/13]

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