An Updated NDAA Falls Short of Real Reform

Posted May 1, 2015

An Updated NDAA Falls Short of Real Reform

May 1, 2015

This week, the National Defense Authorization Act (NDAA) was marked up in the House Armed Services Committee and now waits to head to the floor for additional work. While the bill takes the important step of modernizing the outdated military retirement system, it stops well short of the kind of reforms and choices needed to sustain American military power efficiently and effectively. Overdue cost-savings reforms like paring down the Pentagon’s bloated civilian work force or closing excess bases were either not tackled or explicitly prohibited in the bill. Meanwhile, Congress is keeping its Overseas Contingency Operation (OCO) funding $38 billion above the president’s request, ensuring that the war fund actually serves as a slush fund for skirting the Budget Control Act caps and adding more uncertainty into the budgetary planning process. Finally, the latest version of the bill adds more F-35s despite the aircraft’s serious shortcomings and adds more money to fund the Navy’s new Ohio-class replacement submarine through a separate fund, setting a precedent for funding big-ticket items outside of procurement budgets.

The NDAA takes on the hard issue of reforming an outdated retirement process to be more equitable and efficient – Congress should see the action through. The NDAA includes a provision that would reform military retirement along the lines of a recommendation made by the recent Military Compensation and Retirement Modernization Commission (MCRMM). The current “defined benefit” retirement system pays retirees based on their salary in the military, but is only available to service members who serve 20 years or more. The Commission explains that “Under the current system, 83 percent of the enlisted men and women serving our Nation will never benefit from a traditional 20-year Uniformed Service retirement.” As Bloomberg reported at the time, the plan recommended by the MCRMM would more equitably distribute benefits by allowing all service members “to enroll in a 401(k)-type savings plan that would include some matching contributions from the government” and receive retirement benefits if they leave the military sooner than 20 years. “Under the proposal, current military members would be grandfathered into the present system and wouldn’t see changes to their defined pension benefit.” While the benefits under defined pension would be reduced, the Commission claims the alternative system “increases the expected value of Government-sponsored retirement assets for Service members who retire after reaching 20 years of service” because their defined benefits combine with the 401(k) benefits open to all Service members. The Commission notes this option “reduces annual DoD budgetary costs and Federal outlays, in FY 2016 constant dollars, by $1.9 billion and $4.7 billion, respectively, after full implementation.” [Military Compensation and Retirement Modernization Commission, 1/29/15. Bloomberg,1/29/15]

The NDAA misses an opportunity to enact overdue efficiency reforms to save money that could otherwise be spent on military capability. A bipartisan letter signed by NSN Senior Advisor Maj. Gen. Paul Eaton (Ret.), Michèle Flournoy, Dov Zakheim, Andrew Krepinevich, and dozens of other national security experts and retired military veterans states: “too much of the defense budget is currently consumed by institutional inefficiencies, some of which are mandated by law. This is leaving a smaller share of the budget to pay for the manning, training and equipping of our armed forces that make the US military without peer.” They recommend that Congress take bold action, including:

BRAC and excess bases: The NDAA prohibits a further round of Base Realignment and Closures (BRAC) despite, as the letter explains, “The Pentagon’s first four BRAC rounds are producing an annual recurring savings of around $8 billion…Estimates remain constant that the Pentagon retains over excess [basing] capacity here in the US.”

Bloated civilian workforce: The NDAA does not appear to take on significant civilian workforce reform despite that “from 2001 to 2015, the active duty military shrank by nearly 3 percent. Yet over the same timeframe the number of civilian defense employees grew by 10 percent to 756,000. This workforce rose another 3 percent in just the past year” and consumed “$76 billion of the defense budget in 2015.” [Experts’ letter, 4/29/15]

Adding billions to the OCO slush fund postpones hard choices and adds more uncertainty to the budget environment. The NDAA adds $38 billion to the President’s Overseas Contingency Operation (OCO) fund. This money will not be spent on war-related costs but, instead, be put back into base budget priorities (evading the Budget Control Act caps) and actually add more budgetary instability to the planning process. A letter organized by the National Security Network signed by a bipartisan group of organizations explains, “From 2001-2014, the Pentagon spent $71 billion from the OCO account on non-war programs, including funding for Israel’s Iron Dome system, repairing surplus gear from Iraq, and the majority of funding for US Central Command (CENTCOM). This year, $39.7 billion has been transferred from the operations-and-maintenance funds into OCO to fund base requirements. Leaders at the Pentagon believe budgeting in this manner only exacerbates the problem. Assistant Secretary of Defense for Special Operations and Low Intensity Conflict Michael Lumpkin noted in a March 18th hearing before the House Armed Services Strategic Forces Subcommittee, ‘It’s not something I can sit here and plan on, so it actually increases my fiscal uncertainty.’” [Coalition Letter, accessed 5/1/15]

Budget gimmicks for the Navy’s Ohio-class submarine replacement program sets a dangerous precedent that sidesteps setting clear priorities for defense procurement. The NDAA increases funding for the National Sea-Based Deterrence Fund that “would allow the transfer of funds to the Procurement, Defense-wide account for the replacement of the Navy’s OHIO class of ballistic missile submarines,” writes the Taxpayers for Common Sense. “Let’s be blunt, the cost of buying submarines belongs in the Navy’s Shipbuilding and Conversion account where all other major sea-based assets are funded…The Congressional Budget Office estimate is that the overall costs of the OHIO class replacement is almost $92 billion.” The budgetary maneuver has been justified on the basis that the submarines are “national assets” and thus do not need to be funded via the Navy’s budget, but, as Taxpayers for Common Sense continues, “The assertion that ballistic missile subs are ‘national assets’ which should be funded in the Office of the Secretary of Defense is a dangerous slippery slope” that could be used to justify additional budget gimmicks without sufficient debate over the budgetary trade-offs of the programs in question. [Taxpayers for Common Sense, 4/29/15]

The NDAA doubles down on F-35s despite the aircraft’s expensive lack of capability. The recent markup in the House Armed Services Committee added an additional 6 F-35Bs on top of those already in the bill. Tobias Gibson, Professor at Westminster College and NSN Non-Resident Fellow, explains: The F-35’s “capabilities are mismatched to even conventional military threats — to say nothing of its bang-for-the-buck value against non-state actors or terrorist networks. The short range of the platform makes it of limited utility in the expansive Asia Pacific, where the U.S. Air Force is poised to operate 60 percent of its fleet by the end of the decade. The extent of the F-35′s stealthiness is also in question compared to aircraft like the F-22 — and at a time when advances in sensors and signals processing are significantly reducing stealth’s future outlook. And without the full advantage of its expensive stealth, the F-35 will be forced to rely on close-in maneuvering, where it is comparable and even inferior to other fourth-generation aircraft.” [Tobias Gibson, 1/21/15]