Budget Deal: Pentagon Gets Unneeded Increases but Still Faces Longer-term Drawdown

On Tuesday evening, a deal was announced to increase the Budget Control Act (BCA) caps imposed on defense and non-defense discretionary spending. For the Pentagon, if passed, the deal would increase the BCA caps by $22 billion in FY14 to $520 billion (up from $498 billion) and $9 billion in FY15 to $521 billion (up from $512 billion). While the need for these funds is questionable – especially given the level of Pentagon resources even before the deal far outmatch any conceivable competitor in the world – the longer-term defense drawdown would continue as the BCA caps after FY15 remain untouched. That means the Department of Defense still has the need to make smart choices to reduce spending while maintaining military power, only now with a significant buffer to get the job done. If passed, Congress and the Pentagon need to make the most of that cushion to manage the drawdown and provide sensible defense planning, especially because that flexibility will be paid for by imposing very real costs on Americans, including failing to extend unemployment insurance and keeping cuts to Medicare in place longer.

Deal will ease Pentagon drawdown planning challenges. NSN Senior Advisor and Major General (ret.) Paul Eaton explains, “The leadership of our armed forces require sufficient capacity (money) and time to give them the flexibility to maneuver. The Budget Control Act at once denied our military resources already integrated into war planning and preparedness, denied it the time to react and restricted needed operational flexibility due to the across the board implementation of the cuts.  The recent budget deal, if passed, will restore some funding and flexibility, and provide additional time to allow adapting the military during a draw down in a complex world.” Gordon Adams of the Stimson Center adds, “The current level of funding is roughly $100 billion above the constant-dollar Cold War average…The emerging decision to temper the next round of sequester may suggest that the pace of the defense drawdown is slowing, but in truth it will continue at least through the next couple of years, and probably long thereafter.”

Furthermore, the Pentagon’s planning challenge for the drawdown is consistent with – and even less severe than – historical drawdowns. Even the full reductions under the BCA caps result in a 31 percent decrease in Pentagon spending from the 2010 peak, whereas past drawdowns have been 36 percent (post-cold war), 33 percent (post-Vietnam) and 43% (post-Korea). [Paul Eaton, 12/11/13. Gordon Adams, 12/9/13]

Putting Pentagon spending in strategic context, even full reductions before deal ensured adequate resources for national security. As Peter Singer of the Brookings Institution explained leading up to sequestration, “At the height of the Iraq war, US spending was above half of all the world’s military spending, but is now down to slightly above 40% of all military spending. Sequestration would take it down by about 2% more of the pie, roughly 38% of all global military spending, excluding any likely contingency or war spending.” Now, that portion may be slightly higher. Moreover, the majority of world military expenditures are by U.S. security partners. As Michael O’Hanlon as explained, “United States leads a global alliance system of more than 60 partner states that collectively account for almost 80 percent of global GDP and more than 80 percent of total global military spending between them.” [Peter Singer, 9/23/12. Michael O’Hanlon, 12/10]

To manage the drawdown, Congress and the Pentagon still must make hard tradeoffs to make DoD more efficient and more effective – but now have more time. Examples include:

Address personnel costs: The need to address the Pentagon’s crisis in personnel costs is well documented, and the recent deal takes very modest initial steps worth $6 billion in retirement reform. However, plans that more ethically distribute resources to retirees can save much more. According to the Task Force for a Unified Security Budget, “while the military’s retirement program serves only a small minority of the force, it provides exceedingly generous benefits, often providing 40 years of pension payments in return for 20 years of service. As a result, the program now costs taxpayers more than $100 billion per year.” The Task Force notes that one alternative, a 401k-style retirement system that would outperform most private sector plans, would save $13 billion per year in the near term, perhaps more in the future. [Task Force on a Unified Security Budget, 10/12]

Serious efficiency reforms: The CBO explains, “thousands of members of the military work in support, or ‘commercial,’ jobs that could be performed by civilians.” However, if “DoD would replace 70,000 of the more than 500,000 uniformed military personnel in commercial jobs with 47,000 civilian employees…those changes could reduce the need for appropriations by $20 billion” from 2015 to 2023 while performing the same commercial duties. Moreover, CBO identifies that DoD can benefit by taking a broader eye towards evaluating when using contractors makes good sense, “only a small percentage of military positions have been reviewed and evaluated for that purpose [of potential replacement by contractors].” [CBO, 11/13]

Fixing acquisition: Todd Harrison notes that over the past decade, $46 billion dollars were invested in weapons programs that were cancelled – not to mention the cost-overruns and inefficiencies of weapons systems that were purchased years behind schedule.  A study by the Stimson Center found that “at least $100 billion” could be saved by acquisition reform, including better contracting, commercial off-the shelf purchasing when appropriate. The need to take such steps is further demonstrated by recent independent assessments that the Air Force long-range strike bomber under development could cost 47 percent more than initially projected (up to $81 billion). [Todd Harrison, 7/16/11. Stimson Center, 11/12]

Develop a strategy that respects budgetary realities: Mark Gunzinger of the Center for Strategic and Budgetary Assessments explains how the upcoming Quadrennial Defense Review should be reformed to manage resource constraints: “Establish priorities across the Pentagon’s primary mission areas. One of the most important tests of a force planning construct is the extent to which it helps translate the Pentagon’s strategic guidance to its resource priorities. Instead of simply adding new requirements to existing planning policies, the next QDR presents an opportunity to define specific missions and capability areas where the Services should reduce risk, maintain the current level of risk, or increase risk.” [Mark Gunzinger, 6/13/13]