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Secretary Panetta and the Doomsday Mechanism

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The rhetoric of people rushing to rescue Pentagon spending from "completely unacceptable" cuts is quite hysterical. Leading the chorus has been Secretary of Defense Leon Panetta. He termed the possible defense budget cuts (about $850 billion over 10 years according to most) a "doomsday mechanism," if the automatic sequestration trigger of Obama's debt deal with the Republicans in Congress is pulled. Some think tank types, opining in the Washington Post and the New York Times, have deemed these reductions "indiscriminately hacking away" at the Pentagon's budget and something that could "imperil America's national security." Their defense spending allies, including various generals and admirals sitting atop various Pentagon bureaucracies, confirm it all with descriptions like "very high risk" and "draconian." It should be pointed out that these people are underestimating the size of the potential cuts the new debt deal could theoretically cause. The $850 billion supposition measures the reductions against an artificial "baseline" from the Congressional Budget Office (CBO) that does not include the actual budget growth the Pentagon had scheduled for itself. Todd Harrison of the Center for Strategic and Budgetary Assessments tells us in a useful analysis ("Defense Funding in the Budget Control Act of 2011") that the debt deal's automatic sequesters, if implemented, would mean $968 billion in cuts over ten years from the DOD budgets heretofore planned -- over $100 billion more in cuts. To react to this new scenario, the hyperventilators will need to upgrade their rhetoric, if that is possible. Some factual perspective puts the brown paper bag around this hot air. As analyst Harrison also informs us, the "doomsday mechanism" would reduce the Pentagon's "base" (non-war) budget to about $472 billion, the approximate level of the base DOD budget in 2007. I do not recall anyone declaring our national security being "imperiled" at that spending level in 2007. In fact, that level of spending for the "base" (non-war) Pentagon budget was a sixteen year high -- calculated using "constant" Defense Department dollars intended to compensate for inflation. Not exactly the result of "hacking away." If returned to the $472 billion 2007 level, the base DOD budget would be $73 billion higher than it was in 2000, the year before our various interventions started to occur. If spending were to be continued at the $472 billion level for the next 10 years, base Defense Department spending would be three quarters of a trillion dollars above the levels extant in 2000. And, not a penny of the additional monies to be spent on the wars would be eliminated. It is also useful to compare the 2007 level of "base" DOD spending to the average amount we spent during the Cold War, when we faced a threatening and heavily armed super power, the Soviet Union, plus its Warsaw pact allies, and a hostile, dogmatically communist China. From 1948 to 1990 we spent, on average, $434 billion each year -- $38 billion less than we would under the "completely unacceptable" "doomsday mechanism." Finally, at the 2007 - $472 billion -- level, our defense budget would remain multiples of those of China, Russia, Iran, Syria, Cuba and any other potential adversary -- combined. Much of the heartburn with the "doomsday mechanism" is directed at the Pentagon's hardware budget, which appears to be what the admirals and generals have successfully lobbied Secretary Panetta to protect above all else. The complainers talk about how we will never be able to modernize our equipment with the high tech weapons that many people say are our winning edge against present and future enemies. Mouthing the kind of words the advocates of Pentagon procurement spending love to hear, Secretary Panetta bemoaned his ability to modernize our aging hardware if he were to receive only the money permitted by the dreaded "doomsday mechanism." The budget data give a different perspective. Procurement in the 2007 "base" budget was $88 billion in inflation adjusted -- "constant" -- dollars. That amount is higher than any year since 1992, and $15 billion higher than Secretary of Defense Richard Cheney's last defense budget for 1993. The problem is not money. Under this worse case scenario, the Pentagon would be left quite flush with money -- plenty of it in historical terms. The problem is that the Pentagon, as it currently exists, is incapable of surviving with less money; it is also incapable of surviving at a frozen -- constant -- level of spending. In truth, it is incapable of surviving with more money. For years, more money for the Pentagon has meant smaller, older, less ready to fight forces. Since the 2000 DOD budget, presidents and Congress have added $1 trillion to the base (non-war) Pentagon budget and during that period our forces have decayed. Between 2001 and 2012, the Navy's combat fleet shrank from 316 ships and submarines to 287, a decline of 10 percent. This is not a smaller, newer fleet; it is a smaller, older fleet -- about four years older, on average, according to CBO. Is it better maintained and more ready to fight? Almost certainly not; for the past year the press has repeatedly reported on severe maintenance and readiness problems throughout the fleet, and Navy combat pilot training in the air has remained at historic lows. The Air Force is worse off. Despite its "base" budget increases, during the same 2001-2012 period, the number of active and reserve fighter and bomber squadrons went from 142 to 72, a decline of 49 percent. Aircraft are older on average; according to CBO they now average historic highs of about 23 years. Air Force budget data tells us that premier fighter pilot air training hours today are only one-half to one-third of what they were in the 1970s, an era not touted for high readiness. The Army's brigade combat teams did grow from 44 to 45. But still, CBO tells us that major Army equipment inventories are mostly older. More ready to fight? In 2006, the House Armed Services Committee held hearings and leaked a memo documenting historic lows in the readiness of active Army units in the US. The analysis has not been publicly updated; we should worry that it has gotten worse, not better. Instead of better trained, better equipped, larger forces, the post-9/11 money increases went into things like cost growth for hardware (over $300 billion of it according to the Government Accountability Office). It was not that the planned hardware purchases just ended up costing more; it was that more money literally meant buying fewer weapons. Extra money also went for higher pay and benefits for personnel; it was not just for higher troop pay, but also for the most extravagant government healthcare program in the country, double pensions (so called "concurrent receipt") for military retires who also qualify for veterans benefits, higher payments to the survivors of World War II veterans, expanded ranks of general officers and their staffs, still more senior managers at the top of the DOD civilian bureaucracy and lots more that had nothing to do with a more effective military. In fact, most of these extraordinarily expensive spending ideas for bloat and benefits -- pursued to buy off various political constituencies -- contributed mightily to a constipated military force structure that is less agile, less innovative, and less adaptive. Now the Pentagon's leadership and its allies in Congress and think tanks are complaining that reductions up to $968 billion over the next ten years will mean "doomsday" for all that. They could be right. Thank goodness for that. Doomsday for business as usual at the Pentagon is much to be desired. Time is long overdue for a new set of guiding principles for the Pentagon and its managers -- principles that will seem radical to them but which are unexceptional in the real world. They would also dramatically reduce costs. They include -
  • Understand what is happening to the money. Right now, the Pentagon is up to 22 years late in complying with statutes requiring an audit. The current plan is to be "ready" for a very superficial set of balance sheet audits in 2017. These are issues not just for green eyeshade pedants: Without audits and independent evaluations of phony cost estimates for hardware and personnel programs, managers and politicians pretend we can afford what they propose, and they ape shock and horror when the costs inevitably multiply -- as they have, for example, by factor of two (going onto three) for F-35 Joint Strike Fighters.
  • Place the highest priority on people, the real source of any success we enjoy on current and future battlefields. By this, I mean not the grotesquely expensive benefits to non-combatants and political constituencies but the selection, training and retention of people of the highest military competence and character, demonstrated on the battlefields of Iraq and Afghanistan. To make it possible to retain these quality people, the entire pay and benefits system needs to be reformed and made affordable. This also means eliminating the profoundly demoralizing -- and cost growth enabling -- "revolving door" in Congress, the Pentagon and the White House: the existing permissive revolving door environment is a key support for business as usual.
  • The wars are winding down, and most of the Nation is learning not to waste lives and treasure in futile, ill-advised interventions. We can reduce manpower -- especially at the bloated top -- and reduce somewhat our military force structure (perhaps placing a larger component in the less costly Reserves) to protect just our real and vital national security interests. Pretending US armed forces are "indispensable" for all matters - whether they involve our supreme interests or not -- is demonstrated and expensive folly.
  • "Fly" and compete all new equipment before we buy it. Any further production for hardware before the completion of rigorous field testing should immediately be suspended. The deferred production of several Major Defense Acquisition Programs would result (including for the F-35, some naval shipbuilding projects, and various ground vehicles). Scores of billions of dollars would be saved, especially if only equipment empirically proven to provide a real improvement -- in rigorous tests compared to all competitors -- at a cost within our means are considered qualified for production, which in turn should be competitively sourced. Pretending we must rush equipment for purely hypothetical future battlefields by producing it before we test it ("concurrency") and pretending we can manage effectively non-competitive, sole source contracts has cost untold billions and forces us to accept second rate hardware that can be, and has been, a step backwards.
The essential link between such reforms and the "doomsday mechanism" that Secretary Panetta so abhors is that none of the desperately needed changes will occur unless the money flow is constricted. As long as the Pentagon is rewarded with special favor in the federal budget negotiations, business as usual there will prevail. Less money is the key to an affordable, reformed, more effective future for our armed forces; that may be counterintuitive, but so are smaller, older, less ready forces as a result of an added $1 trillion. Secretary Panetta and his newfound cohort of big spenders use their rhetoric not to avoid just the automatic sequestration of significant portions of the defense budget. They also seek to avoid the lesser but more probable reductions that would incur in a negotiated federal budget deal. They hope to stand pat with the minor changes now being negotiated inside the Pentagon and that amount to about one-third of what the "doomsday mechanism" would incur. Not only would that rescue the Pentagon from a long list of tough decisions, it would also preserve business as usual. That business as usual will mean that the forces are cut more than the money; the personnel budget is cut more than the hardware budget, and the troops and civilian workers are cut more than the bloat at the top. The decay -- the shrinkage, the aging, and the lower readiness - will continue; in fact, it will accelerate. Real budget reductions present the prospect of real reform in the Pentagon. Clearly, Secretary Panetta is not opting to be the source of that reform. It now must come from the outside. Severe budget reductions imposed on the Pentagon are the first step.
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