On 31 May, the Strategic Choices and Management Review ordered in March by Defense Secretary Hagel will be completed. The review will explore three defense budget reduction options, presumably matching these with proposed new efficiency measures, cuts in military pay and benefits, and adjustments in America's defense strategy and posture.
The Hagel review is the most recent in a series of official and independent defense savings proposals prompted by concerns about government debt and deficits. A number of these proposals, like the Reasonable Defense plan (published by the Project on Defense Alternatives in November 2012), have adopted a "strategy-based" approach, which aims to align changes in strategy and budgeting.
Changing Just Enough to Remain the Same?
Twelve years of war, mounting federal debt, and America's ongoing economic crisis provide reasons enough for adjusting America's defense posture and budget. While reform proposals are proliferating, all face two challenges and raise two questions:
■ Are defense leaders really willing to rethink US defense strategy?
The Pentagon strongly prefers "efficiency measures" - not strategic reform - as a way to achieve savings, although DoD efficiency efforts have consistently delivered less than promised in the past. Never have they delivered the magnitude of savings dictated by the Budget Control Act. Instead, efficiency campaigns can too easily lead to a "hollowing" of the armed forces as people but not tasks are cut.
The surest way to spend less is to do less by adopting more realistic military missions and goals. This would allow reductions in the size of the armed services, which facilitates savings in all categories of defense expenditure. Buying reliable upgrades to existing equipment rather than entirely new and risky platforms, when possible, would also deliver guaranteed savings. But this modernization path is strongly opposed by industry. Indeed, the only path to assured savings popular with Pentagon leaders is cuts in military compensation.
■ Is the defense establishment prepared to seriously rethink "How much is enough?"
Defense savings proposals routinely tie budget cuts to specific reductions in America's military assets. What's often missing is the next critical step. It has become uncommon to demonstrate in any detail how the quantity of proposed forces -- the number of units, assets, and personnel -- actually correlate with specific security challenges and outcomes.
What are the contingencies and tasks that require that America's armed forces be as large as they are? How do the numbers correlate with need? What specific risks and benefits are associated with having more forces or less? How do costs and benefits balance? Are there more cost-effective ways to achieve desired ends?
Asking such questions and scrutinizing the answers was central to defense policy debates during the Cold War and early 1990s. Since then (and especially since the 9/11 attacks), vague generalities have sufficed. This would not wash in any other area of public policy. America's current strategic and economic circumstances require a stricter interrogation of what passes for defense "requirements."
Hagel's Three Options
What presently constrains defense spending is the Budget Control Act and its provisions for the sequestration of discretionary funds, both defense and non-defense. Due to the failure of national leadership to reach a "grand bargain" on deficit reduction, the BCA is compelling a $500 billion rollback in the ten-year spending plan submitted by the Pentagon last year. This is the context for the three spending options being developed for Secretary Hagel.
The first option - entailing a $100 billion cut from last year's ten-year plan -- reflects the Administration's FY-14 budget submission. This is the Pentagon's preferred option, although it implies ending sequestration.
A second option, entailing a $500 billion cut from last year's long-range plan, would achieve total savings equal to those required by the sequestration provisions of the Budget Control Act (BCA) - but not necessary as quickly as the BCA dictates.
A third option splits the difference between the first two, seeking a $300 billion reduction. Seemingly "moderate," this option also would require overturning or superceding the BCA in some way - either by raising taxes or cutting deeper into non-defense programs, or both.
Is there room for big savings?
Pentagon and defense industry leaders persistently claim that sequestration-level cuts in DoD spending would imperil America's security. Some have said it would strip away the capacity to fight even a single major war and sap our ability to respond flexibly to smaller contingencies, such as the Syrian conflict. Even if this were more than mere hyperbole, it would only call into question how well the Pentagon manages its vast resources. After all, America and its allies outspend current and potential adversary states by a factor of four-to-one.
In fact, even the largest cut option now on the table - $500 billion over ten years - would only modestly dent the Pentagon's budget.
- In nominal dollars, the $500 billion "deep reduction" option would still allocate $5.33 trillion to the Pentagon base budget over the next ten years.
- In real terms, the $500 billion savings option entails only a nine percent (9%) decrease in average spending from the 2013 level.
- The $500 billion reduction option would leave the Pentagon with an average annual budget of about $480 billion (in today's dollars), not counting war expenditures. This is 16% above the 2001 level and 11% above average annual spending during the Cold War, both in real terms.
A Reasonable Alternative
A secure path to more than $550 billion in savings was outlined late last year in PDA's Reasonable Defense proposal, which serves as the basis for the alternative defense budget advocated by the Congressional Progressive Caucus. This alternative plan would, over five years, gradually reduce the Pentagon's base budget to $472 billion (2014 USD).
The principal innovation of Reasonable Defense was the adoption of a more realistic and effective defense strategy - one better adapted to America's core security requirements. This allowed a 13% reduction in active-duty military personnel from currently planned levels.
The Reasonable Defense proposal assumes only modest efficiency gains, while nonetheless saving $550 billion more than last year's DoD plan. And it assumes no cuts in military pay and benefits. By contrast, some other plans focus solely on efficiency gains and reform of military compensation. Taken together, these two complimentary approaches might allow America to safely reduce its base military expenditure to $455 billion (2014 USD) per year. And that would release more than $70 billion a year for debt reduction and economic renewal.
It is indeed a new world, as Pentagon planners are slowly discovering. Adapting to it begins with the recognition that the principal strategic challenge we face today is economic in character.