Defense budget woes go beyond sequestration

I’m glad I covered the Center for Strategic and International Studies forum, “Preparing for a Deep Defense Drawdown,” on a Friday because I’d have the weekend to recover.

The myriad issues that the Defense Department face is downright depressing. Here is a link to slides that describe the CSIS research on the defense budget.

Here are some highlights:

• Things are actually worse than many realize; if sequestration happens, it will bring an 8 percent to 10 percent cut, on top of 8 percent to 10 percent cuts that have already happened or are planned.
• Because of the rising cost of items such as personnel, health care and operations and maintenance, which really can’t be cut, the 20 percent reduction will actually feel like 40 percent -- Defense Department dollars don’t buy as many military capabilities as they have in the past.
• More cuts are likely. President Obama offered $100 billion in defense cuts in December, as he was negotiating a solution to sequestration. “That’s just beginning,” said Clark Murdock, senior advisor and director, CSIS defense and national security group, who presented the findings of the study.

The more alarming trend is when CSIS looked out 20 years, and saw non-discretionary spending, i.e. personnel, health care and maintenance and operations, swallowing up the entire budget. Traditionally, the Defense Department spent 32 percent of its budget on modernization, he said.

“The pressure on discretionary spending is just going to continue, and we’re going to have crisis after crisis, no matter the administration,” Murdock said.

So, what are CSIS’ recommendations?

It is time to “re-conceptualize" an affordable military force. Money should be allocated into two categories:

1. Institutional support, such as the cost of infrastructure like training, recruiting, facilities and administration. DOD also needs to determine how much of their budget should be dedicated to that. CSIS recommends 30 percent.

2. Operational forces. This is the cost of forces under the combatant commands and direct support for those troops. This should be about 70 percent of the budget, and is divided into two subcategories: common core capabilities, the basics the military must possess, and strategy options, which represent different priorities that policymakers could add, if affordable.

How do you accomplish moving all those buckets of money around?

You need a strong secretary of defense who will control the purse strings, and has the guts to kill programs and fire people. And you need a Congress that sets limits on spending, but doesn’t dictate how you spend those resources, Murdock said.

Congress shouldn’t care how many F-22s are being bought, just that DOD has X amount of dollars to spend, he said.

What CSIS and the panelists that discussed the study emphasized is that a new way of making decisions about defense priorities and strategies is needed. And that is no small order, considering the political implications and turf wars.

Mackenzie Eaglen, resident fellow at the American Enterprise Institute, a think tank, and others on the panel said that Congress needs political cover to make a decision on personnel, similar to how base closure decisions are made. The number of people – military, civilian, reservists and contractors – need to be reduced. And benefits need to be reworked.

“It’s not all about cuts,” she said. “It’s about rebalancing.”

Another part of the equation is asking "is this the right strategy?" when you match the mission and strategy to the resources, and there aren’t enough resources, Murdock said.

The common mantra that you have to do "more with less" just won’t work anymore. “It might be a matter of doing less with much less,” Murdock said.

The Defense Department used to have the discipline to do that, said Todd Harrison, senior fellow at the Center for Strategic and Budgetary Assessment. “That’s been missing for the last 10 years,” he said.

The tricky part is, where do you put fewer resources? Where do you accept more risk in strategy?

No one really had an answer to that question.

The impact on defense contractors will likely be different with this drawdown in resources, as compared to past drawdowns, said Bill Greenwalt, vice president of acquisition policy, Aerospace Industries Association.

The post-Cold War drawdown led to the consolidation of the industry, but that consolidation is over. We won’t see a repeat of that.

With each drawdown, and then the following build up, the defense industry looks different. This time around, perhaps, the shift will lead to bringing more commercial technology into the military and government in general, he said.

“Austerity drives innovation and new ways of doing business, whether it is technology or business practices,” he said. “What I’m more concerned about is the plumbing: budgeting, personnel, acquisition, requirements development, financial systems. It’s not sexy, but if we don’t get our arms around them, costs are going to continue to rise.”

Greenwalt struck a common theme among the panelists, that one of the biggest issues is the need for strong management, starting at the top, with the secretary of defense controlling the budget process.

As he said, it’s not sexy, but it has to be done. The bigger question in my mind is, can it get done?