PDA Update - August 15, 2012

A Reasonable Alternative to Sequester of DoD Funding

How should the U.S. defense posture and budget change as the war in Afghanistan winds down? This is a critical question for the nation, especially considering the growing fiscal pressures on the Federal government.

Unfortunately, the current panic about the pending "sequester" prevents clear thinking about the options before us. The January 2013 sequester of $55 billion in security spending will result in a precipitous reduction for the Pentagon. The Budget Control Act will trim the Pentagon in one stroke to a level close to its budget of 2007. This cut has been called "draconian" and "devastating" for the armed forces. A consensus has been growing in Washington that the Budget Control Act (BCA) must be amended or suspended in order to prevent sequestration.

This is not a choice between sequestration and no further cuts for DoD, however. There are ways to apply additional cuts to the Pentagon base budget that avoid both institutional disruption and most of the economic pain associated with deep cuts to government spending – a matter of some concern while the economy remains weak and struggling to recover. An illustrative option is the “Reasonable Defense” plan formulated by the Project on Defense Alternatives. It would ratchet back the base budget to the level of 2006 (corrected for inflation), but do so gradually in stages that the Pentagon and armed services could readily accommodate.

The table and chart that follow illustrate the first five years of the Reasonable Defense plan, comparing it with the Budget Control Act "sequester" budget, Administration's 2013 plan, and the actual 2012 spending level carried forward with increases for inflation. The first three years of Reasonable Defense cuts would be considerably smaller than what the BCA sequester entails. Then in 2017, when the post-recession economic recovery should be complete, the cuts would exceed those dictated by the BCA, eventually plateauing at a level about equal to the 2006 budget, which is somewhat lower than the sequestration level. 

Alternative DoD Discretionary Spending Paths (billions nominal dollars)

Total for five years 2013-2017

2012 level + inflation          2,792

2013 DoD request              2,728

Sequestration Level           2,452

Reasonable Defense plan    2,528

The proposed reduction from today’s level would be quite modest by historical standards – about 14% in real terms compared to the 35% reduction that followed the end of the Cold War. And, because the reduction would occur gradually over four years, the annual steps down would be comparable to those successfully absorbed by the Defense Department during previous periods of adjustment.

What does this proposed level of funding mean?  In inflation-adjusted terms, the 2012 Pentagon base budget is 38% higher than the 2001 budget, which was enacted before today’s wars had begun. While the Reasonable Defense plan would roll the base budget back to its 2006 level (adjusted for inflation), a fair portion of the spending increase would remain. The 2006 budget was 20% above the level of 2001, in real terms. 

The Ten Year Perspective

The Reasonable Defense budget for ten years would cost $560 billion less than the 2013 plan submitted by the White House.

Over the course of ten years the White House plan is to provide the Pentagon with $5.76 trillion.The Reasonable Defense budget would provide the Pentagon with $5.2 trillion over ten years. The Budget Control Act would cap defense at about $5.18 trillion.

The full details of the Reasonable Defense national security posture are forthcoming from the Project on Defense Alternatives in September of 2012. The addendum that follows gives some details of the plan.

Addendum: Prospectus for a Reasonable Defense

The PDA “Reasonable Defense” plan would reset America’s defense posture in light of new strategic challenges and circumstances. Based on a more realistic and cost-effective defense strategy, the new posture would enable a sustainable balance between military power and other elements of national strength. The new strategy would:

• Refocus America’s armed forces on those missions and tasks for which they are best suited: crisis response, defense, and deterrence.
• Prioritize those threats that pose the greatest danger of harm to ourselves and our allies: terrorism and the spread of nuclear weapons. 
• Assume a more cooperative approach to achieving security goals – one in which responsibilities, burdens, and authorities are proportionately shared among allies and the broader community of nations.
• Tailor conventional war capabilities and modernization efforts to a realistic assessment of current and emerging conventional military challenges.
• Hedge against an uncertain future by renewing economic strength, maintaining a strong foundation for force reconstitution as well as a proportionately larger Reserve component, and continuing support for research, development, and the prototyping of new military technologies. 
• Reduce by 40% our routine peacetime military presence overseas and put greater emphasis on surging military power forward when and as needed. 
• Refrain from protracted counter-insurgency operations and armed “nation building” efforts. 
• Take a significant step toward a “minimal deterrent” nuclear posture, redouble efforts at strategic arms control, and adopt a no-first-use nuclear policy.

Following from these strategic precepts, the Reasonable Defense plan would reduce the size of the active-component military from more than 1.4 million troops today to 1.15 million by the end of 2016 – 19% reduction in military personnel over four years. Combat troops and units would be reduced by only 17%, however – more for the ground forces, less for the air forces. The reduction in National Guard and Reserve personnel would also be less: only 11%.

Once the drawdown to a Reasonable Defense level is complete, the annual Defense Department base budget would stabilize at approximately $455 billion (2012 dollars), which is 14% below the Fiscal Year 2012 budget.

http://www.comw.org/pda/fulltext/140812bm56-Defense-Sequester.pdf

PDA Update - August 1, 2012

50+ Congressional Staff Briefed on 
Defense Savings Options

Yesterday, July 31, 2012, Carl Conetta of the Project on Defense Alternatives, Ben Friedman of the Cato Institute, and Larry Korb of the Center for American Progress, presented options and arguments for defense savings to a standing-room-only meeting of more than fifty Congressional staff in the Rayburn House Office Building.   The meeting was moderated by Laura Peterson of Taxpayer for Common Sense and sponsored by the offices of Representatives Keith Ellison (D-MN), Jack Kingston (R-GA), Barbara Lee (D-CA), and John Campbell (R-CA).

A central concern of participants was options for Fiscal Year 2013 defense appropriations and the likely amendment of the Budget Control Act.

Laura Peterson reviewed the debt and deficit challenge as well as the efforts to date to achieve significant defense savings. She noted that the defense industry has mounted a strong defense of current levels of spending, but that recent bi-partisan cooperation on defense budget restraint showed hope for greater savings.

Carl Conetta proposed a goal of reducing National Defense spending for FY 2013 by $15 billion to $18 billion, which would imply a top line of about $535 billion.  Drawing on recommendations outlined in the Defense Sense report, he suggested significant savings could be realized by accelerating personnel reductions, reducing strategic weapon modernization, and selectively cutting conventional weapon programs.  He pointed out that, despite the nation’s fiscal woes, the national defense budget had declined by less than 5 percent in real terms since 2010.

Ben Friedman challenged the notion that defense budget reductions, even at the level implied by sequestration, would imperil the economy or hobble the armed services.  The impact of reduced budget authority in any one year would be spread over several years of outlays, he said.  Greater budgetary restraint would encourage the armed services to compete and find new efficiencies.  And the overall economic effect of debt and deficit reduction would be positive over the long-term.  Funds removed from the Pentagon account would not simply disappear, he said, but could re-enter the economy in ways more conducive to growth.

Reinforcing the point about the delayed impact of cuts, Lawrence Korb pointed out that the Defense Department now holds $80 billion in unspent authorized cash from previous years.  Korb also criticized making defense policy decisions based on industrial interests, noting that the Navy does not really want the F-35, on which it will spend more than $1.8 billion in FY 2013.  Korb also challenged the assertion that significant budget reductions would bring disaster to the Pentagon, recalling that much deeper cuts had been enacted between 1985 and 1994.

Looking to the future, meeting participants saw the recent victory of the Mulvaney-Frank amendment as heralding more bipartisan cooperation in achieving defense savings. And they saw the post-election period – when the sequester threat would loom – as presenting a renewed opportunity for real progress toward a more sensible level of defense expenditure.

PDA Update - July, 2012

It now appears quite likely that following this year’s election the Budget Control Act will be either suspended (“kicked down the road”) or amended in order to avoid the $110 billion sequester of discretionary budget funds, half of which will come out of national security accounts, mostly from the Department of Defense.  The intensive political negotiations on Budget Control Act amendment will begin in November with $50+ billion in DoD budget cuts on the table under current law.  Of course, the composition of future budgets and any fiscal compromise will depend on who is President in 2013 and the balance of power in Congress.

 

Although Pentagon boosters are fond of calling the 9-10% budget cut in the current law “draconian” and “dangerous” it does not amount to much when put in context of what our enemies and potential opponents spend.  A new PDA summary of global military spending called USA and Allies Outspend Potential Rivals on Military by Four-to-One: America Carries Much of the Defense Burden for its Allies tells the story. 

 

 

A $50 billion reduction in U.S. defense spending results in a ratio of 3.8 to 1 (between the U.S. and allies to the un-allied set of current and potential opponents.)  A 4 to 1 spending superiority is extraordinary overmatch, and a 3.8 to 1 overmatch is also extraordinary.  We might want to return attention to this matter when and if the overmatch is merely 2 to 1.  Meanwhile we can continue to make judicious cuts to the DoD spending for quite some time. 

 

When an amended Budget Control program is negotiated later this year and early next PDA believes there should be no less than $12 billion (2.3%) in additional DoD cuts in FY13.  With concern about the still weak economy we favor phasing-in deeper cuts over the next four years.  We think the Pentagon should be trimming back to circa 2006 levels as quickly as the services can reasonably be expected to adapt and the economy can absorb the decline in Federally supported jobs.  

 

The specifics of a readily available set of program cuts worth $17-20 billion in 2013 are listed in PDA's Defense Sense.  

 

Rep. Barbara Lee (CA) has introduced an amendment to the FY13 House Appropriations bill cutting DoD’s budget by $19.2 billion.  This is an appropriate and reasonable cut for the coming year.

PDA Update - May, 2012

Defense Sense and the Budget Control Act

After the U.S. economy slid into the Great Recession in 2008, the Federal Government’s deficit spending and the national debt grew rapidly.  President Obama responded to this perceived fiscal crisis by establishing the National Commission on Fiscal Responsibility and Reform which worked through most of 2010 to craft a bipartisan deficit reduction package.  However, the Fiscal Commission failed to find a solution supported by the super-majority of commission members which its mandate required.  What followed in 2011 was a dysfunctional seven months of partisan conflict in Congress over the budget process.  Finally, in August of 2011, Congress passed the Budget Control Act (BCA), which requires at least $2.2 trillion in deficit reduction over ten years.

The two-pronged approach outlined in the Budget Control Act requires two steps: first, the Budget Control Act requires $1 trillion in discretionary spending reductions over ten years.  Congress is currently considering how to achieve the first portion of mandated spending reductions.  It is notable that the National Defense Authorization Act recently passed by the House exceeds BCA caps by $8 billion.   The Senate is expected to mark its Defense Authorization to the Presidents budget which is $4 billion over the caps.

The second portion of the Budget Control Act (sometimes referred to as the “sequester” provision) goes into effect on January 2, 2013, and mandates an additional $110 billion in automatic cuts to federal spending in fiscal year 2013 and similar cuts for each of the following nine years.

Remarkably, both parties in Congress and the Administration have essentially ignored the requirements of sequestration up to this point.  Because Congress refuses to address the spending reductions mandated by the Budget Control Act that will happen on January 2nd, this year’s lame duck Congress returning from recess after the November election faces an unprecedented challenge.

Many in Washington assume that the Budget Control Act will be amended to avoid sequestration.  However, the major political parties are likely to remain at an impasse.  Republicans have pledged not to allow tax increases while Democrats resist reforms to earned benefit programs such as Social Security and Medicare and are reluctant to agree to additional cuts to domestic programs in the discretionary budget.  While each party’s  leadership remains loyal to their respective ideological position, neither currently acknowledge the possibility of compromise that involves further Pentagon spending reductions.

Today, the Pentagon’s “non-war” base budget comprises over 50 percent of discretionary spending.  Since 2000 it has risen by 90 percent in nominal “inflated dollar” terms and 42 percent in real terms.  The Pentagon base budget is currently around $550 billion annually.  There is no realistic compromise on deficit reduction which does not include a substantial contribution from the Pentagon.

Reaching across ideological differences to produce a new report called Defense Sense, analysts from the Project on Defense Alternatives and the Cato Institute have identified 18 specific options that will yield up to $20 billion in additional defense savings in 2013.

http://www.comw.org/pda/fulltext/120515DefSense.pdf 

These are not “draconian” cuts that threaten national security.  They total about 4% of the Pentagon’s current base budget.  Many involve deciding now to end troubled programs and instead use systems that are field-tested, reliable, and much less costly.  Others savings involve making modest shifts in the posture of forces such as making additional reductions to troops stationed in Europe  sixty-seven years after World War II and twenty-two years after the Cold War.

Examples of troubled programs to cancel are the Littoral Combat Ship and the Marine Corps variant of the new F-35 Joint Strike Fighter, both of which are prime examples of the current problems in U.S. defense acquisition.  Deciding to cancel these and to replace them with proven systems at much lower costs will save an estimated $3.8 billion in Fiscal Year 2013 alone.

There are also sensible changes to the United States’ strategic nuclear posture that involve eliminating and reducing capabilities which are excessive and redundant or designed to counter threats which no longer exist.

The options outlined in Defense Sense are modest in scope.   If we are to ensure a stable fiscal future for generations to come, it is imperative that the United States responsibly balance the requirements of military power and national strength.

It is national strength in its many facets that will ultimately determine our security and our position internationally.  Military power is but one part of national strength.  The Pentagon’s budget, and our overall federal budget priorities, must reflect this reality.

~~~~~

Defense Sense: 

Options for National Defense Savings in Fiscal Year 2013

Full report
Summary of recommendations

Recommendations focus on seriously troubled weapon programs and on capabilities that significantly mismatch or exceed defense requirements.  This is a practical first step.  More might be saved by rethink­ing our national security commitments, strategy, and missions -- as we and our colleagues at Cato have suggested elsewhere.

In developing our recommendations, we drew on and adapted previous efforts to identify safe and sensible defense savings, including the President's own National Commission for Fiscal Responsibility and Reform and the Sustainable Defense Task Force (of which we were members). 

Defense Sense has already played a significant role in Congressional efforts to amend the National Defense Authorization Act.