Thursday, July 19, 2012

7/12/12 RD Bulletin: House to Consider Defense Spending Bill as CBO Knocks DOD's FY13 Budget Request

News: The House is expected to consider its annual defense appropriations bill next week, which would allocate $519.2 billion for the Pentagon’s base budget. 
News: Politico reports that a small group of senators, led by John McCain (R-AZ) and Lindsey Graham (R-SC), are making progress in finding $110 billion in savings that could be used to replace the sequestration of federal funds scheduled to take effect early next year. 
Reports: CBO has published a new analysis of the Pentagon’s five year spending plan which asserts that the department has underestimated the ten year costs of its budget by $123 billion.  Furthermore, CBO concludes that the department’s FYDP would violate statutory spending caps implemented by the Budget Control Act.
State of Play
Legislative: The House is expected to consider its annual defense appropriations bill on the Floor next week, a measure that would provide $519.2 billion for the Pentagon’s base budget, roughly $3.1 billion above the President’s budget request.  Several House members plan on offering a range of amendments that would reduce the topline amount appropriated by the bill, including a bipartisan amendment to be offered by Representatives Mick Mulvaney (R-SC) and Barney Frank (D-MA) to reduce the bill’s total amount by roughly $1.1 billion.  Defense appropriations may be the last spending bill considered by the House this fiscal year. 
The Senate defense appropriations committee is waiting until the House passes its military spending bill before marking up the Senate version, which would provide $511.2 billion for the base defense budget, but would also allocate $93.5 billion to the war funding account - $5 billion more than the President requested in his budget submission. 
Senate Armed Services Committee Chairman Carl Levin says he hopes the Senate will be able to take up its version of the National Defense Authorization Act later this month, even though the Senate’s Floor schedule is quite packed.  If the upper chamber is unable to bring the measure forward in July, it would only have three weeks to consider it in the fall before the election and forthcoming lame-duck session, during which Congress must tackle a number of complex issues, including the expiration of the Bush-era tax cuts as well as Fiscal Year 2013 appropriations and a compromise to ward off scheduled sequestration cuts. 
Meanwhile, Politico reports this week that Sens. John McCain, Lindsey Graham, and a small group of other senators are making progress in developing a compromise alternative that would negate sequestration cuts for at least one year, and are actively considering including some form of increased government revenue as a means of preventing the automatic cuts.  The group is aiming to forge a compromise that would save $110 billion via a ratio of 3-1 spending cuts to revenue increases.  According to McCain and Graham, Republicans would need to agree on $40-50 billion in revenue increases while working with Democrats to identify $60-70 billion in spending cuts.  And CQ Today quotes an unnamed Congressional staffers saying that, “lawmakers are beginning to talk about creating bipartisan, bicameral working groups to work out a deal to avert sequester, but nothing has yet taken shape.” 
At the behest of the Senate Budget Committee, the Congressional Budget Office has analyzed the Pentagon’s five year budget plan (FYDP) and determined that it will cost $123 billion or five percent more than the department estimates in its budget submission.  As a result, CBO concludes that the department’s FYDP would violate the spending caps placed in law by the Budget Control Act last August by $508 billion over ten years without accounting for forthcoming sequestration cuts.  In Fiscal Year 2013, CBO estimates that the defense department budget is $14 billion above BCA spending limits. 
All of the defense spending and authorization bills currently under consideration by Congress would also violate the Budget Control Act’s spending caps, demonstrating that any compromise to avoid sequestration and enact full-year appropriations for Fiscal Year 2013 will likely need to amend the BCA to alter the discretionary spending caps and avoid violating current law. 
Executive: After initially declining to testify before the House Armed Services Committee on the impact of sequestration cuts to defense, acting Office of Management and Budget director Jeffrey Zients has agreed to appear before the panel during a committee hearing on August 1.  Zients will be joined by deputy defense secretary Ashton Carter.  For the first time, Zients has acknowledged that OMB has indeed begun planning for sequestration, though Pentagon officials are increasingly acting as if Congress will cut a deal to avoid sequestration at least for one fiscal year, with Pentagon spokesperson George Little commenting, “We need to move beyond sequestration. And we believe that members of Congress do want to get beyond it.”  Perhaps in anticipation of the August 1 hearing, a group of seven senators has written fifteen major defense contractors requesting that they provide information on the potential impact of sequestration cuts to their contracts, workforce, and future plans. 
Speaking at the Farnborough International Airshow in London, Boeing Mobility vice president Tommy Dunehew told reporters that the latest order for 24 C-17 Globemasters, scheduled to be completed in 2014, may be the last batch of C-17 cargo planes ordered by the Pentagon for the foreseeable future.  Textron Inc. has been awarded a $212 million contract to begin development of a next-generation hovercraft called the Ship to Shore Connector to transport Marines from their ships to beachheads.  The Ship to Shore Connector will replace the Landing Craft Air Cushion, first constructed in 1982, which is all the more important to the service since former Secretary of Defense Robert Gates cancelled the Expeditionary Fighting Vehicle, an armed amphibious assault platform which also would have transported Marines to shore. 
As part of the 2005 BRAC process, the Army merged the Fort Lewis and McChord Air Force Bases into one joint facility, which was originally estimated to save $2.3 billion over twenty years.  However, a recent GAO report found that the 2005 BRAC will save significantly less money than originally estimated, and that Lewis-McChord merger will in fact only save $249 million over twenty years.  And although Congress has expressed its strong opposition to additional base closures and realignments, the Air Force is moving forward with plans to consolidate Materiel Command centers by moving some missions from Eglin Air Force Base in Florida to the Wright-Patterson Air Force Base in Ohio and the Air Force Test Center in California.  However, if provisions included in the House National Defense Authorization Act barring the administration from proceeding with base closures is passed into law, then the Air Force will be forced to undo the consolidation. 
Pakistan has agreed to reopen NATO supply routes into Afghanistan, which were closed late last year following an accidental attack on a Pakistani border post by U.S. aircraft.  Pakistan had recently demanded a $5,000 per truck fee, however, it has agreed to retain the original fee of $250 per truck following an apology by Secretary of State Hillary Clinton for the accidental attack.  During an interview this week, deputy defense secretary Ashton Carter noted that removing U.S. military hardware from Afghanistan will cost billions of dollars and prove much more difficult than the recent redeployment of U.S. forces from Iraq. 
Project on Defense Alternatives Perspective: CBO has published a new analysis that serves as reasonable cause to accuse DoD of gaming the efforts by the Administration and Congress to cut the deficit.  The ten year DoD budget reductions since the beginning of 2011 (the greatest percentage of which were included in the Budget Control Act) were supposed to save upwards of $475 billion.  CBO estimates that at least $123 billion in savings will be negated by the actual costs of current DoD budget plans.  Of course, the CBO estimate of the costs of plans does not mean that they will be actually funded by Congress.  But this discrepancy certainly suggests that DoD is not planning to the budgets they are submitting and that they expect they will have higher budgets when debt and deficit reduction is no longer viewed as a top policy priority.
News and Commentary
A group of major defense contractors, led by Lockheed Martin, has threatened to send out hundreds of thousands of pink slips to their workers as a result of forthcoming sequestration cuts.  The group claims that the 1988 Worker Adjustment and Retraining Notification Act requires them to notify workers of impending layoffs.  However, labor experts question whether this is simply a scare tactic on behalf of defense contractors or if they are actually required under the law to carry out such notifications.   General Dynamics, another major defense contractor, has stated that it will not join the Lockheed effort, citing the lack of legal necessity and their concerns about the effect on employee morale. (7/10/12)
CNN Security Clearance: Fighting terrorism softly
In an op-ed piece, former Representative Jane Harman (D-CA) laments the “hijacking…of our national narrative” in which projecting military power is increasingly seen as the primary role of the United States on the global stage. Harman suggests that, not only must we win the physical war with extremists, but “We need to win the argument.” She identifies disaster relief as a prime opportunity to project American values and exhibit generosity around the world.  (7/10/12)
Winslow Wheeler discusses a recent GAO report on the F-35 that listed cost growth of 42 percent in the aircraft program.  However, Wheeler shows that GAO summary data uses the 2007 baseline when the system development actually began in 2001.  When accounting for that, the cost increase is actually closer to 70 percent.  Wheeler commends GAO’s assessment of the F-35’s service life as “unaffordable and simply unacceptable in the current fiscal environment.”  Lockheed Martin, meanwhile, has dismissed the $1.1 trillion price tag DoD has put on the 55 year operating cost of the F-35. (7/10/12)
In a recent report, the Defense Department Inspector General (IG) criticized the Army for failing to implement cost controls in its logistics contract for the Stryker vehicle family. Allegedly, “managers failed to establish effective means to tie the level of operational funding to the actual workload needed to sustain the Stryker [and instead] relied on estimates made years earlier.” The report estimates that $335.9 million has been spent on maintaining excess inventory. (7/10/12)
The Washington Post: 13 minutes to doomsday
“Two decades after the end of the Cold War, one-third of U.S. strategic forces, including almost all land-based missiles and some sea-based, are still on launch-ready alert” writes the Post editorial board.  Some experts, including retired General James Cartwright, have called for a reevaluation of the current policy that sets the necessary time required to launch at 24 to 72 hours instead of the infamous “13 minute” timeframe. The editorial board notes that today the United States and Russia have “as many as 1,800 warheads on alert at any given time…both countries should ease off the alert status for strategic forces.” (7/8/12)
A recent Congressional earmark ban has not only eliminated earmarks, but also made it “difficult for watchdog groups and lobbyists to figure out what’s going on.”  Kate Brannan reports that generic increases in program spending is the new and indiscernible manifestation of earmarks that are more vulnerable to large funding shifts and much more beneficial to contractors whose needs are still met by Congressional champions. (7/5/12)
Congressional Budget Office: Monthly Budget Review (7/9/12)
Government Accountability Office: Observations on the Navy's Use of Live and Simulated Training (6/29/12)
Government Accountability Office: Updated Costs and Savings Estimates from BRAC 2005 (6/29/12)
International Security: Testing the Surge: Why Did Violence Decline in Iraq in 2007?  (Summer, 2012)
Department of Defense Chief Information Officer: Mobile Device Strategy (July, 2012)