Thursday, July 19, 2012

7/19/12 RD Bulletin: House Set to Approve Annual Defense Spending Bill As Senate Refuses to Proceed on the Measure

Highlights
 
Reports: A new report published by the Project on Defense Alternatives has found that the United States and its close allies spent $1.23 trillion on their armed forces in 2010 – more than 68 percent of the global total – and that the percent of GDP that the United States devotes to military ends far exceeds the average percentage set aside by the rest of the world for military purposes: 4.8 percent in 2010 for the United States versus 2 percent for all other nations.
 
News: The House is taking up its annual defense appropriations bill this week, which would provide $519.2 billion for the Pentagon’s base budget (excluding military construction and mandatory spending).  The bill is roughly $3.1 billion above the President’s budget request, and $6-8 billion above the spending caps implemented by the Budget Control Act.  Meanwhile, Senate Majority Leader Reid has indicated that his chamber will not take up its version of the defense spending bill before the end of the fiscal year, confirming the need for a Continuing Resolution to keep the government funded past September 30. 
 
State of Play
 
Legislative: This week, the House is considering its annual defense appropriations bill, which would provide $519.2 billion for the Pentagon’s base budget (excluding military construction and mandatory spending) with an additional $88.5 billion in war funding.  The measure is $3.1 billion above the President’s budget request and $6-8 higher than the amount authorized by the Budget Control Act last August.  Final passage of the measure is expected later today.  Several Representatives plan on offering amendments to the bill to lower the topline amount appropriated, including a bipartisan amendment by Representatives Mick Mulvaney (R-SC) and Barney Frank (D-MA) to freeze this year’s funding level at the same amount appropriated in Fiscal Year 2012. 
 
Separately, Congresswoman Barbara Lee (D-CA) plans on offering two amendments, one of which would bring the bill’s topline amount into line with the Budget Control Act, and a second amendment that would reduce the bill’s funding level by $19.2 billion.  Earlier this year, defense analysts from the Project on Defense Alternatives and Cato Institute authored a report which outlined $17-20 billion in national security savings that could be implemented this fiscal year without impacting the United States’ global defense posture or the readiness of its armed forces. 
 
Yesterday, the House overwhelmingly passed standalone legislation to require the President to detail how exactly executive branch agencies would implement sequestration cuts.  The Senate has adopted similar language in the latest version of its farm bill.  However, neither measure is expected to be signed into law before the August Congressional recess.  This comes in advance of an August 1 hearing, during which Office of Management and Budget acting director Jeffrey Zients and Pentagon deputy secretary Ashton Carter will testify on implementation of sequestration cuts. 
 
Despite the fact that the chairman of the Senate Armed Services Committee, Carl Levin (D-MI) is “hopeful” that the Senate will consider its version of the National Defense Authorization Act (NDAA) this month, his Republican counterpart, Senator John McCain (R-AZ) is warning that this could be the first time in fifty years that Congress fails to enact its annual defense authorization bill – a warning he issued last year as well.  McCain is urging Majority Leader Harry Reid (D-NV) to schedule Floor time for the measure, although the Senate’s limited July schedule is already quite packed.  The Senate NDAA as currently drafted is roughly $3 billion below the amount authorized by the House.  
 
Last week, the Congressional Budget Office released a report which found that the Defense Department underestimated the ten year costs of its budget submission by $123 billion.  In Fiscal Year 2013, CBO predicts that the Pentagon’s proposed budget would violate the Budget Control Act’s spending caps by $14 billion, while CBO predicts that its five-year budget would violate the Budget Control Act by a total of $508 billion over ten years.  The Chairman of the House Appropriations Subcommittee on defense, Rep. C.W. Young (R-FL) says he is troubled by the report’s findings and expects that Congress will address potential violations of the Budget Control Act’s spending caps when it passes a Continuing Resolution to keep the government funded past the end of this fiscal year.  For its part, the Pentagon objects to the CBO’s scoring of its five-year defense plan, saying that CBO fails to account for several cost-saving measures that the department has proposed as well as making assumptions about how Congress will proceed on issues like military pay and benefits. 
 
Among the CBO report’s other findings is that even if sequestration cuts take effect next year, the Pentagon’s budget would remain higher than it was in 2006 (in 2013 dollars) and much higher than it was during the 1980s at the height of Cold War spending levels.  This finding mirrors a prediction that the Project on Defense Alternatives made earlier this year in a report entitled, Four Decades of US Defense Spending, which found that both the President’s FY13 budget request, as well as the spending projections portended by the Budget Control Act, would hold U.S. defense spending above the Cold War average.  The CBO report also noted that military personnel costs have doubled since 2001 and are expected to grow even faster over the next twenty years. 
 
Speaker of the House John Boehner (R-OH) and Majority Leader Eric Cantor (R-VA) have written President Obama urging him to begin negotiating with both political parties in Congress on a deal to avert sequestration next year.  And in a testy exchange between House Armed Services Committee Chairman Buck McKeon (R-CA) and Majority Leader Reid, the chairman strongly urged the Senate leader to bring legislation to the Senate Floor to nullify next year’s sequester.  Meanwhile, Majority Leader Reid has announced that the Senate is unlikely to consider any further appropriations bills before the beginning of the new fiscal year – making it increasingly likely that Congress will pass an omnibus appropriations bill or a full-year Continuing Resolution to keep the government funded through Fiscal Year 2013.  A group of Republican senators have written party leadership asking them to support a clean, short-term Continuing Resolution that would keep the government funded into the new Congress – indicating their belief that Republicans will increase their gains in Congress and improve their leverage at the negotiating table.  Although, Democrats are more likely to support a long-term or full-year CR. 
 
On Wednesday, CEOs from four major defense contractors testified before the House Armed Services Committee regarding the “calamitous effects” of scheduled sequestration cuts.  Defense contractor executives, led by Lockheed Martin's Robert Stevens, told the panel that they were planning to send out notices to some employees shortly before the November election notifying them that if an agreement could not be reached to avert sequestration, their jobs would be terminated in January 2013.  Lockheed has indicated that it would have to lay off 10,000 of its 123,000 workers if sequestration is implemented as scheduled.  
 
Executive: In response to a reporter’s question this week, Pentagon spokesperson George Little asserted that scheduled sequestration cuts will not impact defense contracts that use Fiscal Year 2012 dollars, but rather will only apply to FY12 dollars that remain unobligated by October 1, 2012.  Meanwhile, Pentagon acquisition chief Frank Kendall indicated that the Pentagon is in negotiations with Lockheed Martin to purchase the next batch of 32 F-35 Joint Strike Fighters.   Despite the fact that the White House has proposed purchasing 179 fewer aircraft over the next five years, the Pentagon is attempting to lower the cost of the jet in its next procurement cycle using a new formula to develop estimates for how much the F-35 should cost. 
 
Despite confusion over whether or not the Pentagon and Office of Management and Budget have in fact begun planning for sequestration, Principal Deputy Under Secretary of Defense Kathleen Hicks has insisted that the Pentagon does not have a “plan B” besides its FY13 budget submission, and that further defense cuts beyond those for which the defense department has already budgeted would “undermine strategic interests, undercut our strategic approach and generate unacceptable risks to the nation.”
 
The Air Force has grounded its fleet of C-27J cargo planes following a mechanical failure in one of the aircraft’s flight controls.  The C-27J fleet has already been pulled from combat operations in Afghanistan following the proposed retirement of the aircraft fleet in the Pentagon’s FY13 budget request.  Defense Department acquisition chief Frank Kendall has signed off on a second low-rate initial production order for 13,077 Rifleman Radios for the Army following a 2011 $56.4 million contract for 6,250 radios.  According to Inside Defense, Kendall has also moved to disband the Joint Tactical Radio System program office and “transition oversight of all radio hardware to the services.”
 
The Aerospace Industries Association has published an updated report which claims that sequestration of defense and non-defense discretionary funding, scheduled to take effect on January 2, 2013, would cost the United States 2.14 million jobs and push the economy back into a recession.  The updated study estimates that 1.09 million jobs would be lost in defense-related industries, an increase from its previous study, which found that 1.01 million defense-related jobs would be impacted.  The Center for Public Integrity’s R. Jeffrey Smith criticized the report by pointing out that it included a number of assumptions which imagine “a more serious set of cuts than what’s on the table.”
 
On Friday, the Special Inspector General for Iraq Reconstruction issued its final audit report regarding the $51.4 billion appropriated for reconstruction projects in Iraq.  While the report concluded that the exact amount of money lost to fraud and abuse may never be known, it is indeed a “significant” amount.  Last year, the Commission on Wartime Contracting in Iraq and Afghanistan estimated that the United States has lost between $31-60 billion to waste and fraud in reconstruction programs in both countries.

Project on Defense Alternatives Perspective: Following this year’s election, it appears quite likely that 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 amending the Budget Control Act will begin in November with $55 billion in scheduled DoD budget cuts on the table.  Although Pentagon boosters are fond of calling this 9 percent budget cut “draconian” and “dangerous,” it does not amount to much when put in context of what our enemies and potential opponents spend. 
 
According to a new report that analyzes global military spending published by the Project on Defense Alternatives (PDA), the U.S. and its allies overmatch all potential (and, importantly, unallied) opponents by a 4 to 1 margin.  A $55 billion reduction in U.S. defense spending would change this ratio to 3.8 to 1.  A 4 to 1 spending superiority is an extraordinary overmatch, as is a 3.8 to 1 ratio.  When the Budget Control Act is amended later this year or early next year, PDA believes there should be no less than $12 billion in additional defense cuts in FY13.  Defense analysts from PDA and the Cato Institute recently outlined $17-20 billion in national security savings possible in Fiscal Year 2013 in a report entitled Defense Sense.  Rep. Barbara Lee (CA) plans on offering an amendment to the House defense appropriations bill to cut the Pentagon’s budget by $19.2 billion - a very reasonable, and frankly modest, cut.
 
Polling: This past May, the Stimson Center and the Center for Public Integrity published results from an Internet survey, which found that when Democrats, Republicans, and Independents are provided contextualized information about the federal budget, they overwhelming support military spending cuts in excess of those entailed by sequestration.  This week, the think tanks published updated analysis which examined how the Internet survey breaks down between Republican and Democratic-leaning Congressional districts.   The new analysis found that 74 percent of people living in Republican-leaning districts support cutting defense while 80 percent of those living in Democratic-leaning districts support military spending cuts. 
 
News and Commentary
 
A new PDA analysis has found that the United States carries much more than its share of the allied defense burden, as measured by percentage of Gross Domestic Product allocated to defense. Together, the United States and its close allies worldwide spent $1.23 trillion on their armed forces in 2010 – more than 68 percent of the global total.  But had the burden been shared equally among the allies based on GDP, the United States could have reduced its military spending by one-third (33 percent), including spending for war.  (7/17/12)
 
Robert Naiman discusses the different positions that Democrats and Republicans have staked out in the House and Senate over the nullification of sequestration and the forging of a grand compromise on deficit reduction.  Within the context of the defense appropriations bill, which the House is considering this week, Naiman argues that every dollar which is not taken from the Pentagon’s budget is a dollar that will likely be culled from the non-defense domestic discretionary budget.  Naiman predicts that the topline amount approved by the House for the FY13 defense spending bill will be a negotiating position from which to extract concessions from Senate Democrats and the White House.   (7/17/12)
 
Gordon Adams asserts that defense budgets are momentum driven and that despite strong opposition, future defense budgets will continue to decline.  Citing historical precedent, Adams refers to industry claims of doomsday as strictly political and refers to the recent Aerospace Industries Association jobs study as “flawed and hypocritical.”  Adams writes, “The truth the ‘defender’ crowd, supported by AIA, don’t like to acknowledge [is that] every reduction in federal spending reduces employment somewhere.” (7/17/12)
 
In honor of yet another round of defense contractor appeals not to cut the defense budget, Bill Hartung points out that the value of defense prime contracts has doubled.  Hartung reckons that more than $36 billion in contracts given to Lockheed last year equate to “a ‘Lockheed Martin tax’ of nearly $300 per taxpaying household.” Hartung suggests that “the next time [HASC] invites [Lockheed’s CEO] Robert Stevens to testify, Rep. McKeon's committee should make him talk about these issues rather than giving him a platform for special interest pleading.” (7/17/12)
 
In its FY13 budget submission, the Pentagon requested $4.5-5.6 billion in funding for personnel in the war funding account, also known as the OCO account, even though personnel funding has typically been included in the base defense budget.  The Cato Institute’s Chris Preble points out that since the OCO account is not subject to statutory budget caps implemented by the Budget Control Act, it is increasingly seen by appropriators and the White House as a slush fund in which to park additional military spending.  (7/16/12)
 
Walter Pincus reports that a greater reliance on military healthcare by active and retired military personnel could result in its cost increasing dramatically in future years.  According to CBO, costs “could grow from $51 billion in fiscal 2013 to $65 billion by 2017 and $90 billion by 2030.” The report shows that only 25 percent of military retirees and their families are enrolled in private healthcare. (7/16/12)
 
Lowering the requirements for entry into the bidding process would dramatically cut costs by allowing a wider array of firms to enter the market, says the Lexington Institute’s Daniel Goure. He suggests that simply by cutting requirements, a variety of new platforms have been developed.  (7/16/12)
 
Charles Zakaib suggests, as many others have before him, that doomsday claims by the defense industry and HASC Chairman Buck McKeon (R-CA) are nothing but scare tactics.  Zakaib acknowledges that defense reductions and sequestration would likely have an effect on the American economy, but says that immediate losses will quickly be recovered, given the historical precedents following past spending reductions. Meanwhile, the Cato Institute’s Christopher Preble argues that Congress and the White House should simply let sequestration cuts be implemented early next year.  (7/16/12)
 
Citing the necessity of spending reductions, the New York Times editorial board points to two poster children of “dysfunctional” and wasteful military spending: The F-35, whose “cost overruns now total $1 billion”, and the F-22, which has been grounded for as long as five months due to safety concerns.  Writes the Times’ op-ed board, “Many are complaining about the financial and strategic pressures that are forcing defense reductions. They need to worry as much about the billions being wasted.” (7/16/12)
 
Christopher Cavas reports that the modular mission packages, a crucial component and selling point of the Littoral Combat Ship (LCS), will now require weeks to install instead of days. This revelation largely negates the advantage of the LCS, which was also determined to be unable “to fulfill most of the fleet missions required by the Navy’s primary strategy document.” (7/14/12)
 
The Navy recently launched its F/A-XX initiative to develop a replacement platform for the F/A-18 causing some defense analysts to wonder if the Navy is hedging against the potential cancellation of the F-35C.  However, after interviews with Navy officials and industry experts, AOL Defense’s Sydney J. Freedberg concludes that the service does not have the appetite to develop another expensive weapons platform, like the F-35, and instead, will likely seek an upgraded and improved version of the F-35C as its F/A-XX candidate.  Meanwhile, the Chief of Naval Operations, Admiral Jonathan Greenert, has reiterated his support for the F-35C following an opinion piece he authored on the limits of stealth technology which some interpreted as signaling his disinterest in the Joint Strike Fighter.  (7/13/12)
 
Gordon Adams accuses some members of Congress of purposefully manipulating sequestration fears for the sake of electioneering.  Adams calls the situation “Pure balderdash, but with a purpose: win the election and set up a budget deal afterwards.”  Furthermore, he suggests that not only will the defense budget drop below purported “flat budgets”, but that this is “good thing for security” as it forces a refocusing of priorities and a reduction in systematic over-spending. (7/12/12)
 
Reports
 
 
Congressional Research Service: Defense: FY2013 Authorization and Appropriations (7/13/12)
 
Office of the Special Inspector General for Iraq Reconstruction: Final Forensic Audit Report of Iraq Reconstruction Funds (7/13/12)
 
 
Congressional Research Service: Afghanistan Casualties: Military Forces and Civilians (7/12/12)
 
 
Center for Strategic and Budgetary Assessments: Rebalancing Military Compensation: An Evidence-Based Approach (7/12/12)
 
 
Center for Strategic and International Studies: Preparing for the Third Generation of Conflict, Stabilization, and Reconstruction Operations (July, 2012)
 
 
Military Intelligence Professional Bulletin: Language and Cultural Competency (Jan-Mar 2012)
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