Thursday, October 4, 2012

10/4/12 RD Bulletin: Hill Support for a Mini-Simpson Bowles Sequester Deal Grows

News: Although members of Congress are home campaigning for reelection, support for a mini-Simpson Bowles compromise that could delay sequestration by a few months seems to be growing.  Next week, a group of bipartisan senators, led by Senator Mark Warner of Virginia, will meet off Capitol Hill to continue to negotiate a long-term bipartisan deficit reduction plan aimed at preventing sequestration in its entirety. 
PDA Perspective: Carl Conetta examines how the Simpson Bowles plan would impact defense spending relative to current levels, and concludes that over ten years, Simpson Bowles would likely spend $360 billion less than what the President proposed in February and $550 billion less than what Representative Ryan has proposed. 
Reports: Taxpayers for Common Sense has released a new report which outlines $672.5 billion in potential national security savings over ten years.  Amongst other recommendations, the report proposes cancelling the B and C variants of the F-35 Joint Strike Fighter, the V-22 Osprey, four next-generation nuclear submarines, and one variant of the Littoral Combat Ship.
State of Play
Executive: With less than three months until the sequestration deadline, the Pentagon is holding firm in its prediction that Congress will take some action during the forthcoming lame-duck session to delay or prevent sequestration from taking effect next year.  So much so, in fact, that in a recent memo obtained by several news outlets, the Pentagon’s deputy secretary, Ashton Carter, explicitly told employees not to plan for or assume enactment of sequestration because it could negatively impact the department’s operations and planning.  In the memo, Carter writes, “I am…directing that all commanders and managers in the Department of Defense continue the defense mission under current laws and policies, without taking any steps that assume sequestration will occur… Commanders should not, for example, curtail planned training, maintenance, health care or family programs…Commanders and managers should not alarm our employees and their families by announcing personnel actions related to sequestration or by suggesting that these actions are likely.”  With Congress having taken little official action to delay the automatic cuts, it appears as if Carter believes lawmakers will be unable to stomach sequestration when they return from the pre-election campaign season. 
For months now, major defense contractors have threatened that they will to send out layoff notices to employees who may lose their jobs if sequestration takes effect next year.  In late July, the Labor Department issued guidance that clarified that the contractors did not need to send out pink slips because there is still too much uncertainty around sequestration.  However, many contractors appeared undeterred by the July guidance and claimed they could face litigation from affected employees should Congress fail to avoid the automatic cuts. 
Last Friday, the Office of Management and Budget weighed in on the issue by declaring that any litigation costs associated with firing contract employees would be covered by the federal agency with which the contractor was doing business.  “Thus, agencies may treat as allowable other costs potentially associated with sequestration, including WARN Act-related costs arising under circumstances not specified in this guidance,” says the memo.  Following this latest guidance, Lockheed Martin, EADS North America, and BAE Systems announced that they would forgo sending out pink slips in advance of the election. 
Republicans in Congress responded to the latest OMB memo and subsequent Lockheed Martin announcement with anger with Senator Lindsey Graham (R-SC) calling the move by the White House “patently illegal.”  Graham and Senator John McCain (R-AZ) have pledged to block any move by the Obama administration to reimburse contractor costs related to the WARN Act, ostensibly through blocking reprogramming requests.  Moreover, Senators Chuck Grassley (R-IA) and Kelly Ayotte (R-NH) have written the Office of Management and Budget questioning the agency’s authority to cover reimbursement costs related to the WARN Act.  Specifically, the two are “concerned about the authority of the Executive Branch to instruct private employers not to comply with federal law and to pay the monetary judgments and litigation costs that arise out of lawsuits that may follow.”  Several GOP senators predict that such reimbursement costs could reach into the billions of dollars. 
Fearing that any unobligated funds not secured under contract by January, 2013, will be subject to sequestration, Lockheed Martin and the Pentagon are scrambling to finalize the fifth round of F-35 buys before the end of the yearAccording to Politico, the Department of Defense still has $131.8 billion in FY12 unobligated funds.  Following disparaging comments by the new F-35 program manager, who called the relationship between Lockheed and the Pentagon the “worst” he’s seen, Inside Defense reports that the Defense Department is looking to open up portions of the F-35 program to new contractors in order to increase competition. 
The trade publication, as well as Bloomberg, note that the Pentagon’s top weapons tester, Michael Gilmore, has raised serious objections to the Air Force’s test and evaluation plan, saying that rushing forward with statutorily-required tests could entail “significant risk with no benefit.”  Ultimately, Gilmore recommended delaying testing and evaluation until the aircraft is combat-capable.  However, it appears as if the Air Force is ignoring his recommendation. 
Despite the fact that few in Washington expect sequestration take effect as currently mandated by the Budget Control Act, two large defense contractors, Sikorsky and Northrup Grumman, have already announced plans to fire more than one thousand workers.  The two contractors cited declining defense budgets and increasing fiscal constrains as reasons for the layoffs. 
The recently enacted six-month Continuing Resolution (signed into law on Monday) failed to include authorization for U.S. military and police training efforts in Iraq.  There are currently less than two hundred troops in Iraq complimented by an additional one hundred Pentagon civilians and contractors.  Despite the lack of funding, the Pentagon says it will retain the personnel in Iraq and attempt to find other funding sources to maintain the Iraqi Security Forces Fund. 
On September 28, Chairman of the Joint Chiefs of Staff Martin Dempsey released the Capstone Concept for Joint Operations, a strategic concept for the future of the military based around networking capabilities for rapid and “fluid” action.  Integral to the concept is an idea called globally integrated operations which will be the model for the Joint Force 2020. The concept places “a premium on partnering” not just with allies, but with other U.S. and international agencies.  Marine Corps Lt. Gen. George J. Flynn, the director of Joint Force Development on the Joint Staff, said that the concept will “permeate the military from professional military education, to training, to equipping, to mindset.”
Legislative: The idea that savings outlined in the Simpson Bowles plan can be used to forge a short-term compromise to delay sequestration for up to six months seems to be taking hold on Capitol Hill even though lawmakers are busy campaigning at home.  Many prominent senators, including Senators John McCain (R-AZ) and Lindsey Graham (R-SC) have for months been voicing their support for Simpson Bowles as a sequester replacement.  With the deadline to sequestration rapidly approaching, another key lawmaker, House Budget Committee Ranking Member Chris Van Hollen (D-MD), has voiced his support for a “mini-Simpson Bowles” deal to avert sequestration.  According to National Journal, “even Democrats appear to be warming up to the idea of a short-term deal, as House Budget Committee ranking member Chris Van Hollen, D-Md., said he also wants to find ‘some kind of agreement’ to achieve deficit-reduction goals for six months and avert the across-the-board cuts that way.” 
The aforementioned Simpson Bowles plan refers to recommendations, issued by the co-chairs of the National Commission on Fiscal Accountability and Reform in 2010, which were never considered by the full commission for a vote.  The co-chairs, former Senator Alan Simpson and Erskine Bowles, recommended establishing statutory budget caps which would yield $200 billion in savings in 2015.  These savings were equally divided between defense and non-defense discretionary spending.  Despite the fact that the Simpson Bowles plan included defense savings, Senator McCain recently told Bloomberg Television’s Peter Cook that “Everybody knows what the solution is, and that’s Simpson- Bowles… We are prepared to support it as an outline.” 
Hoping to hammer out a compromise before lawmakers return to Washington next month, a group of eight senators, led by Senator Mark Warren (D-VA), are meeting near Capitol Hill next week to continue to develop the outline of a $4-5 trillion long-term deficit reduction plan.  According to CQ Today, other senators in attendance will likely include Dick Durbin (D-IL), Kent Conrad (D-ND), Tom Coburn (R-OK), Mike Crapo (R-ID), Saxby Chambliss (R-GA), Mike Johanns (R-NE), and Michael Bennet (D-CO).  While the chances that the group produces a long-term plan that can be enacted before the end of the calendar year are slim, portions of a compromise budget could be used to delay sequestration by three to six months. 
A senior Republican appropriator, Rep. Jack Kingston (R-GA), has proposed an alternative to sequestration that would reduce defense spending in a rational and strategic manner.  Kingston recommends eliminating the Medium Extended Air Defense System (MEADS), withdrawing 40,000 U.S. troops from Europe, and halting the production and recapitalization of the M1 Abrams tank. 
Kingston’s recommendations dovetail nicely with a new report from the nonpartisan think tank, Taxpayers for Common Sense, entitled Sliding Past Sequestration, which outlines potential savings of more than $2 trillion over ten years and $162 billion in Fiscal Year 2013 savings.  Specifically, the report outlines $672.5 billion in savings that could be drawn from the national security budget by eliminating, amongst other things, the B and C variants of the F-35 Joint Strike Fighter, the V-22 Osprey, four nuclear submarines, and one variant of the Littoral Combat Ship.
Project on Defense Alternatives Perspective
With sequestration pending, some in Congress (Sen. Lindsey Graham and John McCain among them) are proposing that the Simpson Bowles plan might form the basis of a short-term deal to avert it -- at least until the spring.  But can advocates really mean to adopt the plan’s provisions regarding defense spending?
The plan by the co-chairs of the President’s 2010 Fiscal Commission involved, among other things, setting either defense or "security" spending at their 2010 level (beginning in 2012) and then reducing this level by one percent each year from 2013 to 2015.  After that, the plan would allow spending to increase at the pace of inflation.
If National Defense spending is capped for 2013 at one percent below the 2010 level then approximately $10.5 billion would have to be subtracted from the budget set by the recent Continuing Resolution.  The National Defense account (minus war) would get about $546.7 billion in 2013. This is close to the initial cap entailed by Title III of the Budget Control Act.  However, the plan would then cut defense by one percent more in both 2014 and 2015 before allowing increases for inflation beginning in 2016.
Over ten years, the Simpson-Bowles plan might spend $5.7 trillion discretionary on National Defense – $360 billion less than what the President proposed in February and $550 billion less than what Representative Ryan has proposed.  On the other hand, it would provide almost $221 billion more for defense than would be allowed under full sequestration.  From a security perspective, it’s a perfectly feasible target, as numerous proposals have argued.  Is this where "born again" Simpson Bowles advocates hope to go?  Probably not, given that many are principally concerned with "defending defense."
The rub is in the phrase “based on Simpson Bowles” -- and in the fact that a deal would extend for only a few months. The actual 2013 defense cuts would not be dramatic, if implemented at all.  And, as noted above, the plan allows that caps might be applied to the broader “security” category rather than to defense specifically, which would give budgeters freedom to shield the Pentagon and instead target International Affairs, Homeland Security, or Veterans Affairs.  For some, the attraction to Simpson Bowles may lie solely in the plan’s cuts to Social Security and health care, or in its radical restructuring of the tax code.  Even short-term moves in these directions might serve as game-changing precedents.
National Journal recently conducted a survey of its national security insiders, querying them on whether or not Congress will “punt” on sequestration during the forthcoming lame-duck session.  79 percent of those surveyed believe that Congress will enact a short-term delay in sequestration and allow a new Congress, and potentially a new administration, to deal with the issue.  Only 13 percent of those queried believe that Congress will enact a long-term deficit reduction compromise to ward off the automatic cuts, while eight percent of those asked believe Congress will fail to enact a deal and allow sequestration to take effect. 
The National Journal’s Sara Sorcher writes that one of its insiders predicted that “a continuing resolution would delay the sequester for six months, and an omnibus spending bill would likely keep defense spending afloat six months after that. ‘Sometime during this period, the Congress will likely agree to a comprehensive plan that takes Simpson-Bowles as its basis, or otherwise financial markets will begin penalizing U.S. government borrowing.’”  
News and Commentary
The deal concluded in October of 2001 between the Defense Department and Lockheed Martin over the F-35 was the largest defense procurement contract in history. At a cost now totaling almost twice the original estimate, however, the contract is much less of a bargain than it originally appeared to be for the customers. The author argues that the Air Force should consider other options outside the F-35, including long-term contract competition openings, and upgrades to current fighters including the F-15, F-16 and F/A-18. (10/1/12)
Winslow Wheeler examines the tendency on both sides of the aisle to be “wedded to myths” surrounding the defense budget. Wheeler lambast dramatic rhetoric from the likes of Leon Panetta and Sen. John McCain regarding the potential sequester, and the subsequent exploitation of data regarding what defense spending means - specifically an oft cited graph depicting defense spending as a portion of GDP. Wheeler turns instead to a graph charting US defense spending as a percentage of world military spending, but asserts that increased spending has not equated to superior forces: “In our system...more money does not necessarily translate into bigger, newer, more trained forces. In fact, it can mean less.” (10/1/12)
"The current economic crisis and tepid economic recovery...have created the imperative to reduce defense spending" asserts former CIA analyst Melvin Goodman.  He continues by voicing his support for the Budget Control Act, and specifically mentions programs that may warrant a cut including the carrier fleet, V-22 Osprey, and ICBM programs.  (9/30/12)
The Pentagon’s testing director has condemned the Air Force’s expansion of testing programs for the F-35, writes Tony Capaccio. New testing limits the monitoring by ground personnel and is considered to entail “significant risk with no benefit.” The Air Force has accelerated testing in an effort to expand the number of trained instructor pilots from five today, to eighty by 2015.  (9/28/12)
The Associated Press reports on efforts, led by a high-level Air Force working group called the Raptor Aeromedical Working Group, which was set up in 2005 to examine breathing problems and coughing being experienced by pilot flying the F-22.  Among a number of recommendations, the working group proposed reducing the amount of oxygen supplied to pilots as well as developing a backup oxygen supply system.  However, because the F-22 program was already over-cost and behind schedule, the Air Force ignored many of the working group’s recommendations, even though the underlying problems continued to persist.   (9/28/12)
In a recent interview with National Defense, the program manager for the CVN aircraft carrier program, Rear Adm. Thomas J. Moore, explained why the Navy expects the per-unit cost of next-generation aircraft carriers to fall.  The carrier currently under construction, CVN-78, is almost a billion over its original cost estimate, as is the next carrier to be constructed, CVN-79.  Moore says that unless the third new carrier’s cost can be brought down to around $9 billion, the service may have to dip into other shipbuilding accounts to shore up funding or delay CVN-80’s construction – potentially further increasing its cost.  (9/28/12)
The neo-conservative think tank, Foreign Policy Initiative (FPI), has released the results of a poll it commissioned which found that more than 63 percent of respondents believe that U.S. defense spending “is about right” or “too little.”  The Washington Post’s Suzy Khimm points out that, “FPI’s findings seem to contradict a study this year from the Stimson Center, the Program for Public Consultation and the Center for Public Integrity, which showed that Americans not only wanted to cut defense spending, but also slash defense budgets by an average of 18 percent.”  The Stimson Center’s Matthew Leatherman, who helped prepare the aforementioned survey, believes that the discrepancy between the two surveys’ results arises from the questions and underlying context posed to respondents.  (9/27/12)
Robert Maginnis divides the political arena along philosophical lines, asserting that opinions on defense spending are a case of realist versus idealist.  Ideology, he suggests, should be cast aside in favor of a conservative approach to defense spending focused on clearing non-essential spending and increasing accountability. (9/11/12)
Senate Committee on Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations: Federal Support for and Investment in State and Local Fusion Centers (10/3/12)
Congressional Research Service: Sequestration: A Review of Estimates of Potential Job Losses (10/1/12)
Department of Defense: Management of the Defense Security Enterprise (10/1/12)
Taxpayers for Common Sense: Sliding Past Sequestration (10/1/12)
Department of Defense Office of Inspector General: FY 2013 Comprehensive Oversight Plan for Southwest Asia Issued (9/28/12)
Congressional Research Service: Military Medical Care: Questions and Answers (9/27/12)
Congressional Research Service: U.S. Military Aid To Central Asia: Who Benefits? (9/27/12)
International Security Assistance Force (ISAF): ISAF Monthly Data Trends through August 2012 (9/24/12)
Office of the Joint Chiefs of Staff: Capstone Concept for Joint Operations: Joint Force 2020 (9/10/12)
Henry J. Kaiser Family Foundation: The U.S. Department of Defense and Global Health (September, 2012)