Monday, November 19, 2012

11/16/12 RD Bulletin: Congress Back to Work on Fiscal Cliff, PDA Releases New Strategic Guidance

 
Highlights
 
Project on Defense Alternatives: PDA released a new report this week entitled Reasonable Defense: A Sustainable Approach to Securing the Nation.  The report argues for a new balance among the various instruments of U.S. national power better suited to today’s strategic conditions.  Adopting a realistic view of security needs, the plan advocates a military almost 20 percent smaller than today’s.  
 
Reasonable Defense advances a “discriminate defense” strategy that would focus the military on cost-effective missions, gradually roll back the Pentagon budget to 2004 levels (adjusted for inflation), and save $550 billion more than official plans over the next decade. The plan focuses the U.S. military on those tasks it does best: defense, deterrence, and crisis response.  It argues that non-military means are the best tools for preventive security tasks.  And it calls for a new deal with our allies based on real reciprocity.
State of Play
 
Fresh off a bruising campaign season, Congress returned to Washington this week with a long list of legislative items that require immediate attention, none more pressing then the forthcoming “fiscal cliff” – a combination of expiring tax provisions coupled with automatic cuts to discretionary spending which the Congressional Budget Office warns could force the United States back into an economic recession. 
 
During his first post-election press conference, the President committed to working with Congress to address the forthcoming fiscal cliff before the December holidays; however, he has remained firm in his insistence that increased taxes on the wealthy must be included in any budget compromise.  Following a meeting between Congressional leadership and the President this morning, Majority Leader Harry Reid (D-NV) said that they have the “cornerstones of being able to work something out” in order to avert the fiscal cliff and that both sides will have to “give some of the things we know are a problem.” 
 
For his part, House Speaker John Boehner said he is willing consider increased revenue – through the closing of tax loopholes or the simplification of the tax code – as a component of any long-term deficit reduction deal to replace the sequester provision of the Budget Control Act.  However, it remains to be seen if the Speaker can marshal the House Republican caucus in support of increased government revenues. 
 
Congressional Republicans challenged the notion put forth by President Obama that he received a mandate from the electorate to increase tax rates on wealthy Americans.  Furthermore, Republicans remain insistent that Congressional Democrats and the President agree to enact entitlement reform and protect the Pentagon in whatever deal is reached to avert sequestration with HASC Chairman Buck McKeon (R-CA) telling Politico, “I am confident there is enough bi-partisan agreement on funding for the Pentagon that we can avert further deep cuts.” Rep. Barney Frank (D-MA), however, believes that additional military spending cuts will be included in any final budget compromise. 
 
Interestingly, Democrats seem to be entertaining the idea of going off the “fiscal cliff” by the end of the year in order to force panicked Republicans to agree to increased tax rates on the rich.  In fact, a group of 13 senators, led by Sen. Jay Rockefeller (D-WV), is drafting a letter to the President demanding that any final budget deal include a 1-to-1 ratio of spending cuts to revenue increases, a position seemingly unlikely to garner any Republican support.  Majority Leader Reid reportedly has discouraged Rockefeller from sending the letter, because Reid fears it could show that Democrats are not united in their approach to addressing the fiscal cliff. 
 
The most likely scenario for the lame duck remains that Congress simply “punts” or delays the automatic spending cuts until sometime next year.  Whatever short-term deal emerges from behind closed leadership doors to avert the immediate impact of the fiscal cliff will likely be sent straight to the Senate and House floors with little chance for amendment or debate.  Taking the contrary view, several senior analysts at the Center for a New American Security recently published a paper in which they argue that the likelihood that Congress avoids sequestration during the lame-duck is increasingly dim.  In a Foreign Policy piece, the trio write, “Continued gridlock during the lame duck session remains a high probability, and budget talks will likely involve a significant amount of brinksmanship among negotiators trying to maximize their own gains -- brinksmanship that could well end in failure, preventing a deal and driving the nation off the fiscal cliff.” 
 
If the analysts at CNAS are correct and no deal is reached during the lame duck session , Congress and the White House may still have a last minute option to buy additional time.  According to a report published by OMB Watch, should Congress fail to take action on sequestration by January 2, 2013, the White House has the ability to delay enactment of the automatic cuts for a few weeks through a process known as “apportionment.”  The Lexington Institute’s research analyst Kimberly Suttle explains, “To counteract the effects of sequestration, the Office of Management and Budget (OMB) can utilize its power of apportionment to accelerate spending for programs in early 2013. Additionally, some programs have what are known as “carryover funds,” where savings roll over from year to year. Since carryover funds are not affected by sequestration, this money can help ease the impact for some programs.” 
 
The Congressional Budget Office released a series of reports recently, one of which, Costs of Military Pay and Benefits in the Defense Budget, calls for reforms in the military compensation system because the services are not experiencing problems recruiting or retaining personnel.  The report recommends capping military pay raises and instead relying on pay bonuses to recruit and retain highly specialized personnel.  It also recommends switching from a defined benefit program for those who serve more than twenty years with a system similar to the federal Thrift Savings Plan.  While service chiefs and senior Pentagon officials have complained for years that military compensation and health care costs are eating alive the defense budget, there seems to be little if no appetite in Congress for enacting military benefit reform. 
 
A second report from CBO questions the Army’s plan for procuring the new Ground Combat Vehicle, estimated to cost $34 billion and weighing more than the M1 Abrams tank.  And another set of reports examined how the U.S. economy will respond to the “fiscal cliff.”  CBO concluded that should no action be taken to avert sequestration and extend the Bush-era tax cuts, then the U.S. economy would contract by 0.5 percent next year.  On the other hand, CBO found that if sequestration is delayed, then GDP would grow by approximately 0.75 percent. 
 
The Senate is preparing to take up the annual defense authorization act, however due to the compressed lame duck schedule, members are attempting to limit debate and amendments on the measure.  Majority Leader Reid says he’s received assurances from SASC Chairman Carl Levin (D-MI) and Ranking Member John McCain (R-AZ) that they will table non-germane amendments in order to expedite the bill’s passage.  If debate and amendments cannot be curtailed, Leadership is prepared to bypass the Senate Floor completely and move the bill directly to conference negotiations with the House.  Having failed to secure agreement on NDAA amendments this week, the Senate is preparing to consider the measure following the Thanksgiving holiday recess. 
 
Inside Defense reports that concurrency costs for the fourth production run of the F-35 have doubled, up to $580 million, since the original estimate was produced in April.  These funds cover modifications to early versions of the Joint Strike Fighter.  The trade publication also notes that the Air Force has decided to cancel the $1 billion Expeditionary Combat Support System, “a key piece in the service's plan to reach financial auditability by 2017.”  Finally, according to Inside Defense, a bill under consideration by the House would require the Pentagon to certify the new Long-Range Strike Bomber to carry nuclear weapons before it can be declared operational.  So far, the Air Force plans to certify the bomber for conventional use before clearing it to carry nuclear weapons.  According the Pentagon, requiring nuclear certification would “delay the integration of a conventional weapons capability by three years and trigger ‘acquisition inefficiencies’ in the classified, $55 billion program.”
 
 
PDA New Strategic Guidance: A "Reasonable Defense”
 
The Project on Defense Alternatives released a study this week outlining a new global strategy for addressing security threats that also promises to free hundreds of billions over ten years for debt reduction and economic revitalization.  Entitled Reasonable Defense: A Sustainable Approach to Securing the Nation, the report sees the principal challenge to the United States as being economic in nature rather than military. 
 
Reasonable Defense proposes focusing the U.S. military on those missions and responsibilities for which it is best suited – traditional defense, deterrence, and crisis response – while jettisoning large national-building efforts and counter-insurgency campaigns.  It advocates more and better-balanced security cooperation with other nations, but sees “preventive security” initiatives to be largely the job of the State Department. 
 
With a Reasonable Defense posture in place, the United States could adopt a national security budget similar in size to that which would result under the sequester provisions of the Budget Control Act..  However, unlike that budgeting device, the proposed reductions would be introduced gradually over a period of five years.  The PDA plan sees the defense budget stabilizing at about $462 billion in today’s dollars.  Compared with President Obama’s Fiscal Year 2013 budget, this would save $550 billion over ten years.
 
Under the Reasonable Defense plan: The active component military would comprise 1.15 million personnel – a 19 percent reduction from the 2012 active-component military of about 1.42 million.  The Navy would have a battle fleet of 230 vessels: 9 aircraft carriers, at least 23 amphibious warfare ships, and 160 other surface and subsurface combatants.  This would allow annual shipbuilding to fall from the current level of 9 ships per year down to 5-6 ships.  The United States would field 2,780 combat fighter aircraft – down from the previously planned level of 3,150.  The Navy and Marine Corps variants of the F-35 Joint Strike Fighter would be cancelled in favor of additional procurement of F-16 and F/A-18s. 
 
Rep. Barney Frank (D-MA) joined Reasonable Defense author and PDA co-director Carl Conetta for a press briefing earlier this week, commenting, “This latest report makes the case very persuasively that we will save even more and with less stress in some ways, if we rethink our strategic posture and essentially scale back what has been a multi-decade assertion that America needs to be everywhere.  And this says, you know, the Cold War is over, and things have gotten a lot better in terms of not having a major enemy.  Let’s revise our strategic objectives to a realistic point.  And then we can save a great deal of money.”
 
 
News and Commentary
 
From the Cato Institute’s Chris Preble, “The fiscal cliff is looming and Washington is scrambling to reach a deal to avoid a Thelma and Louise ending in January. To start, policymakers need to identify spending cuts, and they could begin with Senator Tom Coburn’s (R-OK) just-released report on wasteful and duplicative spending in the Pentagon. The report identifies savings totaling at least $67.9 billion over the next decade in the Department of Defense. The common thread linking these disparate recommendations—from axing non-military research and development projects ($6 billion) to eliminating Pentagon-operated grocery stores ($9 billion)—is that the expenditures ‘have little to do with national security’ and therefore could be implemented ‘without impacting our national security.’” (11/15/12)
 
“Regardless of what happens in the current talks over avoiding the fiscal cliff, the defense budget ought to be in for a drawdown during the next decade, according to two new studies.  ‘The country is ready and there’s broad agreement that we’re overcommitted and should reduce the budget going forward  within the current strategic framework,’ retiring Rep. Barney Frank, D-Mass., told reporters Wednesday in a conference call praising the release of a study by the Cambridge, Mass.-based nonprofit Project on Defense Alternatives. ‘The report is the antidote to the notion that America must maintain a presence anywhere in the world, and scale back overreach to make substantial contributions to reducing budget deficit, without having to savage social programs,’ he said.”  (11/14/12)
 
“There is ‘zero chance’ of Democratic support on any sequestration deal that exempts massive military reductions, specifically in capabilities considered outdated on the modern battlefield, a top House lawmaker said Wednesday… The military cuts backed by [Rep. Barney] Frank and others to duck the sequester would fall along the lines of those outlined in a new report by the left-leaning think tank Project on Defense Alternatives.  The report, released on Wednesday, calls for increased investment in areas such as counterterrorism operations and DOD-led efforts to limit nuclear weapons proliferation.  But the report, drafted by PDA co-chairman Carl Conetta, also calls for a ‘reduced requirement’ in U.S. nuclear arsenal as well as other conventional warfare operations, ‘which is the bulk’ of DOD's budget. (11/14/12)
 
“Republicans and deficit hawks are raising unnecessary alarm over the so-called 'fiscal cliff' to pressure President Barack Obama into a "grand bargain" he shouldn't make, progressive economists and scholars said Tuesday at a symposium… Carl Conetta, co-director of the Project on Defense Alternatives, pointed out that the U.S. spends vastly more than any other country in the world on defense spending -- four times as much as China and Russia combined.  ‘What we should be hearing is this: If this is not enough so that we cannot afford a 13 percent cut, then we either have the wrong strategy or the wrong leadership or both.’” (11/13/12)
 
Chuck Spinney explains the U.S. manufacturing sector’s dependence on defense dollars, writing, “The birth date for the permanent war economy was 30 September 1950.  On that day, President Harry Truman officially signed NSC-68, a document that became a blueprint for the containment strategy for waging the Cold War. Central to this strategy was the establishment of a large, permanently-mobilized defense manufacturing sector.”   (11/13/12)
 
“Nobody yet knows whether Mr. Obama is willing to go over the so-called fiscal cliff and allow the scheduled changes — the end of all the Bush tax cuts and the temporary tax cuts from Obama stimulus bills, as well as cuts to military and domestic programs — to take effect. If they were to take effect, the economy could fall into recession next year, economists say. But if Republicans believe that Mr. Obama does not consider failure to be an option, as was the case during the debt-ceiling talks in 2011, they have little incentive to compromise.”  (11/10/12)
 
“The latest critic of the U.S. Air Force’s ambitious — and pricey — plan for an all-stealth fighter fleet is one of the flying branch’s top stealth pilots.  Writing in the Air Force Research Institute’s Air & Space Power Journal, Lt. Col. Christopher Niemi, a former F-22 test pilot who later commanded a frontline squadron of the radar-evading jets, says the Air Force is making a big mistake by buying only the most expensive stealth fighters — namely, the F-22 and the newer F-35.” (11/8/12)
 
“With Tuesday’s election results, President Obama and Congress should take steps to end “the warfare state” instituted by the George W. Bush White House.  No one can deny that threats to U.S. security exist around the world. But the Defense Department needs continued reform to meet those varied threats and to cut the most costly elements in the core Pentagon budget that were developed for past wars.” (11/7/12)
 
“With the November 6 election, the shadow play over the defense budget and the fiscal cliff has come to an end. For the past 15 months, we have been entertained by a drama scripted in the Budget Control Act that appears to threaten a fiscal cliff for discretionary spending in January 2013. Defense has played one of the lead roles.  But now that the entertainment portion of the program has ended, it's time to get real. Here are the five things about the defense budget the next administration has to deal with.”  (11/6/12)
 
“The National Nuclear Security Administration, already under fire for billions of dollars of cost overruns, has underestimated by billions more how much it will cost to refurbish the nation’s stockpile of B61 nuclear bombs, according to an independent cost assessment commissioned by the agency.  Already juggling its budget to cope with existing problems, the agency will likely need to come up with another $1 billion per year for the next few years if the project is to go ahead as currently envisioned, according to a summary of the assessment obtained by the Journal.”  (11/4/12)
 
Andrew Krepinevich, Jr. argues that, “Over the next decade, the U.S. military will need to undertake the most dramatic shift in its strategy since the introduction of nuclear weapons more than 60 years ago. Just as defense budgets are declining, the price of projecting and sustaining military power is increasing and the range of interests requiring protection is expanding. This means that tough strategic choices will finally have to be made, not just talked about… A new strategic framework will be needed, one focused less on repelling traditional cross-border invasions, effecting regime change, and conducting large-scale stability operations and more on preserving access to key regions and the global commons, which are essential to U.S. security and prosperity.”  (November/December, 2012)
 
 
Reports
 
Project on Defense Alternatives: Reasonable Defense: A Sustainable Approach to Securing the Nation (11/14/12)
 
 
Stimson Center: A New US Defense Strategy for a New Era (11/15/12)
 
Office of Senator Tom Coburn: Department of Everything (11/15/12)
 
Congressional Budget Office: Costs of Military Pay and Benefits in the Defense Budget (11/14/12)
 
 
Center for a New American Security: Upholding the Promise: A Strategy for Veterans and Military Personnel (11/9/12)
 
 
Congressional Budget Office: Choices for Deficit Reduction (11/8/12)
 
 
 
 
Congressional Budget Office: Monthly Budget Review (11/7/12)
 
 
 
Congressional Research Service: Air Force F-22 Fighter Program (10/25/12)
 
 
Air & Space Power Journal: The F-22 Acquisition Program: Consequences for the US Air Force's Fighter Fleet (November-December, 2012)
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