Monday, December 10, 2012

12/6/12 RD Bulletin: Some Defense Execs Slowly Coming On Board With DoD Reductions

 
Highlights
 
News: The Pentagon has received sequestration guidance from the Office of Management and Budget, which allows the department to formally begin planning for the effects of the automatic spending cuts in Fiscal Year 2013.  Still, the Pentagon is not incorporating sequestration-level savings into its FY14 budget submission. 
 
News: This week the Senate unanimously passed the National Defense Authorization Act which must now be conferenced with the House-passed version of the legislation.  A formal conference agreement is expected by the end of next week. 
 
Project on Defense Alternatives Perspective: PDA co-director Charles Knight responds to a recent AIA press conference, during which defense industry executives admitted that additional reductions to planned levels of defense spending are likely to occur over the coming decade.
State of Play
 
With less than one month until sequestration kicks in, both political parties seem no closer to enacting a grand bargain that could avert sequestration and prevent what the Congressional Budget Offices has called a “fiscal cliff.”  Last week, President Obama proposed a large deficit reduction package, which was quickly panned by most Republicans on Capitol Hill.  Not to be outdone, House Speaker John Boehner (R-OH) put forth his own recommendations this week which in turn were rejected by Democrats.  (For a comparison of the two proposals, click here). 
 
Neither the President nor the Speaker’s proposals explicitly call for additional reductions in the Pentagon’s budget, however the Boehner plan does include $300 billion in further cuts to discretionary spending – which, if split evenly between defense and non-defense, could portend $15 billion in defense cuts per year over the next decade.  But, Politico’s Tim Mak reports that Boehner’s office quickly shot down the notion that his “opening offer in the fiscal cliff negotiations could cut $100 billion to $150 billion from the defense budget over the next decade.”  
 
Meanwhile, House Majority Leader Eric Cantor (R-VA) said that the House would not recess for the holidays until “a credible solution to the fiscal cliff has been announced.”  (The House’s target adjournment date has now been pushed back by one week).  Despite Cantor’s proclamation, it would still take Congressional staff weeks if not more to craft the legislative language required for a “grand bargain” to avert sequestration.  Hoping to increase their leverage in negotiations to avert the fiscal cliff, Republicans are toying with the idea of injecting the debt limit extension into discussions over spending levels and tax rates.   White House officials, including the President, quickly shot down the notion that the debt limit could be held hostage to negotiations over tax rate increases.  In fact, Treasury Secretary Timothy Geithner declared yesterday that the President would veto any legislation to avert the fiscal cliff that does not also include an extension of the debt limit or an increase in taxes on the wealthy.  Geithner added that the President was prepared to go off the fiscal cliff if negotiations fail. 
 
The Office of Management and Budget has provided guidance to the Pentagon which allows the department to begin planning in earnest for sequestration.  Despite having repeatedly characterized sequestration as a “meat axe” which would hit all programs and accounts within the defense budget equally, Pentagon spokesperson George Little said their “intent is to not implement sequestration in an absurd way.”  The President has already moved to exempt military personnel from the effects of sequestration, but civilian defense employees would likely face furloughs should the automatic cuts be enacted. 
 
This week, the Senate unanimously passed the annual National Defense Authorization Act and will move quickly to conference the bill with the House.  While the legislation is relatively noncontroversial, several differences between the House- and Senate-passed bills will have to be reconciled during conference negotiations.  The topline amount authorized by the House bill is $4 billion above the amount included in the Senate bill.  Both bills authorize national security funding above the level set by the Budget Control Act.  The Office of Management and Budget has said it will recommend a veto against both versions of the bill unless they further conform to the President’s budget request.  Other differences between the two bills include House authorized funding for an East Coast-based missile defense shield as well as continued funding for the Global Hawk Block 30 drone, both of which the Senate legislation declined to fund.  House and Senate staff have already begun pre-conferencing the legislation, and a final conference report is expected by the end of next week.  (For additional details on the National Defense Authorization Act, click here for analysis conducted by Defense News’ John Bennett). 
 
Four defense industry executives participated in a press conference organized by the Aerospace Industries Association this Monday during which they acknowledged that additional reductions to planned levels of defense spending are likely – although the CEOs are virulently opposed to the sequester provision of the Budget Control Act.  When pressed to specify how much more additional reductions to defense spending could be accomplished without impacting America’s national defense, David Langstaff, CEO of TASC, suggested an additional $150 billion could  be saved from the Pentagon’s budget over ten years while Northrup Grummon CEO Wes Bush put out a lower figure of $20-25 billion over the next decade. 
 
American University professor Gordon Adams agrees with the CEO’s assessment that additional reductions to defense spending are likely to occur, telling Defense News, “Of course, it’s going to have to come down some.  There is zero possibility that defense is not on the table here.”  Still, the Project on Government Oversight’s Ben Freeman was unimpressed by the defense industry executive’s proposed reductions: “When he said the $150 billion figure, I honestly cringed… We can get $15 billion from [cuts to] individual programs,” Freeman proclaimed during a press call organized by the National Security Network. 
 
If added to the first tranche of savings required by the Budget Control Act, the total amount of savings suggested by Langstaff and Bush still pale in comparison to the reduction in defense spending experienced after the end of the wars in Vietnam, Korea, and the Cold War.  Moreover, several prominent think tanks, including the Project on Defense Alternatives, have recently called for additional reductions of at least $550 billion over the next ten years, again much larger than what defense CEOs seem to be coming to terms with. 
 
Joining the debate over sequestration and the future size of the Pentagon’s budget, former chairman of the Joint Chiefs of Staff Admiral Mike Mullen is heading up a new coalition of retired foreign policy dignitaries called the Coalition for Fiscal and National Security.  At a press conference held on Tuesday, Mullen, joined by former senators John Warner and Sam Nunn, suggested that the defense budget would have to be reduced further than currently planned if the United States is to tackle its debt and deficit challenges over the long-term.  In a statement issued earlier this week, the coalition wrote, “In previous eras, increased defense spending may have been required to maintain security.  That is no longer the case. In our judgment, advances in technological capabilities and the changing nature of threats make it possible, if properly done, to spend less on a more intelligent, efficient and contemporary defense strategy that maintains our military superiority and national security.” 
 
Congressman Ed Markey (D-MA) was joined by 44 House Democrats this week in sending a letter to Congressional leadership requesting that savings from the nuclear weapons budget be used to address the United States’ deficit in lieu of savings from social programs like Medicare and Social Security.  The letter requests that $100 billion in savings be drawn from the nuclear weapons budget over ten years, and specifically calls for cuts to the ICBM arsenal as well as reductions in nuclear-armed B-2 and B-52 bombers.
 
 
Project on Defense Alternatives Perspective
 
Since the election, defense industry leaders have noticeably shifted their positions in regards to additional defense budget reductions.  In a news briefing sponsored by the Aerospace Industries Association earlier this week TASC, Inc. head David Langstaff gave a succinct assessment:  “The real alternative to automatic defense spending cuts under sequestration is not an indefinite extension of defense spending at current levels,” Langstaff said. “The real alternative is a process of strategically targeted, phased and predictable defense spending cuts.”  In terms of how to phase in Pentagon spending reductions his alternative is consistent with PDA’s Reasonable Defense proposal.  Langstaff offered an additional cut of up to $150 billion over ten years as realistic and reasonable; whereas, we would argue that $560 billion is reasonable.
 
Before the election the best leadership position on additional cuts was from Senate Armed Services Chairman Carl Levin who floated the possibility of another $100 billion over ten years.  Now Langstaff has raised Levin by $50 billion.  Most likely, this voluntary public move is a concession to the realism of where things are at behind closed doors in Washington.  With numerous DC think tanks, some of which are closely associated with the Pentagon, recommending and modeling cuts considerably deeper than Langstaff’s number, the way appears to be opening to a non-trivial round of reductions.
 
Given the reality that Congress appropriates money to the Pentagon year by year, and ten year plans almost never accord to actual budgets in future years, Langstaff and many others in Washington are happy enough to trade planned reductions in out years for smaller reductions in 2013.   With sequester cuts looming, some industry leaders now seem willing to take their chances that public perception of security threats will be up and fiscal restraints will be coming down two, three and four years out.
 
News and Commentary
 
TIME Battleland: Building a Smarter, Smaller Military – Douglas Macgregor
“Lawmakers and the White House should view defense cuts as a once-in-a-century opportunity to harmonize defense investments with the evolutionary trends in military technology, organization and command structures, as well as, the nation’s need for fiscal discipline.  It’s time to craft a new military strategy and a new force designed for the post-industrial age.  The top priority in U.S. military strategy is economic prosperity and the technological superiority that economic strength creates. Conflict avoidance is vital to this outcome.”  (12/6/12)
 
“Gordon Adams, a former budget official during the Clinton administration and a professor at American University, described the role of defense spending as ‘residual’ in the context of the budget talks. ‘It's something that gets dealt with as you move along the path,’ Adams said at the conference. Most of the high-level discussions deal with health costs and taxes, not defense.  He said cuts are all but inevitable, not because of the fiscal cliff, but because two major wars are ending. Regardless of the outcome of the negotiations, he predicted the Pentagon will ‘go over a pothole, not a cliff.’ The politicians will find a way to avoid sequestration, he said, because the ‘embarrassment factor is too great.’”  (12/5/12)
 
Huffington Post: Toss Wasteful Defense Weapons Programs off the Cliff – Rep. Barbara Lee
 “There are many proposals out from a wide variety of groups from across the political spectrum detailing defense savings on par or beyond the cuts called for under the sequestration portion of the Budget Control Act of 2011. The Project for Defense Alternatives, CATO Institute, Taxpayers for Common Sense, Center for American Progress, and Bowles-Simpson Commission have all called for deep cuts in defense spending ranging from $350 to $590 billion beyond the cuts already in place.  While the programs and methods targeted vary, the common theme shared by all is that vast savings can be realized by treating the Pentagon like any other government agency that is subject to oversight and transparency standards.”  (12/5/12)
 
The Hill: Reshaping Pentagon spending – State Sen. Nan Grogan Orrock
“Our leaders must recognize the need for investments that promote jobs and build the economy, even as we cut back on spending. Unlike most other areas of spending, the Pentagon budget has grown unchecked for the past decade. But it is not clear that these dollars are the investment we need for the 21st century. Reshaping Pentagon spending, which currently eats up more than half of the discretionary spending that Congress allocates annually, will be crucial to any deal on the federal budget.”  (12/4/12)
 
“If numbers mean anything — and they do — we are headed in the wrong direction. Even if it is not President Obama’s conscious plan to shrink the Navy from its current number of 284 “battleforce” ships to 250, as Romney and his surrogates disingenuously charged, that shrinkage—perhaps more—is what is very likely to happen.  Keep in mind that since 2001, the Navy’s “base” budget (not including the additional amounts to fight the wars in Iraq, Afghanistan and elsewhere) increased dramatically. However, since 2001 the size of the Navy’s battlefleet shrank.”  Click here for part two and here for part three of this series.  (12/3/12)
 
Aviation Week: Is There Too Much Secrecy? - Bill Sweetman
“Militaries need to keep secrets. But secrets naturally elude oversight, and whenever decisions are immune to challenge, there may be a lack of balance. And there are very good reasons why over-classification is an imbalance that creates its own problems… Black programs stifle competition. Within the industry, competitors may know only the basic details of a classified project, but they assume that the incumbent has that area locked up.” (12/3/12)
 
TIME Battleland: USMC: Under-utilized Superfluous Military Capability - Douglas Macgregor
“The Marines as currently organized and equipped are about as relevant as the Army’s horse cavalry in the 1930s and the Marines are not alone. They have company in the Army’s XVIII Airborne Corps… Today, enemy forces will mine approaches from the sea, and rely on stand-off attack to drive surface fleets away from coastlines. They’ll employ their ground forces, particularly mobile armored forces, inland, away from the coast. These mobile reserves will attack within the range of the defending forces’ own artillery and airpower to destroy elements that attempt to come ashore whether over the beach or through ports.”  (12/3/12)
 
“The Obama administration can make things up, too. For example, the president's budget proposal, sent to Congress in February and reiterated by Secretary Geithner, invents budget savings that are not there. Specifically, I am talking about the $800 billion the administration claims as ‘war savings,’ or, if you like, a ‘peace dividend’ over the next 10 years. Except, funny thing, the administration's budget does not forecast war spending past the next five years. And the numbers for those five years ($44 billion per year) are notional -- that is, they are not based on any programs or plans for prosecuting the war; they are a placeholder. The administration actually has no idea what war costs will be in the future… With troops coming home next year, they are likely to continue to fall until they disappear, absorbed into the regular Pentagon budget. The back of my envelope (which is as good as the number the administration uses) says war spending will disappear by the FY 2015 budget submission (that's the year after next).”  (12/3/12)
 
Washington Post: Saving taxpayer money on Tricare – Editorial Board
“In the politics of defense spending, cutting expensive weapons programs plays the role that taxing the wealthy plays in the overall fiscal debate. Though undoubtedly necessary to any credible plan, it is far from sufficient. Yet advocates often talk as if reining in Pentagon spending is all about wasteful weapons.  In fact, weapons programs account for only about a third of defense spending, and the Obama administration is already planning significant reductions. The costs of operations and personnel make up the majority of the defense budget, so any balanced approach must deal with those as well.”  (12/2/12)
 
Washington Post: DIA sending hundreds more spies overseas – Greg Miller
“The Pentagon will send hundreds of additional spies overseas as part of an ambitious plan to assemble an espionage network that rivals the CIA in size, U.S. officials said.  The project is aimed at transforming the Defense Intelligence Agency, which has been dominated for the past decade by the demands of two wars, into a spy service focused on emerging threats and more closely aligned with the CIA and elite military commando units.”  (12/1/12)
 
Foreign Policy: Quagmire on the Potomac – Winslow Wheeler
“Amidst the many uncertainties and machinations in the negotiations in Washington on the "fiscal cliff," a few things are beginning to emerge as certain. Among them: the defense budget will be going down. Another is that none of the parties to the negotiations is seeking the kind of change that the Pentagon must undergo to survive effectively, even prosper, under significantly reduced budgets.”  (11/30/12)
 
 
Reports
 
 
 
 
Congressional Research Service: Addressing the Long-Run Budget Deficit: A Comparison of Approaches (11/30/12)
 
 
 
 
Public Interest Declassification Board: Transforming the Security Classification System (November, 2012)
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