Thursday, January 10, 2013

1/10/13 RD Bulletin: Pentagon Bemoans Budget Uncertainty 'Madness'

 
Highlights
 
News: Defense Department Comptroller Robert Hale told an audience at Brookings this week that some delay in the department’s Fiscal Year 2014 budget is almost “inevitable” at this point due to the severe uncertainty surrounding the federal budget.
 
Analysis: Todd Harrison of the Center for Strategic and Budgetary Assessments has released new analysis of the American Taxpayer Relief Act which explains how the recent law delayed and altered the defense sequester.


State of Play
 
As previously reported, the recently enacted American Taxpayer Relief Act, also known as the ‘fiscal cliff deal,’ extended the majority of Bush-era tax cuts and delayed sequestration of discretionary funds by two months.  Unbeknownst to many, however, there are actually two sequesters facing the Pentagon: one sequester, originally totaling more than $50 billion, was the result of the failure of the Joint Select Committee on Deficit Reduction, while the second sequester is meant to enforce the statutory budget caps implemented by the Budget Control Act.  Because Congress has appropriated funding for defense above the amount authorized by the Budget Control Act, the Pentagon was facing two sequesters come January 2013. 
 
The fiscal cliff deal delayed the larger sequester until March 1, 2013 and the second ‘mini-sequester’ until March 27, the same day that the current Continuing Resolution expires –  the latter of which does not conform to BCA’s spending caps.  Originally, the second mini-sequester was to apply to 050 national defense spending, however, the compromise legislation altered the enforcement mechanism so that it applies to security and non-security instead of defense and non-defense.  According to analysis conducted by Todd Harrison of the Center for Strategic and Budgetary Assessments, while the law delayed enactment of the sequester of defense funds, it also reduced the total amount of the larger sequester by approximately $12 billion.   (Click here for a presentation by Harrison on the findings of his new report.) 
 
Prior to the New Year fiscal cliff deal, supporters of the Pentagon budget had hoped to use an extension of Bush-era tax cuts for the middle class as leverage against enactment of the defense sequester.  With those tax cuts now permanently in place, the focus in Washington has returned to government spending and the need to again raise the federal debt limit.  In new analysis, the Bipartisan Policy Center concludes that Congress will have to extend the borrowing limit by mid-February or else risk a default on U.S. debt.  While Republicans and other fiscal conservatives are expected to demand cuts to entitlement programs in order to extend the debt limit, the defense industry is increasingly concerned that the reductions to the Pentagon budget will again be used as savings to offset the borrowing increase. 
 
In an interesting interview with the Wall Street Journal, House Speaker John Boehner asserted that Republicans would accept allowing sequestration to occur in order to extract concessions from Democrats.  The interviewer, Stephen Moore, writes that Boehner “is counting on the president's liberal base putting pressure on him when cherished domestic programs face the sequester's sharp knife. Republican willingness to support the sequester, Mr. Boehner says, is ‘as much leverage as we're going to get.’”  Still, several notable Republicans seem unnerved by Boehner’s thinking. 
 
With time running out to replace sequestration with other cuts to government spending, Congress may simply provide the Pentagon with the latitude to enact sequestration as it sees fit instead of the across-the-board manner that the Budget Control Act stipulates.  In fact, the influential Committee for a Responsible Federal Budget (CFRB) recently advocated for the Project on Defense Alternatives’ Reasonable Defense plan, which would save the same amount as sequestration, but in a more gradual manner that the armed forces could accommodate.  Writes CFRB: “This report, and others, show it’s possible to have well-thought and gradual reforms to DoD, unlike the sequester which would be abrupt and untargeted.” 
 
Following up on last week’s news reports that the Pentagon will likely delay its budget release past February, DoD Comptroller Robert Hale confirmed that “some delay is almost inevitable” given the general uncertainty surrounding the federal budget.   Responding to Hale’s admission, Todd Harrison told Government Executive that it makes sense for the Pentagon to delay as much as possible the release of its upcoming budget, because “it’s hard to cut at the end of the budget cycle when DoD has already finished its budget and is awaiting the passback from OMB.”  Hale said that any final decision on delaying the FY14 budget will be decided by the Office of Management and Budget. 
 
In recent weeks, President Barack Obama has nominated several candidates to top national security posts in his cabinet: former Senator Chuck Hagel (R-NE) for defense secretary, Senator John Kerry (D-MA) for secretary of state, and current homeland security advisor John Brennan to serve as CIA director.  Amid controversy over past statements and votes regarding Iran, Hagel’s nomination has sent defense analysts in Washington scrambling to discern how the former senator may address the defense budget as secretary. 
 
In a wide-ranging duo of interviews with the Financial Times in 2011, Hagel bemoaned the amount of waste at the Pentagon, arguing not only that its budget was “bloated” but that it was inevitably taking resources away from important diplomatic initiatives and other priorities.  Hagel also noted that the Pentagon must be more diligent in how it spends money, and that while he is a strong supporter of the defense department, “that doesn’t mean an unlimited amount of money, and a blank check for anything they want at any time, for any purpose… The realities are that the mess we’re in this country, with our debt and our deficits, and our infrastructure and jobless and all the rest, is going to require everybody to take a look, even the defense department, and make a pretty hard re-evaluation and review.” 
 
At a press conference on Tuesday, White House spokesperson Jay Carney said the President remains committed to avoiding the upcoming deadline for enactment of sequestration and will work with members of Congress to finding a “balanced approach” to deficit reduction when the legislature returns to business later this month.  Carney said the President will launch talks with Congress sometime over the coming months to negotiate an end to sequestration.  Meanwhile, DoD spokesperson George Little told reporters at a press conference earlier this week that Pentagon officials have begun “seriously planning” for enactment of sequestration.  
 
Under the 2010 New START treaty, the United States and Russia are required to reduce the total number of deployed strategic delivery systems to 700 by the year 2018.  As a result, the United States is required to retire or convert to non-nuclear status 145 bombers in its strategic fleet.  In an interview with DoD Buzz’s Michael Hoffman, the Air Force says it is making progress on converting or reducing its fleet of nuclear-capable bombers, and expects to reach its goal of reducing to a total fleet of 60 strategically-certified bombers well ahead of the 2018 deadline. 
 
In a piece posted on AOL Defense, Air Force Secretary Michael Donly wrote that further downward pressure on the Air Force budget could force additional reductions in the A-10 and F-16 fleets, but that the service would move to protect from further reductions its conventional bomber fleet.  Donly also noted that the current strategic airlift fleet is too large, but that Congress continues to block efforts by the department to reduce it in line with last year’s strategic guidance. 
 
Changes to the membership of Congressional committees with jurisdiction over the Pentagon’s budget are beginning to come into focus: With the recent death of Senator Daniel Inouye, the chair of both the full Senate Appropriations Committee as well as its subcommittee on defense have become vacant.  Senator Barbara Mikulski (D-MD) is set to take over the full panel, while rumor has it that Senator Dick Durbin (D-IL) is interested in assuming control of the defense sub-panel.  Although Senator Carl Levin (D-MI) will remain chair of the Senate Armed Services Committee, he will have a new ranking member in Senator Jim Inhofe (R-OK). 
 
In the House, Representative Nita Lowey (D-NY) will take over from recently retired Representative  Norm Dicks as ranking member on the Appropriations Committee with Chairman Hal Rodgers (R-KY) retaining the gavel.  The chair and ranking membership of the House Appropriations subcommittee on defense have yet to be announced.
 
 
Project on Defense Alternatives Perspective
 
From the beginning there was an unspoken contradiction in the aggressive global military activism George W. Bush unleashed after 9/11:  He was not about to ask the American people to pay for it.  Bush became president long after Republicans had decided that taxes must only go down, never up.  Bush would, by political necessity, be buying ‘full spectrum dominance’ on the national credit card.
 
Of course, ‘leaning forward,’ as Donald Rumsfeld liked to put it, is very expensive.  The Pentagon base budget (cost of wars aside) grew 45 percent in real terms over the course of both of President Bush’s terms and during the first half of President Obama’s first term.  Nearly a trillion dollars was added to the national debt.
 
With budget restraint high on the agenda in Washington, President Obama has reluctantly put the brakes on Pentagon budget growth and the Budget Control Act has so far made very small real cuts in 2012 and 2013.   That circumstance has led some to warn of impending loss of U.S. global leadership.  David Brooks, writing in the New York Times, suggests that “Chuck Hagel has been nominated to supervise the beginning of this generation-long process of defense cutbacks… the beginning of America’s military decline.”  In an article titled America’s Superpower Status Goes Over the Fiscal Cliff, Mackenzie Eaglen of the American Enterprise Institute asserts that further cuts on the horizon will drop U.S. spending below what is “…necessary to maintain a military with global reach and responsibilities.”
 
A military insufficient to meet “global responsibilities” and “military decline” are serious sounding claims made against budget adjustments that are modest when compared to recent budget growth.  What is actually at stake here, or should be, is the fate of the “aggressive military activism” of the recent past.  Without the support of growing Pentagon (and CIA) budgets that strategic posture is probably doomed… and the U.S. will be better off for it.

 
News and Commentary
 
“With revenue largely off the table for future negotiating, we need to resolve our budget woes by putting the breaks on runaway government spending in a balanced, strategic way. Given that the Pentagon budget makes up more than half of all discretionary spending, smart savings there should be a key part of the solution to the current budget battle.  Rather than thinking incrementally, policymakers should rise to the challenge of adjusting our national security strategy by crafting a budget deal that funds programs based on their real contribution to our security.”  (1/10/13)
 
Committee for a Responsible Federal Budget: Reasonable Defense Cuts Possible
“Lawmakers made significant progress under the Budget Control Act's caps on discretionary spending, which saved $350 billion compared to CBO's baseline at the time or nearly $500 billion relative to the FY 2012 President's budget. The Defense Department has proposed changes to help meet those caps, including slowing procurement of the F-35 fighter, withdrawing two of four brigades in Europe, limiting military pay raises to private sector wage inflation, and introducing fees for TRICARE, among others. But given our fiscal path, more reforms may be needed.  To do this, the Defense Department is going to have to make some tough choices. A report from Carl Conetta of the Project on Defense Alternatives, Reasonable Defense: A Sustainable Approach to Securing the Nation, presents $560 billion that could be saved over the next ten years, putting defense spending at post-sequester levels but through more targeted changes.” (1/9/13)
 
“Most Americans realize that instead of spending billions of dollars extending our military presence in Afghanistan, we need to commit to a political settlement, bring all of our troops safely home and invest in jobs as well as nation-building here at home.  Yet for too long, we have given the Pentagon blank checks while neglecting our crumbling roads, our aging water systems and our struggling schools. From 2000 to 2010, overall spending on the base defense budget rose from $300 billion to $700 billion. That massive increase in spending, combined with $1.4 trillion (and counting) spent on two wars, and the projected hundreds of billions in costs to care for our returning veterans, were all committed even as we passed tax cuts for the wealthiest Americans. This is an unprecedented and disastrous policy course that led directly to the debt problem we have today.”  (1/9/13)
 
The American Prospect: Yes, We Have A (Defense) Spending Problem– David Callahan
“Last year, in 2012, the U.S. government spent about $841 billion on security—a figure that includes defense, intelligence, war appropriations, and foreign aid. At the same time, the government collected about $1.1 trillion in individual income taxes. (And about $2.4 trillion in revenues overall if you include payroll, corporate, estate, and excise taxes.)  In other words, about 80 cents of every dollar collected in traditional federal income taxes went for security.  That's an astonishing statistic, and it captures the most underappreciated aspect of today's fiscal challenges: We have a security spending problem. Such spending is significantly higher than all non-defense discretionary domestic spending.”  (1/7/13)
 
Washington Post: America’s staggering defense budget, in nine charts – Brad Plummer
“The United States spends far more than any other country on defense and security. Since 2001, the base defense budget has soared from $287 billion to $530 billion — and that’s before accounting for the primary costs of the Iraq and Afghanistan wars. But now that those wars are ending and austerity is back in vogue, the Pentagon will have to start tightening its belt in 2013 and beyond. If Hagel gets confirmed as secretary of defense, he’ll have to figure out how best to do that.  [Click on the link above to see nine charts that provide] an overview of the U.S. defense budget — to get a better sense for what we spend on, and where Hagel might have to cut.”  (1/7/13)
 
Foreign Policy: Will Chuck Hagel Stand Up to the Drone Lobby?– Winslow Wheeler
“With the Department of Defense budget looking at no real growth or even reductions in the next few years, there will be a clear need for defense systems that offer more performance for less cost. The data from Afghanistan on what drones are contributing to the war there show that we are getting little but paying a lot, the reverse of what we will need in the future. These data notwithstanding, drones are the embodiment of what conventional wisdom in Washington holds to be the wave of the future for air power -- the quintessence of the high tech cutting edge that the pundits want more and more of and just the kind of myth that politicians appointed to senior executive branch positions fall for time and time again.  The Pentagon's new leadership needs the wit to recognize that the conventional wisdom on these (and other) systems can be badly wrong, and it needs the moral courage and political dexterity to act, standing up to the embedded material and intellectual special interests in the Pentagon, Congress, and think tanks that leap to the defense of these systems time after time.”  (1/7/13)
 
Foreign Policy: Cut out of the Conversation– Michael O’Hanlon
“So far, the debate about the defense budget has focused chiefly on dollars -- with the huge numbers involved tossed about like chips in a Vegas casino, with little regard for context or strategy. A more useful way to approach the problem is conceptually. There are two basic ways we can cut the defense budget further, should we choose to do so. One set of cuts would pursue relatively modest savings from additional efficiencies -- within the parameters of existing national security strategy. The second would include the economies of the first approach but, in addition, change current strategy in important ways, or otherwise dramatically change how the Department of Defense goes about its global responsibilities. The real issue, which few are addressing head-on, is which approach the United States ought to take.”  (1/4/13)
 
Reports
 
 
Center for Strategic and Budgetary Assessments: What the Fiscal Cliff Deal Means for Defense (1/9/13)
 
 
Congressional Budget Office: Monthly Budget Review (1/8/13)
 
Congressional Research Service: Military Medical Care: Questions and Answers (1/7/13)
 
Bipartisan Policy Center: Debt Limit Analysis (1/7/13)
 
Congressional Budget Office: The “Fiscal Cliff” Deal (1/4/13)
 
 
 
Congressional Research Service: Afghanistan: Post-Taliban Governance, Security, and U.S. Policy (1/4/13)
 
 
Council on Foreign Relations: Reforming U.S. Drone Strike Policies (January, 2013)
 
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