Thursday, December 13, 2012

12/13/12 RD Bulletin: Bipartisan Group of House Members Calls for Significant Savings from DoD Budget

 
Highlights
 
News: A bipartisan group of House members wrote to the White House and Congressional leadership this week requesting that significant savings from the Pentagon budget be included in a “grand bargain” deal to avert the fiscal cliff. 
 
News: Bloomberg is reporting that former Senator Chuck Hagel (R-NE) is likely to be nominated as the next Secretary of Defense. 
 
PDA Perspective: Responding to recent comments by Navy Under Secretary Robert Work, PDA co-director Charles Knight discusses the importance of Congress in helping the Pentagon manage the current defense builddown.


State of Play
 
A bipartisan Congressional group this week submitted a letter to President Obama and Congressional leaders urging that “substantial defense savings” be included as part of any deficit reduction budget agreement.  The signatories, led by Representatives Mick Mulvaney (R-SC) and Keith Ellison (D-MN), included eleven Democratic and eleven Republican members of the U.S. House of Representatives.  Noting that “how we spend our resources is just as important as how much we spend,” the letter argues that “substantial defense savings can be achieved over the long-term, without compromising national security.”  According to the authors, future budgets should reflect the conclusion of recent wars and, more generally, a reduced requirement for military resources:  Between 1998 and 2010, the Pentagon budget grew by 92 percent in real terms, making it a debt and deficit leader. 
 
As part of this spending surge, routine Pentagon spending rose 49 percent in real terms.  Since 2010, war spending has declined in accord with reduced war requirements.  However, routine Pentagon spending has shown little improvement.  It is down less than 5 percent from its 2010 high point, despite the nation's fiscal woes and the pending prospect of substantial tax increases.  The Mulvaney-Ellison letter noted that several prominent think tanks, including the Project on Defense Alternatives and Cato Institute, have called for additional reductions to defense spending of at least $550 billion over ten years.  Earlier this year, Mr. Mulvaney was joined by Representative Barney Frank (D-MA) in spearheading a successful effort to freeze defense spending at last year’s enacted level when the House approved its annual defense appropriations bill. 
 
Much of the recent attention in Washington has been focused on the large “fiscal cliff” the United States faces early next when a host of Bush-era tax provisions expire and $109 billion in automatic cuts known as sequestration take effect.  The sequester is scheduled to begin on January 2, 2013, due to the failure of the Joint Select Committee on Deficit Reduction to produce a $1.2 trillion deficit reduction package that Congress could enact.  Separate from the Budget Control Act’s sequester provision, the law also implemented statutory budget caps intended to constrain defense and non-defense spending over the next decade. 
 
Interestingly, the six-month Continuing Resolution, which was passed in September, set defense spending above the sub-cap implemented by the Budget Control Act.  As a result, defense spending now faces a second “mini-sequester” of at least $11 billion come January 2013, in addition to the roughly $55 billion large sequester due to kick in.  Congress may take action before the end of the calendar year to avert the larger sequester, and an unnamed Congressional aide told CQ Today that they expect both sequesters to be nullified when and if Congress delays the fiscal cliff, saying, it is “hard to believe that they would do a fiscal cliff deal and not address this lingering $11 billion in 2013.”
 
President Barack Obama and House Speaker John Boehner (R-OH) continue to discuss ways to avert the fiscal cliff and enact long-term deficit reduction legislation – although the two sides seem to be making little public progress.  In recent weeks, both sides have offered outlines for a “grand compromise,” but neither side seems very willing to seriously consider the other’s proposal.  Republicans are now calling on Democrats to specify exactly how they would enact additional cuts to domestic spending, while Democrats are waiting for the other party to specify how they would draw additional federal revenues either through increased tax rates or the elimination of tax deductions and preferences.  While the two sides publicly attack each other, the President and Speaker continue to negotiate privately.  The White House remains steadfast in its opposition to any compromise that does not include increased tax rates on the wealthiest Americans.  A growing number of rank-and-file Republicans, including Representative Tom Cole (R-OK) and Senator Tom Coburn (R-OK), seem to be warming to that proposal.  
 
While virtually no one in Washington expects Congress to enact a “grand compromise” deal before the end of the year, Congress still has the opportunity to delay the impending fiscal cliff while implementing a “down-payment” of savings in the short-term, which House Budget Committee Ranking Member Chris Van Hollen (D-MD) says could be done “very quickly.”  Still, TPM’s Brian Beutler reports that for the first time both the White House and Congress seem to be “earnestly contemplating the possibility that December will come and go without a deal to eliminate or delay the sequester’s spending cuts; to extend expiring measures like the payroll tax holiday; to provide emergency unemployment benefits; to protect Medicare physician reimbursement rates; and without having raised the debt ceiling.” 
 
The pessimism in Washington seems to be seeping into the defense industry as well.  Politico’s defense reporter Philip Ewing notes that, “Industry executives who once threatened to embarrass the government into acting now attempt to reassure investors that sequestration wouldn’t be a ‘guillotine,’ but only a ‘speed bump.’”  Ewing further writes, “The defense establishment’s best hope is the negotiations between Obama and Boehner, which could yield a less onerous path toward spending cuts than the one laid out under sequestration.”  Coincidentally, the Project on Defense Alternatives has released a report which shows exactly that: How to achieve sequestration-level savings in the defense budget in ways that mitigate short-term economic pain and avoid institutional disruption to the armed forces.  For more details on PDA’s recent report, a Reasonable Defense, click here for a new executive summary. 
 
Though it remains unclear whether Congress will be able to punt on sequestration in the short-term, several think tanks have called on the legislature to enact a down-payment of savings if it delays the onset of the fiscal cliff.  Taxpayers for Common Sense sent a letter to the President and Congressional leadership asking them to “forge a short term agreement that includes increased revenues and spending cuts that delay the impending sequester and directs the 113th Congress to take up meaningful tax, spending, and entitlement reform proposals in a transparent and orderly way.”  Separately, several defense analysts at the Center for American Progress have identified $100 billion in defense cuts that could serve as a down-payment in advance of further defense reductions. 
 
In weapons systems news, AOL Defense’s Colin Clark reports that Air Force acquisition costs have declined by $7 billion or two percent over the past year.  The savings have accrued primarily from 26 large Air Force acquisition programs.  The Pentagon and Lockheed Martin have reached a tentative deal on a fifth round of low-rate initial production F-35 Joint Strike Fighters.  The batch will cost $3.8 billion for 32 fighter aircraft.  Lockheed officials say the fifth batch of F-35s is approximately 14 percent cheaper than the fourth batch.  Separately, the Pentagon’s inspector general is conducting an investigation into quality assurance management in the F-35 program.  Although the investigation is still underway, the IG indicated in a semi-annual report to Congress that it has sent four “notices of concern” to the program office, which have since been accepted. 
 
According to Bloomberg, the Pentagon is expected to request funding for 29 additional F-35s in its Fiscal Year 2014 budget.  And speaking of its FY14 budget request, Inside Defense reports that the Pentagon will cut $100 million from the Ground Combat Vehicle program in its forthcoming budget, and that sources say an additional $600-700 million could be cut from the program in the future.  The Ground Combat Vehicle is intended to replace the aging Bradley fighting vehicle. 
 
Secretary of Defense Leon Panetta was in Afghanistan this week discussing future troop levels with U.S. commanders and Afghan officials.  The Los Angeles Times reports that the Pentagon and White House have decided to retain 6,000-9,000 troops in the country after the bulk of NATO forces withdraw in 2014.  Meanwhile, in its semiannual report to Congress on progress in Afghanistan, the Pentagon painted a bleak picture of the country moving forward: the report found that Afghan security forces are largely unable to operate without NATO support, corruption continues to plague the Afghan government, safe havens for militants in Pakistan remain a problem, and that violence is higher than it was prior to President Obama’s “troop surge.” 
 
The National Intelligence Council has released a report predicting what it describes as a series of “megatrends” that will shape the world by 2030. The most notable predictions include a boom in the size of the global middle-class and consequent decline in poverty; diffusion of world economic and military power to Asia; and a world population of 8.3 billion. The report also notes specifically that the U.S. will likely lose its superpower status, but that no that country will take its place and it will retain a position as “first among equals.” 
 
 
Project on Defense Alternatives Perspective
 
Addressing a Government Executive breakfast last week, Navy Under Secretary Robert Work spoke of the need for Congress to make ‘strategic’ decisions about the Pentagon budget: “We're in the fifth defense drawdown since the end of World War II.  It's not like this is something we haven't done before [and] whenever there is a defense downturn, that is where the Congress's role is absolutely most important, because you have to make broad strategic choices.”
 
Imagine for a minute Congress actually deliberating and making decisions about strategic priorities instead of fighting in the weeds over the distribution of ship and aircraft contracts, and resisting base closures.  Hard to do, because Congress has long been content to allow the White House to set strategic direction, and in recent decades the White House has tended to cede that power to the Pentagon chiefs.  So Work probably doesn’t mean that he wants a debate in Congress on broad strategic choices, but rather that he wants Congress to make investment decisions that recognize and underwrite the Pentagon’s new strategic direction.
 
Air Force Under Secretary Jamie Morin, also a presenter at the breakfast, added, “The fiscal environment made it all the more pressing, but we needed to relook the defense strategy regardless of the fiscal environment.” The so-called ‘pivot to the Pacific’ constituted the strategic framework for the administration’s FY2013 budget. “We made a very good first effort in the 2013 budget submission,” Morin said, “[but] we still don't have a 2013 budget enacted by Congress, so to some extent we haven't even started that shift in the real world of execution.”
 
It is the Air Force and the Navy which stand to benefit most from the “pivot to the Pacific” and what these Under Secretaries seem to be saying is that they want Congress to endorse the new strategic direction and reserve relatively more resources for the most Pacific-relevant services.   Both the Navy and the Air Force have many costly weapon platforms they want to buy this decade.  Work and Morin are essentially arguing that money should flow in their services’ direction rather than go to the Army which has been a big consumer during the decade plus of the Iraq and Afghan wars.
 
As many have noted, the “pivot to the Pacific” has few particulars to date.  And there are many ways to shift relatively more attention to the Pacific region without investing in more military instruments.  We at PDA believe that an appropriate strategic reset demands that all the services moderate their military ambitions to conserve American resources for other strategic needs and goals.  Even if the Army takes the biggest hit, there will be fewer ships for the Navy and fewer air wings and new planes for the Air Force.

 
News and Commentary
 
Foreign Policy: The Checklist Manifesto – Lawrence Korb
“Leaders from both branches of government and both political parties agree that the amount of money that the United States can and should spend on defense must be part of the discussion on how to reduce the federal deficit. But in their deliberations, they must keep in mind that they cannot buy perfect security. Even if the Obama administration and Congress were to give the Pentagon the entire federal budget or the whole gross domestic product, there would still be risks and unforeseen developments. But, in deciding how much of the nation's scarce resources to allocate to national security, political and military leaders can minimize those risks by considering five interrelated factors.”  (12/12/12)
 
Huffington Post: Contractors: The Pentagon Isn't a Jobs Program – Ben Freeman
“At a National Press Club event last Monday, attended by the Project On Government Oversight, the Chief Executive Officers (CEO) of two contractors called for cutting Pentagon spending. Wes Bush, CEO of Northrop Grumman and 2013 Chairman of the Aerospace Industries Association (AIA), suggested Pentagon spending cuts in the $20 to $25 billion range over the next ten years.  David Langstaff, CEO of The Analytic Science Corporation, went even further, arguing that the Pentagon budget should be cut by around $150 billion over 10 years. Langstaff also chastised some in his industry for being ‘unwilling to park short-term self-interest…we need to stop pretending there’s a scenario out there that offers no defense cuts.’” (12/12/12)
 
Democracy: The New Mandate on Defense – Rep. Barney Frank
“Deficit reduction over the long term must include significant reductions in military spending along with tax increases on the very wealthy if we are to avoid devastating virtually everything we do to promote the quality of life at home. A realistic reassessment of our true national security needs would mean a military budget significantly lower not only than the one President Obama inherited, but that which he now proposes. That is, by next year, we no longer should be forced to spend additional funds—close to $200 billion a year at their peak—in Afghanistan and Iraq. Additionally, we can reduce the base budget by approximately $1 trillion over a ten-year period (this includes the $487 billion reduction that President Obama proposed in early 2012) while maintaining more than enough military strength to fully protect our security and those of our allies that genuinely need help because they are too poor and weak in the face of powerful enemies.”  (12/12/12)
 
CNN: Get real and cut Pentagon spending - Lt. Gen. Robert Gard (ret.) and Brig. Gen. John Johns (ret.)
“Too often, the Pentagon spending debate is ensnared in the outmoded ideology of past wars and driven by legions of lobbyists for parochial interests in the military-industrial complex.  America's power is more than a massive force structure and numbers of ships, tanks and planes. A national security strategy must be based on current and future threats, not past war doctrines.” (12/12/12)
 
National Interest: The Debt Ceiling Allowance – Bruce Fein
“The 113th Congress should brandish its debt ceiling power to diminish the current annual $1.2 trillion in national-security spending. It should align defense spending with genuine dangers to our sovereignty, as opposed to inflated threats. National-security expenditures should honor the creed: Billions for defense, but not one cent for empire or a quest for a risk-free existence. A national security budget of $500 billion would still dwarf the defense spending of any conceivable rival nation.”  (12/11/12)
 
“The Senate has moved to block a Pentagon plan to send hundreds of additional spies overseas, citing cost concerns and management failures that have hampered the Defense Department’s existing espionage efforts.  A military spending bill approved by the Senate last week contains language barring the Pentagon from using funds to expand its espionage ranks until it has provided more details on what the program will cost and how the extra spies would be used.  The measure offers a harsh critique of the Pentagon’s espionage record, saying that the Defense Department ‘needs to demonstrate that it can improve the management of clandestine [human intelligence] before undertaking any further expansion.’”  (12/10/12)
 
“In policy circles, problems that are mind-bogglingly difficult or impossible to solve, like global warming, are formally termed ‘wicked.’  For the United States Air Force, installing a new software system has certainly proved to be a wicked problem. Last month, it canceled a six-year-old modernization effort that had eaten up more than $1 billion. When the Air Force realized that it would cost another $1 billion just to achieve one-quarter of the capabilities originally planned — and that even then the system would not be fully ready before 2020 — it decided to decamp.”  (12/8/12)
 
The Atlantic: Why Not Push the Pentagon off the Fiscal Cliff?– Robert Wright
“This week the White House Budget Office directed it to plan for $500 billion in cuts it may have to make over the next ten years if cliff-averting negotiations fail. The negotiations may of course not fail, but it's still worth asking: in the event that our military resources really did shrink significantly, how much damage would that do to our national security?  Here's my initial estimate: zero.  I mean, what actual threat to America's security is the military currently fending off? Are there any countries that would invade the United States if the Pentagon's budget were 10 percent smaller than it is--which is roughly what $500 billion in cuts over 10 years would amount to?”  (12/7/12)
 
Washington Times: Sequestration spotlights real defense abuses– Col. Ken Allard (ret.)
“A panel of defense-industry executives complained last week to a National Press Club audience about the defense budget cuts known as sequestration. Calling those reductions “irresponsible,” TASC CEO David Langstaff said sequestration would shatter “our ability to execute U.S. national security strategy.” That may well be the case.  Yet on the same day, the Pentagon’s chief weapons tester harshly criticized the Army’s costly data-mining system known as the Defense Common Ground System (DCGS). Rather than smoothly producing battlefield intelligence to hunt insurgents, even the new and theoretically improved version of DCGS was ‘not operationally effective, not operationally suitable and not operationally survivable against cyberthreats,’ he said.  Despite its ineffectiveness, the American taxpayer has spent $2.5 billion on DCGS.”  (12/7/12)
 
Foreign Policy: Flexible Spending Accounts – Gordon Adams
“Sequester is not about closing the government; it's about cutting back on spending. If I were betting, the impact will most likely be felt by services contractors (the lawn service company) and by folks almost nobody is talking about -- the civilian workforce at the Pentagon, some of whom could be taking an involuntary day or two off, without pay.  None of this will happen right away. In fact, although OMB has not said what it will do if there is no budget deal by January 3, one possibility is that it will use its existing authority to tell agencies how fast they can spend their money (apportionment) conveying to them the message: ‘Keep spending like you were before. We'll get back to you on sequester when we know what Congress is going to do.’ In other words, if OMB anticipates that Congress might reach a deal sooner rather than later, sequestration might be short-lived, even if there's no agreement by the January 3 deadline.  So this is all contingency planning. The ball is still in President Obama and Speaker Boehner's court. At least DOD may now have a clearer view of the track ahead, just in case.”  (12/7/12)
 
“The Pentagon inspector general’s recent negative report on the revamped auditing priorities of the Defense Contract Audit Agency has prompted a fresh rebuttal from a senior Defense official familiar with DCAA. Last month, the IG reported that DCAA’s two-year-old effort to review fewer contracts and focus on high-dollar returns had missed an opportunity to save as much as $250 million a year, in part because the Office of Defense Procurement and Acquisition Policy had not performed a ‘business case analysis’ to support the decision to alter DCAA’s priorities in choosing contracts to review.  On Thursday, a key official, speaking to Government Executive on condition of anonymity, argued that the IG’s ‘analysis is fundamentally flawed’ and denied the charge that DCAA’s new approach ‘left money on the table.’” (12/7/12)
 
Center for American Progress: $100 Billion in Politically Feasible Defense Cuts for a Budget Deal– Lawrence Korb, Alex Rothman, Max Hoffman
“If carried out correctly, a well-managed defense drawdown can return the Pentagon’s budget to more sustainable levels without harming our national security or our economic recovery. In this issue brief, we recommend $100 billion in responsible reductions over 10 years as an initial target, a modest ‘down-payment’ that would bring the defense budget back to its 2010 level in real terms. While greater savings are both possible and, we would argue, necessary, this brief outlines a menu of the most politically palatable cuts, widely endorsed by organizations on both sides of the aisle, including the Bowles-Simpson Deficit Commission, the Stimson Center/Peterson Foundation, the office of Sen. Tom Coburn (R-OK), the Project on Defense Alternatives, and the RAND Corporation.”  (12/6/12)
 
 
Reports
 
 
 
 
 
 
Congressional Budget Office: Monthly Budget Review (12/7/12)
 
Congressional Research Service: Iran’s Ballistic Missile and Space Launch Programs (12/6/12)
 
 
Department of Defense: Report on Progress Toward Security and Stability in Afghanistan (December, 2012)
 
National Intelligence Council: Global Trends 2030: Alternative Worlds (December, 2012)
 
 
Department of Defense Inspector General: Semiannual Report to Congress (October, 2012)
 
 
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