Thursday, January 24, 2013

1/24/13 RD Bulletin: DoD Outlines Short-term Cost Savers as it Braces for Fiscal Calamity

 
Highlights
 
News: The Pentagon and its individual services have begun outlining short-term cost saving measures intended to mitigate the impact of future funding shortages. 
 
News: The House of Representatives has passed legislation that would suspend the statutory debt limit for roughly four months buying lawmakers additional time to work out a fiscal compromise that addresses sequestration, the debt ceiling, and appropriations for the remainder of Fiscal Year 2013. 
 
Report: The Pentagon’s annual DOT&E report has been released to Congress highlighting vulnerabilities in the F-35 Joint Strike Fighter and Littoral Combat Ship.

State of Play
 
Although the deadline for sequestration has been delayed by two months, the military’s budget woes are continuing to cause heartburn at the Pentagon.  Because the Pentagon has been operating under a Continuing Resolution, which maintains Fiscal Year 2012 funding levels, and because it still faces the prospect of sequestration come March, the Deputy Secretary of Defense has provided guidance to the services outlining short-term cost-savings measures intended to mitigate future funding shortages.  The guidance directs the services to protect funding for wartime operations, wounded warrior programs, actions critical to the administration’s new defense strategy, and personnel funding.  The guidance also directs the services to impose hiring freezes, consider furloughs, suspend nonessential travel, review contracts, and authorize voluntary separation initiatives. 
 
Commenting on the new guidance, the Center for Strategic and Budgetary Assessment’s Todd Harrison told Government Executive that “The department is starting to do the things it needs to mitigate against the worst consequences of sequestration, and it’s better late than never. But ideally they would have started doing this months ago.”  All of the measures outlined in the new memo are meant to be reversible should the fiscal crisis facing the department be averted. 
 
In subsequent memos, the individual services outlined additional preemptive measures that could yield savings in the short-term.  The Air Force guidance directs the service to cancel ‘non-mission critical’ events such as airshows, flyovers, training seminars, and conferences, and defer base improvements and repairs.  The F-35 Joint Strike Fighter, KC-46 aerial refueling tanker, and next generation bomber programs are all particularly vulnerable if sequestration occurs or if Congress enacts another six-month Continuing Resolution.  The Army guidance directs the service to cut base operating expenses by at least thirty percent and reduce depot maintenance and contracts that do not directly support war fighting missions.  Finally, the Navy memo directs the service to cull as much savings as possible from the operations and maintenance budget.  Because the services are desperate to find short-term savings, they are looking to the O&M accounts instead of focusing on large procurement items.  The Stimson Center’s Russell Rumbaugh explains: “It’s not clear that sequester forces choosing winners and losers, because procurement spends out so slowly.  The immediate drop — though bigger than usual — is a long-term management problem, and doesn’t necessarily entail walking away from any one program.”
 
Last week, the Pentagon’s director for operational test and evaluation released its annual report to Congress on the development of weapons systems.  Among the report’s findings: the Bradley Fighting Vehicle’s undercarriage is vulnerable to explosions; the Littoral Combat Ship’s combat ‘survivability’ is still in question and its guns exhibit reliability issues; and the F-35 Joint Strike Fighter may be vulnerable to light arms fire and lightning strikes.  In separate weapons systems news, the Pentagon has decided to delay development of the new Ground Combat Vehicle program while down-selecting to one contractor.  Pentagon officials are wary of repeating the same mistakes which led to the GCV’s predecessor’s cancellation under former Secretary of Defense Robert Gates’ watch.  The Pentagon believes the GCV delay will help save billions of dollars. 
 
Only one month after program officials touted the success of the F-35B in Arizona, the Marine Corps variant of the Joint Strike Fighter has been grounded. The cause was a failure in the exhaust system that forced a pilot to abort a training flight. Though Senator John McCain (R-AZ) has described the program as “overall...moving in the right direction,” Center for Strategic and International Studies’ senior adviser Maren Leed recently told an audience at the Stimson Center that the JSF is “a whale with numerous harpoons sticking out of it” and more being added all the time.  Since the initial F-35 contract was signed in 2001, the estimates for the total cost of procurement have jumped by 70 percent.  Over the entire life of the program, the aircraft is expected to cost approximately $1.5 trillion to procure and maintain.
 
Speaking at the annual Surface Navy Association’s symposium in Virginia last week, Navy Secretary Ray Mabus and Under Secretary Robert Work both proclaimed that the service fears another six-month Continuing Resolution (CR) as much as it dreads sequestration.  In comparing the two scenarios, Mabus observed that sequestration would cut approximately $4.6 billion from the Navy’s FY13 budget while another Continuing Resolution would provide $4.6 billion less than the service had previously planned for.   Mabus pleaded for Congress to provide the Pentagon with a topline amount for Fiscal Year 2013 so that the services can begin planning for their share of budget cuts, saying “Nobody likes budget cuts… But if the Department of Defense has to be a part of some grand bargain or deal or strategy, then give us the top line, and let us manage how the reductions are made.”  For his part, Under Secretary Work believes that Congress will eventually nullify sequestration while enacting another six-month CR. 
 
Yesterday, the House of Representatives passed a measure to suspend the statutory debt limit for four months until May 19.  The measure would also withhold Congressional members’ salaries until each chamber passes a budget resolution.  Senate Majority Leader Harry Reid (D-NV) and President Obama have both voiced support for the bill.  Earlier, House Republicans, led by Speaker John Boehner (R-OH), had been demanding that any extension of the debt limit be coupled with commensurate reductions in spending. 
 
By delaying the vote on the debt limit, Republicans seem to be buying themselves more time to finalize a negotiating position on sequestration.  However, the GOP may still be toying with the idea of allowing the automatic cuts to take effect in March, with Boehner recently proclaiming, “The sequester is going to go into effect… unless there are cuts and reforms that get us on a plan to balance the budget over the next 10 years. It’s as simple as that.”  Veteran defense reporter John Bennett observes that Republicans’ ongoing insistence on slashing federal spending in return for keeping the federal government running could ultimately “drag the massive Pentagon budget back into Washington’s crosshairs.” 
 
Following a series of militant gains in northern and central Mali, France has begun an aerial bombing campaign supplemented by some ground forces.  As per promises of logistical support, the United States has begun providing airlift assistance in the form of at least five C-17’s carrying French troops and supplies. The French have reportedly requested American aerial refueling tankers, however the Pentagon has not responded to this latest request.
 
 
Polling
 
A recent poll conducted by Greenberg Quinlan Rosner Research queried respondents regarding the level of spending reductions they would favor as part of a deficit reduction package.  A majority of likely voters, 54 percent, favored bringing the Pentagon budget back to 2001 funding levels.  That would be an 18 percent cut and would exceed the reductions that many Washington think tanks, including the Project on Defense Alternatives, have been advocating.  A larger majority, 62 percent of likely voters, supported reducing military spending to 2010 funding levels achieving  a much smaller savings and percentage reduction.  The poll was conducted from January 10-14 and queried 852 likely voters.
 
Separately, National Journal conducted a survey of its ‘national security insiders’ asking them how much funding could be reasonably extracted from the Pentagon budget over the next decade.  Eighty percent of the national security insiders said that more than $100 billion could be cut from the military budget.  The largest plurality, 35 percent, said $101-300 billion could be removed from the Pentagon budget, 21 percent said a reduction of $301-500 is reasonable, while 24 percent said that more than $500 billion could be cut over the next ten years.
 
 
Project on Defense Alternatives Perspective
 
During his second inaugural address, President Obama noted that “The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us.”  In essence this was a statement about national strategy:  National strength requires that the social security programs established in the 20th Century be supported — despite the fiscal pressures of the moment.
 
In 2011, the Project on Defense Alternatives observed that “the essential challenge in the art of strategy is how to achieve objectives within the demanding reality of resource constraints… strategists must always be prepared for changing resource conditions and quickly adapt accordingly.”  This is an uncontroversial yet fundamental aspect of strategy.
 
What is remarkable at this particular point in time is that so few congressional offices and NGOs address national strategic matters when they consider adjustments to the Pentagon’s budget.  Instead they limit themselves to seeking out ‘waste,’ ‘pork,’ and other ill-advised investments in so-called ‘Cold War-era weapon systems’ acting as though debate about national security priorities and how to adjust them in response to new national conditions is somehow inappropriate or best left to the professionals who fill the offices over at the Pentagon.  It is not hard to see that this approach abdicates basic responsibilities of democratic participation in determining the country’s foreign and security policy.
 
Some will argue that a reform majority can be built in Congress by focusing on Pentagon waste while strategic debates will only produce divisiveness and inaction.  A counter to this sort of ‘political realism’ is that some measurable factor of waste and pork is what always greases the wheels in Congress, wheels that recently have demonstrated a lot of rust.  Waste-reduction drives come around every decade or so and never go very far.
 
A concerted bipartisan anti-waste drive has the potential of reducing the Pentagon budget by somewhere between two and five percent.  That’s $11-27 billion saved from an annual Pentagon base budget of $530 billion; the lower figure being the sober conservative estimate of what savings could be achieved.  That’s not enough to make much of a dent in the deficit or to represent any real change in national priorities since the Bush years: After all President Bush was also against ‘waste’.  Pledges to cut waste are the unproductive lowest common denominator of Washington politics.  Real strategic change is needed instead.
 
News and Commentary
 
“No matter how much Congress softens the sequestration's austerity footprint, everyone in government will have to nip-and-tuck in order to balance budgets. And that will include the Pentagon – something that Secretary of Defense nominee Chuck Hagel and even the Bowles-Simpson commission support. We cannot afford to continue a clear and present double-standard in Washington, DC while also keeping the government accountable to its taxpayers. On one side of the discretionary spending spectrum, Republicans are absolutely religious about each government dollar doled out, and are quite keen to see sequestration cuts – to "entitlement" programs. On the other side, cuts to defense spending and oversight of the Pentagon is not up for discussion.” (1/23/13) 
 
“As the Air Force begins to dust off plans for the Minuteman III ICBM replacement, a stark choice faces the service. On one hand, the time has come to replace them. On the other, the Air Force is strapped for cash, victim to a perfect storm of bureaucratic bloat, several rounds of defense cuts, and a fighter fleet exhausted by war and age. The purpose of our strategic deterrent is simple: prevent nuclear weapons from ever being used. And the current Minuteman III inter-continental ballistic missile system, long in the tooth at 40 years old, is the foundation of that strategy.”  (1/23/13)
 
“The Navy is stuck with a number of poorly performing ships it wasn't permitted to scrap but can't afford to fix because Congress hasn't resolved its budget stalemate. Four Ticonderoga-class guided missile cruisers were on the Navy's decommissioning list for 2013 because repairing and upgrading them would cost billions of dollars. But Congress objected to the cuts and instead authorized money to maintain three of them. That money has yet to materialize.”  (1/22/13)
 
Foreign Policy: It's time to move ahead on defense reductions – Gordon Adams
“I have been saying for some time that we are in a defense drawdown. It has already begun. Including war costs, overall DOD budgets are down more than 10 percent in constant dollars from the FY 2010 peak. While some will immediately say that is because we left Iraq and drew down in Afghanistan (which is true), the so-called ‘base defense budget,’ which is largely interchangeable with the war budget, has also come down. It was flat in FY 2011 (no gains for inflation), down about 1 percent in FY 2012, and seems very likely to go down even further this year, with negotiations over sequester between now and March 1 likely to arrive at an agreement that includes more defense reductions. A drawdown is realistic. What is unrealistic is the Pentagon's current expectation and planning projection that defense budgets will keep up with inflation over the next ten years. While Secretary Panetta likes to claim (he did so just last week in Europe) that he has cut $487 billion from future defense budgets, he fails to say that these "cuts" actually brought projected budgets down to where DOD would still keep up with inflation, or, in other words, continue to grow in current dollars.” 
 
Huffington Post: GAO Cannot Audit Federal Government, Cites Department Of Defense Problems – Luke Johnson and Ryan Grim
“The Government Accountability Office said Thursday that it could not complete an audit of the federal government, pointing to serious problems with the Department of Defense.  Along with the Pentagon, the GAO cited the Department of Homeland Security as having problems so significant that it was impossible for investigators to audit it. The DHS got a qualified audit for fiscal year 2012, and is seeking an unqualified audit for 2013.”  (1/19/13)
 
The Lexington Institute: Why Sequestration Would Hit Republicans Hardest – Loren Thompson
“Despite a bipartisan agreement to delay implementation of sequestration from January 2 to March 1, some observers believe that Republicans will eventually insist on triggering across-the-board cuts as a way of permanently lowering federal spending. The tactic might work, but not in a way that most Republicans want. In fact, a simple assessment of how such cuts would be applied to the federal budget suggests that hardworking middle-class voters in the Republican electoral base would be hit harder than other constituencies. You don't need a calculator or spreadsheet to understand why, all you need to do is think through the structure of federal spending and how the sequestration provisions of the budget law are written.”  (1/16/13)
 
“In less than two months, the Navy will send the first of its newest class of fighting ships on its first major deployment overseas. Problem is, according to the Pentagon’s chief weapons tester, the Navy will be deploying the USS Freedom before knowing if the so-called Littoral Combat Ship can survive, um, combat. And what the Navy does know about the ship isn’t encouraging: Among other problems, its guns don’t work right. That’s the judgment of J. Michael Gilmore, the Defense Department’s director of operational test and evaluation, in an annual study sent to Congress on Friday and formally released Tuesday. Gilmore’s bottom line is that the Littoral Combat Ship (LCS) is still ‘not expected to be survivable’ in combat. His office will punt on conducting a ‘Total Ship Survivability Test’ for the first two LCSes to give the Navy time to complete a ‘pre-trial damage scenario analysis.’ In other words, the Freedom will head on its first big mission abroad — maritime policing and counter-piracy around Singapore — without passing a crucial exam.”  (1/15/13)
 
Washington Post: Paying for the all-voluntary military – Walter Pincus
“’The all-in cost of the all-volunteer force is one of the time-ticking bombs that could explode our defense capabilities if not dealt with responsibly,’ said Arnold Punaro, chairman of the board, a former top staffer on the Senate Armed Services Committee and retired Marine Corps major general.  Punaro said one reason that it’s difficult to reform the system is because ‘the Pentagon does not know what the all-volunteer force really costs.’ His board study says the Defense Department has not included in its calculations all ancillary, life-cycle costs such as family housing, education, day care, commissaries and health care.”  (1/15/13)
 
National Interest: Hagel Should Trim Defense – Christopher Preble
“Knowing what the taxpayers’ spend is a crucial step for any SecDef who wishes to manage the Pentagon, rather than be managed by it. Knowing why we spend it is equally vital. Americans spend far more on our military than other advanced industrial economies—both as a share of GDP and on a per capita basis—largely because policymakers in Washington have assigned the U.S. military the task of defending not just the United States and our interests, but also the territories and interests of others.  If Chuck Hagel intends to implement a responsible drawdown in Pentagon spending, he must champion conservative values of self-reliance and responsibility among America’s allies. Burden sharing is good; burden shifting is better. If other countries take on full responsibility for defending themselves, they can also do more to secure common interests, reducing the risks for American troops and costs for American taxpayers.”  (1/14/13)
 
Washington Post: America is not in decline or retreat – E.J. Dionne, Jr.
“We are about to have a major foreign policy debate in the guise of a confirmation battle over Chuck Hagel’s nomination as secretary of defense and the related argument over how long American troops should stay in Afghanistan. President Obama should use this opportunity to stand up for his broader vision of how American power can be sustained and used, even if that doesn’t come naturally to a pragmatist who likes making decisions one at a time. Underlying this clash will be another over whether the United States is in long-term decline. We are not, and the decline discussion should not scare us. We seem to have it every few decades.” (1/13/13)
 
New York Times: The Myth of Nuclear Necessity – Ward Wilson
“America’s 76 million baby boomers grew up during the cold war, when a deep fear of nuclear weapons permeated American life, from duck-and-cover school drills to backyard fallout shelters. Then, in the 1980s, President Ronald Reagan’s leadership, combined with immense anti-nuclear demonstrations, led to negotiations with the Soviet Union that drastically reduced the size of the two superpowers’ nuclear arsenals. Sadly, the abolition movement seems stalled. Part of the reason is fear of nuclear weapons in the hands of others... There is also a small group of people who still believe fervently in nuclear weapons. President Obama had to buy passage of the New START treaty with Russia, in 2010, with a promise to spend $185 billion to modernize warheads and delivery systems over 10 years — revealing that while support for nuclear weapons may not be broad, it runs deep. That support endures because of five widely held myths.”  (1/13/13)
 
Foreign Policy: More or less: The debate on U.S. grand strategy – Stephen Walt
“If you'd like to start 2013 by sinking your teeth into the debate on U.S. grand strategy, I recommend you start with two pieces in the latest issue of Foreign Affairs. Both are by good friends of mine, and together they nicely limn the contours of a useful debate on America's global role. It's also worth noting that there are realists on both sides of this particular exchange, which reminds us that agreement on fundamental principles doesn't necessarily yield agreement on policy conclusions. The first piece is Barry Posen's ‘Pull Back: The Case for a Less Activist Foreign Policy,’ and the second is Stephen Brooks, John Ikenberry, and William Wohlforth's ‘Lean Forward: In Defense of American Engagement.’”  (1/2/13)
 
Reports
 
 
 
 
Congressional Research Service: Crisis in Mali (1/14/13)
 
Office of the Deputy Secretary of Defense: Handling Budget Uncertainty in Fiscal Year 2013 (1/10/13)
 
Office of the Director, Operational Test & Evaluation: FY 2012 Annual Report (1/10/13)
 
Special Inspector General for Afghanistan Reconstruction: Afghan Police Vehicle Maintenance Contract: Actions Needed to Prevent Millions of Dollars From Being Wasted (January, 2013)
 
Congressional Research Service: Nonstrategic Nuclear Weapons (12/19/12)
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