Thursday, March 21, 2013

3/21/13 RD Bulletin: Obama set to offer 20% of sequester-level cuts, six years from now

Highlights
 
News: The forthcoming Pentagon budget request for Fiscal Year 2014, expected on Capitol Hill by April 8, will propose replacing the sequester of defense funds with $100 billion in military spending reductions beginning in 2019. 
 
PDA Perspective: Charles Knight discusses the implications of a recently disclosed internal Navy memo that suggests big changes are coming to fleet composition.
 

State of Play
 
On or before April 8, the Obama administration will submit its Fiscal Year 2014 budget request that will propose eliminating the sequester and replacing it with a $4 trillion deficit reduction package.  The White House will propose replacing the military-side of the sequester with approximately $100 billion in defense spending reductions.  But these reductions will not kick in until the second half of the ten-year budget window beginning in 2019.  “The way the president did it was he took $100 billion out of defense, but he took it out [from] the second five years…  So essentially you have a FYDP (five year defense plan) that remains intact and we take another $100 billion out beyond the FYDP,” Frank Kendall, the Pentagon’s top acquisition official, told the National Defense Industrial Association conference in Virginia this week. 
 
By putting off the proposed spending reductions until 2019 when President Obama is no longer in office, the administration is hoping to escape the political repercussions of implementing a post-war budget drawdown.  Stephen Miles of Win Without War was unimpressed by the administration’s proposal to save a “meager” $100 billion, telling Reset Defense, “The Pentagon's budget has exploded and is now so filled with wastes that it can and should be reshaped to save five to ten times this amount.”  Meanwhile, Talking Points Memo’s Brian Beutler reports that House Republicans led by Speaker John Boehner (R-OH) are quite happy maintaining post-sequestration spending levels into the foreseeable future – but will also try to shore up the defense budget by culling domestic spending even further. 
 
The Senate has completed work on a mini-omnibus appropriations act, H.R. 933, that would keep the government funded past the end of March.  Senators John McCain (R-AZ) and Tom Coburn (R-OK) initially opposed passage of the spending bill due to concerns over more than $6 billion in defense-related earmarks, which the duo referred to as “egregious pork barrel spending.”  However, the two senators dropped their objections after an amendment by McCain was approved that would cull DoD funding for infrastructure development in Guam.  The mini-omnibus spending measure would provide the departments of defense and veterans affairs with full-year appropriations bills – something the Pentagon wants more than the nullification of sequestration because it would mitigate one-third of an expected 40 percent shortfall in operations and maintenance funding.  This morning, the House approved the Senate-passed measure, which will now head to the President’s desk for his signature.  Both chambers are scheduled to leave town at the end of the week for a two-week recess. 
 
The House, this week, considered its annual budget resolution as well as a number of substitutes offered by various factions within the chamber.  As previously reported, the official House Republican budget resolution, offered by Rep. Paul Ryan (R-WI), would nullify sequestration and allow defense spending to grow with inflation from last year’s enacted level.  The Congressional Progressive Caucus substitute resolution, dubbed the ‘Back to Work Budget,’ would have cut defense spending by roughly $900 billion over the next decade relative to a modified CBO baseline.  Finally, the conservative-Republican Study Committee offered a substitute, which also would have allowed defense spending to grow gradually with inflation, while the Democratic minority offered a substitute that would prevent the defense sequester and replace it with $200 billion in targeted reductions to the Pentagon’s budget.   Senate Majority Leader Harry Reid (D-NV) says the upper chamber must complete work on its budget resolution before recessing – which appears within grasp.  For a summary of how the House and Senate budget resolutions treat defense spending, click here for an analysis conducted by the Stimson Center’s Russell Rumbaugh. 
 
Despite the fact that the Pentagon will soon begin conducting its Quadrennial Defense Review (QDR), newly minted Defense Secretary Chuck Hagel has ordered a review of last year’s strategic guidance, which was most notable for advocating a re-pivot to the Asia Pacific region.  The original guidance was developed under the assumption that previously planned levels of spending would have to be cut by roughly $500 billion as a result of the Budget Control Act, however it did not incorporate the additional $500 billion in automatic spending reductions, known as sequestration.  As a result, Hagel has now instructed his deputy, Ash Carter, to work with the Joint Chiefs of Staff to determine if the strategy is still executable with diminished resources and whether the Pentagon needs to readjust its “ambitions” to match current “abilities.”  The review is expected to be completed by May 31, 2013, and will help “frame” the Fiscal Year 2015 budget request as well as the upcoming 2014 QDR.  Meanwhile, the American Enterprise Institute’s Mackenzie Eaglen has criticized the Pentagon for failing to incorporate sequestration-level spending reductions into its upcoming budget request, saying, “It’s a political decision, and it’s a dereliction of duty, I think, by senior Pentagon leadership. It’s not just irresponsible — they’re not following the law. The law is the sequester is in place.”
 
Speaking at a recent defense conference in Washington, the Pentagon’s top acquisition chief, Frank Kendall, lamented problems in the department’s acquisition process and discussed why the ‘fixed-price contract’ system may not be the answer to the department’s acquisition woes despite the much-lauded KC-46 fixed-price contract.  Kendall and Lt. Gen. Charles R. Davis both mentioned that acquisition officials are leery of starting new programs that will likely go over-budget and suffer from delays.  Kendall pointed to the fact that the Pentagon has cancelled more than $50 billion in new weapons systems over the past decade with little to nothing to show for the efforts.  “I have been watching programs get canceled because they weren't affordable. We have done too much of that,” Kendall proclaimed.  Ultimately, Kendall falls back on the common Pentagon refrain that excess overhead costs are the number one driver of acquisition cost growth and must be brought under control. 
 
The Congressional Budget Office recently examined the Pentagon’s Fiscal Year 2013 budget request to see how it conforms to the post-sequestration statutory spending caps implemented by the Budget Control Act.  Because the department included savings in its FY13 budget request that are unlikely to materialize, and because the department did not account for sequestration, its most recent budget plan “would exceed the funding allowed under the budget caps by a large margin.”  As a result, the Pentagon will have to “cut back on its forces and activities more each year to remain within the budget caps.”   
 
Due to the Pentagon budget plans’ nonconformity with current law spending caps, CBO examined four different scenarios that may occur as policy and lawmakers work to reign in excessive military spending: (1) maintain the current size of the military by reducing funding for O&M and acquisitions; (2) reduce funding for acquisitions and O&M and then gradually phase in force size reductions beginning in 2017; (3) spare the acquisitions and O&M accounts and instead enact aggressive force structure reductions; and (4) modify the statutory spending caps to allow for a more gradual topline reduction in defense spending while slowly reducing force structure.  CBO noted that a number of recent studies, including the Project on Defense Alternatives’ Reasonable Defense, illustrate how to enact strategic reforms to U.S. national security policy in order to conform to new budget realities.  
 
 
 
Project on Defense Alternatives Perspective
 
Defense News reports this week on a classified Navy memo titled, “Vision for the 2025 Surface Fleet,” which gives some insight into the service’s thinking as it prepares for a time when it will have a smaller budget and likely a smaller fleet.   The article headlines a recommendation in the memo to buy one of the two littoral combat ship (LCS) variants in production.  It was always a profligate plan to build two different designs.  Defense News suggests this may mean cutting the total procurement order of this ship from 55 to more like 26.
 
Better yet, it might be preferable to abandon plans to purchase more LCS (troubled both in concept and execution) and instead buy modern frigates and/or corvettes for the close-to-shore role for which the LCS is designed.  This configuration would cost about half as much to buy and operate as the LCS.  There is even an American ship building company ready to build new frigates.
 
The memo also reportedly recommends cancelling the planned purchase of Flight III destroyers equipped with new, large, and power-hungry radars for missile defense.  Instead, the memo recommends developing a new cruiser-size ship with ample room and power for current and future ballistic-missile defense systems. The Navy believes it needs a missile defense cruiser for each carrier task force it deploys.  Such a new cruiser will surely be expensive.  It should be thought of as part of the cost of hedging against the increasing vulnerability of aircraft carriers to anti-ship missiles. 
 
As numerous analysts have pointed out, most recently Navy Capt. Henry Hendrix, the big aircraft carriers will be edging into obsolescence during the coming decade.  That doesn’t mean there won’t be some role for these floating air bases twenty years from now, but the cost-to-risk calculation of using carrier task forces for routine forward presence will result in a smaller number, kept closer to home and out of harm’s way until it is necessary to surge them forward in war time. That results in a smaller surface fleet in future years – fewer carriers, cruisers, and supply ships for these large and costly task forces.   Destroyers, frigates and submarines will provide most of the Navy’s routine forward presence… at much lower cost -- if, that is, the Navy can be restrained from routinely patrolling all the seven seas.
 
 
News and Commentary
 
Battleland: Army Lessons Observed…But Not Learned – Douglas Macgregor
“In a Defense Daily article entitled ‘Army Senior Leaders Consider Strategic Landpower AT UQ 2013 Seminar,’ Ann Roosevelt quotes Army Lieut. General Keith Walker as saying, ‘For example, an important lesson from World War I is that the allied failure to occupy a defeated Germany allowed militarism to survive, he said. The German people never felt themselves defeated, thus World War II came within two decades.’ Walker is expressing a widely held view in the senior ranks: that the U.S. Army must be postured to repeat the multi-trillion dollar folly of Iraq by repeating the disastrous mistake of occupying countries when there is no need to do so. These neocon inspired statements exemplify the ignorance and the delusional mentality of the Army’s senior leadership.”
 
“A panel of White House advisers warned President Obama in a secret report that U.S. spy agencies were paying inadequate attention to China, the Middle East and other national security flash points because they had become too focused on military operations and drone strikes, U.S. officials said. Led by influential figures including new Defense Secretary Chuck Hagel and former senator David L. Boren (D-Okla.), the panel concluded in a report last year that the roles of the CIA, the National Security Agency and other spy services had been distorted by more than a decade of conflict. The classified document called for the first significant shift in intelligence resources since they began flowing heavily toward counterterrorism programs and war zones after the attacks of Sept. 11, 2001.”  (3/20/13)
 
“With the U.S. military now gone from Iraq, and with the 10th anniversary of the invasion, [Special Inspector General for Iraq Reconstruction Stuart] Bowen’s retrospective summary of his audits offers useful insights into how well the U.S. government managed its occupation and the legacy it left behind. The mostly downbeat tone is set early, when the report summarizes final interviews Bowen conducted with 44 top U.S. and Iraq officials, who addressed the simple question of whether the decade-long project left Iraq in better shape.”  (3/20/13)
 
“The U.S. Navy’s huge, nuclear-powered aircraft carriers — capital ships that have long dominated military planning and budgeting — are slowly becoming obsolete, weighed down by escalating costs, inefficiency and vulnerability to the latest enemy weapons. But if the supercarrier is sinking, what could rise to take its place? Smaller, cheaper flattops; modified tanker ships; and missile-hauling submarines are three cheaper, more efficient and arguably more resilient options.”  (3/20/13)
 
“Our military leaders can do better. We believe that the budget cuts will instill some much-needed fiscal discipline. We believe it's possible to cut back without hollowing out the force. And we believe that it's time for our generals to prioritize, something that has fallen by the wayside in this era of military-industrial excess. In the end, all we are asking is that our senior leaders take some of the advice we were given as young lieutenants: Stop pointing fingers elsewhere. Figure it out. Improvise, adapt, and overcome.”  (3/19/13)
 
POLITICO: The delicate matter of base closures – Phil Ewing
“The man who ran the last round of military base closures knows better than anyone that it’s one of the toughest jobs in Washington — but he says going through with it again soon might ultimately be better than putting it off. Anthony Principi, a former secretary of Veterans Affairs and the chairman of the 2005 Base Realignment And Closure Commission — known by the infamous shorthand BRAC — told POLITICO in an exclusive interview that he appreciates as few do just how tough it is for members of Congress, local officials and communities. Military downsizing is a fact of life, however, and so if Congress doesn’t agree to the new rounds of BRAC the Defense Department is expected to pitch in its budget submission next month, Principi said, it might still wind up with changes — ones outside its control, under another name.”  (3/18/13)
 
“The Obama administration's announcement that it would spend $1 billion to deploy 14 additional antimissile interceptors in Alaska was a clever move. It sent a strong signal to North Korea -- and to China. It reassured close allies Japan and South Korea. It won praise from Republican opponents and generated great newspaper headlines: ‘U.S. beefs up missile defenses.’ It hit all the right buttons. There is only one problem: The interceptors do not work. The Ground-based Midcourse Defense has cost almost $40 billion, but it has not had a successful intercept test since 2008, the year President Obama was elected. It has failed to intercept targets in half of its 15 carefully scripted tests. The success rate is getting worse, not better. It hit only two targets in eight attempts since 2002. In some of these tests, the interceptors could not even get out of the silos. The problems are so bad that the Pentagon has not attempted an intercept test for two years.”  (3/18/13)
 
“The term - recently invoked by top brass involved in the F-35 program - refers to a budgeting Catch-22 that plagues the defense industry. To keep the cost per airplane low, you need to build and sell a lot of planes. But in tough economic times, governments cut orders to save money. That pushes up the cost per plane, leading to more cancellations, pushing up the cost, leading to more cancellations. And so on… Postponing orders for about 40 of the 260 Navy models of the plane, which will take off from and land on aircraft carriers, would save money in the short-term, according to several defense officials familiar with the analysis, which has not been made public. But it would also add from $1 billion to $4 billion to the eventual price of the F-35 program, already at a record-setting $396 billion.”  (3/15/13)
 
“America’s role and its interests still require that it maintain a substantial military force. But even in the Pentagon, leaders note that cuts in defense spending are needed. Their concerns about recent reductions have been more about the way in which they were imposed, without proper planning, and without considering their impact on forces or overall strategy.”  (3/13/13)
 
National Defense: 10 Reasons to Reform U.S. National Security Policy - Nathaniel Sledge Jr.
“Our national security policymakers are now facing [a] test of reason and adaptability. The phrase ‘rude awakening’ comes to mind. Will they retrench themselves in the past, or choose the path of liberation and leverage the current financial crises to implement national security more efficiently? Can they reform the military departments to address real threats? Can they be trusted to manage 20 percent of the federal budget? And finally, will they make the investments in cooperation, manpower, materiel and technology to position the United States to defend itself and its allies with flexibility and strength? Perhaps the answer to these questions can be found by focusing on the drivers of defense policies, procedures, organizations and structures, and the motivations of the actors engaged in national security policy development and execution.”  (2013)
 
 
Reports
 
 
 
 
 
Stockholm International Peace Research Institute (SIPRI): Trends in International Arms Transfers, 2012 (3/18/13)
 
 
 
Congressional Research Service: Coast Guard Cutter Procurement: Background and Issues for Congress (3/15/13)
 
 
Congressional Research Service: A Unified National Security Budget? Issues for Congress (3/14/13)
 
 
 
 
 
 
 
 
 
 
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