Thursday, April 11, 2013

4/11/13 RD Bulletin: President’s FY14 Budget Drops – in denial of reality

News: On Wednesday, the Pentagon unveiled its Fiscal Year 2014 budget request – totaling $526.6 billion for the base budget.  This topline request ignores sequestration and could result in more than $50 billion in defense spending reductions in FY14. 
Project on Defense Alternatives Perspective: The President’s proposed FY14 DoD budget is an exercise in denial of current fiscal conditions -- conditions made very real by the sequester provisions of the Budget Control Act.  A military posture in denial of reality is dangerous.

The Fiscal Year 2014 Budget Release
Yesterday, the White House unveiled its budget for Fiscal Year 2014, requesting $526.6 billion for the Pentagon’s base budget (Click here for the Budget Appendix – Military Programs).  The administration submitted a ‘placeholder’ request of $88 billion for war activities, while a more detailed request is expected later this month or in early May.  According to Carl Conetta, director of the Project on Defense Alternatives, the FY14 defense budget request is 1.5 percent lower in real terms than the FY13 budget request.  Conetta also notes that the next three years are the most significant ones in the President's budget for an obvious reason: in 2017 someone else takes over and all bets are off. 
From 2013 to 2022, the new budget foresees spending $5.64 trillion on the Pentagon base budget, which is $120 billion less than was planned in the FY13 budget and $430 billion more than sequestration would allow. The FY14 defense budget requests $137 billion for personnel, $210 billion for operations and maintenance, $99.3 billion for procurement and acquisition, $67.5 billion for research and development, and $9.5 billion for military construction and family housing.  The personnel request represents an increase of $1.7 billion from last year’s enacted level, while the O&M, procurement, and R&D requests fell relative to last year’s level.  These funding comparisons do not reflect sequestration, however.  In total, the Pentagon’s new budget proposes saving almost $14 billion in the acquisition budget through program terminations, restructuring, and reduced buys.  Some of the proposed cancellations were rejected by Congress last year, including the proposed termination of the Global Hawk Block 30 drone, the retiring of aging Navy cruisers, and the mothballing of the C-27J transport aircraft. 
Overall, the new budget proposes replacing the entire trillion dollar sequester with $1.8 trillion in deficit reduction.  This includes $200 billion in discretionary spending reductions, split evenly between defense and non-defense, while the remaining deficit reduction target is accomplished through proposed increases in federal revenues as well as reforms to earned benefit programs.  Commenting on the proposed defense reductions included in the President’s budget, Russell Rumbaugh of the Stimson Center remarks, “Those cuts don’t start until FY17—three years from now—and in the President’s budget are expressed as lower statutory spending caps.  But those cuts are real savings.  Or as real as projected savings can be.  The first cut of $36B isn’t real savings because its just a decrement from a request, which wasn’t approved in any way by Congress.  The $114B cut is a cut from the current statutory caps and has the effect of actually decreasing deficit and debt projections.”  
Because the administration’s budget proposes replacing the sequester in its entirety, its FY14 topline does not reflect the reduced spending caps resulting from the onset of sequestration.  PDA senior fellow Charles Knight laments the fact that the White House is seemingly ignoring reality, proclaiming, “It’s a very irresponsible thing.  Both Congress and the White House are in denial about the law of the land, which is the Budget Control Act. It’s now in effect and they’re acting as though it doesn’t exist.”  Conservative analyst Mackenzie Eaglen was less contrite, “By continuing to ignore the law of the land –- and however lousy that may be, that’s what the Budget Control Act is — the President is doing greater damage than is necessary to the military… President Obama’s 2014 defense budget is a recipe for continued uncertainty, additional budget cuts, an ultimately reduced strategy, and inability to safely and smartly plan for the long-term.” 
According to the Center for Strategic and Budgetary Assessment’s Todd Harrison, the Pentagon’s FY14 topline budget request is more than $50 billion above the post-sequester defense spending cap of $475 billion.  Both the recently passed House and Senate budget resolutions also fail to account for sequestration in Fiscal Year 2014.  The Pentagon currently is in the process of bringing its FY13 budget down to post-sequester levels and has until the end of the fiscal year to do so.  If sequestration stays in place, as predicted, the Pentagon will likely begin enacting strategic reductions to its budget and force size beginning in 2015 – after the department has concluded its Quadrennial Defense Review.  (For a comprehensive guide to reading the defense budget, provided by Winslow Wheeler of the Project on Government Oversight, click here). 
For comparison, the Congressional Progressive Caucus alternative budget resolution for FY14, dubbed the ‘Back to Work Budget,’ would accrue more than $562 billion in national security savings over the next decade relative to the President’s new defense budget.  In FY14 alone, the CPC budget would save $23 billion more than the President’s military budget request. 
The Navy request proposes spending $155.8 billion in FY14.  This includes $5.41 billion for the Virginia-class program, including funding the procurement of two vessels in FY14, as well as a $1.6 billion downpayment on an additional two vessels in Fiscal Year 2015.  This level of funding represents a 27 percent increase from last year.  The request also funds the procurement and development of the next two Ford-class aircraft carriers with $1.68 billion – which represents a two-fold increase from last year’s request. 
Despite reports that the Navy is considering reducing significantly its total procurement of the Littoral Combat Ship, the FY14 request continues the previously planned acquisition of four LCS this year.  The recently enacted omnibus appropriations act cleared the way for the Navy to purchase an additional Virginia-class submarine in FY14 as well as an additional DDG-51 destroyer.  In its budget submission, the Navy is proposing a new multi-year contract to purchase ten more submarines.  It also proposes increased funding for development of the Ohio-class replacement submarine.
The service is requesting an increase in the price cap on the first Ford­-class carrier, which had been set at $11.8 billion by the 2007 National Defense Authorization Act.  GAO is currently preparing a report to Congress on the Ford-class program, its cost growth, and development.  The Navy now expects that carrier to cost at least $12.3 billion.  The service plans on submitting a multi-billion dollar reprogramming request in coming weeks in order to cover an expected shortfall in operations and maintenance, resulting from the FY13 sequester.  Finally, the proposal requests increased R&D funding for the Marine Corps’ Amphibious Combat Vehicle, intended to replace the canceled Expeditionary Fighting Vehicle. 
The Air Force has requested $144.4 billion in Fiscal Year 2014, the only service to receive an increase in requested funding relative to last year’s pre-sequester enacted level of spending.  Despite mounting criticism of the Joint Strike Fighter program, as well as pending automatic spending cuts, the Pentagon has maintained last year’s plans to purchase 29 F-35s in Fiscal Year 2014.  This includes 19 aircraft for the Air Force as well as ten for the Marine Corps and Navy.  Last year, the Air Force proposed canceling the Global Hawk Block 30 variant, though it encountered stiff resistance from Congress.  This year, the service is again proposing canceling the Block 30 variant as well as its Block 40 cousin.  It has also proposed increased funding for the C-130J Hercules transport plane.  The budget proposes terminating the future Space Based Surveillance follow-on as well as the Expeditionary Combat Support System.  It also proposes a modest reduction in funding for the next-generation long-range strike bomber. 
The Army has requested close to $130 billion in FY14 funding -- roughly $5 billion less than was requested in last year’s budget.  Army leaders have repeatedly said that under sequestration, the service will be required to cut an additional 100,000 active duty personnel from its ranks.  However, the FY14 budget request proposes maintaining Army end strength at current levels despite the onset of the automatic cuts. The budget request defers procurement of the new AH-64E Apache gunship, for $1.3 billion in savings, and reduces procurement of the Army Light Utility Helicopter.  The Army has again requested funding, $178 million, for upgrades to the M1 Abrams tank, a request that was widely ridiculed last year.  The Army’s budget accrues $600 million in savings from reforms to radio acquisition and a cut in unmanned aerial systems. 
The administration has proposed a modest reduction in funding for missile defense initiatives, requesting $9.16 billion in FY14 – roughly a $550 million reduction from last year’s enacted level of spending.  Though the overall request for missile defense is down – despite recent bellicose threats from North Korea – the Pentagon has requested slight increases in funding for the Ground Based Midcourse Missile Defense (GMD) and Aegis Ballistic Missile Defense systems.  The decrease in total missile defense funding requested is largely due to the fact that the administration has zeroed out funding for the controversial Medium Extended Air Defense (MEADS) system, for which it received close to $400 million in final funding.  The budget also proposes terminating the Precision Tracking Space System for $270 million in FY14 savings. 
The White House has again proposed several policy recommendations that were roundly rejected by Congress during last year’s budget battles: The Pentagon has requested an additional round of BRAC as well as proposals to reform the Tricare and Tricare-for-Life military health care programs.   Senior military leaders have repeatedly warned that force reductions necessitated by sequestration will leave the department with excess domestic infrastructure.  In order to carry out a new round of BRAC, the Pentagon has requested $2.4 billion in upfront funding for the process.  However, Senate Armed Services Committee Chairman Carl Levin announced that the BRAC recommendations were dead on arrival, saying, “I think they would know they’re not going to get it, so why put it in?”  The Pentagon is also proposing culling its civilian workforce by an additional 40,000-50,000 employees. 
The funding request for the National Nuclear Security Administration (NNSA), housed within the Department of Energy, notably favors nuclear modernization and sustainment programs over non-proliferation. Under the proposal, DoE sustainment programs would see a total increase in funding of about 7 percent or $500 million. Non-proliferation programs like the Global Threat Reduction Initiative (GTRI), designed to reduce and protect vulnerable nuclear and radiological materials located at civilian sites worldwide, would see a 15 percent reduction.  The controversial Mixed Oxide (MOX) fuel program would also see a 53 percent reduction in funding.
Project on Defense Alternatives Perspective
No general in their right mind would ever consider going into battle in full denial of enemy capabilities and battlefield conditions.  Realistic assessment is critical to success in war. 
For the second year in a row the Pentagon, the White House and Congress are proceeding in deep (and apparently fully conscious) denial about the budget reality they face.  Although Congress passed and the President signed the Budget Control Act of 2011 (BCA), all government parties are behaving as though by ignoring sequester while preparing budgets that they can somehow avoid its consequences.
The BCA caps the Pentagon’s base budget at a level 10 percent below the White House’s proposed budget.   When the Republican controlled House Armed Services Committee reports out an authorization bill in about a month it is likely to be higher than the White House budget and thus even less in accord with reality.
Recent budget proposals and authorization bills have been ‘all politics.’  They should be understood as no more than bargaining positions in presumed service of building to a compromise ‘grand bargain,’ but the chances of such a bargain this year are once again exceedingly small.
Meanwhile, the denial and political posturing can only hurt the armed forces.  Why?  Because the armed forces, whether they like it or not, need to be taking reasoned steps now to adjust to the lower budgets mandated by the BCA – budget levels they lived comfortably within just a few years ago.
The Air Force, for instance, should reduce the number of active fighter squadrons by 10 percent, reduce the buy rate of the super-premium F-35s and plan to keep advanced model F-16s in service until 2030.  (For a set of proposed adjustments to all service plans see the Project on Defense Alternative’s Reasonable Defense plan).
It is no problem for the Air Force to say they would prefer it to be otherwise.  When there is more government revenue in a few years, the White House and Congress might be ready to override BCA and welcome a different budget for Air Force fighters.  Until then it is a disservice to the Air Force to encourage them to plan and budget as though there is no change in the reality they face.  The next sequester hit comes in less than a year and to date none of the services have adjusted their force plans to 2013 realities.  A defense posture based on denial of reality is dangerous.

News and Commentary
“2013 is a lost year for the defense budget. Political paralysis from the election, the fiscal cliff, sequestration and the debt ceiling doomed 2013 from the beginning. The FY2014 budget request is already under duress and is unlikely to fare better. Despite the two month delay in its release, the new budget request fails to recognize the 2013 appropriations just passed and it exceeds the budget caps in the Budget Control Act. With an erroneous baseline and disregard for the BCA caps, the president's request not only endangers the 2014 spending levels, but sets DoD on a path to plan for higher budgets over the entire Future Years Defense Program (FYDP), compromising the planning process.” (4/10/13)
Real Clear Defense: DOD Budget Ignores Law and Reality - Mackenzie Eaglen
“By continuing to ignore the law of the land (and however lousy that may be, that's what the Budget Control Act is), the President is doing greater damage than is necessary to the military. Last year, Pentagon leaders were directed to not plan for sequestration until it basically took effect. Using equally poor judgment, the Pentagon was allowed to overspend throughout the first half of the fiscal year on the overly optimistic assumption that Congress would provide higher dollars than ultimately transpired and that the Department would get a budget bill enacted (something that was very much in doubt until an omnibus spending measure passed). These political decisions to let the Pentagon plan and operate outside of realistic bounds set by law seem to help the military in the near-term but are actually exacerbating ongoing damage and making the outlook worse through continued uncertainty.”  (4/10/13)
USA Today: Special ops global whack-a-mole  - Linda Robinson
“Most Americans are unaware that U.S. special forces face the serious danger of being bogged down in a permanent game of global whack-a-mole rather than operating as part of deliberate campaigns that can achieve lasting outcomes. To understand why there is this danger, one has to understand the two models of special operations—a direct approach of individual manhunting (such as the raid that brought down bin Laden) and an indirect approach of working through and with others. The direct approach is fairly well known and simple to grasp. But the indirect approach is less understood and less well known.”  (4/9/13)
The F-35 Lightning and F-22 Raptor fifth generation fighters are among the most technologically advanced aircraft in history but the fact that they're barely out of testing (more than can be said about their Russian and Chinese counterparts) doesn't mean the US military isn't already designing an even better sixth generation. These next gen war-fighters will be able to fly farther, faster and fight smarter with advanced weapons systems and maybe even self-healing skin.”  (4/9/13)
“The Pentagon appears to be headed toward another round of forced budget cuts in October with no plan in place for absorbing the reductions, even as it struggles to implement a $41 billion budget cut for which it was ill-prepared. ‘By ignoring sequester and hoping for a grand bargain that has remained elusive  Pentagon leaders are in for another year that looks like the one before it and the one before that, with no clarity in the short- or the long-term on budget or strategic matters,’ said Mackenzie Eaglen, a defense analyst at the conservative American Enterprise Institute think tank.”  (4/9/13)
Associated Press: Pentagon struggles with high cost of health careDonna Cassata
“Despite dire warnings from three defense secretaries about the uncontrollable cost, Congress has repeatedly rebuffed Pentagon efforts to establish higher out-of-pocket fees and enrollment costs for military family and retiree health care as an initial step in addressing a harsh fiscal reality. The cost of military health care has almost tripled since 2001, from $19 billion to $53 billion in 2012, and stands at 10 percent of the entire defense budget. Even more daunting, the Congressional Budget Office estimates that military health care costs could reach $65 billion by 2017 and $95 billion by 2030.”  (4/8/13)
“In 2001, the U.S. Navy started the Littoral Combat Ship (LCS) program to replace the aging FFG-7 class scheduled for retirement by 2020. The concept was to use existing commercial ferries, modify them for naval use, customize them selectively with mission packages and buy 55 ships to replace the FFG-7 class and 14 mine countermeasures ships. All of this would be done inexpensively. The plan has not worked.”  (4/7/13)
New York Times: Results Must Be More Rigorously MonitoredLora Lumpe
“The United States spent nearly $600 million training about 61,200 foreign soldiers from around the world in 2001, the largest such program in the world. But the State and Defense departments have failed to develop any sound method for evaluating effectiveness, let alone cost effectiveness, of the missions, the Government Accountability Office determined that year. This is largely because efforts to monitor the armed forces after training is so weak… The United States needs to allocate more resources to ensuring the integrity of this screening process as a cost of training so many troops in so many countries in so many political contexts around the world.”  (4/7/13)
Project on Government Oversight: Hagel: A Secretary of Defense Reforms?Ben Freeman
“Hagel must address our over-reliance on contractors, which results in a distorted policy-driver of contractor profits over sound national security strategy. In addition, taxpayer dollars are misspent or wasted because contractors often cost more to do the same jobs as federal workers. There are plenty of specific ideas for reforming Pentagon contracting, like reducing the taxpayer-financed compensation of contractor executives or even just providing the public with access to contractor workforce size and cost data, both of which POGO has advocated for.”   (4/6/13)
“In March 2012, the Government Accountability Office, Congress’ investigative agency, took a look at the 96 highest-priority defense programs in the Pentagon acquisitions system. The watchdog organization found that the acquisition programs represented an estimated total cost of $1.58 trillion, and had actually “grown by over $74 billion or 5 percent in the past year.” (.PDF) The sources of that increase were everything from changes in the per-unit costs of all the planes, guns, trucks and ships; upticks in R&D expenses; or plain ‘production inefficiencies.’ $74 billion is a lot of money. To put it in context, if all that hardware cost growth were a sovereign nation, it would spend more money on its defense sector in a year than Russia does. ($64 billion in 2012, although in Putin’s Russia, defense money spends you.) It would laugh at India’s $44 billion effort in 2012 at becoming a rising military power. It would pen op-eds in British newspapers about the paltry $57.8 billion that once-imperial London spent on defense last year. The only countries’ defense sectors that would eclipse it are China and the U.S. itself.”  (4/4/13)
Early Warning Blog: Can a Dysfunctional Pentagon Reform Itself?Daniel Goure
“Is it possible for a dysfunctional Pentagon to reform itself?... I am sorry to say it but physicians generally do not heal themselves. What is needed in order to address a problem of such magnitude and political sensitivity is an independent commission that combines the essential features of Simpson-Bowles, Goldwater-Nichols and BRAC. It would have to have the support of both the Executive and Legislative branches. Its goal would have to be legislation directed at reforming the Pentagon’s structures, policies and procedures. Like BRAC commissions, it would recommend cuts and realignments to the current civilian and military organizations that could not be amended; Congress could only vote up or down.” (4/4/13)
“Furloughs and other temporary budget patches could become a way of life for the Pentagon unless congressional Republicans and the White House reach a long-term budget deal. Few think a decade of furloughs is the best way to close the budget deficit. Pentagon leaders this week suggested eliminating and prioritizing specific programs would be more efficient. But the 2014 budgets from the House and Senate set defense spending at higher levels than what's allowed by law, effectively ignoring this year’s mandatory spending cuts. President Obama’s budget is expected to take the same course when it is released on April 10.”  (3/31/13)
Office of the Under Secretary of Defense (Comptroller): Operation and Maintenance Overview (4/10/13)
Office of the Under Secretary of Defense (Comptroller): National Defense Budget Estimates for FY 2013 (Green Book) (4/10/13)
Office of the Under Secretary of Defense (Comptroller): Financial Summary Tables (4/10/13)
Office of the Under Secretary of Defense (Comptroller): FY2013 Multiyear Procurement Exhibits (4/10/13)
Office of the Under Secretary of Defense (Comptroller): Program Acquisition Costs by Weapons System  (4/10/13)
Office of the Under Secretary of Defense (Comptroller): Performance Improvements (4/10/13)
Office of the Under Secretary of Defense (Comptroller): Overview - FY2014 Defense Budget (4/10/13)
Office of the Under Secretary of Defense (Comptroller): Fiscal Year 2014 Budget Request and FY 2013 Update (4/10/13)
Center for Strategic and Budgetary Assessments: Looking Beyond the Fog Bank: Fiscal Challenges Facing Defense (4/5/13)
Congressional Budget Office: Monthly Budget Review (4/5/13)
Office of Management and Budget: Ongoing Implementation of the Joint Committee Sequestration (4/4/13)
Congressional Research Service: North Korea’s Nuclear Weapons: Technical Issues (4/3/13)
Council on Foreign Relation: The Future of U.S. Special Operations Forces (April 2013)
Department of Defense: Defense Budget Priorities and Choices Fiscal Year 2014 (April 2013)