Thursday, July 11, 2013

7/11/13 RD Bulletin: Hagel Notifies SASC of Sequester Impact While Ignoring Imperative for Strategic Change

News: The House and Senate are moving forward with wildly divergent spending plans neither of which adheres to the Budget Control Act’s post-sequester spending caps.  While the Senate will appropriate above the topline cap authorized by the BCA, the House will instead ignore the firewall that separates defense spending from domestic spending.
PDA Perspective: Hagel’s focus in the Strategic Choices and Management Review on choices for 2015 is in denial of the reality of ‘sequester budgets’ in 2013 and 2014, which demand adjustment of strategic ambitions now.

State of Play
In a long-awaited assessment, Secretary of Defense Chuck Hagel notified the chair and ranking member of the Senate Armed Services Committee about the potential impact of sequestration cuts in Fiscal Year 2014.  The Pentagon currently is in the process of enacting almost $40 billion in cuts, and has until the end of the fiscal year to do so.  Hagel warned Senators Carl Levin (D-MI) and James Inhofe (R-OK) that sequestration cuts would imperil U.S. readiness, could cause a 15-20 percent cut in weapons modernization accounts, and could result in “severe and unacceptable effects.”  The Secretary also bemoaned the fact that Congress has not permitted the Pentagon to make modest reductions in weapons systems and personnel benefits. 
While, in the letter, Hagel implores Congress to enact a balanced deficit reduction package that could replace the military sequester, prospects for such action appear nonexistent.  It had been expected that the White House would push for such a grand bargain compromise as a means of extending the debt limit, which will require some action come this fall.  However, Defense News’ John Bennett reports that little progress is being made on Capitol Hill between the two political parties in advancing a grand bargain deficit reduction package.  And with the economy improving, the Treasury Department may be able to continue to put off raising the debt limit thereby further reducing incentives for both parties to come together and compromise over a solution to end sequestration.   

Between now and the end of the fiscal year in September, the Pentagon will furlough approximately 650,000 civilian employees for eleven days each for estimated savings of $1.8 billion.  The Center for Strategic and Budget Assessments’ Todd Harrison believes there is plenty of excess civilian workforce at the Pentagon, and as a result, the impact of furloughs will likely not be felt immediately.  “There are a lot of people who are constantly writing reports and doing analysis, and if that work just doesn’t get done, does anyone care? Does anyone notice? I suspect a fair amount of that work is not essential,” Harrison recently told the Christian Science Monitor
It remains to be seen if there will be a similar public outcry over the Pentagon furloughs as there was over potential FAA furloughs earlier this year.  Or, the Pentagon furloughs could bolster the argument of those who assert that the Pentagon can easily absorb sequestration cuts with little or no impact on national security.  And lest anyone thinks that Pentagon acquisition will slow down as a result of sequestration, just last week, the department unveiled a list of more than 260 new contracts worth a combined value of $45 billion
In an exhaustive survey, the Washington Post examined the White House’s warnings about sequestration to see if they measured up to the actual effects: in 24 cases, the Post found the administration’s predictions turned out to be “wrong.”  In many cases, Congress passed minor legislative fixes or used unobligated balances to mitigate the impact of sequestration.  “In the process, the ‘meat cleaver’ of sequestration often became a scalpel. It spared crucial programs but cut second-tier priorities such as maintenance, information technology, employee travel and scientific conferences,” report David Fahrenthold and Lisa Rein. 
Case in point, since March of this year, the Pentagon has warned that all procurement accounts would suffer an equal sequestration cut of approximately 7.8 percent.  However, military budget planners are using prior-year unobligated balances to pay-down sequestration cuts on specific accounts.  As a result, for example, Breaking Defense reports that Army procurement accounts will face a 4.4 percent reduction while Navy procurement will see a 7.7 percent reduction.  While the Navy procurement account is undergoing a full sequester cut, service budget planners were able to protect three high-priorities weapons systems from undergoing any cuts by using unobligated balances to pay their sequester tabs.  While there is plenty of unobligated funding to use in Fiscal Year 2014, the Pentagon may lack such a fiscal cushion next year.
Last month, the Senate Appropriations Committee moved forward with a spending outline for Fiscal Year 2014 that completely ignores sequestration – setting a topline cap of $1.058 trillion, which is approximately $91 billion above what the House will allocate.  While the House has hewed to a smaller topline amount, House Appropriations chair Hal Rogers (R-KY) has proposed doubling cuts to domestic agencies in order to ignore the effects of the military sequester.  As a result, both the Senate and House spending plans will run afoul of the Budget Control Act.  Moreover, given the $91 billion difference between the House and Senate spending plans, it is difficult to see how the two chambers will be able to reconcile differences through regular legislative order.   
The House has completed consideration of the annual Energy and Water appropriations bill, which includes funding for the nation’s nuclear weapons arsenal.  Among the amendments that were offered was a proposal by Representative Mike Quigley (D-IL) that would have cut funding for the B61 nuclear bomb Life Extension Program (LEP).  Analyst Jeffrey Lewis, working with a Ploughshares Fund grant, recently noted that the B61 bomb will literally cost more than its weight in gold when accounting for the fact that updating 400 of these weapons is estimated to cost $10 billion.  The Quigley amendment was defeated by a vote of 196-227.
The House is soon expected to consider its annual military spending bill, which could come up as soon as next week.  Typically, the House GOP leadership has allowed appropriations bills to come to the Floor under what’s known as an ‘open-rule process,’ where members can spontaneously offer amendments without preapproval from the Rules Committee.  However, due to internal divisions within the GOP caucus related to arming Syrian rebels, U.S. aid to Egypt, and controversial domestic surveillance programs, Republican leaders are considering bringing the defense spending bill to the Floor under a more closed process, where Rules Committee members can block controversial amendments. 
The chair of the Republican-led defense spending subcommittee, Rep. C.W. Bill Young (R-FL), for his part, says he still supports bringing the bill to the Floor under an open rule. 
Senior House appropriator Jack Kingston (R-GA) remarked, “In this environment, sometimes you have to choose between passing a bill with modified rule or not passing a bill, so I think it is proper to explore this as an option.”
On July 5, the Pentagon conducted a flight test of the Ground-based Midcourse Defense (GMD) system in Alaska, a test which failed for the third consecutive time since 2008.  This embarrassing failure comes just months after Secretary Hagel announced a $1 billion plan to deploy additional GMD interceptors to Alaska to guard against the threat posed by North Korean ballistic missiles.  The failed test cost the United States roughly $214 million to execute
In a statement, Philip E. Coyle, a former top weapons tester at the Pentagon, lambasted the Pentagon for continuing to invest in this unproven system: “Whether you count the performance over the past five years or the last ten, clearly the GMD system is something the U.S. military, and the American people, cannot depend upon.  The idea of deploying 14 more of these same flawed interceptors at Fort Greely in Alaska would be throwing good money after bad.”  Still, Pentagon spokesperson George Little said that the department will move forward with plans to expand GMD assets in Alaska despite the failed test. 
For the second year in a row, the Air Force has proposed cancelling procurement of the C-27J transport plane in favor of the much-larger C-130.  However, last year, Congress required the service to continue to purchase the aircraft even though it was preparing to send its C-27s to a boneyard for retirement.  Now, the Air Force is preparing to offer a sole-source contract for an additional five planes, however, Inside Defense reports that the Senate is attempting to scuttle the contract. 
In his first assessment as the top acquisition official at the Pentagon, Frank Kendall has published a 126-page analysis on the performance of the U.S. military acquisition system.  In the report, Kendall cites “poor management” as the biggest cause of cost overruns in the department’s major acquisition systems. 
Separately, in a new assessment, the Pentagon has acknowledged that the estimated costs for its long-range strike inventory has tripled from roughly $3 billion estimated last year to $10 billion now.  The increase in estimated cost comes from a more “realistic” assessment of how much the long-range strike bomber will cost to develop and procure. 
Project on Defense Alternatives Perspective
The Pentagon’s 2012 Defense Guidance was essentially a strategy revision that adjusted to the Budget Control Act's caps on discretionary spending.  Soon after, Joint Chiefs of Staff Chairman Martin Dempsey testified before Congress about the guidance.  The American Forces Press Service reported at the time:
“It is a strategy that has to have this budget to support it… Anything beyond this, we have to go back to the drawing board on the strategy.” The defense strategy is an aggregate of military objectives, the resources available, and how to meet those objectives with those resources, he said. “We’ve got it balanced right now,” the chairman said. “But any change in the future means we have to go back and redo our strategy.”
In essence Dempsey was warning Congress that should sequester happen it would sink the strategy.   Now, of course, sequester has happened and, more likely than not, sequester will be in place at least through the mid-term elections in 2014.
By Dempsey's early 2012 assessment, the Pentagon should have gotten busy redoing its strategy late last year when it became clear there would be no ‘grand bargain’ with the current Congress. Dempsey alluded to this need when he spoke at the Center for Strategic and International Studies in March 2013: 
“As I stand here, I don’t yet know how much our defense strategy will change, but I predict it will. We’ll need to relook our assumptions. We’ll need to adjust our ambitions to match our abilities. That means doing less, but not doing it less well.”
Dempsey's remarks followed closely on Sec. Hagel's decision to order a Strategic Choices and Management Review (SCMR) with the objective of framing "the Secretary’s guidance for the Fiscal Year 2015 budget and will ultimately be the foundation for the Quadrennial Defense Review due to Congress in February 2014.” 
Note that the Review was meant to inform planning for Fiscal Year 2015 and beyond, not Fiscal Years 2013 and 2014, years of likely sequestration and therefore most obviously in need of serious strategic revision.  Last week, Inside Defense reported Sec. Hagel saying, “There will be no roll-out of any grand plan on this.  The aim was to determine how to live with further sequestration in the event there is no alternative,” Hagel said.
Sec. Hagel must now face the fact that there is no alternative to sequestration for the remainder of 2013 and most likely for all of 2014.  It is a diversion from the job at hand to study and plan for 2015 when Fiscal Year 2014 and its $52 billion cut is right around the corner. As Dempsey said back in March, the Pentagon “needs to adjust [its] ambitions.” It needs to do that now, not wait until 2015.  When the department stops avoiding the budget reality standing right before it, it can accomplish that adjustment in short order.
News and Commentary
Deutsche Presse-Agentur: New $34M military base to be demolished, SIGAR says - Subel Bhandari, Hafiz Ahmadi
“A never-used U.S. military base in southern Afghanistan will likely be demolished, a government watchdog reported Wednesday. Some $34 million was spent on the construction of the full-fledged military facility, it said. ‘Based on these preliminary findings, I am deeply troubled that the military may have spent taxpayer funds on a construction project that should have been stopped,’ John Sopko, the Special Inspector General for Afghanistan Reconstruction, said. ‘Unfortunately, it is unused, unoccupied, and presumably will never be used for its intended purpose.’”  (7/10/13)
Associated Press: MIA Work Acutely DysfunctionalRobert Burns
“The Pentagon's effort to account for tens of thousands of Americans missing in action from foreign wars is so inept, mismanaged and wasteful that it risks descending from ‘dysfunction to total failure,’ according to an internal study suppressed by military officials. Largely beyond the public spotlight, the decades-old pursuit of bones and other MIA evidence is sluggish, often duplicative and subjected to too little scientific rigor.”  (7/7/13)
“In past rounds of base realignment and closure (BRAC), [Michael] O’Hanlon noted, many local economies (not all) actually did better in the long run after their base shut down. Federal grants to ease the transition helped, but more fundamental was innovative repurposing of former military facilities and real estate into industrial parks, recreational parks, community colleges, and so on. In a post-recession economy driven by bottom-up alliances of local governments, the private sector, and civic groups — what Brookings’ Bruce Katz calls the ‘Metropolitan Revolution’ — there are ever-more metro areas that could find alternative uses for a closed military base that would more than outweigh the loss of federal dollars.”  (7/2/13)
Foreign Policy: Just How Many Weapons Can America Sell?William Hartung
“When the leaders of the global aerospace industry met late last month at the 50th anniversary staging of the Paris Air Show, one word predominated: exports. With military budgets leveling off or declining in the United States and Europe, arms companies are looking to deals in the Middle East and Asia to bolster their bottom lines. Nowhere has this strategy been more successful than in the United States, where an export-friendly Obama administration has presided over the largest arms-export boom in history. In 2011, the most recent year for which full statistics are available, the United States entered into arms sales agreements worth over $66 billion -- an astounding 78 percent of the world market.”  (7/2/13)
U.S. News and World Report: How U.S. War Funds Get Wasted ... And How to Stop ItMichael Shank
“If the American people think the IRS was bad, take a quick look at Afghanistan. Late last year, a U.S. army staff sergeant was charged with smuggling $1 million in cash inside numerous DVD recorders loaded for shipment to the U.S. Another U.S. army sergeant pleaded guilty to smuggling $100,000 in a backpack at the end of her overseas tour, while a former U.S. army chief was convicted of conspiracy for his role in a bribery/kickback scheme, after soliciting a $60,000 bribe. Afghanistan war profiteering is ubiquitous. A U.S. army sergeant first class stole $225,000 in funds earmarked for reconstruction. A U.S. army 7th Special Forces group sergeant stole tens of thousands of dollars hidden inside a teddy bear. The convictions are constant, the charges are countless and the monies lost are by now in the billions. But don't take my word for it; read the SIGAR report.”  (7/1/13)
“The Army’s vaunted battlefield intelligence processor is ‘difficult to operate’ and suffers ‘workstation system failures,’ a confidential government report says. The Government Accountability Office examined the Distributed Common Ground System (DCGS), which some soldiers in the war zone have rejected as being too slow and unreliable. The GAO report says users testified that the system actually ‘impeded the flow of intelligence information.’ But the Army says the system is a great step forward in collecting multiple pieces of intelligence for analysts to retrieve to better understand the enemy — in this case, insurgents in Afghanistan or Islamic terrorists.”  (7/1/13)
“The Army [has] announced plans to hit the reset button on its force structure, cutting its head count by 80,000 soldiers from 570,000 to 490,000, effectively taking the force back down to pre-9/11 levels… Unfortunately, these cuts do not go far enough to insulate the Army from the dawning age of fiscal austerity, and even deeper cuts in the future. And, by embracing such modest cuts now, the Army is missing a huge chance to leverage this crisis moment to embrace more fundamental change. This is the moment for the Army to fix its anachronistic business model, including its obsolete system of pay and benefits, and trim its bloated network of bases. The Army should also re-examine its mix of active and reserve forces to better leverage its part-time soldiers. And as the largest service, it must also invest more heavily in unmanned systems to break the link between cost and manpower that shackles the force. Troop cuts are but one part of the equation; they are necessary but not sufficient.”  (6/26/13)
“The Pentagon has vowed to preserve the famed nuclear triad despite President Barack Obama’s goal to cut strategic nuclear weapons by as much as a third, avoiding — at least for now — a heated political debate over the future of the nation’s land-, sea- and air-based delivery systems. At some point, though, the nuclear arsenal may simply become too small to justify the expense of maintaining and replacing the aging bombers, submarines and intercontinental ballistic missiles that make up the triad. Where that point might be, however, is a matter of intense debate.”  (6/25/13)
New York Times: A Modest Nuclear Agenda
“President Obama’s latest nuclear weapons proposals, announced last week in Berlin, were a disappointing example of what happens when soaring vision collides with the reality of obstructive Republican senators, a recalcitrant Russia and a convergence of regional crises… Mr. Obama’s main proposal was an offer to seek to reduce deployed strategic weapons by about one-third beyond the New Start level of 1,550 warheads, to about 1,000 warheads. He also said he would seek ‘bold reductions’ in America’s 500 short-range nuclear weapons, which are said to be safely guarded, and Russia’s 2,000 or more short-range weapons, which may be vulnerable to theft. The key is the word seek. Mr. Obama wants to negotiate reductions with Russia, a standard way of doing business. But this could give Russia a veto over American force levels, given that President Vladimir Putin has refused to talk until the two sides resolve differences about the United States missile defense program.”  (6/22/13)
“With the Pentagon budget in decline, amputating a leg of the triad would surely save money. But the dollars are tough to nail down, and spread among hundreds of U.S. government accounts. Figuring out precisely how much might be saved is challenging: triad boosters tend to minimize the cost ($10 billion annually to operate!), while those eager to jettison nuclear weapons tend to maximize them (more like $56 billion when you include the cost of replacing the aging systems used to actually deliver them!). It’s a safe bet the truth is somewhere in-between.”  (6/21/13)
Congressional Research Service: Pakistan: U.S. Foreign Assistance (7/1/13)
Department of Defense: Performance of the Defense Acquisition System (6/28/13)
Congressional Research Service: Egypt: Background and U.S. Relations (6/27/13)