Thursday, February 14, 2013

2/14/13 RD Bulletin: Budget Request to Come Piecemeal; Dates Remain Tentative

 
Highlights
 
News: The Pentagon is expected to release its topline budget request amount on March 25 with additional portions of the budget being released in April.  However, this tentative release date could be further delayed if Congress takes no action to negate sequestration. 
 
Reports: The Center for International Policy’s William Hartung has published a new report entitled Minimum Returns: The Economic Impact of Pentagon Spending, which provides a detailed critique of industry-backed reports on the economic and employment impacts of Pentagon spending.
 
PDA Perspective: Reducing strategic nuclear weapons and the complexity of their force structure are among the better ways to reduce the cost of America’s armed forces, and the Obama administration appears ready to take another step in reducing the number deployed nuclear weapons.
 


State of Play
 
With less than a month until sequestration occurs, there is little substantive progress in Washington on addressing the forthcoming automatic cuts to the military.  Republicans remain resigned to allowing the cuts to occur, while Senate Democrats today unveiled legislation that would replace the sequester in ways that are anathema to Republicans.  Increasingly, members of Congress believe that sequestration will take effect at the beginning of next month, and then nullified within a few weeks when the current Continuing Resolution (CR) expires necessitating the passage of a second CR.  Senior House Republican Rep. Kevin Brady (R-TX) told Roll Call that “The best time to redesign the automatic spending cuts will come with the [expiration of the] continuing resolution on March 27. The cuts will occur on March 1. Then there will be a fight in the CR over the design.”  Also on March 27, a second ‘penalty’ sequester will occur in order to bring national security spending down to the level authorized by the Budget Control Act.  However, it is widely expected that Congress will negate or delay both sequesters in the second six-month CR, which will likely receive Floor consideration before the end of March. 
 
Meanwhile, senior Pentagon officials and service leaders continue to appear before Congressional committees outlining the current steps their services are taking to address funding shortfalls as well as the steps that the services will take if sequestration occurs.  These measures include deferring ship maintenance, cutting flying hours, furloughing civilian employees, and cutting temporary employees.  The latest warnings from the service chiefs include not deploying the USS Truman aircraft carrier to the Persian Gulf, delaying the refueling of the USS Abraham Lincoln carrier, and withholding the deployment of Marine Corps units to the Pacific.  And budget pressures may force the Marine Corps to delay development of the new Joint Light Tactical Vehicle while the Air Force may be forced to cut two SBIRS satellites that the service had intended to purchase in FY13.  According to Inside Defense, under sequestration, the Air Force would have to cut two F-35 purchases in FY13 and renegotiate a contract to recapitalize the C-5 cargo fleet. 
 
Despite heated rhetoric, the military leaders’ pleas seem to be having little effect in moving Congress toward a permanent solution to the budget crisis.  In fact, some believe the rhetoric has gone too far, with House Armed Services Committee member and staunch defense hawk Rep. Duncan Hunter (R-CA) accusing the Pentagon of “adding drama” to Congressional deliberations and failing to cut programs whose time has come and gone.  “The Department of Defense and the military services are operating multiple programs and undertaking initiatives that are inconsistent with priories or core functions, experiencing cost overruns and performing inefficiently,” Duncan wrote in a letter to deputy defense secretary Ashton Carter. 
 
As a result of pending sequestration cuts combined with general budget uncertainty, the White House will be releasing portions of its defense budget in stages tentatively beginning on March 25, reports Defense News. The intelligence request will be submitted on April 8 and the technology funding request on April 12.  A date has not yet been set for submission of the war funding budget request, because that account could be cut if sequestration takes effect.  Theoretically, the administration will pad its OCO funding request if it believes no action will be taken to avoid the automatic cuts.  All of the dates outlined above could change depending on how Congress addresses sequestration as well as appropriations for the remainder of Fiscal Year 2013.  In fact, the Office of Management and Budget has still not directed the Pentagon to incorporate sequestration into its FY14 request, and doing so would delay the budget by another couple of months.  
 
In recent analysis, Franklin “Chuck” Spinney, a former Pentagon analyst, predicts that the first four years of the Pentagon’s FY14 budget request will be $140-160 billion less than the first four years of the FY13 budget, which was submitted last year.  If sequestration takes effect, Spinney asserts that the first four years of the new budget will be approximately $360 billion less than the first four years of the FY13 budget request.  Spinney further believes that the reductions outlined in the forthcoming FY14 budget submission will “cause the Air Force to cutback 286 aircraft from a total aircraft inventory of about 5,500 aircraft and the Navy to reduce the increase in the growth of its battle fleet from the current level of 287 to 313 to a reduced goal of 306.” 
 
As previously reported, the Pentagon is operating under a CR which maintains FY12 funding levels.  Because the department has been spending on operations and maintenance at the levels requested in its FY13 budget, it currently faces an $11 billion shortfall in funding.  This shortfall will only be further exacerbated if Congress enacts a second six-month CR.  However, CQ Roll Call reports that House Republicans are drafting a new CR that includes both a full year Defense and Military Construction appropriations bill – which would allay the department’s funding shortfall concerns. 
 
The Center for International Policy’s William Hartung has published a detailed critique of industry-backed reports on the economic and employment impacts of Pentagon spending.  Key findings are that claims by the Aerospace Industries Association of 1 million jobs displaced due to sequester level cuts are exaggerated by a factor of two to three; that major contractors have a substantial financial cushion that will shield them from any initial reductions in Pentagon contracting; and that Pentagon contracts are far more concentrated than industry analyses assert, with over one-third of prime contracts going to just three states (Virginia, California and Texas).  “If evenly distributed across all states, even a 10 percent reduction in Pentagon spending would have only a direct impact on one-fifth of 1 percent of the economic activity in these areas,” writes Hartung.  His analysis also points out that the Pentagon has more than $100 billion in obligated funds that can be spent over the coming years.    
 
During President Obama’s State of the Union address this week, he again called on Congress to prevent sequestration through a balanced mix of revenue increases and spending cuts while specifically rebuffing the idea of preventing the military cuts but allowing domestic reductions to go through, “Now, some in this Congress have proposed preventing only the defense cuts by making even bigger cuts to things like education and job training; Medicare and Social Security benefits. That idea is even worse.” 
 
Obama also committed to withdrawing half of the current number of U.S. troops stationed in Afghanistan by next year.  This announcement follows the publication of a recent GAO report which questioned the ability of the Afghan government to fully fund its security forces over the next five years.  The Afghan National Security Forces (ANSF) is expected to require $25 billion in annual funding to equip and maintain the force over the next half decade.  The GAO report also admonished the Pentagon for failing to adequately estimate the long-term funding needs of the ANSF. 
 
During the State of the Union, the President also pledged to work with Russia to bilaterally reduce both countries’ stockpiles of nuclear weapons.  Earlier in the week, the Center for Public Integrity reported that the While House and Pentagon have decided that it is safe to reduce deployed strategic nuclear weapons by about one third below New START treaty levels.  According to McClatchy, Vice-President Joseph Biden met with Russian officials on February 2, 2013, to negotiate an addendum to the 2010 New START treaty to stipulate additional bilateral reductions. 
 
Politico reports that House Republican leadership will refrain from passing any legislation that addresses federal revenues until after the sequester fight has been resolved.  Because the Constitution requires that tax-authorizing legislation must originate in the House of Representatives, this action would prevent the Senate from passing revenue-increasing legislation that could be considered by the House and ultimately replace the sequester. 
 
The Stimson Center’s Russell Rumbaugh recently published an op-ed in the New York Times calling for a surtax to fund overseas contingency operations.  Rumbaugh’s proposal would require that any military funding above the statutory spending limit would require a special surtax.  Indeed, Congress is currently appropriating funding for the Pentagon above the statutory spending caps enshrined in law by the Budget Control Act.  Rumbaugh joins a growing chorus of defense experts, including the Project on Defense Alternatives’ own Charles Knight, calling for a special war tax to fund contingency operations.
 
Classified studies obtained by the Associated Press reveal that the missile shield intended for Europe and originally designed to protect the United States from Iranian nukes may be “diplomatically or technically untenable.” The multi-billion-dollar initiative has faced resistance from Russia, initially a proponent, because of a recommendation that interceptor missiles be relocated to ships in the North Sea. The shield has also faced criticism from both sides of the aisle; Democrats criticizing its cost and Republicans its efficacy in current form.
 
 
Polling
 
In a new survey of its national security insiders, National Journal found that 78 percent of respondents believe sequestration will take effect next month as scheduled.  One insider explained that “If Republicans cannot get a new deal involving entitlement cuts but no added tax revenue, they prefer accepting sequestration cuts to defense programs as the price of getting some cuts to civil programs. If Democrats cannot get a deal involving more tax revenue but without entitlement cuts, they prefer accepting sequestration cuts to civil programs as the price of getting some defense cuts.”  Only 22 percent of insiders queried believe that Congress will strike a deal to avoid the automatic cuts, with one insider saying, “In fine D.C. tradition, we will stumble forward until the moment of disaster and come forward with a suboptimal compromise.”   
 
Despite the fact that Washington is seemingly obsessed with the automatic cuts known as sequestration, a new poll conducted by The Hill found that only 36 percent of voters know what the term “sequestration” refers to.  This poll was conducted among 1,000 likely voters on February 7, 2013.
 
 
 
Project on Defense Alternatives Perspective
 
As reported by R. Jeffrey Smith of the Center for Public Integrity, President Obama will soon sign a new strategic nuclear directive which reduces the number of enemy target points.  This in turn will allow for a reduction of about 500 warheads from the deployed strategic forces. 
 
The New START treaty limits deployed warheads to 1,550 by the year 2018.   Having decided that U.S. national security does not require 1,550 deployed weapons and that closer to 1,000 will be adequate, it appears that the Obama administration will seek agreement with Russia for both countries to simultaneously reduce their deployed arsenals to the lower number.  This may not involve a treaty, but rather rely on an informal understanding (reports Smith), verified by national intelligence means.
 
A motivating factor for both the U.S. and Russia at this point is the cost of maintaining large arsenals of nuclear weapons.  Cutting its deployed strategic forces by one-third would save the U.S. tens of billions of dollars over the next ten years.
 
While the Reasonable Defense proposal from PDA calls for a somewhat larger reduction in deployed weapons, the 500 weapon reduction implied in the new directive is a significant step in the right direction.
 
So far there is no information from the administration about the structure of a smaller nuclear force.  That configuration will determine how big the savings will be.  One of the most costly procurement items in the next decade are the twelve strategic missile submarines that must be built to replace the fourteen aging ones in the present fleet.  Smith reports that the Navy could “cut at least two of the 12 new strategic submarines it now plans to build.”  PDA recommends the Navy trim five missile subs from its plans.
 
As the deployed force gets smaller it makes sense to reduce the complexity of the force structure.  There is nothing magic about the triad created at the height of the Cold War.  PDA has argued for moving to a dyad made up of submarines and land-based ICBMs.  Ending the strategic nuclear role of bombers would reduce the requirement for (and the cost of) the new bomber currently in development and also allow the remaining bomber fleet to more effectively focus on a conventional role.  Others, such as Global Zero, have recommended retiring the ICBM leg of the triad.
 
Either way, reducing strategic nuclear weapons and the complexity of their force structure are among the most practical ways to reduce the cost of America’s armed forces.
 

 
News and Commentary
 
The Will and the Wallet: Waste Is in the Eye of the Beholder – Matthew Leatherman
“We’re all against cutting waste.  Respondents to the defense spending survey we ran last spring, together with the Program for Public Consultation and Center for Public Integrity, made that point more clearly than any other.  Over 80 percent of them, both as a group and when separated out by party, were convinced by an argument that began, ‘There is a lot of waste in the national defense budget.’ The problem comes in trying to label exactly what spending is wasteful.  Nowhere is the axiom about one person’s trash being another’s treasure truer than in the defense budget.  Each line is there because someone defends it.  The implication is that ‘waste’ often is a euphemism for ‘someone else’s priority.’”  (2/14/13)
 
Government Executive: Striking a New Deal for Defense – Carl Conetta and Charles Knight
“Whether or not the sequester goes into effect -- or lasts only a couple of months -- the Pentagon's budget is surely coming down another notch or two. It would be wise to prepare for a 2014 budget that is $10 billion to $30 billion lower than those of the past few years. After that, defense spending will probably continue to trend downward for a while. That's simply the reality of the current economic and strategic circumstance. It's time for defense leaders to plan accordingly.”  (2/13/13)
 
ThinkProgress: The United States Should Reduce Its Nuclear Arsenal – Lawrence Korb
“In his State of the Union address last night, President Barack Obama referred to the need to reduce the force structure of our strategic military systems by cutting the number of deployed nuclear weapons. Press reports over the last year have indicated that military and civilian leaders have settled on a plan to reduce the number of deployed nuclear weapons by one-third, to between 1,000 and 1,100, down from 1,700. President Obama should push for such a reduction, which would follow the practice of his predecessors and improve our national security. As the Center for American Progress has argued for the last decade, this move makes sense both strategically and fiscally, and is long overdue.”  (2/13/13)
 
“In trying to show how they would cope with these automatic cuts, the three military branches have, perhaps unwittingly, exposed what Sen. John McCain (R-AZ) calls a ‘culture of inefficiency’ at the Pentagon. Detailed ‘guidance documents’ released by the branches call for curtailing spending on things that aren’t ‘mission essential.’ As it turns out, the list of non-mission essential items in the half-trillion-dollar Pentagon budget is quite extensive. Examples include Blue Angels airshows and flyovers at sporting events — which cost hundreds of thousands of dollars. The Navy’s participation in Fleet Weeks, festivals, and conferences, which can each cost millions of dollars, are on the chopping block too.”  (2/13/13)
 
“Though smaller defense budgets are now as certain as death and taxes, the real question is ‘just how bad is it going to be?’ According to Clark Murdock, who spoke at a recent panel hosted at CSIS, fewer dollars is only half the issue. The more significant, though less discussed, problem is how "weak" defense dollars have become due to internal cost growth. This ‘double whammy’ of fewer and weaker dollars will make cuts feel twice as bad as they look on paper. Current Operations and Maintenance (O&M) costs are projected to consume 80 percent of the budget by 2021, and the entire budget by 2039. Even though total force size increased only 3 percent over the last decade, personnel costs increased 90 percent. These projections are clearly unsustainable, but since the Defense Department can't do without people or operations, what should it do?”  (2/13/13)
 
“Making Pentagon spending share the pain equally with other federal functions would seem a common-sense mechanism since defense consumes nearly 60 percent of the discretionary budget. For all its faults, sequestration was designed to keep everything on the table, including Pentagon spending. Every serious budgetary reform proposal of the past few years, including the Simpson-Bowles and Domenici-Rivlin proposals, would make defense shoulder at least half of any discretionary spending reductions.”  (2/12/13)
 
“America’s latest stealth fighter just got heavier, slower and more sluggish. For the second time in a year, the Pentagon has eased the performance requirements of the F-35 Joint Strike Fighter (JSF). The reduced specs — including a slower acceleration and turning rate — lower the bar for the troubled trillion-dollar JSF program, allowing it to proceed toward full-rate production despite ongoing problems with the plane’s complex design. Under the old specs, the stealth fighter, due to enter service in 2018 or 2019, probably wouldn’t pass its Pentagon-mandated final exams.”  (2/11/13)
 
Huffington Post: Budget for MOX Program Cut by 75 Percent– Danielle Brian
“The beleaguered Mixed Oxide Fuel (MOX) program at the Savannah River Site was targeted for possible cancellation last fall, but ongoing discussions resulted in a recent lifeline offered by a top Department of Energy official, which appears to have been accepted by the White House. Under a plan brokered by Deputy Secretary of Energy Daniel Poneman, the MOX facility would see its funding cut by 75 percent -- rather than being eliminated entirely -- according to sources who have seen parts of the recently released White House Office of Management and Budget ‘Passback’ budget document being circulated on Capitol Hill. The Department of Defense, the State Department, and the DOE had tentatively agreed to zero-out the program, which is designed to convert weapons-grade plutonium into mixed-oxide fuel for U.S. commercial nuclear reactors. The MOX program is 300 percent over budget, a decade behind schedule, and has sparked zero interest from potential customers.”  (2/11/13)
 
TIME Battleland: A Reckoning for The Army ­– Douglas Macgregor
“In a recent essay entitled The Force of Tomorrow, General Ray Odierno, the Army chief of staff, describes a globally engaged Army, an Army that promises all things to all people inside the Beltway, an Army that if reduced in numbers will be unable to flood the battlespace with masses of ground troops and, hence, win or deter conflict. The piece, posted earlier this week on Foreign Policy’s website, is more than simply a plea for no further cuts in the Army’s strength. It’s the Army’s prescription for what Odierno calls ‘precision results’ in future conflict. It’s also a statement of belief from the chief of staff that what the nation, and its Army, need is more of the same, an unchanging military doctrine, along with an institutional culture and organization for combat. It equates capability with mass and athleticism inside an Army that responds to action from the Tet Offensive to Anbar province with requests for more troops, more money, more air strikes and more time.”   (2/8/13)
 
“How big would the U.S. defense budget be if sequestration happens? Turns out, despite the sometimes-apocalyptic rhetoric, big. And how would the post-Afghanistan defense budget draw down compare to slowdowns in Pentagon spending that occurred after the Korean, Vietnam and Cold wars? Turns out, it would be smaller… Under sequestration, annual Pentagon spending would drop 31 percent from its 2010 peak to its sequester-era low. That compares to a 33 percent decline after Vietnam, and a 36 percent post-Cold War drop. And after the Korean war, yearly Defense Department budgets fell off by 43 percent.”  (2/8/13)
 
 
Reports
 
 
 
Government Accountability Office: Standard Missile-3 Block IIB Analysis of Alternatives (2/11/13)
 
 
 
 
Government Accountability Office: Afghanistan: Key Oversight Issues (2/11/13)
 
 
 
 
 
Center for International Policy: Minimum Returns: The Economic Impacts of Pentagon Spending (February, 2013)
 
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