Thursday, July 18, 2013

7/18/13 RD Bulletin: Sequester's Effects on FY15 Budget Request Beginning to Emerge



Highlights

News: Although the Pentagon has not released the results of the Strategic Choices and Management Review, a few recommendations are beginning to emerge: Chuck Hagel has ordered a twenty percent reduction in senior DoD staff, and an ambitious proposal by the Air Force to upgrade its Space Fence may be terminated.

 PDA Perspective: For nearly two decades, the country has pursued a strategy of global preponderance of power --- possible only for a rich and strategically blessed nation.  Now circumstances have changed and the United States needs a broad national discussion of how to achieve a carefully tailored mix of strategic responses to present and emerging military challenges.
 

State of Play

Though the Pentagon is keeping the results of its Strategic Choices and Management Review confidential for the time being, a few recommendations from the recently completed review are beginning to emerge.  The review, which was initiated this past March by Secretary of Defense Chuck Hagel, was originally intended to examine the administration’s 2012 Defense Guidance in light of sequestration.  However, now it appears that the review is intended to inform budget decisions from Fiscal Year 2015 onward.  In fact, just this week, Inside Defense reported that the Office of the Secretary of Defense has issued new budget guidance “providing high-level instructions that will give shape to the Pentagon’s first budget proposal which accounts for the impact of spending cuts required by sequestration.”  The Pentagon has for quite some time now insisted that it would not begin incorporating sequestration into its budget guidance until the FY15 budget process.

So, just this week, Secretary Hagel announced one of the first recommendations to come out of the Strategic Choices and Management Review – a twenty percent reduction in senior staff.  This proposal is estimated to save the Pentagon around $1.5 billion and will be carried out from Fiscal Years 2015-2019.  However, former assistant secretary of defense Lawrence Korb says he’s skeptical that the Pentagon will follow through on Hagel’s recent order: “It’s one thing to announce this, but another thing entirely to make sure it happens… Gates said he would cut the number of generals and admirals, but when he left there were more.”  Ultimately, between 3,000 and 5,000 staff positions could be cut.

Another detail that has leaked from the Strategic Choices and Management Review is the possible termination of upgrades to the Air Force’s ‘Space Fence,’ which tracks orbital objects passing through space.  The Air Force was ready to award a contract, but it has been put on hold while the Pentagon determines whether the upgrade will be cancelled as part of the strategic review.
 
Executive

Since sequestration began this spring, one of the Pentagon’s sternest warnings about the effects of the spending cuts was that Air Force training and flying hours would be cut by one third due to a multi-billion dollar shortfall in operations and maintenance (O&M) funding.  Subsequently, the Pentagon submitted to Congress a $7.5 billion reprogramming request that diverted funding from low-priority modernization and procurement programs to O&M accounts.  This has now allowed the Air Force to restore approximately $208 million in funding for flying hours thus negating one of the Pentagon’s most compelling overtures for nullifying the sequester.  This temporary O&M funding patch should last until the end of the fiscal year in September.

Commenting on the  Air Force’s restoration of flying hours, Stephen Miles from the advocacy organization Win Without War, tells Reset Defense, “As we've seen time and time again, what the Pentagon once told us would be doomsday has disappeared. The reality is, was, and always has been that the Pentagon has ample waste in its budget to make cuts of the magnitude of the sequester without some of the painful cuts they chose to make for political grandstanding. The ability of the Air Force to get its jets flying again is just the latest example of the reality that the Pentagon, if forced to, can make significant savings while still keeping America safe.”  Still, Senator John McCain seemed distraught by the reprograming request (which he had previously pledged to block), saying, “the Air Force is cutting hundreds of millions of dollars from important programs so that it can continue to fund the minimum acceptable amount of training for combat squadrons.”

In addition to restoring flying hours, the recent reprogramming request has allowed the Pentagon’s two air demonstration squads, the Blue Angels and Thunderbirds, to resume training in anticipation of resuming air show flyovers next year despite the fact that the Pentagon must again cut more than $50 billion from previously planned spending levels.
 
 

Editor's Picks

Legislative

Upon assuming control of the House of Representatives in 2011, Republicans pledged to consider appropriations bills under an ‘open-rule process,’ in which members could offer amendments to spending bills without preapproval from the Rules Committee.  However, for the first time, House Republicans have decided to consider the annual defense spending bill under a ‘structured’ rule, which allows the Rules Committee to block amendments before they are considered on the House Floor.  House Republicans had been expected to bring the bill to the Floor this week; however, it now appears more likely to come up for consideration next week.

The legislation would provide $512.5 billion for the Pentagon’s base budget (excluding military construction, mandatory spending, and other national security funding) as well as $85.8 billion in war funding.  As a result, the bill’s topline amount is roughly $51 billion above the amount that sequestration allows.  Furthermore, the war funding figure is roughly $5 billion above what the Pentagon has requested for Fiscal Year 2014.

With the House soon completing consideration of both the National Defense Authorization Act as well as its annual military spending bill, attention now turns to the Senate, in which neither bill has come to the Floor for consideration.  The Chair of the Senate Armed Services Committee recently told reporters that he’s hopeful the Senate could consider the NDAA before the August recess.  Though, if history is any guide, the Senate will likely consider the bill sometime this fall. 

Last week, the House completed consideration of the annual nuclear energy spending bill.  During Floor consideration of the measure, Rep. Mike Turner (R-OH) offered an amendment which was adopted that would prohibit any funding in the bill from being made available for additional nuclear weapons reductions unless the Senate first approves such a move.  This follows a recent announcement by President Barack Obama in which he committed to additional nuclear weapons reductions.  Turner and several other Republicans have submitted to the Rules Committee amendments to the defense spending bill that also would block the President from enacting additional nuclear weapons reductions.
   
Weapons

For Fiscal Year 2014, the Air Force has requested nearly $400 million to continue advanced development of the new long-range strike bomber, which is intended to replace the Air Force’s aging B-2s and B-52s sometime in the 2020s.  The service has labeled this nascent program as one of its top budget priorities in the post-sequester budget landscape.  Yet, the Air Force is also moving forward with a $313 million plan to upgrade its fleet of B-52s with new technological improvements.  While these upgrades will not extend the life of the B-52 fleet, the planes can remain operational well into the 2040s – almost 20 years after the new long-range strike bomber comes into service.  This may cause some to wonder whether the Air Force is hedging against the uncertain future of its new bomber program similar to the way that the Air Force has maintained the U-2 Dragonlady fleet as a hedge against the Global Hawk Block 30 or the way the Marine Corps’ Harrier jump jet is serving as a hedge against the troubled F-35B Lightning II.

Speaking of the F-35, production is expected to ramp up significantly next year.  In Fiscal Year 2014, the Pentagon has requested 29 aircraft, yet this figure will climb to 42 in Fiscal Year 2015.  Despite the fact that a recent GAO report indicated the military’s unease with the $1 trillion cost of maintaining the F-35 over its entire lifecycle, Rep. C.W. Bill Young (R-FL), the head of the House defense spending subcommittee, indicated this week that he will attempt to provide more than $500 million in advanced procurement funding for the F-35.

The Pentagon seems to be moving full-speed ahead with the F-35 program despite the onset of sequestration.  Speaking to Bloomberg’s Tony Capaccio earlier this week, acquisition chief Frank Kendall announced that the Pentagon will attempt to protect the program from any sequester cuts in Fiscal Year 2015.  “The F-35 is a very high priority… Could we protect it completely? I’m not sure. We have to look at all the trade-offs,” Kendall told Capaccio.

While the department may reprogram funds next year in order to protect the behemoth program, its fate this year is still being determined.  The Pentagon has previously announced that it would have to cut five F-35s in Fiscal Year 2013 in order to comply with sequestration.  And it appears that the Pentagon has chosen not to use prior-year obligated funding to protect the F-35. 

The Project on Government Oversight’s Winlsow Wheeler, after crunching official Pentagon funding figures, has determined that more than five aircraft may be cut from the FY13 buy.  According to Wheeler, “The number produced in 2013 may be closer to 20, and with no one in Congress raising a finger to undo the second sequester in 2014, we can probably expect a similar result next year.  Then, the plan to get to 42 in 2015 becomes a real stretch.”
 

Project on Defense Alternatives Perspective

Just below the surface of any discussion or debate about the military budget is the question: Why we invest so much wealth in military instruments?  This leads us to another question: What purposes is our incomparable store of military power supposed to serve and how does it figure in a national security strategy?

The United States is slowly climbing out of the most severe financial and fiscal crisis in eighty years.  Together with the prospective end to the Afghan war the continuing fiscal constraints constitute a significant change in the strategic circumstances for the U.S.   It follows that our democracy should be having a wide and deep discussion of strategic options.   Instead, the discussion of national security strategy remains narrow and truncated, even among policy makers.  Both the White House and Congressional leaders routinely make general pronouncements on goals, interests, and threats.  But when it comes to taking the lead on devising or revising national security strategy, civilian leaders cede nearly all the effective power to the Pentagon.

There are always several strategic paths to any goal -- especially one as broad as national security.  Some are much more expensive than others.  When money is tight there should be vigorous debate about alternative strategic paths.  However, the way things work in Washington is that the Pentagon writes the strategy and declares “It is a strategy that has to have this budget to support it,” as JCS Chairman Martin Dempsey testified before Congress regarding the 2012 Defense Guidance.  Subsequent Congressional action on the budget is largely narrowed to concerns about individual weapons procurement, personnel benefits, and military base expansion or closure.  Yes, sequestration can squeeze the budget, but this reflects a political impasse, not a durable strategic consensus.  Meanwhile, important deliberations about national defense are not happening outside the Pentagon walls and certainly not outside the beltway.

Recently, Robert Worley, Senior Fellow at John Hopkins Center for Advanced Governmental Studies, addressed how much U.S. military force is enough.  In positing an answer to this question, he wrote:

“One answer is just enough to defend the state against aggression -- defensive power. Another answer is enough to defend the state plus enough to tip the scales abroad, possibly in concert with a coalition of those who share our interests -- balancing power. And a third answer is enough power to defend the state plus enough to dominate in any conflict in the world and against any coalition that might form in opposition -- preponderant power. Preponderance is clearly the most expensive answer to the ‘how much is enough’ question. The preferred force posture follows from a preferred theory, but neither is publicly debated.”

Preponderant power is what the U.S. has pursued since the mid-1990s.  But there are numerous alternatives -- combinations of defensive, balancing, preponderant, co-operative, and collective approaches -- that the U.S. could pursue in the coming years.  They can be tailored to differing regional challenges and opportunities.  Given the nation's fiscal and economic woes, themselves matters of great strategic concern, we need to debate the available options fully and openly.  We need a debate that doesn't end when the Chairman of the Joint Chiefs weighs in with the Pentagon’s preference.
 
Charles Knight is a co-founder of the Project on Defense Alternatives and a senior fellow at the Center for International Policy.

 

News and Commentary

Stars and Stripes: Contractors were paid millions but Afghan school remains dangerous, unfinished - Heath Druzin
“A $3.4 million teachers' school in northern Afghanistan remains unfinished and dangerous to its occupants four years after construction began, and the contractor faced no penalties for failing to complete the project, according to a report from the Special Inspector General for Afghanistan Reconstruction. ‘More than 4 years after construction began, the Sheberghan teacher training facility remains incomplete,’ the report says. ‘Its history is one of broken promises and undelivered results.’ The report is just the latest in a flurry from the inspector general highlighting waste and questionable spending on U.S.-funded projects worth hundreds of millions of dollars.”  (7/18/13) 
 
  Marketplace: Why wasteful spending and war seem to go hand in hand – Kate Davidson
We’ve spent about a $200 billion on wartime contracts for security, reconstruction, and other projects in Iraq and Afghanistan. A lot of it has been flat-out lost to waste or fraud. Wartime contracting reform is the subject of testimony in the Senate today. But war and wasteful spending have long gone hand in hand. It’s kind of a tale as old as time. ‘I suspect in the battle against the Barbarians, the Roman government probably investigated spear manufacturers,’ says Gordon Adams, a professor of international relations at the School of International Service at American University. ‘The reality is that when you’re in a wartime contracting situation, you’re spending money very fast... The purpose is the mission, not the audit.’”  (7/16/13)
 
  Center for Public Integrity: The huge drone that could not be grounded – Richard Sia
“Canceling the purchase of new Global Hawks and putting recently-built planes in long-term storage would save $2.5 billion over five years, the [Air Force] projected. And the drone’s military missions could be picked up by an Air Force stalwart, the U-2 spy plane, which had room for more sensors and could fly higher. But what happened next was an object lesson in the power of a defense contractor to trump the Pentagon’s own attempts to set the nation’s military spending priorities amid a tough fiscal climate. A team of Northrop lobbyists, packed with former congressional staff and bolstered by hundreds of thousands of dollars in campaign contributions, persuaded Congress to demand the drone’s continued production and operation.” (7/16/13)
 
  Defense One: The Next QDR Is the Last Chance for Sanity – Shawn Brimley
“The next nine months will be the most important period for United States defense strategy since the end of the Cold War. The highly anticipated Quadrennial Defense Review and, perhaps more importantly, the congressionally mandated National Defense Panel that is tasked to assess the QDR, offer the last chance to truly reshape the U.S. military for the future. If hard choices are not made between now and the QDR’s release in February 2014, it will become exponentially more difficult to prevent an erosion of American military power.”  (7/15/13) 
 
  TIME: Cooked Books Tell Tall Tales – Winslow Wheeler
The Pentagon’s budget has increased, over time, much more than the Defense Department tells Congress, and the public. The vast majority of people in Washington who consider themselves experts on the defense budget also have little idea just how large the increases have been. Using standard, generally-accepted economic measures to keep the value of dollars spent over time on an equal footing. But except for the final three years of George W. Bush’s presidency, President Obama’s pending military-budget request is larger than any other president’s defense budget, in war or peace, since the death of Franklin Roosevelt in April 1945. If one were to cut the $612 billion defense budget Obama requested for 2014 by an additional $52 billion — the amount mandated by the Budget Control Act of 2011 and its widely dreaded “sequestration” — Pentagon spending would be hundreds of billions of dollars above what we spent, on average, during the Cold War, when we had much more dangerous enemies to worry about. It would even surpass by more than $100 billion the average annual amount President Reagan spent on defense.”  (7/15/13) 
 
  Defense News: DoD's Budget Straitjacket
“Sequestration — or the cuts it is driving — is here to stay because of political gridlock; and the end of two wars and the open spigot of defense spending means the Pentagon cannot escape cuts. Allowing such dumb cuts to undermine military capabilities, though, is a grave mistake. Giving the Pentagon hard budget targets and the flexibility and authority to make thoughtful cuts must become a priority. If the White House and lawmakers fail to lead, then it’s up to the senior military officers to craft and widely market honest recommendations that deliver maximum capability for available resources, including targeted personnel reforms.”  (7/14/13) 
 
  Foreign Policy: Letter of Resignation: Why won't Chuck Hagel use sequestration to strengthen the military? – Gordon Adams
“Secretary Hagel has finally answered the mail, addressing the impact that a $52 billion sequester cut would have on the defense budget the president requested for Fiscal Year 2014. His July 10 letter -- which responds to a request from Senators Carl Levin and James Inhofe, the chair and ranking member of the Armed Services Committee -- is full of bad news and seriously misses an opportunity to start some real planning for a defense drawdown that is underway, with or without sequestration.” (7/11/13)
 
  Huffington Post: Sizing U.S. Military Forces: How Much Is Enough? – D. Robert Worley
“In spite of the post-Cold War drawdowns, the U.S. still holds a preponderance of power. Today's base Defense budget in constant dollars is larger than budgets dating back to the beginning of the Cold War. U.S. Defense expenditures exceed the combined expenditures of the next dozen or more countries, including China. Without vision and strong management from Secretary Hagel, budget reductions will be shared equally across the four services and across weapon acquisition programs. As with past reductions, insiders are calling for reductions in the bloated Pentagon staffs and inefficiencies squeezed out of the byzantine weapon acquisition process. Not bad ideas, but they don't answer the question. The question remains, how much is enough: defensive, balancing, or preponderant power?”  (7/9/13) 
 
  Cato At Liberty: The Smart Way to Cut Pentagon Spending – Christopher Preble
“The main reason why defense procurement reform is a perennial loser is because getting the biggest bang for the buck isn’t the primary concern for many people here in Washington. Military spending has always been treated as a jobs program, even though it isn’t a very efficient one. If the goal is to maximize employment in a particular weapons program, or at a given military facility, then we shouldn’t expect well-intended, reasonable proposals for increasing efficiency to ever become law. Put another way, unless we confront the mindset that treats military spending as different from other forms of federal spending–a bipartisan affliction, but one that is especially prevalent among Republican politicians and their overpaid consultants–then we are unlikely to ever see major changes in how the Pentagon does business. And that means that Americans will continue to spend more than we have to in order to keep the nation safe and secure.”  (7/8/13)


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