Charles Knight. Project on Defense Alternatives Briefing Memo #51, 25 October 2011.
http://www.comw.org/pda/fulltext/1110bm51.pdf

Excerpt:

…modest changes to U.S. military strategy and global posture implemented over the next ten years can reliably offer deficit-reducing savings from the Pentagon budget ranging from $73 billion a year to $118 billion a year.

To achieve the savings only requires the application of different means to attaining strategic goals. That is precisely what any good strategy does when conditions change.

Ethan Pollack, The Economic Policy Institute Blog, 20 September 2011. http://www.epi.org/blog/militaristic-foreign-policy-saves-money/

One of the persistent criticisms of President Obama’s fiscal plan is that it counts war spending reductions as savings. Basically, the Congressional Budget Office calculates its defense baseline in part by taking the most recent war supplemental (technically called Overseas Contingency Operations, or OCO) and assuming that amount—adjusted for inflation—will be spent each year over the foreseeable horizon. This adds up to about $1.73 trillion over 10 years. The president’s proposal, however, includes only $653 billion in OCO spending over 10 years, for a savings of about $1.1 trillion.

Some critics, however, allege that these savings cannot be counted because the CBO OCO baseline itself isn’t realistic, therefore the savings are not “real.” For example, the Committee for a Responsible Federal Budget (CRFB) argues that counting these savings is a “budget gimmick” that the president uses to “inflate his savings.” According to this critique, another baseline for OCO expenditures should be used—either the president’s budget request or the CBO’s drawdown policy option—which would lower the baseline and make it practically impossible to generate budget savings from reducing war spending.

All due respect to CRFB and the other critics, but this criticism is silly. The CBO OCO baseline isn’t “unrealistic”—rather, it represents the costs of President Bush’s aggressive invasion-centered approach to foreign policy extended into perpetuity. President Obama is, thankfully, in the process of trying to change America’s approach to foreign policy, drawing down troops from Iraq and Afghanistan and moving toward a more multilateral, patient, diplomatic, and most importantly, less expensive approach. Furthermore, the fiscal plan proposes to cap OCO spending, thereby making sure those savings are realized.

President Obama’s foreign policy approach costs less money than President Bush’s, and the budget outlook should reflect those savings.

Editor’s Comment:

It must be a sign of just how bad things are for progressives that EPI now celebrates a big puff of smoke from the Obama administration sent to divert attention from real budget reductions and, in particular, to protect the Pentagon from further cuts in the fiscal battles. Ethan Pollack has worked for OMB, so he surely understands the accounting distortion built into the CBO baseline projections based on current law. Not one person in the world (including those at CBO who prepare the baseline) believes that OCO expenditures will continue to fund the wars in Iraq and Afghanistan at the same level as 2011. That’s why the CBO did a “draw down policy option” – to estimate likely OCO costs. That latter exercise is not “silly”, nor the suggestions that such estimates be the basis for considering budget reduction plans.

Mr. Pollack must also know that President Obama’s FY12 budget submission to Congress contains only $50 billion a year for OCO for future years. Which is it? $118 billion forever or $50 billion forever? You can’t have it both ways.

CBO’s draw down option is surely better for budget (and deficit
reduction) planning that either the unrealistic “placeholder” (which
is simply irresponsible budgeting) or the CBO baseline artifact of
$118 billion forever.

If President Obama wishes to announce a plan to save meaningful
amounts from OCO he would need to announce more rapid withdrawals from Afghanistan… but then no one really believes he is leaving
Afghanistan in 2014. So this is all smoke and mirrors…and progressives should feel terrible about it, not celebrate.

It is disingenuous to claim that the CBO’s baseline OCO is somehow a Bush responsibility. It is simply a methodological artifact of how CBO does its baseline.

President Obama has been in charge for nearly three years and has not brought all the troops home from Iraq and has hardly begun a draw down in Afghanistan. The current year OCO of $118 billion is his responsibility as is the phoney-ness of projecting it forward ten years and then claiming savings from spending “$653 billion…over ten years.” If he was really willing to end the war in Afghanistan soon he might be able to cut that OCO in half and offer $325 billion from reduced future war costs to deficit reduction.

And until this year’s budget imbroglio in Congress forced his hand he
has continued to feed the Pentagon with higher and higher base budgets every year. There is no evidence that President Obama’s “approach to foreign policy…[is] less expensive”… not as far as the largesse offered up to the Pentagon is concerned.

We must not base progressive policy on smoke and mirrors. Such
politics only hurts us in the long run.

Another critique of this budget gimmick can be found at: http://capitalgainsandgames.com/blog/gordon-adams/2369/how-about-those-defense-savings.

___________________________________________________________

editorial. Boston Globe, 30 June 2011.
http://articles.boston.com/2011-06-30/bostonglobe/29722652_1_panetta-pentagon-government-discretionary-spending

When Leon Panetta takes the helm at the Defense Department tomorrow, he will be facing difficult choices about the US military efforts in Afghanistan, Iraq, and Libya. But an equally pressing — and potentially even more intractable — problem is the Pentagon’s budget and spending. Outgoing secretary Robert Gates was good at paying lip service to the need to control spending; he noted recently that “the United States should spend as much as necessary on national defense, but not one penny more.’’ But the department’s baseline budget has risen every year since Gates took over — from $450 billion to more than $550 billion four years later. This year alone, the Pentagon is seeking a 3.4 percent increase from its 2010 budget.

It’s not just the wars; they represent less than 30 percent of the Pentagon’s enormous budget request. In the context of other government spending, the Pentagon is a behemoth. For every $100 of government discretionary spending, over $30 goes to non-war defense expenditures. The scope is overwhelming; the need for more than piecemeal cuts of failed systems is urgent.

Gates recently claimed that the Pentagon has already cut $300 billion, but the math suggests otherwise. That money came from programs already scheduled to be terminated. The savings were simply put into other military priorities. After noting that the Navy’s 11 carrier battle groups were excessive, Gates refused to eliminate a single one.

Panetta will need to take a more disciplined and systemic look at the budget. There is no shortage of advice from influential think tanks and independent studies, including last year’s report of the Sustainable Defense Task Force, a bipartisan group convened by Representative Barney Frank. Their recommendations would trim $960 billion between 2011 and 2020, if only the Pentagon would act on them.

Cutting the number of deployed nuclear weapons by half — to 1,000 warheads — is consistent with a reduced emphasis on nuclear warfare and the efforts of arms control advocates. This move alone would save over $100 billion over 10 years. Reducing conventional forces by 50,000, which would still leave 100,000 personnel deployed in Europe and Asia, is more realistic force structure. Cancelling just a few systems that are neither cost-effective nor essential would save more. The MV-22 Osprey and Expeditionary Fighting Vehicle are long on trouble, and short on capability. In addition, the Congressional Budget Office and the Government Accountability Office both have proposed changes to support efforts, such as maintenance, supply, and infrastructure, that could save $100 billion in the next decade.

All this could be accomplished without compromising national security. Panetta needs to push back on the political forces that claim any cuts make the nation vulnerable to various enemies. The deficit is a much greater security risk.

Unfortunately, the Pentagon remains the largest federal agency that simply cannot pass an independent auditor test; when subjected to the normal bookkeeping procedures, it cannot, with any accuracy, track spending, fraud, waste, or redundancy. It has given itself a September 2017 deadline for audit “readiness.’’ That’s not soon enough. Panetta, who, as the former head of the Office of Management and Budget, has a reputation as a rigorous fighter for fiscal discipline. He will need to get the Pentagon’s house in order on day one.

Jeff Jacoby. Boston Globe, 22 June 2011.
http://defensealt.org/HzhtEB

Excerpt:

…with great power come great responsibilities, and sometimes one of those responsibilities is to destroy monsters: to take down tyrants who victimize the innocent and flout the rules of civilization. If neighborhoods and cities need policing, it stands to reason the world does too. And just as local criminals thrive when cops look the other way, so do criminals on the world stage.

Our world needs a policeman. And whether most Americans like it or not, only their indispensable nation is fit for the job.

Editor’s Comment:

When three-quarters of Americans reject a role of global policeman for the U.S. perhaps they understand something fundamental about policing that Jeff Jacoby doesn’t. A police force without oversight by a judiciary and a guiding body of law is surely a formula for tyranny.

Jacoby would never endorse tyranny, but the avocation to be global policemen by White House occupants who are elected by and responsible to only 10% of the world’s people is a decision to be a vigilante on the global stage. Consider that Americans would be up in arms if China or Russia took it upon themselves to be global vigilantes.

For the leaders of the U.S. to so gladly to take up this role only serves to delay the day when we have capable international judicial and policing institutions. If our leaders attempt to think even a few years into the future it should be clear to them that the practice of vigilantism does not serve American interests.

[A version of this comment was published as a letter to the editor in the Boston Globe, 28 June 2011.]

Sandra Erwin. National Defense , 10 June 2011.
http://defensealt.org/HtE3zx

Excerpt:

Not only are there internal disagreements within the Pentagon and the Obama administration over what the military services will be doing in the future, but factions within Congress also will be pushing individual agendas. “In Congress, you have 535 individuals and every one of them thinks they’re in charge,” O’Keefe said. “If you don’t have some benchmark to work with to start the discussion,” the Pentagon will lose control over what gets cut in future budgets.

“If there is no strategic framework, that is what will happen: The process takes over,” said O’Keefe. Defense leaders should come up with a reasonable strategic framework as early as possible that they can sell to Congress, he said. “Absent that, it is going to be the programmers and bean counters driving the train to meet a number.”

A coherent message from the Defense Department is “missing right now,” said John J. Hamre, president of CSIS and former deputy defense secretary.

“What are we really trying to plan for, as a Defense Department, that is good for 20 years?” he asked. “Are we going to get the hell out of these wars and never fight them again? What are we preparing for?” he added. “That, I think, is the work for the next six months.”

There has to be a sense of urgency about articulating a plan for the future of the U.S. military, because increasingly the American public is losing patience with seemingly endless wars and gridlock over how to move forward, Hamre said

Pentagon’s Phantom Savings: $330B Claim Erodes as Programs Reappear
Marcus Weisgerber. Defense News, 16 May 2011.
http://rempost.blogspot.com/2011/05/pentagons-phantom-savings-330b-claim.html

Excerpt:

Nearly 40 percent of that sum [$330 billion] is going straight back into U.S. military programs that replicate the canceled ones, and it’s unclear where another 10 percent came from at all, according to a Defense News analysis and to several analysts.

…many of the military services’ capability requirements remained in place. More than $130 billion is back on the books, or will be soon, for follow-on or replacement programs. Of the programs canceled in 2010, at least five have already been relaunched, or are in the planning stages to begin again.

Editor’s Comment:

When President Obama addressed the nation about the Federal deficit on April 13th he said, “Over the last two years, Secretary Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again.” A number of us military budget analysts looked at each other and said, “Huh, did we miss something?” We hadn’t notice any significant cuts in Pentagon spending that could count toward reducing the Federal deficit. Where did the President get that big number?

Of course, we had taken notice when Defense Secretary Gates had announced $78 billion in budget cuts for the FY12 five year defense plan. We noted that the DoD budget would still continue to grow, that some of these cuts were fairly soft (dependent on assumptions about future inflation rates) and most savings would be generated in the out-years. (See: Pentagon Resists Deficit Reduction)

And we had noted that Secretary Gates had cancelled a number of programs in 2009. But we also noted that many of the cancelled programs were being replaced by others substantially reducing the putative savings (see Gordon Adams, Defense Budgets: Still Need to Get it Right!)

In the days following the President’s speech we commented on how there was much less real savings than the President attributed to Secretary Gates’ “courageous” efforts. I pointed out that $68 billion of the January $78 billion in savings had been consumed when 2012 war costs appeared in the budget released in February, replacing small placeholder numbers.

Benjamin Friedman observed that “current ‘savings’ consist entirely of spending that the Pentagon reprogrammed and kept, and the future ‘savings’ come by reducing planned spending growth, rather than reducing actual spending.”

Carl Conetta reviewed the history of these supposed cuts going back to 2009 and compared successive Obama budgets, 2010 through 2012, finding no more than $233 billion in “maybe” DoD reductions in projected out years.

The collective skepticism of independent analysts about the $400 billion no doubt reached the attention of the editors of Defense News, the leading defense industry weekly, where Marcus Weisgerber sought to justify Secretary Gates’ claim of $330 billion in savings from the 2009 program cancellations. When DoD officials refused a request to give a program-by-program breakdown of the figure Defense News “used budget justification documents, DoD officials’ public statements, annual acquisition reports and Government Accountability Office estimates to project program costs. For classified and far-term programs not on the books – but factored into DoD’s projections – think tank and analysts’ estimates were used.” The Weisgerber article title, “Pentagon’s Phantom Savings“, sums up the results of Defense News’ effort to justify Secretary Gates’ claim of savings.

Defense News editorial, 16 May 2011.
http://rempost.blogspot.com/2011/05/us-defense-budget-get-real-pentagon.html

Excerpt:

There is an old Washington saying that no money is less real than out-year money. This means that anything that is beyond the immediate spending bill is purely notional.

Requirement control is a popular method of limiting the costs of new weapons, but it’s equally important to control the growing number of missions.

The first step should be to ensure the roles-and-missions review ordered by Obama slashes unnecessary and costly redundancies in capabilities.

Second, the Pentagon must avoid doing what it did – portraying soft numbers as hard ones that do little other than expose it to criticism.

Lastly, to make wise cuts, the Pentagon must improve its internal financial management processes to pinpoint what it’s spending and how. Without hard data, it’s hard to come up with hard savings.

Charles Knight. Project on Defense Alternatives Note, 12 May 2011.

Word is that two principals in the production of 2010 Quadrennial Defense Review will be charged with producing the “fundamental” defense review President Obama ordered in his April 13th speech on the deficit. They are Kathleen Hicks, Deputy Undersecretary of Defense for Strategy and Force Planning, who was the lead 2010 QDR author and David Ochmanek, Deputy Assistant Secretary of Defense for Force Development, who headed the “analysis and integration cell” which pulled together all the analytical aspects of the last QDR.

Update

Defense News reports (23 May 2011) that “The missions and capabilities review will be led by Christine Fox, director of cost assessment and program evaluations [and formerly the President of the Center for Naval Analyses (CNA)]; Michele Flournoy, defense undersecretary for policy [and the Pentagon official in charge of the 2010 QDR]; and Adm. Michael Mullen, Chairman of the Joint Chiefs of Staff.”

Editor’s Comment:

Putting the same people who did the 2010 review in charge of producing the new review raises an obvious question of whether we should expect anything much “new” or “fundamental” from this review. QDRs in the past have certainly failed to be “fundamental” in any meaningful sense of the word.

One suspects that the foregone sub-text of what Ms. Hicks writes into the new review will be, “We got this pretty much right when we did it last year. Now, of course, if you are willing to take greater security risks you can cut some pieces out of the force posture, but that is a political decision…”

If the new review makes such a smug presentation it will serve the President and the nation poorly. The 2010 QDR did not make any real effort to set clear priorities among the many military requirements it listed, failing one of the principles of strategy development which is to set a practical path within resource constraints. A new fundamental review must present a variety of low-risk options that can be achieved at various resource investment levels. Its authors should not be allowed to simply push the matter of security risk into the political domain.

President Obama would be smart to solicit ideas from a wide variety of sources, reaching far beyond the Pentagon’s strategy, policy and force planning staff. If a fundamental review is needed, it is wise to hear and consider diverse voices.

Project on Defense Alternatives Budget Brief, 28 April 2011.

The Obama Administration to date has made three successive Pentagon budget requests: FY10, FY11, and FY12. Each has looked ten years into the future.

On 13 April, the President offered a new proposal and framework — a revision to achieve greater deficit reduction. It looks forward 12 years. How do all these compare?

In order to compare the President’s successive plans, we must stretch the earlier ones out to the new horizon set in his April 13 speech, which is 2023. Reviewing the budget requests shows that in each case the projections for the “out years” — the tail-end years — have been generated by the application of a simple inflator. We can adopt these inflators to stretch all the requests out to 2023. Of course, the result must be regarded as only an estimate of the administration’s intent.

The difference between the FY11 and FY12 plans for the 10-year period 2012-2021 is around $240 billion. Stretch it out two more years and the difference grows to about $400 billion. This shows that the differences among the plans (when measured in “then year” dollars) really begin to accumulate as we go further and further into the future.

Keeping in mind that Congress must consider and pass the budget year by year, any series of budget projections going out twelve years, spanning three Presidential terms and differing economic conditions, must be judged distinctly uncertain.

Below are the total budget figures (in “then year” dollars) for the President’s successive plans. Each plan is also weighed as a percentage of the earliest one (i.e. FY10):

FY10 plan for 2012-2023: 7543 billion = 100%

FY11 plan for 2012-2023: 7947 billion = 105%

FY12 plan for 2012-2023: 7512 billion = 99%

New (April 13) proposal for 2012-23: 7112 billion = 94%

The most consequential years for national policy are the next five: 2012-2016, which constitute the FYDP. The President’s successive requests for these years are more firm and we needn’t do any estimating to derive them. All the Administration budget requests have been explicit about these years. And reviewing the successive requests for 2012-2016 shows that the difference among them is not as substantial:

FY10 plan for 2012-2016: 2878 billion = 100%

FY11 plan for 2012-2016: 2995 billion = 104%

FY12 plan for 2012-2016: 2919 billion = 101%

We don’t yet know what the President’s April 13 proposal will imply for the 2012-2016 period. It’s a fair bet, though, that he will want to reinstate his earlier request to DoD that $150 billion be “saved” in the near future and not just the $78 billion pledged earlier this year by Secretary Gates. That would produce the following:

New plan for 2012-2016: 2845 billion = 99%

If this proves true, the rollback in planned spending for the five years that matter most will be modest, verging on insignificant.

Project on Defense Alternatives, Briefing Memo #49, 25 April 2011.
http://www.comw.org/pda/fulltext/1104bm49.pdf

There is good reason to welcome a strategic review, as promised by President Obama on 13 April. For nearly 14 years, US defense policy has been guided by the “QDR consensus” – a set of axioms and imperatives that won adherence among defense planners in the course of four Quadrennial Defense Reviews, beginning in 1997. In retrospect, this consensus has produced a syndrome of profligate and desultory military activism. It has fed the dysfunctions of our military procurement system and helped drive the Pentagon’s base budget to unsustainable heights. Certainly, it is time for a fresh start. But will the promised review deliver?

Will the review be more open and critical than the QDRs it aims to rectify? How deep will it dig? Will it even aim to “rectify?” Or will it serve a more narrow purpose: a revised bargain among the Commander-in-Chief, his defense secretary, and the chiefs of the armed services to exchange modest new constraints on budget growth for a strong rationale, a bulwark, against any further cuts.

What the President seeks is only $400 billion in savings over 12 years – about 6.5% of planned base budget expenditures. Last year, the President’s Fiscal Commission and other independent task forces identified more than twice as much in potential defense savings over a period of just ten years. And it is unclear whether the President intends to extract the $400 billion from the Pentagon’s budget alone or from the larger “security basket,” which includes International Affairs, Homeland Security, and Veterans Affairs.

Also, it is not encouraging that the President applauded Defense Security Gates for having “already saved” $400 billion in previous years, when most of those “savings” never left the Pentagon’s coffers, nor dented the government’s deficits. What the nation needs now are “savings” in the colloquial sense of an actual decrease in defense spending.

A serious strategic review should enable considerably more than a 6.5% retraction in planned future expenditures. It should do more than limit future growth. And maybe it will. But we should recognize at the start that what the President has proposed is not itself substantial enough to actually necessitate a strategic review. Yes, we need one – but not because the President hopes to modestly dampen Pentagon growth.

To be meaningful, such a review must look well beyond $400 billion in savings, and even beyond what the Fiscal Commission and other task forces have proposed. Of course, Secretary Gates and Admiral Mullen disagree. They have already publicly derided any substantial new constraints on their spending as putting the nation and its armed services at risk. The strategic review should be more than a conciliatory concession to their concerns, which are tendentious.

We can gain needed perspective by comparing recent budget submissions and proposals in historical context. This table prepared by PDA converts recent plans and proposals into average annual Pentagon base budgets, expressed in 2010 dollars. It shows that the President’s requests and proposals, including his recent one, would produce average annual budgets that occupy a narrow band of spending. They are all close cousins.

Even the more ambitious proposal by the Sustainable Defense Task Force does not go far afield.

All of the President’s requests and proposals produce average annual budgets that, in real terms, exceed previous spending, exceed Reagan-era levels of spending, and substantially exceed average spending during the entire Cold War period. (And, notably, the budget average for the Cold War years includes war spending, while the more recent averages do not.)

We should gladly accept the opportunity for a review of defense planning and work to make it worthwhile. But we need not and should not accept the idea that modest revisions in budget planning give good reason to hit the “strategy panic” button.

Sebastian Sprenger writing in Inside Defense on 21 April 2011 reports that the QDR Red Team headed by Gen. James Mattis (USMC) and Andrew Marshall, director of the Office of Net Assessment, raised concerns in 2009 about the fiscal restraint effects of the deep recession on military plans to be represented in the QDR.

The Red Team report was not made public. When the QDR was published in early 2010 it did not include a presentation of the effects of fiscal constraints.

Last week, a little more than a year later, President Obama asked Secretary Gates to find $400 billion in additional security budget cuts over a twelve year period and called for a new review of military roles and missions.

The effect of this development will be an update of the 2010 QDR which will likely now heed the concerns of the 2009 Red Team concerning fiscal constraints.

On Wednesday April 13th 2001, President Obama announced an initiative to roll back planned security spending by $400 billion over the next 12 years. The nature of these “savings” is not yet clear. Nor is it clear how much will be subtracted from the Pentagon’s spending plans.

Nonetheless, Secretary Gates and the Chiefs are not pleased and have begun to make noise about risks to security. Apparently, they were not briefed on the proposal until Tuesday.

Part of the initiative is to begin a “fundamental review of America’s missions, capabilities, and our role in a changing world.” What and how much is subtracted from the Pentagon will depend on this review. Notably, the United States just completed a Quadrennial Defense Review last year. What the President proposes is some sort of “second look.” The President, Secretary Gates, and the service chiefs will be the prime movers of this process. How deep their “second look” will go is unclear. And it seems battle lines are already being drawn.

At a press conference on Wednesday, Pentagon spokesperson Geoff Morrell said the review would likely affect the 2013 budget. It will not be ready by June, when congressional debate of the 2012 budget commences.

How open will the review process be? We don’t yet know. But the experience of recent defense reviews is not encouraging. Still we should welcome this first step and strive to open up the process. The need for a rethinking our defense strategy and posture was emphasized in the 2010 report of the Sustainable Defense Task Force:

[I]n order to ensure significant savings, we must change how we produce military power and the ways in which we put it to use. Significant savings may depend on our willingness to:

Rethink our national security commitments and goals to ensure they focus clearly on what concerns us the most;

Reset our national security strategy so that it reflects a cost-effective balance among the security instruments at our disposal and uses those instruments in cost-effective ways; and

Reform our system of producing defense assets so it.

News links on President Obama’s proposed rollback in planned security spending, his call for a strategic review, and the Pentagon’s reaction:

DOD: Finding More Savings In Defense Budget Means Nixing Missions. Christopher J. Castelli. Inside Defense, 13 April 2011.

Obama Calls for Sweeping Review of U.S. Military Strategy. Sandra Erwin. National Defense, 13 April 2011.

Pentagon warns on big defense cuts. Missy Ryan and Jim Wolf. Reuters, 13 April 2011.

Defence chief warns against planned cuts. Daniel Dombey and James Politi. Financial Times, 14 April 2011.

Events frequently overtake long-term Pentagon planning. Megan Scully. Government Executive, 14 April 2011.

Editor’s Commentary

13 April 2011 (revised and updated 16 April 2011)

In President Obama’s April 13th “deficit speech” he says:

Just as we must find more savings in domestic programs, we must do the same in defense. Over the last two years, Secretary Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again.

What might “do that again” mean?

Actually contribute $400 billion from projected Pentagon budgets to deficit reduction?

That would require the Pentagon to take in and spend $400 billion less. But it is very difficult to identify much actual contribution to deficit reduction in the first $400 billion in Pentagon savings President Obama refers to and believes can be repeated.

Let’s take a quick look at the components of that first $400 billion working backward through time.

This past January Secretary Gates announced $78 billion in cuts over five years. In February when the President’s FY12 budget appeared all but $70 billion of this as regards deficit reduction evaporated. $68 billion was consumed by the special Overseas Contingency Operations (war) budgeting as the FY11 projected placeholder of $50 billion was replaced by the FY12 real OCO budget of $118 billion. Another $2 billion in the savings appears to have simply vanished in the five year budget projections, perhaps due to those pesky “rounding errors” that plague Pentagon budgets.

In 2010 Secretary Gates announced $100 billion in “efficiency” savings. He was quite forthright at the time, saying that he was keeping all the savings within the Pentagon to pay for other requirements. So we can’t legitimately count those toward deficit reduction, and presumably the President did not count those toward the $400 billion that has been saved.

So that leaves about $322 billion in Pentagon savings the White House needs to account for.

In testimony before the Senate Armed Services Committee on 17 February 2011 Secretary Gates said:

…over the last two defense budgets submitted by President Obama, we have curtailed or canceled troubled or excess programs that would have cost more than $330 billion if seen through to completion.

Connecting this to President Obama’s speech Defense News reports (13 April 2011) that:

Of the $400 billion already saved, $330 billion is supposed to come from Gates’ cuts to weapons programs – for example the cancellation of the Army’s Future Combat Systems program and the Air Force’s Next-Generation Bomber, both of which Gates terminated in the 2010 budget. However, those two programs have been replaced: The Army is developing the Ground Combat Vehicle, and the Air Force has launched a scaled-back bomber program.

“Supposed” and “However” are the key words in the preceding paragraph. To be real savings that contribute in any meaningful way to deficit reduction the the program cancellations would have to lead to a declining Pentagon budget topline… and not be replaced by some other expenditure.

Gordon Adams of the Stimson Center assesses the $330 billion savings claim in a 5 November 2010 post this way:

Gates has not cut $330 billion from defense. When he announced hardware cuts, he said the out-year savings were estimated at $330 billion, but he didn’t cut a nickel from the projected defense budgets; he wants, as he has clearly said, to use those savings for other investments, not give them back to the taxpayer. And the figure is way too big, anyway, because he terminated the F-22 and the C-17 cargo plane when neither one of them was in the long-term budget (he has been trying to let both programs arrive at a normal death, as planned, and Congress keeps getting in the way.) It is even more too big because his savings figure did not net out the alternative investments he proposed for the same missions, like replacing the terminated Future Combat Systems (FCS) vehicle with a new Army vehicle R&D program. So a big kerfuffle over a non-number, but no big cut in defense here.

To date the Pentagon or OMB have not produced any accounting of these supposed savings from Secretary Gates’ program cancellations which indicate where they come out of the topline. Meanwhile it would be wise to substantially discount their value when thinking about overall Federal spending.

What we know for sure is that Pentagon budgets continue to rise despite the “savings.” The Pentagon and the Administration might argue that the Pentagon budget would have grown faster if Secretary Gates had not made those “courageous” program cuts. Possibly. But that “would have been” is simply not the same as actually contributing to deficit reduction which requires real cuts in the topline of the Pentagon budget.

In terms of cutting the topline of the Pentagon budget, when we remove the long-awaited reductions in war costs, we can count just $8 billion that Secretary Gates has given up to deficit reduction in the five year defense plan (FYDP) through FY16.

Looking out ten years there are more savings in the President’s projections. My colleague Carl Conetta finds $164 billion less Pentagon spending in the overlapping four “out years” (FY17-20) when comparing the President’s FY11 and Fy12 budget submissions.

We might speculate that this is where we realize some of Secretary Gates’ $330 billion in savings, but it would be only speculation…

So far no one in the Administration has demonstrated in sufficient detail how the Pentagon will contribute much of anything toward reducing the Federal deficit, rounding errors notwithstanding.

Budget Memo by Charles Knight. 14 February 2011.

For several years now White House budget projections have included a “placeholder for outyear overseas contingency operations” most of which are accounted for by the wars in Iraq and Afghanistan. This placeholder number has been and remains $50 billion. Every year actual OCO (overseas contingency operations) spending turns out to be several times that number. FY11′s OCO is $159 billion and FY12′s is $118 billion.

Adjusting for the effect of the new OCO for FY12, the $68 billion budgeted above the placeholder of $50 billion eats up most of the $78 billion in Pentagon cuts that Secretary Gates offered up in January to fiscal responsibility (only $76 billion actually shows up in the 14 February budget release.) The remaining $8 billion (and much more) will go to the war budgets when reality collides with placeholder projections.

On 14 February Pentagon Comptroller Hale confirmed that the $50 billion placeholders for FY13 and beyond was the “best we can do.” Others make an attempt to be more realistic. The high tech industry association called Tech America annually projects DoD budgets for ten years out. In their 2010 projection they estimate that OCO spending will be $102 billion in FY13, $69 billion in FY14 and $57billion in FY15. When we subtract the $50 billion placeholder for each of those years and total the remainder we find that the Pentagon is likely to spend $78 billion more in the years FY13 through FY15 than in the White House budget projections.

In sum, not only does the President’s FY12 budget plan give an exemption to the Pentagon from contributing anything substantial to deficit reduction, but the likely cost of the war in Afghanistan will push up the national debt substantially higher than the White House budget projections.

Project on Defense Alternatives Briefing Memo 46, 26 January 2011.
http://www.comw.org/pda/fulltext/1101bm46.pdf

Excerpt:

* Although described as a “cut,” Gates’ offer would allow defense spending to rise steadily over the next five years.

* Although Gates says that any bigger cuts would court “catastrophe,” all the savings plans grant DoD more money in real terms during the next ten years than it had during the last ten.

* The proposals for bigger cuts would produce average Pentagon base budgets during the next ten years that are only about 5% below Reagan-era spending, adjusted for inflation.

* The Pentagon seeks future budgets that average more than 12% above the Cold War highs.

18 November 2010

Dear Co-chairman Bowles and Co-chairman Simpson:

We are writing to you as experts in national security and defense economics to convey our views on the national security implications of the Commission’s work and especially the need for achieving responsible reductions in military spending. In this regard, we appreciate the initiative you have taken in your 10 November 2010 draft proposal to the Commission. It begins a necessary process of serious reflection, debate, and action.

The vitality of our economy is the cornerstone of our nation’s strength. We share the Commission’s desire to bring our financial house into order. Doing so is not merely a question of economics. Reducing the national debt is also a national security imperative.

To date, the Obama administration has exempted the Defense Department from any budget reductions. This is short-sighted: It makes it more difficult to accomplish the task of restoring our economic strength, which is the underpinning of our military power.

As the rest of the nation labors to reduce its debt burden, the current plan is to boost the base DOD budget by 10 percent in real terms over the next decade. This would come on top of the nearly 52 percent real increase in base military spending since 1998. (When war costs are included the increase has been much greater: 95 percent.)

We appreciate Secretary Gates’ efforts to reform the Pentagon’s business and acquisition practices. However, even if his reforms fulfill their promise, the current plan does not translate them into budgetary savings that contribute to solving our deficit problem. Their explicit aim is to free funds for other uses inside the Pentagon. This is not good enough.

Granting defense a special dispensation puts at risk the entire deficit reduction effort. Defense spending today constitutes over 55 percent of discretionary spending and 23 percent of the federal budget. An exemption for defense not only undermines the broader call for fiscal responsibility, but also makes overall budget restraint much harder as a practical economic and political matter.

We need not put our economic power at risk in this way. Today the United States possesses a wide margin of global military superiority. The defense budget can bear significant reduction without compromising our essential security.

We recognize that larger military adversaries may rise to face us in the future. But the best hedge against this possibility is vigilance and a vibrant economy supporting a military able to adapt to new challenges as they emerge.

We can achieve greater defense economy today in several ways, all of which we urge you to consider seriously. We need to be more realistic in the goals we set for our armed forces and more selective in our choices regarding their use abroad. We should focus our military on core security goals and on those current and emerging threats that most directly affect us.

We also need to be more judicious in our choice of security instruments when dealing with international challenges. Our armed forces are a uniquely expensive asset and for some tasks no other instrument will do. For many challenges, however, the military is not the most cost-effective choice. We can achieve greater efficiency today without diminishing our security by better discriminating between vital, desirable, and unnecessary military missions and capabilities.

There is a variety of specific options that would produce savings, some of which we describe below. The important point, however, is a firm commitment to seek savings through a reassessment of our defense strategy, our global posture, and our means of producing and managing military power.

■ Since the end of the Cold War, we have required our military to prepare for and conduct more types of missions in more places around the world. The Pentagon’s task list now includes not only preventive war, regime change, and nation building, but also vague efforts to “shape the strategic environment” and stem the emergence of threats. It is time to prune some of these missions and restore an emphasis on defense and deterrence.

■ U.S. combat power dramatically exceeds that of any plausible combination of conventional adversaries. To cite just one example, Secretary Gates has observed that the U.S. Navy is today as capable as the next 13 navies combined, most of which are operated by our allies. We can safely save by trimming our current margin of superiority.

■ America’s permanent peacetime military presence abroad is largely a legacy of the Cold War. It can be reduced without undermining the essential security of the United States or its allies.

■ The wars in Iraq and Afghanistan have revealed the limits of military power. Avoiding these types of operation globally would allow us to roll back the recent increase in the size of our Army and Marine Corps.

■ The Pentagon’s acquisition process has repeatedly failed, routinely delivering weapons and equipment late, over cost, and less capable than promised. Some of the most expensive systems correspond to threats that are least prominent today and unlikely to regain prominence soon. In these cases, savings can be safely realized by cancelling, delaying, or reducing procurement or by seeking less costly alternatives.

■ Recent efforts to reform Defense Department financial management and acquisition practices must be strengthened. And we must impose budget discipline to trim service redundancies and streamline command, support systems, and infrastructure.

Change along these lines is bound to be controversial. Budget reductions are never easy – no less for defense than in any area of government. However, fiscal realities call on us to strike a new balance between investing in military power and attending to the fundamentals of national strength on which our true power rests. We can achieve safe savings in defense if we are willing to rethink how we produce military power and how, why, and where we put it to use.

Sincerely,

This letter reflects the opinions of the individual signatories. Institutions are listed for identification purposes only. The letter is the result of a joint effort by The Coalition for a Realistic Foreign Policy and the Project on Defense Alternatives.

Editor’s Commentary

There are at least as many reasons to think that significant real reductions in defense spending will be hard to achieve as there are reasons to doubt that significant revenue increases will be found or that substantial reductions in entitlement spending will happen. “Political realities” are indeed daunting for any of the options the National Commission on Fiscal Responsibility and Reform will consider. If there were quick, easy and obvious decisions to be had there would be no need for the Commission.

Political realities change over time in part because underlying realities eventually change political calculation. Such is the case with defense spending. After more than a decade of rapid growth there is likely to be some retrenchment in the middle of this decade, notably by 2015.

The likely path of defense spending this decade was recently forecast by the high-tech industry association Tech America Foundation in their DoD Topline Forecast 2011-2020.

Tech America’s forecast is for a real reduction in the base Pentagon budget (not including Overseas Contingency Operation war supplemental funding) of 9% or $45 billion (USD 2011) in 2015 relative to the 2011 base budget.

When taking into account the Pentagon’s preferred budget path this decade of at least 1% real annual growth, Tech America forecasts a reduction in defense spending by 2015 of 16%.

Tech America’s forecast of Overseas Contingency Operation (OCO) war supplemental spending during the decade is also important to consider. Since FY10 (President Obama’s first budget) there has been an OCO war supplemental DoD budget line for FY12-FY15 of $50 billion per year. The OCO war supplemental in the FY11 budget is $159 billion.

Although the actual OCO war supplemental might come down in FY12, with the military operational demands in Afghanistan remaining elevated it is unlikely the OCO war supplemental will come down even $50 billion, let alone $109 billion in FY12. Tech America forecasts OCO war expenditures of $122 billion in FY12.

These likely under-budgeted OCO war supplemental costs should be counted as probable additions to the national debt beyond those already projected by the government.

Tech America’s forecast is for the OCO supplemental to be $122 billion in FY12, $102 billion in FY13, $69 billion in FY14 and $57 billion in FY15. That adds up to $150 billion more than is budgeted in the Five Year Defense Plan… an un-budgeted addition to the national debt.

For the target year of the federal budget reaching “primary balance” in FY15, the forecast OCO war supplemental will add $7 billion to the problem that the National Commission on Fiscal Responsibility and Reform faces in attempting to balance the budget in that year.

Adam J. Hebert. Air Force Magazine, November, 2010.
http://defensealt.org/HqU73L

Excerpt:

…ill-advised calls to cut the Pentagon budget follow as predictably as the tides. Without credible analysis of strategy or requirements, critics are once again declaring defense spending to be out of control.

Editor’s Comment:

In his editorial Security Isn’t Cheap Adam J. Herbert cites the work of the Sustainable Defense Task Force as a case in point of critics of Pentagon spending recommending cuts “without credible analysis of strategy or requirements.” As a member of the task force I differ over the credibility of our analysis. But let me speak to where I agree with Mr. Herbert:

• “Security is not cheap.” In fact it is extremely expensive. When the country is hit with a financial disaster we owe it to the country and our military to reexamine our national security strategy and make sure priorities are clear and that our military investments are cost-effective. In the last twelve years of Pentagon budgets the planning has proceeded as though there is no resource constraint. Unfortunately, that is true of the last QDR as well. Those days are clearly over – Secretary Gates has said as much.

• “A well-trained, well-equipped, professional military is not cheap. If the nation wants it to cost less, the nation will probably have to ask it to do less.” Exactly. Since the end of the Cold War the U.S. military has steadily advanced its global reach and engagement. Missions have proliferated, including many that should be done by civilians in the State Department and other agencies. Significant numbers of U.S. troops still remain in Europe, even though there is no military threat to Europe that allies can’t handle. The most important take-away lesson from the wars in Iraq and Afghanistan is that long low-intensity land wars are not cost-effective uses of U.S. military power and should be avoided whenever possible. Hopefully we can all agree there should never again be such a “war of choice.”

• “There are certainly ways to reduce defense spending…” Yes, and one that will save around $45 billion in Air Force modernization accounts is available in a choice about how to modernize the fighter fleet. The Air Force has decided to replace its aging F-16s with just about the most expensive new fighter one can dream up, the F-35. In today’s fiscal environment either the Air Force will end up with a lot fewer of these planes than planned, or they will choose to get ahead of the budget crunch and modernize with new block versions of the still best of class F-16s and limit the buy of F-35s this decade to a few squadrons for high-intensity air-superiority missions. If serious air competition emerges a decade from now we can then roll out production of F-35s (or perhaps a less costly follow-on to the F-16), planes presumably much improved with ten years or more of further fighter technology development.