Behind the Rhetoric

The Pentagon starts to manage the defense drawdown.

As I have noted many times over the past three years, we are in a long-term drawdown at the Pentagon; the Department of Defense budget will continue to head south. But for those three years, the DOD has been resisting this notion.

From the Pentagon's point of view, the $487 billion the secretary took out of the FY 2012 10-year projection for defense budgets (which flattened but did not cut the defense budget) is the bottom line; anything else is "doomsday" for the defense strategy he articulated last year and for our national security.

Secretary Panetta continued this hyperbolic rhetoric about defense cuts last Thursday in his joint press conference with Joint Chiefs Chairman Gen. Martin Dempsey.

Panetta warned that "the most immediate threat to our ability to achieve our mission is fiscal uncertainty, not knowing what our budget will be, not knowing if our budget will be drastically cut, and not knowing whether the strategy that we've put in place can survive...All told, this uncertainty, if left unresolved by the Congress, will seriously harm our military readiness."

This politically-intended hyperventilation was accompanied by a memo to the military services the same day from Deputy Defense Secretary Ash Carter asking them to draft plans to cope with lower levels of funding this year.

These spending cuts, Panetta and Carter both said, could result from either the looming sequester or from the extension through the rest of the year of the continuing resolution currently governing the defense budget.

In reality, the Carter memo was the first sign of recognition inside the Pentagon that there is no uncertainty here; a defense drawdown is truly underway. While the rhetoric reeked of hyperbole, the memo looked like exactly what DOD should start doing as the money drifts away. It focuses on one of the Pentagon's most pressing long-term fiscal issues: the bloated (now that Chuck Hagel has koshered the term) "back office" at DOD.

Specifically, the memo asks the services to prepare for lower funding levels by freezing civilian hiring and considering furloughs for up to 22 days for some civilian staff. It asks the services to consider releasing temporary employees and imposing hiring freezes. It also asks the services to cancel maintenance activities at the depots that repair and overhaul military equipment.

It suggests that non-essential training and conference activities be suspended as part of these plans. It also suggests the services curtail travel, maintenance of facilities, and such administrative expenses as supplies, IT, and the ubiquitous Pentagon and military ceremonies.

And it set operational priorities. Protect funding for war operations, wounded warrior programs, readiness, family programs, and activities associated with the Pacific pivot strategy.

Operations is one of the key areas the Pentagon needs to focus on in a drawdown. It eats up about a third of the Pentagon budget, is over-staffed, very difficult to track, and has proven almost impossible to control in the past. And while furloughs would be an appropriate (and likely) short-term response to budget cuts, a longer-term strategy would be to gradually thin the civil service by attrition.

Gee, this sounds familiar. This is not the first time that DOD has had to plan for a short-term funding shortage. In the summer of 1994, with refugee operations ramping up in Goma and an intervention in Haiti in the planning stages, DOD was running out of funds.

In anticipation, we had to do all the things mentioned above, especially in the operations accounts: slow down training, consider furloughs, defer maintenance, slow the speed at which equipment went through the repair depots.

We even had recourse to the famous Feed and Forage Act from Civil War days, allowing the military to spend funds without an appropriation. Then, in the middle of the next budget year, we refilled the pots with appropriated funds, in the middle of an overall defense drawdown.

So it is not a crisis, it is sound contingency planning. And it is an excellent first step toward bringing budget and management discipline to the Pentagon. We are in a drawdown today. Fiscal and planning prudence is a necessary and good thing.

The services might even discover in the process of preparing these plans that there are temporary civilian employees they don't really need, activities that can slow down for good as we come out of Afghanistan, maintenance that can be deferred because it is not needed for a smaller force, and civil service and military positions that are unnecessary (over a third of the active duty military never deploys).

It is a good idea to start with sweeping out the cluttered back office. But the memo barely scratches the surface on the other challenges in a drawdown. It barely mentions contracts. It only says protect procurement if it is directly related to combat operations (sensible) or tied to the Pacific pivot strategy (dangerous, as it tempts the services to call every program part of the pivot).

And for those contracts supposedly endangered by a sequester, it only asks the services to minimize disruption and added costs, which suggests that procurement contracts are not seriously threatened by sequester. That's consistent; sequester would not affect funding already tied to existing contracts. But drawdown planning will have to put hardware choices on the table, a next step that will be confronted in the forthcoming Quadrennial Defense Review.

And the memo does not deal with military personnel issues at all. Active duty forces and their benefits (as well as those for retirees) are untouched by sequester. But this third rail will have to be dealt with in a drawdown, including shrinking the force further (including jobs in the back office), and revisiting the healthcare and retirement systems.

Sequester is not doomsday, as the Carter memo makes clear. There is a lot of room at DOD for this kind of fiscal discipline. With luck and planning, the next secretary can make a silk purse out of the sequester sow's ear.

Robert Ward/DVIDS

National Security

Running Hills

Why senators shouldn't head the Pentagon or Foggy Bottom.

President Obama appears about to name senators to head the two most important national security agencies in the executive branch: Chuck Hagel at the Pentagon and John Kerry at Foggy Bottom. Commentators are all over Hagel about his views on Israel and the Middle East, while Kerry is getting a free ride after the Susan Rice fracas.

All this chatter misses the more significant, substantive challenge: both would have to manage a drawdown, with all the attendant revisions of strategy, priority-setting, and management reform shrinking budgets demand. And both hail from the Senate, where management is, at the most, a secondary job requirement. Moreover, knowledgeable as both men are, neither has significant management experience outside the Senate. This may not bode well for the era of shrinkage that is coming to DOD and State.

The departing secretaries have done many good things, but neither has truly tackled the requirements of waning resources. DOD hates and fears a drawdown -- it means choices have to be made and priorities set. Defense Secretary Leon Panetta has started that process, somewhat reluctantly, in his relatively short tenure, but has not acknowledged the reality that real cuts are coming and that the budget will not hold at the growth with inflation level he currently projects. As for Hillary Clinton over in Foggy Bottom, she peered over the edge of State's (and USAID's) internal problems in the Quadrennial Diplomacy and Development Review (QDDR) but made few fundamental changes. There is little State or USAID planning for the decline in resources that is coming.

We are at an inflection point in both agencies, and the budgetary piper is calling the policy and management tune. The question is whether either Hagel or Kerry have internalized that reality and are prepared for the tough internal leadership both institutions will need over the next four years. There are hard decisions to be made about personnel, acquisitions, and future strategy -- decisions that will require taking on baronies and fiefdoms while minding the management store.

Almost any senator comes heavily challenged in the management domain. It is not uncommon to have a former member of the House or a former senator head up the Pentagon -- out of 25 secretaries of defense since the DOD was created, six have served in Congress: Melvin Laird, Donald Rumsfeld, Dick Cheney, Les Aspin, William Cohen, and Panetta. It is less common at State, given that only three of the 20 postwar secretaries have served in Congress: James Byrnes at the end of the war, Ed Muskie, very briefly, and the incumbent, Hillary Clinton.

Laird, at DOD, served during a build-down and, as the late Duke professor and White House budget official Richard Stubbing pointed out years ago, had a reputation for being beloved, even while picking pockets. But Laird was not a manager and, as a consequence, the drawdown of the 1970s was perhaps the least well managed we have experienced. Cheney, on the other hand, was a tough manager and decision-maker (skills honed more in the White House than in Congress). Not beloved, but decisive -- he cut the budget 25 percent, canceled weapons programs, took on the services, and, with the support of Joint Chiefs Chairman Colin Powell, shrank the ground forces by 500,000. He left a capable, agile military behind that was maintained by the Clinton administration; despite the critics, Bill Clinton's military proved good enough to handle multiple crises in Iraq and the Balkans and for George W. Bush to use Saddam Hussein as a speed bump in 2003.

The problem at State goes deeper. Management has never been Foggy Bottom's strong suit, and its shrinking reputation for effectiveness bears witness to that reality. The only secretaries who truly focused on how the department worked were Larry Eagleburger and Colin Powell; the rest have hunkered down on the seventh floor and let the building grind on with minimal attention. Clinton has been there long enough to try to make a dent in the reform of State Department management. QDDR notwithstanding, it was not much of a dent; most of the challenges remain for the next incumbent.

Management is the problem. Is a senatorial nominee up to it?

I have written much about the challenges at DOD. While adjustments in strategy are important, they are not the most important challenge. We live in a relatively secure, not a more dangerous world. The security challenges are complex, but nothing like the existential threat America faced during the Cold War.

The real challenge at the Pentagon is how to wrangle the services' unending budgetary appetite to the ground and tackle three fundamental problems. These problems have led for years to defense budgets that are unreasonably high but, at best, the problems have only an indirect impact on capability.

First, the Pentagon's out-of-control acquisition system. For 70 years, the United States has spent too much on programs that cost significantly more than the Pentagon expects, arrive behind schedule, and provide less capability than promised (leading to more spending). It doesn't matter when or where you look -- the C-5 airlifter, the B-1A bomber, the M1-A2 tank, the next-generation carrier -- they all share this trait. It will take a tough leader to control the services' unchanging desire to underbudget for hardware programs (that's how you squeeze them in), and hold at bay the contractor's equally unerring instinct to undercost the same programs. Not a senatorial instinct.

Second is the Pentagon's out-of-control back office. McKinsey did a study in 2010 that said the Pentagon had the biggest overhead compared to combat forces of 29 countries, including Russia, China, and most of our NATO allies. Only Switzerland was worse. That same year a Pentagon advisory group, the Defense Business Board said that 560,000 active duty forces never deploy. That's a big back office. Cutting it means saying no, and no again, and lowering funding levels to force efficiencies. Not a senatorial instinct.

Third is the compensation and benefits system at DOD. Compensation has been raised substantially and, for years, pay increases were indeed needed. But catch-up has been done; in a drawdown, pay needs to be used as a force management tool, not a peanut butter spread of wage increases. Healthcare costs, which have doubled in the past 10 years to $60 billion, are out of control, as the last two secretaries have repeatedly pointed out, and Congress keeps making it hard to enforce discipline on health benefits. The retirement system rewards nobody before 20 years of service, and everybody, regardless of age, once the 20 years are in. It's the third rail of Pentagon planning; are senators up to the challenge of taking it on?

All these challenges become even more important in a defense drawdown; retaining capability while managing these reforms is a huge challenge. The senatorial candidates' background in these areas is, at best, unclear. You could hand some of it off to a deputy, but they had better be a manager and they will need full backing from a secretary that understands the problem.

State's management issues are even more serious, because the building has given short shrift to management for decades.

First, the budget and planning system at State has only barely begun to be created. Foggy Bottom still cannot do long-term planning, meaning it still struggles with accurately forecasting the costs of its programs and projects. A budget office was created in 2005 and has struggled for seven years to gain control over a sprawling bureaucracy, devoid of budget and resource planners. Moreover, that budget office only has responsibility for programs, like Economic Support Funds, Foreign Military Financing, and counternarcotics operations, not for State's management or for personnel budgets; those belong to the undersecretary for management. In other words, the undersecretary (and the director general of the Foreign Service) oversee things like building security, training, and promotions, while the planning for programs is handled over at the budget office. The two are not connected in any official way, so putting programs and people needs together is almost impossible. The new secretary badly needs to back up and strengthen this budget and planning capability. Senators like Kerry, who have not been appropriators or passed full budget bills will be challenged, but the budget and planning system will not get better without secretary-level support.

Second, U.S. foreign-policy institutions are a diaspora of organizations. State only owns a bit; its relationship with USAID is strained, even though USAID reports its budget through State (and Clinton's QDDR strengthened USAID's semi-autonomous capability -- needed, but it poses a continuing coordination challenge). Treasury owns the international development banks programs; the Millennium Challenge Corporation splits the foreign aid portfolio; Peace Corps, EXIM Bank, OPIC, TDA -- this alphabet soup of independent agencies further fragments the portfolio and weakens America's civilian statecraft. Will a senator have the skills to work the kinks out of this system?

Third, in the 21st century, America's civilian statecraft needs a makeover. This is a human resources issue. For centuries, the task of a diplomat has been to represent, report, negotiate, and advise. Today, all those things are needed -- and U.S. diplomats are the best at this -- but also much, much more. They have to run programs (foreign assistance, counternarcotics, anti-terrorism), support stronger governance through the embassies (nation-building), help prevent and resolve conflicts, carry out public diplomacy, manage budgets, and persuade Congress to keep the taps open. The Foreign Service is only at the edge of this revolution in competence; the department lacks a comprehensive training program, especially as a career progresses, and officers who serve in non-traditional billets (political-military affairs, development, public diplomacy, management) find they are still sidelined for promotion. This is nitty-gritty personnel stuff, but critical to the long-term sustainability of America's diplomacy. It is not the normal grist for the senatorial mill.

These are only a few of the management challenges the next two secretaries will face. But as resources shrink in both departments, there will be a crying need for tough, smart, experienced leadership at the top. We can get a drawdown right, but we will need leaders who understand these needs, even more than we do leaders who understand policy issues. The task of running huge, complex bureaucracies like the State Department and the Pentagon is about much more than just showing up and making policy -- now more than ever. If they want these positions, Kerry and Hagel are going to have to prove that they are ready manage, roll up their sleeves, put on their green eyeshades, and get to work inside their respective buildings.

DVIDS/Staff Sgt. Bernardo Fuller