Military Review

How Chuck Hagel can show the generals who's boss.

The time for a strategic rethink at the Defense Department has arrived. It is signaled by the third straight year of declining defense budgets and the reality that the sequester will bring the defense budget down even more -- and more quickly than forecast.

Not surprisingly, these budget realities are stirring up the same sentiments that we encountered at the end of the Cold War. The defense community is beginning to search for ways to prevent what Colin Powell and Les Aspin called a "freefall" in the early Clinton years, when they were chairman of the Joint Chiefs and the secretary of defense, respectively. "Stability" is the defense community's new goal, and a more intense strategy review than the one Leon Panetta oversaw is what will get them there.

Last November, I flagged five think tank reports that rethink fundamental U.S. strategy to frame options for the forces and their budget. With Secretary Hagel's arrival and the beginning of the Quadrennial Defense Review, it's time to put that approach into practice.

The latest signal that we need to rethink America's defense missions comes from five former deputy secretaries of defense: John Deutch, John Hamre, John White, Rudy de Leon, and William Lynn. They sent Secretary Hagel a letter on March 5, urging him to take a page from the Aspin era and carry out a separate "Bottom Up Review," or BUR, of our defense posture. Their intentions are good, but adding another review to Hagel's agenda would seriously compound his difficulties in getting control over the Defense Department -- and it wouldn't necessarily focus attention on the areas that most need it.

Strategy and force posture are driven by shrinking resources. As strategist Bernard Brodie once put it: "strategy wears a dollar sign." The deputies urge the secretary to take a new look at the threats we face and specify the forces we need, the tempo at which they should operate, the level of readiness they should have, and the training equipment they need. But they put "the resources needed for the posture" at the end of their list of priorities, instead of at the beginning where it belongs in the current budget atmosphere. They are still locked into the blue sky world of defense planning -- we decide strategy first, then we worry about the money.

To be fair, they ask that the review present the secretary with a "range of postures" at different levels of cost and capability, which is something the Quadrennial Defense Review has never done. They point out that savings will take time, that the hard choices need to be made early, that terrorism and cyber should be priorities, and that the rising costs of pay and benefits are a growing problem for Pentagon planning. Perhaps most importantly, their proposed review incorporates a key principle: "More cannot be done with less."

That is a crucial observation, and it flies in the face of the endless, mindless chatter from many officials that the Pentagon will now have to do "more with less." Nobody is asking DOD to do more! As Iraq is forgotten (though see the excellent report from the Special Inspector General for Iraq Reconstruction on the many negative lessons learned from our invasion and occupation) and we leave Afghanistan, the fact is that we are asking the military to do "less with less."

But there are serious problems with the planning process they propose.

I was around for the BUR; I remember it well, as an OMB participant in the process. Secretary Aspin brought to the Pentagon a pre-formed idea about U.S. force posture, based on years of thinking and testimony before his House Armed Services Committee, and informed by the "base force" concept Chairman Powell had already begun. The goal was to shrink the force, but guided by a set of strategy considerations.

The process of downsizing the force was already well underway when he took office. Secretary Cheney and Powell had already drawn down roughly 500,000 people from the Cold War force. In his first few months, Aspin was confronted with budget realities: The planning process for the first Clinton budget had lowered the resources he thought he might have. So the BUR was immediately "resource constrained," and the force had to come down even further.

The BUR was a new process; Pentagon planning processes before then had always been ad hoc and informal, at best. There was no QDR around to compete with it, or run parallel to it. In fact, the BUR could be seen as the "parent" of the QDR, which first took place under Secretary Bill Cohen in 1997.

Now the Pentagon is in a different place, and it has a different institutional problem. The QDR is a statutory requirement and has, as the deputies rightly point out, been "captured," as many Pentagon processes are, by the services. This makes the process a forum for advancing service goals, but not a process which the secretary can use to set overarching priorities for the Department. But it is and should be the secretary's tool. Unfortunately, instead of stiffening the secretary's spine so he can recapture his planning process, the deputies' proposal of reinstituting the BUR would either leave the QDR churning away in parallel under the old rules or abolish it altogether (the deputies leave this entirely vague).

The real problem for Chuck Hagel is that over the past 12 years, the military services have captured much more than the QDR inside the Pentagon. In an era of runaway resources, they had no incentive to rethink strategy or make hard choices; they just spread out to do everything, as the last two QDRs have done.

When the time came to make hard choices -- the last two years -- the services have railed against the necessity, still arguing for everything, trying to plug the leaky fiscal dike with their fingers. And in the most recent round of the sequester battle, the White House made the tactical decision to step aside and let the services become the poster child for the entire budget war, further encouraging them to wander outside the box of proper civilian control.

One of Secretary Hagel's most important challenges, then, is to reassert civilian control in the Pentagon. The services are magnificent, in many ways, but they have not been disciplined for more than a decade -- disciplined about what really matters: planning sensibly to spend the resources the Pentagon will have to perform the military's missions.

The best managed drawdown, for that is what Hagel will oversee, depends on his gaining control over the existing machinery, not inventing new machinery to run parallel or instead of what exists. Instead of abandoning the QDR, he should be encouraged to embrace it, make the QDR a resource-driven exercise, and run it from his office using his staff.

Above all, he should ensure that it is focused on doing what the deputies recommend: producing options for strategy, mission, force structure, readiness, and equipment. And these need to be real options, such as the proposal made last week by former Navy CNO Adm. Gary Roughead that would dramatically shrink the ground forces and enhance the role of the Navy. That's an option, and it breaks a lot of china in the Pentagon. It should be on the table, and the services are unlikely to put it there.

And there are a few budgetary and management options the former deputies left out. In addition to this strategic rethink, and reducing/changing the personnel mix, the next QDR should tackle the two other big sources of Pentagon fiscal indiscipline: the back office (the administrative overhead which employs more than a third of the active-duty force), and the out-of-control acquisition system (which leads to endless cost growth for military equipment, delays in production, and diminished capabilities from those promised).

These two major problems seriously compromise the secretary's effort to keep the point of the spear sharp, because they devour the shrinking resource pie. And they pass unmentioned by the former deputies.

Shrinking resources and sequester are, like the Chinese symbol, both a crisis and an opportunity. The arrival of a new secretary and the start of the next QDR strategic review are the place to start.


National Security

26 Days Later

On March 27, the sequester will rise from the dead.

Just one more day of garment-rending, teeth-gnashing, and hair-tearing at the Pentagon, and then...well, then the Department of Defense has to get cracking before the roof really caves in on March 27.

Oh, you thought the fight was about March 1 and sequester? Not half likely, as the Brits would say. The real game has always been about March 27, when the continuing resolution, which has funded the government for the last five months, expires. That's when the government shuts down or, if it doesn't, when we find out how much money the Pentagon really has to spend this year.

Sequester is happening. While the White House continues its theater and the president goes on the road, realism has set in about this show -- even among congressional Republicans. When House Armed Services Committee Chair Buck McKeon is ready to fold his cards after nearly two years of non-stop campaigning to "save defense," you know the fat lady has sung on the March 1 deadline: "Republicans aren't cookie cutters, but we do agree on the basic premise of where we're trying to go. And if we don't get our fiscal house in order, it's very hard to provide for the defense of the nation."

Now it's time to get on with the business of managing the defense drawdown, starting with the walk over the next hurdle. The real deadline has always been March 27. Deputy Secretary of Defense Ash Carter effectively conceded this point on January 10, when he instructed the military services to start planning for cuts not only because of the impending sequester, but also because of the continuing resolution, which kept FY 2013 discretionary spending (including defense) at the FY 2012 level, pending passage of an actual appropriations bill.

Planning was particularly critical for what is called the operations and maintenance, or O&M, account. The O&M budget -- which makes up over 40 percent of the Pentagon's total budget -- covers everything from the costs of sailing ships, to driving tanks, to flying planes, to maintaining bases, fixing equipment, training and educating the force, to, especially, the salaries of the 800,000 civilians who work for DOD. It is particularly vulnerable to sequester because other large Pentagon expenses will not be cut through sequestration. Military personnel and their benefits (including retirees) are exempt under the law, and dollars already obligated to contracts shield contractors from the near-term impact of sequester.

What's more, DOD had actually wanted to grow the O&M account, asking for a 6 percent increase when it submitted its FY 2013 budget request. And, adding insult to injury, during the first quarter of this fiscal year, the Pentagon actually spent its operations and maintenance funding at the higher rate it had requested -- not the FY 2012 level funded in the continuing resolution. "Silly us," Deputy Secretary Carter said of that mistake. That's why March 27 represents a real reckoning point for the Pentagon.

So the questions are: Will Congress negotiate a final appropriation for FY 2013, or just extend the continuing resolution through the rest of the fiscal year, leaving the Pentagon (and other agencies) at the FY 2012 level of funding (and still subject to sequester)? Or will there be an actual appropriation for the military, setting a final level above the continuing resolution (also still subject to sequester)?

Whatever the new level for the defense budget after March 27 (it is likely to be less than what the administration asked for), it sets a new baseline for the sequester itself. Then the question is, will Congress use the occasion of passing a new CR or an appropriations bill to "fix" the sequester? Will the bill be used to give the Pentagon greater flexibility to implement the sequester or change the allocation of dollars inside the defense budget to make the implementation of the sequester "easier" in some way? Will it change the caps set out in the Budget Control Act, so the sequester is reduced, or not needed altogether?

If this sounds complicated, it is because it is complicated -- very complicated. Congress cannot just appropriate more money to Defense and "fix" the sequester that way. Doing so would just set a new baseline from which sequester would take place. So to "fix" the sequester, they have to do something about the caps set in the Budget Control Act, which put the whole train wreck in motion.

And trying to fix it in an appropriations act is even more complicated. I was talking this through with Richard Kogan at the Center on Budget and Policy Priorities, one of the best informed people in Washington on this issue. It seems that if Congress tries to add money to Defense but doesn't want those funds to create a new target for the sequester, they would have to ask, specifically, that those additional funds not be "scored" against the sequester target -- a fancy way of saying, these monies just don't count. If they try to cancel part of the sequestration, they would have to say the cancellation doesn't count.

Either way -- in fact, almost any way the Congress tries to use the appropriations act to fix sequester or make it easier, including greater flexibility -- would encounter the reality that they are messing with the basic congressional budget statute and process. Meaning that the jurisdiction for these changes belongs not to the appropriators, but to the budget committees.

And if the budget committees do not sign off on the changes, they are subject to what is called a "point of order" in the House and the Senate. Meaning that the House might not be able to consider them, and one member of the Senate can stop the process. Imagine Senator Rand Paul or Tom Coburn saying, this will not stand; I prefer sequester. Then the Senate would need 60 votes for the changes in order to overcome the sequester.

I told you it was complicated. It makes it sound like a deal at the end of March is going to be almost impossible, given the current atmosphere. If sequester doesn't kill you, the appropriations and budget process will. And if you don't get agreement in the maze of requirements and provisions I just described, you could get a continuing resolution that goes through September, plus a sequester, or maybe even the cherry on top -- a government shut-down.

It's going to take a lot of good will to climb this mountain, something that is in noticeably short supply in Washington right now. Just take flexibility about how to enact the cuts: The administration says it doesn't want it and it won't help, because everything gets hit anyway, particularly operations at DOD. And if the administration has it, they have to make choices, choices that could get them in trouble with members of Congress whose oxen are gored. Congress is uneasy about it for the same reason -- it gives the administration too much freedom of action. Members of Congress hate that, especially appropriators. Furthermore, flexibility will only be politically possible if every agency gets it; otherwise, a defense-only flexibility bill is unlikely to make it through the Senate.

It's going to take some very heavy lifting to fix sequester, and even more lifting to get an appropriation. Even thinking about it gives Members of Congress (and analysts) a headache. The bottom line is that the defense bottom line is coming down, and the only question is how fast and how far.