Mirage Across the Potomac

The Pentagon's proposed spending and savings are both totally unrealistic.

Boy, that upcoming Strategic Choices and Management Review (or "Scammer," in Pentagon speak) better be good. Because right now, the Pentagon's new FY 2014 budget submission perpetuates the illusion of business as usual.

The budget request willfully ignores reality in three ways: It treats sequestration and deeper budget decline like the ghost in the closet -- there, but not remembered. It contains a lot of wishful thinking about the hard choices the Pentagon faces, asking Congress for things Congress will not provide. And it projects growth for programs and forces that will not survive in this budget environment.

It is no wonder the mainstream press has generally ignored the defense budget this year. The reality is that DOD's funds are not at the center of public attention. The overall budget is, however, and the president's larger budget request actually takes some steps toward what might, in a parallel world, be a budget deal -- calling for higher tax rates for the rich, alongside Medicare means-testing and the chain-weighted CPI for social security.

Defense budget levels are just collateral damage in this bigger budget fight, as they have been for the last two years. They will be adjusted to fit any overall budget deal or will simply be nibbled away at, year by year over the next decade.

We will look back in 10 years time and realize that we have cut the defense budget more than a trillion dollars from the levels projected in last year's budget. And, by the way, we will still be, as we are today, the toughest kid on the military block, as the rest of the world sees us.

But that would be a realistic perspective. The defense budget request of nearly $527 billion is not. Sequestration is ignored altogether (well, not quite; the defense request includes the $4 billion in cap reductions for FY 2014, agreed to last January). It is, as everyone now knows, $52 billion above the revised budget cap for next year.

It may be good politics: "Look, we Democrats are defending defense and not vulnerable to the Buck McKeon charge that we are gutting security. Now over to you Republicans to one-up us on defense, gut domestic programs, resist putting revenues (even ones you proposed last December) on the table, prevent an agreement, and allow the sequester to happen." You can run on that record in next year's congressional elections, and good luck to you. I am shocked -- shocked! -- to find politics going on in this place.

The reality is that sequestration is happening this year. It is unlikely to be fixed. In fact, the administration is wrong in its calculation that big defense cuts this year will bring the Republicans to the table on the budget. After March 1, it became clear that House Republicans were prepared to live with the $42 billion in FY 2013 defense cuts.

For them -- for everyone, in fact -- the sequester is a kind of a Base Realignment and Closure round for the entire defense budget. Because it is automatic, its brutality and mindlessness can be blamed on a "process," a deus ex machina for which nobody can be held accountable, but which nevertheless lowers the defense budget. Democrats cannot be blamed. And Republicans will capture some much-desired domestic cuts on the way.

Behind closed doors, the services are starting to be more realistic about how achievable those sequestration cuts are this year. The days of "Doomsday" are gone. The furloughs have become a water mirage, disappearing as we drive into the future. The projected number of days civilians will lose between now and September 30 has gone from 22 to 14 to 7 -- and the Navy wants them to go away altogether, making other choices to live with less. And the department is planning to send a big reprogramming request to Congress to help deal with other sequestration impacts.

While Gen. James Clapper, the director of national intelligence, may be right that the impact of sequestration is "insidious, gradual, and almost invisible," it is the "invisible" part that is telling. Sequestration is exposing the fat, and starting the process of trimming it.

Suggesting the reality of the sequester will go away, as the budget request does, however, sends a contradictory message to Pentagon planners. It allows the services to continue to live with the illusion that defense budgets will be flat over the next decade. And they will not. What the services need to hear is that their resources are going down.

The budget fails that realism test. And it expands the illusion even further by promising cuts that will not happen. Like major increases in the fees younger retirees pay for Tricare health insurance. Like a new BRAC round or two. Like limiting pay increases for troops to 1 percent, almost a percentage point below projected wage growth.

None of these proposals will survive in Congress. And if a larger budget deal (even a short-term one) lowers the defense budget below the administration's request and the appropriators refuse to scoop up these proposed savings, the trade-offs they make will not make the services happy.

There is also a lack of realism in the projections for the size of the military force and the amount of hardware the services can afford. Army and Marine Corps "end strength" is still projected to decline to the previously planned 490,000 troops and 182,000 troops, respectively. But, in truth, they will come down further. The Army knows this, but it is still searching for new missions and requirements to justify the larger force (including giving ground forces a big role in the so-called pivot to Asia).

The budget's procurement plans are also unrealistic. The Pentagon is still planning to buy two Virginia-class subs every year. Still planning to spend nearly $9 billion over five years for a new bomber, even though the current ones continue to fly well. Still planning for that Army Ground Combat Vehicle it doesn't really need, given all those MRAPs and Strykers the Army bought over the last decade. And still hoping and praying that the F-35 is under control, so it can buy 29 next year and ramp up production.

As I have written a number of times, procurement funds are the first things to go in a defense drawdown. They are already down 20 percent in constant dollars between FY 2010 and FY 2012, double the 10 percent decline in the defense budget overall. The new budget documents show that projected procurement spending through FY 2018 is already 4.5 percent lower than the projection for the same time period offered a year ago, or over $20 billion less. But the lack of realism continues, fanned by the expectation that sequestration will be fixed and the new budget caps will go away.

Secretary Hagel's job is still in front of him: cutting through the illusions. The "Scammer" needs to start with an assumption about lower budgets than those currently forecast. It needs to pin the services down as to what they will do when lower budgets become the reality. It may do to play politics with the budget request to Congress, but anything other than tough signals to the services will do a long-term disservice to defense planning.

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National Security

Hagel Channels Eisenhower

Can the new SecDef actually rein in the military-industrial complex?

It was a New Yorker cartoon, I think, that showed two generals walking in front of the Pentagon, with one saying to the other, "Well, we've run out of money; guess we have to start thinking." Secretary of Defense Chuck Hagel started that thinking process in his speech at National Defense University on Wednesday. He is the first to really do so since we started flooding the Pentagon with money when we invaded Afghanistan and then Iraq.

Oh, the speech is full of some miserable speechwriter progeny. The boilerplate per square minute was almost indigestible: "a principled realism that is true to our values" (a Dagwood sandwich of prose, everything in the strategic fridge layered on top of itself), and "we are a wise, thoughtful, and steady nation, worthy of our power, generous of spirit, and humble in our purpose" (how could we, dare we, be anything else?).

But in and around this mindless rhetoric, Hagel got the problem right: It's about the money. And the money is going south probably for a number of years. Strategy and planning have to follow the money, not the other way around.

He was wrong to say that the Pentagon will be dealing with "significantly less resources than the Department has had in the past," as Mark Thompson pointed out on TIME's Battleland blog. Defense budgets, even down 10 percent over the past two years, are still higher than they have ever been since the end of World War II, in constant dollars.

And instead of drawing the line at the "cuts" Secretary Panetta made (that $487 billion in reductions to projected budget growth over 10 years), Hagel was clear that the Pentagon now needs to plan for further reductions, perhaps as low as the full sequester. (Realistically, I would suggest even lower than that.)

But instead of saying these lower budgets will turn the United States into a second-rate power, or undermine national strategy, or decimate the nation's military capability, his message was clear: It is time to adapt, change, reform, and move on. If the Pentagon wants funding for the point of the spear, he said, it will need to zero in on the real budget issues: military hardware that has cost too much for decades; a system of pay and benefits that has spun out of control; and, especially, a "back office" that is over-stuffed and hasn't faced budgetary discipline in decades.

As the secretary said, everything we buy costs too much, takes too long, and falls short on performance. The Government Accountability Office has reported that recent reforms to the way the Pentagon buys equipment have lowered cost growth in hardware programs. Maybe, maybe not. (A large part of the cost change has come simply because programs have been finished or cancelled.) It is certain that costs will not stay down unless the secretary follows weapons programs closely. Maybe Hagel will; most secretaries do not.

He raised good questions about personnel costs, too, like healthcare fees and pay raises. Like how many civilians and military the department really needs. And how many officers, and what about all those folks who are doing commercial, not military work? If any secretary wants to take this on, he does so gingerly, and at the edges, the way Secretary Gates did, but a full assault is needed to make any real progress.

Above all, Hagel addressed what he once called "bloat" at the Pentagon -- too many headquarters, too big a Joint Staff, a plethora of offices. The back office needs to be the cutting edge of budget discipline; it is too often ignored in debates about whether weapons or uniforms will pay the price.

Like all good speeches, and all puddings, the proof will lie in the eating. So far, the signs aren't good. The terms of reference for the Strategic Choices and Management Review (known as "scammer" in the Pentagon -- an unfortunate acronym) Hagel ordered did not make it clear that program options were needed at much lower budget levels. And the secretary may have made a strategic error in saying that the entire building, including the service chiefs, "are going to come out of this together." The big, hard choices are the ones the chiefs do not like to make: cutting billets, offices, infrastructure. The operating budgets have historically been cut the least in a defense drawdown. They are the pet rocks, the bulwark of service turf. And to cut them down to size, the secretary is going to have to discipline the services, not bear hug them. It will not be easy. He will need to lay down the law and take the money.

In fact, the whole task is going to be unbelievably difficult. Because if Hagel means business, he is taking on the Iron Triangle, all three parts at once. He is going after the services' cherished possessions. He is going after the programs and basing infrastructure Congress loves to protect. And he is telling industry and the communities that house bases and offices that some of them will not survive.

Few secretaries have done this and gotten away with it. Eisenhower, whom Hagel quoted twice, could do it because, well, he had five stars and the highest-ranking officers had only four. Nixon could do it because the war was ending and his defense secretary, Melvin Laird, was one of the best pickpockets the Pentagon has ever seen. And Dick Cheney and Colin Powell could do it because they were Cheney and Powell.

Every drawdown is tough. This one should, in theory, be less tough because the budget is historically high. But the problems are historically tough, too. So we should wait a while, spoon in hand, for the pudding tasting, to see if the rhetoric this week is followed by the discipline it will take to bring the Iron Triangle to heel.

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