Great Expectations

Are the Pentagon budget planners encouraging bad behavior?

For the past three years, we have been bathed in pathos, hand-wringing, and garment-rending as the Pentagon faced declining budgets and the sequester cliff. But with the Ryan-Murray budget agreement for the next two years finalized last December and ratified in detail by the appropriators in January, it would seem the long nightmare is over.

Washington may be struggling in the snow, but the air is full of springtime and summer joy for the Pentagon, its contractors, and its congressional supporters -- or so it would seem. "White House Pushes Budget Hike," hollers the Defense News headline. There is talk, reported there, that the Obama administration may send up a budget on March 4 that will include a $26 billion list of "wants" that the military services would love to have next year, if they just had a little bit more funding than the Ryan-Murray agreement provides. That same FY 2015 budget is likely, moreover, to include projected DOD funding for 2016 and beyond that is higher than the caps currently in place under the Budget Control Act (BCA).

But are "Happy Days Here Again" for the Pentagon? Well, if you have been reading this column for the past 18 months, you know that happy days actually never left the Pentagon behind. Defense spending, even after the sequester last year, is at a level unmatched in any year from 1945 to 2006, in constant dollars. Even the 2013 sequester was manageable, without doing long-term damage to military capabilities or, for that matter, military readiness.

Congress made sure of that last month when it not only increased the DOD's budget above the sequester amount, but approved more than $85 billion in so-called war funding (the Overseas Contingency Operations funds). This represented $5 billion more than the administration had asked for and included $10 billion in operational funding (some of which is readiness-related) that the appropriators slid over from the base budget so they could make room for things the Pentagon did not want and did not ask for -- but were definitely congressional pet rocks. These included the Global Hawk Block 30 UAV (which the Air Force wanted to ditch), and money for armored vehicle plants in Ohio and Pennsylvania (which the Army wanted to mothball). And the whole $85 billion in "war funding" is not counted toward the budget caps. From a budgetary point of view, the Pentagon has solved its readiness problem and done it "for free."

The way I see it, the Pentagon was already happy, and deliriously so, well before the Obama White House decided it would load it up with more money -- and not just on top of this year's budget caps, but well beyond 2015. It is sad that they have decided to play this game. Letting the services put out a wish list just postpones the day of reckoning and encourages bad budgetary behavior.

Is it really true that the days of wine and roses are here? Not really. There are still hard choices ahead. To understand this reality, we need to understand "baselines" in budgeting -- just what, exactly, was the Pentagon's budget plan for the future prior to the Budget Control Act and the sequester of last year? Was it more, even much more, than what these proposed increases from the Budget Control Act would provide? Definitely, about a trillion dollars more. The Pentagon's problem now is that the planning appetite for money and things was way beyond what the forthcoming budget is likely to offer. When first Bob Gates and then Leon Panetta complained that the defense budget was being "cut," they were playing this baseline game. The cuts they were complaining about were from the appetite baseline -- from a budget play that they thought would grow more than 2 percent every year above inflation.

When actual defense funding began to come down in FY 2011 -- instead of growing as hoped -- the services were watching those delusions of endless growth disappear. Future budgets began to look flat. First the services would only see their budgets grow by the rate of inflation, meaning that they could buy the same things, but no more. Then, as more budget realism reached Congress, the Pentagon would not even get growth with inflation. And then the BCA hit, followed by sequestration, which took the expected funds for FY 2013 down more than $30 billion below what the Pentagon thought it had for last year. It was time to forget about illusions of growing resources.

The funny thing about budgets is that this baseline -- the point from which we start counting what is going to happen in the future -- keeps changing every year, as new budgets are passed and new forecasts are provided. So, between last year's sequester, which set a new, lower starting point for 2013, and the Ryan-Murray bill, which only slightly improved on the baseline after sequester, all those future budget projections keep starting from a lower level than they did in the previous year.

The Pentagon has played this baseline game for decades; optimism and hope about future budgets have always prevailed over common sense and history, especially after a war. The bottom line is that we remain in a defense drawdown, with a defense budget that has actually gone down every year since FY 2010, and today we have a projected defense budget that is now well below the appetite the services counted on just two years ago. If you look at the space between the healthy appetite of two years ago and the likely budgets today, more than $1 trillion in total has disappeared from the 10-year wish list the service chiefs once had. And the safety blanket that by now much-abused war funding has provided is slowly going away (a lot of it stopped funding the war and supported basic operations several years ago).

I'm not worried. Politicians and policymakers have put plenty of cushioning in this budget, even at levels lower than those previously wished by the services. The defense industry, too, has clearly adjusted to the new environment, saving its dollars and adjusting its business. It now feels that the worst is over. Or, as Raytheon CEO Bill Swanson put it: "[I]f you look at '16 and look at the numbers, it [the defense budget] ticks up even under sequestration." Of course, he has to say that. He's hoping for some of those funds (although he's making a dangerous error -- what looks like growing budgets is really only just adding inflation to the budget from the previous year's budget, not new, additional funding). And, as long as the war budget is available, the politicians on the Hill will be able to put things back into the budget that the Pentagon wants to take out -- like funding for the Ohio and Pennsylvania armored-vehicle production plants, keeping a carrier from being retired early, and preventing the Air Force from retiring its whole fleet of A-10 close air support aircraft.

But a lot of tough choices remain for the DOD, because even though the defense budget looks like it's going up, those budgets won't buy what the services wished for even two years ago, much of which is still in the plan. The budgetary rock has rolled down the hill, so the pushing gets harder. It means the Army is still likely to shrink to 420,000 service members, down from the 490,000 Gen. Ray Odierno wanted. The Air Force will still lose some squadrons; the Navy will still shrink. The rising costs for military compensation and benefits will still squeeze the rest of the defense budget. The huge costs of the DOD's back office will still weigh like an anvil on planners looking for savings -- and the civil service at the DOD will still shrink.

These are the tough choices the new Pentagon leadership needs to focus on. Shame on the leadership for promising a wish and a prayer -- $26 billion in FY 2015 the services will never see, or another $36 billion in FY 2016 that is equally unreal. Those are counterfeit promises that let the services keep the unaffordable in their future plans until the day comes that the money is not there and the decision-making they should do now has become even harder.

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Gordon Adams

Echoes of 1914

A strange, dangerous, and oddly familiar era -- of declining American power, global rebalancing, and profound inequality -- is upon us.

We think we can predict the future -- though as physicist Niels Bohr noted years ago, prediction is very difficult, especially about the future. But in the first days of 2014 -- a year that happens to mark the 100th anniversary of the start of World War I -- some of the coming conflicts and challenges are pretty clear. We will hear a lot about the Syrian civil war, the fate of the Iranian nuclear program, conflict in Iraq, the departure of U.S. forces from Afghanistan -- not to speak of what applecart Vladimir Putin plans to upset next, whether the North Korean regime will implode, and whether China and its neighbors intensify their conflict over the rocky outcroppings they all want to own.

As we reflect on this anniversary year, however, there are deeper rumblings afoot, rumblings that will color and shape many of these conflicts. The same was true 100 years ago. The Edwardian era that preceded the Great War celebrated a pervasive view that war might be obsolete, and a blithe lack of concern among the wealthy about the rising tide of unhappiness at the gap in resources and power between rich and poor.

At the start of that new century, however, the shape of world politics was about to transform, while class conflict rose and shook the very foundations of the monarchies of continental Europe. Between these two forces, they would wipe out the Austro-Hungarian Empire, remove royalty from power in Germany, bring revolutionary turmoil to Russia, undermine the colonial systems established by France and Germany, and bring a new power -- the United States -- to the center of the world stage.

For all the differences in the current historical moment (and there are many), there are two eerily similar challenges that lie beneath the surface of these predictable conflicts today. Both will be hard for policymakers to manage, and both could usher in dramatic change to the international system over the next decade.

The first of these is the clear decline in the ability of the world's most powerful country -- the United States -- to act as the indispensable nation, particularly as the influence of other countries rises and the global system rebalances. The second is the yawning economic gap between rich and poor, both in the United States and internationally. Systemic geopolitical rebalancing and the wealth gap are already substantially reshaping the international system in ways that are hard to predict, just as the statesmen and politicians of the last century could barely see the conflict that would break out in 1914.

The power shift and rebalancing of the international system is even harder for many to adjust to. The United States appears to remain the most powerful country in the world. But it is a power measured today largely in one dimension -- the possession of the world's only truly global hard security capabilities: military force and intelligence. That's the surface reality. But something is clearly going on underneath the reality of that military power that is weakening the hold the United States had over the international system.

The decline in the role of the United States as system integrator, manager, and, for some, global hegemon (a trend I have already noted) continues to manifest itself at an accelerating pace. It is reflected most recently in widening disregard for expressed American desires and goals -- such as whether Japan should increasingly arm itself and extend its military reach beyond its own shoreline. It is found in the growing distance between Washington and its long-time ally in Ankara, as the struggling Turkish government blames the United States for its internal corruption problems and struggles to assert an independent regional role. Meanwhile, India attacks the United States for allegedly mishandling an Indian diplomat in New York, and reduces the privileges it had provided to American diplomats in New Delhi. Likewise, another traditional ally, Saudi Arabia, grows increasingly unhappy with U.S. policy in the Gulf region and becomes querulous and critical.

Each incident, taken on its own, might be explained away as diplomatic feather-ruffling, simply business as usual. But together they are becoming a trend, forcing Secretary of State John Kerry to flit from country to country, trying to dampen the fires. There seems to be some recognition that things are fundamentally changing -- just look at the apparent reluctance of the Obama administration to use its power to intrude into the myriad of conflicts that beset the Middle East and Africa. Leave peace enforcement in Africa to the African Union, the United Nations, or the French. Don't send the Marines. Stay at the edges of the Syrian conflict, not at the center. Encourage a peaceful solution to the disputes over the seas off the Chinese coast, but do not promise to send U.S. warships steaming into the middle of tense waters. And so on.

I don't think Washington has yet come fully to grips with the reality of systemic change. There is not yet a clear strategy to deal with a world in flux. But some of this reality seems to have penetrated, nonetheless. First, there seems to be a realization that, despite the global superiority of the U.S. armed forces, military intervention has lost what international popularity it ever had, partly as a result of the failed use of force in Iraq and Afghanistan. In neither country has stability been created, democracy implemented, or economic development established -- while regional security around these countries is less stable today than before the U.S. intervened with force. Other countries, and their populations, cast a more jaundiced eye today than they once did about American leadership, intentions, and capabilities.

This global skepticism about Washington's use of its hard power has been exacerbated by the exposure of the reach of U.S. "silent power" in the intelligence arena. The Snowden flakes that keep falling documenting the extent of America's global intrusion into private, public, and governmental communications have only accelerated. And the fallout is real: First, Brazilian President Dilma Rousseff cancels a state visit to the White House because the NSA was eavesdropping on her personal communications. Traditional allies in Germany and France are equally upset. Other governments are searching for ways to protect their information and communications systems from U.S. intrusion.

Second, not unlike the negative international reaction to America's power projection abroad, there has been a significant shift in domestic opinion about the nature of U.S. foreign policy and public willingness to countenance more hard power deployments into foreign conflicts. The latest Pew poll on these issues is dispositive. More than half of those polled think the United States "should mind its own business internationally and let other countries get along the best they can on their own." This exceeds the previous polling summit on this question in 1976, which was right smack in the post-Vietnam era. And 70 percent recognize that the United States has lost respect internationally, virtually as high as the Bush-era numbers in 2008.

What we see here is an opinion shift well within the historic American view of its global role -- a reassertion, not of isolationism, but of a more realistic engagement of a different sort. Rather than send the Marines overseas "in search of monsters to destroy" (about which John Quincy Adams warned back in 1821), the American people seem to be saying that we should engage through the power of example, diplomacy, and, especially, through economic means. In other words: Keep our noses out of other people's business, solve our problems here at home, and keep our military powder dry. Even the soldiers who fought to free Fallujah from terrorists just a few years ago agree -- the United States needs to stay out, today.

Inevitably, the realization that rebalancing requires rethinking U.S. policy and the nature of U.S. engagement is not universally popular here at home. To advocates of "muscularity" like Sens. John McCain and Lindsey Graham, the hesitation in the Obama administration's practice is a political fault to be criticized, not a global reality. Time to talk tough, send arms to Syria, assert some leadership here, tell others what they should do, for goodness sake.

The problem with muscularity as an answer is that we are in a period of system change, not business as usual. President George W. Bush tried the muscular thing and not only failed to reach his goals, but, in trying, simply accelerated the trend toward rebalancing. Trying to restore the "ancien régime" would not only be self-defeating, but dangerous, exacerbating global concern about the wisdom and intentions of the U.S. role. The world has changed. And being the muscle-bound bully will only lead to getting global sand kicked back in America's face, to military conflicts that it did not anticipate getting into. The "historical rhyme" (perhaps apocryphally attributed to Mark Twain) here of 100 years ago is pretty clear: Look to the presumed security European nations thought they would obtain by arming up in the years before 1914. The system was rebalancing, but the old order could not be preserved by arms.

The other eerie similarity to the era of 100 years ago is the revival of sharp distinctions in the national and global economies. The Pulitzer Prize winning author Hedrick Smith is not alone in documenting the major shift in income and wealth between the very rich in the United States in his 2013 book, Who Stole the American Dream? The disappearance of the American middle class is an economic, sociological, and, in the end, political phenomenon of enormous significance, one that upends the dominant American mythology of the 1950s and 1960s. It has increasingly divorced the very rich from the rest -- the so-called 99 percent. The gap has driven the United States down the global list of countries ranked by income disparity. Today, income inequality in America, measured by Palma ratios (the gap between the richest 10 percent and the poorest 40 percent) ranks the United States 44 out of 86 countries, well below most industrialized countries -- even below Nigeria, India, Iran, and, Egypt.

A similar trend in inequality is found in other countries around the world, which many analysts believe will lead to a rising tide of global unrest. Slowing economic growth in India could risk destabilization. Fissures over the unequal distribution of income and wealth in China are linked to provincial instability. And anger across the Middle East can be linked not only to religious and political tensions, but to the stubborn resistance in the region's economies to allow for the kind of growth that could create opportunities for millions of educated, but unemployed, youth.

In the Edwardian era, rising wealth was seen as a positive trend, one that would usher in an era of broad economic well-being. Instead, it reflected what Princeton professor Samuel Hynes described as a world of "estrangement and anxious uncertainty," in which a British upper class of "irresponsible rich, living in a new vulgarity and a strange new poor, living in new ugliness, were replacing the old class division of gentry and peasantry." Social conflict was the inevitable outcome.

We are clearly entering a time of global political and economic transition, where the shoreline of apparent stability is receding in the distance. We are on the waves of change, with the new shoreline -- the emerging international balance and the global economy -- not yet clear. It is going to make for hard sailing for U.S. foreign policy in 2014 and well beyond. Some will want to hang on to the apparent stability provided by U.S. military power; in a world of "uncertainty," they will say, military dominance is the best instrument of power.

But holding on to that instrument could well lead directly to destabilizing conflict. And the failure at the same time to deal, nationally and internationally, with the economic gap could exacerbate that conflict in unpredictable and dangerous ways. Welcome to the new year.

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