The Pentagon's budget imagines spending levels that are not based on reality. This isn't just a problem for now, but a problem for the next five years.
It's budget season in Washington. Every year at this time I am hopeful that the Pentagon might finally escape Wonderland and wake up. And every year at this time, I am disappointed -- but not surprised -- when it does not.
Although the Pentagon won't make the budget public until March 4, Defense Secretary Chuck Hagel provided a sneak peek, which shows some progress in the effort to get real about defense resources. That is to say, the Defense Department budget for fiscal 2015 is consistent with the budget deal struck last year by Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.). And the Pentagon has abandoned the notion that future defense budgets should reflect last year's unreal Pentagon forecast. That's the good news.
The bad news is that Hagel's current forecast is still not real. It could work, but the budget castles he designed for between 2016 and 2019 are built on quicksand, which is a real problem for defense planners over the next five years.
Good news first. Plans involving Army cuts seem to be based in reality. Gen. Raymond Odierno, the Army's chief of staff, used to argue that the Army could not perform its missions with less than 490,000 in the active-duty force. Shrinking the budgetary appetite means shrinking the Army to a smaller force, and Hagel plans to do that -- maybe to 440,000.
Headlines falsely stated that the proposal would "shrink the Army to pre-World War II levels." This is simply not true; the Army, in fact, would be larger. And we don't live in Hitler's world -- there is no major enemy ground force surging into other countries that the United States needs to confront. Moreover, this ain't the conscript Army of yesteryear -- it is a well-armed, superior force any way you look at it, larger than that of almost any nation the United States might fight (except that of China, which it wouldn't fight on the ground) and the only one that can be deployed around the globe.
The Army needs to shrink, to reflect the end of the wars and the reality that the Pentagon's own strategy rules out large, long-term stability operations, like Iraq and Afghanistan. And, unlike the 1930s, there are now more than 500,000 U.S. Army guardsmen and reservists to call up in a time of need, if it ever arises. It is a better Guard and Reserve than ever, courtesy of the deployments in Iraq and Afghanistan -- quality force, for sure.
There is some reality in the hardware decisions, as well. Hagel proposes to retire the Air Force A-10 attack aircraft and the U-2 surveillance aircraft, saving some operating monies, plans to buy only 32 new littoral combat ships (instead of the original goal of 52), and wants to provide a mercy killing for the Army's latest failure in designing a new ground combat vehicle (on to the next one, I guess).
There is even some reality on the pay and benefits side, where spending has doubled per troop over the past 12 years, pay raises have exceeded the standard measure for wage increases in the economy, and health benefits have been extended to more recipients among the Guard and Reserve and the retiree community.
That last item costs taxpayers $1.4 billion a year. Takes some guts to try to end it: When I was at the Office of Management and Budget in the 1990s, we tried to end the subsidy, but it was the one proposal that was certain to ensure the presence of every four-star officer at a Defense Resources Board meeting; thus, it was rejected time and time again. Guess who likes the benefit? Retired officers.
OK, so now for the unreal part -- the Wonderland adventure. The new Hagel budget still imagines that the Budget Control Act and its spending levels are higher than what they actually are, when, in fact, the Budget Control Act caps are lower than Hagel's numbers -- $115 billion lower over the next five years. He has not gone far enough.
Even in 2015, when the Hagel budget accepts reality, he has added an asterisk. There's a little $26 billion boost he would like to get, as part of a White House proposed investment fund, that would be above the Ryan-Murray cap. This is the first step back into Wonderland -- this magical investment fund will not happen. Republican Rep. Mac Thornberry, who is likely to be the next chair of the House Armed Services Committee, has made it clear that the House majority will abide by the Bipartisan Budget Act. Rep. Ryan, chair of the House Budget Committee, will agree. If it can't pass the House, it will not happen.
The return to Wonderland gets even worse in the out-years. The secretary's four-year budget proposes $115 billion in spending above the 2011 Budget Control Act's caps between 2016 and 2019. The White House may have encouraged him to do this, but he took the bait and ran with it. But allowing the military services to imagine there will be more money down the road than the act provides is a dangerous temptation, one the secretary should have resisted.
The Budget Act is real; Hagel's projections are not. But bad budgeting is the result of this misstep. Unlike the domestic agencies, the military actually plans out its future budgets in excruciating detail, putting in programs it thinks will actually happen. My guess is that the services were given a higher budgetary target than the Budget Control Act caps and then were asked what would disappear if the Pentagon were forced to live at the caps. Needless to say, planned that way, the things that fall off the table sound like military disasters: The Army would have to shrink to 420,000, which is too small. The Pentagon would have to eliminate all the KC-10 tanker aircraft, dry dock a lot of ships, suspend the Navy version of the F-35 fighter for two years. "The resulting force," Hagel said, "would be too small to fully execute the president's defense strategy."
That's not the only unreality in his budget plan. He proposes cutting the housing allowance subsidy that troops receive from 100 percent to 95 percent of the total cost; he wants to raise co-pays and deductibles for the military's health insurance scheme; and he wants to eliminate the taxpayer subsidy provided to military commissaries. They are not bad ideas, but they are unreal, politically. Congress will not allow it to happen, any more than they were willing to swallow the lower COLA for military retirees under 62 years old that Ryan and Murray built into their December 2013 budget agreement. Congress reversed that one in a second earlier this month; Hagel's proposals will fare no better.
His plans even contradict the very rules he laid out in his budget preview -- compensation changes need "a holistic and comprehensive approach," not a piecemeal one, he said. But his approach is entirely piecemeal, and it will fail, as it has before, leaving future budget planners with the task of finding the savings somewhere else.
Same deal with the savings he would get from closing more bases starting in 2017. The United States has only had one base closure round in the past 15 years, and it didn't save a lot of money because a lot of it involves consolidating forces into other existing bases, which cost money for construction and expanded operations.
I give the Pentagon team credit for not getting all the way down the rabbit hole, but the price of not awaking at the end of the story is that the dream is still not "real." Congress is unlikely to fix this problem; year-by-year they will just vote less money than the services expect and the planners will have to rewrite the plans.
What the secretary should have done is to instruct his budget planners to do their work assuming the 2011 Budget Control Act caps were real, write the best plans and choose the best programs at that level, and go to the president with an honest accounting of the forces' capabilities and missions at an acceptable level of risk. He didn't do that; reality will have to wait.
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