The Myth Dies

Last year BFAD’s Gordon Adams and Matthew Leatherman took to the pages of the Washington Post to debunk the myth that Republicans like defense spending while Democrats do not. Matthew returned to the same point during an event Monday on the Hill:

There is an idea percolating in Washington right now that Democrats favor defense cuts and Republicans don’t. That hasn’t been substantiated by the evidence as far as I can tell… When you adjust for inflation, our national defense budget has been declining for the past two years. That’s this Congress. Even if the high end of the appropriations, which is the House side, were enacted, it would still be a nominal freeze. And again, adjusting for inflation, it’s a cut. It would be year three of cuts. We are already two years into this build down; a third year is coming irrespective of what position is enacted.

New data from our survey, conducted together with the Program for Public Consultation and the Center for Public Integrity, inspired this event and showed that both Republican and Democratic congressional districts support defense cuts.  To hear more about what defense budget average Americans would build, see C-SPAN’s video of the event.

Defense, Jobs, and the Making of Hypocrites

Updated from the 30 Oct 2011 post on Capital Gains and Games and the abridged the Will and the Wallet post

Defense budgets go up and down.  They have ever since the end of the Second World War. We are in a build down today, one that is likely to continue for the next decade, regardless of what happens to the shadow play about a defense sequester and the full court press coming from Sens. Ayotte, McCain, and Chairman McKeon, and especially the defense industry, which is once again threatening pink slips and job losses from defense cuts.

Start with the facts.  The current projection of a flat defense budget (there have been no projected cuts yet) is the most moderate and shallow build down we have ever experienced since the end of the Korean War.   The current flat budget projection is not a cut, but it is less than the previous projection (done in the FY 2012 budget) by about 8%. The last three defense build downs saw defense resources actually fall, on average, 30% in constant dollars over ten years.  Even with a sequester, the overall cut of an additional $500 billion, in round numbers, would be only 17%, and that’s from a budget that was projected to grow.

We’re a long way from "doomsday" and all the political hair tearing, garment rendering, and teeth gnashing.  But the “defenders of defense,” are back at it on the jobs front, arguing, again today, that such a build down will cause a terrifying loss of more than one million jobs in the economy, something we can ill afford in a soft labor market with high unemployment.

The jobs argument is on the table because the Aerospace Industries Association (AIA) has just updated its jobs study from last October.  The study and the argument ought to be dismissed out of hand for what they are: flawed and hypocritical.  This is a side show about the economy, not a straight-up argument about whether defense should be affected by deficit and debt reduction, and whether we can or need to continue spending the highest sums we have ever spent on defense, peacetime or wartime, since the end of World War II.

But let’s examine the argument on the purported merits. 

Click to read more ...

Tuning Out the Static

Confusion and rumor are swirling around the sequester scenario, as a glance at almost any newspaper these days will indicate. To take one example, last week The Economist published an article saying:

Military pay and benefits are exempt from the sequester, as are “overseas contingency operations” [OCO] (the war in Afghanistan), so the money will have to come out of a remaining defence pot of $375 billion.

In fact, neither military pay nor OCO has been exempted from sequestration. The Budget Control Act allows the President to choose whether to exempt military compensation, but no decision has yet been made.  (See reference mid-way through this article.)  Also, contrary to The Economist’s description, OMB already stated in letters dated May 25th and June 15th that OCO will not be exempt from sequester. According to the May letter:

Funds designated by Congress for OCO are subject to sequester, provided that those funds are not otherwise exempt… BBEDCA does not provide any special exemption for spending on OCO, meaning that those funds are generally subject to sequester.

Studious Will + Wallet readers will notice that the media’s quickening drumbeat on sequester doesn’t mean that new stories are being broken, or even that old stories are being clarified.  Indeed, when The Economist rightly reported that in “nothing much [regarding a substitute deal] is likely to happen until after the election in November,” it could have extended that conclusion to most other aspects of sequestration.

More than Just Strategy

Rebalancing toward Asia, a cornerstone of the administration’s strategy, implicates the military’s ability to strike over long distances, and that in turn draws attention to air and naval power projection.  It thus should come as no shock that Air Force Maj. Gen. Michael Holmes* believes that:

The B-1's [penetrating bomber] capabilities are particularly well-suited to the vast distances and unique challenges of the Pacific region, and we'll continue to invest in, and rely on, the B-1 in support of the focus on the Pacific directed in the president's new strategic guidance.

Looking back over recent history, though, makes this statement a bit more surprising.  Just last year, as part of its FY2012 budget request, the Air Force proposed retiring 6 B-1 bombers (see pg. 50).  That decision put it squarely at odds with Representatives like Randy Neugebauer (R-TX) and Kristi Noem (R-SD), whose districts includes the B-1 jets of Dyess and Ellsworth Air Force Bases.

The result was a compromise: the FY2012 National Defense Authorization Act (see §132) permitted the retirement of 6 B-1s, but only after the Air Force provides “a modernization plan for sustaining the remaining B-1 bomber aircraft through at least calendar year 2022.”  In other words, statute now commits the Air Force to no additional retirements in the near term.

As we observe the B-1 program over the next decade, it’s important to bear in mind that the Air Force may “continue to invest in, and rely on, the B-1” for more reasons than just strategy.

*Holmes is assistant deputy Air Force chief of staff for Operations, Plans and Requirements.

Keep Calm and Carry On

Defense industry firms are turning up the heat surrounding the sequestration debate, raising threats that federal law will require them to send off hundreds of thousands of lay-off notices just before the upcoming election. A recent article by Bloomberg puts these claims into a clearer context—a context that looks a lot like our own Gordon Adams has described. 

To employment-law attorney Margaret Keane, giving mass dismissal warnings in such uncertain conditions looks more like a lobbying tactic by corporations trying to ward off the cuts than an effort to follow the letter of the Worker Adjustment and Retraining Notification Act.

A point echoed in the article by Byron Callan noted:

“That’s more a scare tactic than something that aligns with the underlying reality of how sequestration works,” Callan said.

Borrowing from a historically popular saying of the UK, we must be mindful to keep calm and carry on without focusing too much on the smoke being blown around sequestration.

The $2.1 Billion Coincidence

The United States has a long and convoluted history of foreign aid with Pakistan, something the Government Accountability Office has researched extensively. According to a GAO report, funds provided to Pakistan towards the goals of increasing counter-terrorism operations in the FATA region, dismantling nuclear networks, and ensuring that Pakistani security forces are not “subverting the political or judicial processes of Pakistan” are not subject to certification that ensures cooperation and national security goals are met. In short, 88% of the funding may not be utilized entirely towards its stated goals. In our report, A New Way Forward: Rebalancing Security Assistance Programs and Authorities, Gordon Adams and Rebecca Williams note this general issue with all aid programs:

There is no oversight mechanism that collectively evaluates all US security assistance programs, and no metric that challenges or supports when or whether to provide assistance. That information is essential to major policy judgments, such as: Is it worth it? Is it enough? Is it sustainable? Does it support US policy goals?

If U.S. objectives as stated in the GAO report are not being met and there is a systemic lack of oversight, there must be some unstated policy goals being met for the U.S.-Pakistan relationship to continue. Earlier this month, Secretary Panetta asked for $2.1 billion for increased shipping costs in a reprogramming request. The billions would cover the increased costs due to Pakistan closing supply routes through the country last November. But after the recent U.S.-Pakistan reconciliation, one of the unstated goals may seem clearer.  The U.S. is now saving a great deal in shipping costs and Pakistan will begin to receive its aid payments withheld since November that coincidentally total to about $2.1 billion dollars this year. With an apology, we save billions, are able to resupply troops in Afghanistan and will transfer appropriated aid to continue our convoluted relationship with Pakistan.

More Method Than Amounts

Secretary Panetta has repeatedly emphasized the mechanism rather than the scale of sequester, as he did in a recent Pentagon briefing:

The sequester will cut another $500 billion across the board from our national security budget, and do it in a way that threatens to hollow out our national defense.

This remark suggests that the nature of sequestration, not necessarily the resulting overall funding levels, threatens to “hollow out” the armed forces. In Senate testimony last month, Panetta even seemed to suggest that if the mechanism of sequester were changed, there might be room to “do what is necessary":

[Sequestration] would result in a doubling of cuts -- another $500 billion that would have to be cut through this kind of formulaic, meat-axe approach that was designed into that process. And it would guarantee that we hollow out our force and inflict severe damage on our national defense… I know the members of this committee are committed to working together to stop sequester, and I want you to know that we are prepared to work with you to try to do what is necessary to avoid that crisis.

His remark about being “prepared to work” to avoid sequestration indicates that, if further cuts prove inevitable, he’d rather have them made in a strategic manner. And shortly after the testimony, the Senate Armed Services Chairman, Carl Levin, floated the possibility that more cuts done through a different mechanism than sequester might offer a solution, setting up a dynamic we’ve previously said is more likely than sequester.

Brief Analysis of the SFOPS Committee Bills

We'd worried the President's requested increase in International Affairs funding would be a tempting target for cuts by Congress.  It was. Although movement between base and war funding complicates analyzing how funds are allocated, looking at totals gives a sense of the different priorities of the administration, House, and Senate. Looking at the House and Senate Appropriations Committee reports for State and Foreign Operations, the committees both cut from the administration’s request but did so to different degrees and in different ways. The House made substantially deeper cuts than the Senate, shaving 11.6% ($6.3B) off of the President’s request, while the Senate cut by a smaller 4.7% ($2.6B). Beyond overall funding levels, the House and Senate agreed on some budget priorities while sharply disagreeing on others.

Notably, both Committees cut deeply into the State Department’s operating costs, each slashing about $2.5 billion, or about 22% of the President’s request, from State’s Diplomatic and Consular Programs account. In fact, this cut accounts for over a third of the House’s $6.3 billion overall net cut and falls only about $50 million short of the Senate’s net cut. In effect, both chambers cut deeply in ongoing expenses and, by comparison, generally spared programmatic funds.

The House and Senate nonetheless starkly disagreed in other areas. While the House was relatively generous to International Security Assistance, cutting it considerably less than average, the Senate cut nearly 20%, or five times its average reduction, from security assistance programs. On the other hand, the House and Senate reversed roles in the areas of Multilateral Economic Assistance. The House made a deep, nearly 25% cut to these funds, particularly in various contributions to international financial institutions, while the Senate created a 13% increase in Multilateral Economic Assistance by meeting or exceeding the President’s request on every single line item in that area.

For all of their disagreements, there were also some areas where the House and Senate agreed that the administration’s request was way off base. They both rejected the administration’s proposal to cut the Democracy Fund appropriation while making total or near-total cuts to debt restructuring programs run by the Department of Treasury, Conflict Stabilization Operations, and the Pakistan Counterinsurgency Capability Fund.

Considering that there hasn’t been a standalone foreign operations bill since FY 2006, further progress on SFOPs appropriations will probably take place in the context of a consolidated appropriations bill. Nonetheless, with the House and Senate committees disagreeing so sharply with the administration and each other in several areas, it will be interesting to see how these differences are reconciled moving forward.

The American Public and Defense Spending

Last week at the Council on Foreign Relations, BFAD’s own Matt Leatherman took part in a roundtable, What Does the Public Really Think About Defense Spending? When discussing our recent survey on the subject, Matt noted:

If we are on the right track strategy wise; respondents want it to be much stricter. They think policy makers have been too tentative policy wise. They cut the budget by about 18% on the item by item basis. That’s a figure of $103.5 billion …American’s views, as expressed here, are one of the reasons why national defense will remain on the table after the election for whatever deal is struck to replace sequester. The debate is not necessarily about sequester. The debate is about what happens to the defense budget trend and the biggest takeaway from this survey is that Americans have some opinion on what that trend ought to be.

Though there’s been a lot of shadow plays and sideshow about sequestration’s effects, the public doesn’t seem terribly perturbed by more defense cuts.  To hear this panel discussion in its entirety, listen to CFR’s podcast of the event.

Quality, Not Quantity

HASC Chairman Howard “Buck” McKeon has recently discussed the effect sequestration will have on the United States using facts—just facts without much context:

America would have its smallest ground force since before World War II, its smallest n Navy since before World War I and its smallest air force Air Force in the history of the service. Sequestration would limit America’s power and influence in the world and restrict our ability to defend vital interests.

Not only are we likely to have the smallest forces ever regardless what happens with sequester, it’s not clear these smaller forces are any less capable.  As the Navy’s own Vice Admiral Dirk Debinnk stated “that our fleet today is far more capable than any fleet than we've ever had in the past, irregardless of numbers.” Sometimes it is quality over quantity.

Not So Automatic

The defense industry, Pentagon officials, and members of Congress have been predicting all manner of nasty consequences if defense budget sequestration happens as planned next January. Our own Gordon Adams’ recent column for The Hill, however, puts these concerns in perspective:

What Congress makes it can unmake, and unmake it Congress will after the election, carving out a new short-term deal from the many issues on the table: the debt ceiling, tax cuts, a doctors’ payment fix, the alternate minimum tax, payroll taxes. Congress will boot sequester down the road, and continue to argue.

As we pointed out last year, four of the five previously planned sequesters have been eliminated or scaled back. This time, Congress might prove slow to act and do little more than put the issue off for another year. Nonetheless, don’t hold your breath waiting to see the dreaded “meat-ax” of sequestration come slicing down on the defense budget in January.

The Sequestration Sideshow

BFAD’s Gordon Adams has a few insights to share on the sideshow occurring with the sequester debate, addressing some of the claims made by defense industry advocates with greater granularity. With the possibility of over $50 billion in defense cuts going into effect this coming January, the defense industry has launched an all-out campaign against sequestration that would raise nearly any eyebrow. Our own Gordon Adams provides some context for some of the claims of that campaign:

• “A million jobs are not at stake. Two-thirds of those cited are ‘induced jobs,’ not defense jobs. This broader employment is affected by everything (and typically counted many times over, depending on what direct spending is being focused on)…[and] when the broader economy grows, so do those jobs. They are not tied to defense.”

• “The main event is the defense build-down, not the sequester. The typical build-down — Korea, Vietnam, the Cold War — lowers defense budgets 30 percent in constant dollars over 10 years. If we took a trillion dollars out of the defense plan DOD projected last year, it would, at 17 percent, be the most shallow build-down we have experienced since World War II.”

As Gordon noted, when the sideshow is viewed more closely, it may not be worth all the attention it’s getting.

Counting All Costs

Back in May, Lt. Gen. James Kowalski, Commander of the Air Force Global Strike Command, managed to acknowledge and then gloss over the ambiguities of nuclear weapons costs in almost the same breath: 

There’s broad disagreement about how much the nuclear enterprise costs. Now I can point to Global Strike Command and I can tell you that Air Force Global Strike Command has an annual budget of about $4.8 billion. That seems like a lot, but when you get the ICBMs, you get that strategic stability, and you get dual-capable bombers for $4.8 billion a year, and that’s less than one percent of the Department of Defense budget.

As we pointed out in our recent report, Resolving Ambiguity: Costing Nuclear Weapons, numbers like those offered by Lt. Gen. Kowalski are not as clear-cut as they might seem. While $4.8 billion might be an overestimate by including conventional missions performed by dual-capable bombers, such estimates don’t include the costs that nuclear weapons add for command and control, tanker aircraft, airlift, recruitment, training, and some other personnel costs. By highlighting these issues and breaking down costs as much as possible, we hope our report adds some clarity to a muddled issue.

Beyond Procurement Costs

It’s often easy to focus only on acquisition costs when discussing military procurement programs, but the GAO’s most recent report on the F-35 program provided an interesting reminder of the importance of long-term operations and maintenance costs:

In addition to the costs for acquiring aircraft, significant concerns and questions persist regarding the costs to operate and sustain JSF fleets over the coming decades…The sustainment affordability target for the Air Force’s CTOL ($35,200 per flight hour) is much higher than the current cost for the F-16 it will replace ($22,500 per flight hour, both expressed in fiscal year 2012 dollars)… The program has undertaken efforts to address this life-cycle affordability concern. However, until DOD can demonstrate that the program can perform against its cost projections, it will continue to be difficult for the United States and international partners to accurately set priorities, establish affordable procurement rates, retire aged aircraft, and establish supporting infrastructure.

The steadily upward trend of aircraft procurement costs is no doubt a serious challenge for defense budgets, but it’s ultimately only one piece of puzzle. And while acquisition costs stop once a buy is complete, sustainment costs continue to play an important role in service budgets for decades.

Scaling Back the Overmatch

Amidst hyperbolic language about the effect sequestration would have on national security, General Martin Dempsey’s commentary in Congressional testimony last week sounded much more measured: 

We would go from being unquestionably powerful everywhere to being less visible globally and presenting less of an overmatch to our adversaries. And that would translate into a different deterrent calculus and potentially therefore increase the likelihood of conflict.

Dempsey’s right that this conversation is about the scale of America’s enormous “overmatch” in military strength.  And remember that this isn’t the first time he’s made the point.

Sequestration clearly is not the right mechanism for drawing down defense spending, but the United States could responsibly achieve similar savings by adhering to our historical build-down trends of modest cuts sustained over time.

Something for Everybody

With defense cuts looming, the exact cost of our strategic nuclear offensive forces has become a hotly debated topic. There is a wide range of disagreement as to what should qualify as a related expenditure. This debate stems around the idea that:

Fewer nuclear weapons presumably mean less spending, but no one can say how much less, in part because there is no definitive estimate of current nuclear weapons spending. Official estimates tend to be narrowly defined. Unofficial estimates capture more costs, but with less detail and authority.

In our newest report, Resolving Ambiguity: Costing Nuclear Weapons, we take seventy pages to help elucidate what has previously been less and less clear. Our bottom up estimate is fully detailed, but we also have something for those looking “to ease some of the confusion surrounding the issue” without the full length seventy page read. BFAD wrote a more succinct and accessible summary of the report that is well below seventy pages in Arms Control Today.

Shadow Play

Pentagon officials have been insistent that they are not planning for sequestration.  Speaking on Tuesday at the National Press Club, Gen. James Cartwright, former Vice Chairman of the Joint Chiefs of Staff, gave an interesting explanation for why that might be:

My sense is that there's a bit of a conundrum here. You want to plan for the future. It's responsible to plan for the future. You also don't want to give away anything. And so often times the worry is that as you announce a plan, well, if I were asked to do X, Y or Z, this is what I'd do, and then all of a sudden it happens and the discussion sometimes is felt to be lacking in whether that should have happened or not.

“Wanting to plan” for sequester might not be quite as clean-cut as Cartwright’s description.  It all depends on who’s being asked to do the planning.  The military has a planning culture, and this clearly is weighing on General Dempsey’s mind, but the civilian leadership is part of an administration trying to keep the pressure on Congress and ensure that sequester is the most damning incentive for deal-making that it can be.  Underscoring their point that sequester can’t – and won’t – be managed is part of that strategy.

Still there are many types of possible plans.  The Pentagon could offer an alternative savings plan, for instance, without planning for sequester itself.  In this respect, Cartwright is spot on about the risks of that approach.  As our own Matthew Leatherman noted in February:

Showing forbearance is its own challenge, of course. If the Pentagon has a plan to manage cutting on this scale, it would show that such cutting is manageable. Congress then would be much more likely to impose it. That is because lawmakers could burnish their collective fiscal credentials without looking soft on security.

With all this subtext, it’s no wonder Gordon Adams talks about this debate as a political “shadow play”.

Budget Stability and Strategic Change

Any physical scientist will tell you that adding pressure increases friction.  It’s for the same reason that comparisons of the military departments’ budget shares seem to be popping up as fiscal caps tighten.  No one wants to fall behind the others, but neither does anyone want the conspicuously stable division of resources to distract from their mutual position that this budget is strategy-driven.

General Martin Dempsey, Chairman of the Joint Chiefs, was on point when the issue came up in Wednesday’s hearing of the Senate Defense Appropriations Subcommittee.  Responding to a question from Sen. Susan Collins (R-ME) about the strategic priority placed on maritime power, Dempsey commented:

…the budget we submitted is a joint budget. It's not a -- it's not the individual service budgets kind of bundled together; we really worked this as a joint team.  We were faced with the Budget Control Act, $487 billion. And so every service paid a bit of that -- paid a bit of that bill. I will tell you the Navy paid least of all, because we prioritized exactly the issue you're talking about.

There’s just one problem – the Navy didn’t pay least of all.  That distinction goes to the Army.  Its FY13 base request is a billion dollars above its FY12 base appropriation, while the Navy’s is a billion dollars below.  Since the Air Force base request is down $5 billion, both the Army and the Navy are set to grow as shares of the base Pentagon budget, but the Army’s 0.6% increase exceeds the Navy’s 0.2%.

If the Overseas Contingency Operations (OCO) costs are counted, however, things do line up with Dempsey’s characterization.  The Army’s share falls by 1.3% while the Navy’s increases by 1.2%.  But OCO by definition isn’t part of the post-war strategy meant to drive this budget; it isn’t part of the savings plan that Dempsey was referencing; and, after more than a decade in which war costs have been separate, changing the message now would be dubious.

Not that one-point margins in one year could indicate strategic realignment anyway.  Looking for the impact of strategy on the budget requires taking a long view.  We won’t know the precise effect of the new strategic guidance for years – but we do know our past.  Since FY72, from leaving Vietnam through the end of the Cold War and until even now, the military departments’ budget shares tend to deviate from their average, roughly equal shares by less than 1.5%.

Watching the Army share increase alongside a strategy prioritizing sea power is just a minor example of the inertia behind the military’s budget equality.

* In addition to the three military departments, Congress also appropriates resources to a “Defense-Wide” account, which includes activities like SOCOM, the Missile Defense Agency, and the Office of the Secretary.  This analysis excludes defense-wide funding when calculating the departments’ shares.

Clarifying the Debate

Eli Jacobs at CSIS’s Project on Nuclear Issues has taken a long hard look at the debate over nuclear weapons related costs before, and found “tons of uncertainty.”  That is just what we tried to mitigate in our recent report, Resolving Ambiguity.  Keeping with his critical approach, Jacobs notes where our estimate could be expanded using our inductive methodology, especially regarding aerial refueling tankers. He also notes that a better accounting of costs doesn’t answer what savings can be expected if cuts to strategic nuclear offensive forces are made. He concludes overall:

“Ultimately, this is even more reason to praise Rumbaugh and Cohn’s report. Their inductive approach ties capabilities to costs in the greatest amount of detail that can be reasonably expected, in the face of DoD classification…Like its predecessors, the Stimson Center report is certainly vulnerable to misuse. Unlike its predecessors, it does the rigorous methodological work that could allow it to be put to good use.”

We’re glad to know that the study is helping clarify the debate rather than further muddying the waters.

Creating a Fallback

Boeing is trying to keep its F/A-18 Super Hornet attractive to the Navy, now suggesting the ability to launch a small UAV.  Which lines up with what our own Gordon Adams said a few weeks ago on This Week in Defense News:

I have a prediction on the F-35. The version that gets bought in smaller numbers than currently projected is the Air Force version. The version that gets bought even though it probably shouldn’t be is the Marine Corps version—because their lobbyists are good and the Brits want it. The version that gets killed or cut very deeply is the Navy version, and they buy F-18s instead.

As the Navy keeps buying F/A-18s in the near-term, it also seems to be easing the need for the F-35 in the long-term too.  As Secretary of the Navy Ray Mabus testified in March:

In the far term, the Navy will need to replace its F/A-18E/F Fleet. Pre-Milestone A activities are underway to define the follow-on F/A-XX aircraft. Options include additional F-35s, a variant of the Unmanned Carrier-Launched Airborne Surveillance and Strike System (UCLASS), a new manned/unmanned platform, or some combination of these.

Then the Navy formally asked for other options for their follow-on to the F/A-18, heightening suspicions the Navy is looking to replace, not complement the F-35.  The F-35 program would be a little less big without the Navy, but that's likely to be more a dilemma than an advantage for the program.