It has been said that the definition of insanity is continuing to do the same failing thing, hoping the outcome will be different the next time. A good part of the U.S. defense industry is clearly stuck in this pattern.
CQ/Roll Call ran a piece over the weekend that lays bare the time warp some contractors and their trade associations are stuck in.
The headline talks about how the industry is facing its "moment of truth." The content makes it clear that the industry, and its spokesperson, the Aerospace Industry Association, is far, far from facing the truth about the defense budget.
If this piece is any indication, the industry continues to live in a hermetically sealed box, telling itself its own dream-like stories, and expecting to be "saved" by actors on the Hill who are in the box with them.
The reality is that sequester is now underway, not because the industry lobbying campaign failed in some technical way, as some in the industry seem to think. Millions of dollars ($27 million in campaign contributions alone), numerous road shows (McCain, Graham, and Ayotte visit carefully pre-selected friendly audiences), thousands of interviews (will Buck McKeon ever sit down?), factory-floor lobbying, visits to the Hill -- they were all done to a fare-thee-well. These are tried and true lobbying techniques, which I described at length in my 1980 study, The Iron Triangle.
But the techniques only work if the message is in tune with the voters at large and the majority of the members of Congress. The industry's problem is not technical, it is the failure to recognize we are in a defense drawdown. The budgetary party is over.
Defense budgets rise and fall in response to changing international and political conditions. And those have changed dramatically: The end of the war in Iraq and the coming end of the war in Afghanistan lower significantly the level of public and congressional attention and concern about national security.
And some in the industry seem not to have noticed that we are in a major budget battle, and have been for two years. It is a much bigger battle than the one over the defense budget; that smaller fight is a side show. And as long as some Democrats do not want to change entitlements and Republicans do not want to put tax expenditures on the table, the drive-by budgetary victim of that battle is discretionary spending.
Last time I looked, defense was about 55 percent of discretionary spending, and the third largest cause of the U.S. debt more than doubling since 2001. Of course it is on the table; does the industry still think it is going to get a pass?
The days of ever upwards on defense are over. Sequester or not, defense budgets are going down and sequester just accelerates the pace. The industry should be prepared for the projected defense budgets over the next 10 years to fall at least 20 percent in constant dollars, or roughly a trillion dollars from the current forecast of more than $5 trillion.
When the industry still tries to argue that Leon Panetta "cut" defense $487 billion over 10 years, when all he did was flatten the projected growth in defense, leaving it to grow with inflation, they are not being realistic.
When they think Rep. Harold Rogers, the appropriations chair in the House, is going to save their bacon by giving DOD flexibility on sequester, when that will never survive the Senate, they are not being realistic.
When they think just a little more money to the Aerospace Industries Association to fund more misleading studies about the jobs impact of sequester will be adequate to turn the public around, they are not being realistic.
The realistic companies have been coping for two years: attrition and layoffs, buying in capacity they used to contract out, selling divisions that are less strong in a declining market -- they know what to do. The rest of the industry seems to be howling into the wind.
BRENDAN SMIALOWSKI/AFP/Getty Images
In all the festering about sequestering, one thing sticks out like a sore thumb: the Navy's decision not to deploy a second carrier to the Gulf -- a decision it is blaming on sequester.
All the other possible disruptions make sense: Civilians could see a part-time furlough, term employees might not get renewed, services contractors might be put off. But the decision to keep the USS Harry S. Truman in dock is odd.
Yes, the costs of running the Truman are part of the Navy's $59 billion operating budget, and it is operating budgets that are targeted in sequester. But that is the biggest part of the Navy budget and, by the way, the most flexible target for sequester. Defense officials have room to move funds at will in that account, even under sequester.
So why that carrier, why two days before it was due to deploy? The Navy could have kept other, less visible ships at home -- like the littoral combat ship Freedom, sailing now to much-threatened Singapore. It could have lowered readiness requirements for other parts of the fleet, or stood down a training cycle.
Rear Adm. John Kirby put it this way: "Could money have been found somewhere, anywhere, to pay for the Truman's deployment? Maybe. But without the ability to transfer money from other accounts, there aren't many places from which we could have taken it without a greater cost to readiness elsewhere."
That is nonsense. The Navy does have the flexibility Adm. Kirby says they lack -- the whole operations account is trade space under sequester. And what cost to readiness where? The Navy doesn't tell us what the cancellation of this deployment allows it to protect.
It seems likely that given overall operating tempo for carriers (one at sea, two in port), deploying two was going to stress the fleet, anyway. And the requirement for two carriers in the Gulf was, and should be, subject to review, sequester or not. So maybe the timing was just serendipitous. We were going to go to one carrier anyway, and with sequestyria the order of the day, what the heck, why not offer it up now?
The Navy could have made other choices, as Adm. Kirby acknowledges. But this one was going to get attention.
Mass Communication Specialist 2nd Class Ryan D. McLearnon/U.S. Navy via Getty Images
Former Undersecretary of Defense Michèle Flournoy weighed in Tuesday on the debate over the defense budget. While her comments are useful, her recommendations would not really help the Pentagon deal with reductions that could be 20 percent below the spending levels it had projected for the next 10 years. The problem is that to cut defense, you need to actually cut defense -- including things Flournoy says should be untouchable.
First things first. Flournoy writes that we have a terrible post-war record on defense drawdowns. "Almost all have resulted in a ‘hollow force' -- too much force structure with too little investment in people, readiness and modernization," she writes. Secretary Gates said the same thing; so did Secretary Panetta. Fortunately, this is not right; fortunately, because it is possible to manage a drawdown successfully.
As someone who was there for the last one, in the 1990s (as was Flournoy, actually), I can vouch that the management of that drawdown, including readiness investments, did not lead to a hollow force. The drawdown of the 1990s was begun by Secretary of Defense Dick Cheney and Chairman of the Joint Chiefs of Staff General Colin Powell. It established a smaller force, invested in the readiness of that force, and, even with a "procurement holiday" (appropriate after Reagan had filled the services' hardware coffers in the 1980s), continued to equip it well. (The C-17 and F-22, for example, both moved along to production.)
The 1970s drawdown did have a readiness problem, exacerbated by the transition from a conscript to an all-volunteer force. It remained, however, a globally dominant force. And the Eisenhower draw-down did not sacrifice readiness; it chose to base U.S. defense strategy on strategic nuclear capabilities, with a smaller ground force. But it was ready, not hollow.
Regardless, Flournoy's prescriptions for managing the drawdown now under way will not get us to where the budget is going. She says past drawdowns failed "because the easiest way to reduce Defense Department spending quickly is to enact across-the-board cuts in military end-strength, operations and maintenance, and procurement -- solving the budget problem on the back of the force rather than on the department writ large." The problem is that these are precisely the categories of spending that must be drawn down. They constitute, after all, 96 percent of the defense budget. If you take those accounts off the table, it is not clear what is left -- they are "the department writ large." That's why they are cut in a typical drawdown -- and why they should be cut now.
Flournoy's suggestions for where to cut are good, but they won't get us very far toward managing the drawdown:
In the end, a smart drawdown requires that we address those parts of the budget that Flournoy takes off the table. We need a smaller force, procurement priorities, and serious constraints and priority-setting in the operations and maintenance account. Now that would be a realistic drawdown!
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The Pentagon does it best. They are "best practice" in federal agency planning and budgeting. And they are world class in public relations. We are getting a bit of both these days. And it is striking that by-and-large, while the planning continues, as it should, the cries of pain are not getting much traction.
Planning first. I have said before that it is high time the Pentagon began to roll out its formidable capacity to plan and get down to work, not only about sequester, but about the underlying reality that we are in a defense draw-down. The five-sided building needs to forget the rhetoric about the Panetta plan and the $487 billion "already cut" (which was not a real cut, just a flattening of the budget so it is projected to grow with inflation), and start taking a good look at the options and choices we face over the next decade when the budget will actually be cut. I expect the budget to go somewhere between $500 billion and $1 trillion below the currently projected aggregate over the next decade; this would be consistent with prior draw-downs.
The Pentagon is not quite on board with this, in planning terms, but it is getting close. The new Quadrennial Defense Review is just starting to gear up. Incoming Secretary Hagel would do well to put a strategic red team together to draw up both budget options and an outline of questions for strategy, forces, procurement, and operations, for each of those budgetary options. Will he? That remains to be seen, because the services are too good at gaming such a set of options by putting the highest priorities on the table to be cut, which stops options in their tracks.
Meanwhile, the planners are stepping out on the near-term agenda. Every service chief has submitted a memo, following Deputy Secretary Ash Carter's memo of early January, as part of the effort to put together a plan, by the end of this week, about how they would manage if a sequester happens and/or if the budget this year stays at FY 2012 levels.
They are going to need those plans, even if there is no sequester, because the plans focus on the key part of the defense budget. Operations are the problem; they have always been a significant management problem for DOD. Nobody seems to be able to figure out exactly how the money is spent on operations and what we get for it.
So that's the right target. And the categories the chiefs worry about are the right ones in a draw-down. How fast do we repair equipment in military depots? What is the pace of travel and orders for the small stuff -- from pencils to computers? What is the intensity of the training cycle, now that the wars are ended/ending? How much priority should we put on support to the field? How many temporary contractor employees to we have, do we need, do we want? How many civil servants? How many bureaucrats in uniform running the back office?
Now, of course, the chiefs cannot resist what must seem to be an opportunity in this management dilemma -- an opportunity to stop sequester, spare defense, and reverse the tide. So the sensible planning is accompanied by painful cries. Rhetoric about a readiness crisis, being on the brink of hollowness, breaking the force, endangering our national security.
They don't need that; they don't need it because is it not true. We have never spent so much on defense. Our military readiness is at heights unreached at the start of any previous draw-down, in the active force and the reserves. Our operations budgets are unprecedentedly high, both in constant dollars and per soldier. The troops have never been as well trained, exercised, and experienced. U.S. global capabilities far surpass any other country.
Yes, there are many management issues at DOD; there are in every government agency. There are problems with the high costs for programs that were promised for less; problems with pay and benefits nobody can touch; health care costs that grow for defense as they do everywhere else, and problems holding down the growth of the Pentagon's large back office. And, yes, sequester is an ugly way to approach a budgetary draw-down, though DOD is better protected than most.
The challenge today is not to "save the defense budget." It is to "manage a draw down." On Thursday the Senate Armed Services Committee will grill the putative next secretary. The focus of that questioning should be less on such irrelevant issues as Israel, Iran, and gays. It should be on how Sen. Hagel intends to manage the department's adjustment to post-war budgetary realities and how he will focus the chiefs on the job they can and should do, without the rhetoric.
JIM WATSON/AFP/Getty Images
There are only a few more days, and cliff diving is all the rage.
Senate Majority Leader Harry Reid has said that making a deal before Jan. 2 seems unlikely, while House Speaker John Boehner has scarcely been seen or heard from since last Friday, when he pulled the House vote on tax increases for the very, very rich. House lawmakers have been summoned back to Washington for an exciting Sunday night session -- during the Redskins-Cowboys game, no less -- but it seems like the political system has reached the limits of gridlock.
One wonders why? America's political leaders have sad faces, but don't seem motivated. Are the Democrats waiting for their 55-seat majority to kick in? Is the speaker waiting to be re-elected to his speakership, before he turns on his troops and passes something with Democratic votes?
Something tells me the political leadership is not as worried about going over the cliff as they have been saying they were for the last year, especially for the last six weeks.
Indeed, it has been my sense all along that the fiscal cliff rhetoric is theater. I have thought for 16 months that the curtain would come down, the rhetoric would abate, some sausage-like deal would be passed, and we would enter 2013 walking out of the playhouse.
But it seems the political leadership want to keep going. And for my favorite part of the budget --defense spending -- it turns out that extending the show may not matter all that much. Soldiers, sailors, and flyers will still be paid. Retirees will still get benefits. Contractors will keep working, with no layoffs or contract cancellations. Even civilian employees in the Pentagon, whom I see as the most likely to be affected by sequester, have been reassured by Secretary Panetta that there will be no immediate furloughs.
So when the circus leaves town, it seems, very little happens and we return to the program previously in progress. Or, to put it another way, the same political stalemate that has existed since Barack Obama first became president.
Let's hope the markets applaud on Jan. 2.
Gordon Adams tracks the budget and the national security establishment for FP.