Voice

Why didn’t senators ask Hagel the question that matters?

Putative secretary of defense Chuck Hagel had his baptism-by-fire yesterday at the Senate Armed Services Committee. It was all theater. One of its most striking features was the absence of almost any serious attention to the challenge he will actually face if he is confirmed: the management of a defense drawdown.

No senator focused on the Pentagon's long-term budget and management challenges. Not one. While a few asked about the looming sequester, the answers were anodyne. Only Sen. McCaskill asked about whether the department needed to have an auditable financial statement by 2017.

There was no discussion of the challenge of getting the costs of weapons procurement under control. Instead, senators from Connecticut, Colorado, Maine, New Hampshire, and Virginia all wanted to be reassured that the defense programs in their states were key to our national security, the top priority of the Pentagon, and protected from budget reductions.

There was no discussion of how to restrain compensation and benefits costs at the Pentagon. There was precious little interest in the programs that deal with the transition of veterans and returning soldiers. Aside from (rightly) honoring Hagel for his service in Vietnam, the people in the military were not a central focus.

And there was virtually no attention at all paid to the critical, long-term management challenge posed by the explosive growth of the Pentagon's "back office." The administrative part of the military bureaucracy has roughly doubled in cost per troop over the past 15 years.

When it came to sequester, the focus was on keeping it from happening, because of the pain it would allegedly cause. The senators have clearly been listening to the campaign being conducted by the service chiefs over the past two weeks, a campaign saying that sequester will cause U.S. military readiness to fall to security-threatening low levels. And, of course, Senator Hagel simply adopted the Panetta rhetoric that sequester would be a "disaster."

But we need to be cautious about this campaign. The service chiefs have been announcing specific, horrific things would happen as a result of a sequester -- docked ships, lowered brigade readiness rates, an end to equipment maintenance. Maybe. But maybe not. The chiefs are suggesting these consequences before they have actually submitted plans for the sequester to the deputy secretary of defense.

Those plans are due today, Feb. 1, but they have no official standing at all. Seems to me the deputy might have something to say about these steps, before the consequences can be announced.

So maybe, even here, we are watching political theater. And the service chiefs are running this show during a transition, while one secretary leaves and another is not yet confirmed. Convenient timing to shape the debate before Hagel arrives? I would be shocked -- shocked! -- to learn there is politics going on in this joint.

It is a pity that the Senate Armed Services Committee decided to avoid the long-term drawdown and the management challenges it actually poses. These are the problems Hagel will really face when he gets to the five-sided building: managing a drawdown safely and intelligently. These are the questions that should have been front and center, instead of the show we saw.

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The Sheathed Sword

GDP and defense: Who’s to blame

There is a flurry in the dovecote today about the decline in the GDP registered in the fourth quarter last year. Is defense spending decline the culprit, we are asked? Indeed defense consumption spending (buying things, not paying people) declined 22 percent in the fourth quarter of the year, the largest single element in an overall decline in federal consumption spending. And doesn't that say we shouldn't let sequester happen or, above all, cut the defense budget?

Not so fast. There may be less here than meets the eye. After all, there is an historical pattern here. Every third quarter of the calendar year (which is the last quarter of the federal fiscal year) defense consumption goes up. Obligating and spending resources at the end of a fiscal year is a way of ensuring the services can get them spent and that they can justify the next year's budget to Congress: we really needed that money; don't take it back or cut us next year.

Then, in the first quarter of the next fiscal year (which is the fourth quarter of the calendar year) defense spending slides from the leap upward in the previous quarter. Time to catch the Pentagon's breath, reset spending, and start again.

There is nothing new to this pattern. The Commerce Department data make it clear that this happens during the last two quarters of every fiscal year.

But this year it was a higher jump at the end of FY 2012 and a deeper slide at the start of FY 2013 than in previous years. Why? I believe the answer is partly that the Pentagon is anticipating a decline in resources (and so husbanding money) and partly that the defense draw-down has actually begun.

The concern about the budget this year is only partly about sequester, which everyone seems to think is going to happen March 1. The real focus now is on funding levels for FY 2013, which are currently set at FY 2012 levels in the Continuing Resolution. The military services are worried that this may end up being the budget level for the rest of the year, which is below their budget request. Congress has begun to mark up appropriations bills for defense that are actually $11 billion higher than the cap set in the 2011 Budget Control Act, but a negotiation is likely to bring that level down. It could be that DOD is slowing the spending train to protect resources that will be needed deeper into the year.

The defense draw-down may be playing a role, too. For the past three years the Overseas Contingency Operations account has been falling. It funded a lot of services contractors that provided everything from guards to maintenance to food in Iraq and Afghanistan. Those contractors are already noticing a decline in business, which is accelerating with the move out of Afghanistan.

And one of the foci of the "efficiencies" Secretary Gates pushed a couple of years ago was to deeply cut services contracting in general at the Pentagon. There have already been reductions in the rate at which the Pentagon hires people to sit at desks as if they were government employees, when they are actually employed by private contractors.

We have been seeing a draw-down at DOD for three budgets, now, and are down 10 percent in constant dollars below the FY 2010 peak. So it would not surprise me to see those cuts start to show up in the Commerce Department's data.

The argument about the GDP decline is a bigger one, with lots of explanations and answers. Clearly DOD spending plays a role in the economy, though it has been shrinking over the years. The ups and downs of the data will continue, as the draw down moves ahead. The worst answer, however, would be to spend unnecessarily on defense as a form of stimulus.

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