What Flournoy got wrong about the budget

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:

  • "Unnecessary overhead" -- Yes, but which part and focused on what missions? We have the biggest military "back office" of the world's major militaries; what should we cut? Just civilians? How about the 560,000 active duty forces that never deploy, according to the Defense Business Board? We can't carry out this drawdown on the backs of the civilians alone.
  • "Military health care" -- Yes, but healthcare overall is only 10 percent of the defense budget; trimming it is important for long-term cost control, but it doesn't accommodate the fiscal expectations of a drawdown.
  • "Another BRAC round" -- Yes, but base closures cost money up front, and it is not clear they produce substantial savings downstream -- maybe $2-3 billion a year. That is a drop in the bucket.
  • "Reform acquisition" -- You bet, and every secretary since Eisenhower has tried; virtually every one has failed. Better to cut programs and set priorities, unless you have a secretary and deputy secretary who will stay on every program regularly and push back against the services.

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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National Security

There they go again

You think the Pentagon would learn. But, no, there may even be a payoff in being ill-behaved on your spending: when you get into deep trouble you made for yourself, you just take yourself hostage and threaten to pull the trigger.

Two years ago, then-Chairman of the Joint Chiefs Adm. Mike Mullen warned that "the budget has basically doubled in the last decade. And my own experience here is that in doubling, we've lost our ability to prioritize, to make hard decisions, to do tough analysis, to make trades."

Seems like the Pentagon didn't get the memo and has been overspending its allowance. According to a Politico piece today from David Rogers, one of the best budget writers in town, DOD decided last September it would just keep spending on operations at the rate they had asked for in the FY 2013 budget request they sent to Congress a year ago.

Some kind of denial must have set in. The continuing resolution funded DOD through March 27 of this year at the FY 2012 rate, which means the 9 percent growth in operations spending the Pentagon wanted was not on the table, not yet.

Apparently, the Pentagon "bet on the come," assuming sequestration would not happen, and has merrily been funding operations (training, exercising, equipment maintenance, fuel purchases, services contracts, and, yes, operations in Afghanistan) as if the FY 2013 budget request were real.

Haven't they been watching? Even if we don't have a sequester, every analyst in town and on Wall Street has been saying the FY 2013 request is the best the Pentagon will do, and cuts are extremely likely, as part of a budget settlement.

Seems a bit irresponsible to spend when you know the money will not be there. Or is this a bizarre form of hostage-taking: if you don't do what I want, I will shoot myself...

Now, of course, we are being treated to round two of the "shoot myself" scenario, with dire, and highly vocal threats that we are headed for a readiness crisis of grand proportions. Readiness, which can be a refuge of scoundrels (especially when they don't define it), is funded largely in those same operations accounts. (See Panetta and Dempsey on the Sunday talk shows.) As I have already noted, this supposed crisis is way overstated, even though managing sequester levels of funding is a challenge.

Overspending your allowance is one way to get there, though. And the continuing resolution set a pretty clear level for the allowance. Overspend, and you run out of money earlier. And have to pull the trigger, especially if you are trying to prevent losing more money through a sequester.

Too cynical? Adm. Mullen was pretty realistic about the Pentagon's management problem. Either they did not hear him, or just willfully decided to ignore him and scream for help when they got into trouble.

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