Unfinished Business

As U.S. Defense Secretary Robert Gates takes the latest Asian spin in his endless series of departure laps, he is receiving widespread praise for his reformist language and his stewardship of the Department of Defense (DOD). Although there is certainly much to applaud — some canceled weapons programs, the search for efficiencies, and a large volume of persuasive rhetoric — Gates’s real legacy is one of deferred discipline.

In reality, Gates is leaving behind a large agenda of seriously unfinished business. He has been a reluctant disciplinarian at DOD. As he himself put it in a June 1 interview with Politico: “I think one of the reasons it’s probably time for me to leave is that sometimes too much experience can get in the way, and you can get too cautious.… It may … be making me more cautious than I ought to be.”

Gates’s instinct for reformist rhetoric but deferred discipline at the Pentagon will leave incoming Defense Secretary Leon Panetta with 10 serious challenges:

1. MISSION CREEP

Gates allowed “mission creep” to infect the services, particularly the ground forces. Rather than use last year’s Quadrennial Defense Review (QDR) to set clear mission priorities, he signed off on an expansion of defense missions, all of which were given equal priority.

Counterinsurgency (COIN), nation-building, counterterrorism operations, and stabilization and reconstruction are right up there with conventional deterrence, nuclear deterrence, forward presence, and humanitarian operations. They are all equal, and the stated intention is to reduce risks in all of them to as close to zero as possible.

Despite the secretary’s disdain for alternative defense proposals (he called them “math, not strategy“), this unlimited agenda of missions does not constitute a strategy. It is a grocery list that justifies ever-expanding, global U.S. military engagement and, of course, significantly more resources than the country can ever afford.

As he leaves, Gates has called for a review of the strategy, but the shopping list has not changed. The new review uses the same QDR framework and is being carried out by the same team that produced the first flawed version. Expect nothing revolutionary from this review. It will take a complete relook by the new secretary to impose real priorities, such as asking where the next big conventional war is to be fought (hard to find) and why the less-than-successful exercises in Iraq and Afghanistan should justify some kind of global counterinsurgency mission for U.S. forces.

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2. LEADING FROM BEHIND

Gates has backed into a declining defense budget rather than showing the way. Instead of recognizing that debts, the deficit, and the end of the wars are certain to put defense budgets on a downward glide path (one the country is already on), Gates fought budgetary trench warfare year by year, trying to protect real growth in his resources and arguing it was absolutely necessary.

The public thinks he is a budget cutter (there’s that rhetoric, again), but he has been a stalwart promoter of growth in what is already the largest U.S. defense budget since 1945, in constant dollars. This budget strategy has nurtured illusions in the services that budgets might continue to grow, instead of stimulating planning for the inevitable downturn.

Panetta will have to craft the new, unpopular, but necessary message for the service planners. And that message will need to describe in stark terms what the coming era of cuts will be like — something well beyond the $400 billion over 12 years that the White House recently set as its target.

The president’s proposal is an illusion. It would be the high-water mark for defense, a “nothingburger” easily accomplished by simply increasing the defense budget every year for the next 12 years by the rate of inflation. The reality is more accurately reflected in the Simpson-Bowles, Rivlin-Domenici, and Frank-Paul projections, which foresee defense budgets declining by $500 billion to $1 trillion over the next 10 years.

That’s more like the build-downs we have seen in the past, such as when the defense budget went down by 35 percent in constant dollars between 1985 and 1998, much of it under the presidency of George H.W. Bush and the secretaryship of Dick Cheney.

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3. NUMERICAL FUDGE

Gates has left behind a legacy of numerical fudge that will have to be swept away. For example, he cleverly claimed that he had achieved savings of more than $330 billion from canceling weapons programs. He did terminate or cancel some programs. But the “savings” were mostly well off in the future; even the Pentagon cannot provide details to back up the number, when asked.

More seriously, the “savings” were seriously overstated. They included the termination of the C-17 and the F-22 aircraft programs, neither of which had any dollars in DOD’s long-term budget plan. And though the savings counted the funds that would no longer be spent, they did not subtract the funds that were being committed to new programs to replace the canceled ones, like the Army’s new fighting vehicle program. The real savings are probably less than half those Gates claimed. Panetta is going to have to clean up funny numbers like this to restore credibility to his budget proposals.

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4. CHEAP TALK

Gates repeatedly underlined his commitment to helping the civilian agencies — the State Department and the U.S. Agency for International Development — obtain more resources and avoid the “militarization” of U.S. foreign policy. Good rhetoric. But when asked whether DOD would reduce its budget so the civilian budgets might grow, he regularly made a joke out of the answer — why would he agree to cut his budget? So where did he think the funds would come from — domestic program cuts?

What’s more, he has continued to support the dramatic expansion of DOD authorities and funding that compete with those of civilian agencies in such areas as security and economic assistance. This has weakened civilian agencies’ ability to make the case for their programs and has given the services incentives to keep expanding those missions. Panetta is going to want to take a hard look at this growing militarization problem.

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5. TRIMMING THE FAT

Gates gets points for tackling the mammoth DOD infrastructure, the overhead that occupies more than a third of the active-duty forces and consumes more than 40 percent of the defense budget. But his thin efficiencies effort has, by his own admission, labored mightily to produce a mouse of savings and reforms.

Efficiencies rarely emerge from the bottom up; they require strong, persistent leadership from the top and a serious reduction in both military and civilian personnel in the back office. Panetta is going to have to get tougher, a lot tougher, to discipline DOD’s overhead. Budgets for overhead functions are going to have to be cut to incentivize reform, as they were in the 1990s, when Panetta was director of the Office of Management and Budget.

For overhead savings to be enduring, moreover, DOD has to seriously “do less,” meaning mission reform, and not backfill military slots with more civilians or, worse, contractors.

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6. THE BIG GUNS

Gates failed to get weapons costs under control, as the new estimate of $1 trillion to operate the new F-35 fighter shows. Ashton Carter, undersecretary of defense for acquisition, continually promises cost discipline, but the annual Government Accountability Office studies on hardware price tags makes it clear that they continue to grow unchecked.

The sad history here is that almost no secretary, with the possible exception of David Packard (as deputy), has ever gotten his arms around this problem. As long as the services can promise lower costs than they encounter and the contractors can buy into a program with the same promise, this problem will be with us. Panetta is going to have to climb this mountain, too, or big-ticket items like the Navy’s Littoral Combat System or the next-generation bomber will eat the rest of a declining procurement budget.

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7. MORE THAN A PAYCHECK

Gates did little to solve the growing problem of military compensation, which has regularly risen above the level of wage growth in the larger economy and is a political “third rail” for secretaries. Military pay raises that are made across the board cost a lot and do not help with managing the forces. It is increasingly urgent to address specific needs with bonuses and targeted pays, something DOD study groups have recommended for years. Good luck with this one.

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8. BENNIES FROM HEAVEN

The other third rail is military health care and retirement benefits. Gates complained, but made only a minimal effort to adjust Tricare premiums for able-bodied retirees and their families, which have not been raised in more than 15 years. The big problem of defense health-care costs remains to be tackled, much like the larger health-care problem for the United States as a whole.

The current retirement system is due for major reform. Anyone with less than 20 years’ service gets no retirement; all those with over 20 can draw it right away, regardless of their private-sector employment opportunities. Today’s military retirement system means the services have to keep everyone staying in until they are eligible for the benefit, making it hard to manage the force by keeping the good performers and weeding out the less good. Bad for force management, bad for the budget. Good luck here, too.

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9. BASE BALL

Gates did nothing to shrink the DOD’s geographic footprint, e.g., close some bases in the United States. There has not been a new round of base closures in six years, but one is badly needed. The services know DOD’s footprint is still larger than they need. Panetta is not going to like this one; he lived through a local base closure as a member of Congress. Maybe it will look different from the secretary’s office.

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10. TOO MANY TROOPS

Finally, there is the question of reducing the size of the ground forces, which grew by 92,000 over the past decade. Gates promised to lower forces by 47,000, though only starting in 2015. But ending combat deployments, shrinking that pesky COIN mission, putting the DOD infrastructure on a diet, and dealing with declining budgets make this a more timely option for Panetta. The attrition of the forces should begin now, as U.S. forces go to zero in Iraq and begin the withdrawal from Afghanistan; the country no longer has the rotation needs these large deployments required.

As secretary, Gates said, even did, many good things. But his rhetoric had more discipline than his actions, leaving a tough agenda for his successor. In this tight fiscal era, it is time for Panetta to put words into action.

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