Gambling on the defense budget’s “double whammy”: How to avoid strip poker

By David Forman

Best Defense guest columnist

Though smaller defense budgets are now as certain as death and taxes, the real question is "just how bad is it going to be?" According to Clark Murdock, who spoke at a recent panel hosted at CSIS, fewer dollars is only half the issue. The more significant, though less discussed, problem is how "weak" defense dollars have become due to internal cost growth. This "double whammy" of fewer and weaker dollars will make cuts feel twice as bad as they look on paper.

Current Operations and Maintenance (O&M) costs are projected to consume 80 percent of the budget by 2021, and the entire budget by 2039. Even though total force size increased only 3 percent over the last decade, personnel costs increased 90 percent. These projections are clearly unsustainable, but since the Defense Department can’t do without people or operations, what should it do?

Mr. Murdock recommends re-conceptualizing the defense budgeting structure and sticking to it by asking "how much is affordable" instead of "how much is enough." The budget should have two major categories. The first category, "Institutional Support," should not exceed 30 percent of the total budget and would cover training, recruiting, facilities, and administration of the force. The other 70 percent should be allotted to the "Operational Force" that would directly support military operations for combatant commanders. Within the Operational Force allotment, 35-50 percent should be spent on common core capabilities (considered the musts), and the other 20-35 percent should be spent on strategic investment (considered the coulds).

Time will tell if the upcoming Quadrennial Defense Review adopts these recommendations, but the panel at CSIS brought to light two excellent points that can help minimize the gamble on this double whammy.

First, strategy development needs to become an iterative process. As it stands now, combatant commanders take strategic guidance and establish force requirements based on cost assumptions, but when their assumptions price out too high, we do not adjust strategy to make it affordable and determine where to accept more risk.

Second, military personnel compensation reform can’t garner congressional support because the focus is mainly on cuts to current compensation. Todd Harrison of CSBA provided the freshest perspective I’ve seen by referring to his report on maximizing value from the entire military compensation system. Instead of just cutting, we need to adjust compensation to areas of cost-effective value to service members. Military personnel value certain benefits more than others, but not all benefits have the same relative government cost for perceived value. By measuring value and cost (as he did in his report) and spending accordingly, the Defense Department can still attract high quality personnel without consuming the entire budget.

As the next defense secretary confronts a lower top-line budget, with or without sequestration, internal cost growth must be addressed. Now may be the best time to re-conceptualize how defense dollars are allocated. Success in this process will create a sustainable budgeting structure that supports an affordable national security strategy executed by a high quality and well-compensated military force of all-volunteer Americans.

LCDR David Forman, USN, is a senior military fellow at the Center for a New American Security. The views presented here are his own and do not represent those of the Navy or the Department of Defense.