Sequestered: The strategic implications of a freefalling U.S. defense budget

This is excerpted from the full-length piece with the same title published by the American Interest, available here.

After months of conspicuous silence and arguing that the sequester was Congress’s problem to solve, the White House went into full panic-inducing mode shortly after the beginning of the new year. As part of that effort, the Joint Chiefs of Staff asserted that, should the sequester come into force on March 1, the impact on U.S. military capability would be catastrophic. To help drive home the point, the chiefs canceled an aircraft carrier deployment, with the result that only one carrier battle group was deployed overseas at a time when North Korea was becoming increasingly belligerent, Iran was forging ahead with its nuclear program, and the Arab Middle East writhed in unprecedented turmoil.

It now also appears that Congress will stave off the worst effects of the sequester on the Defense Department’s operations. It has provided the department some relief in the form of the fiscal year 2013 continuing resolution, which funds the administration’s defense budget request, though at levels mandated by the sequester. The continuing resolution also affords the department some additional flexibility by raising the ceiling for moving funds from one budget account to another, though such major "reprogramming actions" will, as in the past, require prior congressional committee approval. 

Congressional leaders are now confidently predicting that the sequester will not survive the fiscal year (FY) 2014 budget process. True or not, more defense cuts are in the offing that could amount to at least $15 billion annually through FY 2020. These cuts would come hard on the heels of not only the annual $47 billion in reductions mandated by the Budget Control Act but also earlier cuts ordered by then-Secretary of Defense Robert Gates.

Of course, it is possible, perhaps even likely, that predictions regarding the sequester’s demise will prove misplaced. If sequestration does not touch off apparent calamity or political anxiety in the White House, it is much more likely to persist. After all, recall that no one really believed at the time that the sequester would ever happen.

The White House is continuing to bet that somehow the sequester will no longer be in place in 2014. To that end, the administration has produced an FY 2014 budget that is $52 billion above the cap for defense spending imposed by the sequestration provision of the 2011 Budget Control Act. Should the sequester remain in force, the Department of Defense (DOD) once again will have to implement across-the-board cuts to come down to the cap. No doubt the personnel accounts will again be exempted, as they have been in 2013, and the brunt of the reductions will once more fall upon the operations and acquisition accounts, with the notable exception of those elements of the Defense Health Program that are included in the operations accounts and that will be protected as military entitlements.

In theory, the sequester could remain in place through FY 2021, making for a total of $1.2 trillion in defense cuts. Unless the administration takes major steps to reduce DOD’s overhead costs, it will have to cut back on force levels, force posture, deployments, and other operations. The greatest consequence of such radical changes would be to diminish America’s overseas presence. A drawdown in forward air, naval, and land deployments — the inevitable product of annual budget cuts amounting to at least $60 billion — would unnerve allies, encourage adversaries, and dissuade historically nonaligned emerging powers such as India from moving closer, both politically and militarily, to the United States. 

There are better ways to realize savings than to impose a mindless sequester on DOD. Congress could legislate changes to the package of benefits offered to the military. It could legislate both changes to the oversight of contractors, especially contingency contractors, and the creation of an internal audit office (not to be confused with the Office of the Inspector General, which is not suited for such a function). It could close unneeded military facilities and commissaries, contracting out the latter. Finally, the number of both civil servants and "staff augmentation" contractors can be severely restricted.

President Barack Obama has consistently argued that defense must contribute its "fair share" to deficit and debt reduction. But the sequester reduces defense spending more than nondefense spending: Of the $109 billion that needs to be cut each year of the sequester, defense contributes $54.5 billion in cuts while all other discretionary programs account for less than $40 billion. In fact, defense has already sustained two major reductions: the Gates cuts, which were unique to the department, and the annual $47 billion reduction over 10 years that was mandated in the FY 2011 Budget Control Act. In addition, the "fair share" argument overlooks the real cause of the debt crisis — namely, untrammeled growth in Medicare and Medicaid costs and, to a lesser extent, Social Security. If these three entitlements were factored into the baseline for budget reductions, the so-called "fair share" to be levied on defense would drop from more than half of mandated cuts to about 20 percent. The international security consequences of the difference between those two figures cannot be overstated.

The sequester does offer DOD the opportunity to implement long-needed efficiencies, though a more efficient Defense Department may be no less costly. Nor might greater efficiency obviate the need for some additional budget reductions. To the extent that those cuts are only a minor addition to the major ones already sustained, America’s prospects for maintaining a credible defense posture will increase markedly. America’s allies, friends, and enemies will then surely take note and calibrate their actions accordingly, in a way that can only benefit America and a more stable world order.