The Pentagon’s Stages of Budget Grief

The defense budget is going down. The Defense Department has been through the first two stages of grief: denial and anger. Denial was from FY 2010 to FY 2012 — "the budget should not go down, we need more." Anger was 2012 — the Aerospace Industries Association campaign to halt sequestration, Senators McCain, Graham, and Ayotte touring bases and plants, "defending defense" and hoping to influence the election and reverse the tide.

Now we are at "bargaining," the stage where the department and the services try to make a deal that will slow the decline, delay the effects. Secretary Chuck Hagel and Admiral Sandy Winnefeld, the vice chairman of the Joint Chiefs of Staff, made this clear on Wednesday, July 31, when they rolled out the Strategic Choices and Management Review (SCMR). The key signal that we have arrived at "bargaining" was the demand the secretary made for "time." Just give us more time because these cuts cannot come so fast, he argued. We cannot manage them.

He particularly argued for time in his commitment to cut 20 percent out of the tiny staffs for the Office of the Secretary of Defense and the Joint Staff — by 2019, not this year or next.

The reality, however, is that budget cuts are coming fast. Time is not available; the time is now. But nothing the secretary announced on Wednesday demonstrated anything more than the fact that the Department of Defense is able to implement the president’s budget request, if that’s the funding they get in the end.

Any cuts beyond that budget, the secretary warned, would be lethal to the department and the nation’s military capability. Sequester-level cuts ($500 billion over 10 years) "would be a huge strategic miscalculation that would not be in our country’s best interests."

Note that he said "sequester-level cuts," not "sequester." The resistance at DOD is not to sequestration — which is bad enough — but to any approach that would reduce the defense budget by $500 billion over 10 years from the current Defense Department projections. Any approach at all.

That’s just not reasonable. A $500 billion reduction from the current projection would be consistent with prior defense drawdowns, not a "strategic miscalculation." That kind of grandstanding may play to the president’s desire to get a budget deal by threatening to kill the DOD "hostage," but it is not good planning.

So the secretary set up another "bargain." If we have to make those cuts, we can shrink the forces, driving the Army down as deep as 380,000 troops and eliminating air wings, and use the funds to buy technology to keep up the defense investment budget. Or, bargain the other way, we can keep up the size of the force, but then we have to make "massive cuts" to procurement and take the risk, globally, that entails.

This is a false choice. The reality is that the "big money" is in the department’s overhead. Secretary Hagel knows this — he focused on overhead at the start of his briefing. But his statement on overhead was simply a confession that it is hard to get savings from the overhead. He noted that Secretaries Gates and Panetta had sought $210 billion in savings; that he himself has proposed $34 billion, all over 10 years. And he offered up such things as his 20 percent cut in the secretary’s office and the Joint Staff, reductions in direct reports to him as ways to, maybe, get another $40 billion over 10 years. Maybe we get the overhead czar he proposed.

But if this is the extent of the overhead reforms he proposes, no wonder he is facing a tradeoff between forces and technology if budgets go down by $500 billion. These reforms barely scratch the surface of the Pentagon’s "back office." The secretary threw up his hands on doing a lot more: "Unlike the private sector … the department simply does not have the option of quickly shutting down excess facilities, eliminating entire organizations and operations, or shedding massive numbers of employees."

Or maybe DOD lacks the political will. If not now, when? What are we to do with a contractor force in the Pentagon that is almost as large as the civil service? Where once we had twice as many active-duty combat forces as civil servants, we now have more civil servants and "ghost" civil servants than we have soldiers, sailors, and pilots. What do we make of the duplicative offices, bureaus, and agencies among the services; when are finances, health, personnel functions consolidated?

After World War II, in four years, the United States cut the Pentagon civil service 50 percent; after Korea, 24 percent; after Vietnam, 28 percent; after the Cold War, 37 percent. These were "moral, responsible and legal" reductions. When do we start this time? The secretary did not address this option in any detail; he did not propose to start now. Nor did the secretary address in any detail the question of how much technology costs and how much could be saved by more senior-level attention to the projected costs for programs like the F-35 or the long-range strike aircraft.

The budgetary reality is that the resources are going away. And they are disappearing at a pace that is faster than the secretary would like. But bargaining gives the illusion of delaying those reductions and the impacts — and it is an illusion, not the reality for which the Pentagon needs to be planning. With planning, the secretary could, over time, buy the space to alleviate his draconian choice between technology and forces by stepping up firmly on the issue of the back office.

Unless the secretary, and the service chiefs, step up to this back office issue, the secretary’s draconian choice risks becoming a self-fulfilling prophecy. He rightly pointed to the huge obstacle of getting savings through the military personnel accounts — most of the reforms he proposed for personnel and retiree policy are either small or politically impossible. He didn’t talk to the big ones: overhaul of the retirement system, consolidation of the services’ duplicative health care infrastructure, an end to "across the board" pay raises — they all fall in the "too hard" basket.

If the back office doesn’t shrink, and the budgets continue to come down, there are bigger issues, strategic ones, the department should address, but there’s no sign in the SCMR it will do so: Waging offensive cyberwar is getting expensive; maybe there is a role for deterrence and "cyberarms control" that is a cheaper option. Should Special Operations Forces be in 75 countries, making U.S. commitments that risk drawing in larger U.S. forces downstream? Do we actually need to modernize every leg of our strategic nuclear forces, or, in a world where we vastly exceed the nuclear capabilities of anyone but Russia, and where our nuclear forces are unlikely to be used in combat, can we "deter" with a monad of stealthy submarines? Why is going to a 380,000 person Army and parking the capability for recall in the reserves not a good answer to a world of asymmetrical war?

Secretary Hagel has a huge burden, but also a huge strategic opportunity — to slenderize DOD, focus on the core missions, and reshape America’s strategic choices. The Strategic Choices and Management Review does not appear to have set the table for such a dramatic change; it sounds more like a classic budget drill.

Sequestration, and the deep cuts that seem likely even without sequestration, may force such a reconsideration on more difficult terms, the longer we wait. Bargaining is not enough; acceptance is the stage the department needs to reach.