Shots Fired

We are almost through the first year of the sequester, and the impact at the Department of Defense (DOD) has been less serious than advertised. The aircraft carrier Truman sailed to the Gulf; civilian furloughs were predicted to be 22 days, but instead were cut to six; and forces were clearly ready to fire on Syria if the president had asked. Was the sequester a mirage for the Pentagon? No, but the capacity of the DOD to manage the situation has actually been pretty impressive.

As I have said before, the tools DOD has to manage sequestration cuts are significantly more flexible than those of other departments: Military personnel are exempted from the sequester, and existing hardware contracts are also not affected by it; reprogramming authorities are large and flexible; war funding is fungible with non-war operating funds; funding for operations, training, and administration is also extremely fungible and doesn’t require asking Congress’s permission to move money around; and Congress gave DOD an actual appropriation this year, which was not the fate of most other federal departments. (This increased DOD’s operations funding.)

Let me be clear: The sequester is not a walk in the park. The Pentagon would rather have even more flexibility — who wouldn’t? But in reality, the sequester only accelerates a process that has been underway since fiscal year (FY) 2011: We are in a defense drawdown, and that is what the DOD needs to be planning for.

The political process in a drawdown typically erupts into two kinds of battles: the one between the Pentagon and Congress ("if you cut us, do we not bleed badly?") and the one among the services ("the military must absorb cuts, but take them from the other guy"). We are heading into a budget war that will involve both of these battles — a war that, as long-time Pentagon observer George Wilson once said, "really matters."

As an example of an early shot in the first type of battle, acting Air Force Secretary Eric Fanning said that his service could probably protect future budgets for its new fighter (the F-35) and its new tanker (the KC-46), but that it might have to get rid of its close air support aircraft (the A-10) and its more modern tanker (the KC-10). The Air Force has wanted to put the A-10 over the side for years, but the KC-10? That sounds like more of a Washington Monument cut — you know, "If you slash the budget of the National Park Service, we will have to close the monument."

Meanwhile, the harbinger of the second battle came from former Chief of Naval Operations Gary Roughhead when he argued that ground forces (the Army and Marines) could take deeper cuts than currently projected, while the Navy budget should stay large. He may be strategically correct (I am inclined to agree with him), but his suggestion was not well received everywhere in the Army. My conversations suggest this particular battle is just now getting underway as the services prepare to respond to the request for sequester-level budget choices.

So it appears that the Pentagon is beginning to wake up and smell the coffee — that is, to acknowledge that the drawdown is happening. Nonetheless, there is still a tendency at the DOD to make things look worse than they are, or to shape the budget realities to suit budget politics. For example, the Pentagon is still talking about the dangers of a $52-billion cut in FY 2014 if a sequester happens again. But another way of looking at things is that the sequester this year already took away more than $30 billion, setting a new baseline for the FY 2014 defense budget. The DOD comptroller, the redoubtable Bob Hale, keeps emphasizing this view: "If they’ve cut $30 billion, you’d probably better execute at that and maybe even be a little risk averse and go below that."

Given that FY 2013’s sequester-level funding is now the new normal for defense, last spring’s "wish list" for the DOD is now just that — a wish. It can no longer be used for measuring cuts. Although it makes better politics for the Pentagon to compare a possible FY 2014 sequester to the old number, rather than the new one, it has to start admitting that, over the next two to three years, the defense budget is going to settle somewhere around $450 billion (in this year’s dollars). This would make this drawdown similar to the ones we have gone through in the past.

Some see a budget agreement with Congress as a way out of this reality. Don’t count on it — Congress has never seemed further away from an agreement. House Republicans can’t even agree on a continuing resolution to tide the government over to December.

The Pentagon’s leadership needs to emphasize reality over politics and continue pushing the services to accept and plan for the drawdown. It will be a manageable change, especially if the leadership keeps up a drumbeat about shrinking the Pentagon’s overhead. Christine Fox, former head of the Pentagon’s Office of Cost Assessment and Program Evaluation and the leader of DOD’s most recent strategy and management review, argued in a recent Defense News editorial that the "back office" could not be cut deeply or quickly because the people there are doing things that need to be done, including logistical support and equipment repairs. She left out some key data, however. Like the fact that the Congressional Budget Office notes 60 percent of the overhead is in infrastructure, unrelated to readiness. Or that there are, as Hale estimates, 700,000 contractor personnel (not the military, not civil servants) that are doing back-office work. Or that even a substantial number of folks in uniform are performing civilian or contractor functions, according to the Defense Business Board.

Shrinking the Pentagon will not solve all problems. But senior leadership can tackle the issue more aggressively than it has thus far and create lasting savings. If Pentagon leaders — both military and civilian — take this challenge on fully and honestly, they will be creating budgetary space for the forces and technology that are most important for the military’s future.