Death by Sequestration
The defense budget has always been collateral damage in the great budget debate over the relative merits of entitlement reform and tax increases. The current deficit is projected to total some $642 billion in 2013. The combination of cuts to the defense budget mandated by the fiscal year 2011 Budget Control Act (BCA) and those imposed by the sequester amount to less than $85 billion, that is, they account for no more than a 14 percent reduction of the 2013 deficit. Clearly, defense does not provide a solution to the annual deficit, much less to the seemingly endless growth in the national debt. That solution can only be reached when the Congress resolves the taxes-versus-entitlements debate.
In the meantime, cutting defense by $85 billion has had a severe impact on our military’s readiness, operations, and modernization program. And should sequestration continue into fiscal year 2014, as by all indications it will, its impact will be even more devastating, since the defense budget that the administration submitted to the Congress earlier this year would have to be reduced by $52 billion in addition to the $47 billion in BCA-driven reductions that the budget incorporates. Secretary of Defense Chuck Hagel and Deputy Secretary Ash Carter have made it clear that the only way the sequester can be honored is by implementing further severe cuts in readiness, in addition to some combination of radical reductions in force levels and cancellation of modernization programs.
The administration’s budget presupposes that there will be no sequester in the coming fiscal year, though of course the White House recognizes that this is mere wishful thinking. It continues to call on Congress to reach a deal that would bring the sequester to an end. But the administration has offered nothing to help that deal along, other than to offer a “balanced approach” to the deficit and debt, “balanced” being a code word for the administration’s long-standing proposals to focus on tax increases and shelter entitlements.
In the meantime, the best that the Defense Department can hope for is more flexibility in managing the budget cuts than it was granted in fiscal year 2013. Even with that flexibility, however, DoD will be faced with the reality that it has only a limited ability to cut the entitlements portion of its budget—the personnel and military health accounts that constitute nearly half of all defense expenditures. The White House may yet rule that the military-personnel accounts are exempt from the sequester, placing the burden of budget reductions on the remaining defense-budget accounts—operation and maintenance, procurement, research, military construction and family housing. In practice, the Defense Health Program, a significant portion of which is funded in the operations accounts, will also be off-limits to budget reductions.
While the secretary of defense, his deputy and senior military officers have rightly hit the panic button as they anticipate what the next fiscal year will bring, the president has remained studiously aloof, arguing that the defense budget deserves no special treatment and should be subject to sequestration in the same manner as other accounts. His stance belies what has clearly been a White House objective since the sequester was first mooted in conjunction with the FY 2011 Budget Control Act: to cut “excessive” defense spending without getting blamed for doing so. If the nation’s defenses are cut back and worn down; if our overseas presence shrinks, together with our ability to extend our influence worldwide; if readiness sinks to dangerous levels; if our forces do not have the equipment that renders them second to none; it will all be the fault of the sequester, and of the Congress that approved it, rather than of a White House that has rarely seen a weapon system it liked.
It should be noted that the so-called Strategic Choices and Management Review (SCMR) has offered only a limited set of choices for meeting budget reductions. It has barely addressed the excessive cost of “staff augmentation” contractors, the bane of Secretary Robert Gates while he was in office. It has dismissed proposals for large reductions in civilian personnel, whose levels now exceed by about one hundred thousand those of fiscal year 2000, on the grounds that immediate savings cannot be achieved, even as it has called for another base-closure round, whose savings would be realized much further into the future. It has barely touched the third rail of military retirement, even though changes in the way future retirement pay is calculated would have an impact on actuarially determined accrual costs that would result in immediate savings.