Hagel's Defense Cuts: A Good Idea

Putting America's war machine on a sustainable financial path.

The House and Senate Armed Services Committees will take up the National Defense Authorization Act for Fiscal Year 2015 (NDAA) over the next month, reviewing a $601 billion total budget request submitted by the Department of Defense and tweaking the plan to reflect Congressional priorities. The Pentagon is asking for $496 billion for the base budget, $26 billion for the defense portion of President Obama’s “Opportunity, Growth and Security Initiative,” or OGSI, and a $79 billion for overseas contingency operations (OCO), largely for the war in Afghanistan. This year’s NDAA will test whether Congress can set aside parochial interests in favor of strategic choices and plan effectively for the future of national defense.

This is a crucial period for defense planning and budgeting. The Budget Control Act of 2011 (BCA) trimmed $487 billion in planned future spending increases from already elevated spending levels, basically slimming down the Pentagon’s unrealistic budget plans. This reduction in planned spending is often falsely presented as a cut, but it was not. In 2013, the Pentagon refused to submit a budget in line with the BCA caps, triggering sequestration. This $42.7 billion in cuts were less significant than many have argued. They trimmed the fat built up from over a decade of unprecedented increases in defense spending, were partly absorbed by spending down unobligated balances left over from past years, and were further mitigated by shifting funds around between more fungible readiness accounts and into the off-book OCO accounts. The military came through largely unscathed in terms of real capabilities. But since the Department of Defense has cut the low-hanging fruit, it now faces real choices about how to define its priorities and invest its resources for much of the next decade.

However, the Pentagon still seems to think that if it can weather a short-term budget squeeze this year, the near-record-high funding levels that characterized the decade after 9/11 will return. This year’s $496 billion base defense budget request adheres to the cap established under the BCA for 2015, the first time the Pentagon budget request has met the BCA caps since the law was passed nearly three years ago. However, this budget discipline is short-lived. While the $79 billion in requested OCO funding is exempt from the caps, the White House has also tried to plus up defense with the $26 billion defense portion of the OGSI request. Moreover, the Pentagon’s five-year plan calls for an additional $115 billion over the BCA caps.

Despite the hopes for higher funding in the future, the Pentagon’s budget request this year makes sound strategic choices, and Congress should support it. The plan, examined in detail in our recent report, shifts dollars away from programs unsuitable for contested operational environments, like the lightly-armed Littoral Combat Ship, and slows down programs that face hurdles in development and testing, like the Navy and USMC variants of the F-35 stealth fighter. It also proposes reforms intended to slow the growth of personnel pay, benefits, and health care costs, which the Congressional Budget Office estimates will contribute to 46 percent of the unbudgeted cost increases over the next five-year defense program (FYDP). Overall, the Pentagon has outlined cuts and reforms that will save about $40 billion over the next five years without jeopardizing America’s ability to project power or defend its interests.

Hyperbolic cries of deep cuts and a “hollow force” from defense hawks should be ignored. Under the Department’s plan the United States would continue to spend roughly three times more on defense than its closest competitor, and roughly as much as the next nine largest countries in the world combined, many of whom are our allies. This year’s defense budget would also be higher than it was in 2005, when the United States had 163,000 troops deployed in Iraq and Afghanistan.

There is just one problem with hoping for Congressional fortitude: it is a midterm election year. Instead of evaluating the national-security implications of defense-spending choices, Members of Congress will be fighting to protect favored defense programs which can control billions in taxpayer dollars for their districts. There are several key questions at stake. Congress’ actions in the NDAA process will show whether they can choose the strategic over the parochial and prioritize future defense needs over the present-day status quo.

For example, will Congress offer the Department explicit guidance on the BCA caps? The Pentagon has chosen to ignore the caps after this year’s budget, raising the prospect of sequester again next year. Clarity from Congress on future defense-funding levels might open members up to political criticism, but could also force the Pentagon to plan more realistically.

Likewise, what will be the fate of the Littoral Combat Ship? The two-variant LCS program is largely a product of parochial politics, and increases the Department’s procurement, training and maintenance costs in perpetuity. The Pentagon has proposed reducing its long-term buy from fifty-two to thirty-two ships and will consider a new small surface combatant more like a traditional frigate. But these planned LCS cuts come outside the current five-year defense program. Will members consider a fundamental rethink to finance procurement of a new frigate class, or consider cutting one of the two variants of the LCS?