By Leslie Wayne
The New York Times, 06 December 2005
For the first time since the 9/11 terrorist attacks, the Pentagon is feeling pressure from the White House to rein in rapidly rising spending and, with its budget reaching record levels, it is now looking to cut billions of dollars in labor and equipment costs.
Pentagon officials are in the midst of working out the final details of $32 billion in cuts that are to begin with the 2007 budget. They are also meeting with military contractors and members of Congress to prepare them for a slowdown in the double-digit growth of Pentagon spending.
Pressure for the cuts comes from the Bush administration's growing awareness that the nation cannot afford to pay for new weapons systems costing hundreds of billions of dollars, fight wars in Iraq and Afghanistan and cover major domestic demands - whether rebuilding Gulf Coast areas damaged by Hurricane Katrina, financing the new Medicare prescription benefit or reducing the federal budget deficit.
At the Pentagon, planners are facing hard choices between the staffing they want to sustain and the types of weapon systems they want to have. While there have been periodic attempts recently to hold the line on some costly weapons, this is the first serious threat to the next-generation weapons that military contractors have been developing for years.
This would be the first reversal in the Pentagon budget since 2001, when a steady climb brought it to levels not seen since the Reagan era. Spending for the current year, not including the supplemental appropriations to cover the costs of Iraq and Afghanistan, has reached $444 billion, a growth of 41 percent since 2001, according to the Pentagon.
On top of that, Congress' supplemental appropriations are now running at $50 billion to $80 billion, bringing total military outlays to around $500 billion a year. Even without these supplemental funds, Pentagon spending accounts for about 18 percent of all federal spending, the largest of any agency.
"We have unsustainable defense spending," said Senator John McCain, the Arizona Republican whose subcommittee of the Senate Armed Services Committee is holding hearings on Pentagon weapons-buying practices. "We cannot sustain the number of weapons programs" now in development.
In a report prepared at the request of Mr. McCain, the Government Accountability Office, the investigative arm of Congress, said last month that "costly conditions" at the Pentagon "are running head-on into the nation's unsustainable fiscal path."
The report warned that "persistent practices show a decided lack of restraint" at the Pentagon, which is facing "a cascading number of problems" because of budget pressures.
The $32 billion in Pentagon cuts would begin with a $10 billion reduction in 2007, with more in the years ahead. The Navy and the Air Force plan some personnel cuts to protect weapons programs, while the Army, which provides most of the troops in Iraq, has sent no signals.
The Pentagon's campaign to sell the program has already begun. Gordon England, the acting deputy defense secretary and the Pentagon's public face in this effort, met with the chief executives of the nation's biggest military contractors at a dinner last night - with no deputies or assistants allowed to attend.
The meeting has led some analysts to draw comparisons with a 1993 dinner that Les Aspin, the secretary of defense then, held with industry executives that is widely known in military circles as the "Last Supper." That session led to a decade-long decline in Pentagon budgets as well as a round of industry consolidations.
But Mr. England's public affairs officer, Captain Kevin Wensing, said the meeting was nothing more than one of a series of gatherings with "no particular agenda," and he called it "a chance to get together and talk about common issues."
Since 9/11, Congress has been more than willing to give the Pentagon everything it asks for - and, often, more. But now, even many pro-military members of Congress are beginning to waver on that.
Senator Jeff Sessions, the Alabama Republican who came to Washington eight years ago, when the Pentagon budget was about $250 billion a year, said at a recent Senate Armed Services hearing that "glory days for defense budgets" are coming to an end.
Christopher Hellman, a military policy analyst at the Center for Arms Control and Nonproliferation in Washington, said the reductions reflect changing times. "Like it or not, no one thought that the days of 2001, 2002 and 2003 when you saw substantial increases in Pentagon spending would be sustainable over the long term," he said. "It's a different political world."
Given the huge size of the military budget, analysts say, even a $32 billion cut may have little impact on a Pentagon that still plans to spend $2.3 trillion from 2006 to 2011.
"If we were talking about the Department of Interior or Health and Human Services, $32 billion would be quite a burden to eliminate," said Loren Thompson, a Lexington Institute analyst. "But when the Pentagon is spending nearly half a trillion dollars a year, it's barely noticeable."
At the moment, the Pentagon has committed itself to more weapons systems than it can realistically afford, with the costs of many "megasystems" spiraling out of control. The Pentagon has about $1.3 trillion in weapon systems in some stage of development, with over $800 billion of those costs yet to be paid.
Many of the weapons have been decades in development - for instance, the F/A-22 Raptor Air Force fighter jet or the V-22 Osprey aircraft for the Marines - and are still not ready for combat.
The most striking example is the F/A-22, which was ordered up in the early 1980's to fight Soviet jets. The Air Force initially planned to buy 648 F/A-22's, at a cost of $125 million each, measured in current dollars, but it can now afford only 181 jets, now priced at $361 million each, a 189 percent increase, according to the G.A.O. None are combat-ready.
The G.A.O. also found that the five most expensive weapons in the Pentagon's 2001 portfolio cost a total of $291 billion, measured in today's dollars. Today, the five costliest weapons total $550 billion, with many weapons on both lists.
Bills for these complex new weapons are coming due just as more mundane equipment like helicopters, airplanes, Humvees and munitions is being worn out in Iraq and Afghanistan and must be replaced.
"It's crunch time for a lot of programs," said Richard Aboulafia, a military analyst at the Teal Group, a consulting firm in the Washington area. "Equipment is wearing out at a fast rate because of Iraq and Afghanistan. And, a lot of money has been spent on developing new equipment that isn't even being produced yet and now the money is running out."
Winslow T. Wheeler, director of the military reform project at the Center for Defense Information and a former adviser to Congressional Republicans, said that Congress and the Pentagon could be facing a "classic bad compromise and underfund getting boots on the ground in order to help with a dubious procurement exercise for some equipment for 10 to 15 years from now."
Whether Congress will go along with these cuts - even if critics say they are not enough- is an open question. Last year, just before Christmas, Paul Wolfowitz, then a defense under secretary, made a first attempt at cuts.
But Congress refused to kill nearly everything on Mr. Wolfowitz's list, which included many systems, like the popular C-130J transport plane.
Other analysts question whether the White House and the Pentagon mean business this time, especially given Mr. Bush's strong pro-military stance. In the past, the Pentagon has evaded budget cuts by suggesting eliminating weapon programs that have widespread support among members of Congress.
Budget cutters say they worry that the Pentagon and Congress could reduce the annual Pentagon budget by simply stretching out the development of weapons systems over more years. While this can lower the annual outlay for a weapon system, it ultimately raises its overall cost.
So far, there are signs that business will continue as usual. The Pentagon has approved development of the next-generation destroyer, the DD(X), which, at $3.3 billion a ship, was thought to be a target for cuts. Similarly, discussion about cutting the $257 billion Joint Strike Fighter program, the costliest in the Pentagon portfolio, has ended after behind-the-scenes lobbying.
The C-17 Globemaster transport plane, long a target for cuts, is the beneficiary of efforts by the California Congressional delegation as well as Gov. Arnold Schwarzenegger.
Still, for all the lobbying, some critics say, the cutting only scratches the surface. "A cut of $32 billion doesn't even start to fix the problem," said Mr. Wheeler of the Center for Defense Information. "They need more like $32 billion a year."
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Citation: By Leslie Wayne. "White House Tries to Trim Military Cost," The New York Times, 06 December 2005.
Original URL: http://www.nytimes.com/2005/12/06/business/06military.html?adxnnl=1&pagewanted=print&adxnnlx=1133897868-FkDpvkHE8w3POkI9kDKnYg
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