Pentagon FY-11 Budget Being Squeezed By Revised Economic Assumptions

Inside Defense

Nov. 19, 2009 -- The Defense Department budget is being squeezed by revised economic assumptions that will decrease the purchasing power of the Pentagon's allowance, and the military services are awaiting the latest guidance from the Office of the Secretary of Defense on how these changes will impact modernization and maintenance accounts.

The White House Office of Management and Budget this spring directed the Pentagon to draft a fiscal year 2011 budget – not including war costs --- that was $541.8 billion, a slight increase over the FY-10 budget request of $534 billion.

In June, however, Pentagon sources say OMB issued revised guidance based on the mid-session review directing the Pentagon to adjust inflation rates for all accounts except those dealing with fuel and personnel pay.

This guidance decreased the Pentagon's purchasing power, a point underscored in a briefing yesterday on a draft FY-11 Defense Department spending plan presented by Robert Hale, the DOD comptroller to senior uniformed and civilian resource managers, according to Pentagon officials.

The services are awaiting a a final “issue paper” from the Office of the Secretary of Defense on inflation assumptions between fiscal years 2011 and 2015 that will be used to fine tune allocations across their entire budget.

This spring, Gates told Congress the Pentagon requires at least 2 percent real growth -- a hike that with inflation could be as much as 4 percent.

A formal appeal to the White House, should Gates elect to seek more money for the Defense Department, would likely take place this month, according to Pentagon sources.

After Thanksgiving, the Pentagon expects to receive the “passback” memo from the White House Office of Management and Budget, which lays out exactly how much the Obama administration plans to allocate for defense in FY-11.

Matthew Goldberg, a defense analyst at the Congressional Budget Office, estimated last month that current Pentagon plan requires 6 percent more than its current base budget of $534 billion. -- Jason Sherman

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Amid Talk of Higher FY-11 DOD Topline, Cuts Still Predicted In Long Term

Inside Pentagon

The topline of the fiscal year 2011 defense budget is bound to rise relative to FY-10 if the White House decides to implement the recommendations of the top commander in Afghanistan, Gen. Stanley McChrystal, according to the head Republican on the Senate Armed Services Committee, but some lawmakers and analysts still forecast declining defense budgets in the long term.

In a brief Nov. 17 interview with Inside the Pentagon, Sen. John McCain (R-AZ) said the Pentagon’s FY-11 topline figure will depend “partially on what the president announces in the strategy for Afghanistan.” To the extent the White House opts to support McChrystal’s recommendations, McCain said he would have no problem with the Defense Department’s FY-11 topline rising above FY-10 levels.

The Office of Management and Budget’s topline for the Pentagon’s FY-10 base budget submission was $534 billion. Last month, ITP reported that a DOD official expressed optimism that OMB would provide DOD topline relief in FY-11 in the form of several billion dollars more than the $542 billion base-budget FY-11 DOD topline figure that OMB proposed months ago (ITP, Oct. 29, p1). That decision is now expected this week, Pentagon sources said.

Without topline relief in FY-11, the Pentagon would likely have to eat into other programs to pay the costs at issue, but would probably not resort to killing entire programs, Pentagon sources said. Last month, the official predicted DOD would end up receiving about $8 billion in relief above the $542 billion figure, though DOD was pitching a range of relief options to the White House, some seeking as much as $16 billion.

Defense officials are mulling alternatives in the FY-11 budget process while awaiting a decision. In addition to the base budget, there is the overseas contingency operations account that covers war costs. Discussions about the FY-11 base budget and the FY-11 OCO account are going on in parallel.

McCain said it is hard for him to judge what DOD’s FY-11 topline should be because the White House has not yet spelled out “what our commitment is” in Afghanistan.

“But if [President Obama] carries out Gen. McChrystal’s recommendations then clearly it is going to be higher,” McCain added. The strategy is “going to dictate the budget,” he said. He opined that Democrats would not object to a higher FY-11 DOD topline if the White House deemed it necessary. Noting the president is “extremely eloquent,” McCain said he is confident the president would be able to make such a case to the American people.

Sen. Carl Levin (D-MI), the chairman of the Senate Armed Services Committee, has voiced opposition to sending additional troops to Afghanistan. Sen. Jack Reed (D-RI), who also sits on the panel, has said some number of additional combat troops in Afghanistan could be useful, but has also said increasing the defense budget would be difficult.

In testimony provided yesterday to the House Armed Services Committee, the Congressional Budget Office said its base projection of DOD’s current plans -- excluding overseas contingency operations in Iraq, Afghanistan and elsewhere -- would average about $567 billion (in constant 2010 dollars) annually from 2011 to 2028. That amount is about 6 percent more than the $534 billion in total obligational authority requested by the administration in its regular FY-10 budget. CBO provided similar testimony last month to the House Budget Committee.

Reed and David Berteau of the Center for Strategic and International Studies see a coming crunch for the defense budget. Berteau argued yesterday before the House Armed Services Committee that the trend of increasing defense budgets is unlikely to end in FY-11, but it will end and both Capitol Hill and the Pentagon are unprepared for the change.

“We all know that this run of increases will end and that defense budgets will come down,” Berteau writes in his testimony. “I don’t think it will be in FY 2011, but it will occur soon thereafter. Whether defense budgets start coming down next year or the year after is not what’s important. What’s important is that neither Congress nor the Defense Department is ready to deal with declining defense budgets.”

The ongoing Quadrennial Defense Review is likely to provide too little guidance about how much risk is acceptable and how to allocate that risk to different threats, he said.

The only solution is for DOD to define and articulate its force requirements, pay for what it can to meet those requirements, lay out the shortfalls and the long-term program in the future years defense plan, and propose that to Congress in the FY-11 budget and the associated outyears, Berteau testified.

“There is no shortcut to this process, and there is no easy fix,” he writes. “We either have to provide the resources needed to meet force structure and requirements, adjust the overall size of the force, constrain the requirements for their use, or live with more risk than we want. Regardless of which path we choose, we need to revitalize the tools of a fiscally disciplined Defense Program, program review, and FYDP. There is no other real solution.”

Reed predicted major pressure on the defense budget at an Oct. 28 breakfast in Washington.

“I think it’s going to be difficult to increase the defense budget and I think that the overall economy is suffering so much that a lot of our efforts have to be directed towards economic recovery here in the United States,” Reed said. “And then . . . we will start seeing growth and then the big issue is falling unemployment. We’ll be in a situation where we then have to turn our attention to deficit reduction because of economic considerations worldwide and the liability of our economic recovery.”

A Pentagon official told ITP that regardless of whether OMB provides topline relief in FY-11, there is incentive for the White House to take a harder line in the outyears to reduce the deficit.

Looking ahead, there is a domestic crisis that is requiring significant unexpected resources and once that is fixed the country will have the tough challenge and opportunity to fix the deficit, Reed said.

“So the bottom line is that there’s going to be significant pressure on defense budgets going forward,” Reed said. “I don’t think there’s going to be that much relief on the personnel front given the demands in Afghanistan. And so the likely path is first you delay programs and platforms that you don’t think are absolutely essential, and in combination with that you typically reduce the number of platforms you buy. You make other savings, but they’re very painful adjustments that DOD has to face.” -- Christopher J. Castelli

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Inside the Pentagon -- 11/19/2009

Lynn Launches Major Review of OSD Organization, Structure, Titles and More

Inside Defense

Nov. 17, 2009 -- Deputy Defense Secretary William Lynn has launched a sweeping review of the entire Office of the Secretary of Defense -- an undertaking aimed at reducing the number of deputy under secretaries of defense from 28 to five, and a possible precursor to a much wider set of management reforms.

“I am directing a review of the organization, structure and titling within OSD,” Lynn writes in a Nov. 16 memo announcing the assessment, which ostensibly is being carried out to comply with a prevision of the 2010 National Defense Authorization Act that requires the Pentagon to report on plans for streamlining the number of deputy under secretaries.

Pentagon sources say Lynn also is considering an ambitious set of Defense Department management reforms, in the works since this spring and previewed only to a small circle of senior leaders, that may be folded into this review (DefenseAlert, June 3).

Indeed, the deputy defense secretary states in his memo that the scope of the review will be wider than Congress’ immediate concern in the authorization act, which is the number of deputy under secretaries of defense.

The review, he writes, “will be used to identify, inform, and treat, as appropriate, other relevant OSD organizational and structural issues.”

To conduct the review, Lynn has set up a senior working group -- led by his special assistant, Sandra Hodgkinson -- that includes representatives from the roughly 15 offices that directly report to the defense secretary, according to the memo. The memo directs each under secretary of defense to provide updated organizational charts illustrating their offices’ reporting relationships and titling conventions as well as details about the total number of personnel in each shop.

In addition, each deputy under secretary of defense is to describe the major functions of their office; “major partners both inside and outside” the parent organization; and any major recent organizational, functional and manpower changes.

“Congress is interested in quickly enacting any required changes in statute,” Lynn writes, noting that lawmakers have said the Pentagon’s reorganization plan should be provided to them by March 15, 2010.

“In order to meet this suspense, this review will need to move expeditiously in the collection of information,” the deputy defense secretary writes, seeking replies to the requested data by Nov. 23.

In finalizing the FY-10 defense authorization bill this summer, Congress granted the Pentagon a brief reprieve from a looming requirement to abolish nearly two dozen deputy under secretary of defense positions this fall -- a step Defense Department officials believe would severely disrupt management of the military enterprise -- and set a Jan. 1, 2011, deadline for DOD to realign its leadership structure (DefenseAlert, Oct. 8).

Sen. Carl Levin (D-MI), chairman of the Senate Armed Services Committee, this spring expressed concern that the growing number of high-level billets established by the defense secretary -- particularly the proliferation of deputy under secretaries -- has created confusion over who reports to whom (DefenseAlert, May 15).

The Pentagon has 28 deputy under secretaries of defense, five of which are called for by statute; the rest have been established at the discretion of the defense secretary. In some instances, deputy under secretaries of defense report to other officials with the same title.

Pentagon officials successfully prevailed on Congress for an opportunity to address the issue internally. Lawmakers agreed to give the Pentagon time to independently realign senior executive positions and to identify which five positions will be designated deputy under secretaries of defense. -- Jason Sherman

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Army combat stress is up Afghanistan, down in Iraq

By Bob Brewin bbrewin@govexec.com November 13, 2009

Soldiers deployed to Afghanistan reported more combat stress this year, while troops in Iraq reported a decrease, according to mental health reports released by the Army on Friday.

The findings reflect the increased intensity of combat in Afghanistan, and less fighting in Iraq, said Lt. Col. Paul Bliese, an Army psychologist and director of the division of psychiatry and neuroscience at the Walter Reed Army Medical Center in Washington, during a Pentagon press briefing.

Multiple deployments exacerbate combat stress, according to the reports. Soldiers on "their third and fourth deployments report significantly more acute stress [and] psychological problems," said the executive summary. The Army's Mental Health Advisory Team issued the reports, the sixth such package, since 2003.

The team also concluded that soldiers who spend little time at home, or dwell time between deployments, have a high incidence of mental health problems.

Army Surgeon General Lt. Gen Eric Schoomaker told reporters that troops who spend more time at home between deployments experience less stress and better mental health. He said soldiers who spend 24 months at home have a "near return to garrison rates of mental health...."

Currently, soldiers remain home between deployments from one year to 18 months, said Adm. Mike Mullen, chairman of the Joint Chiefs of Staff at a Government Executive leadership breakfast earlier this month.

Mullen added that more time at home in the future will depend on how many additional troops President Obama plans to send to Afghanistan during the next year. The United States currently has 68,000 troops in Afghanistan; Army Gen. Stanley McChrystal, the U.S. commander there, wants an additional 40,000 troops deployed within the next year.

Multiple deployments also increase stress on marriages, according to reports from the military services. Navy Corpsman Petty Officer 1st Class Richard Martinez told Government Executive in a recent interview that in his role as a psychology technician, he spent more time treating troops with marital problems than combat stress. Martinez returned from Iraq in October.

Fred Mael, a Baltimore, psychologist said the Army's assessments make sense, because multiple lengthy deployments do not provide any relief from combat stress. He suggested the Army could better manage stress and troop requirements with three-month deployments.

The combination of multiple deployments and insufficient time at home is "demolishing" the Army, said Paul Sullivan, executive director of Veterans for Common Sense. He urged the service to require that all troops spend a minimum of 24 months at home before redeployment.

The Army has increased dramatically the number of behavioral health professionals since 2007, when there were only 350 psychologists on active duty in the entire Defense Department, Schoomaker said.

Lt. Col. Edward Brusher, an Army behavioral health specialist, said the service currently has 2,700 uniformed and behavioral health specialists. This includes 643 civilian and 178 active-duty psychologists, and 121 military and 194 civilian psychiatrists. Brusher said the Army has 43 behavioral health providers in Afghanistan and 227 in Iraq, and plans to add another 65 providers in Afghanistan.

Schoomaker said the Army plans to use technology to provide behavioral health services to remote camps and forward operating bases in Afghanistan, and also has started a pilot test of Internet-based diagnostics and counseling services at the Tripler Armed Medical Center in Honolulu.

Mael said he endorsed such an approach as a "good deal of counseling can be done just using the phone and e-mail."

Reset War Costs Could Mean Billions More for Navy, Air Force

Inside Defense

Nov. 11, 2009 -- The Pentagon is reviewing whether to crack open a pot of money that in recent years has been dedicated largely to the repair and replacement of Army equipment in order to pay maintenance bills and new weapons purchases for the Navy, Air Force and Marine Corps -- a decision that could influence the allocation of tens of billions of dollars, according to Defense Department officials.

Under review is the policy that defines the criteria for what repairs and new equipment can be paid for in the war cost portion of the Pentagon budget, and which so-called reset costs must be funded in the operations and maintenance portions of the annual base budget.

“There is still work ongoing in that regard,” said Alan Estevez, acting deputy under secretary of defense for logistics and material readiness, in a Nov. 5 interview. His office is participating in the policy review, along with the office of cost assessment and program evaluation and the Pentagon's comptroller shop, according to Defense Department sources. Any proposed guidance will also require approval from the White House Office of Management and Budget, sources said.

War cost spending bills have long included substantial sums for the Army to repair and replace equipment worn out and stressed by operations in Iraq and Afghanistan. Now, the other services are looking to have the war cost appropriations pay for costs that under current rules must be financed in the base budget.

Last fall, for instance, the Navy submitted a $4.2 billion bill for the repair and replacement of aircraft it argued were stressed by the wars, according to Pentagon sources. Specifically, the Navy was looking to recover fatigue life lost due to missions flown in contingency operations with procurement funds.

The Navy's request was rebuffed, but its move served as a catalyst for the current review.

“If I am flying a Navy jet off an aircraft carrier in the Arabian Gulf, is that a legitimate OCO expense?”

said Estevez, using the acronym for war cost spending -- overseas contingency operations. “I'd be flying that plane in some regard anyway. If it gets a bird strike over the air in Iraq, is that damage from OCO or is it different from a bird strike that occurs over the gulf during a normal flying patrol?

“What are the rules on that? It gets pretty gray pretty fast,” Estevez said.

The Pentagon's definition of equipment reset is “the actions taken to restore and enhance combat capability to equipment destroyed, damaged, stressed, or worn out beyond economic repair due to combat operations by repairing, rebuilding, or procuring replacement equipment,” Estevez said.

Under current rules, the Defense Department estimates that as of this summer, the total cost to reset all major equipment deployed to both Iraq and Afghanistan is $29 billion, according to a Pentagon source familiar with recent equipment liability estimates. This sum is not necessarily what the Pentagon would seek to repair in a single year, but simply a snapshot at a point in time of the total amount of work required to rectify the U.S. equipment inventory.

Of these costs, the Army's portion is $19 billion, including: $2 billion for new equipment, $5 billion to replace damaged gear, $9 billion for overhauling equipment at U.S. depots and $2 billion for repairs in the field. The Navy and Air Force reset liabilities are calculated to be $3 billion each and the Marine Corps’ $4 billion, according to the Pentagon source. -- Jason Sherman

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US Military Personnel Have Grown Too Expensive

Another Looming Disaster
Monday, Nov. 9, 2009
by George C. Wilson

The all-volunteer military that took over from the draft in 1973 has become so expensive it will either have to get smaller, not bigger as Congress desires, or declare the civilian equivalent of bankruptcy and resume the unpopular draft calls of the Vietnam era.

This is the prediction of retired Marine Maj. Gen. Arnold Punaro, a fully certified expert on military manpower. He was the longtime aide for former Senate Armed Services Chairman Sam Nunn, D-Ga. Punaro himself chaired the Commission on the National Guard and Reserves, which issued a report last year on how those forces should be transformed. He was also on President Obama's short list for Army secretary.

Our all-volunteer military "has priced itself out of the market" under the flat or reduced Pentagon budgets Punaro sees in our future, he said.

But nobody in Congress or the administration wants to look hard how we're riding to the poorhouse in Cadillacs because none of the ways to stop the skyrocketing cost of recruiting, fielding and retiring the military is politically appealing: raiding the Pentagon's hardware, maintenance or research accounts; settle for a smaller military force or go back to the draft.

Yet military manpower costs are in the same kind of "death spiral" former Pentagon analyst Franklin Spinney rightly predicted would lead toward the nightmare of pilots taking turns flying the one aircraft their service could afford to buy because of its high cost. The new Air Force F-22 fighter, for example, costs about $350 million for just one plane, when research and development costs are included.

In 2005, GAO took a dizzying plunge into how much it costs to recruit, train, pay, house, care for and pay retirement, health and other benefits for one active duty soldier.

It threw up its hands, sounding this complaint: "No single source exists to show the total cost of military compensation. Tallying the full cost requires synthesizing about a dozen information sources from four federal departments and the Office of Management and Budget." The Pentagon should appoint a compensation czar to keep track, GAO said.

Its auditors made an educated guess that, in FY04, the all-volunteer military was costing, when averaged out, $112,000 a year for every trooper and officer on active duty. The cost has gone way up since 2004 because Congress and the Pentagon have heaped more money on the military to save it.

Of the 1.4 million military men and women on active duty, not counting activated Reservists, only about half are deployable to battlefields around the world because so many are in overhead jobs like handing out towels in a gym, Punaro lamented. This means the troopers who know how to fire a rifle or drive a Humvee are sent to Iraq and Afghanistan again and again.

A smaller Army and Marine Corps would crash head-on into the plans of Gen. Stanley McChrystal, the field commander in Afghanistan, to get enough additional U. S. troops from Obama to put a full-court press on the densely populated areas of Afghanistan.

The most recent CIA estimate of Afghanistan's population is 28.4 million people. Let's say about half that number live in densely populated areas threatened by the Taliban. Applying accepted counterinsurgency doctrine that it takes one soldier to protect 50 civilians, McChrystal would require 300,000 troops to protect 15 million Afghans. Where would all these protectors come from even if McChrystal gets 100,000 U.S. troops on the ground in Afghanistan? Certainly our NATO allies are not going to send in the other 200,000. And the Afghan people don't trust their own army and cops to protect them.

Recall that at the end of 1968 the United States had 536,100 U.S. personnel in South Vietnam and a native military numbering 820,000 men and women and still lost the war in a country whose population was then 16 million, a little over half Afghanistan's.

Gen. David Petraeus, McChrystal's boss, directed the writing of the Army's new field manual entitled "Counterinsurgency." That manual states that "a counterinsurgency effort cannot achieve lasting success without the host nation government achieving legitimacy." The corruption that plagued the election of Afghanistan President Hamid Karzai means McChrystal will be starting his pacification effort from behind the goal line, no matter how many additional troops Obama sends him.

Because the future of today's all-volunteer military will largely determine what the United States can do at home and abroad to combat terrorist and other threats, some unit of Congress should demand the Pentagon answer questions like these: What is each person in our active duty force costing the taxpayer today counting everything? What will that cost be 10 years from now? How will you curb or pay that rising cost? Is it economic folly to pay salaries and benefits to officers for 60 years who only served for 20 years? How many military aviators got flight pay while filling desk jobs on active duty and then received tax free disability payments upon retiring? What are your plans for transferring military people out of jobs civilians could do?

Government Auditors Allege Lack of Contingency Plans for Iraq Drawdown

Inside Defense

Nov. 6, 2009 -- Government Accountability Office auditors recently told lawmakers they believe the Defense Department lacks contingency plans for the drawdown of forces from Iraq, as they would be required by U.S. military doctrine, InsideDefense.com has learned.

Senate Armed Services Committee staff recorded Oct. 2 as the receipt date of the secret September GAO assessment, according to public panel records. The report is titled “United States Drawdown Plans Should Include Contingency Plan For Use If Key Assumptions About Security Conditions and Iraqi Capabilities Prove Wrong,” and it is part of GAO's “Securing and Stabilizing Iraq” audit series, according to those records.

House Armed Services Committee members also are aware of the document. “The committee works very closely with the GAO, and had knowledge of the report” when panelists questioned senior defense officials during an Oct. 21 hearing about DOD's Iraq drawdown plans, a spokesman for the panel's top Republican, Rep. Howard McKeon (R-CA), wrote in an e-mail last week.

“Do we have contingency plans in the event the security situation demands revisiting the August 2010 time line?” McKeon asked witnesses, including DOD policy chief Michèle Flournoy, in his opening statement.

President Obama announced a plan to redeploy all combat troops from the country by August of next year. The move entails removing roughly 80,000 personnel from the country, leaving a force of 50,000 in place.

Defense officials have said they will use “decision points” as the coming months unfold in the still-volatile country to determine whether the redeployment pace should be kept or altered.

Sources said therein lies the crux of auditors' findings -- that periodic strategy evaluations alone cannot replace long-term contingency plans considering a wide range of worst-case scenarios. For example, the decision point strategy could leave little time to reconcile a potentially sudden need for more forces with already scheduled troop rotations, the argument goes.

In a statement, a Pentagon spokesman did not specifically address GAO's charge. “[W]e have always said that our drawdown plan retains some flexibility to deal with [the] changing situation on the ground,” Marine Corps Maj. Shawn Turner wrote in an e-mail. “We have decision points along the way that will allow us to adjust to a wide range of changes in the security environment. Going forward, we will continue to assess and adjust as necessary.”

A GAO official last week told InsideDefense.com the report is secret because its assumptions about the Iraqi security environment stem from classified intelligence reports. The classification was ordered by the National Intelligence Council, the official said, noting GAO has no authority to classify records. The council, an arm of the Office of the Director of National Intelligence, and DOD provided comments on the report, the official said.

Auditors have previously raised questions about contingency plans in Iraq. A March GAO report outlining topics for congressional oversight asked what U.S. plans would be if Iraqis voted against a November 2008 status-of-forces agreement governing the presence of American forces in Iraq until the end of 2011. Such a development could significantly hasten the redeployment, according to the March report.

Lawmakers have said the country's national election, envisioned for January 2010, and the possibility of increased violence thereafter is a crucial factor for the pace of the redeployment.

“Given all that is at stake in the upcoming elections and that the drivers of instability continue to threaten Iraqi security, I am concerned that your redeployment schedule is too aggressive,” McKeon wrote in a Nov. 4 letter to President Obama. “Moreover, if Iraq's national elections slip past January 2010, I believe the August 31, 2010 redeployment deadline offers [Multinational Force-Iraq Commander Army Gen. Raymond Odierno] little room to maneuver,” the letter states. -- Sebastian Sprenger, with additional reporting by Kate Brannen

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The Debt Problem Is Worse Than You Think

Even alarmists may be underestimating its size and how quickly it will become unbearable.

NATIONAL JOURNAL Saturday, Nov. 7, 2009 by John Maggs

It is hard to imagine, but not long from now the epic fight over health care reform and the looming battles over climate change and banking regulation could seem like footnotes to the Obama presidency. The jury is still out on whether the economic stimulus bill and corporate bailouts helped pull the United States out of the worst recession since the Depression, but these too will fade in importance once the true challenge faced by the U.S. government comes into focus.

Sometime in the next few years -- possibly before the 2012 presidential election and probably by 2016 -- it is likely that two huge challenges will come to dominate government and politics. Either of them alone would be daunting enough to overwhelm the unreliable machinery for making hard decisions in Washington. Together, they will demand a degree of consensus, acumen, and political bravery that hasn't been seen here for a long, long time.

The first task is to confront the reality that the budget process is out of control and that deficits and government debt are headed much higher than anyone can remember. The tripling of the deficit in 2009 has been much noted in Washington, but the implications of the longer-term path of the budget are not fully appreciated by many policy makers. Simply put, even alarmists may be underestimating the size of the problem, how quickly it will become unbearable, and how poorly prepared our political system is to deal with it.

There is a sense in Washington that the budget problem is merely one of several challenges that Obama would face in a two-term presidency, just a nettlesome complication for him as he pursues climate change, entitlement reform, and other priorities. Yet dealing with the budget and the debt is likely to dominate, one way or another, most of Obama's domestic policy agenda, whatever his hopes and intentions. Republicans tend to portray the budget woes as the product of the nine-month-old Obama presidency and the $787 billion stimulus plan. Democrats blame the Bush tax cuts and reckless spending on the wrong war. Such posturing obscures the consensus that underlies the fiscal expansion, over many years, that has brought us to this perilous moment.

The second challenge is monetary policy, as set by the Federal Reserve Board. The Fed uses interest rates and other tools to influence inflation, employment, and economic growth. In the same way that fiscal policy will need to make a sharp U-turn from expansion to contraction, monetary policy must do so as well. The switch isn't on the radar screen of nearly as many decision makers as the budget, but it is probably just as important and daunting a task.

In normal times, this monetary about-face is a delicate operation, but these are not normal times. Ordinarily, the Fed gradually raises interest rates during an economic recovery to tamp down inflation but not so much as to throttle growth. During this recession, it cut rates to zero to combat the near collapse of the banking system, and raising them will risk reigniting that crisis.

Just as the economy begins to strengthen, the Fed will have the added job of selling off upward of $2 trillion in assets from its efforts to rescue banks. It will need to do so because, as with the banks it saved, the Fed has become over-leveraged. As Fed Chairman Ben Bernanke has noted, the Fed has acted in ways and on a scale that it never has before. To reduce its holdings, the Fed will need to engage in many kinds of transactions that it has done only on a limited basis -- this time on an unprecedented scale. Part of Bernanke's job is to project an easy confidence about this enormous task, but Fed experts know that he is in uncharted waters.

Mishandled, these efforts to rein in the money supply could revive the financial crisis, kill off a recovery, or unleash ruinous inflation that would wreak havoc with the economy for years, as it did in the 1970s. As much as the budget or any other issue, the tightening of monetary policy is likely to shape history's view of the Obama era.

What unites these two challenges is that they are ultimately about how government will manage its debts. The financial crisis that began in 2007 was driven by the excessive debt of businesses and consumers. Government stepped in to effectively assume some of those private debts, saving many companies and families from bankruptcy. But now the U.S. government is starting to have debt problems of its own.

Unusual among developed countries, the United States has always escaped the temptation to pile up too much debt, even while fighting wars and building a welfare state. Part of the reason is the unique blessing of cheap resources and a productive free-enterprise system that allowed the country to grow its way out debt, as it did after World War II when government debt was greater than 100 percent of the country's yearly output. Since 1950, it has fallen to an average of 40 percent.

But that legacy of thrift is under siege as never before. Economists Kenneth Rogoff and Carmen Reinhart have written a dense analysis of financial crises through 800 years of world history, full of scatter charts and equations with Greek symbols. Their book, This Time Is Different, is a surprise best-seller, outpacing cookbooks and celebrity memoirs. Rogoff and Reinhart document every financial predicament back to 1300 to show the great consistency with which these crises come about and what happens afterward. The book doesn't deal with the recent U.S. crisis, but it is an implicit critique of American exceptionalism in economics -- the idea that we can avoid the fate of other nations.

The influx of foreign capital, the bubbles in housing and stocks, and the run-up in borrowing and commodity prices that preceded the meltdown that began in mid-2007 were typical signals of an impending crash. Financial crises tend to yield weak recoveries, the authors found. Both poor and rich countries spend hugely on bailouts and stimulus and fail to rein in spending, leading to crushing debt problems. Even more than the cost of bailouts, however, weak revenues from sluggish recoveries strangle governments as they maintain spending levels to soften the downturn.

In one comparison of 14 major financial crises involving a mix of developed and developing countries, Rogoff and Reinhart find that within three years of the onset of the problem, debt rose by an average of 86 percent. In the best of circumstances, the United States will blow through this number. According to an estimate by the Office of Management and Budget (which excludes many likely developments, such as an extension of the Bush tax cuts), the net federal debt will nearly double from $5 trillion at the end of 2007 to $9.9 trillion at the end of 2010. (This is the number that matters to investors. Gross debt, including federal trust funds, is now close to $12 trillion.)

A debt default -- a form of bankruptcy -- seems unthinkable for the United States, but Rogoff reminds us that it happened in 1933, when President Franklin Roosevelt revalued the dollar by seizing gold supplies. A default would wipe out wealth and retirement savings and do long-term damage to the economy. No one knows how much debt America would have to incur to risk a default, but one thing is certain: Without a drastic fiscal U-turn soon, debt is going to reach the point where some kind of default is likely.

The Thermostat

As the charts on pp. 21-24 show, spending and taxes collected by the federal government have been remarkably steady until recently, despite popular belief. Since 1969, federal spending has stayed within a narrow band, running between 19 and 22 percent of gross domestic product, with only brief periods when it was higher or lower. During the 1980s, spending was mostly above 20 percent, and from 1995 to 2007, it was mostly below 20 percent. The average over 40 years is 20.6 percent.

Revenue is even more stable. Despite tax cuts, recessions, and major tax increases, the amount of tax revenue from 1969 through 2008 was amazingly constant, varying by just a couple of percentage points. The average for revenue was 18.3 percent, yielding a long-term average deficit of about 2.4 percent.

Looking more closely at spending and revenue together, it seems that the largest swings in one direction are almost immediately followed by a move back toward the average.

The metaphor of a thermostat nicely describes how Washington responds to changes in the political climate. This idea of a set point for spending and taxes is consistent with what economists think of as "dynamic equilibrium." Whenever policy moves taxes or spending very far from the set point, other forces -- some economic, some political -- emerge to move it back toward the average.

For example, when taxes get too high and government does not lower them, slower economic activity comes along to reduce revenues. When tax revenue drops, often reflecting a tax cut, the economy responds with higher growth that boosts revenue, reversing the trend.

Likewise, when spending gets too high, government eventually acts to rein it in. In the popular view of history, Ronald Reagan cut taxes sharply and backed a defense buildup that boosted overall spending. The truth is that spending, as a share of the economy, peaked in 1983 and fell gradually for the rest of Reagan's presidency. By 1982, in the face of rapidly rising deficits, Reagan endorsed a series of tax increases after it became clear that "business tax cuts had gone way too far," recalled Bob McIntyre, director of Citizens for Tax Justice, which has targeted the decline in corporate taxes. After tax cuts and a deep recession drove down revenues in the Reagan administration's early years, tax increases and a recovering economy brought revenue back to the set point, almost exactly.

Repairs Are Needed

Based on recent events and future plans, however, this thermostat seems to be on the fritz. According to the Obama budget's baseline, if current policies stand, spending that jumped to a postwar peak of 26 percent of GDP in 2009 will settle in at a new set point of 24 percent for the next 10 years. But revenues -- with or without Obama's proposed tax increase on high-income earners -- will continue to average about 18 percent of GDP, which is right around their 40-year norm.

In other words, spending will bump up to a new, higher set point, but taxes will not. The resulting gap would produce deficits in the range of 5 to 6 percent over the next 10 years -- more than twice as large as the 40-year norm.

Even this is probably too optimistic. Obama's budget, by all measures, undercounts some likely expenses, such as the continued cost of the Afghanistan war, and leaves out the extension of some likely tax breaks. The budget hawks at the nonpartisan Concord Coalition propose their own scenario to account for these likelihoods, dubbed the "plausible baseline." It finds a new 10-year set point of 24.6 percent for spending and 16.3 percent for revenue, an average deficit of 8.3 percent.

What are the sources of this long-term shift? Despite the sense that Washington has never been more divided ideologically, in practice there is a surprising amount of agreement about taxes and spending. Unlike the 1980s, when Republicans were associated with the idea of smaller government, and the 1990s, when a Democratic president and a Republican Congress achieved the biggest reduction in the relative size of government since the 1940s, neither party is much identified now with the idea of limited government -- nor with fiscal prudence. Republicans may be fighting tooth and nail over the Obama health care proposal, but they aren't willing to challenge popular spending programs such as Medicare, as they once did. Democrats, meanwhile, have embraced tax cuts as a political bonanza.

As an example, Obama recently proposed a $250 per person payment to Social Security recipients because recent deflation means that they won't be getting the customary bump in their monthly checks to account for inflation. Economists condemned the rebate as political pandering to seniors, who as a group don't need the money as much as others and are less likely to spend it. But there was hardly a peep from Democrats or Republicans in Congress.

The new tolerance for high deficits comes at a time when government badly needs to address the long-term cost of entitlements. As a presidential candidate, Obama complained that Bush had squandered his opportunity to deal with the looming funding shortfall for Social Security and Medicare. But now Obama proposes to jettison what truly does appear to be the last chance to "bend the curve" of runaway costs. According to a comparable "plausible" scenario from the Congressional Budget Office, entitlement costs will start to rise steeply near the end of the 10-year budget cycle in 2019. Government spending is projected to ascend even more sharply -- past 30 percent of GDP around 2030, and 40 percent around 2050. Unless Obama does something to rein in spending in the next few years, solving this problem seems much more improbable than it did even a year ago.

The effect would be a frightening accumulation of debt much sooner than Obama's economic team is acknowledging. According to the White House's baseline projections, federal debt is expected to rise from 40 percent of GDP in 2008 to 53 percent in 2009 and top out at 65.9 percent in 2013, and then come down slightly until 2019. But the more realistic alternative scenario from CBO sees debt rising steadily through that period to 87 percent of GDP in 2020. Thereafter, it takes off like a rocket, jumping to 181 percent by 2035 and 321 percent by 2050. In today's dollars, this would be enough money to fight three wars the size of World War II.

Too Much Money

The threat of accumulating public debt is also a problem for the Federal Reserve in managing the dollar and interest rates. Even in calmer times, knowing when to cut rates and when to raise them is tricky. Increase rates too soon after a recession, and you can squelch the recovery. Hike them too late, and you can unleash inflation. Since it was created in 1913, the Fed has mishandled the timing of interest-rate changes many times, according to John Taylor, a former Bush Treasury official and one of the foremost experts on the Fed.

This time, the job for the Fed is going to be much more complicated, according to Rogoff, a Harvard economist. In addition to interest-rate cuts, the Fed has effectively lent $1.5 trillion to banks, with about $500 billion more in loans planned by early next year. This doesn't count guarantees to banks and other financial institutions that could potentially add trillions more to the money supply if some aspect of the financial crisis returns.

Sometime in the next year or two, the Fed must start selling off its assets. Like any bank, it will need to do this to bolster confidence that it has the means to deal with future problems -- akin to the "stress tests" that the Treasury Department is using to determine whether private banks are healthy. Put another way, the Fed will have to sell assets to soak up the extra trillions in the money supply. In times of normal growth, when banks are more willing to lend their own money, this extra money could fuel inflation.

Meanwhile, the Fed will do its customary about-face on interest rates, but this too will be more complicated than usual. For starters, the Fed will be raising short-term rates after effectively cutting them to zero last December (the actual rate is between zero and 0.25 percent, which is more or less a transaction fee). It will do this in a financial system that has depended on virtually free money to maintain its lending to businesses and consumers.

Both actions are a way for the Fed to reduce the money supply, which has grown more and faster than at any time in its history. The risk is that even modest economic growth could trigger inflation that will be hard to control. Bernanke projects great confidence in the Fed's capacity to manage this complex switch on debt and interest rates, but again "we are in new territory," Rogoff said.

The damage could be deep and lasting: If rates are raised too soon or too steeply, a recession would return, threatening companies and consumers already weakened by the Great Recession. That's what happened in 1937, when the Fed boosted rates too soon and extended the Great Depression by a year. On the other hand, if the Fed waits too long to raise rates and moves too slowly to sell off its assets, inflation would ensue, a problem that could take years -- and perhaps another recession -- to correct.

The Fed Is Part Of The Government

Because of the Fed's unique independence, it is tempting to view these crucial decisions by the board as fundamentally different from the budget and debt problems outlined earlier. Unlike the very public process by which Congress writes a budget and votes to raise the federal debt limit, the Fed makes its decisions privately and then announces them in press releases. But that doesn't mean that the Fed is not accountable for its actions, as Bernanke is learning in hearing after hearing about his handling of the bank bailouts. Even routine decisions on interest rates are the subject of intense scrutiny in Washington and on Wall Street, and politics has always influenced Fed chairmen.

Consider Arthur Burns, a close political adviser of President Nixon's who was rewarded with the Fed chairmanship in 1970. According to former Nixon aide William Safire, Burns was pressured to lower interest rates before the 1972 presidential election, through Nixonian leaks to the media about Burns's possible replacement. The Fed chairman relented, unleashing nearly a decade of ruinous inflation and one of the worst eras of economic turmoil in the 20th century.

Bernanke has already been renominated, but Fed chairmen still face pressures. Alan Greenspan, generally considered to have been above such suasion, has been at pains to explain how he came to unequivocally support the Bush tax cuts, something that he now says he never intended to do. Paul Volcker was vilified at the time for engineering the 1981-82 recession to help throttle inflation, and only years later received the credit he deserved.

Like the president and congressional leaders, who will face intense pressure and agonizing choices about the budget, Bernanke will encounter the same forces in his complicated series of decisions on reducing the money supply. And like those leaders, he must find consensus among the Fed's other board members and the sometimes very independent presidents of the Fed's regional banks. In the same way that Volcker's recession helped shape the view of Reagan's presidency, Bernanke and the Fed will influence whether Obama's stimulus and bailouts are seen as a success.

A large part of the Fed's lending involves short-term debt, or gaining control of assets that will be relatively easy to dispose of, Rogoff says, but that doesn't include mortgage-backed securities. By next spring, the Fed will have purchased $1.3 trillion of these bonds -- $1.3 trillion more than it owned before the crisis, when its total assets were $860 billion. Rogoff is among those who think that it is going to be tricky to unload these securities without destabilizing the credit markets. After the Fed's unusually close coordination with the executive branch of late, its image as an independent agency would probably be helped if ownership of those mortgage securities were transferred to the Treasury Department, Rogoff says (as originally envisioned under the Troubled Asset Relief Program). But he acknowledged that Congress is unlikely to embrace the optics of boosting the debt limit by another trillion dollars, even though it makes no difference to the true size of the public debt.

Borrowing by the Fed may not show up in the budget as an expenditure by taxpayers, but as Rogoff points out, the economic effect is the same: Until the Fed is able to successfully unwind its trillions of dollars in commitments, the board is adding to a growing Everest of debt.

Banana Republic

Debt is rising so fast that it seems reasonable to wonder why long-term interest rates remain so low, suggesting that Wall Street isn't worried. Consider the conditions that led to public debt harming the economy the last time. This was 1990 to '92, when economists concluded that growing deficits and debt were keeping long-term interest rates higher than they otherwise might be. Deficits had risen from about 3.8 percent of GDP in the late 1980s to 5.5 percent in 1992, which in turn helped drive up debt from its long-term average of 40 percent of GDP to 48 percent that year.

There is little doubt that the picture is much worse now, as outlined earlier -- debt has already risen more and faster, and deficits and debt are on a path to continue rising far higher. Economist Simon Johnson, among others, has warned that the United States is headed for the kind of debt crisis that has often plagued developing countries. In such cases, nations see interest rates climb, currency values plunge, and inflation soar out of control. Investment flees, confidence in the economy suffers, and long-term damage is done to the country's finances. That has been the experience of Japan, which once appeared to have eclipsed the United States in productivity and living standards but since 1990 has been mired in slow growth. Depressed about the three-year slump in home prices? In Japan, home prices fell for 17 straight years.

Still, Washington seems far from grappling with the financial crisis. William Gale of the Brookings Institution has been trying for years to interest policy makers in budget problems that looked scary before the crisis. "If you had told me two years ago that the housing market was going to collapse by 50 percent, that there was going to be a credit crisis that put the economy in free fall, that the world economy would collapse, that the deficit would be 10 percent of GDP, and that Congress would do nothing about the budget, I would have said you were crazy."

During the last budget crisis in Washington, an important factor moving the political system to action was the perception on Wall Street that the process was out of control. This was reflected in high long-term interest rates, slow growth, and, by some accounts, a heightened volatility in stock and bond markets. The financial situation helped Robert Rubin, as director of the newly created National Economic Council, to persuade President Clinton in 1993 to focus his efforts on deficit reduction.

Don Marron, a former top CBO official, is one economist who wonders why the markets haven't registered more concern recently. One possibility, he said, is that investors believe that the budget crunch will fade, presumably through some combination of vibrant economic growth and fiscal conservatism in Washington.

On the first point, last week's surprisingly strong report on economic growth in the third quarter of 2009 is encouraging those who think that a robust, "V-shaped" recovery will follow the sharp downturn of the Great Recession. The economy grew at a 3.5 percent annual rate in the third quarter, after contracting in each quarter of the previous 12 months. About 1 percentage point of that gain came from retailers replenishing their inventories, a signal of confidence in the months ahead. Viewed another way, however, about two-thirds of the gains were tied directly to temporary stimulus from the government -- extended unemployment benefits, the "cash-for-clunkers' rebate to boost car sales, and a tax credit for first-time homebuyers. After rising through the spring, consumer confidence has returned to levels normally associated with a recession.

A Slow Recovery

Rogoff is hoping that the economy will rebound strongly, but his research indicates that recessions caused by financial crises result in unusually slow and shallow recoveries. On average, he said, housing markets contract for five years, unemployment doesn't turn around for almost that long, and stock markets take three and half years to recover. In Rogoff's compendium of crises, the story for other nations is pretty much what has been the story for the U.S. so far: asset bubbles, inflow of foreign capital, huge borrowing by consumers, business, and government. As the accompanying charts show, in the best of conditions, deficits and debt in the United States follow the same script.

For their part, the Obama administration and CBO are counting on an unusually strong recovery. As sobering as OMB's long-term "plausible baseline" is, the agency is still expecting sluggish growth of 1.7 percent in 2011 and meteoric growth beyond -- an average of 4.7 percent a year for 2012 and 2013. That would be a more robust expansion than for any two yearsduring the 1990s boom, and the fastest for any two years since 1983-84. If growth is slower, and especially if there is another recession, the deficit and debt picture gets much worse, very fast.

Another lesson of Rogoff's book is that rich countries' experiences with debt crises are very similar to that of poor nations. Other countries have been hit by crises with public debt levels as low as 70 percent of GDP, or avoided them with debt as high as 150 percent, but none of those nations had the advantage of America's dominant role in the global economy and its control of the dollar, the "reserve" currency for most of the world. One paradox of the recent recession is that, as bad as it was here, it was more severe in most of Europe and Japan, prompting a surge in foreign purchases of U.S. Treasury bills just when the government needed to sell them. Since the crisis hit, the share of worldwide wealth held in U.S. dollars has risen from about 65 percent to 70 percent.

Marron is skeptical that low long-term rates reflect confidence in Washington's ability to solve the debt problem. "I don't know what the evidence would be for that." It could be, he speculated, that investors are engaging in the kind of wishful thinking that brought about the financial crisis. Based on recent experience, Marron said, "we know that is a possibility."

It may also simply be a matter of what gets investors' attention. In 1992, one of the larger components of federal spending was servicing the national debt. In the past year, the debt has increased by more than 30 percent, but the projected cost of servicing it actually went down, Marron notes, because of the sharp cut in interest rates. Money is nearly free for big banks at the moment, and running up the national debt is nearly free, too.

This is where the two policy challenges of the budget and the money supply converge. Once interest rates start rising, the cost of government debt will climb sharply; at the same time, investors are going to notice that their borrowing costs are also higher. That's what happened from 1990 to '92, when Wall Street and Washington suddenly decided that the budget and debt were an emergency. If interest rates were to rise 2 percentage points, Rogoff said, a national debt that will be close to $10 trillion in 2011 would cost an extra $100 billion to service.

Taylor, Rogoff, Marron, and Gale all think that it will be a year or two before the recovery is strong enough to trigger the inflationary signals that lead the Fed to start raising rates. But all four also say that a shift in investor confidence could come suddenly and sharply. When the shift does arrive, the need for drastic action in Washington will be greater than it was in the 1990s, when Republicans and Democrats put aside their differences to reach comprehensive budget deals that ushered in an era of lower deficits and the only balanced budgets since 1969. Given the pressure of dealing with entitlements, Marron says, "the job will be much bigger" than what Washington faced in that earlier era. (See "What to Do?" p. 28.)

Not coincidentally, 1990 to '92 was a time when difficult decisions on fiscal and monetary policy converged. While Congress and President George H.W. Bush were reaching a budget deal in 1990, Fed Chairman Greenspan was resisting pressure from the White House to lower interest rates. Greenspan sensed inflationary pressure in the pipeline, and he held off. The result was a recession that surely cost Bush a second term. Likewise, tougher stances on fiscal policy can have electoral consequences. Voters then were also angry that in reaching a budget deal in 1990, Bush broke his vow of no tax hikes. Gale says that Obama will similarly have to go back on his promise to protect the middle class from tax increases, if he is to have any chance of getting a handle on the deficit. "Do I expect that [soon]? No."

Pentagon Readying FY-11 Budget Decisions, Changes to Service Spending Plans

Inside Defense

Nov. 4, 2009 -- The Office of the Secretary of Defense is expected within days to unveil a rough draft of the U.S. military's fiscal year 2011 spending request in an internal Pentagon document that will detail new changes the services must make to their investment plans as part of Defense Secretary Robert Gates' continuing effort to rebalance the Defense Department.

The draft omnibus resource directive, prepared by the Pentagon's two most important resource shops -- the comptroller's office and the cost assessment and program evaluation (CAPE) team -- will capture decisions that in prior years would have been published in dozens of program budget decisions. The directive will provide the services the first clear direction about changes they must make to their spending plans.

“We're expecting a macro RMD,” said a Pentagon official, referring to the resource management decision. “This will be the first vehicle for a decision. There are bills to be paid, there are monies to be garnered up, there are things now to lock in with a decision mechanism so that people can be directed to make changes to their data base.”

It marks the beginning of the endgame in hammering out details of the Pentagon's FY-11 budget proposal and accompanying investment plan through FY-15.

Gates plans to convene the so-called “Large Group-Plus” on Nov. 23, a gathering that includes the service chiefs, top Pentagon civilians and combatant commanders to review, among other matters, the FY-11 budget proposal, according to Pentagon officials.

After Thanksgiving, the Pentagon expects to receive the “passback” memo from the White House Office of Management and Budget, which lays out exactly how much the Obama administration plans to allocate for defense in FY-11. Pentagon sources say OMB's national security staff this week began its review of the Pentagon FY-11 budget.

This spring, Gates told Congress the Pentagon requires at least 2 percent real growth -- a hike that with inflation could be as much as 4 percent. A formal appeal to the White House, should Gates elect to seek more money, would likely take place in the coming weeks, according to Pentagon sources.

Gates, Deputy Defense Secretary William Lynn, the service chiefs and their vice chiefs, combatant commanders and top civilian Pentagon officials have since August met regularly, in different combinations, to adjudicate resource issues that span the entire military enterprise (DefenseAlert, Sept. 30).

Through the Quadrennial Defense Review this summer, defense officials proposed nearly $60 billion in changes to service investment plans over the FY-11 to FY-15 planning period, the bulk of which would require changes to Air Force, Navy and Marine Corps investments, according to Pentagon officials.

In addition to these proposals, more than 100 “issue papers” submitted by top brass and senior civilians have been largely sorted through.

The bulk of the budget decisions have been addressed by a group of approximately 30 senior military and civilian resource managers, known as the “three-star programmers.”

The new RMD is a common resource document that can have adjustments to spending accounts made by either CAPE or the comptroller (DefenseAlert, Oct. 21). -- Jason Sherman

1142009_nov4c

DOD Mulling Ways to Beef Up Support for Peacekeeping Operations

Inside Pentagon

The United States intends to boost support for United Nations peacekeeping operations by contributing more military training, airlift or staff officers to compensate for Washington’s inability to offer more “blue-helmeted” troops due to stretched forces in Afghanistan and Iraq, according to a senior defense official.

Defense officials, including the plans shop in the Office of the Secretary of Defense, are eying the Guidance for the Employment of the Force (GEF) and other “planning instruments” to determine “useful ways to bring the voices and interests” of the combatant commands into the discussion on assisting peacekeeping missions, the senior defense official told Inside the Pentagon this week.

“It would be a stepped-up, broad commitment on the United States’ [part] to assist and improve U.N. peacekeeping performance through this general technique we’re calling enabling assistance,” the official maintained. “The driver here basically is in a specific interest the administration has in better ways to enable success in U.N. missions. This follows the president’s visit with top troop-contributing country member states in New York in September during the U.N. General Assembly.”

Given commitments in Iraq and Afghanistan, the U.S. government is hard-pressed to substantially ramp up its presence within U.N. missions -- that is, “formed, blue-helmeted units,” said the official, adding the U.N. and key member states understand this challenge.

But the Obama administration has an opportunity to “lend more assistance,” enabling other countries to contribute troops and help the U.N. reform and improve its processes, the senior defense official said. “And we do, of course, provide some staff officers in some staff missions, which are actually very, very high payoff in terms of mission performance within a given area such as Liberia, for example.”

The United States, including DOD, the State Department and the National Security Council, may bolster the Global Peace Operations Initiative (GPOI), the defense official noted. Though a State Department program, U.S. Southern Command and U.S. Africa Command are involved “to increasing degrees” in its implementation, the official added. The program helps to carry out peace-support operations through training and equipping, regional and institutional-capacity building, logistics support, among other things.

In support of the Global Peace Operations Initiative, SOUTHCOM has established partnerships with 10 nations in its hemisphere with the goal of assisting in their efforts to increase their capacity to support U.N.-sponsored peacekeeping operations, command spokesman Jose Ruiz said in a statement to ITP. He noted SOUTHCOM’s GPOI program focuses on three areas: development or enhancement of a national peace operations training center in each partner nation, equipping an appropriate unit for U.N. peacekeeping deployments, and training that unit in U.N. peace support operations as well as in specialized military training.

SOUTHCOM has helped Honduras, Guatemala, El Salvador, Nicaragua, Dominican Republic, Belize, Paraguay, and Uruguay develop deployable infantry companies, he added. SOUTHCOM has also helped regional partners make significant improvements to eight national peace operations training centers, as well as the regional, multinational center in Guatemala supporting the Central American Armed Forces battalion, Ruiz said. SOUTHCOM sponsors three multinational peacekeeping exercises annually (PKO Americas, Southern Exchange and a CFAC battalion exercise), he said. Its SOUTHCOM GPOI program as a whole has trained more than 6,000 partner nation troops in U.N. peace support operations, many of whom have already deployed in support of missions in Haiti, Lebanon, and Congo, among others, he said.

The command, moreover, has also assisted Paraguay and Belize to develop deployable peacekeeping light engineering companies, Uruguay to enhance its existing capacity, and Peru to develop a deployable engineering battalion, he added. Next year SOUTHCOM is projected to continue partnering with Bolivia to assist the country to improve its peace operations training center in Santa Cruz de la Sierra.

Boosting U.N. support may also take the form of airlift assistance in “critical cases,” human resources or staff officers, the senior defense official told ITP.

Defense officials may use the upcoming iterations of the GEF and the Guidance for the Development of the Force to direct the implementation of Quadrennial Defense Review initiatives, Kathleen Hicks, the deputy under secretary of defense for strategy, plans and forces, said last summer. Work on both classified documents will occur during the winter, with an envisioned released date of early spring, Hicks said (ITP, Aug. 13, p1).

In a July report, the non-governmental organization Refugees International urged the U.S. government to provide forces and assets, such as engineering units, tactical and strategic lift capacity, and other “enablers” to help U.N. missions deploy quickly and completely.

Through the Global Peace Operations Initiative, Africa Contingency Operations Training and Assistance and the U.S. Army Peacekeeping and Stability Operations Institute, the United States must work more closely with the U.N. to provide “standardized peacekeeping training, both bilaterally and through support to regional peacekeeping training centers, to increase global peacekeeping capacity,” advised Refugees International. -- Fawzia Sheikh

PENTAGON-25-44-2

SOCOM, JFCOM Mulling New CBA Focused on Civil Affairs Operations

Civil Affairs ‘needs to evolve’

Inside Pentaqon

Senior planners from U.S. Special Operations Command and U.S. Joint Forces Command are in the early stages of drafting a new capabilities-based assessment for civil affairs, with the goal of carving out a large niche for such operations in the future, according to a senior SOCOM official.

“We are still in the process of scoping that capabilities-based analysis,” the command official said at an Oct. 29 irregular warfare symposium in Arlington, VA. That work is being headed up by the civil affairs division in the command’s operations directorate (J-3), in conjunction with the joint warfighting center (J-7) at JFCOM.

In April, Defense Secretary Robert Gates tapped SOCOM to be the joint proponent for civil affairs operations.

The SOCOM official could not comment on the specifics of the pending CBA, since both commands are still early in the coordination process and awaiting Joint Staff approval to officially begin the assessment.

But he noted the development of the CBA was one of the primary recommendations to come out of the command’s “senior warfighting forum” held in September.

At that time, top brass from the special operations and civil affairs community -- including Maj. Gen. David Blackledge, commander of U.S Army Civil Affairs and Psychological Operations Command (USACAPOC) -- agreed that some sort of in-depth analysis was needed to further integrate civil affairs capabilities into irregular warfare operations.

“The one big recommendation” to come out of the forum was the need for a capabilities-based assessment for the civil affairs community, said the official, who spoke on condition of anonymity.

“That idea originally germinated out of the Marine Corps. They are the ones who originally suggested that to [SOCOM] early on . . . and that was the big, overriding recommendation in the forum,” he added.

The need for such guidance, the official said, stems from the increasing role that civil affairs operations have assumed in four of the five major irregular warfare missions: counterinsurgency, foreign internal defense, stability operations and counterterrorism.

“You cannot escape that fact,” he said of the growing importance of civil affairs in irregular warfare. “Doctrinally, [it] needs to be updated and [the civil affairs] role needs to evolve.”

As part of that evolution, officials in SOCOM’s civil affairs shop plan to hold the third annual civil affairs “proponency conference” in January, according to the official, noting such powwows are the “primary forum” in which SOCOM is able to glean new ideas and perspectives from the “larger civil affairs community.”

“Those [meetings] were initiated once the [joint] proponency discussion started,” the official said. “Some forward thinking folks down at SOCOM pushed that through.”

The proponency conference will focus on the short-term training and equipping for current and future civil affairs operations, the official said. “We are going to try and kick that effort off with some e-mails and [video teleconferences] to get that process started,” he added.

On the plus side, the CBA proposal indicated that SOCOM and the overall civil affairs community “now has some COCOM buy-in to look at, in some detail, key elements of civil affairs,” according to the official.

“The bad side of it is that CBA’s typically have a very focused activity,” he said, noting that many in the civil affairs community may assume a potential CBA may cover those key issues “a mile wide and a mile deep, and we are probably only going to cover 500 yards wide and about 100 yards deep.”

Another issue that could hinder any future work by SOCOM on the civil affairs CBA is the ongoing organizational transition at the command.

Organizationally, SOCOM is “in a state of change,” the official said. SOCOM is currently exploring reorganization options, shifting away from its “centers-based” structure and back to a “J-staff” model, he said. SOCOM announced the plans for the “new, flatter headquarters staff organization,” in a Sept. 8 statement.

“This will, in ways that I do not quite know right now, affect” how the command’s efforts to institutionalize civil affairs will play out, the official said. Currently, civil affairs within SOCOM is handled by the command’s operations directorate (J-3), he added.

It remains uncertain on where the proponency responsibility for civil affairs will end up, due to SOCOM’s ongoing staff reorganization, the official said. In addition to civil affairs, the command also holds joint proponency for psychological operations and security force assistance. “Where will those proponencies come up?” the official said.

The current discussion within the command is that civil affairs could be shifted under the command’s knowledge and futures directorate (J-7/9), the official said. “That is the ongoing discussion. . . that is where we stand,” he added. -- Carlo Muñoz

PENTAGON-25-44-12

Settlement by stealth belies promises of restraint

Hillary Clinton has praised Israel for its policy on settlers but, the displacements go on. By Donald Macintyre in Jerusalem. Independent. Wednesday, 4 November 2009

Maysaa Al-Kurd has lived all her life in the home her family moved into in 1956. The pomegranate tree standing in the garden was planted by her father when she was still an infant nearly half a century ago. But that hardly reassured her yesterday when she heard the Jewish settlers break into the next-door extension building her brother Nabil built to house his family in 2001.

"I heard the door opened by force," she said. "And then I heard one of them say: 'This furniture belongs to whom?'" Later she saw "with my own eyes" a settler breaking a television set. Outside, a refrigerator, cushions and household furniture, apparently removed by the intruders, stood for several hours in the pouring rain. Inside, broken glass could be seen above a stove.

What Ms Kurd, of the inner-city East Jerusalem neighbourhood of Sheikh Jarrah, was hearing at about 10.30am yesterday was the latest in an accelerating series of highly charged and organised moves by settlers into the city's Arab sector. Armed with a court order saying they own the property, the settlers – about 40, according to Ms Kurd – decided to break in just four days after Hillary Clinton, the US Secretary of State, dismayed Palestinian and other Arab leaders by praising the Israeli Prime Minister Benjamin Netanyahu's "unprecedented" promise of "a restraint" in illegal settlement activity.

Mrs Clinton sought on Monday to "clarify" her remarks by acknowledging that Mr Netanyahu's proposals fell well short of the settlement freeze the US had earlier called for. And, while Mr Netanyahu has offered temporarily to halt authorisations of new settlement building in the West Bank, he has resolutely set his face against any slowdown in East Jerusalem. The UN says that 194 people were forcibly displaced from their homes in East Jerusalem by evictions and demolitions between January and July of this year. Israel insists it annexed the Arab sector of Jerusalem after the Six-Day War in 1967, but this is rejected by most of the international community who endorse Palestinian aspirations for it to be the capital of a future state. In Amman, the British Foreign Secretary David Miliband expressed "concern" over events at the Kurd house and added: "The current situation is obviously particularly tense in respect of Jerusalem."

Since a 2001 court order the rooms invaded by the settlers have been closed and used only to store furniture. But for Ms Kurd, whose property is one of at least 24 that settlers are hoping to acquire in this sensitive neighbourhood, their sudden arrival only intensified her fear of losing her home. "We are all worried for the future," she said, "not just in Sheikh Jarrah but in all East Jerusalem."

Only last week about a hundred Israeli security personnel arrived to remove a nearby protest tent that the Palestinian Ghawi family had been sleeping in since being evicted in August. That move came 24 hours after bulldozers levelled the homes of six families across East Jerusalem on the grounds they did not have the proper permit. Human rights activists say it is exponentially harder for Palestinians than Israelis to obtain permits.

Another elderly member of Ms Kurd's extended family, Mohammed al- Kurd, died after being evicted last August from his home and moving into a similar tent to the Ghawi family's. Like other of his relatives, he had refused to pay rent to the post-1967 Jewish owners, partly, some diplomats say, because they still dispute the historic right of ownership.

Maysaa al-Khurd said that her "life and blood" was in the house. Asked about the settlers' argument that they have a right to the land because Yemenite Jews lived there before 1948, she added that her own family were 1948 refugees from what was now Israel. "My family are all from Haifa. Can I go there and say I own the house and I have the key? Can I tell the people there that is my house? They will kill me."

Police stood guard outside the Sheikh Jarrah house while settlers occupied the adjacent building but eventually left on police advice. However two security guards employed by them were still there at the end of the day.

Although the house and its land was allotted to the Palestinian family in 1956 by the UN Relief and Works Agency and Jordan – then in control of the West Bank and East Jerusalem – the Israeli authorities expropriated numbers of properties in the area as state land after 1967. In some cases – apparently including this one – the land was later transferred or sold to companies or organisations representing settlers. None of the departing settlers would speak to reporters, but Adnan Husseini, the Palestinian Authority governor of Jerusalem, said: "The changing position of the American administration led to this."

Nabil al-Kurd, a father of four children, was summoned from work by his family when the settlers arrived. He was later told by police the settlers would be ordered to stay away pending 10 days in which Mr Kurd could lodge an appeal.

GAO Identifies Challenges that Threaten to Complicate Iraq Drawdown

Inside Defense

Nov. 2, 2009 -- An insufficient number of contract oversight personnel and a lack of visibility over the inventory of some equipment are just two of the challenges that may impede the Defense Department’s ability to meet drawdown deadlines agreed upon by the United States and Iraq, the Government Accountability Office said today.

In a statement released today, William Solis, director of defense capabilities and management for GAO, provides initial observations on the Pentagon's planning for the drawdown of forces in Iraq and warns of challenges that need to be addressed. Solis appeared today before the congressional Commission on Wartime Contracting in Iraq and Afghanistan.

The current drawdown time line calls for a reduction of U.S. troops in Iraq to 50,000 by Aug. 31, 2010, and a complete withdrawal is supposed to take place by the end of 2011, according to GAO. The scale of the drawdown is enormous: 128,700 U.S. troops, more than 115,000 contractor personnel, 295 bases and more than 3.3 million pieces of equipment.

To meet the established targets for August 2010, Multinational Force-Iraq (MNF-I) "must draw down 32 percent of its contractor personnel workforce, retrograde over 50 percent of its tracked and wheeled vehicles, and close 67 percent of its bases in Iraq," Solis states.

Adding to the complexity of the effort, the drawdown of equipment and personnel is "one of several tasks U.S. forces in Iraq are conducting concurrently in a continuously evolving environment during a period of Iraqi political uncertainty," according to Solis.

By the Pentagon's own estimates, efforts to reduce personnel and return equipment have so far exceeded targets, he notes. However, much remains to be done and serious challenges threaten to complicate the Pentagon's plans, states Solis.

First, DOD has not fully determined what kind of contractor support it will need to complete the drawdown, said Solis in his statement.

"In planning for the contractor presence needed during the final phase of the drawdown, MNF-I has made assumptions in the absence of defined requirements or full visibility over contracted services that may contribute to wasted resources and may hinder the timely execution of drawdown," he states.

Contracts for services in Iraq and Kuwait, which will soon reach their expiration date, are also presenting challenges to drawdown plans, according to Solis. Contracts for base and life support, convoy support and equipment maintenance are scheduled to be re-competed and re-awarded at the height of the drawdown, he notes.

"To prevent similar service interruptions when other key contracts transition, it will be critical that DOD ensures that the outgoing contractor release personnel to the incoming contractor as anticipated," he states.

The lack of sufficient contract oversight personnel, a problem that GAO has been documenting since 2004, also must be addressed, says Solis.

In addition, key decisions about what is going to happen to certain equipment have yet to be made, according to Solis. The complexity surrounding decisions about what can and cannot be transferred to the Government of Iraq is contributing to planning uncertainty.

So far, Multi-National Security Transition Command-Iraq has prepared a list of equipment it believes the Iraqi government will need to provide security after U.S. forces leave. According to Solis, this list includes about 1.5 percent of the estimated 3.3 million pieces of equipment in Iraq, with a projected value of about $600 million.

The list is being reviewed by the Pentagon, according to Solis. "Until this list is approved, and an appropriate transfer mechanism determined, the equipment that will be transferred to the Government of Iraq remains uncertain," he states.

The future of the fleet of Mine Resistant Ambush Protected vehicles is one area that poses significant challenges, according to Solis.

"According to Army officials, the Army, which manages most of the MRAP fleet, has issued preliminary disposition instructions for MRAPs to be retrograded from Iraq, but service-wide requirements for MRAPs have not yet been finalized," Solis writes.

"To remove MRAPs from Iraq according to the timeline set by the Security Agreement, the pace of their retrograde will need to significantly increase as the drawdown progresses, which heightens the potential for bottlenecks," he continues.

Finally, Solis highlights the longstanding weaknesses of information technology systems and the Pentagon's lack of visibility of inventory of some equipment and shipping containers as further challenges that have to be addressed if drawdown time lines are to be met.

"While much has been done to facilitate the drawdown effort, the efficient execution of the drawdown will depend on DOD’s ability to mitigate these challenges," Solis says. -- Kate Brannen

1122009_nov2c

Pentagon Likely to Order At Least 1,000 More M-ATVs Next Week

Inside Defense

Nov. 2, 2009 -- The Defense Department is likely to order at least 1,000 more Mine Resistant Ambush Protected All-Terrain Vehicles early next week, program officials said today.

The Pentagon is 1,400 vehicles shy of the Joint Requirements Oversight Council-approved requirement of 6,644 M-ATVs, but MRAP program manager Paul Mann told Inside the Army today that orders are planned based on lead time.

Speaking to ITA at an M-ATV display at the Pentagon, he predicted DOD will "at least order 1,000" around Nov. 10, though he emphasized that the date reflects an estimate.

"Will we order the rest of them?" Mann asked. "Well, that's an option, but 1,000 keeps us able to do the maximum production with no break in production, and that's why Nov. 10 is important."

The vehicles ordered thus far will be completed in March 2010, Mann said.

"Orders we place now for the deliveries in April, May just buys us more time," he told ITA. "As long as we're buying 100 percent of their capacity, we don't always have to buy every vehicle they can produce in a month."

"The requirement is very dynamic -- it's changed four times this year," Mann continued. "So do you want to hurry up and finish or do you want to ramp down and allow yourself a little bit of time on the back end in case the requirement changes again?"

Marine Corps Brig. Gen. Michael Brogan, joint program executive officer for MRAP, told ITA at the same event today that "there will be another order.

"It may not to be to the full approved JROC quantity," he added. "The services continue to massage their numbers, but we expect it's probably going to be early next week."

Brogan declined to identify the quantity of vehicles the Pentagon will buy or to say if the order will be the last for M-ATV, noting that "if experience has shown us anything in MRAP, it's a growth industry.

"So to proclaim a final number at any point before we're done is probably just too risky," he continued.

Brogan said today that manufacturer Oshkosh remains well ahead of its scheduled production rates. Though slated to build 385 M-ATVs in October, the company as of the end of last week was already 159 vehicles into November's production, according to Brogan.

Oshkosh has said it is scheduled to build 664 of the vehicles in November before ramping up to 1,000 in December, and Brogan said today he remains confident the company will reach those levels.

As part of today's event, Pentagon acquisition chief Ashton Carter viewed the vehicle. He told reporters he had driven it at Aberdeen Proving Ground, MD, and praised its comfort and effectiveness, as well as the performance of Oshkosh.

Additionally, Carter told reporters that allied countries have expressed interest in the truck.

"There are other countries that have asked for MRAPs and MRAP ATVs," he said today. "This is the kind of capability that obviously all of the partners would like to have and they can be part of the program."

However, Mann said the program office is focused on first fielding the trucks to the services, and a foreign component to the effort "is still in the discussion phase for procurement orders." -- Marjorie Censer

1122009_nov2a

JSF 'Will Likely Breach' Critical Nunn-McCurdy Target

Inside Defense

(Editor's note: This story was modified after initial publication to correct a quote attributed to Pentagon spokesman Geoff Morrell.)

Oct. 29, 2009 -- A senior Pentagon official with access to details of a closely held new cost assessment of the Joint Strike Fighter program is advising Defense Department colleagues that the F-35 development program “will likely breach” a key congressionally mandated cost threshold, a step that could require dramatic remedial action for the U.S. military's costliest weapon program.

The predicted breach of the so-called Nunn-McCurdy statute, delivered within the last two weeks and confirmed by two Pentagon sources, indicates that an audit of the program prepared this summer by a DOD team of cost estimators, aircraft engineers and missions systems experts has found the F-35 program’s performance -- measured in cost schedule -- has deteriorated over the last year.

That audit, by the Joint Strike Fighter Joint Estimate Team, is due to be briefed soon to Deputy Defense Secretary William Lynn. A similar team last year determined an additional $14.8 billion and two years was required to develop the aircraft, being built by Lockheed Martin.

The Nunn-McCurdy law requires that Congress be notified if a program faces cost growth greater than 15 percent over the current baseline estimate. It also dictates that the project be terminated if the price climbs higher than 25 percent -- a “critical” breach -- unless the defense secretary certifies the program is essential to national security, that no lesser-cost alternative is available, and that cost controls are in place.

Draft Pentagon policy being considered to implement the 2009 Weapon Acquisition Systems Reform Act calls for programs that experience a critical cost breach to be restructured “in a manner that addresses the root cause or causes of the critical cost growth,” have their "most recent milestone approval rescinded,” as well as other steps to rein in cost growth, according to a copy of the draft policy.

The JSF program is due to be reviewed by the high-level Defense Acquisition Board between October and December, according to Pentagon fiscal year 2010 budget documents.

The new cost estimate -- first reported Oct. 22 by InsideDefense.com -- is "pessimistic," Pentagon spokesman Geoff Morrell told reporters today, adding that Ashton Carter, the Defense Department's acquisition executive, has been briefed on the JET assessment. He also said the assessment "clearly raises concerns about the course the program is on."

“The Joint Strike Fighter program may not be as neat and on time, on schedule and on performance as perhaps the secretary of defense was led to believe six months ago when he made [fiscal year 2010] budget decisions in April,” said a Pentagon official familiar with tactical aircraft deliberations -- a regular focus of high-level meetings of a standing panel chaired by Deputy Defense Secretary William Lynn, including one held as recently as Oct. 20.

“The information last week was: If you're associated with the program, you probably are concerned,” said the Pentagon official.

Sources with indirect access to preliminary findings of the JSF JET said the results were not only as bad as last year, but worse.

“The JET was convinced that none of the fundamental underlying labor trends, software trends, testing trends improved,” said one of the sources, who is not in the Pentagon. “On all of them, the JET thought they were as bad or worse.”

In reviewing the program, the JET may have looked at the management reserve ledger in the JSF Joint Program Office books.

Two years after the JSF program was restructured and the depleted management reserve accounts topped off at $800 million, the coffers are now nearly empty while the program has not increased its scope of work, according to a government source.

Cheryl Limrick, a spokeswoman for the JSF Joint Program Office, did not return repeated calls requesting comment on the state of the program's strategic reserve account.

Last month, the Pentagon's Office of the Director of Test and Evaluation said in briefing slides obtained by InsideDefense.com that the “F-35 is a highly concurrent program with significant risk of discovery of deficiencies after several hundred aircraft have been procured.” The briefing also cited “significant risk in [the] planned production rate before flight test[s] provide significant results” and said “more time is needed [for flight tests] due to the lateness of developmental test aircraft.”

Defense Secretary Robert Gates, during a visit to Lockheed Martin's JSF manufacturing facility in Fort Worth, TX, on Aug. 31, voiced support for the program.

“My impression is that most of the high-risk elements associated with this developmental program are largely behind us, and I felt a good deal of confidence on the part of the leadership here that the manufacturing process, that the supply chain, that the issues associated with all of these have been addressed or are being addressed,” Gates said.

Morrell today said the JET is “a very important tool” in the budget process.

“It provides us a worst-case assessment of how the program will likely develop,” the Pentagon spokesman said. “And that is balanced against, on the other extreme, the [F-35 Joint] Program Office's assessment of it, which is generally much more optimistic.”

In March 2008, DOD advised Congress that it was forming the JET to provide and “independent” assessment of the effort's true cost, not necessarily to envision a worse-case scenario.

“And so what we need to do, what the secretary tries to do, is to sort of figure out the sweet spot, if you will, between those. What's the appropriate balance between the JET's sort of sky-is-falling assessment and the program office's perhaps rosier view of things?” Morrell said.

The JSF Joint Estimate Team -- more than two dozen experts in both accounting and the complexities of combat aircraft development -- is led by a group from the cost assessment and program evaluation (CAPE) office, with support from NAVAIR 4.2, the Navy's team of analysts who assess the cradle-to-grave cost of weapon systems, and the Air Force Cost Analysis Agency.

Many CAPE cost estimates, particularly those that induce sticker shock because of their high price, are discounted by critics -- particularly those in the services looking to protect their programs from budget cuts -- who believe that CAPE is institutionally inclined toward finding programs to cut from the Pentagon's portfolio.

However, the JSF JET estimate is far from a typical CAPE assessment; the team’s ecumenical composition is unusual. According to Pentagon documents, the team includes officials from the Air Force and Navy with expertise in not only cost estimating, but in systems engineering, manufacturing, software integration and air vehicles. Also on the team are senior engineering and acquisition professionals from across the Defense Department's tactical aircraft community.

Their work is the result of visits to numerous sites associated with the F-35, including those involved in the design, manufacture and testing of the aircraft. This includes government facilities as well as those run by the team of defense contractors building the aircraft.

The JET has subdivided its work into groups that include a cost team, a schedule team and a risk team.

The work of the team examining the costs will be decisive in determining when the JSF program joins the pantheon of weapons programs that breach the “critical” Nunn-McCurdy line.

According to an InsideDefense.com analysis of Pentagon JSF selected acquisition reports, an increase of $17.2 billion would push the JSF baseline program cost to $227.6 billion; the original baseline estimate was $177.1 billion.

The Pentagon's most recent acquisition report on the JSF -- provided to Congress in April 2008 -- pegs the JSF unit cost, which includes research and development spending, at $85.5 million per aircraft, a cost that would have to climb to at least $92.7 million to qualify as a “critical” breach. -- Jason Sherman

10292009_oct29c

War Demands May Result in Near-Term Reduction to JLTV Funding

Inside Defense

Oct. 28, 2009 -- Pressure on the Defense Department's budget, coupled with the urgent needs of war, may force the Army to reduce funding to the Joint Light Tactical Vehicle program, according to a senior service official.

There is a "longstanding need" for a humvee replacement, Lt. Gen. Stephen Speakes, deputy chief of staff for programs (G-8), told reporters yesterday at his last media roundtable before retiring after 35 years in the service. However, it is a long-term priority, he said, meaning its funding may need to be reduced in the near term to make room in the budget for capabilities critical to operations in Iraq and Afghanistan.

"In the near term, we may be forced, depending upon what the defense topline is and how pressing new needs are, to make trades in which JLTV is potentially reduced or trimmed in some way, but I think there's a longstanding requirement," he told reporters.

The Army purchased the majority of its 140,000 light tactical wheeled vehicles between 1990 and 1992, said Speakes. Like any wheeled vehicle, these will eventually need to be replaced over time, he added.

"That force over time needs to be modernized," he said. "It's not a pressing need of war that needs to change the composition of the entire force overnight. It's a thoughtful modernization approach."

"It is part of a larger recapitalization issue that will probably take place in the next 10 or 15 or 20 years," Speakes continued. "In other words, it will take time to do."

And, "the near-term exigencies of war" may cause the service to go "up and down in terms of our procurement patterns," he added. -- Kate Brannen

10282009_oct28e

Revisiting The Anbar Miracle

The governor of Iraq's once-violent Anbar province talks about recovery and foreign investment.

Saturday, Oct. 31, 2009
by James Kitfield, The National Journal

When twin suicide truck bombs rocked Baghdad on October 25, killing more than 150 people in the worst terrorist strike there in two years, the attacks provided a grim reminder that Iraq's security remains fragile in the face of a still-deadly insurgency. By contrast, Anbar province, the former hotbed of terrorist and insurgent activity, has remained relatively quiet. Indeed, when the history of the Iraq war is written, the turnabout of Anbar will feature prominently.

Once the focal point for Al Qaeda in Iraq and the Sunni insurgency, Anbar's main towns of Falluja and Ramadi are synonymous with some of the war's worst fighting. But Anbar today is one of the quietest regions in the country. That transformation is the result of a 2006 decision by tribal leaders to form the "Awakening Councils," striking an alliance with U.S. forces and sending local "Sons of Iraq" to fight Al Qaeda.

Recently, National Journal Staff Correspondent James Kitfield spoke with Anbar's governor, Qasim Abed al-Fahadawi, who was in Washington for a conference. The interview touched on the pending withdrawal of U.S. combat troops, Iraq's difficult transition to normalcy, and the lessons that the "Anbar model" holds for the war in Afghanistan. Edited excerpts follow.

NJ: Recent months have seen renewed terrorist attacks in Iraq. How concerned are you that Al Qaeda in Iraq and associated Sunni insurgent groups may be making a comeback?

Fahadawi: I will tell you, for my region this is not really a big issue. It's well known that Anbar at one time was the most violent area in Iraq, because at that time many people were acting as incubators to the violence. Now the opposite is true. Almost everyone in Anbar is now convinced that violence works against their interests and in favor of outside agitators. In my opinion, the violence works against the interests of all Iraqis and serves mainly the interests of Iran.

NJ: How strong is Al Qaeda in Anbar province?

Fahadawi: I think it is weak, because they have very little support. Anyone known to support Al Qaeda is rejected by the community. That was the main success behind the Sons of Iraq in Anbar. Al Qaeda could not have been defeated by the American Army or the Iraqi army. It could only survive with the support of the people, and the tribes and the people have turned against Al Qaeda. Of course, we had the help of the American and Iraqi armies, but the main element in the defeat of Al Qaeda in Anbar was the rejection of the group by normal people. If you mention Al Qaeda to our citizens today, everyone feels nervous. So I don't think Al Qaeda will ever be able to find a base in Anbar again.

NJ: How important are the national elections in Iraq scheduled for January?

Fahadawi: We all hope the January elections will provide solutions to many problems, because the last elections were dominated by sectarian forces. Iraq is too diverse a nation to be based on a sectarian foundation. We have Arabs and Kurds, Christians and Muslims, Sunni and Shiite. We all have to find a way to live together as we did in our past, because this sectarian fighting is largely new to the Iraqi people.

As an example of how the elections can help, right now there are delegations from [Shiite majority] Nasiriya and [Sunni majority] Anbar forming a secular coalition and political party based on its opposition to sectarianism or religion. We believe that Iraq cannot be led on the basis of religion, because that will lead directly to sectarianism.

NJ: How concerned are you that the Iraqi parliament has been unable to pass an election law that will determine whether voters choose between "closed lists" of political parties or "open lists" of individual politicians?

Fahadawi: For sure we need open-list elections to be successful, because the 2005 elections were based on closed lists and the whole country lost as a result. We paid a very heavy price for those elections and the subsequent rise to power of sectarian politicians. There are people in parliament today as a result who are not only unqualified to hold their positions, but some are not even Iraqis! There is one parliament member who has Iranian citizenship and is not an Iraqi at all! Why? Because with closed lists people don't know who they are really voting for. The party behind the closed list puts whoever it wants into power.

NJ: So are you worried that Iranian influence will increase as a result of the upcoming elections?

Fahadawi: I actually think the political parties most associated with Iran will lose in this election. They gained influence from past elections, but there is a growing feeling inside Iraq that we need to pursue our own national interests separate from Iran, or Syria, or any of our neighbors. We hope to have good relations with all neighbors, but we can't follow their lead because they are looking after their own interests, and Iraqis need to do the same. After all of the blood and treasure we Iraqis have expended, and all the destruction we have seen, more and more people are concluding that we have to live together as Iraqis.

NJ: Do you think that Prime Minister Nuri Kamal al-Maliki, a Shiite Muslim, is now perceived as such a secular leader?

Fahadawi: Yes. No one believed a few years ago that he could take on the Iranian-backed special groups in Basra, but he led Iraqi security forces there and that was a very dangerous move. He took a big risk. And because he prevailed, it is now working in his favor. We all appreciate what he did. Personally, I don't care if the next leader of Iraq is a Shiite, or a Kurd, or a Muslim, or a Christian. It means a lot, however, that he is not motivated by sectarian feelings. Maliki proved that he is a leader of all Iraqis, and I think that will help him in upcoming elections.

NJ: Earlier there was talk of holding a referendum on pushing up the date for the withdrawal of U.S. troops by a year, with all combat forces out by the end of 2010 instead of 2011. Would you support such a referendum?

Fahadawi: Personally, I am opposed to the idea of a quicker withdrawal of U.S. forces from Iraq. Of course, I will have to live with whatever the federal government decides, but personally I oppose the idea and not primarily for security reasons. We in Anbar are already managing our own security without much help from the Americans. But we still need the Americans for aid and reconstruction.

Working with local tribal leaders, my team has made great progress in terms of investment and reconstruction in Anbar province, and we have developed a foreign investment master plan. But for decades we were isolated from the rest of the world. We lack experience and contacts. The American officers have been helping us with their administrative skills and international contacts, and therefore it is my wish that they stay longer to help us solidify these gains.

NJ: There is a heated debate in Washington about whether the "Anbar model" can be exported to Afghanistan, in terms of persuading local tribal leaders there to turn against the Taliban. Do you think there are lessons from Anbar that might apply to Afghanistan?

Fahadawi: Well, there are obvious differences between Iraq and Afghanistan, so you will not be able to replicate the Anbar model exactly. It's like a mathematical formula: You can use similar concepts and formulas to find a solution, but you have to factor in the elements unique to each situation.

NJ: Can you give an example?

Fahadawi: If you compare Anbar and Afghanistan, for instance, you'll find that many people in Anbar are highly educated, with university degrees and experiences traveling and training abroad. So you can approach them based on a certain logic.

In Afghanistan, you will find less educated and worldly people, so you have to adjust the formula for that difference. They may be more like the Iraqis in Najaf and Karbala, where the religious leaders are the key. If a religious leader issues an edict, the people there will follow.

NJ: What other differences stand out between Anbar and Afghanistan?

Fahadawi: In Anbar the standard of living is pretty high. Most families have their own villas. I have my own house and farm in Ramadi, for instance, and my business and children. That means I have something that I don't want damaged, something to defend, something to fight for.

Afghanistan is a much poorer country, and because they don't have so much to lose it's easier to want to destroy things. I would say you have to provide the people there something of value that they don't want to lose. You have to give them something that they are willing to defend, to fight for. That kind of heavy investment will take time. I think it will take you even longer than in Iraq. In the end, however, I think the problems in Afghanistan can be solved in a similar way to Anbar.