Real McCoy: $450B-ish

Jason Sherman
Inside Defense, 21 Sept 2011

Roman Schweizer, MF Global defense analyst and former chief editor of Inside the Navy, today honed in on a key point about the military budget raised during yesterday's Pentagon press briefing by DOD's top civilian and uniformed leader. In a note to Wall Street investors, Schweizer writes:

Defense Secretary Leon Panetta and Joint Chiefs Chairman Adm. Michael Mullen yesterday disclosed that the first round of DoD cuts required under the Budget Control Act's discretionary caps is actually higher than the widely reported $350 billion.

We expect mainstream media to start adopting the "$450B-plus" terminology even though it has been discussed by defense trade press and experts in recent weeks.

On Sept. 2, InsideDefense.com reported the actual size of the spending cuts the Pentagon was working to adopt was $460 billion:

The Office of the Secretary of Defense, eying what a senior official says is a White House-directed cut of "about $460 billion" over the next decade, has instructed the services to deliver by Sept. 16 their revised spending plans in accordance with the Budget Control Act of 2011.

The explanation for the higher number -- nearly one-third higher than the widely reported $350 billion figure -- is the $110 billion difference between the lower Congressional Budget Office forecast and the Obama administration's long-range budget plan outlined in February along with the FY-12 spending request.

The larger figure underscores the likelihood that the first round of DOD budget cuts will be “much worse and immediate, even without sequestration and particularly when compared to the previous budget plan that had modest real growth for research and development and procurement,” Schweizer notes. “It also makes it harder on those accounts because implementing money-saving reforms in other areas takes time -- but cuts are real for the FY-13 budget, sequestration or not.”

Lastly, he argues:

While there are various political scenarios that make sequestration a possibility but never implemented, we think the Pentagon's FY-13 budget will show significant program changes. That's assuming the budget that is released is not under sequestration. If the Pentagon must release a "doomsday" budget in February because Congress and the administration cannot find $1.2T in savings, it'll show draconian cuts that will have to wait until January 2013 to actually be implemented.

McCain Blasts Appropriators for $10 Billion 'Budget Gimmick'

Megan Scully, National Journal, 21 Sept 2011

Senate Armed Services ranking member John McCain, R-Ariz., on Wednesday sharply criticized appropriators for shifting roughly $10 billion from the Pentagon’s base budget to its war-spending accounts.

McCain, who has long battled appropriators over what he considers wasteful spending, called the maneuver a “budget gimmick” that misleads taxpayers into believing the bill makes sharp reductions in Pentagon spending to help reduce the country’s deficit.

Senate appropriators shifted the funds from the Pentagon’s base budget to the separate accounts that pay for operations in Iraq and Afghanistan to lessen the blow of a $26 billion cut to the Pentagon’s base budget mandated by the Budget Control Act approved by Congress in August.

During its markup last week, the Armed Services panel fully funded the $117.8 billion in war spending proposed by the Pentagon, but cut $5 billion because of planned force reductions in Afghanistan and $1.6 billion requested for Afghan security forces. Those and other sizable cuts helped make room within the war accounts for about 75 programs that ordinarily would receive funding through the base budget.

A committee spokesman said on Monday that the funding transfers to the war accounts reflect the panel’s recommendation to pay for items related to the war, regardless of where the administration requested it.
“These activities include funding for war-related equipment and war-related operations, other items essential to prepare our men and women in uniform with the best training and equipment before they are sent into harm’s way, and maintaining readiness of the overall force to respond to overseas contingencies,” the spokesman said.
McCain, however, said the cuts in the war accounts could put troops at risk.

“Cutting $10 billion from the president's request for the wars in Iraq and Afghanistan, shifting over $10 billion in nonwar expenses, and then claiming in a press release that the president's request for the war-fighting accounts are fully supported, is not only a gimmick, it is dishonest with the American people,” McCain said. “It is a disservice to the men and women of the military who depend on that funding for critical war-fighting equipment and support.”
McCain asserted that the appropriators cut funds from the war accounts without knowing the “real needs” of deployed forces amid uncertainty about whether – or how many – U.S. troops would remain in Iraq after the end of the year.

“There is no money in the war-fighting accounts of this bill to pay for those additional troops no matter what the final number may be,” McCain said. “Cutting funds from the war-fighting accounts without knowing what our real needs are puts our troops at risk.”

McCain also suggested that some additional funds may be needed if there are any problems reducing the U.S. presence in Afghanistan. “I can only pray that our withdrawal strategy in Afghanistan goes as smoothly as planned,” McCain said.

The Pentagon's Phantom Savings

Commentary by Project on Defense Alternatives -- 10 Sept 2011

DoD claims to have "already saved" $400 billion, but where is it?

 

There is no better example of the dysfunctional political dynamic governing the Pentagon budget than President Obama's affirmation of the claim that former Secretary of Defense Gates had "already saved" the nation $400 billion in defense expenditure.  And there is no better illustration of the poverty of our discourse on this subject than the fact that the claim goes largely unchallenged. 

 

Most of the $400 billion in earlier DoD "savings" that President Obama has attributed to former Secretary Gates are not "savings" in the ordinary sense of the word. They do not show up as reductions in DoD budget plans from one year to the next, as shown below.  At best, they represent DoD marginally adjusting its programs and aspirations to marginally deal with spiraling cost growth.

 

When we look for the $400 billion in "savings,"  what do we find? 

 

Desperately Seeking $400 Billion in Past Pentagon Savings
 

1. Much of the $400 billion that former Secretary Gates is claimed to have saved derives from his April 2009 announcement of program cuts. Gates claims that the systems and programs he cut in 2009 would have eventually cost more than $300 billion. However, at least some of this was immediately reprogrammed, meaning: DoD used the savings to buy other things. 

 

April 2009 Gates Defense Budget Recommendation Statement http://www.defense.gov/speeches/speech.aspx?speechid=1341 

 

2. In August 2010 and January 2011, Secretary Gates outlined additional "cuts" and "savings" totaling $178 billion. Of this, $100 billion was immediately reprogrammed to purchase other things or cover other costs. The remaining $78 billion was supposed to be released from the Pentagon orbit to help pay down the deficit. 

 

August 2010 Gates Statement on Department Efficiencies Initiative http://www.defense.gov/speeches/speech.aspx?speechid=1496 

 

Jan 2011 Gates Statement on Department Budget and Efficiencies http://www.defense.gov/speeches/speech.aspx?speechid=1527 

 

PDA summary chart re: the $178 billion http://www.comw.org/pda/fulltext/Gates-Jan2011-proposal.pdf  (In the August 2010 statement, we find Gates' claiming that his earlier 2009 effort has already saved more than $300 billion) 

 

3. How much (if any) of the earlier "more than $300 billion" in savings was similarly given over for deficit reduction? Looking at actual budget plans, what do we see?  The first $300 billion was announced in April 2009 and it might reasonably have shown up as difference between the last Bush budget plan (FY09) and the first Obama budget plan (FY10). 

 

Comparison between these two budget plans is easy for the years 2010-2013:

– Bush FY09 planned total spending for 2010-2013 = 2.155 trillion

– Obama FY10 planned total spending for 2010-2013 = 2.183 trillion 

 

An increase is not a reduction, therefore: no savings apparent in the near years.

 

4. Obama’s next budget plan (FY11) foresaw a significant increase over his first. So, no savings apparent there either.

 

5. Only in the next plan – the FY12 plan – do we see a reduction in planned spending between FY12 and FY11 plans. In the nine years that overlap between the FY11 and FY12 plans, we see a reduction of about $233 billion. But the FY12 plan follows Gates’ second announcement of cuts and savings (summarized in #2 above).  So, at least, $78 billion derives from that and not the earlier cuts. Indeed, when we compare the FY12 plan with the FY11 plan for the years 2012-2016, there is a reduction in planned spending of $76 billion. Still no apparent impact from the April 2009 "cuts," however. 

 

6. Well, as noted above, the total difference between the FY11 and FY12 plan for the years 2012-2020 is $233 billion. 233 minus 78 = 155. This additional planning rollback of $155 billion shows up for the years after 2016. So maybe we’ve found at least $155 billion of the earlier supposed cut?  Maybe it just took 2 years to register? 

 

Maybe. 

 

"Maybe" because the Obama FY12 budget rolls back planned spending almost exactly to the levels foreseen in the Obama FY10 budget ...being the budget that was larger than the final Bush budget and being the budget that showed no impact from Gates’ April 2009 offer.  To put it another way: Obama's FY12 budget simply rolls back the future spending plan he produced in FY11 to the level he had proposed in FY10.  The FY12 plan simply disappears the increase proposed in FY11. 

 

7. The other possible (likely) reading of all this is that:

 

(i) None of the original $300 billion "saved" ever left the Pentagon, 

 

(ii) The $78 billion that Gates offered up to deficit reduction is the only "savings" really specified so far to actually show up as a reduction in planned spending, and

 

(iii) The other $155 billion that the FY12 plan subtracts from the FY11 plan involves as yet unspecified cuts and efficiencies.

Navy Of Tomorrow Could Have Fewer Cruisers, Aircraft Carriers

Potential cuts eyed
Navy Of Tomorrow Could Have Fewer Cruisers, Aircraft Carriers
Inside the Pentagon - 09/01/2011

To save billions of dollars in the coming years, the Navy may keep fewer cruisers and aircraft carriers in its fleet while preserving major investments in attack submarines, destroyers and littoral warships, according to former service officials and industry sources.

The Pentagon is hunting for savings in the fiscal year 2013 budget process to implement required security spending cuts totaling hundreds of billions of dollars over the next decade. The Navy, meanwhile, is mulling how to retreat from its goal of a 313-ship fleet to a more affordable target in the 200s.

To that end, the service is considering retiring at least a handful of its aging Ticonderoga-class cruisers, these sources said. This would be a departure from the ongoing multibillion-dollar program to modernize the fleet's 22 cruisers. An industry source said the department will likely "significantly cut" modernization funding for the cruisers, slashing money for upgrades to the ships and their Aegis combat systems. Initially, the Navy might retire six cruisers, former service officials said. But the ultimate goal might be to retire them all, one former official added.

Last year, the Navy killed its next-generation cruiser program, CG(X), opting instead to develop new warships based on the design of Arleigh Burke-class DDG-51 destroyers. Sources said the Navy's high priorities include Aegis-equipped destroyers, which are assigned key missions such as missile defense, and Littoral Combat Ships, which are designed to combat fast boats, hidden submarines and mines close to enemy shores.

Although the numbers of cruisers and destroyers in the fleet are already slated to fall substantially below required levels in the coming decades, that officially acknowledged gap could fade away if the Navy, as anticipated, significantly lowers its goal for the size of the fleet. Today, the fleet has 284 ships in its battle force, despite the 313-ship goal. Describing the range of options pondered for the new goal, an industry source said, "I have heard as low as 225, but nothing more than 285."

In another potential major change, Navy is looking at reducing the number of aircraft carriers in the fleet to nine or eight, sources said. A force of nine carriers would be accomplished by not refueling the nuclear-powered George Washington (CVN-73), said a former service official, noting the Navy is also mulling cutting six aircraft squadrons. Another source noted the Navy is also considering delaying the purchase of the John F. Kennedy (CVN-79) by two years, as Defense News reported in July. An industry source said scenarios discussed within the Navy include a 240-ship fleet with eight carriers and seven strike groups and a 250-ship fleet with 10 carriers and nine strike groups.

As the fleet shrinks, Navy officials want to preserve the department's plans to continue building two nuclear-powered Virginia-class attack submarines per year, sources said, noting the stealthiness of these subs makes them especially valuable warfighting assets.

But the cost of another submarine program -- SSBN(X), also known as the Ohio-class replacement -- remains a concern for the Navy. The 12-sub program could be delayed and cut by two subs, sources said. And it will be funded within the shipbuilding account, not in a separate account as the sea service's top admiral has advocated, Defense Department acquisition chief Ashton Carter told Inside the Pentagon in March. But the program's massive cost would consume a major portion of the account. Buying and operating a dozen new nuclear ballistic missile submarines will cost the department $347 billion over the life of the boats, Carter wrote in February in an acquisition decision memorandum.

DOD also faces concerns about the fate of the FY-12 defense budget. All eyes are on Senate appropriators, who are slated to mark up their FY-12 defense bill sometime after Labor Day. A former service official said the Senate appropriations defense subcommittee is expected to cut DOD's $553 billion baseline request to roughly $526 billion. This cut of about $27 billion -- "a tall order" -- is needed to keep the budget under the security spending caps that were agreed to in a deficit-reduction deal this summer, the source said. A subcommittee spokesman declined to comment on the panel's forthcoming spending recommendations.

Another key question is how DOD's budget will be impacted by the work of a congressional supercommittee tasked with proposing $1.5 trillion in new deficit-reduction measures. If the panel fails to come up with at least $1.2 trillion in savings, a trigger in the deal could confront DOD with additional cuts totaling hundreds of billions of dollars over the next decade. Defense Secretary Leon Panetta has said such cuts are unlikely but would be unacceptable.

Given the unlikelihood that the FY-12 defense budget will be finalized before the fiscal year ends on Sept. 30, defense officials are readying once again to operate under a continuing resolution. "The department expects Congress to complete the appropriations process by Oct. 1," said a Pentagon spokeswoman. "As in most fiscal years, the department is prepared to execute its program under a continuing resolution. The department will work with Congress to make sure it has the critical legal authorities to keep operating and support the deployed troops." During the last budget cycle, Congress subjected DOD to a string of continuing resolutions.

"The biggest concern about operating under a string of continuing resolutions is the uncertainty which undermines any planning efforts," the Pentagon spokeswoman said. "Any new starts will be precluded and contracting for support services will have to be broken into smaller increments with all the attendant inefficiencies." -- Christopher J. Castelli

Navy Examining How Attack Sub Shortfall Will Affect Force

Navy mulls SSGN payload on VA-class subs
Richardson: Navy Examining How Attack Sub Shortfall Will Affect Force
Inside the Pentagon - 09/01/2011

The Navy must factor in the looming attack submarine shortfall in the 2020s as well as strategic needs when planning deployments and positioning the undersea force in the future, Vice Adm. John Richardson, commander of submarine forces, told reporters last week.

At the current rate, the Navy will dip to a low of 39 attack subs at some point in the 2020s as aging Los Angeles-class subs retire, well below the requirement of 48 subs. Richardson's predecessor, Vice Adm. Jay Donnelly, said the Navy could implement mitigation measures such as changing deployment cycles and altering surge capability. Richardson told reporters at the Pentagon Aug. 25 that the service is looking at some of those adjustments now.

"All of that is kind of part of the discussion," he said. "Right now, we have the six-month deployment model. That's what we use as our baseline. When emergent combatant commander requests come in, we can stretch that some, and we have. And then in terms of . . . responding to a crisis, we want to make sure that we've done what we can to increase the pool of ready forces so that they're ready to go if called."

He said the "trough" in the 2020s is a "function of the shipbuilding plan and what the budget can sustain." He said his job was to inform Navy leadership what kind of options the service has.

"I see it as our role to make sure that we've got sort of an array of options that will provide them some trade space, both in the positive direction if they wanted to invest more, or if we had to take cuts, how we might do that most gracefully," he said. "They'll come up with the best decision that they can make. Then it kind of comes [to], 'OK, how do we optimally deploy that force that's been decided on?'"

Richardson recently unveiled a "Design for Undersea Warfare" document that seeks to "streamline" and better define the role of undersea forces in today's world where concerns such as anti-access and area-denial are preeminent.

"It was not our goal to come up with something revolutionary," he said. "We really just wanted to kind of sharpen our thinking and focus.

"What is our unique role, our unique capabilities, our unique responsibilities that emerge in this environment where we've got these emerging technologies?" he continued. "The long-range precision weapons pose a challenge for those sorts of forces that are not concealed, so that opens up, I think, some new potential roles and possibilities for concealed forces like submarines -- undersea forces -- that can go forward and provide the warfighter with some options."

Meanwhile, the Navy is mulling placing a guided-missile payload module aboard a Virginia-class hull as a way to replace the four modified Ohio-class SSGN subs when they go out of service, Richardson said.

While the Navy would not be able to put an entire SSGN payload on the smaller Virginia-class hull, "a smaller version of that would be this payload module, and then you recover the volume by stretching the number of Virginias or something like that," the three-star admiral said.

He cautioned that such a payload is not a program of record, and no formal decision had been made yet. The Navy will need to figure out what to do about the SSGNs in the next five to 10 years, however, he said.

"The payload volume is something we'd like to have," he said. "How we get that, there's a number of different options right now."

Donnelly told Inside the Navy in late 2009 that the Navy was considering modifying a Virginia-class sub to replace the SSGNs, as the guided-missile subs had proved their worth in the fleet and the Navy was interested in keeping the capability.

"In a budget-constrained environment, it may be difficult to find the money to modify the SSBNs and SSGNs," he said at the time, cautioning that it was one of many options under consideration. "It was $1 billion a copy when we did it last time, but that's certainly an option."

Richardson last week cited the payload module option as an alternative, "rather than trying to build a dedicated SSGN." -- Dan Taylor

Army Could Shed Up To 15 BCTs In Push To Meet Budget Savings Goal

End strength cuts seen as inevitable
Army Could Shed Up To 15 BCTs In Push To Meet Budget Savings Goal
Inside the Army - 08/29/2011

The Army has offered to cut up to 15 brigade combat teams to meet defense savings goals negotiated by the White House and Congress, Inside the Army has learned.

The proposal, briefed to the high-level Deputy's Advisory Working Group in recent weeks, offers a range of cuts in personnel that could bring the number of active-duty BCTs from 45 down to 30 in the most extreme case, according to an official familiar with the deliberations.

A plan to reorganize the Army's premiere fighting formations has been in the works for some time. Then-Training and Doctrine Command Chief Gen. Martin Dempsey last year ordered an exploration of the effects that a plus-up of maneuver forces in BCTs would bring. The force-design move, as envisioned then, was expected to reduce the total number of BCTs by 10, but increase their size and fighting capability.

Dempsey became Army chief of staff in the spring. President Obama selected him to serve as chairman of the Joint Chiefs of Staff only weeks after taking the Army job.

The goal of fewer but bigger and more fighting-capable BCTs still holds as the number of reductions possible is now pegged at 15, according to the official. While planning continues toward $350 billion in savings over a decade, the possibility of even greater cuts has created a sense of uneasiness. "If sequestration comes into play, who knows what the number is," said the official, referring to an automatic reduction of hundreds of billions of dollars in security-related spending that would take effect if Congress is unable to pass new saving proposals produced by a bipartisan debt "super committee."

The Army proposal leaves intact the service's 28 Reserve-Component BCTs, according to the official. The units are less expensive than their active-duty counterparts; tweaking their numbers is considered politically sensitive, and their capabilities are needed by governors to deal with domestic crises, the official said.

An Army spokeswoman did not return a request for comment on the service's BCT plans by press time (Aug. 26).

While the expectation among defense insiders has been that the Army's response to the nation's fiscal woes would involve reducing end strength (beyond reversing temporary increases and a cut of 27,000 already planned), the matter has so far been discussed only behind closed doors.

Army Chief Information Officer Lt. Gen. Susan Lawrence, in a teleconference with reporters last week, noted "directions" from Defense Department leaders to that effect. "We . . . anticipate, based on the reduced budget, depending on how reduced the budget is -- then we're probably talking taking forces out of the inventory," she said. "I think we can say with pretty high confidence that there'll be forces taken out of the inventory. We just don't know how many at this time."

The number of Army BCTs is a fundamental yardstick in a defense-wide strategy for the employment of land power. Internally, the figure is tied into the Army Force Generation concept and equipping strategies, and it plays a role in the tempo of unit rotations in and out of war zones during extended conflicts.

From an operational perspective, fewer BCTs would mean the Army "can't be in as many places; they can't be in as many cities at the same time, because they won't have the headquarters to control independent operations," the service official said. But the goal is to retain sufficient combat power for a "big fight" as well as a set of smaller fights in which units would need to operate independently, the official added.

Some analysts see the appetite for long ground engagements, like Iraq or Afghanistan, waning among administration officials and the public. Inside the Army reported last month that Joint Staff officials readying their annual Operational Availability study had been instructed to identify force cuts that could be made under the assumption that the U.S. military would no longer take up the hugely expensive mission of rebuilding wartorn nations (ITA, July 7, p1).

Brigade combat teams are the Army's response to demands for a more nimble organization than a division-centered force could offer. The service had 33 BCTs when the reorganization, known as modularity, began in 2003. -- Sebastian Sprenger