Trickle Down Economics

By John Grady

May 1, 2012

 

The numbers frighten industrialists, depot managers, governors and lawmakers. From the moment President Obama signed the Budget Control Act in 2011, the days of ever rising money to buy weapons, uniforms, armored vehicles, planes and ships to fight wars in Iraq and Afghanistan were over. 

To some it was a nightmarish rerun of Lockheed Martin Chief Executive Officer Norman Augustine’s Last Supper account of that fateful Pentagon meeting with federal contractors at the start of the Clinton administration. The good news was the Cold War was over. But then-Defense Department Secretary Les Aspin admitted there wasn’t enough work left to keep all their businesses afloat and plants open. 

In 2012, these same contractors likely all want to join in chorus with Sen. Susan Collins, R-Maine, who in defending her state’s shipyards said, “At some point quantity has a quality all its own.” Instead, companies should be tracking what is going on in the Army and in their own divisions that are doing business with the service. 

Army weapons buying is down by 65 percent since fiscal 2008, when it spent more than $67 billion. The service’s fiscal 2013 budget request for $24.3 billion in modernization and recapitalization funding is lower than the $26 billion it plans to spend this year. It’s an even bigger drop from the previous year’s request for $29 billion. 

The sharp decline before the Budget Control Act signaled a congressional push to end the free-wheeling days of “trust us” spending when Donald Rumsfeld was Defense Department chief. Who knew where the money was really going? 

Oversight is much easier for lawmakers when they look at the base budget. Take the mine-resistant ambush-protected vehicle, for example. The philosophy on the Hill is if you really want to keep the MRAP then find a way to pay for it—from factory to field—and, yep, that means the spare parts as well. As wonderful as the Rapid Fielding Initiative and other programs to develop new equipment might seem, few of them are in the base budget. Now they compete for dollars to replace the aging OH-58A Kiowa Warrior reconnaissance helicopter and to fund the Joint Light Tactical Vehicle, the replacement for the Humvee. 

Army leaders like Lt. Gen. Robert Lennox, deputy chief of staff for G-8, dispute the idea that the service has been living high on the hog. 

The Army began the decade with a $56 billion hole in modernization accounts earmarked for acquisition, research and development, and science and technology, Lennox said at a recent Institute of Land Warfare breakfast. As early as 2007, then-Chief of Staff Gen. Peter Schoomaker predicted it would take the Army 30 years to dig out of such a deep procurement hole. 

Slipping Navy ship construction dates and paring back the Air Force’s F-35 purchase drew big headlines even before the fiscal 2013 budget was released. Such measures have been largely accepted in Congress to achieve $489 billion in defense cuts over the next 10 years. But quietly canceling eight Army programs such as the Family of Medium Tactical Vehicles, and restructuring or delaying 89 others, including research for a new Ground Combat Vehicle to replace the Bradley, barely drew any media attention. 

Perhaps the millions of dollars for those two Army programs pale in comparison to the billions the Air Force, Navy, Marine Corps are pouring into Virginia-class submarines and the Joint Strike Fighter, for which allies are ready to pony up $112 million per copy. 

In the case of the Ground Combat Vehicle, it could have been simple fatigue—think Future Combat Systems and its 2009 cancellation when billions already had been spent. Soon after, then-Defense Secretary Robert Gates’ ordered military planners back to square one to develop a successor. Been there, done that.

Modernization consumes Army budget talks on the Hill while Air Force hearings focus on the future of the Air National Guard, and Navy and Marine Corps discussions emphasize the new defense strategy in the Pacific and
Middle East. 

At a recent Army budget hearing, Rep. Silvestre Reyes, D-Texas, whose district includes Fort Bliss, wondered aloud what will happen when the production lines for Strykers, Abrams tanks and Bradleys start shutting down this year. “How can we be sure that capacity will be able to regenerate itself?” he said.

Time and again, before House and Senate committees, Army Secretary John McHugh has admitted there are no guarantees that foreign military sales, the resetting of equipment from Iraq and Afghanistan, and public-private partnerships at government depots would be enough to keep the trained workforce employed. “We are willing to look at all of them,” he said. But there are only so many dollars for personnel and modernization in a zero-sum game.

For many in state houses and Congress who have followed the Army budget, particularly since 2008, it’s also a jobs bill. Employment at the Lima, Ohio, plant where the M1A1 tank is manufactured has fallen from 1,200 to 1,000 since 2011. The Army estimates it will cost $2.8 billion to keep the line open until 2015.

“We don’t want to be in the position the Army was in in 1939,” Lennox said, referring to the days when funding went to keeping saber and bridle manufacturers in business for the horse cavalry rather than to building tanks. “We’ve tried to focus on things that make a difference. It’s gotten more challenging.” 

John Grady, retired communications director for the Association of the United States Army, writes about defense and

national security for various publications.


By John Grady

May 1, 2012

http://www.govexec.com/advice-and-comment/magazine-advice-and-comment-analysis/2012/05/trickle-down-economics/55477/