DoD's Collision Course

By James Kitfield and National Journal

June 23, 1997

For those in command of America's armed forces, the future is usually clouded by the uncertainties of day-to-day crises in this or that corner of the globe and, closer to home, by Congress's annual budget deliberations.

Recently, though, the belt-tightening demands of the balanced budget agreement and the mission-expanding agenda of the just-completed Quadrennial Defense Review (QDR) have given Defense Department officials a relatively unobstructed view into the next millennium. And what the two milestone documents have revealed, many specialists say, is a Pentagon whose ever-growing responsibilities are on a collision course with fiscal reality.

The swift rejection earlier this month by many Members of Congress of the QDR's most controversial cost-cutting measures--steps designed to provide money for new weapons for the 21st century--has further heightened those concerns.

"Washington has decided that it wants to retain a high-quality, globe-spanning military that subsists on a declining budget, without goring any of the oxen that Capitol Hill favors. It flat-out cannot be done," said Dan Goure, deputy director of political and military studies for the Center for Strategic and International Studies, a Washington think tank. "Barring a crisis that alters the present course, the military is now on a path to becoming steadily smaller, less ready, and older in terms of equipment. What we're seeing is a variation on the classic theme of a hollow military."

Under the bipartisan balanced budget plan, the defense budget--now $250 billion--will decline by 3.3 per cent over the next three years in real, inflation-adjusted dollars and then remain flat in fiscal 2001. Though it will rise slightly in 2002, defense spending that year will still be about 3 per cent below this year's level, which at 3.2 per cent of gross national product is at its lowest comparative level since before World War II.

Even at the current level of support, the Pentagon can't carry out its far-flung assignments and keep its arsenal up-to-date. For the past three years, the Defense Department has robbed its new-weapons accounts to pay for the kinds of contingency operations--such assignments as peacekeeping and humanitarian missions--that the QDR establishes as a regular order of business for the future. Since 1985, spending on procurement has declined by 67 per cent.

Equally worrisome are reports that recruits are becoming increasingly harder to come by and that, compared with their predecessors, pilots and other skilled (and expensively trained) uniformed professionals are bailing out at alarmingly higher rates. Last year, the number of Air Force pilots accepting bonuses to extend their service commitments fell by 59 per cent, and is running at 43 per cent of the pool of eligible pilots this year.

"The QDR outlines a [broad] strategy that takes into account contingencies such as Bosnia and Haiti, and the need to `shape the world.' The problem is, the budget won't fulfill that strategy. The end result of the shortfall will be to place greater strains on people in uniform and their families, and force good people to leave the military," said Rep. Ike Skelton, D-Mo., a longtime member of the House National Security Committee. "What we need is small, predictable increases in defense spending each year, but that's not likely to happen, because defense is simply off the radar screen of the American people and Congress."

In A Budget Box

To many analysts, the balanced budget agreement is perhaps most significant for largely deciding an ongoing debate between defense hawks and budget hawks--in favor of the latter. After Republicans won control of Congress in the 1994 elections, those advocating stepped-up spending on the military initially held sway, adding significantly to defense spending. In fiscal years 1996 and 1997, for instance, Congress added $7 billion and $10 billion, respectively, to the Pentagon's budget request.

While the balanced budget agreement increases defense outlays in fiscal 1998 by $6.6 billion over the Administration's original request--thanks largely to the "windfall" recently discovered by the Congressional Budget Office--spending caps in the accord ensure relatively flat defense budgets over the next several years.

Congressional proponents of a stronger defense have railed against being painted into a budget box. Much of their ire has been trained on the QDR, which assumes annual defense budgets of roughly $257 billion through 2002.

"If the Pentagon had said in the QDR that we need to spend $15 billion or $20 billion more a year for defense than the balanced budget agreement lays out, then we could have had a hell of a debate on this nation's defense, and I think we could have gotten the money," said Rep. Duncan L. Hunter, R-Calif., chairman of the House National Security Subcommittee on Military Procurement, at a forum on Capitol Hill. "Instead, it includes a lot of platitudes about peace through strength, without backing them up."

Rep. Saxby Chambliss, R-Ga., also criticized the QDR for being "budget"- rather than "strategy"-driven. "Secretary [of Defense William S.] Cohen limited the Pentagon to $250 billion annual budgets, based on his personal sense of what the American people will support, and I view that as a fatal flaw of the QDR," Chambliss said at the forum. "I believe he should have laid out what the military needs, and left it up to Congress to come up with the spending priorities."

Yet in the 1980s--when Republicans occupied the White House and Democrats controlled Capitol Hill--lawmakers were just as critical of then-Defense Secretary Caspar W. Weinberger for routinely assuming unrealistic levels of defense spending, even during President Reagan's second term, when the budget deficit was ballooning out of control. That led to inefficiencies as the services began weapons programs they could not ultimately afford, and forced Congress to make tough decisions that many believed military experts in the Pentagon should have confronted.

"People always talk about defense reviews being strategy- rather than budget-driven, but in fact, if you envision a defense strategy that ignores budget realities, it immediately lacks credibility," said Sen. John McCain, R-Ariz., a member of the Senate Armed Services Committee. "It would be dead on arrival."

Dennis Bovin, vice chairman of investment banking for Bear, Stearns & Co. Inc., a securities firm, and a defense consultant, asserts that the Pentagon's efforts to reform its acquisition and business practices will succeed only if the Defense Department is forced to live within strict budgets. "Washington is the only place I know where budgets are criticized for not recommending unlimited spending," he said at the QDR forum. "What the Pentagon needs is not more money, but rather the same flexibility we have in the business world to move dollars around and realize efficiencies. And Congress has not allowed the military to do that."

Hemlock Time?

Many analysts maintain that the QDR foreshadows a looming mismatch between money and missions largely because it relies so heavily on questionable savings to underwrite a very ambitious agenda.

According to the QDR--a congressionally mandated survey of strategy and force structure that got under way last year--the military must remain capable of winning two major wars nearly simultaneously; maintain a continuous overseas presence to "shape the international environment"; improve its ability to respond to a variety of smaller-scale contingencies and unconventional threats; and make the most of rapid changes in military technology.

Given those requirements, defense planners avoided weapons cancellations and major cuts in military force structure. Under the QDR, active-duty forces would decline moderately by 60,000 (from 1.4 million to 1.34 million) and civilian personnel by 80,000. The number of tactical aircraft that the Pentagon would buy was also significantly reduced (from 438 F-22 fighters to 339; 548 F/A-18E/F fighters instead of 1,000; and 360 V-22 tiltrotor aircraft, not 425), in a contraction of programs that historically has caused unit prices to soar.

For other savings, the QDR focuses on initiatives that are widely unpopular on Capitol Hill: two additional rounds of base closings; acquisition and management reforms that would represent a massive shift of defense support work--engine overhauls and routine bureaucratic functions--to the private sector; and significant cuts in reserve forces.

"I know that the QDR pushes some political hot buttons. It's difficult talking about closing bases or facilities or cutting reserve units in someone's district or state," Cohen said in a meeting with defense reporters. "But ultimately I'm presenting Congress with the same decisions I had to make. Are you going to protect unneeded facilities, or are you going to protect our forces by putting modern weapons in their hands? Those are tough questions to face up to, but there are no more easy choices. It's all hemlock time now."

Over Joel's Dead Body

Unless you're a Member of Congress with a facility in your district, the Pentagon's sprawling network of bases looks ripe for pruning. According to Defense Department figures, the number of American troops on active duty has declined by 32 per cent since 1989, and it will fall an additional 4 per cent by 2003 under the QDR.

In contrast, the Pentagon's real estate will have decreased by only 26 per cent (21 per cent domestically) when the rounds of base closings already in progress are completed early in the next century. The result will be an annual savings of $5.6 billion, according to Defense Department figures. The QDR thus recommends two new rounds of base closings--in 1999 and 2001--that could (it is hoped) save an estimated $2.8 billion a year.

Having gone through four contentious rounds of base closings, however, Congress has shown little stomach for returning to the issue so soon. The House National Security Committee completed work on the fiscal 1998 defense authorization bill earlier this month without granting Cohen's request of additional base-closing authority.

Rep. Joel Hefley, R-Colo., chairman of the National Security Subcommittee on Military Installations and Facilities, declared that a 1999 round of closings would proceed "over my dead body." An amendment to include 1999 and 2001 closings in the Senate Armed Services Committee's defense authorization bill was defeated on June 12.

The usual congressional resistance to additional closings has been reinforced by the broadly held view that President Clinton politicized the process. In 1995, the Administration refused to fully shut down big Air Force repair depots in California and Texas, as recommended by the independent Commission on Base Realignment and Closure (BRAC). With both states seen as crucial to Clinton in the 1996 election, the White House decided instead to "privatize in place" the work done at the two depots to save local jobs.

"By injecting politics into the BRAC process, I think the Clinton Administration poisoned the well. I doubt you're going to get another BRAC round while he's President," Hunter said. "You don't rid yourself of excess capacity or reap the savings of closing a base by just changing the workforce from public to private, so it defeated the purpose."

In response, Cohen has suggested that Congress stipulate in any new base-closing legislation that privatization-in-place is not an option in the future. A number of Republican lawmakers insist that he will have to go further by fully shutting the California and Texas facilities.

"The balanced budget agreement lays out a fairly predictable path for defense funding, and that means we need to meet our savings goals through restructuring and reforms," said John Goodman, deputy Defense undersecretary for industrial affairs and installations. "And if we don't get BRAC authority by November of this year, we will have missed the 1999 round. That means we'll have to look elsewhere for roughly $2 billion in annual savings."

Lotsa Bucks, Little Bang

The QDR proposals with the potential for the most savings, and perhaps the greatest risks, involve shifting many military support jobs to the private sector. According to a 1996 Defense Science Board study, the Pentagon could save as much as $30 billion a year by letting civilian contractors carry out an array of military support activities. The Defense Department's 1995 "Roles and Missions" report proposed a similar large-scale privatization of support functions--everything from managing the Defense Department's massive payroll system to launching satellites.

Pentagon officials estimate that 61 per cent of all uniformed and civilian personnel are assigned to support duties. "The military is now spending somewhere between $100 billion and $170 billion a year on support functions--running the country's largest grocery chain, financial department, travel agency, printing operation and medical organization--yet despite that huge commitment of resources, it gets remarkably mediocre services," says Bovin of Bear, Stearns. "The military chiefs are now speaking with one voice on the need to change, but Congress has to listen."

The Pentagon's push puts generals and admirals on a collision course with a powerful group of lawmakers: the bipartisan House Depot Caucus. Members of the caucus--nearly all of whom have one of the Pentagon's 21 major repair depots in their districts--have written into law that no more than 40 per cent of the armed services' depot work can be performed by private contractors.

In a plea to Congress, Cohen asked that the legislation be changed. "The current 60/40 legislation precludes the services from conducting truly meaningful analyses of potential savings which might accrue from the competitive process," he wrote Sen. Strom Thurmond, R-S.C., chairman of the Senate Armed Services Committee.

The strength of the Depot Caucus was evident, however, during a House subcommittee's recent drafting of the fiscal 1998 defense authorization bill. In the House, the request to abolish 60/40 was rejected by the Military Installations and Facilities Subcommittee--an overwhelming majority of whose members belong to the Depot Caucus--and never made it into the full-committee markup. An amendment to allow the Pentagon to establish a 50/50 ratio between the public and private sectors was included in the Senate bill.

"One of the most bizarre and really disgraceful chapters I've witnessed in my time on Capitol Hill," McCain said, "occurred last year when I was chairman of the [Senate Armed Services] Readiness Subcommittee and I proposed changing the 60/40 rule to 50/50. A group of House Members came over en masse and predicted that I was about to destroy Western civilization as we know it. And I see the opposition as even stronger this year. It's an unfortunate commentary on the system, because we're hearing less and less talk about national security challenges, and more and more parochial talk about protecting my depot, my base and my weapon system. The greatest obstacle to modernizing our military forces may be the Congress of the United States."

Because the QDR relies heavily on savings projected from cutting 116,000 civilians and active-duty troops involved in support jobs, an inability to transfer many of those functions to the private sector could prove devastating. Citing that risk, the Center for Strategic and Budgetary Assessments (CSBA), an independent think tank in Washington, conservatively estimates that the Pentagon could face a $20 billion-a-year funding shortfall early next century.

"With flat defense budgets, the Pentagon has to realize savings and efficiencies out of its infrastructure, just as U.S. industry has already done," said retired Air Force Lt. Gen. Thomas G. McInerney, director of Business Executives for National Security, an independent advocacy group that supports base closures and privatization reforms. "If Congress is not willing to listen to the service chiefs and let them reallocate resources, [it] will be responsible for taking this magnificent military machine that Ronald Reagan built up and breaking it as we head into the 21st century."

Reserves to Spare

Much as base closures have lagged behind force reductions, the Pentagon's reserve components have become larger relative to the active-duty components during the post-Cold War drawdown. Since the Berlin Wall fell in 1989, for instance, the Army's active-duty forces have shrunk by 36 per cent, versus 26 per cent for the reserves.

In the Quadrennial Review, Defense Department officials note that the need for a large strategic reserve has also declined. That is particularly true in the case of eight Army National Guard divisions that have no direct role in the Pentagon's warfighting plans beyond serving as a backstop for deploying forces.

The QDR thus proposes eliminating an additional 55,000 National Guard and Reserve troops. Most of those cuts are aimed at the Army National Guard, which would be reduced by 38,000 troops while the Army Reserve absorbs 7,000 troop cuts.

Because of their home-state connections, reserve forces have strong defenders on Capitol Hill. When the magnitude of the QDR's proposed cuts were outlined for National Guard leaders who had gathered in Oklahoma this spring, they immediately protested to state governors, whose concerns were promptly relayed to Congress.

"We did not feel we participated adequately as the QDR decisions were made at the highest level [in the Pentagon], and we did not agree with a 38,000-troop cut in the National Guard," said Maj. Gen. William A. Navas Jr., director of the Army National Guard. "So a lot of questions were raised on Capitol Hill."

To avoid a potential showdown with Congress, Cohen ordered all three Army branches to meet away from the Pentagon to settle their differences. The deal that emerged in early June calls for the active-duty Army to make all of its 15,000-troop reduction over the next three years as planned, while the Guard will give up 17,000 troops and the Army Reserve 3,000 during that period.

Army leaders still insist that they have not backed away from the QDR plans to cut the Guard further, but National Guard officials clearly have other ideas. "Our position is that the National Guard will be at about the right size [after the 17,000-troop reduction], and there might be better ways to save money than cutting the Guard further," Navas said. "If this country is moving away from the militia concept toward keeping a large standing Army even after the end of the Cold War, that's a debate that should be raised to the level of Congress, which has the constitutional responsibility to raise our armies."

Once again, however, one of the critical engines of proposed savings in the QDR is sputtering. According to the CSBA, the proposed cuts to reserve forces would have generated $700 million in annual savings.

"In nearly all of the areas outlined in the QDR, the Pentagon can become more efficient, but many of them require the cooperation of a very skeptical Congress," said Andrew F. Krepinevich Jr., CSBA director and a member of the National Defense Panel that's charged with offering alternatives to the QDR. Absent a compelling national security threat, he says, it's risky to count on savings that require Members of Congress to go against the wishes of their constituents. "Frankly, I'm afraid the QDR has put us on a path where three to four years from now the military will be facing the same problems it has today, but they will be worse," says Krepinevich.

In the end, Cohen says, he had to decide between doing what he believed was right and doing what conventional wisdom said was politically feasible. The Quadrennial Review wasn't about trying to share the political pain, he said, or doing what was politically correct. Cohen wasn't running for office anymore. Some of his former colleagues seem intent on reminding Cohen that they still are.


By James Kitfield and National Journal

June 23, 1997

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