What Should the Department of Defense Do About Budget Cuts?
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Editor’s Note: We recently announced a contest on defense spending and strategy. We published the third place and second place entries earlier this week. Today, we have the winning submission selected by our panel of judges. Thanks to all who submitted their ideas!
The Pentagon has committed to $450 billion in cuts in spending over the next eight years. These cuts come on top of preemptive cuts by Secretary Gates and Panetta as well as the debilitating effects of sequestration. In a situation like this, hard choices must be made. Yet these choices come with the moral responsibility to leave the Department of Defense (DoD) with the capability framework and elite cadre ready for the next fight. Bean counters in the Pentagon and on Capitol Hill are thus left to weigh the cannibalization of five categories of spending. These include: 1) active/retiree benefits, 2) military/civilian salaries, 3) personnel, 4) weapon systems, and 5) operations and maintenance (O&M).
Defense cost cutting should be based on realism and what can and cannot be replaced beyond a mid-term horizon. Our nation has an obligation to uphold the bilateral covenant we made with those who have worn the uniform. America also has a commitment to ensure that military personnel are well compensated and cared for. Yes, military pay has risen substantially relative to civilian rates, but one must consider how impossibly low military pay was before the 1980s. Lastly, weapon systems can be easy targets for spending cuts given rampant reports of contract bloat. However, budget hawks should be mindful of the painful lesson the British learned in the 1920s when they offered wholesale cuts to a military industry that could not recover in time to face emerging national security threats.
This concept I envision will save an estimated $47 billion per year or an aggregate of $282 billion by 2020. The spending cuts prudently target inefficiencies in the Benefits, Personnel, and O&M budgets while intentionally minimizing reductions that will 1) provoke considerable opposition from constituencies (Capitol Hill) and 2) result in industry cuts that cannot be readily be resurrected. Here is how these reductions are broken down:
Active/Retiree Benefits: There are two (2) substantive spending cuts that can be made in this account. The first stems from a Congressional Budget Office estimate that a modest increase in Tricare drug co-pays for dependents and retirees from $3 to $15 could result in $2.6 billion in savings per year. The second and more significant cut applies to revising military retirement pay for new entrants. Whereas current retirees are paid 50% of their salary after 20 years of service, a proposal from the Defense Business Board would pay out 40% of a retiree’s salary only after he or she turns 60. This would result in a savings of $8.7 billion per year.
Military/Civilian Salaries: Adjustments to personnel salaries supporting the Pentagon’s mission must be made carefully to avoid hollowing out a force in the face of attractive private sector competition. Consequently, I would highlight a solution, first offered by the Sustainable Defense Task Force (SDTF), that would slow the rate of growth in tax-exempt military allowances for housing and food by combining them with basic pay. Implementing this proposal would save an estimated $5.5 billion a year.
Personnel: Spending reductions in this category focus less on withdrawing American forces from forward deployed regions such as Europe or Asia and more on end-strength. Here again, the SDTF proposal offers a viable recommendation to reduce Army and Marine ground forces by 15% within a decade, to 657,400. While this may constrict our ability to respond to multiple conflicts simultaneously, it is a scalable risk we can afford to shoulder. Meanwhile, the civilian force in the Pentagon must also see a corresponding 20% reduction to 630,000 primarily through attrition, in an attempt to balance the “tooth-to-tail” ratio. By accepting these cuts, the DoD would see a savings of $21 billion per year.
Weapon Systems: A budget planner must exercise discretion when considering cuts that may inhibit an industry’s (e.g., aerospace, missile, armament, soldier system, etc.) survivability over the mid- to long-term. With this in mind, I recommend leaving high-profile programs such as the F-35, Carrier Battle Groups, the Army Ground Combat Vehicle, the Air Force Long-Range Bomber, and the Warfighter Information Network-Tactical alone. Instead, the Medium Extended Air Defense System (MEADS) and the Precision Tracking Space System (PTSS) can be eliminated in accordance with a Center for a New American Security report of 2011. These solutions are focused on an outdated Cold War nuclear triad concept that can and should be revised with a savings of $1.3 billion a year.
Operations & Maintenance: The O&M budget is an area ripe for efficiency savings rather than draconian cuts. In particular, significant savings can be realized by replacing military personnel supporting commercial roles such as supply, transportation, and communications. According to a plan put forward by Senator Tom Coburn, swapping 88,000 military personnel with 62,000 civilians would result in $7.3 billion a year in savings when combined with a standardized methodology for base spending per serviceman. This currently varies widely across installations, which is obvious to anyone who has ever had the pleasure of visiting an Air Force base. These cuts can be expanded upon by targeting ancillary expenses such as assuming a reduction in recruiting expenses as ground forces shrink, as well as trimming our military bands by two-thirds. This will present an additional savings of $520 million a year.
In this essay I have proposed a roadmap for achieving nearly $300 billion in savings by the end of the decade. Our military and its associated industries represent a carefully groomed machine that has been cultivated for more than 200 years. Policy and budget planners alike must assess not only the explicit benefits but also the implied risks associated with short- to long-term cuts like the ones proposed above. Whether we like it or not, choices must be made to determine what is necessary to protect American citizens and the national security priorities that ensure we remain safe.
Stephen Rodriguez is the Senior Managing Partner of Coldon Strategic Advisors, an export-import focused start-up. He has more than 12 years of experience working with the United States Department of Defense and Intelligence Community. Recently, Stephen was selected as a Term Member by the Council on Foreign Relations and a New York Leader by the Foreign Policy Initiative.
Photo credit: Secretary of Defense