Storm Clouds Ahead: Musings About the 2022 Defense Budget
It’s that time of year when the president’s annual budget is due to Congress, and with it, the annual update to the Pentagon’s future years defense program. The program is a projection of the forces, resources, and capabilities needed to support Department of Defense operations over a five-year period. The future years defense program covers the current “year of execution” and the next four years. These five-year plans are typically delivered to Congress with the defense resources for the two previous fiscal years and force structure estimates for the three years following the program.
Normally, both the president’s budget and the future years defense program would be delivered during the first week of February. But, in a transition between administrations, they are typically delayed as the incoming administration reviews the program developed by the outgoing administration and makes changes to it. This transition is no different — therefore, we should see the budget and defense program before May 1.
The coming update to the defense program promises to be more important than usual. It’s been over three years since the National Defense Strategy established a long-term strategic competition with “revisionist powers” — particularly China — as the primary defense challenge facing the joint force. During this time, the services have all been developing new operational concepts and the platforms and capabilities to support them. It’s time to start seeing concrete changes in the defense program that should follow.
This is the first part of a short series that aims to frame the Fiscal Year 2022 (FY2022) defense program and to highlight and discuss some of the Department of Defense’s biggest decisions regarding capabilities. None of these decisions will be easy — yet time’s a-wastin’. They need to be made and the sooner, the better. The Department of Defense promised “the masterpiece” — the new joint force, reconfigured for competition with China and Russia — in the FY2020 program. However, we are still waiting for it. One hopes Washington won’t lose another year as its competitors continue to chip away at America’s conventional overmatch.
A Short Budget History
Before discussing the particulars of the FY2022 program, it helps to understand the backstory. The Budget Control Act of 2011, followed by the effects of sequestration in FY2013, completely disrupted the Pentagon’s long-term program planning processes from FY2013 to FY2017. First, defense spending declined over half a trillion dollars relative to the FY2012 program. Second, the outyear budget forecasts continually changed as Congress sought to restore some of the cuts, primarily with short-term (e.g., two-year) “balanced budget agreements.” And third, the department had to deal with successive continuing resolutions at the start of each fiscal year. The combination of all three things made future budget forecasts a continually shifting target and years of execution a constant struggle. Consequently, the future years defense program saw incessant change year over year.
One might have expected the big decline in defense spending to trigger a substantial reduction in U.S. force structure. However, one would be wrong. And if force structure didn’t appreciably decrease, one might then have expected the force to cut back on the frenetic operations and personnel tempo it had maintained since the 9/11 attacks. Nonetheless, it didn’t.
The result: a force that was too big for the budget allocated but too small to meet the demands laid upon it.
How could something like this happen? Even though the Pentagon and service chiefs often promise to shrink the force before the services go hollow on readiness, when it comes time to jump off that cliff, they are not inclined to do so (especially in the chaotic budgeting and planning environment of the Budget Control Act years). Congress isn’t inclined to do so, either — and the Pentagon has been unable to treat regional combatant commander requests for forces as “desirements“ rather than “requirements.” So, the default answer for requests for forces is “yes.”
Regardless of the why and the how, this was a bad place to be, and two things inevitably occurred. First, readiness cratered. The Department of Defense was mostly successful in sending ready units on deployments. But, to make it so, the readiness of units at home station badly suffered in response. Moreover, the constant unconstrained demands of the regional combatant commands — and the Pentagon’s inability to say “no” to them — caused the definition for “ready” forces to gradually change to “available” forces. And most available forces were too often deployed in response to requests for forces. Consequently, the cupboard of forces immediately ready to respond to a contingency became increasingly bare.
Second, with the Pentagon unwilling to put force structure and deployment cuts on the table, it was forced to make program decisions it otherwise would have scrupulously avoided to stay within the budgeted top-line. For example, munition buys were cut, often to minimum sustaining production rates. Facilities maintenance was shaved as well. Ship maintenance availabilities and exercises were scaled back. The Army and Marine Corps ground modernization programs essentially disappeared. All of these things contributed to the overall decline in force readiness.
Then-candidate Donald Trump promised to “rebuild” the military. In practical terms, we witnessed something less than that — it was more of a rebalance. The increased defense spending on his watch (over what was expected in the 2016 future years defense program) allowed the department to bring its personnel, readiness, and investment accounts roughly into balance for the existing force structure. Moreover, Secretary of Defense James Mattis diverted money in FY2017, FY2018, and FY2019 to restore the readiness deficit he inherited. Without question, the “Trump bump” improved forcewide readiness and allowed the Department of Defense to start repairing some of the damage to the program forced by the sequestration caps.
But the Trump bump did not provide the resources necessary for a major force structure buildup, which is what many people expected with a promised “rebuild.” During his campaign, Trump called for a 350-ship Navy, an Army with 540,000 personnel, an Air Force with at least 1,200 fighter aircraft, and a Marine Corps with 36 infantry battalions. After FY2020, once the program was brought back into a semblance of balance and readiness had stabilized, the department would have needed year-over-year budget increases of approximately 3 percent just to maintain the force structure levels the president inherited. This would cover the costs of inflation — running at approximately 2 percent — in addition to fact-of-life increases to the costs of military personnel as well as operations and maintenance, both of which consistently rise faster than the rate of inflation. To make good on Trump’s campaign promise for a larger joint force, the budget would have needed to increase at a rate of 3 to 5 percent year-over-year for a substantial period of time. Instead, defense spending fell 4 percent in real terms between FY2020 and FY2021.
So, here we are. The enacted FY2021 defense top-line came in at approximately $705 billion. To avoid losing future buying power and reducing the force structure the United States now has, the future years defense program needs to be inflated by 3 percent, year-over-year. However, that isn’t likely to happen. It appears the best case is for future budgets with no real increase in buying power — that is, for FY2022 and out to hold at $705 billion, inflated. Assuming an inflation rate of 2.4 percent, that would result in a FY2022 defense top-line of $722 billion, with outyears inflated from there. A worse outcome would be for the FY2022 and subsequent years to hold at $705 billion, uninflated. And the absolutely worst case would be year-over-year real declines in defense spending as called for by the progressive wing of the Democratic Party.
Now, a FY2022 topline of $705 billion is nothing to sneeze at. That tops annual defense spending every year between FY1948 and FY2005. In other words, FY2022 spending at $705 billion will be higher than at any time during the Cold War, including during the Korean and Vietnam wars. But an uninflated FY2022 budget of $705 billion has at least 3 percent less in buying power than FY2021’s $705 billion, and that yearly loss will likely be duplicated across the future years defense program. Even a FY2022 budget of $722 billion, adjusted to account for inflation, is nowhere near enough to grow the services to the size and numbers called for by then-candidate Trump.
Bad news doesn’t get better with age. The United States cannot maintain force structure on flat defense budgets. Rather than reprising the ugly choices policymakers were forced to make after the Budget Control Act and sequestration, it would be better to make force structure and deployment cuts now, in the FY2022 program, and immediately divert the savings to modernization accounts. But if history is any indication, that will be a line the Pentagon and services will be reluctant to cross (except the Marine Corps, which has seen the light and made the hard choices necessary to adjust).
Giving up on visions of a much larger joint force is one thing, but modernizing the military America has and maintaining its current size is also hanging in the balance for a variety of reasons. First and foremost, when you are losing 3 percent buying power per year, service modernization accounts will face steady downward pressure that only increases over time. Second, the entire conventional portfolio — which includes the force structure modernization of the four armed services — will be under increased pressure because of the high costs to recapitalize U.S. nuclear forces. The last time the Pentagon needed to modernize its conventional forces at the same time it recapped the nuclear triad occurred during the Reagan defense buildup from FY1981 through FY1985. Annual defense spending over this time frame increased at an average of 7.3 percent in real terms. With such increases, the Pentagon did not have to trade conventional capability for nuclear forces. Unless something changes, that will not be the case this time. Congress and the Department of Defense will have to find a way to pay for nuclear capabilities within the existing top-line. And, unfortunately, the margins in replacement plans for the Ohio-class ballistic missile submarines, the Minuteman III intercontinental ballistic missiles, the air-launched cruise missile, the warheads to arm them all, and the associated nuclear command-and-control system have all been expended. The bill is coming due, with no more extensions possible.
The same goes for America’s strategic sealift fleet, the key prerequisite for U.S. global power projection. Many of the ships are already more than three decades old, and they will begin to reach the end of their useful service lives in the 2020s. They need to be replaced. Then there are the costs to stand up the new U.S. Space Force and provide the capabilities it needs. To pay for these plus the nuclear recap, the modernization of conventional forces will likely be the biggest bill payer. And all will make the competition for resources within a flat $705 billion top-line extraordinarily intense among the military departments as they argue for their share of the remaining budget pie.
But wait, there’s more! Encouraged by Mattis’ calls for 3 to 5 percent annual growth through at least FY2023, service plans for modernization, recapitalization, and force structure growth were made on the hope of 3 to 5 percent year-over-year growth throughout the 2020s. Without that steady growth, capacity increases are infeasible. With flat budgets, whether inflated or not, competition for resources within the military departments will be as ruthless as competition for resources between them. One needs only to look at the program decisions made by the commandant of the Marine Corps to get a feel for just how ruthless things could get. Gen. David Berger made the difficult decision to shed tanks and other armored vehicles as well as towed artillery and jets and helicopters to pay for capabilities deemed more important in the future. That was a gutsy call that showed both vision and courage. The Army, Air Force, and Navy have yet to make similar decisions — at least on the scale likely necessary. Nonetheless, they are sure to be coming.
So, the first thing to look for is the FY2022 top-line. Will it remain flat at $705 billion? Will it be inflated or uninflated? Or will it reflect a real decrease? Regardless, the competition within the program will be extraordinarily intense, and every program decision difficult.
Prepare for heavy weather!
Robert O. Work served as the 32nd deputy secretary of defense from 2014 to 2017.