Budget Analysts: ‘Efficiencies’ Won’t Cut it, Could Backfire on Pentagon

By Eric Beidel
The Defense Department in its last two budget requests identified $238 billion in “efficiencies” that could help it spend less through 2017, but it is a mistake to call them savings, analysts from the Center for Strategic and Budgetary Assessments said.
Leaders will have to come up with a mix of different ideas and make much tougher decisions than they have been willing to thus far in order to close the gap between dwindling resources and increasing threats to national security, CSBA analysts told reporters June 21 at their Washington, D.C. office.
“The wolf is now at the door,” CSBA President Andrew F. Krepinevich Jr. said. “You’re going to have to think a lot more creatively if you’re going to get through this period without really increasing the risk to security.”
Krepinevich compared the oft-invoked efficiencies to fool's gold. Historically, the Defense Department rarely realizes the savings it says it can achieve, he said.
When Donald Rumsfeld became defense secretary in 2001, he spoke about cutting the defense budget by 5 percent through efficiencies, but expenditures only increased, noted Todd Harrison, a senior fellow for defense budget studies at CSBA.
Today, military officials say they can save money by consolidating information technology systems, but determining whether or not that is true is a complicated matter.
“To know if you saved money, you have to know what you spent on all those systems before,” Harrison said. “You have to know what the process of combining them costs you and then you have to know what it’s now costing you once you’ve combined them and figure out the difference over time. You won’t know that for decades— and in some cases because of the way the budget is and the money is allocated — you may never have a good calculation.”
But officials already are allocating anticipated savings to other programs. If the Pentagon fails to achieve the cost-cutting goals already built into the budget, something else has to give. It could leave less money for procurement programs, leading to lower production rates and higher unit costs, Harrison said.
"Strategy in Austerity," a new report co-authored by Krepinevich, Harrison and another colleague, takes a look back at two instances where military powers dealt with austerity — Great Britain between 1900 and 1914 and the United States between 1969 and 1980. These case studies provide some lessons, including maintaining the ability to ramp up military might whenever needed. They also offer pointers on employing resources more efficiently, outsourcing commitments to allies, accepting greater risks, imposing costs on adversaries and negotiating with rivals.
“You can’t just do one thing,” Harrison said. “You have to do a lot of things, and you have to do painful things all across the federal government.”
It may mean shifting focus from modernization to recapitalization and from developing systems that provide limited leaps in capability to longer-term investments in science and technology. It may mean taking on greater risk in the near-term for more security down the road.
The Army’s Ground Combat Vehicle is a low-risk program that doesn’t provide a significant advance in capability, Krepinevich said. The Pentagon could shift money from that to directed energy development, which would come with a much bigger pay-off, he said. Given the new focus on the Asia-Pacific region, it might make more sense to take money from the GCV and put it into submarines, he added.
The current situation most likely also will force leaders to make even greater cuts to ground forces. Krepinevich and Harrison said the Army and Marine Corps will have to be reduced beyond current proposals that already take them down from 570,000 to 490,000 and from 202,000 to 182,000 respectively.
As for cost-imposition, the United States is losing that battle on the missile defense front. The country relies primarily on kinetic interceptors, which can cost more than the missiles they are designed to strike down. Investing more in directed energy would allow the United States to sidestep the extra costs associated with trying to stop bullets with bullets, Harrison said.
Likewise, the country can impose costs on its adversaries by increasing offensive firepower in cyberspace, “because we know that cyberdefense is incredibly expensive, incredibly hard,” Harrison said.
But the complexities of the economic situation mean that the Pentagon is at the mercy of Congress. That brings into the equation a more general discussion of expenditures and revenue, entitlements and taxes, and the much-feared but little-planned-for automatic cuts to the defense budget outlined in the Budget Control Act that could take effect come January.
By the end of the decade, the federal government may be spending more on interest payments than on defense. All of the United States’ major wars have been deficit financed. What happens when the country can’t borrow money for the next one?
“If we don’t get our financial house in order, it’s going to be very hard even if we are successful in these other areas,” Krepinevich said.

Topics: Defense Department, DOD Budget, DOD Policy, Infotech, Missile Defense, Procurement, Science and Engineering Technology, Shipbuilding, Submarines

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