Analysts: Washington Will Continue to Punt Big Decisions on Defense Spending

Congress and the president have five weeks to decide how much to cut the defense budget. But pressure on the Defense Department to reduce spending will persist much further into the future, analysts warn.
Americans are tired of wars and are becoming alarmed by the nation’s rising debt. The political climate makes defense a vulnerable target in any deficit reduction efforts over the coming years, said Michael E. O'Hanlon, senior fellow and military analyst at The Brookings Institution.
Domestic health and social programs, retirement benefits and tax increases are becoming “harder to look at,” which means there will be greater pressure to cut defense, O’Hanlon said Jan. 24 at a Brookings forum in Washington, D.C.
Rather than wait for the ax to come down hard, the Pentagon should be working with Congress to find ways to preemptively reduce spending in areas such as personnel and administrative costs, O’Hanlon said.
Analysts at the Brookings panel were pessimistic, though. There are too many sacred cows, and Washington is not ready to have a “real conversation” on defense spending, said Alice M. Rivlin, a former director of the Congressional Budget Office and the Office of Management and Budget.
A serious debate on defense should identify “low priority and politically motivated spending” that does not contribute to national security and can be eliminated, Rivlin said.
“Much of what drives the defense budget is that it creates jobs in a whole lot of places,” she said. “We need to resist that kind of thinking and justification for military spending.”
Even though defense makes up just 20 percent of federal spending, it must be further scrutinized, she said. The nation’s debt, which is now equal to 73 percent of the U.S. gross domestic product, Rivlin noted, is rising faster than the economy can grow.
In fairness to defense, she said, the Budget Control Act of 2011 effectively froze military and domestic discretionary spending, which means that the long-term deficit is mostly driven by entitlements.
But there is still a lot of questionable defense spending, she said. Rivlin, who chaired the Rivlin-Domenici deficit reduction commission in 2010, pointed to the Pentagon’s skyrocketing health care and pension accounts as areas that are ripe for reform. “The military can take the lead here rather than drag its feet,” she said. “Politics, again, is the main impediment to sensible reforms.”
Although there are many opportunities to cut costs in defense, the Pentagon has a poor track record, analysts on the panel said.
“I’m fairly pessimistic,” said Jack Mayer, a former Pentagon official and now executive vice president of Booz Allen Hamilton.
The Pentagon can be forced to downsize simply by taking the money away. But a smarter approach would be to completely rethink its missions and go back to basics, Mayer said. “People talk about government, and what government should be doing. We should have the same discussion about defense.”
He also called for a closer examination of military compensation. Many taxpayers might be surprised to know that a military officer can retire after 20 years of service, at age 42, and receive half his salary for life, even though he continues to pursue a civilian career. “As a citizen, that is hard for me to grasp," he said. “I find it unbelievable that the way we compensate the military has not changed in decades."
Marine Corps Col. John Barnett, a federal executive fellow at Brookings, agreed that compensation should be revisited. From 1999 to 2009, basic pay soared 100 percent in nearly every rank, and in some enlisted ranks up to 115 percent, he said. The justification was that they were underpaid in the late 1980s compared to civilian counterparts. “We’ve caught up,” said Barnett. Additionally, the Defense Department has 16 percent more people on its payroll than it had in 2007.
Other areas that should be scrutinized for savings are military missions that already are being performed by other agencies, Mayer said. Case in point is homeland security. The military has a four-star command and numerous agencies that have responsibilities in homeland defense and overlap the Department of Homeland Security. “We have not had a debate on this,” Mayer said. “It is a clear example of mission creep.”
The threat of automatic “sequester” budget cuts has caused much disruption to the Defense Department, but it might spur officials to “think hard about the things that are low-value added,” said William B. Moore, executive vice president of LMI, a government consulting firm. “You see Defense Department functions duplicated in multiple organizations,” said Moore. In some agencies, managers exercise oversight by doing over what someone else has done, which creates inefficiency and added costs, he said. “People don’t have the will to take this on” even if the potential exists to reduce personnel costs by 5 to 20 percent. “We have people in the Defense Department in charge of forecasting weather. What they do is go to the NOAA [National Oceanic and Atmospheric Administration] website.”
The Pentagon also faces other threats to future spending that are out of its direct control. Economists warn that the Obama administration might be overestimating the Afghanistan “peace dividend” and any savings from ending the war would be far outpaced by the rising costs of veterans’ health care. In a Financial Times article, Nobel laureate Joseph Stiglitz and Linda Bilmes projected the Veterans’ Affairs budget is likely to hit $140 billion this year from $50 billion in 2001. “In previous wars, the bill for benefits came due decades later. … Now, with much higher survival rates, more generous benefits, and new, expensive treatments, the eventual costs of caring for veterans of the Afghanistan war will exceed $1 trillion.” Even though the Pentagon is asking Congress to roll back some retiree benefits, they are “politically untouchable,” Stiglitz and Bilmes wrote. “The result is that total personnel costs will soon reach one-third of the total defense budget. … Tricare is growing even faster than Medicare or Medicaid, and will soon consume 10 per cent of the defense budget.”
Photo Credit: Thinkstock

Topics: Business Trends, Doing Business with the Government, Defense Contracting, Defense Department, Civilian Workforce, DOD Budget, DOD Leadership