Nation Paying Steep Price for Rash Decisions

By Lawrence P. Farrell Jr.
Actions, especially those that embrace large swaths of human endeavor, can generate many outcomes, some of which are intended. But they may also produce consequences that are unintended and harmful to the original design. 

Systems engineers understand this well. Their training and experience teach that the many variables of any large design take time to work out and that a system is best deployed in increments after much design and testing. Big Bang implementations — like deploying advanced blocks of a new weapons system or a full-up enterprise management system all at once — always add significant additional cost and extend schedules. The result is delivery of fewer systems, and often cancellation of the procurement after the investment of billions of dollars.

Unintended consequences are not only relegated to actions related to systems design for weapons or enterprises. They also apply to political decisions and budgets that are made without sufficient analysis, and with assumptions that prove to be shortsighted. These are decisions that satisfy short-term needs with little consideration of long-term effects.

Today, there are numerous examples that would provide grist for major academic studies. Many of these rash decisions have driven harsh consequences for the nation’s defense establishment, security and financial stability.

First case in point is the Budget Control Act of 2011, and its accompanying sequestration of funds. The United States is suffering the consequences of the actions of a congressional committee that failed to come up with $1.2 trillion of budget savings over 10 years, or approximately 3 percent of federal spending. To encourage the committee to come up with an acceptable proposal, a sequester action was formulated that would take money indiscriminately from discretionary accounts across the board. The assumption was that no one would accede to this arrangement. But it happened when the committee failed in its assignment. 

Everyone assumed that sequester would never come to pass, and that its consequences were so dire that it would force compromise.  Well, we all know that never happened.  The government is now in a sequester reality, and its unintended consequences are yet to be seen. 

A taste of this can be found in the military chiefs’ testimony last month before the House Armed Services Committee. They testified that under sequester, the 2012 Defense Strategic Guidance is unexecutable. For the Army, troop levels could plummet in the active-duty force, National Guard and Reserves. There will be much deferred maintenance, reduced investment and canceled training rotations. By 2014, the nation would have an Army where 85 percent of its brigades are unable to execute the strategic guidance. It is an Army heavily dependent on overseas contingency operations funding to satisfy day-to-day training, modernization and operational needs. It is an Army that would have to wait until after 2018 to rebalance readiness and modernization. The service could possibly lose up to 30 percent of its captains, many with multiple combat tours.

Army Chief of Staff Gen. Ray Odierno points out that this is the first time that we are drawing down forces while still at war.

Air Force Chief of Staff Gen. Mark Welsh cites the huge uncertainty of the present situation. We don’t know how much funding we will have, when we’ll have it, or the rules for executing it. This year the Air Force has grounded 33 squadrons — including 13 combat-coded flying squadrons — and has limited seven others to take-off and land training only. Next year, the Air Force will reduce flying hours by 15 percent and if this continues beyond 2014, 550 aircraft and 25,000 airmen will be let go. The average age of aircraft is the oldest in history — fighters average 24 years, and tanker and bombers 50 years.  How would you like to drive a 50-year-old car?  The Air Force will be divesting entire fleets of aircraft, and as the force gets smaller, excess infrastructure grows even larger.

Chief of Naval Operations Adm. Jonathan Greenert says sequester will undermine global presence, the Asia-Pacific pivot, Middle East partnerships and European missile defense. Readiness will continue to degrade and procurement of submarines, littoral combat ships, aircraft and carriers will be affected.

The Marines will reduce end strength from 202,000 to 174,000 if nothing is changed. Their equipment and training readiness will be degraded below what is required for their mission.
These outcomes might not have been intended, but here we are.

Another illustration of unintended consequences is the protracted impasse in Congress and its failure to produce a budget, or even a continuing resolution, for 2014. This has caused a partial shutdown of government and furlough of non-essential personnel. The Defense Department elected to include in the non-essential category many of the personnel in the Defense Contract Management Agency and the Defense Contract Audit Agency, who approve work and invoices. This caused the defense industry to begin furloughing personnel as products could not be certified for delivery and invoices were not being approved for payment. Recognizing this, the department quickly returned these folks to work, but many industry personnel are still furloughed as their workspaces are in shuttered federal facilities.

One final example is the uncertain financial path ahead for the United States given the shutdown and the squabbling over the debt-ceiling extension. While few observers believe that the United States will default on its debt, the markets and holders of that debt are getting nervous.
Everyone remembers the unintended outcome of the Lehman Brothers collapse in September 2008. Few had anticipated the freezing of credit markets because of the large number of parties that were affected by Lehman transactions.

Are we approaching something similar with the debt limit debate? Financial markets have been showing signs of stress. Short-dated Treasury bills due Oct. 17 had climbed 18 basis points by Oct. 9, the highest since the Lehman collapse. Bill rates as of Oct. 9 had risen 14 basis points. In September, the bill rate averaged 7.4 basis points. Demand for Treasury bills has begun to drop, reflecting nervousness about the U.S. ability to meet its obligations.  Finally, the 10-year T-note has risen three basis points to 2.66 percent, versus averaging 1.8 percent in September.  With the Fed at near-zero interest rates, and with a substantial quantitative easing not having much effect, if a crisis occurs, it will not have much ammo left in its pouch.

Unintended consequences abound in crises that were manufactured and unnecessary. Short-term actions are creating long-lasting problems. And the longer this continues — and policy makers keep ignoring the advice of government leaders who have to execute programs ­— the nation will continue to suffer painful consequences of ill-considered actions.

Topics: Defense Department, DOD Budget, DOD Policy

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