Kendall: Under Sequester, ‘We Are Unilaterally Disarming’

In his most pessimistic forecast yet of the military’s fiscal future, Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall did not mince words: “The picture isn’t pretty. …We are headed into a very difficult time. … Continuing sequestration is a serious problem for the department. … We don’t know where we are going.”

The sound bites sum up Kendall’s latest assessment of how the Pentagon is coping with the automatic budget cuts that began in March: Not well.

“It is very hard for us to manage these abrupt cuts,” Kendall said Sept. 4 in a speech to the ComDef defense industry conference at the National Press Club, in Washington, D.C.

Any deficit reduction plan should allow the military more time to absorb cuts, he said. The $1 trillion across-the-board spending reductions that Congress mandated for the entire federal government — half of which fall on the Defense Department — are causing untold damage to the military in ways that have not yet manifested, Kendall said.

The Obama administration’s budget proposal seeks cuts of $150 billion later in the decade. A Senate-backed bill would impose cuts of $250 billion, compared to $500 billion reductions from 2013 to 2021 under sequestration. “We already cut 10 percent when the Budget Control Act was passed [in 2011]. Now we are asked to do that again in an abrupt and indiscriminate way,” he said.

The scramble to slash spending is taking a disproportionate toll on so-called “investment” accounts that pay for research, development and procurement of new weapons and equipment for troops, said Kendall. Personnel cutbacks take several years to implement, so the Pentagon has little choice but to target investments, he said. He estimates these accounts could see a 20 percent reduction.

These draconian cuts to technology programs are ill timed, said Kendall, as they coincide with a growing need for the military to invest in new systems to combat unknown enemies. “This is a bizarre situation for the United States,” he said. “We are seeing growing national security threats but we are unilaterally disarming because of concerns about the deficit and the national debt. This is a very unusual situation for us.”

Like some defense hawks on Capitol Hill who oppose sequester, Kendall noted that the federal deficit is shrinking, and that the primary drivers of the deficit are health costs and social security. “Cutting defense is not the solution to the problem,” he said.

A year ago, Kendall said, he was confident that Congress would reverse sequestration. He harbors no such hopes now. The best-case scenario for the Pentagon, said Kendall, will be to contain the damage. “We don't want furloughs. [Furloughs in fiscal year 2013] had a devastating effect on the workforce.”

Defense Secretary Chuck Hagel already has been working to prepare the Pentagon for budgetary chaos in fiscal year 2014, similar to what it endured in 2013. Hagel said he wants to protect troop training, equipment and combat readiness programs, even if that means laying off workers and taking other politically unpopular measures. Hagel directed a 20 percent reduction in the budgets of his office, the Joint Staff and military headquarters.

Kendall’s office alone employs at least 450 full-time civil servants and an equivalent number of contractors.

The Pentagon is building two sets of budgets for the 2015-2019 defense plan. One at the level proposed by President Obama, and another that lops off $52 billion per year in accordance to the Budget Control Act.

The exercise is one of the outcomes of the Strategic Choices and Management Review, or SCMR, that Hagel kicked off in March to help guide spending decisions.

Hagel unveiled the results of the study July 31. The SCMR did not produce a detailed budget blueprint but rather a menu of options. One would be to slash the size of U.S. forces. The current plan is for the Army to downsize from 580,000 to 490,000 active-duty troops. The SCMR concluded that, under sequestration, the Army might have to slim down further, to between 380,000 and 450,000 soldiers. The Air Force might have to reduce as many as five tactical aircraft squadrons, retire bombers and cut the size of the C-130 cargo aircraft fleet. The Navy could see its carrier strike groups drop from 11 to eight or nine, and the Marine Corps could shrink from 182,000 to between 150,000 and 175,000.

Hagel warned that sequestration would result in a decade-long “modernization holiday.” The military could find its equipment and weapons systems “less effective against more technologically advanced adversaries,” he said. “We also have to consider how massive cuts to procurement, and research and development funding would impact America's private sector industrial base.”

To help shore up U.S. military technology during the downturn, Kendall said he is seeking to launch several studies in areas such as air superiority and rotorcraft, “for the purpose of moving technology forward and position ourselves should threats change.” Such projects so far are wishful thinking, he warned. “They will be hard to squeeze into the budget right now,” he told reporters at the National Press Club following his speech.

Kendall sees a grim future for U.S. defense industry under sequestration, and projected companies might have to lay off “tens of thousands” of engineers.

“I am increasingly concerned about [preserving] our technological superiority,” he said. “I don't think people understand as much as they should that our technological superiority is not assured at all.” Potential adversaries are “designing systems to be better than ours and to defeat ours.”

The conventional wisdom that has set in — that sequestration cuts can be absorbed without noticeable degradation of military capability — is wrong, said Kendall. “It is going to get much worse,” he said. And lamented that he does not see a way out. “I don't see people negotiating a deal on the Hill,” said Kendall. “What it will take is enough visibility of the damage that has been done. … There is not enough visibility yet. … The Congress needs to act on this.”

The chances of a budget deal are slim to none, analysts predict, as the parties stand far apart on fiscal issues.

“The president has threatened to veto any bill that supports the House budget resolution because it protects the Defense Department from cuts by more than doubling cuts in domestic spending, a clear violation of the Budget Control Act,” said David J. Berteau, senior vice president and director of the international security program at the Center for Strategic and International Studies. The Senate’s budget resolution, he noted, also violates the law by not cutting to the lower BCA cap level.

“Given these differences, the Defense Department will likely start FY14 under a continuing resolution, or CR. By definition, a CR would be at the 2013 level, which means funding would start the year at a level that is $37 billion below its proposed FY14 budget,” Berteau wrote in a CSIS report. “This matches the cuts made last March under sequestration and will cause new readiness problems and further delays or terminations of contracts and weapons procurement.”

It could get worse as the administration and Congress gear up for a showdown over the debt ceiling, when the government will reach the limit of its borrowing authority and Congress will be asked to increase it. The Defense Department, said Berteau, “may be held hostage to the larger political dynamics.”

Topics: Defense Department, Civilian Workforce, Defense Watch, DOD Budget, DOD Leadership, DOD Policy, Procurement, Science and Engineering Technology