16 September 2013

How Painful Will the Coming Budget Cuts Really Be?


Going where the “real money” is invariably leads to compensation, about half of all defense spending, broadly defined as all pay and benefits, military and civilian, current and retirees, direct and in-kind (such as DoD schools and the commissaries). The 2000s saw substantial military pay and benefit increases leading to a compensation package that cannot be sustained under today’s budget circumstances — at least without making truly damaging (and dangerous) cuts elsewhere. Unlike “overhead,” significant savings are possible in the compensation category that could mitigate the sequester’s damage — between $50 billion and $100 billion over the next decade if riskier and more controversial options are included.

But, unlike a private corporation looking to downsize its overhead and personnel costs, the Defense Department cannot make pay or benefits changes — like modest raises to some health insurance fees for working-age retirees — without legislative approval. And, as with BRAC, the Congress has consistently rejected any proposal — including those unanimously endorsed by the uniformed leadership — that could be portrayed as cutting military compensation. So between one-third and one-half of the Pentagon’s budget is effectively off limits. That is why cutting the defense top-line by a tenth, in reality, means a much higher percentage reduction to the military’s size, readiness and technological capability.

Here we are talking about the proverbial “teeth” of defense spending: force structure (primarily measured in Army brigades, Air Force wings, Navy ships, Marine battalions), modernization investments (procurement, research and development) and readiness (training, maintenance and related operations).

One major source of savings would come from reducing the size of the active Army. SCMR concluded that the Army’s projected end strength could be reduced by about 50,000-70,000 at minimal strategic risk if there is no requirement for large, protracted stability operations along the lines of Iraq and Afghanistan.

Yet again, unlike in the private sector, the Defense Department doesn’t have the option of shedding large numbers of people quickly by handing out pink slips — nor would we countenance doing so. Involuntary separations to shrink the Army, the equivalent of civilian reductions in force, cost money at first and would do little to close the severe budget gap the department faces next year. And are we really going to do this to members of the military service that bore the brunt of the wars after 9/11?

So long as the DoD is seen by many legislators as a jobs program first and an instrument of national policy second, the cuts will be painful, and nonsensical.

By: Brant

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