Monday, March 2, 2009

President Obama’s First Defense Budget – The End of an Era

For anyone concerned about spiraling military spending in recent years, the Obama Administration’s new budget proposal gives cause for hope. The Pentagon is seeking $533.7 billion in funding for Fiscal Year 2010, not including funding for military operations in Iraq and Afghanistan or the nuclear weapons related activities of the Department of Energy. Adjusted for inflation, the $534 billion request is $9 billion, or 1.7 percent, more than Congress approved for the Defense Department for FY 2009.

The proposed increase, less than two percent when accounting for inflation, is extremely modest. This is particularly true when you consider the following:

• President Obama largely inherited this budget, and had little time or flexibility to put his imprint on it.

• Military spending has been growing rapidly over the past decade. Under the Bush administration, Pentagon spending (not including war funding) increased by 36 percent when adjusted for inflation. And while much of that increase occurred in the years immediately after the terrorist attacks of September 11, 2001, Pentagon spending has still been growing by more than five percent annually over the last several years.

• The Pentagon had planned to request much more money for next year. A “wish list” of additional spending released by the Defense Department late last year proposed raising the Pentagon budget by $55 billion over FY’09 levels after accounting for inflation – a 10.5 percent increase.

How will the Defense Department deal with a tightening budget? The details will have to wait until the complete budget is rolled out in mid-April, but a number of high-profile weapons programs are receiving close scrutiny from Pentagon budgeters and it seems likely that several will see their funding cut. Here’s why.

The Defense Department’s budget is divided into four major accounts. The first, the Personnel account, which covers pay and benefits for members of the military and their families, will continue to grow. The Administration is proposing a 2.9 percent pay raise for the military next year and is continuing to fund plans to increase the size of the active duty Army and Marine Corps.

Likewise the Operations and Maintenance accounts, which are the part of the Pentagon’s annual budget most closely associated with actual combat operations, are likely to increase. This is particularly true as the costs of repairing and operating aging equipment continue to rise – something that happens at a much higher rate during war time than during peace time.

This leaves the two “acquisition accounts” – Research, Development, Testing & Evaluation, and Procurement – whose primary role is to fund the development and purchase of major weapons systems. Efforts to achieve savings within the overall Pentagon budget will have an impact on these accounts. A number of big-ticket items, which represent large pots of money and are therefore considered most able to absorb the necessary reductions, could see their funding cut. These could include the Joint Strike Fighter, the Army’s Future Combat System, and ballistic missile defense. The Navy’s shipbuilding accounts will also face cuts. The DDG-1000 destroyer (or DDx) in particular will receive very close attention. And finally, the future of the Air Force’s F-22 fighter program is uncertain, despite strong Congressional support.

Granted, the Obama Administration’s first defense budget doesn’t cut military spending; it only slows its growth. And last week’s funding request is just the first round in the annual budget process. Congress has yet to have its say, and Capitol Hill is notoriously reluctant to cut weapons funding, even when it’s requested by the Defense Department. But a clear message has been sent to the military’s leadership, who have become used to getting their way on budget matters – the era of uncontrolled Pentagon spending growth is coming to an end.

Wednesday, September 10, 2008

Pentagon Decision to Delay Tanker a Huge Win for Boeing

Today the Defense Department announced that it was terminating the current competition to build the next generation of the Air Force’s airborne refueling tanker, leaving the final decision on who would control the $35 billion program to the next Administration.

In the press release announcing the decision, Defense Secretary Robert Gates stated that the atmosphere surrounding the competition between Boeing Company and Northrop Grumman and its partner European Aeronautical Defence & Space Company (EADS), “has become enormously complex and emotional” and that in his judgment “ in the time remaining to us, we can no longer complete a competition that would be viewed as fair and objective.”

This decision can only be viewed as helpful to Boeing, who as of late February were out of the tanker competition entirely. On February 29 the Pentagon announced it was awarding the contract to Northrop Grumman. Boeing received a reprieve in June, when the Government Accountability Office (GAO) upheld Boeing’s protest of the contract award. At the time, GAO stated that in selecting the winner, “the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman.”

While neither today’s announcement nor GAO’s finding actually reverses the Air Force’s initial decision to award the contract to Northrop Grumman, Boeing lives to fight another day. The delay, which could easily exceed a full year, will allow Boeing to significantly revamp it’s initial bid, including developing a proposal based on a larger aircraft – something Boeing officials believe is critical if they are to be competitive. In August Boeing announced (albeit likely with their fingers crossed behind their backs) that they would consider withdrawing from the competition entirely if they weren’t given additional time to complete revisions of their bid, which would include a design based on a larger air frame.

Northrop Grumman is unlikely to “stand pat” on its bid now given additional time. Widespread media accounts over the last few weeks indicate that it too will submit a new bid using a different airframe.

For background on the Air Force’s tanker competition, see my Fact Sheet "GAO Review of the Air Force Tanker Contract Award to Northrop-Grumman."

Tuesday, October 23, 2007

White House War Funding Request Highlights Skyrocketing Pentagon Spending

Yesterday the Bush Administration announced that it needs an additional $42 billion to fund the wars in Iraq and Afghanistan this year. Together with the more than $140 billion that the White House has already requested for this year’s military operations, and the $481 billion requested to fund the Pentagon’s regular annual budget, projected U.S. military spending for Fiscal Year 2008 (which began on October 1) will exceed $670 billion.

On National Public Radio’s “Morning Edition” today, I noted that at that level “we're spending more than the Cold War average at this point, and, in terms of the high point of the Cold War, yes, we're exceeding that." [Listen to NPR’s story “Bush Wants $46 Billion More for Iraq, Afghanistan.”]

By comparison, that $670 billion (which doesn’t include roughly $16 billion that the Pentagon spends on the nuclear weapons-related activities of the department of Energy), puts U.S. annual defense spending at its second highest point, historically, exceeded only by defense budgets during World War II.

In addition to being higher than at any other time since World War II, current annual defense spending:

• Is 14% above the height of the Korean War
• Is 33% above the height of the Vietnam War
• Is 25% above the height of the “Reagan Era” buildup
• Is 76% above the Cold War average

In fact, since the September 11, 2001 attacks, the annual defense budget – not including the costs of military operations in Iraq and Afghanistan, has gone up 34%. Including war costs, defense spending has gone up 86% since 2001.

Monday, October 1, 2007

Annual U.S. Security Spending: $1 Trillion???

Today marks the beginning of the new fiscal year, and “closes the books” on fiscal year 2007 – a year when the United States spent nearly $1 trillion on security-related matters.

Back in February, 2006, the Bush administration requested, and Congress later approved, roughly $463 billion for the military. But this figure didn’t include almost $175 billion appropriated for the Pentagon in FY 2007 to cover the costs of military operations in Iraq and Afghanistan.

And that’s just the tip of the iceberg. In addition to the almost $650 billion spent by the military on U.S. security, a new analysis I've done for the Center for Arms Control and Non-Proliferation details over $350 billion in other federal security spending.

Security spending outside the defense budget ranges from the small -- $421 million for “Non-Proliferation, Antiterrorism, Demining and Related Activities” in the Foreign Operations budget – to the very large – nearly $100 billion for interest on the national debt attributable to past Pentagon spending.

It includes some funding that is clearly related to U.S. national security such as veterans’ benefits ($73 billion) and homeland security ($43 billion), and some spending, like retirement benefits for former Pentagon civilian employees ($22.4 billion) that’s less clearly connected. It also includes intelligence funding, foreign military assistance, and the military space program.

And even THIS figure is incomplete. It doesn’t include, for instance, pay and benefits for non-DoD civilian federal employees working on security issues for the Department of Homeland Security, State Department, or Department of Justice or Treasury. Nor does it include the costs of past debt accrued paying veterans’ benefits, retirees’ pensions, etc. It doesn’t include the majority of the State Department’s operating budget, although one must assume that SOME of our government’s diplomatic initiatives are directed at promoting U.S. security.

Former Senator Everett Dirksen is often credited with saying, regarding federal spending, that "a billion here and a billion there, and soon you're talking real money." In a $2.8 trillion annual federal budget, $1 trillion in security spending IS real money.

Monday, September 17, 2007

Pentagon, DHS Can’t Pass Audits

So what else is new?

A recent Associated Press story reports that neither the Department of Defense nor the Department of Homeland Security can pass a financial audit. Sadly, this is old news, especially for the Pentagon.

It’s not too surprising that DHS’s books are a mess. First, it’s a new federal agency, created by Congress in 2002. Second, homeland security funding has increased dramatically since the September 11 attacks, growing from $16 billion in 2000, to a request of $61 billion for Fiscal Year 2008, which begins on Oct. 1. And though the department’s budget is only about half of this total -- $30 billion in FY’08 (the $35 billion figure in the AP article is inaccurate) – DHS has to coordinate the homeland security-related activities of some forty other federal agencies. Yet as the AP story points out, DHS did pass its first audit in 2003, albeit with a number of disclaimers. But they’ve failed every audit since.

The situation at the Defense Department is much worse. According to the Government Accountability Office (GAO), the federal government’s auditing branch, the Pentagon has never successfully completed an audit. And this is despite the fact that during the 1990’s Congress passed several pieces of legislation requiring the Defense Department to make the changes in its accounting practices necessary to do so.

Since 1999 GAO has regularly produced and updated its “High Risk Series,” which “identif[ies] federal programs and operations that, in some cases, are high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement." Of the 26 federal programs identified as “High Risk” in GAO’s most recent (Jan. 2007) review, seven are related to the Department of Defense. One was related to DHS (although several others are connected to U.S. homeland security, such as protecting critical technologies related to U.S. security and federal oversight of food safety.)

Ironically, very few federal agencies or programs are identified by name in the high risk series. In addition to DoD and DHS you will find the FAA, Department of Energy, NASA, the IRS, and Medicaid and Medicare. Not Social Security. Not Transportation. Not Agriculture. Not Education.

Why is this a problem? Because the Pentagon and DHS, which the GAO identify as “high risk,” are also the fastest growing areas of federal spending, outside of Social Security. Funding for homeland security has quadrupled since Sept. 11, while the annual defense budget has grown by almost forty percent -- more than $120 billion – not including the $180 billion plus we spend on the wars in Iraq and Afghanistan.

As I said when I first wrote on this issue back in March 2000, “That a federal agency as large and diverse as the Department of Defense cannot account for each and every transaction is no surprise. What is disturbing is the magnitude and the duration of the problem. The Federal Financial Management Act of 1994 and additional laws passed in 1996 require the Defense Department to submit audited financial statements each year. Neither the Defense Department nor any of the individual services have done so as of yet. And as the [Defense Department Inspector General’s] report notes, ‘DoD does not expect to have systems necessary to meet these new requirements before the year 2003.’"

Apparently, despite Congress’s concerns, the situation Pentagon is unchanged seven years later, and DHS is following this dubious example. At a time of ballooning deficits, where every dollar spent on our security needs to count, there’s no accounting for what our government is doing.

Monday, September 10, 2007

Budgeting for War

While attention focuses on General Petraeus’s long-awaited report on Iraq, Congress continues to deal with thorny defense spending issues.

With the attention of the media and most of the country focused on the report on Iraq being delivered to Congress this week by Gen. David Petraeus and Amb. Ryan Crocker, the Senate will also be taking up the Pentagon’s annual funding legislation. It does so with a number of competing forces at work – the Democrats’ desire to continue using Iraq to make political points; the unwillingness of members of Congress to appear not to be supporting U.S. troops; and inability of the opponents of the Iraq war on Capitol Hill to round up enough bi-partisan support to force the issue with the Bush Administration.

On Wednesday the Senate appropriations committee will consider the 2008 defense appropriations bill, which funds the Pentagon’s annual basic operations. The House has already passed its version of this legislation (H.R. 3222), which includes $460 billion for the Department of Defense, $3.5 billion below the Bush Administration’s request and nearly $40 billion above current levels. Like the House, the Senate is NOT planning to include any additional funding to support combat operations in Iraq and Afghanistan in this legislation.

Traditionally, wars are funded outside the normal annual appropriations process. This is because the federal budget process, which can take well over two years to enact funding for a single year, is simply too cumbersome to respond to unanticipated emergency spending needs, such as disaster assistance and wars. But last year Congress required the Administration to include the costs of military operations in Iraq and Afghanistan as part of their annual budget request, arguing that after five years in Afghanistan and three years in Iraq the Pentagon should have at least some idea of the costs of these operations. The request for war-related costs for fiscal year 2008, which begins on October 1, was estimated by the White House back in February at roughly $142 billion.

The decision by Senate Defense Appropriations subcommittee chairman Daniel Inouye (D-HI) to follow the example set by his House counterpart Rep. John Murtha (D-PA) and separate out Iraq funding from the DoD base budget spending bill means the appropriations bill should be able to move smoothly through Congress, possibly before the end of the fiscal year on September 30. Meanwhile, the Iraq debate will be focused on the additional supplemental funding bill, which Sen. Inouye and Rep. Murtha believe will begin moving in mid-October – AFTER current funding legislation expires.

But this scenario means that Congress will confront a similar situation to the one in May – with the military complaining it is running short of war-fighting funds, and the White House accusing the Democratic leadership of playing politics with American lives. Congress will certainly include in the annual defense bill a limited amount of transfer authority for the Defense Department, which permits the Pentagon, with Congressional approval, to transfer funds from its annual base budget to pay for actual combat operations. The House bill includes $3.2 billion in General Transfer Authority, and the Senate version will undoubtedly include similar authority, although the final amount that will actually be available to the Pentagon remains to be seen.

It is unlikely, however, that whatever amount of transfer authority approved by Congress will be sufficient. A July report by the independent Congressional Research Service put the current monthly costs for the wars in Iraq and Afghanistan, known as the “burn rate,” at $12 billion – roughly $10 billion per month for Iraq and $2 billion for Afghanistan. At this rate, the military will soon find themselves short of money. This is especially true given recent press accounts that indicate that the White House will be seeking even more money for war-related costs – as much as $50 billion above the $142 billion already identified.

What is more likely is that Congress will enact one or more short-term funding packages for Iraq. This option could be very attractive to the Democratic leadership. First, it will help inoculate Congress from criticism for abandoning American troops. Second, it will continue to keep Iraq on the front burner of national politics well into the 2008 campaign season. And third, any spending approved by congress will certainly be linked to continued reporting on the military and political situation in Iraq, which the war’s opponents hope will help increase Congressional opposition to the war.

The “wild card” in the deck? President Bush has already indicated he will veto a number of the annual appropriations bills before Congress which fund other federal agencies because they exceed the budget limits laid out in the White House’s 2008 budget request. Democrats may gamble that tying one or more of these domestic spending packages to the annual Defense bill may force the President to withhold his veto – a gamble that could certainly backfire.

Monday, July 16, 2007

The MRAP: A Case Study in Military Planning (and Congressional Response)

Improvised Explosive Devises (IEDs) are the #1 killers of U.S. military personnel in Iraq. Suddenly, acquiring vast numbers of Mine Resistant Ambush Protected vehicles (MRAPs) -- is at the top of the military’s to-do list.

They should have seen it coming. That they didn’t, or worse, that they did and ignored the signs, is symptomatic of the Cold War mentality that still preoccupies our military and political leadership.

Two weeks ago the DoD approved the Army’s request to acquire 17,700 MRAPs. MRAPs are popular with U.S. forces because their V-shaped undersides, or “hulls,” help deflect the energy of roadside bombs or land mines away from the crew inside the vehicle, and provide much greater protection than even the armored version of the military’s ubiquitous High Mobility Multipurpose Wheeled Vehicles, or “Humvees.”

The Pentagon’s decision to dramatically ramp up procurement of MRAPs comes two months after Defense Secretary Robert Gates announced that the military would make replacing its fleet of Humvees a top priority. At the time, Sec. Gates told reporters that up-armored Humvees were “the best we had” but that now “…we have something better, and we're going to get that to the field as best we can.” [see the
Defense Department press conference, May 9, 2007.

Yes, MRAP has become the top priority of the military, with the Army, Marines Corps and other branches of the service seeking a total of 23,000 vehicles, and of Congress, which has already allocated $3 billion to the program earlier this year and is in the process of adding $4.6 billion more. Yet according to a story in today’s USA TODAY, reports by Pentagon analysts about the need for MRAPs reached the Joint Chiefs of Staff as early as December 2003, three and one-half years before Sec. Gates’s May announcement.

The specter of urban combat that planners feared prior to the invasion of Iraq did not materialize the way the U.S. military expected. Members of the Iraqi military shed their uniforms and melted into the civilian population rather than hunkering down in their cities. But such combat materialized nonetheless, as part of a complex insurgency that strikes at U.S. combat and support forces not just in urban areas, but also at their bases and along the known routes they must travel.

Neither the Bush Administration nor the military were adequately prepared for this eventuality. Politically, this myopia manifested itself in Vice President Dick Cheney’s now infamous comment on “Meet the Press” in March, 2003, which predicted that U.S. forces would be “greeted as liberators.” The military, which critics say arrived with an undersized force, was unable to safeguard Iraq’s infrastructure, including the vast amounts of military material at Saddam Hussein’s former bases.

The U.S. military’s initial response to the growing waves of insurgent attacks was to call for dramatically increasing supplies of personal body armor and the “up-armored” version of Humvees (although Congress can legitimately claim at least partial credit for responding to the perceived need by approving billions of dollars for these programs over the last several years.)

Up-armoring Humvees could never be more than a stop-gap measure – a view reflected by then-Marine Corps Major Roy McGriff III. In a 2003 paper, cited in the USA TODAY article, Maj. McGriff wrote “…our underprotected vehicles result in casualties that are politically untenable and militarily unnecessary. Failure to build a MRAP vehicle fleet…will substantially increase” risks for the military. The Humvee was a replacement for the venerable Jeep, albeit with vastly greater capability, but it was never intended to be the mainstay of an occupation force in a hostile environment. It simply was not designed for that type of work load.

That the “round peg” Humvee was forced into the “square-holed” role it finds itself in Iraq is symptomatic of the old military axiom of preparing to fight the last war. The predominance of Army and Marine land forces are heavy (armored) vehicles like the M1 tank and Bradley Fighting Vehicle, or thin-skinned vehicles like the Humvee. Prior to the 2003 invasion of Iraq there were virtually no examples of hybrids in the U.S. arsenal. Even the up-armored version of the Humvee was in short supply.

This situation, intentionally or not, demonstrates the limitations of one of the essential components of what has become known as the "Powell Doctrine;" that military force, when used, should be overwhelming and disproportionate to the force used by the enemy. It helps explain why the U.S. military has dominated the traditional battlefield in Iraq, both in 1991 and the spring of 2003, and yet is inadequately prepared for the current insurgency. To put it another way, the U.S. military has plenty of hammers in its tool box and knows how to use them, but it’s short on crowbars.

Finally, the response of the Pentagon and Congress to the need for the MRAP is typical; a sluggish, inertia-riddled effort to address an under-appreciated problem, transiting at near light-speed to a hyper-reaction once overdue attention elevates the situation to “criticality.” Neither approach is healthy, yet the cycle repeats itself within government again and again.