Cutting Defense: Is Bob Gates Behind the Curve?

By now much virtual ink has been devoted to the “cuts” that Secretary of Defense Robert Gates proposes in the defense budget and defense programs. These have been treated as a clear statement of intention that DOD will contribute to the overall effort at restraining federal spending, the deficit, and the growing national debt.

In reality, the Gates strategy does not make any contribution to restraining federal spending or reducing the deficit. And in trying to avoid cutting his budget, he is putting the Pentagon behind the curve in the growing effort to discipline the federal budget and on a collision course with other parts of federal spending and revenues.

The Gates “cuts” are nothing of the sort. He has, to be sure, pushed hard inside the Pentagon to focus on priorities, eliminate hardware programs like the F-22 and the Army’s vehicle program (the “Future Combat System)”. In August, he announced plans to close the Joint Forces Command in Virginia, trim other headquarters, reduce the number of military flag officers, reduce spending on contractors, and find other efficiencies in DOD.

These are all valuable contributions to greater efficiency in the Pentagon, but they do nothing to discipline the defense budget. As Secretary Gates made clear to a small group of us who met with him on his proposals in early August, his primary goal in announcing these reforms is to protect real growth of one percent above inflation in defense resources, not prepare the services or the Department for a decline in resources. He was equally transparent in his press briefing: “Let me clear, the task before us is not to reduce the department’s top line budget. Rather, it is to significantly reduce its excess overhead costs and apply the savings to force structure and modernization.”

Nobody can argue with the desire of a department head to find efficiencies and tradeoffs in his or her budget and to identify priorities. Certainly, with a budget that is nearly $700 billion (up from $318.65 billion in FY 2001 or 119%), larger than the defense budgets of almost every other country in the world combined, there is ample room to find a good deal of waste and search for efficiencies. The Defense Business Board, at a July 2010 press briefing, observed that 40% of our active duty military forces have never been deployed, more than 40% of the defense budget is spent on overhead, and 340,000 military personnel are actually performing commercial activities, while simultaneously DOD is spending nearly $200 billion contracting for services in the private sector.

It is doubtful, however, that jaw-boning Pentagon bureaucracies to produce savings will produce more that internal bureaucratic resistance and some box-shuffling, although Gates’ promise that the services can keep the savings to apply to forces and investment may help. A budget cut imposed from the outside has generally been more effective in generating efficiencies at DOD, as the experience of the 1990s shows.

But Secretary Gates has yet to confront the real problem of cutting defense budgets. And cut, they are likely to be. The Secretary seems to hope that defense will be spared, while mandatory spending (which he fingers as the principal spending culprit), domestic discretionary spending (including international affairs spending, whose budgets he has previously supported), and maybe even revenue increases bear the burden of deficit reduction.

His “theory of deficit reduction” is flawed, for both economic and political reasons. Economically, there is no way deficits can shrink or the debt be slowed unless all spigots – spending and revenues – are on the table. Trying to stabilize our debt on the back of revenue increases or spending, without including defense, is a Himalayan challenge. Mandatory and discretionary spending combined, would have to be cut more than 10 trillion between now and 2022, just to keep debt at 60% of GDP. If we only did it through taxes, rates for the highest tax brackets would have to go to levels unheard of since World War II – more than 85%.

Defense spending is now one of the “big four” spending categories. Defense, social security, means-tested entitlements, and non-defense discretionary spending each consume between 15 and 18% of federal spending. Revenues are inadequate today to cover all of them. Ensuring that none of them are devastated means having to include all of them in the mix.

The secretary is behind the curve politically, as well. As the (successful) experience of deficit reduction between 1985 and 1998 showed, a political agreement to tackle the deficit and the debt is only possible if all spigots are on the table. Take one off – taxes and defense for the Republicans, or domestic discretionary and mandatories for the Democrats – and there is no way to make a deal.

The tidal wave is coming. Republicans and Democrats on the President’s National Commission on Fiscal Responsibility and Reform (Simpson/Bowles) have made it clear that everything, including defense is on the table. The Bipartisan Policy Center’s Debt Reduction Task Force, co-chaired by Alice Rivlin and former Sen. Pete Domenici, is doing the same. Senators and Representatives ranging from Tom Coburn (R-OK), Ron Paul (R-TX), Walter Jones (R-NC), and Barney Frank (D-MA), and John Duncan (R-TX) have put defense on the deficit reduction/debt control table.

Were the Republicans to win control of the House in November, there is no guarantee at all that they would grant Secretary Gates’ wish to spare defense. The House and Senate Defense Appropriations subcommittees this year, with Republican support, have already lowered the FY 2011 defense budget request by $6-8 billion.

It is time for the Pentagon to get ahead of the curve. And they cannot do it the old-fashioned way – efficiencies, waste and abuse, trimming programs around the edges, spreading cuts peanut-butter style across all programs. It is time for a more fundamental look at America’s overseas engagement and role, for setting priorities among military missions that support our role, for parsing acceptable risk in setting those priorities, and for reducing the force, investments and budgets at DOD to fit the new design. Gates is a long way from there, but the tidal wave of budget cuts is coming and he can no longer afford to duck the need for fundamental choices.

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