November 19, 2010
New Letter to Deficit Commission on DOD Budget
Linked and reproduced below is a sample of letters mailed earlier this week to each member of the President Obama's bipartisan National Commission on Fiscal Responsibility and Reform (the Deficit Commission).
The letter addresses the defense budget. It is significantly different from all but one of the major defense budget proposals and letters before the Commission. It does not specify a cut list of weapons, benefits and policies. Instead, it advocates a fundamental way to make sense out of all the cuts in the defense budget that are now generally recognized as inevitable.
The letter argues that there are two essential, interrelated issues: first, while two of the other major proposals before the Commission and now public fuzz up the actual amount of reductions they recommend for the Gates-Obama defense budget over the next decade, they all round to $1 trillion. Second, while reform is a byword of everyone regarding the Pentagon these days, too many overlook the essential foundation for any defense reform: real understanding of how defense dollars are spent as a basis for decision-making in the future. Indeed, if you do not know how defense dollars are spent (and today that is impossible), how can you cut the defense budget intelligently?
While two of the more prominent proposals before the Commission, the Bowles-Simpson co-chairs' proposal and the Sustainable Defense Task Force Report, constructively address the financial management problem in DOD, they do not make comprehensive audits of programs, policies and contractors the essential precondition to moving ahead in the defense budget and to rational future budget reductions. This new letter urges the Commission to make the audit issue a top priority and precursor for DOD's budget future. It follows on the central theme of Sen. Tom Coburn's, R-Okla., May 18 letter (available on request) to all commission members to freeze the DOD budget at the 2010 level (without inflation) unless and until it can actually pass comprehensive audits of major acquisition programs, components and contractors. (This new letter was not coordinated with Senator Coburn or his office.)
The new letter is signed by eight individuals who represent over 300 years of combined experience with the DOD budget, weapons and/or military operations.
If you have any comments or questions, please contact any of the individuals who signed the letter; there are hot links and phone numbers for each of them in the text of the signature block.
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November 15, 2010
The Honorable Erskine Bowles
National Commission on Fiscal Responsibility and Reform
1650 Pennsylvania Avenue, N.W.
Washington, DC 20504
Dear Mr. Bowles:
We are writing to you and other members of the President's National Commission on Fiscal Responsibility and Reform as individuals who have worked in national security affairs for decades for the Department of Defense, in the Armed Forces and for Democrats and Republicans in Congress. Our concern is the defense budget.
Similar to what your "Co-Chairs' Proposal" said last week regarding Social Security and other issues, we do not believe that defense spending should be reduced to a bargaining chip in budget negotiations at the Deficit Commission. On the other hand, we do believe that the defense budget is dangerously bloated, giving rise to serious decay in our armed forces.
Weaker forces at higher costs (discussed below) are the result of many years of exploitation of defense spending for political purposes, dereliction of oversight duties, and gross mismanagement by the Pentagon, the White House and the Congress. There has been a fundamental absence of accountability, both that required by the Constitution and that which accompanies sound management.
With or without the work of the Deficit Commission, the central problems in our defenses need to be addressed as a matter of high priority. The Commission provides a historic opportunity to build the consensus to do so now. We urge you to consider the proposition that the decay of our forces cannot be reversed under growing defense budgets. Instead, it can, and should, be achieved at levels of defense spending even somewhat lower than those the Co-Chairs' Proposal recommends.
To understand what is needed in the future, consider the mistakes of the past.
For example, over the last decade, the Navy budget received $293 billion more than the baseline of spending in 2000 anticipated (adjusted for inflation). Seen another way, the 2011 Navy's "base" budget, which does not include spending for the wars in Iraq and Afghanistan, is 44 percent higher than it was in 2000. Yet the size of the Navy's combat fleet went down in this period, from 318 ships and submarines to 287—a decline of 10 percent. This is not a smaller, newer fleet; it is a smaller, older fleet—about four years older, on average, according to the Congressional Budget Office (CBO). It is also less ready to fight: for the past year the press has repeatedly reported on severe maintenance problems throughout the fleet, and Navy combat pilot training in the air has remained at historic lows.
The situation in the Air Force is worse. It received $320 billion more than the base budget levels anticipated in 2000 and increased by 2011 by 43 percent. During the same 2000-2011 period, the number of active and reserve fighter and bomber squadrons went from 146 to 72, a decline of 51 percent. According to CBO, our combat air fleet is now about nine years older than in 2000—an historic high average age of about 23 years. Fighter pilot in-air training hours today are one-half to one-third of what they were in the 1970s, an era not noted for high readiness.
The Army received a $297 billion budget plus-up, a 53 percent increase. In this case, the combat forces did increase; the number of brigade combat teams grew from 44 to 46, an increase of 5 percent. A 53 percent budget increase bought a 5 percent increase in combat forces. But CBO tells us that major Army equipment inventories are mostly older, and in 2006, the House Armed Services Committee held hearings and leaked a memo documenting historic lows in the readiness of active Army units. The analysis has not been publicly updated, but we should worry that it has gotten worse.
There is no mystery why the increased spending has led to shrinking, aging hardware inventories. New weapons systems cost three to ten times more to buy and operate than the weapons they are replacing. Even if their budgets could grow steadily at five percent per year (over and above inflation), the cost explosion in new weapons dooms the military services to being unable to buy as many weapons as they had—hence the shrinking hardware inventories. Because they can buy so few new planes, tanks or ships, they extend the life of the old ones—hence the aging.
At $707 billion, the defense budget is today higher in than it has ever been since the end of World War II, even when the effects of 65 years of inflation are removed. This spending level is unrelated to the military threat. During the Cold War, from 1948 to 1990, when we faced the sizeable forces of the Soviet Union and the Warsaw Pact, annual Pentagon spending averaged $440 billion in inflation-adjusted dollars, (and that includes the effects of the Korean and Vietnam wars). Today, big spending advocates point to China, with a defense budget variously estimated at from $80 to $180 billion per year, as the future threat we must prepare against. But, if we add the highest available defense budget estimates for China, Russia, Iran, North Korea, and Cuba and then double that sum, the Pentagon still spends more. As to the threat of terrorism, we almost certainly spend more in one day than al Qaeda, the Taliban and all their affiliates spend in an entire year.
Despite Secretary of Defense Robert Gates' efforts to cancel or redo several weapon programs that were over cost and under-performing, the number of major defense acquisition programs has changed from 91 programs costing $1.6 trillion to 87 programs costing $1.6 trillion. As you know, Secretary Gates has also imposed a plan on the DOD bureaucracy to transfer internally $102 billion dollars over 5 years, but there is no net savings to help the deficit.
Instead, Secretary Gates wants the DOD budget to grow one percent per year plus inflation for the next 10 years. That would increase the base DOD budget from $554 in 2010 to $735 billion in 2020—a 33 percent increase, not including any spending for the wars against terrorism. While the Co-Chairs' Proposal seeks a number of terminations, reductions, and efficiencies beyond the Gates' plan (many of them welcome and overdue, but some that we believe require major modification), both the Co-Chairs Proposal and the Gates' plan project into the future a defense program that is essentially the same as that we have today, simply at different spending levels. Under either plan, the size and modernity of our forces will continue to shrink and age, even if all remaining programs are implemented without any cost increases or schedule delays.
We believe there is a path that meets the goals of deficit reduction and strengthens real national defense. That path needs to start with the acknowledgement of a need for fundamental reform.
Right now, the Pentagon does not know how or where it spends its money. As the Government Accountability Office and DOD's own Office of the Inspector General have reported for decades, the Pentagon cannot track the money it spends. Routinely, DOD does not know if it has paid contactors once, twice, or not at all. We recently learned it does not even know how many contractors it has, how many they employ, and what they are doing. Google the terms "audit" and "Pentagon" and read the horror stories.
The Chief Financial Officers (CFO) Act of 1990 sought to solve this problem by requiring the Pentagon, and all other federal agencies, to pass annual audits of the links between their expenditures and legally enacted appropriations authorizing those expenditures. This requirement was intended as a first step to give meaning to the Appropriations and Accountability Clauses in the Constitution, namely—
"No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time."
In sharp contrast to almost every other federal agency, the Pentagon has failed to comply with the CFO Act, let alone with the Constitution's much more sweeping and absolute requirement for accountability. We are sure you will agree this puts at risk not just fiscal responsibility—the task of your Commission—but also fundamental checks and balances in our system of government. As federal officials and members of the Armed Forces, we all took an oath, freely and without reservation, to uphold, protect and defend that principle, among others. The Pentagon, in effect, claims an exemption.
Since the CFO Act was enacted in 1990 to start the journey toward the Constitution's requirement for an uncompromised accounting of Pentagon spending, DOD's managers have made promise after promise to perform. A very modest level of "audit readiness" was promised for 1997; that slid to 2006, then 2007, 2016, and finally 2017—27 years after the passage of the CFO Act. The sitting DOD CFO recently said the Pentagon will need yet another extension: that is, more than twenty seven years. With every promise broken, it is clear that if you ask what a DOD program or policy has cost, is costing, and might cost in the future, the current DOD system will provide you any dollar amount it wants you to hear. Ask for an audit of those numbers, or just an independent review, and listen to the excuses.
For further explanation of the practical effect, we urge you to look at an important new report from Senator Charles Grassley, R-IO ("Oversight Review of Audit Reporting by the Department of Defense, Office of Inspector General"). It reveals just how deep the problems are: not only are the Pentagon's books a gigantic mess making it impossible to know how money is actually spent, but the office charged with fixing the mess is broken.
To expose and understand the massive misuse of the windfall in the base budget, the huge excesses in new weapon costs, and the extent of incompetence and even corruption in DOD contracting, the national security decision-making community in the Pentagon, Congress, and the White House must confront the painful truth of accurate, comprehensive, audited cost and spending figures. However, those data do not exist because no one has insisted on them, notwithstanding the legal requirements of the Accountability Clause of the Constitution and the Chief Financial Officers Act. Worse, while promising watered-down versions of such data in the vague future, the business-as-usual Pentagon protests that its spending must keep on growing in perpetuity - as our forces shrink and age. It is precisely this behavior that the Constitution and the CFO Act sought to preclude.
Without a jolt, without radically altered incentives, the bureaucratic system that thrives on corrupted, unaudited accounts cannot and will not change. A colleague of yours on the Deficit Commission, Senator Tom Coburn, R-OK, has written to you recommending the urgently required accounting changes, together with a new and strong incentive: the DOD budget should be frozen at current (2010) spending levels until it can pass comprehensive audits of all of its programs, agencies, and contractors.
Freezing the DOD budget at the 2010 level would mean spending $5.5 trillion for defense in the next ten years. That is $1 trillion less than the $6.5 trillion that Secretary Gates' plan would spend. It is not radically different from the slightly more modest $865 billion reduction we understand the Bowles-Simpson Co-Chairs' Proposal would extract. Either spending limit could impose a discipline on Pentagon spending that has been missing for a long time. And freezing spending until the Pentagon passes audits up to the standards we require of taxpayers and businesses - as specified in the Coburn plan - provides a truly powerful incentive for the Pentagon to conform to the letter of the Chief Financial Officer Act and to the original intent of the Accountability Clause of the Constitution.
These audits are, in fact, the minimal prerequisites for beginning the reforms that actually strengthen defense, but their enforcement would lay the foundation for the decision-making discipline we have long needed. This goes beyond the commendable goal of saving money by identifying waste, fraud and abuse. Trustworthy, audited cost figures allow shaping new, more effective procurement programs - and ensure that planned procurements and force levels fit actual budgets.
Advocates of continuing DOD budget growth are loath to point out that holding the Pentagon's base budget at the 2010 level is actually a $900 billion increase over the pre-war year 2000 spending level (adjusted for inflation). Nor are they likely to tell you that the frozen budget will remain multiples of what China, Russia, North Korea, and Iran - combined - spend. Nor will they tell you it will match the combined spending of almost every other nation on earth.
The historical record shows that the magnitude of reduction suggested here has precedent. In 1985, during Ronald Reagan's presidency, and in 1991 in George W. Bush's presidency, Department of Defense budget authority took sharp downward vectors. Today, the United Kingdom has set out a path of an eight percent reduction in defense spending to meet essential fiscal goals. Sadly, however, the British government has not adopted a meaningful reform agenda, so it is simply buying less of the same weapon systems and force units that were planned before. Given the clearer picture of Pentagon spending resulting from Senator Coburn's crucial audit/freeze proposal, our collective experience makes us confident that Pentagon spending can be reduced in better informed, more effective ways - ways that can actually strengthen national security while ending the shrinking and the aging of our forces at ever higher cost.
All this is inextricably interwoven with our present wars. If - after our withdrawal from Iraq, Afghanistan and similar adventures, an increasingly inevitable consequence of impending bankruptcy - we simply default to the Pentagon's military and civilian bureaucracies, allowing them to continue business as usual by just shrinking presently planned forces, it would be an enormous tragedy for the American people and for all those in uniform. Your support of constructive, thoughtful use of reduced budget levels and audited spending figures can make possible truly fundamental reform, reform that reorients our national military strategy to more prudently balance national ends against national means.
We urge you to consider these ideas. If you would like to discuss any of the issues or data addressed above, we would be happy to meet with you.
former Director, Operational Test and Evaluation
Office of Secretary of Defense
defense career started: 1955
Pierre M. Sprey
a key designer of the F-16 & A-10
defense career started: 1956
Lt. Col. USMC, ret.
defense career started: 1966
Franklin C. Spinney
former Analyst, Office of Secretary of Defense
(Program Analysis and Evaluation)
defense career started: 1967
Col. USMC, ret.
defense career started: 1969
Winslow T. Wheeler
Director, Straus Military Reform Project
defense career started: 1971
Douglas Macgregor, Ph.D.
Col. US Army, ret.
defense career started: 1971
Maj. US Army, ret.
defense career started 1981
Director, Straus Military Reform Project, CDI at POGO, POGO
Mr. Wheeler's areas of expertise include Congress, the Defense Budget, National Security, Pentagon Reform and Weapons Systems
The goal of the Straus Military Reform Project is to secure far more effective military forces and much more ethical and professional military and civilian leadership at significantly lower budget levels.
We would like to thank Philip A. Straus Jr. and family for their generous support.
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