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The Defense Death Spiral

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The Pentagon's "green book" for 2012

Why is the Pentagon Underfunded?

The courtiers in the Hall of Mirrors that is Versailles on the Potomac are lining up to give Leon Panetta advice on how to manage the Pentagon in the coming era of budget “constraints.”  Most of this wisdom takes the form of platitudes of how important it is to have a strategy and to make the hard choices needed to budget for that strategy. Duh!

My current favorite is Dr. Daniel Goure’s recent blog on the web page of the Lexington Institute, a pro-defense “think tank.”  Goure starts his advisory by saying:

Let’s be honest. The current U.S. defense program is underfunded, even at over $500 billion a year in the base budget and another $100 billion plus in contingency expenses.

Goure then goes on to discuss the need for vision, particularly concerning controlling personnel and health costs and avoiding duplication by transferring work done in government facilities, and by the military, to contractors.  In other words, when times are tough, return to the old game of protecting industry at the expense of the soldier and the taxpayer.

Thanks for your honesty, Daniel, but more of the same won’t cut it this time.

Goure is correct about one thing, however.  The defense program is underfunded.  But before dispensing advice on how to shovel money to his friends in industry, Goure ought to explain how and why the highest budget since the end of World War II could possibly end up underfunding the current program.  After all, the United States is engaged in a tough but relatively small war on terror, with far smaller forces and minuscule operational tempos compared to those deployed to either Korea and Vietnam.

Moreover, the United States no longer needs to spend a large part of the defense budget to maintain a large forward deployed conventional and nuclear forces to counter the threat posed by the Soviet Union.  With a few minor exceptions, the United States is also fielding the smallest combat-coded force structures since 1950.  Nevertheless, despite a defense budget that has almost doubled in inflation adjusted dollars since 1998, Mr. Panetta is inheriting a defense program approaching the programmatic equivalent of a meltdown.

Why?

If Mr. Panetta wants to nurse the Pentagon into to health he must come to grips with the real causes of the Defense Death Spiral — a problem I have been studying and writing about since the late 1970s.

The central management problem plaguing the Department of Defense — i.e., the meltdown of the entire defense program — can be characterized in a general sense as being produced by the mutually reinforcing effects of

1. A modernization program that cannot buy enough new weapons to modernize the force structures of the Army, Navy/MC, and Air Force, because the unit costs of new weapons always grow faster than budgets, even when budgets increase sharply, as they did in the 1980s and after 1998;

2. Continual budgetary pressure to reduce readiness and shrink force size to contain the growth of operating costs (from operating aging, more complex hardware, but also from the growing personnel costs of the all volunteer force) to free up funds to finance the bankrupt modernization program; and

3. Corrupt and unauditable accounting, financial management, and program planning systems that lubricate the degenerative process by making impossible to assemble the information needed to sort out and correct the first two problems.

As long as these three relations remain in place, the defense budget will always be underfunded.  In fact, as I explained to Senator John Tower during testimony to Congress in 1983, “spending more money the same way actually makes matters worse.”  A near doubling of the defense budget since 1998 has shown again that statement to be correct.

This is the fundamental management dilemma facing Mr. Panetta.  Resolving it won’t be easy, because this trifecta of structural problems is only the outward manifestation of a bureaucratic engine powered by deeper behavioral pathologies that insensibly built up over during the 40 years of Cold War and are now seamlessly embedded in the culture of the Pentagon, the defense industry, and their wholly owned subsidiaries in Congress  — these habitual modes of conduct are known as the defense power games (front loading and political engineering).

The defense power games, together with their trifecta of external manifestations, effectively turn the decision making process and program planning processes inward and disconnect the entire decision/policy making effort from external reality, including the threats it purports to cope with, the strategy alleged to meet those threats, and the shaping of force structures needed to execute the strategies.  The resulting self-referential decision making engine — referred to by some wags in the Pentagon as a self-licking ice cream cone — creates the inwardly-focused death spiral portrayed by the following figure.

Simply repeating the same old empty platitudes about having a strategy and fitting forces and budgets to that strategy leads nowhere, because the Pentagon decision process that consumes millions of man hours each year to create this mess year after year — the Planning, Programming, and Budgeting System — already is designed precisely to link threats to strategy to programs and then to budgets!  The real problem is why it fails to do so year after year — which brings us back to a diagnosis of the pathologies.

The repetitive pattern of these pathologies and their effects have been well understood and have been well documented since the early 1980s.  Moreover, the programmatic meltdown the Defense Department is experiencing today was foreseen by the late 1980s and early 1990s.  Nevertheless, with a few lonely exceptions, notably Senator Charles Grassley (R-Iowa), no one in leadership positions in the Pentagon, Congress, or the White House has taken any interest in correcting the Pentagon’s self destructive patterns of behavior.

For this reason, at the end of the 1980s, I decided the only thing I could do was to begin documenting these problems for posterity.  My intent was to provide a track record showing how these problems were indeed foreseeable and how they could have been avoided, if the leaders in the Pentagon chose to make that effort. They did not — and today, the American public is reaping the Pentagon’s bitter harvest of shame — an underfunded defense program in chaos even though is being funded by largest budgets since the end of World War II (after removing the effects of inflation).  Those who blame this mess on the war on terror and out of control personnel and medical costs are selling snake oil to grease a continuation of this destructive pattern of business as usual.

This link, for example, will take you some of my more important unclassified reports and papers describing these problems:  They explain why and how the Defense program has been in a continuous state of unraveling.  They predicted what would happen if these behavioral pathologies were left on unaddressed.  My June 2002 statement to Congress outlined a comprehensive plan for fixing these general decision-making problems.  I don’t know if that plan will work, but at least it was designed to address the real causes of the underfunding problem.

TACAIR Case Study

No mission area reveals the Pentagon’s behavioral pathologies more clearly than tactical fighter aviation or TACAIR.  As the Cold War was ending in the early 1990s, the Air Force, Navy, and Marine Corps wanted to embark on a new generation of high-cost, high-complexity fighter/attack aircraft (these became the F-22, F/A-18E/F, and the F-35 Joint Strike Fighter).

To summarize a somewhat complex story:   In 1991, just as the Cold War was ending, the AF front loaded the F-22 by pushing it prematurely though decision-making milestone II into concurrent engineering and manufacturing development (EMD, aka Milestone II).  This decision allowed the contractor (Lockheed Martin) to begin the construction of a social safety net by spreading dollars, jobs, and profits to many congressional districts, a power game known as political engineering. Front loading and political engineering are explained in Defense Power Games.  Less than a year later, the Navy pulled off the same stunt by prematurely rushing the F-18E/F into EMD for the same reason.  Both airplanes were high cost legacies of Cold War thinking.  The objective of the decision making game in each case was to turn on the money spigot and lock it open; in effect, the goal was to let the Cold-War cows out the Cold-War barn before its door closed.

It is important understand that the senior military and civilian decision makers in the Pentagon responsible for rushing these two decisions knowingly created a long term force structure crisis.  They knew beforehand that the Pentagon’s contractors could not possibly produce enough new F-22s and F-18E/Fs quickly enough (even in the unlikely event where there were no delays due to cost overruns and technical problems) to replace the 3,000-plus fighter/attack aircraft in the inventories on a timely basis.  Consequently, decision makers knew before the fact that the average age of the older airplanes remaining in that inventory would rapidly grow to unprecedented levels and that the increased aging would lead to unpredictable increases in future operating budgets.  They also knew before the fact that only way to slow down the increased rate of aging would be to approve a drastic reduction in the size of those inventories by retiring the oldest airplanes without replacement.

The senior decision makers responsible for these decisions also knew beforehand that the force-structure crisis created by the F-22/F-18E/F decisions would became the source of enormous extortionary pressure to approve the development two years later of yet a third high cost fighter/attack program — what was to become the problem-plagued F-35 Joint Strike Fighter — yet another Cold-War-inspired concoction of highly complex and costly technologies that is now the most expensive single weapons program in history.

Put bluntly, the disastrous ramifications of these reckless decisions were known before they were approved.  If you don’t believe me, you can download and read my reports.  They describe how this was being done while it was being done — they can be found here in the subsection entitled “Specific Reports on Tactical Fighters.”  Together, with my March 1996 essay, Defense Budget Time Bomb, the case of tactical aviation provides the clearest evidence of how the Pentagon bureaucracy, with malice of forethought, deliberately created the modernization crisis that metastasized after 2000 and is now staring Mr. Panetta in face.  But if you think I am cherry picking my data by focusing on TACAIR, a more general, albeit more complex picture of the same general pattern of decision making can be found in my unclassified 1998 briefing, Defense Death Spiral.

That, in a nutshell, is the dirty story of why the defense budget is underfunded, but you won’t hear this story from courtiers trying to ingratiate themselves with the new Secretary of Defense.  Given that political pressure is mounting to cut back non-defense programs including Social Security, Medicare, education, infrastructure, etc., to reduce deficit, I submit the time has come to rein in the Pentagon’s out of control budget, to discipline its reckless behavior, and to force it to clean up its act.

Job 1 is to provide more reliable programmatic information to the Secretary of Defense, so he and his staff can figure out how to pull the Pentagon out of its death spiral.  The only incentive to force this is to put the entire core budget at “risk,” say by placing the core (non-war related)  budget on a downward sloping glide path of 2 to 4% per year (in current as opposed to inflation-adjusted dollars) until the Pentagon can produce auditable books. That would simply bring it into compliance with Chief Financial Officers Act of 1990 and the Accountability and Appropriations Clauses of the Constitution. Given that every member of the Defense Department has taken a sacred oath to protect the Constitution, making the Pentagon conform to the requirements of the Constitution is hardly an onerous requirement.

Only with cleaner books can serious policy-making and strategic planning begin.  Readers interested in a short primer written by defense insiders, with over 400 years of collective experience, on how to think about defense and what kinds of changes can and should be made once we have reliable information are referred to the The Pentagon Labyrinth: 10 Short Essays to Help You Through It.

Who knows, if we can force the Pentagon to think before it spends, the United States might be able to field a military that meets the threats it faces at a cost the nation can afford.

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