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Is Leon Panetta the Right Man to be Secretary of Defense?

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Pablo Martinez Monsivais / Pool / Getty Images

U.S. Secretary of Defense Leon Panetta speaks to military personnel during his visit to Camp Lemonnier, Dec. 13, 2011 in Djibouti.

For several months, Secretary of Defense Leon Panetta has been using extreme rhetoric to characterize cuts in the Pentagon budget beyond the $450 billion reduction over ten years he has already accepted.  With the failure of the so-called Super Committee in Congress to come up with a plan to address the federal deficit, Panetta has warned—over and over again—that an automatically triggered “Doomsday Mechanism” to impose another $450 billion in reductions over nine years would be a “catastrophe” that could be so crippling as to “hollow out the force,” and “enemies would be emboldened to attack the U.S.”

As a matter of Pentagon budget history, Panetta’s rhetoric and logic are—to put it politely—puzzling. Here’s why…

Figure 1 below shows DOD spending since World War II and projects it out to 2021.  It uses the Congressional Budget Office’s (CBO) estimates for the size of the Pentagon budget for the years 2013 to 2021 under the “Doomsday Mechanism” (also known as sequestration) triggered by the Budget Control Act negotiated between President Obama and Congress last summer.  (CBO’s numbers pertain to the larger “National Defense” budget function; they are adjusted here to pertain only to the Pentagon.)

Three things are important to note in Figure 1 about the “Doomsday Mechanism:”

1. Spending for the wars in Iraq, Afghanistan and elsewhere (shown in blue) is not affected by sequester; the amounts needed to prosecute the wars will remain impervious to the debt reduction changes, but they are not shown on the graph beyond the year 2012 because the amounts are not known.  However, they would appear on the graph as a significant increase (whatever the president and Congress decide) over the red “Doomsday Mechanism” line.

2. Congress is now using the “un-capped” war spending account to give additional “base” budget (non-war) Pentagon spending a free ride; for example, the Senate Appropriations Committee recommended adding $10 billion in such base budget spending to the un-capped war account in the 2012 budget.  We can expect more of this gimmickry in the future: The red line depicting the “Doomsday Mechanism” in Figure 1 is artificially low, even before actual war spending is added.

3. Even without this gimmickry, base Pentagon spending would remain close to its post-World War II high: At first somewhat below; then slightly above.

4. After initial reductions in the year 2013, the mechanism would permit the DOD budget to grow almost to the extent that CBO predicts inflation.  By 2021 base DOD spending would grow by 20 percent in nominal terms.

The dollars in Figure 1 are what DOD calls “current” dollars; they not adjusted for inflation.  To see the same budget data in “constant” dollars, which the Pentagon asserts to have an equal value over time, see Figure 2.

Using “constant” dollars normalized to the year 2012 does change the story, but not by much.

1. Without the inclusion of war spending, the DOD base budget under the “Doomsday Mechanism” is no longer at or near its post-World War II high, but it is also not near any of the historic lows.  In fact, it is roughly $38 billion above annual spending during the Cold War (shown in green) when the US faced over 200 Warsaw Pact divisions in Europe, a hostile and dogmatically communist China and an international competition that included two wars (Korea and Vietnam).

2. After 2013, the “Doomsday Mechanism” would hold base DOD spending slightly below inflation, as predicted by CBO.  However, future forecasts of inflation are notoriously unpredictable; the projection of below-inflation spending should be considered approximate, and it does not take into account the gimmick noted above that will raise actual base budget spending.

3. The spending under the “Doomsday Mechanism” for 2013-2021 is a more generous allocation of money than during any of the previous drawdowns after the Korean and Vietnam wars and the end of the Cold War, when – in each case – the DOD budget declined at steeper rates over time and ended up at a level well below the “Doomsday Mechanism.”

4. The “Doomsday Mechanism” (at $472 billion in 2013) would return Pentagon spending to its approximate level of spending in 2006 or 2007 in terms of 2012 dollars.

In 2006, when he was secretary of defense requesting the 2007 budget, Donald Rumsfeld was anything but upset with the level of spending he had at his disposal.  He said

The president’s [2007] budget request for the Department of Defense … reflects what we … believe should be the country’s national security priorities – namely to help defend the United States of America and the American people and their interests, to give flexibility to commanders, to prepare for both conventional and unconventional or irregular warfare….

Donald Rumsfeld was a tough talking, even blustering, secretary of defense; he was hardly noted for understatement or advocating feeble levels of funding for DOD.  (See Andrew Cockburn’s excellent Rumsfeld: His Rise, Fall and Catastrophic Legacy).  If Rumsfeld was happy with about $470 billion (in inflation adjusted dollars) for the Pentagon’s base budget, why is Panetta squawking?

Moreover, what of Panetta’s statement that US “enemies would be emboldened to attack”?  The validity of that assertion can be tested by comparing the “Doomsday” level of spending to that of other nations, some of them competitors.  See Figure 3.

At the $472 billion level, the US defense budget would be more than four times that of China.  It would be two and a half times the defense spending of all potential opponents combined.  From whom would this American defense budget invite attack?  From North Korea, which has a military budget one one-hundredth of ours?   From Iran with a defense budget less than two one-hundredths?  To characterize an American defense budget that is so many multiples of individual potential enemies (even all of them combined) as an invitation to attack is absurd.

The problem with the “Doomsday Mechanism” is not the level of money it provides to the Pentagon over the 2013 to 2021 period.  While less than what the Pentagon has recently been getting, it is a budget quite flush with money in historic terms—especially considering the absence of the existential threat we faced in the Cold War.

There are, however, some issues that do merit concern—but not hysteria.

The first real problem is a tactical one: in the first year of sequester, the reduction is noteworthy, approximately $50 billion or just under 10 percent.  In addition, the cut would come in the form of proportionately equal across the board cuts in each Pentagon budget account and programs within those accounts; this is what a sequester is.  (Under the Budget Control Act President Obama may select to exempt military pay accounts, which would make the proportional cuts in the remaining accounts larger.)  While easy to calculate, such automatically imposed, across-the-boards cuts would be literally mindless.

However, as with the rhetoric about spending levels, a little research finds that the sequester mechanism is not the nightmare Panetta would have you believe.  According to astute budget procedure researchers, pre-existing law (2 USC 907C) allows the President meaningful flexibility within major accounts to select the reductions—as long as the overall totals do not exceed the required amounts.  Panetta’s angst over the mechanistic part of the “Doomsday” scenario appears to be as unsubstantiated as over the spending level.

The second tactical problem is the steepness of the reduction required for 2013.  DOD managers will be forced to make many tough decisions: an approach to budgeting that up to now has been quite foreign to them.  The temptation will be to reduce the short term pain and political difficulties in that decision-making, which over the longer term would be exactly the wrong kind of decisions.  For example, there will likely be a strong pressure to cut civilian and military payrolls from the bottom, not the top.  Already notoriously top heavy, the US military could end up even more so (Exhibit A, here.) It will be the top end of the bureaucratic ladder that has the political ability to resist the cuts, far more than, for example, enlisted personnel.  Just where the initial cuts are made will tell us much about the mentality and ethics of DOD’s leadership.

If there is any reasonable relief from the “Doomsday Mechanism,” it would usefully come in the form of permitting a longer period of time—perhaps as long as two years—to come down to the $472 billion level.  This, of course, would also mean additional reductions in the years immediately thereafter to allow the total savings to come to the required $440 billion over nine years.

These issues are not, however, the biggest challenge Panetta and DOD management face.  They confront a major strategic problem, one that will test their mental and moral capacities far more than the above.

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