Panetta’s Challenge

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When the President announced his new national security team last week most of the attention focused on David Petraeus at CIA and the problem of winding down the war in Afghanistan. Leon Panetta’s nomination as Secretary of Defense went almost unnoticed, by comparison.

But Panetta has the bigger challenge: how to manage a build down in defense, as the Afghan war comes to a (way too slow) close.  He will arrive with a victory in hand: the death of Osama Bin Laden, which was a testimonial to the effectiveness of a much-criticized intelligence community and the special forces. This signal accomplishment could contribute to a gradual withdrawal from Afghanistan. That war will end, but as it does, the challenge of disciplining the Pentagon will continue well into the next decade.

Fourteen year into a continuous buildup in defense resources and capabilities, the u-turn is upon us.  Panetta is clearly the right guy for the challenge: he knows budgets better than almost anyone else in Washington, DC.  He presided over the last defense build down, as OMB Director.  He is a skilled agency manager, decisive, while accessible and user-friendly.  And he is respected on both side of this fractious Congress, a credibility the President will badly need as the budget declines.

What does he need to focus on?

First, mission, mission, mission.  The strategy review currently getting under way is making a fundamental mistake: taking the QDR and re-doing it in double time.  The QDR set no mission priorities, calculated no hierarchy of acceptable risks, was deliberately not constrained by resource limitations.  In other words, it was an open door on the budget, no holds barred.

Panetta will have to do better.  Scrap the QDR, and take a hard, hard look at the core mission that has driven the ground forces and the budget for the past ten years: the absurd notion that the US should find and fight insurgents around the globe, and, once the ground forces end up with the responsibility, remake the governments and economies of the countries they land in.  We don’t do it well, few places want us to do it, and we end up creating the insurgents we have to fight.

Second, tailor the forces to match the hierarchy of mission that result.  That means cutting the ground forces back at least to their previous level, or more, and looking at the other missions for more force changes.

Third, restructuring the investment plan to fit the missions.  Fixing Army’s broken procurement mechanism; prioritizing the Navy’s unaffordable shipbuilding plan; disciplining the F-35 program; trimming away at “other procurement” (60 percent of the acquisition budget).  Weeding the R&D budget, as well.

Fourth, going way deeper into the defense overhead/infrastructure that consumes more than 40% of the budget.  Gates has only touched the surface here.  As missions decline, so should that fraction of the active duty combat force that does not deploy (560,000, according to the defense business board), and they do not need to be replaced by civilians or contractors – the military will be doing less.

Fifth, tackle the defense budget’s third rail: compensation, health care, and retirement.  A build down is the moment to find discipline in this part of the defense budget, which is running away with spending.  The analytical institutions looking at defense have lots of good ideas here; overcoming the bureaucratic and political obstacles is the trick.

It’s a big job.  It has been done before, in fact three times before, most recently after 1989, when President Bush, Secretary Cheney, and Chairman Powell took 500,000 people out of the force structure and cut the budget 25%.  The force that was left worked hard, took some criticism, but used Saddam Hussein as a speed bump in 2003.

It needs to be done again.  And it might even be good for the Pentagon.  As Chairman Mullen put it in January: “The budget has basically doubled in the last decade.  And my own experience here is that in doubling, we’ve lost our ability to prioritize, to make hard decisions, to do tough analysis, to make trades.”  Now is the chance to do better.