The Promise — and The Danger — in Panetta’s Budget

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Leon Panetta rolled out some of the first details on the new FY 2013 defense budget on Thursday. It’s the first since FY 1998 to actually decline in nominal terms (though FY 2011 and FY 2012 were “real” cuts, as they did not keep up with inflation). The Secretary didn’t have much choice about the base budget for FY 2013; the 2011 Budget Control Act pretty much froze the fiscal options and the base budget request stays within that framework, as Congress intended.

While Congress may mix and match the details, many of which are still to come, they cannot quarrel with the cap, so the total is unlikely to change. There is some promise, and some danger, in the longer-term plan the Secretary unveiled, however.

The promise is the indication that the big ship DOD is slowly turning toward the future, though the strategic framework for that shift remains to be filled in. some of that shift looks a bit like what my colleague Matt Leatherman and I wrote a year ago in Foreign Affairs.

Reducing ground forces is something that needs to happen and always does at the end of war(s). U.S. ground forces remain globally superior and are globally deployable, unlike those of any other country. There is a reason, however, that the Constitution calls for Congress to “raise and support armies,” but “to provide and maintain a navy.”  Ground forces are easier to raise and historic uneasiness about a large standing army remains.  Moreover, with over 500,000 reserve and guard forces (well used the past 10 years), the capacity to “go active” is large.

Moreover, the expeditionary capability that has thrived in the past decade – the Special Forces – is slated to grow, matching the sense that rapid, small missions are the more likely use of our military, rather than regime-change, stabilization/occupation, nation-building missions like Iraq and Afghanistan.  Major stabilization (and related sizeable COIN) mission seem to be fading, which is a good thing.  What is unanswered, is where and why all these Special Forces need to be used; that debate remains to be had.

The Navy and the Air Force thrive, relatively.  These are much harder to reconstitute.  What is less clear is why the number of carriers is magic at 11.  With two major theaters for deployment (Gulf and Pacific) and a global dominance in overall naval forces and battle groups, the Secretary could have gone further.  But at the root of naval forces is the reality that the U.S. has been a naval power for over 100 years and is likely to remain so.  Air power has less of a history, and is not as clearly tied to strategic goals (I will leave the “anti-access” issue for another day.)

The danger is that the long term budget trajectory the Secretary forecast is unrealistically high. Trimming (and it is “trimming”) $487 billion from a large defense plan over the next decade leaves Pentagon planners with the unrealistic expectation that, after the current and next year, budget growth will return, barely at the rate of inflation.  That expectation will lead to unrealistic planning for the future: the out-years of this budget are completely at risk.

Sequester will not happen (though we will hear a great fracas about it over the next ten months).  It never has in any meaningful way, and the threat is more useful than the actual implementation.

But defense budgets will come down deeper than the Secretary thinks.  They will come down because Washington is going to have to find about $4 trillion in spending and revenue changes over the next 10 years if the nation’s debt is to stabilize at 60% of GDP.  To find those cuts, everything, including defense, will still be on the table, even after this budget.  And defense budgets will come down because they always do after combat (or “cold combat” in the case of the 1990s), in fact, at a rate of about 30% in constant dollars over 10 years.

The Panetta budget does not get close to that; his “cuts” are roughly 8% of projected defense budgets.  Even if one generously offered to include projected war funding as part of the baseline (and there is no real baseline for wars after FY 2013), the new slope for defense looks like just over 20% of the projected budgets.

A lack of fiscal realism could have harmful consequences for long-term planning.  That said, the Secretary’s announcement is a step in a different, more realistic direction, with more to come than he thinks.