The FY2013 Defense Budget Submission: Strategy is Easy (and Usually Vacuous); Money is Hard (And Only Meaningful if Used Wisely)
January 23, 2012
The Obama Administration announced a new strategy early this month, but one in which it failed to provide meaningful details as to changes in deployments, force levels and plans, procurement plans, and spending. In presenting this strategy, the President, Secretary of Defense, and Chairman of the Joint Chiefs did not address the broader budget and economic issues affecting every aspect of federal spending, and senior defense official said to wait for the budget details that would emerge over the “next few weeks.”
A new report by the Burke Chair summarizes the new strategy, to the extent that it contains any meaningful details. It notes, however, that the current debate over defense spending has become decoupled from the far more serious issue of the impact of rising entitlement costs on the budget and US economy, and that much of the current debate over defense spending borders on the absurd because it assumes that plans for spending and cuts can be predicted and controlled over a ten year period. It also shows in detail that many of the most serious problems in shaping defense spending are the result of past failures to control costs and shape procurement and force plans, and not the result of US strategy.
This report is entitled “The US Defense Budget and Changes in US Strategy: A Pre FY2013 Budget Submission Report.” The Executive Summary can be found on the CSIS web site at:
The full report – which analyzes the range of defense spending challenges the US faces in detail, can be found here.
The report sets the stage for the release of the FY2013 defense budget, which is scheduled to take place on January 26th. Given the past history of such budget releases, it may do little to clarify either how the new strategy will be implemented or what the money requested will actually buy in terms of military capability. As the CSIS report shows, there are ten key questions that need to be addressed in evaluating the extent to which the new budget submission provides a meaningful path for evaluating the new strategy:
At the same time, the State Department has programs that impact on the future US position in Afghanistan, Iraq Implementing a new strategy that calls for far closer cooperation with regional allies and new, innovative solutions in Africa and Latin America make State and USAID spending critical. Focusing on defense spending alone ignores both the total real world cost of national security and a critical element of the new strategy.
Does the submission put the debate over defense spending and cuts into a real-world perspective? So far, President Obama, all Republican candidates, and the Congress have failed to tie any plans for defense spending to the broader issues that must be addressed in shaping federal spending and American society as a whole.
There are very real needs to bring defense spending under control and allocate it more wisely and efficiently. No cuts in defense spending, however, can address the far more important mix of domestic = problems involved. These are driven by unaffordable rises in the burden retirement medical care costs put on the economy. These problems cannot be dealt with by cutting back the level of government spending without addressing the entire mix of national government spending, demographic trends, and social needs.
At 24.1 percent of gross domestic product, total federal outlays in 2010 were considerably higher than the 20.7 percent they have averaged over the past 40 years. According to CBO baseline projections, federal spending in the next decade will average almost 23 percent of GDP. To put the factors that drive these costs in perspective:
• Mandatory or “entitlement” outlays for social security and medical programs will increase by 5.1 percent in 2011 and by an average of 4.4 percent annually between 2012 and 2020, compared with an average growth rate of 6.4 percent between 1999 and 2008. They will average 12.3% to 13.3% of the GDP during FY2012 to FY2020.
• Defense spending will average only 3.3% to 4.3% of the GDP, dropping from a peak war year level of 4.7% in FY2010. All other discretionary federal spending will equal 4.1% to 3.1% of the GDP.
These rises in spending are driven by two critical factors that cannot be addressed simply by altering defense spending. The US must find solutions that affect its entire population and economy:
• First, an aging population that does not save or assume full responsibility for retirement.
» In 1940, the life expectancy of a 65-year-old was almost 14 years; today it's almost 20 years. By 2036, there will be almost twice as many older Americans as today -- from 41.9 million today to 78.1 million.
» There are currently 2.9 workers for each Social Security beneficiary. By 2036, there will be 2.1 workers for each beneficiary. At the end of 2011, roughly 50% of the present US workforce had no private pension coverage, and 31% of the workforce has no savings set aside specifically for retirement.
» In 2011, 54% of retired married couples and 73% of unmarried persons – some 35 million Americans or 69% of those receiving benefits -- received 50% or more of their income from Social Security; and 22% of married couples. About 43% of unmarried persons receiving benefits relied on Social Security for 90% or more of their income. Another 9% of Americans over 65 had no retirement savings and did not receive Social Security benefits. In addition, 8.4 million disabled Americans and 2 million of their dependents (19% of total benefits) depended on Social Security, plus 6.3 million survivors of deceased workers (12% of total benefits). (Social Security Administration)
• Second, the rising cost of Medicare, Medicaid (and potentially national medical care under the Affordable care Act as of 2014).
» These costs are driven by massive rises in the national cost of medical care from around 6% of the GDP to nearly 20% in 2011 – their total cost rose 5.73% in 2011. Expenditures in the United States on health care surpassed $2.3 trillion in 2008, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980. Without major changes in cost, they will equal some 25% of the GDP in 2025.
» Roughly one quarter of Americans have no insurance, and many only have partial insurance coverage. Even so, the average health insurance premium for family coverage has more than doubled over the past decade to $13,770 a year.
» Some 45.1% of the workforce from ages 18 to 64 had no coverage as of September 2011, and many retirees lacked the savings to pay for any additional payments above Medicare. These figures did not include Americans who had not worked in the last 12 months, and coverage had dropped substantially since 2008. If one includes self-financed medical insurance, some 50 million Americans or 16% of the population had no coverage in 2010.
» In 2010, 31% of Americans relied on the government for health insurance, up from 24.2% in 1999. A total of 9.8% of children under age 18 are uninsured despite the government programs. (US Census Bureau, Kaiser Family Foundation, CNN Money)
- Does the budget focus on the FY2013-FY2017 Future Year Defense Plan, rather than the myth that anyone can control or predict defense spending ten years in the future? Senior defense officials have already said that the budget submission – like the strategy – will ignore the sequestration legislation that could – in theory – increase the cuts in the defense budget by an additional $580 to $600 billion over 10 years.
In reality, however, the key test of the coming budget submission is what it says about spending in FY2013, and the period from FY2013-FY2017 where decisions that are taken this year will have tangible near term consequences. No one can predict US national security needs, the risk of conflict, the strength of the US economy, and the relative priority of defense spending versus other aspects of federal spending 10 years in the future. This President can only shape one year of future requests and this Congress can only control one year of spending.
- Will there be clear force plans, deployment plans, procurement plans, and readiness plans tied to the key priorities of the new strategy? It has been more than a decade since the Secretary of Defense and Chairman of the Joint Chiefs provided posture statements that gave any real details on what the defense budget was actually intended to buy by way of military capability. The QDR process has been a near total failure in adding any coherent picture of the long-term military capabilities the US is seeking to create. A “strategy” defined only in broad conceptual terms is not a strategy, and there is no way to know what form of implementation will or will not take place.
- How will the Department of Defense address its much broader problems in creating effective procurements, and controlling manpower and operations and maintenance costs? The main CSIS report uses GAO, CBO, and Department of Defense data to show that for more than a decade, no US military service has been able to create a stable modernization program, or control its costs to establish affordable force plans. This has not been a matter of strategy. It has been the cumulative result of failures that have steadily forced unplanned cuts in the size of US forces and turned many procurement programs into the source of force cuts.
- How will the new budget and strategy address the Afghan War and transition? The announcement of the new strategy focused almost exclusively on not fighting the kind of war the US is now fighting in Afghanistan. Preliminary reports indicate that the FY2013 budget request will make major cuts in the FY2012 spending level and do nothing other than use a placeholder $50 billion a year level for future spending on the war. This raises critical questions about the risks in focusing on a future situation that does not yet exist and ignoring the war the US is already fighting.
- What does priority for US air-sea capabilities in Asia really mean? The words in the new strategy has sometimes been interpreted a buildup in US forces in the Pacific and Asia. The budget reality is that it may only be a relative priority that results in less future cuts. The emphasis on China does not define a US or allied force posture, or deal with the risk of land contingencies in Korea. This highlights the absurd nature of the continued debate over the number and title of wars the US plans to fight which does not examined any aspect of the balance, what kind of wars might actually occur, or conduct any form of net assessment.
- What is the US plan for dealing with the Gulf, Iran, Iraq, and the Middle East? The US ended the war in Iraq without Iraqi stability or any meaningful form of strategic relationship with Iraq. It now confronts an Iran with steadily growing asymmetric forces and that still pursues nuclear capabilities. It has major plans for arms transfer to friendly Arab Gulf states and Israel, but has not defined what these transfers are supposed to accomplish, or dealt with major uncertainties over the future of Egypt and Syria. It also has not defined future US power projection capabilities, missile defense programs, or options for extended deterrence. Is there actually a US strategy for the region, or is this yet another case of waiting for Godot?
- Is there a credible plan to shape the procurements and force structure of even one US military service? The charts and tables in the main report show that over the last decade, the US Army, US Marine Corps, US Navy and US Air Force have all failed to manage their procurement programs with any effectiveness, and that costs, delays, and cancellations have crippled each service’s force plans. Cost problems, delays and procurement problems still threaten every aspect of the force plans of the US Navy and Air Force. It is unclear what the new strategy means for the force plans of the US Army and US Maine Corp, but the failure of the Future Combat Systems program has left the Army without any current plan to handle modernization and reset, and the Marines face major problems in redefining their force posture with affordable procurements.
- Will there be any plan to preserve an effective defense industrial base and lead in technology? Important as efficiency, cost control, and cuts in defense spending may be, the new strategy puts a new and even higher emphasis on a grand strategic reliance on a US lead in military technology and manufacturing than in the past. These capabilities cannot be simply assumed, particularly given the steady shrinking of the US manufacturing sector and defense industrial base. Is there any tangible plan to come to grips with these issues?
- Will there be any effort to address the full range of national security costs versus the defense budget? The US annually faces costs for homeland defense that OMB has estimated escalated to nearly $71 billion in FY2012, and the Department of Defense only received $18.1 billion. A total of more than $50 billion still adds up to major spending. How do the rest of these expenditures affect US strategy and how necessary is this level of spending?