The Mattis Resignation and the U.S. FY2020 Defense Budget and Strategy Crisis
January 3, 2019
Secretary Mattis' resignation, his resignation letter challenging to President Trump, his forced departure, and the resulting uncertainties over the future U.S. role in two ongoing wars – Iraq-Syria and Afghanistan – have been the well-deserved central focus of the U.S. national security community over the past few weeks. They may, however, be only the prelude to a much deeper crisis, and one that will have an impact on every aspect of U.S defense for at least the rest of the Trump Administration.
Secretary Mattis originally resigned effective as of February 28, 2019. This led most of the attention to his actual timing to focus on a key meeting of NATO and the uncertainties remaining after this year's Ministerial – a meeting where President Trump focused verbally on criticizing allied burden sharing but still signed a strong endorsement of the Alliance along with all the other representatives of member countries.
Firing Mattis at a Critical Point in Shaping Future Defense Spending
The fact that President Trump has now been fired Mattis effective as of January 1st and will replace him at an acting level with Deputy Secretary Patrick Shanahan, affects a great deal more than a NATO Ministerial meeting. Mattis' original timing would have allowed him to control the Department of Defense's final input to the President's FY2020 Budget Request.
Even if one only looks at the size of the future defense budget, this timing would have allowed Mattis to make the case for higher levels of defense spending. This is important simply on fiscal grounds. President Trump has so far shown little consistency in providing any clear benchmark for future spending – much less on how that spending should be allocated. News reports have floated variations of at least four different new total defense budgets for FY2020: $700 billion, $717 billion, $735 billion, and $750 billion.
While these figures only involve a maximum difference of about 7% between the highest and the lowest figure, this still could make a critical difference in U.S. ability to fund modernization and restore readiness after years of cuts driven by the Budget Control Act. The key issue is not total spending but the limited amount of money that can be allocated to new areas and/or to fund past underspending.
For all the talk about defense reform, the Department of Defense remains a rigid, service-driven structure that budgets by military service, rather than mission requirement, and annually consumes a vast amount of its total budget simply doing what it has done in the past. It has failed dismally to modernize its defense planning, programming, and budgeting system despite some of the advances made during the Eisenhower and Kennedy Administrations.
As the analysis in Annex A indicates, the Department of Defense has regressed to relying on annual input budgeting by service, rather than trying to develop coherent future year defense plans and budgets by major mission and to meet a key strategic need. CBO and GAO studies show that the Department has continued to let costs rise, provide unstable and only partially successful procurement plans, and failed to properly react to the rise of China and a renewed Russian threat. Without a real strategy, its answer to any given problem is almost always more money.
Despite yet another round of strategy reports that call for more, rather than wiser, spending, the U.S. is scarcely "defense poor." While any such comparisons are uncertain and involve a wide range of variables, the U.S. has become the world's leading military power by spending far more than other states. The most recent IISS and SIPRI estimates for 2017 – which ignore many significant aspects of actual U.S. spending, indicate that the U.S. not only dominated global military spending before the Trump spending increases, but spent $602.8 to $610 billion compared to $150.5 to $228 billion for China and $61.2 to $66.3 billion for Russia.
These totals are 2.6 to 4.1 times those of China, and 9.1 to 10.0 times those of Russia. Yet, for all the President's complaints about burden sharing, America's strategic partners in Europe spent far more than Russia in the case of NATO. According to the IISS, Britain, France, and Germany alone spent $141 billion. While they scarcely outspent China, America's top three strategic partners in Asia –Japan, South Korea, Australia – did spend a highly respectable $107 billion.
If one looks at the current spending levels, of both the U.S. and its allies, the key issue is not burdening sharing or meeting an Oliver Twist-like demand for "more." It is finding way to spend on the right forces and mission capabilities. Moreover, one really has to ask how so many looks at U.S. strategy can totally ignore the need to compare the efficiency and nature of U.S. force plans, deployments, and spending to that of our key threats, and our allies and partners.
Focusing on Defense Strategy, Planning, Programming, and Budgeting
This need for a better strategic focus at every level of U.S. national security spending is critical because the original timing of Secretary Mattis' resignation letter potentially gave him time to finishing trying to shape the FY2020 budget in ways that would break away from the rigidities of the past and start the actual implementation of the new National Defense Strategy that he issued in early 2018.
Such an effort to tie every major aspect of defense spending to a consistent plan to implement an actual strategy to meet America's needs in each key region and mission area is America's most critical single national security priority. If the FY2020 budget request can actually do this, it will be the first U.S. defense budget request to actually try to implement some form of coherent U.S. strategy since at least the year the Great Recession began in 2008, and more broadly since the end of the Cold War in 1991.
As the analysis in Annex A indicates, it is unclear that Mattis could have shaped the FY2020 defense budget request to properly accomplish this with the current vestigial planning, programming, and budgeting system (PPBS) now used in the Department of Defense. It is even less clear how he could have compensated for the even worse systems used by the State Department and Homeland Defense, and in the congressional review and mark-up of the defense budget. There are deep institutional and structural problems in the U.S. approach to strategy, planning, programming, and budgeting that help explain why Secretary Mattis has been quoted as regularly referring to Washington as a "strategy free zone."
At least some of those around the Secretary have, however, said that he would give the FY2020 budget submission real strategic content for the first time in well over a decade – and give it content that could reassure and motivate America's strategic partners as well as provide at least the core of real changes that are needed in America's posture to contain and deter key potential threats like China, Russia, North Korea, and Iran.
The possible good news is that Acting Secretary Shanahan will at least be able to draw up the extent that Secretary Mattis did succeed in going from the undefined generalities of the National Defense Strategy he issued in February 2018 to actual plans, programs, and budgets; this aspect of the FY2020 defense budget submission has almost certainly already been drafted.
The bad news is that he will not have anything like Mattis' background and influence to push it forwards through the final stages of OMB's war of the knives at the end of the budget cycle. He also may lack the leverage to push it forward through the deep divisions and uncertain strategic experience of those who remain around the President and the even deeper partisan divisions in Congress.
One must have hope, because the timing of the FY2020 budget submission will be critical. There is a very uncertain prospect for any effective strategy to emerge in FY2021 or FY2022, and all too good a prospect for a steadily worsening national budget crisis over rising entitlement costs, a steadily growing deficit, and a sharply rising national debt. Washington has already devolved into focusing on bitter partisan Presidential and Congressional campaigns. Far too many around the President, and that oppose him, already confuse ideology with strategy, see bullying and burden sharing as a substitute for diplomacy and dialogue, and focus on domestic political advantage.
America is already badly adrift and taking a good part of the world with it. It cannot safely wait until an unknown Administration emerges out of the partisan divisions of 2019-2020 and actually tries again for a future budget request with a real strategy – one that can only actually have an impact on national security a half-a-decade or so from now.
Annex A: America's FY2020 Defense Strategy and Programming Crisis
Anthony H. Cordesman
For several decades, American strategic planning has been little more than a facade for annual line item budget debates. Arguably, U.S. strategic planning peaked when Harold Brown was Secretary of Defense in 1981. From that point onwards, efforts to create and manage U.S. national security using some effective linkage between strategy and real-world planning, programming, and budgeting activity steadily declined.
Meaningful posture statements by the Secretary that tied strategy to plans and budgets faded away, along with real-world force goals, future year defense plans and budgets, and efforts to link strategy and spending to key joint mission areas like the categories in the program budget system or to the major regional and functional military commands.
American Farce Planning
By the time the U.S. invaded Iraq in 2003, the defense budget had effectively reverted to a focus on annual spending by military service and agency. There was no clear linkage between the DoD budget and the nuclear weapons activities of the Department of Energy. "Homeland" defense became a major new national security activity after 9/11, but also became an uncoordinated mix of individual Departmental and Agency activities that the OMB and CBO can barely measure, has no effectiveness measures, and – as the latest CBO studies indicates – costs around $70 billion a year. The annual State Department and USAID budget justification remained an inchoate mess showing the cost of major program activities in ways that could not be linked to any clear strategy for a given region, nation, and the activities of the Department of Defense, or in a given war.
U.S. strategy documents bordered on farce. They set broad policy goals without any supporting plans, force goals, clear mission-oriented programs, future years pending plans, and measures of effectiveness. Meaningless national strategy documents and Quadrennial Defense Reviews (QDRs) came and went – each with new goals and slogans, and all with no clear substance. Actual spending was dominated by annual military service budgets, coping with program problems and cost escalations, and funding optional wars like those in Afghanistan and Iraq on a constantly changing annual basis that led to major program turbulence and shifts in spending.
The passing of the Budget Control Act (BCA) in 2011 effectively killed any last remnants of a coherent effort to create consistent defense and other national security planning, programming, and budgeting (PPB) activities. Every post-BCA year became a battle to find ways around the budget ceilings set by the BCA, compounded by efforts to manipulate the added funding provided by the Overseas Contingency Operations (OCO) accounts that were supposed to pay for the added spending for Afghanistan, Iraq, and the wars on terrorism to work around the BCA budget caps.
Every year became another exercise in getting some form of authorization and appropriation for the coming year, with the knowledge that the coming four years of spending in the Future Year Defense plan would have to change to the point where the budget figures issued for each outyear had little real meaning.
At the same time, the QDRs issued by the Bush and Obama Administrations continued to set broad goals for futures that could never exist. They had no real definitions of mission requirements, no meaning force or modernization plans, no spending goals, no supporting net assessments, and no effort to assess the constant warnings from OMB and the CBO that long-term federal spending was being dominated by the growth of civil entitlement plans that were creating a steadily growing federal deficit and debt, and conflict between future civil and national security spending.
The New National Security Strategy, National Defense Strategy, and the Need to Translate Them into Real World Plans and Budgets
This situation will not change unless the Trump Administration uses the FY2020 Department of Defense, State Department, Department of Energy, and other defense and homeland security budgets to provide something approach credible plans, programs, and budgets that are tied to key missions and goals – not simply fund the costs of line item inputs to DoD and Agency spending.
The Administration must now deal with the fact the new National Security Strategy (NSS) that the Administration issued in late 2017 set no clear goals, contained no real plans, and had no estimates of the resources required to implement them. They were as empty as any of the efforts of President Trump's recent predecessors, and without real pans, programs, and budgets, they had had about the same substantive value as the make-up on a corpse.
The new National Defense Strategy (NDS) issued by Secretary Mattis in early 2018 was no better than the NSS. President Trump set specific goals for building up the total size of U.S. forces as he ran for office, but the NDS did not address them, or set any goals, plans, programs, or budgets for its new emphasis on Russia and China as primary threats, Iran and North Korea as secondary threats, and the need to deal with a more vaguely defined post-ISIS threat from terrorism and extremism.
The Department of Defense's FY2019 budget submission was little more than a set of annual service and defense agency line item budget requests with a thin gloss of strategic generalities. CBO and GAO studies indicated that DoD was still sharply under-costing its budget request, and a recent CBO analysis of the Overseas Contingency Operations (OCO) budget is little more than a warning that the OCO budget is largely a facade in providing a coherent costing of America's ongoing wars.
The State Department budget justification was as much of an incoherent mess as in past years – demonstrating that the State Department QDRs could be even more meaningless and ineffective than the Department of Defense QDRs, and OMB dropped its annual effort to at least cost the total budget for home land defense.
The good news was that the Congress did approve a rise in U.S. spending national security for at least FY2019. A CBO annual summary of the overall federal budget for FY2018 – issued a day after the November 6th election – noted that,
Spending for military activities of the Department of Defense (DoD) rose by $38 billion (7 percent) in 2018, increasing for the second consecutive year (in 2017 such spending rose by 1 percent). The increase in 2018 was fueled by an 11 percent rise in funding that DoD received after lawmakers raised the statutory caps on appropriations set by the Budget Control Act of 2011, as amended. All major categories of defense spending increased: operation and maintenance by $11 billion (or 5 percent), research and development by $9 billion (or 13 percent), procurement by $9 billion (or 8 percent), and military personnel by $7 billion (or 5 percent). As was true in 2017, growth in spending by the Air Force was the fastest (9 percent); growth for both the Army and the Navy was about 6 percent. Military spending by DoD was 3.0 percent of GDP in 2018, about the same level as in both 2016 and 2017, but lower than in any other year since 2001.
The FY2018 budget request did not, however, indicate what new forces, readiness, and modernization any of these increases would actually buy, or how they would help support the new NSS and NDS. DoD never provided any data to show this beyond increases in spending by service and agency.
As for any credible long-term spending, shortly before the election, press reports indicated that President Trump had cut the ceiling for total defense spending in FY2020 by roughly 5% and from $737 billion to $700 billion. Much of the press math in the reports was highly uncertain, and it seems more likely that the President cut total national security spending from around $716 billion to $700 billion.
These press reports came out of remarks by the President at the end of a long press conference that focused on the overall budget and took place on October 17th. The White House transcript quotes his statements on defense as follows:
Last budget we had to go — because of the military — we had to fix our military. Our military is in the process of being fixed. Planes are being made. Boats are being made. Ships are being made. Missiles, rockets, everything. Our nuclear is being brought to a level that nobody else could even imagine. Pray to God we don’t have to use it. But there will be nothing like what we have, and there is nothing like what we have...And that’s why I did that. I made deals with the devil in order to get that done, because we had to improve our military. Our military was depleted. It was in bad shape. Our great people in the military hadn’t received a wage increase in more than 10 years. Now they’re getting an increase. First time in more than 10 years.
...But I’d like you all to come back with a 5-percent cut. And I think if you can do more than that, we will be very happy. There are some people sitting at the table — I’m not going to point you out — but there are some people that can really do substantially more than that. Because now that we have our military taken care of, we have our law enforcement taken care of, we can do things that we really weren’t in a position to do when I first came.
So we’ll see you at the next meeting. I’ll see you many times before. I’m sure I’ll speak to all of you during this term. But that’s a very, very important request that I’m making of everybody sitting around this table. It’s tremendous amounts of money, and it’s something that we can do...And I believe we could actually do it, easily. So rather than go by the penny plan, we’ll call it the nickel plan. At least it will be a one-year nickel plan. We may do another nickel plan next year too.
Q Mr. President, does that include the Defense Department, sir? The 5-percent cut.
THE PRESIDENT: We know what the budget — the new budget is for the Defense Department. It will probably be $700 billion. So it’s 716; it was 700 — 716. And that’s a very substantial number but it’s defense. It’s very important. I mean, to us, without defense, maybe the rest of it doesn’t mean very much. But if you know, it was a $520 [billion] a very short while ago. And the reason I brought it up to 700 and then 716 was to build new ships. We’re building new, incredible submarines, the finest in the world. The most powerful in the world, anywhere, ever. We’re doing things that we have never done on this scale. So that included a lot of rebuilding of our military. So despite that, I’m going to keep that at $700 billion — defense. Okay?
In fairness to the President, there are so many ways to total-up national security spending that no one can properly state the budget mark without supporting charts and details. At the same time, no one can create a meaningful new strategy and defense program without stability in both the plan and budget from year-to-year, and over the three-to-five-year period it takes to implement major changes in peacetime.
As any review of America's defense programs and spending will show, this also has not happened to any Administration since the collapse of the former Soviet Union. The last time any Administration actually made a coherent effort to actually implement such a U.S. defense program came at the start of the first Reagan Administration and it never came close to being fully implemented.
Coping with Tax Cuts, and Deficit/Debt Crisis
In practice, President Trump, his Secretaries of Defense and State, and the Joint Chiefs now must define how they are going to actually implement the NSS and NDS in their FY2020 budget request. They have to get the support of a divided Congress. They must get meaningful support from America's strategic partners – rather than meaningful percentages of GDP in defense spending.
And , they must deal realistically with the challenges of a growing U.S. deficit and national debt at a time that polls indicate that many – if not most – Americans want more actual spending on entitlement programs. The same CBO annual summary of the budget quoted earlier noted that,
In fiscal year 2018, which ended on September 30, the federal budget deficit totaled $779 billion— $113 billion more than the shortfall recorded in 2017. The deficit increased to 3.8 percent of the nation’s gross domestic product (GDP) in 2018, up from 3.5 percent in 2017 and 3.2 percent in 2016. Outlays in 2018 were reduced by a shift in the timing of certain payments; those payments were instead made in fiscal year 2017 because October 1, 2017 (the first day of fiscal year 2018), fell on a weekend. If not for that shift, the deficit in 2018 would have been $823 billion, or 4.1 percent of GDP...Outlays for net interest on the public debt increased by $62 billion (or 20 percent), partly because the rate of inflation was higher.
It also noted the pressure for higher entitlements spending, in spite of the President's efforts to roll back such spending:
Spending for the three largest entitlement programs—Social Security, Medicare, and Medicaid—rose by $43 billion (or 5 percent), $16 billion (or 3 percent), and $14 billion (or 4 percent), respectively. Social Security outlays grew because of increases both in the number of beneficiaries (1.6 percent) and in the average benefit payment (2.9 percent). Spending for the retirement portion of Social Security grew by 5.3 percent; in contrast, the disability component grew by less than 1 percent. Medicaid outlays have risen by 47 percent over the past five years, largely because new enrollees were added through expansions of coverage authorized by the Affordable Care Act. The annual rate of growth in Medicaid spending, however, has fallen sharply since 2015, when it was 16 percent. Combined outlays for the three programs equaled 48 percent of federal spending and 9.8 percent of GDP in 2018, slightly below the peak of 10.1 percent of GDP in 2016.
These short-term pressures, however, are relatively minor compared to the growing long-term pressures on the budget caused by the steady growth of entitlements over time, and the gaps between projected federal revenues and spending – a gap that the CBO projects will be sharply increased by the 2018 tax cut.
The CBO has not yet fully marked the trends that will be generated by the FY2018 budget and the recent tax cut, but John McClelland, the CBO's Assistant Director for Tax Analysis, presentedAn Overview of The 2018 Budget and Economic Outlook , at the International Tax Policy Forum on October 4, 2018.
This estimate noted that, “The tax act is projected to increase the level of potential GDP by 0.7 percent, on average, over the 2018–2028 period. It does so mainly by promoting greater investment and potential labor supply." It also noted, however, that even if the positive impact of added economic growth was taken into account. the loss of revenues over the period from 2018 through 2028 would increase the deficit by $1,272 billion excluding debt service costs, by another $582 billion for these debt service costs, and reach a grand total of $1.85 trillion dollars.
This rate of increase also led the CBO to project a long-term trend where, "deficits would rise from 3.9 percent of GDP in 2018 to 9.5 percent in 2048 as spending outpaces revenues... As a result, federal debt is projected to total 152 percent of GDP in 2048, nearly double what it is today. The prospect of a large and growing federal debt poses substantial risks for the nation and presents policymakers with significant challenges."
All of this projected increase in federal spending, which would place an enormous burden on the economy, came from the civil sector. The CBO overview showed that defense and national security would drop steadily as percentages of federal spending and the GDP while entitlements – especially medical ones – and the federal debt would grow massively overtime.
An earlier CBO estimate, issued in May and entitled Analysis of the President’s 2019 Budget, made these trends all too clear. It projected that the deficit rose from 2.8% of the GDP in 1968, to 3.8% in 1993, 4.0% in 2018, and 5% in 2028. It did so even though defense spending was projected to drop from 9.1% of the GDP in 1968 to 4.3% in 1993, 3.1% in 2018, and 2.6% in 2028 – with similar decreases in other discretionary outlays.
The reasons for the sharp rise in the deficit were entitlements and mandatory outlays. Driven by health and social security, they rose from 5.5% of the GDP in 1968 to 9.8% in 1993, 12.7% in 2018, and 15.2% in 2028. This was also the reason that the net interest on the federal debt, which had dropped from 2.9%in 1993 to 1.6% in 2018, now rose back to 3.1% in 2028.
Like all future spending forecasts, such estimates become progressively more uncertain over time and reality inevitably intervenes. It is also important to note that the CBO estimates make no allowance for major further defense build-up spending, or for wartime/contingency spending after 2018. Both CBO and GAO also raise serious questions about DoD claims to have made the cost estimates used in shaping the defense budget request more realistic. Defense now seems just as likely to under cost its future defense plans and budgets as in the past.
Nevertheless, the President had good reason to limit future defense spending beginning in FY2020. These contradictory trends in federal spending are already at the crisis level. They are almost certain to lead to bitter ongoing Congressional debates over civil versus military spending, and to one spending crisis after another until either spending is sharply cut or tax revenues are raised.
They also make it critical for the Department of Defense to develop more realistic plans, program and budgets. An annual defense liar's contest – and constant real-world cost escalation – is not the way to fund a stable and effective implementation of any strategy.
The FY2020 Budget Submission and the "Mattis Effect"
The end result of all these problems has put immense pressure on the Department of Defense to use the FY2020 budget request – which is due in February 2019 – to define all of the elements of a credible strategy in realistic terms. It is time to recognize that U.S. national security planning has become a dysfunctional mess, and one where vague strategic goals are confused with an actual plan, and service-oriented annual budgets are confused with effective mission-oriented program budgets.
The good news is that Secretary Mattis seemed to be focusing on creating the kind of FY2020 budget submission that could turn the concepts and goals in the NSS and NDS into actual programs, mission capabilities, and budgets. The bad news is that it is far from clear that even the best Secretary of Defense can fix the current failures in the defense planning, programing, and budget system in the time – and bureaucratic and political environment – in which the Secretary has to act.
The worse news is the lack of stability in the Administration's senior appointments. Defense and national security agencies badly need continuity for any coherent program to emerge and actually be implemented. It is not clear that there is any substitute for Secretary Mattis that can ensure an effective program will emerge from the FY2020 budget request, or who could actually push such a program through the bureaucracy, the Congress, and the new realities that will emerge over the coming two years.
(NOTE: The figures and trends quoted in this commentary are explained in detail in graphic form in a new Burke Chair report entitled The National Security Political “Iceberg” in Late 2018 on the CSIS web site at
Anthony H. Cordesman holds the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies in Washington, D.C. He has served as a consultant on Afghanistan to the U.S. Department of Defense and the U.S. Department of State.