The drawdown facing the Defense Department in the next decade will likely total $1.2 trillion to $1.5 trillion, exceeding the Budget Control Act's sequestration scenario, according to a new report that criticizes the Pentagon's failure to plan for the cuts as a high-stakes gamble.
The department will likely face not only budget cuts but also a "weakening defense dollar in terms of purchasing power as measured by military capability," states the Center for Strategic and International Studies' report on planning for a deep defense drawdown, due to be released today.
Perpetually rising costs within DOD are "eroding the purchasing power of the defense dollar," Clark Murdock, the report's author, told Inside the Pentagon in an interview. Murdock said his initial estimate is these internal costs are inflating at a rate of roughly 7 percent annually.
Today's interim report, informed by a working group of 30 leading defense and budget analysts, lays out a seven-step approach for determining which military capabilities must be retained and developed in the face of deep defense budget cuts. This includes an analytic way to categorize capabilities as must-have, nice-to-have, and unnecessary. In November, CSIS plans to issue a final report that recommends four to five distinct force mixes, each reflecting different potential long-term investment strategies.
Defense Secretary Leon Panetta, Pentagon Comptroller Robert Hale and senior military leaders have all repeatedly said DOD is not doing any planning for sequestration under the Budget Control Act, which could add $500 billion in cuts to the $487 billion DOD already faces over 10 years. The Pentagon has delayed serious thinking on the issue until this summer, not because it is in denial but rather because Panetta appears to be preparing for the endgame in late 2012 or early 2013, the report states.
Democrats and Republicans will likely wait until January, after the Budget Control Act's sequester mechanism is triggered, before negotiating a "grand bargain" deal on deficit reduction that consists of entitlement cuts and tax increases, Murdock writes, noting the deal will likely call for a less steep but ultimately much deeper defense drawdown.
The absence of big programmatic cuts in DOD's $487 billion reduction plan suggests Panetta is "saving his biggest chips for the hard bargaining that lies ahead," which makes sense politically but could minimize the seriousness of this summer's discussions, the report states. That would be a "big mistake," Murdock writes.
"The time is past for playing games," Murdock said.
Given DOD officials have repeatedly said the department would have to rewrite its recent Defense Strategic Guidance if faced with sequestration, let alone deeper cuts, there is little doubt a new strategy will be needed, Murdock said.
Within the Pentagon's policy shop, an administration official told ITP, there is a recognition that DOD's strategy will need to be rewritten, despite the way senior defense officials have publicly stopped short of describing the outcome as likely.
Murdock said DOD has not yet come to grips with how small its future force might have to be. The next round of changes in the department's strategy and investment plans, he said, can be accomplished in an iterative fashion that enables both strategic goals and fiscal realities to drive the process.
In an article published in Forbes this week, defense consultant Loren Thompson downplayed the potential impact of sequestration, noting it would not be the "end of the world," despite the Pentagon's many apocalyptic metaphors for the potential impact. Depending on the outcome of the elections in November, sequestration's defense cuts will either be averted, delayed, blunted or determined to be not that alarming after all, he wrote.
"I'm a bit more of an alarmist on this than Loren seems to be," said Murdock, noting both the nation and the Pentagon are facing a "fiscal crisis." That does not mean the U.S. military will lose its preeminence or that military professionals should rethink their careers, but the department must plan for the coming drawdown, he added. -- Christopher J. Castelli