Tag Archives: Budget

Misleading Numbers

The Wall Street Journal reported this morning that ten Washington think tanks are preparing a joint letter calling on Congress and the President to cut DoD overhead spending so that training and readiness can be preserved along with the Department’s burgeoning cyber and special operations capabilities.

Military analysts at think tanks from the liberal Center for American Progress to the conservative American Enterprise Institute to the libertarian Cato Institute will sign the letter to be released Monday. (When analysts at these think tanks reach an accord, it might be time to start thinking about a zombie shelter because the.end.is.nigh.)

Specifically, the analysts will recommend another round of base closures, reforming the military health care system (Tricare), and cutting the Pentagon’s sizeable civilian workforce. Of the three, cutting the Department’s civilian workforce will be the easiest to achieve. Congress has rejected the administration’s proposals to increase some Tricare fees and is showing zero interest in another base closure round. Military compensation would seem to be another area ripe for reform, but the personnel subcommittee markup rejected DoD’s proposed cap for the 2014 military pay raise. For now, everyone seems content to let the Military Compensation and Retirement Modernization Commission put forward some proposals that have little hope of becoming law.

That leaves civilians and contractors holding the short straw.

Time magazine’s Mark Thompson linked to a new Government Accountability Office report showing that DoD’s civilian workforce (civilian employees plus contractors) outnumbers active duty military personnel. In FY11, DoD reported 807,000 civilian full-time equivalents (FTEs) and an estimated 710,000 contractor FTEs. At 1.5 million, civilians outnumber the 1.4 million active duty military personnel.

You know who else outnumbers active duty military on the U.S. Government payroll? Military retirees and their survivors / dependents. 2.4 million retirees and their survivors receive $100 billion a year and 5.5 million receive Tricare benefits compared to 3.3 million active duty personnel and dependents.

Putting aside for the moment whether or not the civilian workforce is too large, focusing strictly on the numbers of civilians, contractors, and uniformed personnel is misleading because it overlooks a key fact.

There’s a very good explanation for the current civilian to military workforce ratio: Civilians and contractors cost less. A lot less. (See above.) We’ve grown the size of our civilian and contractor workforce precisely because we can’t afford to grow our active duty military at the same rate. In the last ten years, our military personnel costs have almost doubled without a corresponding increase in size.

Cutting the civilian workforce will achieve less savings than cuts to uniformed personnel. In perhaps typical Washington fashion, we’ve decided to go for the easy fix that won’t actually fix much.

I don’t have the right answer for the appropriate mix of uniformed and civilian workforce so this isn’t an argument prioritizing one or the other. It’s simply about acknowledging the costs of each, so that we can build the force we need at a price that’s right. The problem is that the Pentagon doesn’t have an answer either. According to a recent Reserve Forces Policy Board report (full disclosure: I work for the chairman), “the Department does not know, use, or track the fully burdened and life cycle costs” for active duty service members,” and according to the aforementioned GAO report, “DoD has yet to assess the appropriate mix of its military, civilian, and contractor personnel capabilities in its strategic workforce plan as required by law.”

Based on anecdotal observations from my professional network, many DoD civilians and contractors are military retirees,* which means they’re drawing a pension, receiving subsidized health care, and shopping at DoD commissaries. So it’s ironic that that by cutting the civilian workforce, we’re inevitably harming some of the very retirees we’re trying to protect by avoiding the tough reforms to the military compensation and retirement system.

* I’ve searched far and wide for survey data that confirms or denies this anecdotal hypothesis but have yet to find it.

Posted in Analysis, Civil-Military Relations, Military | Tagged | 5 Comments

Four Percent for Freedom

It’s campaign season and the defense budget, after a decade of bipartisan support for steady growth, is once again a battlefield for Democrats and Republicans. Having used a credit card to fund a forty-year bender, both parties recognize the need – in theory if not practice – to get a handle on the national debt. Representing 20 percent of total Federal government spending and 50 percent of Federal discretionary spending, the defense budget is a large target. And while it may not be the primary driver of deficit spending, to use a basketball analogy, it’s dishing assists like John Stockton. Even some prominent Republicans recognize that some reduction in defense spending is necessary if cutting the debt is to be a real goal and not just a talking point.

Mitt Romney apparently didn’t get that memo. He has pledged to increase the defense budget, spending a minimum of four percent GDP. Pegging defense spending to GDP is not a new idea. The Heritage Foundation wrote a series of reports in 2007 under the tagline Four Percent For Freedom. Around the same time, then-Secretary of Defense Robert Gates and then-Chairman of the Joint Chiefs of Staff Admiral Mike Mullen also publicly supported the four percent baseline. In 2009, Sen. James Inhofe and Rep. Trent Franks introduced a joint resolution that would have required DoD base spending to remain above the four percent figure.

A couple of themes emerge among the arguments for pegging defense to GDP. Some argue that “measuring defense spending as a percentage of GDP is the most appropriate and realistic means to gauge America’s commitment to ensuring an adequate national defense.” Without the four percent baseline, they claim that “America’s military will become a ‘hollow’ force placing the lives of our young men and women in uniform at risk and jeopardizing the Pentagon’s ability to defend the nation’s vital national interests.” Others note that because it is the primary responsibility of lawmakers to “provide for the common defense,” DoD is not just another line item in the Federal budget and thus deserves a baseline. And perhaps the most common refrain is that setting a four percent baseline sends a message that the United States is committed to its security.

Of course, the Constitution does not stipulate minimum spending on defense. Instead, the Preamble states that “We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense… do ordain and establish this Constitution for the United States of America” (emphasis mine). The Oath of Office requires our elected leaders to “defend the Constitution of the United States against all enemies, foreign and domestic” (again, emphasis mine). Neither of these texts, however, defines defense or how to provide for it. A narrow interpretation might hold that these clauses require defense against threats to the territorial integrity or political sovereignty of the United States. A more expansive definition might include defending against threats to American interests far away from our shores. The former would seem to be guaranteed by a vast arsenal of nuclear weapons and two oceans, and the latter by a robust navy, a moderately sized army, significant intelligence capabilities, a fleet of unmanned aerial systems, and special operations forces. Many might disagree with these prescriptions, and how well they serve in the defense of the United States and/or its interests, but that’s the point—there’s no Constitutional instruction for defense, and reasonable people can and should debate these points.

Instead, the premises often used to support a defense-by-GDP conclusion are a mixture of vacuous platitudes (hollow force!), red herrings (entitlements are the real cause of runaway government spending!), and/or irrelevant facts (we can afford it!) making the conclusion itself a giant non sequitur. Putting aside the illogical nature of the arguments, what are the practical consequences of setting a baseline on defense spending that is tied to GDP?

For one, pegging defense spending to GDP is divorced from the strategic environment. In the words of one budget specialist, it has “no analytical basis.” Defense spending does not occur in a vacuum. It takes place in the context of threats, interests, obligations, allies, revenues, and other spending requirements. None of these are static. Once upon a time, the U.S. fought Japan and Germany. Once upon a time, the U.S. faced an existential threat from the Soviet Union. Once upon a time, the U.S. didn’t have a large network of allies. Pledging to spend four percent of GDP on defense disregards changes to the strategic environment. Furthermore, it focuses on only one variable of a multi-variable equation. Richard Betts writes:

Today’s supporters of increased military spending justify their advocacy by pointing out that current levels of spending, measured by the share of GDP devoted to defense, are well below those of the Cold War. This is both true and irrelevant. The argument focuses on only one component of the equation — spending — and conveniently ignores that the scope of commitments, the choice of strategy, and the degree of risk accepted can be adjusted as well. And it draws the wrong lesson from history, which when properly interpreted suggests that today’s lesser threats could be handled with greater aplomb.

I’m sympathetic to the argument that setting a minimum investment in defense sends a message to other branches of government, allies, and potential enemies that defense is a priority. But does anyone think that if the U.S. only spent 3.5 percent of GDP, which is roughly $525 billion, on DoD’s base budget, that we would be any less secure? Conversely, if we spent 9 percent of GDP, roughly the proportion we spent in 1968, would lawmakers feel more secure? Would we actually be more secure? Remember, no amount of money will completely mitigate risk.

Pledging to spend four percent of GDP is no more than a campaign slogan. It serves to cast Democrats in the role of dove played opposite the familiar Republican hawk, but does so without evaluating the strategic environment or (re)assessing potential threats and American interests and how the military should be used to protect them. And the great irony is that many of the proponents of setting a defense baseline have stated unequivocally “strategy should always guide the defense budget.” Pegging defense to GDP as one’s starting point would seem to violate this maxim.

Except, in the Republican worldview, it doesn’t. Mitt Romney and the Defense Defenders’ (worst band name ever?) plan to devote increasingly larger piles of money to the defense budget makes perfect strategic sense. In their view, which for all intents and purposes is a neoconservative one, U.S. military power is the only thing holding this crazy, anarchic world together. Moreover, it’s the only tool the U.S. has for getting what it wants. Rather than reassess commitments and obligations, or tailor strategies, they would double down on old ones, like defending Europe as if it was 1984, and take on new ones, like periodically bombing Iran and intervening in Syria. Thus, a perpetually rising DoD budget becomes necessary, and pegging it to GDP, rather than Federal government revenues (which go up and down), forms an appropriate benchmark.

In reality, setting a floor on defense spending pegged to “the number of Big Macs meals sold at McDonald’s” seems to be a myopic scheme designed to ensure the defense budget rises in perpetuity while assiduously avoiding consideration of the possibility that after spending $4 trillion fighting violent non-state actors, deposing regional pretenders, and fighting wars that never seem to end that maybe, just maybe, we’re doing it wrong. Throwing money at a problem might be good politics, but it’s rarely sound defense policy.

Posted in Analysis, Military, Strategery, War | Tagged , , | 3 Comments