Strategic Thinking and Austerity

By Richard Weitz

The first panel at the U.S. Army War College conference assessed the meaning and consequences of the United States having entered “An Age of Austerity.”

Lawrence Korb

Lawrence Korb, Senior Fellow at the Center for American Progress, argued that defense planners always have to accept some risk since they could not possibly spend so much as to exclude it entirely.

In his view, past U.S. defense budget cuts were only marginally related to specific strategy decisions. On this occasion, the Obama Administration made a major effort to align them, an emphasis underscored by President Obama’s decision to hold a news conference in the Pentagon to outline his new strategy.

Korb believes that President Obama personally made the decision to retain all 11 U.S. aircraft carriers to support the new focus on Asia-Pacific security developments.

Nonetheless, Korb stressed the elements of continuity in the current Administration’s strategy with those of its predecessor. Even before the recent announcement of the Pentagon’s new Asia-Pacific pivot, the United States was quietly strengthening its forces in the region. For example, despite the ongoing commitments in the Middle East and Afghanistan, half of the U.S. Air Force’s top-of-the-line F-22 fighters are deployed in the Asia-Pacific region.

Korb did not consider the Administration’s proposed budget cuts of approximately $470 billion to be excessive, especially since he believes the United States does not face an “existential threat” as it did during the Cold War. In his view, we have national security interests and challenges, but not nearly the same levels of global threats found during the Cold War.

In Korb’s view, the current U.S. relationship with China is best characterized as one of “Mutual Assured Depression.” Accounting for irrationality, war with China is possible but very unlikely. Our two countries’ economic interests encourage cooperation rather than conflict. According to Korb, we cannot treat China as if it were another USSR since we need Beijing’s help to deal with global problems such as the world economy and climate change.

As a point of comparison, Korb noted that President Reagan cut the U.S. defense budget by 10 percent in real terms within the space of only four years in the mid-1980’s. In contrast, the recently planned cuts would amount to a 14 percent reduction over the next ten years.

Korb pointed out that the current U.S. military leadership is supporting the Administration’s position, if only to avoid the threat of much steeper cuts called for by some members of Congress and various defense experts. The problem with the “sequestration” option for DoD is the rapid and blunt nature of the planned cuts.

Looking ahead, Korb thought that the Obama administration’s proposed budget cuts for FY 2013 would likely prevail. Nonetheless, the U.S. president in coming years would face major budgetary and political challenges due to the requirements to curtail the exploding expenditure for defense health care, military retirement benefits, and the need to modernize the aging U.S. strategic nuclear arsenal of bombers, submarines, and intercontinental ballistic missiles.

In Korb’s view, Obama, if reelected, would be tempted to forego the latter since he would like to leave his mark in the area of promoting nuclear disarmament.

However the election turns out, the future president will have to address the escalating costs of military benefits. According to Korb’s estimates, the cost of funding military retirement benefits is now around around $100 billion annually. In his view, cuts are acceptable because the U.S. government never promised military personnel free health care for life, so it could introduce a means test for some of these payments.

Korb did find fault with the management of the Pentagon under the current and previous Administrations. He believed that one major problem was the recent absence of a strong Deputy Secretary who was also a skilled manager with considerable experience managing large private-sector corporations.

Korb warned that proposals for another round of military base closures in the United States would need to overcome the preferences of some Congress members to keep the local jobs generated by those facilities and instead close more overseas U.S. military bases.

He considered the U.S. military facilities in Europe especially vulnerable due to the perceptions in Congress that the Europeans were not sharing the burden of managing global security and were instead seeking a free ride on U.S. contributions.

Still, he did see some benefits from a reduced U.S. overseas military footprint since keeping ground forces in a region often arouses local hostility, as was the case with Osama bin Laden who formed al-Qaeda to fight against those Arab governments that had encouraged the United States to station their predominately non-Muslim ground forces in traditionally Muslim territories.

Tom Davis

Tom Davis, Vice President for Strategic Planning at General Dynamics, focused on the defense industrial dimensions of the current budget drawdown.

He stressed that the currently planned drawdown differs from several respects from earlier ones.

For example, here is a general consensus that the national security threats to the United States have not diminished but have simply changed their form and location. In addition, there is the problem of dealing with the rise of China.

The U.S. defense industry is significantly smaller today than the civilian economy and Davis believed that the last thing we need at this point is a conflict between them.

He argued that the United States no longer had a “military-industrial complex” such as the one that Eisenhower spoke of in his farewell address. In terms of revenues, the financial, consumer goods, and healthcare sectors were all much larger in comparison to the U.S. defense sector.

As an example, even when combined, the revenue of the five largest U.S. defense companies amounts to only half of Wal-Mart. And the second-tier companies often specialize in fuel deliveries or health care management rather than manufacturing military equipment.

Davis agreed that defense companies have become focused on a smaller range of often niche issues due to their narrow customer base.

They no longer have long production lines and mass serial manufacturing; sometimes they produce only one unique platform at a time.

Most defense firms are now led by lawyers rather than engineers, which makes them more cost conscious and reluctant to keep production lines open without firm prospects of government contracts. Davis jokingly observed that, whereas General Motors builds a car it hopes it can sell, General Dynamics sells a ship that it hopes it can build.

Still, Davis felt that the defense industry should be seen as part of the U.S. force structure.

He called for better communication channels between the defense industry and their consumers.

For example, defense industrial leaders need to publicize that, due to mostly economic reasons, they have already eliminated considerable excess defense industrial infrastructure. He also urged the defense industry to follow the administration’s strategic guidance closely since it seemed to be influencing the Administration’s procurement policies. At the time, the Pentagon could benefit by not weighing down the defense industry with excessive regulations, especially when dealing with  small and innovative high-tech company startups. The DoD could also make more use of firm fixed-price contracts since they give the company a greater incentive to save money.

Thomas McNaugher

Thomas McNaugher, a professor at Georgetown University, argued against making the defense budget a major target for budget cuts since it was already a relatively small percentage of the national GDP (falling towards 4 percent).

This is a significant issue, especially when one considers that the DoD’s budget currently funds many more non-military items than before, making a times series comparison and analysis difficult.

If the Pentagon is forced to implement defense cuts, McNaugher insisted that we should do it in a sophisticated and deliberate way.

For example, we should avoid cancelling a weapons system if the resulting termination fees would be almost as costly as funding to complete the system.

McNaugher insisted that Americans should debate defense issues on their strategic merits rather than primarily for their budgetary implications.

We should first ask what do we want to do in the world rather than how much it will cost.

We also need to be honest with ourselves and acknowledge that the defense budget cuts will often lead to reductions in U.S. capabilities and missions rather than more efficiency.

According to McNaugher, we should prepare for a marathon, not a sprint, and therefore not rush to buy new weapons systems before they are ready for deployment.

McNaugher considered proposals that the United States adopt an offshore balancing strategy a mistake.

He understood that proposals to reduce land forces and increase the Navy and Air Forces might be popular given the strains on the Army and Marines due to their frequent deployments in recent years.

But he feared that an offshore strategy could result in the United States once again waiting too long to prevent the rise of a regional hegemon, repeating the failure to balance against Germany and Japan in the first half of the 20th century.

In McNaugher ‘s view, the Europeans might be able to manage their own regional security without the United States as an external pacifier.

He considered steady U.S. engagement in East Asia especially important due to the rising power of China, North Korea’s threatening behavior, and the potential for further nuclear weapons proliferation in the region.

In this regard, McNaugher praised the Obama Administration’s stern stance for moderating China’s conduct.

However, he considered the U.S.’ commitment to a nuclear-free world misplaced since the public U.S. endorsement of a world without nuclear weapons was leading U.S. allies to question the credibility of U.S. extended nuclear guarantees.

Lastly, according to McNaugher, the United States also needed robust conventional and unconventional forces to give the United States options to respond to various scenarios without leaning too heavily on nuclear weapons as deterrents.

(Editorial Comment: Austerity is less about cuts than about the ability of leadership to shape value from the force structure and admit what the country will not do.  Escalating mission sets, “leading from behind,” 2 ½ billion a day in Afghanistan, USCG demands going up but forces going done is not doable.  Just doing it but moving forward not backward is the challenge.  We are sponsoring a forum on “Just Doing It.”  It is a time to build the future, not replicate the past.  And a good example of reasserting the past is maintaining 11 large deck carriers when the F-35 revolution enables building more capable into the amphibious fleet that is more survivable, more lethal and more deployable than a single large deck carrier.)

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