Congress Receives 2014 Budget With Old Battles

White House
White House

This article first appeared in Aviation Week & Space Technology.

President Obama's fiscal 2014 budget plans have only confirmed some of the worst fears of defense industry analysts. The Pentagon's $526.6 billion budget request does not address government-wide budget cuts that started in fiscal 2013 and only continues ongoing uncertainty.

And while Defense Secretary Chuck Hagel's list of changes would help shore up the Pentagon's finances, cuts to missile defense and other weapons, bases, military health coverage and other "entitlements" and the civilian and contractor workforce will open up a multifront war on Capitol Hill.

In 2011, Congress passed a law putting massive across-the-board budget cuts into effect to force lawmakers to reduce the federal deficit. From that time on, budget plans have hinged on the possibility that the White House might reach an agreement with lawmakers to reduce the deficit and prevent the cuts.

That is a big deal at the Pentagon, which spends the bulk of the government's so-called discretionary dollars. And with such a large budget, the Defense Department drafts its spending plans five years at a time.

Making up for the damage caused by sequestration, the mechanism for the across-the-board cuts, will cost money, indicates Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff. "We've already curtailed or canceled training for many units across the services, specifically those not preparing to deploy," Dempsey says. "And it's more expensive to get ready than it is to stay ready. Recovery costs will compete with costs to build the future joint force."

Even if Congress reached a deal this week to stop sequestration from continuing, the Pentagon would have to mitigate its effects, and at this point, its accounting staff is already spread thin.

First, they had to plan for a full-year continuing resolution. Congress resolved that issue by passing a full-year spending bill to fund the military from the end of March until the end of the fiscal year. That leaves the Pentagon accountants now planning fiscal 2013 a second time, while they are rolling out the fiscal 2014 budget and working on a major reprogramming action that will help mitigate the turmoil from the first months of the year. "We are flat-out stressed in the financial planning," says Pentagon Comptroller Robert Hale. "We have not yet begun a get-well plan."

There is also the matter of the war in Afghanistan. The administration "hopes" to submit a request for war spending to Congress within the next month, Hale says. The overall budget request includes an $88 billion placeholder for Overseas Contingency Operations, but little further detail about it. That is up to $10 billion more than the military had anticipated, Hale says, because of a higher operational tempo and logistical difficulties.

Hagel stresses that the Pentagon is preparing for continued across-the-board budget cuts, starting with a $41 billion reduction this year. "I don't think anyone is minimizing the result of sequestration as a law," Hagel says. "We are planning for every eventuality."

That, he says, is why he directed Deputy Defense Secretary Ashton Carter and Dempsey to work on a strategic review to resolve some of the uncertainty.

The budget would save $8.2 billion by terminating and restructuring weapons systems over the next five years, Hagel says. He counts $2 billion in savings on development costs by restructuring the U.S. Army's Ground Combat Vehicle program. Proposed terminations include that of the Missile Defense Agency's Precision Tracking Space System.

In all, the fiscal 2014 base budget seeks $99.3 billion for procurement accounts, a reduction of about 1%, according to Robert Stallard, an analyst for RBC Europe Ltd. The Pentagon is requesting $67.5 billion for research and development efforts, a cut of 3.6% from the previous year. That includes decisions that are sure to draw fire from lawmakers and defense companies, including stopping the purchase of Global Hawk Block 30 and 40 UAVs, C-27J aircraft and truncating the purchase of Lakota helicopters.

Congress rejected similar halts to the C-27J and the Global Hawk Block 30 last year. And with Sen. Thad Cochran (Miss.) leading Republicans on the Senate Appropriations Committee, the Army's plans to limit the purchase of Lakotas made in Columbus will face a fight.

The tiffs with Congress will not end there. Republican lawmakers are already lining up to express general opposition to a $500 million reduction to $9.162 billion in missile defense spending driven largely by the end of development with Italy and Germany of the Medium Extended Air Defense System in fiscal 2013. "While North Korea blusters about nuclear war, the president's budget falls short of funding missile defense," says Rep. Randy Forbes (R-Va.).

Since the Pentagon failed to save money on base realignments in 2005, the suggestion of further base consolidation has been an anathema on Capitol Hill. Last month, the House Armed Services Committee held an entire hearing protesting the idea of another round of base closures. Nonetheless, Hale says the military will request them again. "It seems to me we have to keep asking," he says. "We know we need it. It's the only way to reduce excess infrastructure."

The push-back against changes to military entitlements is the stuff of legend, with retired officers commanding considerable sway. An analysis of military compensation may pave the way for future reductions, but few expect changes in fiscal 2014.

And a struggle is brewing between the Pentagon's unionized civilian workforce and its legions of contractors. Changes that disrupt either constituency will only exacerbate those tensions.

A chorus of detractors is accusing the president of "ostrich-budgeting" and refusing to acknowledge sequestration. That includes Sen. Jim Inhofe (Okla.), the top Republican on the Senate Armed Services Committee, who says the proposal would be "saddling the men and women of our military with disproportionate and illogical budget cuts that drastically undermine the readiness and capabilities they need to operate in an increasingly dangerous world."

The nuclear arms-control community is also critical of the president. "Congress will be faced with the task of paring these numbers down to fit within the caps," says Laicie Heeley, senior policy analyst at the Center for Arms Control and Non-Proliferation. "Given the wide gulf that exists between the two parties, we will again be looking at a very complicated budget year."

The budget situation undermines the credibility of the U.S. defense establishment, says Travis Sharp, an analyst for the moderate Center for a New American Security that was founded by Obama's former Pentagon under secretary for policy, Michele Flournoy. To help restore the U.S.'s standing, Sharp says the Pentagon needs to truly reform its business practices and clarify the military services' roles and missions in cyberspace. The latter would save money and help the U.S. respond to cyberattacks, he says.

Mackenzie Eaglen of the American Enterprise Institute points out that unrealistic budget requests "may seem to help the military in the near term but are actually exacerbating ongoing damage and making the outlook worse through continued uncertainty.

"Poor decisions like not sending an aircraft carrier to the [Persian] Gulf and cutting tuition assistance for service members are, in part, the result of rosy and ultimately false political calculations regarding the 2013 continuing resolution and sequester outcomes," she adds. "The president's 2014 defense budget only continues these trends and accelerates them."

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