For incoming Defense chief, no easy answers on budget cuts

The continued costs of U.S. operations in Afghanistan are influencing the administration's deliberations about the pace of withdrawal from that conflict, scheduled to begin next month. However, whether President Obama and his new, budget-focused secretary of Defense choose to recall 5,000 troops or 30,000 will have little effect on the expense of the operation, meaning that broader defense cuts will come dearer than many anticipate.

"The only way you get meaningful savings out of Afghanistan is getting out of Afghanistan all together," said Chris Hellmann, a defense budget analyst at the National Priorities Project. The costs of maintaining U.S. infrastructure in the country and paying troops means little would change until the war ends or the strategy is altered radically. "At the end of the day, what drives costs are people," Hellmann added.

"Budget constraints are a proxy for people not wanting to be there anymore," said Gordon Adams, an American University professor who handled defense spending at the Office of Management and Budget in the 1990s. Even if troops are withdrawn, the United States will be saddled with supporting the Afghan government; paying and equipping Afghan soldiers alone will cost the Pentagon $12.8 billion in the next year.

But with a growing national debt, it's clear that deficit-reduction pressure must reach the Pentagon. Non-war defense spending increased 50 percent in the last decade, and the United States now spends nearly 5 percent of its wealth on defense, dwarfing the 17 next-biggest spending countries combined. The Obama administration has called for an additional $400 billion in cost reductions over 12 years, a relatively painless goal, but independent, bipartisan deficit panels are more aggressive, seeking approximately $500 billion in reductions over the next decade.

With the retirement of Defense Secretary Robert Gates, CIA Director Leon Panetta has been nominated to replace him, in part because of Panetta's experience as a budget expert while in Congress and as OMB director during the Clinton administration. Given his long experience in Washington and his agency's recent success in the operation to kill Osama bin Laden, his confirmation is widely expected.

"This committee well knows that the days of large growth and unlimited defense budgets are over," Panetta said at his confirmation hearing last week. "I don't deny that there are going to be tough decisions that have to be made … but we owe it to our citizens to provide both strong fiscal discipline and a strong national defense."

Since the current conflicts began in 2001, there has been a reluctance to make those tough decisions, and national-security spending has grown because there has been little effort to prioritize the kinds of counter-insurgency operations that U.S. soldiers are performing in Iraq and Afghanistan over traditional, mechanized warfare or acquiring the latest military hardware. Recent Defense reviews have declined to outline a single strategic direction for U.S. national security, leading to diffuse spending.

"The worst answer that Panetta could find is 'do the same with less,' " Adams said. "That's why mission becomes important."

But those kinds of shifts are difficult, especially when no politician wants to appear insufficiently committed to national security and many in Congress oppose cuts to programs that provide jobs for their constituents.

Sen. John Cornyn, R-Texas, offered a muted warning to Panetta during his confirmation hearing, bringing up a reduction in Pentagon purchases that occurred as part of a deficit-reduction effort during Panetta's tenure at OMB. "Others have said we were cashing the peace dividend, even though we still had many threats to our country," Cornyn said. "Frankly, I hope we don't try to cash a peace dividend in 2012 while we are engaged in two-and-a-half wars."

Budget experts predicted that the largest savings in the coming years will come from reducing the size of the Army and Marines, and the cost of equipping them, as wars in southwest Asia wind down. Adams says that will make counter-insurgency missions more likely, even as the public appears tired of such commitments. Threats that lead to them will be handled more cheaply with targeted Special Forces actions and airstrikes, manned and un-manned.

Even then, Panetta may need to seek reductions in the 42 percent of the defense budget taken up by back-office logistics and infrastructure. Budget experts also suggest that the military's health care plan should be reexamined for cost sharing -- the premiums have not increased since 1995, despite attempts by both Republican and Democratic administrations to do so -- while recognizing the political dangers of reducing veterans' benefits.

"Boy, it's hard, because this is a third rail, but it's way over generous." Adams said. "Ideally, everybody who leaves the services ought to be on a health-benefit program not dissimilar to the federal employee health benefit."

Hot-button issues aside, there has been some progress: Congress gave the administration $20 billion less than its fiscal 2011 request, and a Defense appropriations bill set to be marked up on Tuesday in the House is $9 billion less than requested. But as the public asks for less war-fighting abroad and reduced spending in general, experts expect that future Defense spending fights will concern larger numbers and broader consequences.