Mixed Messages on Funding

When the Bush administration in June finally requested an additional $6 billion in supplemental funding for the Defense Department this fiscal year, the request was months late and several billion dollars short of service leaders' expectations. The increase, which was requested largely to cover obligations for skyrocketing health care costs and congressionally mandated pay raises for enlisted personnel, will not provide much of a boost to flagging weapons programs this year, and may not even fully cover the costs of training and operations.

When announcing the administration's request for supplemental funding in late May, Defense Comptroller Dov Zakheim said the Pentagon would have to break out of the "pathological system" whereby the service chiefs have come to expect funding boosts for ongoing programs outside of the annual budget process. Supplemental budget requests are supposed to be reserved for unanticipated contingencies or emergencies.

"You had a system where there was deliberate underfunding in the anticipation of supplementals, where there was gamesmanship regarding what was termed emergency-'emergency' became used very, very broadly," Zakheim said. "It was felt we have to bring that to a halt. We have to go cold turkey."

The 'cold turkey' lecture at the administration's first opportunity to go to the mat for increased Defense spending took some service leaders by surprise. "Instead of 'Help is on the way,' I think what the President meant to say was, 'The check's in the mail,' " says one senior Army officer, referring to the tax rebate most Americans will receive this summer under the administration's tax-cut plan. Any significant increase in Defense spending has been precluded by the tax cut, he believes.

The officer has plenty of company. There are several signs that the Pentagon will have to learn to live within its current annual budget-roughly $300 billion in recent years-or something only marginally higher. And while that is a huge sum by any measure-it dwarfs the spending on defense by allies and potential enemies alike-it isn't nearly enough to fund the Pentagon's current operations and plans for the future. Various studies put the mismatch between the department's plans and its budget at anywhere from $20 billion a year to $100 billion a year.

The Congressional Budget Office last fall told Congress it would cost, on average, $50 billion more per year to fully support the Defense program being pursued by the Clinton administration. Some congressional staffers predict that at most, future budget surpluses will fund, on average, less than $10 billion annually in additional Defense spending. "I think you might see a substantial one-time boost, either in 2002 or 2003, but I see no way that could be sustained over time. The [projected] budget surpluses just don't do it. You either have to cut other federal programs, break into Social Security and Medicare surpluses,or go back to deficit spending-I don't see any of those things happening," says one staffer.

Despite much hullabaloo surrounding the comprehensive, top-to-bottom review of the department promised by Bush and senior administration officials earlier this year, it's not yet clear how the administration would revise the current Defense program-other than to add more responsibilities. Bush and Defense Secretary Donald Rumsfeld have said repeatedly they will vigorously pursue a national missile defense program and expand the military's space-based operations-goals that could require tens of billions of dollars in additional annual spending.

Potential Cuts

The Defense budget "is going to be an interesting issue," says Andrew Krepinevich, a former Army officer and director of the Center for Strategic and Budgetary Assessments. "It doesn't seem they will be able to win the kind of budget increases that would allow them to bring the budget into balance with the existing program, let alone add additional programs in the form of national missile defense, initiatives in space, or some of these other activities. I think one critical issue is, can they identify the areas where they can effect cuts-either in programs or in force structure-at minimal risk, so that the things they do add to the defense program more than offset the risk from the things that they take away."

While cutting troops and programs is always politically difficult, two areas most vulnerable to reductions are Navy aircraft carriers and Army personnel. Any serious cuts to either would require the administration to revise the national security strategy, which requires the military to be able to fight two wars nearly simultaneously, something Rumsfeld has said he thinks should be considered.

Cutting Army troops may be the easiest way for the administration to reap funds for other programs. "People have been ogling Army force structure as a bill payer for as long as I can remember," says Thomas Donnelly, deputy executive director of the Project for a New American Century, a conservative think tank, and a former staff member of the House Armed Services Committee. "Taking a division out of Europe, which has no hometown political constituency, could just be a matter of political expediency. I think the Army leadership is right to be worried about it."

Krepinevich also believes that the Army force structure could be reduced, perhaps from the five divisions now committed to the defense of South Korea. "South Korea has twice the population of North Korea. It has a far larger economy. The border between the two countries is mountainous and heavily fortified. Perhaps more of that ground defense operation can be taken on by the Koreans themselves, allowing for some reduction in Army force structure."

He also believes the Pentagon might rethink its approach to maintaining a forward presence around the globe. "Fifty years ago, aircraft carriers were about the only way you could do that. Now we have long-range aircraft like B-2s that can strike targets in some cases more rapidly than carriers. We have air expeditionary forces that can rotate to forward bases very quickly and spend some time there. The Army is looking to create rapidly deployable brigades, which could be moved to a forward area in roughly four days. The Navy itself has different ways of striking targets-they have surface ships and submarines that fire cruise missiles. It may be that we have a lot of different ways of providing the kind of forward presence that carriers could provide. If we think more innovatively about that, it may be that we come up with a better mix of forward-presence forces-one that relies less on carriers, which are very expensive to build and maintain and operate.

"You have to look for that sort of low-hanging fruit in the force structure, where if you make reductions, the increased risk is minimal. The funding that you free up by supporting innovation and reform will greatly reduce the risk that you confront over the longer term, because you will have created a much more effective military," Krepinevich says.

'If It Isn't Broke…'

A significant test of the administration's intentions regarding Defense will be how realistically it builds the 2003 budget, the first budget it will fully control, Krepinevich says.

Krepinevich, a member of the former National Defense Panel, which issued a widely respected report, "Transforming Defense: National Security in the 21st Century," in December 1997, says the Rumsfeld team needs to avoid making the overly optimistic economic assumptions their predecessors made, which have contributed to the serious funding crunch the department now faces. The Clinton administration "assumed that a lot of efficiencies would be realized that proved to be mirages-we're going to become a lot more efficient and save billions of dollars, we're going to close bases, we're going to realign depots, we're going to reduce the size of the National Guard, we're going to assume better business practices, and all these things will reveal enormous sums of money. I think you can certainly pursue all those initiatives, but historically speaking, you only realize a fraction of the savings.

"The danger is to bank those savings in advance. When they don't materialize, what ends up getting robbed is the modernization accounts. What tends to get crowded out are the innovative things that can transform the military. Realistic budgeting will be a critical test for this administration. Since this administration seems to have set that as a high priority, it's even more important for them to make sure this doesn't occur," Krepinevich says.

One of the reasons Defense reform is so difficult to achieve is that the military has been remarkably successful in engagements over the last two decades, says Krepinevich. "There's no military that can hold a candle to the U.S. military in many ways. If it isn't broke, why fix it?" In addition, the only time the military gets substantial feedback on how well it is doing its job is when it goes to war-something that rarely happens. "The good news is we haven't had to fight them. The bad news is, in terms of large-scale operations, we have very few data points or feedback opportunities to see how well we're doing."

Just how much reform the administration will be able to pursue is hard to predict. During his confirmation hearing, Rumsfeld emphasized the importance of conducting a top-to-bottom review of the Defense program: "One of our first tasks will be to undertake a comprehensive review of U.S. defense policy," he said.

Several days later, in his first press conference at the Pentagon, a reporter asked him to comment on what White House spokesman Air Fleischer characterized as the President's direction "to do a sweeping force structure review different from the QDR [Quadrennial Defense Review]." Rumsfeld said, "You're right. The President's press spokesman has in fact correctly characterized what the President has asked us to do. We will be doing it."

But by mid-May, after members of Congress and uniformed personnel had complained bitterly in press reports about being excluded from the review process, Rumsfeld began lowering expectations. In an interview with The New York Times on May 16, Rumsfeld said, "The review is not really huge. It's been mischaracterized as top-to-bottom, or comprehensive. . . . It's more of a technique." Now, it appears any substantial reforms will be revealed through the congressionally mandated QDR, to be released by Oct. 1.

"I'm sure what they've discovered is that this turns out to be a little bit harder and more complex than what they thought," says Donnelly. "I think they came in here with the expectation that the Clinton guys just totally screwed this up and it will be pretty easy to fix. Well, it happens that the condition of the military was worse than they thought it was."