Defense Acquisition Spending Faces Impending Jaws of Death

For the past sixty years, U.S. defense planning has counted on the quality of its weapons and personnel to make up for a persistent shortfall in quantities. During the Cold War the United States pushed the technological envelope to acquire better tanks, airplanes, submarines and missiles than those deployed by the Soviet Union and its surrogates. Better technology in the form of systems such as the M-1 Abrams tank, F-117 and F-22 fighters and Virginia-class SSNs was the way the U.S. countered a Soviet advantage in numbers. Today, the U.S. military is living largely off the legacy of Cold War programs. A combination of budget cuts, changes in national strategies, multiple attempts at acquisition reform and program terminations have left the military with only a handful of advanced weapons programs such as the F-35 Joint Strike Fighter with which to meet the evolving challenges of the 21st century. This is particularly worrisome since the Obama Administration’s new defense strategy anticipates that the size of the military will shrink. There will be fewer Army brigades, Navy ships and Air Force fighters tomorrow than there are today. Secretary of Defense Leon Panetta has promised that even as the military grows smaller it will remain agile, flexible and lethal.

Unfortunately, it appears increasingly doubtful that Secretary Panetta or his successors will be able to make good on the promise of a smaller but superb U.S. military. The Department of Defense’s (DoD’s) acquisition accounts face the prospect of being crushed to death between a declining defense topline and the growing expense of the Operations and Support (O&S) accounts. Under the 2010 Budget Control Act, defense spending is projected to decline by some $487 billion over the next decade compared to the levels projected in the fiscal year 2012 budget. If sequestration is imposed, add another $500 billion to that figure.

A trillion dollars in cuts to the defense budget just might be manageable if DoD had control over the O&S accounts. However, this is not the case. Despite decades of effort at acquisition reform, hundreds of billions of dollars in alleged efficiencies and a reduced force structure, the costs of O&S continue to rise. In part, this is a result of an aging pool of platforms and weapons systems that take more resources to maintain. In part it is also the consequence of a national security strategy that demands too much from the military. It is also the consequence of the upward creep of the entitlement culture in DoD’s personnel accounts. Like elsewhere, health care and retirement costs in the military are on the rise. But Congress has refused to allow the Pentagon to reduce benefits or even charge higher fees. The military retirement system is the only one in this country where an individual can enlist at twenty, work for twenty years and retire at forty on a full pension for the next forty years at current life span projections.

The costs of maintaining the smaller, yet better, military is going to be higher than what the Pentagon projected just last year. The Congressional Budget Office (CBO) has already warned the Obama Administration that its long-term defense program is underfunded by about $120 billion over the next five years. According to the CBO, “the primary cause of growth in DoD’s costs from 2013 to 2030 would be rising costs for operation and support (O&S), which accounts for 64 percent of the base budget in 2012. In particular, under DoD’s plans, there would be significant increases in the costs of military health care, compensation of the department’s military and civilian employees, and various operation and maintenance activities.”

If the topline is coming down as projected and the O&S accounts are rising, it is the acquisition accounts that must bear the burden. During the last defense drawdown from the late 1980s to the late 1990s, acquisition spending went down by 60 percent. The impact of such a severe cut in procurement and R&D was not as devastating as one would presume for two reasons. First, the Reagan buildup provided a large pool of modern weapons with relatively low operating costs. Second, the cost of personnel was not rising as fast as it is today because a culture of entitlement had not taken hold. A similarly draconian decline in acquisition spending over the next decade as occurred twenty-five years ago will result in a military that is both small and technologically underwhelming.

No amount of tinkering with the procurement accounts — buying unmanned aerial systems instead of manned platforms — will solve the problem. If the topline is going down and a reasonable level of acquisition spending is to be maintained, the only two choices are radical reform of the O&S accounts or cutting hundreds of thousands of personnel from the military. If neither of these alternatives is feasible then the acquisition accounts will be crushed between the Jaws of Death.