The Consequences Of Defense Spending Cuts Will Be Different This Time

This is not the first time the Department of Defense (DoD) has faced significant, even “draconian” spending cuts. This will be the fourth turn of the boom-and-bust screw over the past sixty years. The last time we went through one of these cycles was over the ten years between FY 1989 and FY 1998 when defense spending declined from $524 billion to $374 billion or $889 billion cumulatively (all figures are in inflation adjusted dollars). This time the reductions cumulative effect on future defense spending resulting from both the initial cuts imposed by the Budget Control Act plus sequestration would cause DoD’s budget to decline from a planned expenditure of $571 billion for FY 2013 to $474 billion in FY 2021 for a total decline over that period of $1.029 trillion. So theoretically it should be possible to take an equal amount from the defense budget this time without catastrophe ensuing.

Except . . .

The last time defense spending went down the actual year-to-year declines were relatively modest; most of the savings came from the difference between planned expenditures and available resources. The actual decline in defense spending for the first year of the Reagan-Bush drawdown, FY 1990, compared to actual spending for FY 1989 was only $5 billion and the reduction compared to projected spending was some $20 billion. No one year experienced reductions greater than $10 billion. Contrast this approach with a now mandatory cut to the defense budget for FY 2013 of $57 billion compared to FY 2012 which itself was $26 billion lower than planned as a result of the first round of mandatory spending cuts for a total of $83 billion in reduced spending. As a result of sequestration, the new FY 2013 defense budget will be over $100 billion less than what the Pentagon projected for its future defense spending just one year ago. Oh yes, lest we forget, DoD has already absorbed over $400 billion in cuts as a result of the force structure and procurement decisions taken by former Secretary of Defense Robert Gates.

The last time defense spending went down it came after a defense buildup which included a significant increase in acquisition. The Pentagon had been able to modernize its fleets of tactical fighters, strategic bombers, surface combatants, nuclear attack submarines and armored combat vehicles. Under Reagan the military was buying some 240 F-16s a year, more than all DoD’s aircraft purchases in 2011. Over the past decade, for example, the Air Force’s inventory of aircraft has actually declined by some 15 percent even as the average age has increased. The Pentagon essentially has lived off the Reagan build up for the last quarter century and now faces a procurement bow wave that it cannot avoid.

The last time defense spending went down the military had capacity it could shed, albeit only at the cost of extra wear and tear on the residual force. The Army went down by almost 60 percent from 18 divisions to 10, the Air Force by around 50 percent, from 36 wings to 20 and the Navy by nearly 40 per cent, from 546 to 298 ships. At the same time, however, the number of missions the military participated in went up four fold. This time around, cuts would reduce the Army to 4 divisions, the Air Force to 10 wings and the Navy to around 200 ships. However, the demands on that military, excluding Iraq and Afghanistan, have risen further under this Administration than its predecessors back to the Clinton Administration. Today there are even U.S. troops in Uganda. The U.S. military has taken increased responsibility for dealing with large-scale humanitarian problems at home and abroad. Regardless of who occupies the White House, this nation maintains a global foreign and security policy and wants a military that can support it.

The last time defense spending went down the threat was receding. The Soviet Union was on its last legs, Iraq had been thrown out of Kuwait and America, to use then-JCS Chairman General Colin Powell’s words, “was having trouble finding enemies.” Today this is not the case. China is a rising military power. Russia has plans to modernize all branches of its military. North Korea, Iran and Syria have already or are attempting to develop nuclear weapons and long-range ballistic missiles, and global terrorism remains a potent challenge. Without a serious modernization program, U.S. military advantages in such areas as space systems, precision weapons, airpower and sea control could vanish.

The last time defense spending went down the United States was in an entirely different economic situation. Deficits were a small part of the overall federal budget. The United States was the world’s premier manufacturing nation. The defense industrial base included a significant number of large prime contractors in each major sector (ships, aircraft, vehicles, etc.). The baby boomers were approaching the height of their productive years. Today, the United States has lost nearly a third of its manufacturing jobs. At best, there are two major defense companies in each of the major sectors. The baby boomers are graying and retiring. The future of this country as an industrial and technological power is uncertain, at best.

The last time defense spending went down, everything was different. So too will be the consequences of catastrophic reductions in defense spending. This time they could be, well, truly catastrophic.