To Reduce Defense Spending You Must Cut Personnel

In his appearance yesterday before the House Armed Services Committee (HASC), Secretary of Defense Robert Gates took issue with efforts by some lawmakers to try and reduce the current budget deficit on the back of defense. “I would tell you, with a $1.6 trillion deficit, if you cut the Defense Department by 10 percent — which operationally would be catastrophic — that’s $50 billion. You haven’t gotten very far toward dealing with the deficit.” Gates has sought to do his part to rein in defense spending, promoting a series of efficiency moves that, among other changes, reduced defense spending over the next six years by more than $70 billion.

While there is the general sentiment on Capitol Hill for reducing spending everywhere, even in defense, the devil is always in the details. Look at the enormous expenditure of political capital it took to finally zero out funding for the alternate engine. Secretary Gates is experiencing push back from senior Republicans on the HASC regarding his plans to shrink the size of the Army and Marine Corps by nearly 50,000.

The problem is that the only way to find real savings in the defense budget is by reducing people costs. As any CEO will tell you and many state and local politicians are learning to their regret, people costs dominate private and public sector budgets. This is particularly the case for federal workers who earn pay and benefits far in excess of their private sector counterparts. On average, federal workers earn nearly double the total compensation of private sector workers: $123,049 versus $61,051. The average private-sector employer pays $9,882 per employee in annual benefits, while the federal government pays an average of $32,115 per employee.

The cost of active duty military personnel is even greater than that of civilians working for the Department of Defense. This is the natural consequence of an all-volunteer military. The average total annual price for someone on active duty is $160,000 not including the costs of deploying and maintaining that individual forward, say in Afghanistan. Then the total price tag rises to about $1,000,000 a year. Moreover, in an era of exploding pension and health care costs, a veteran who enters the military in his or her early twenties and retires today after a twenty-year career will receive benefits for more than three decades. Moreover, retired veterans pay far less for lifetime medical benefits than do their civilian counterparts.

So it should come as no surprise to anyone that Secretary Gates is planning now to cut the size of the Army and Marine Corps, even as we are still engaged in Iraq and Afghanistan. In all likelihood, the proposed cuts, along with further reductions in so-called overhead personnel, including 100 general officers, will not be sufficient to close the inevitable defense resource-cost gap. Fortunately for him, the defense secretary will be gone from office when the nation has to face the question, can it afford an all-volunteer military?