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What Defense Budget Reforms Could Panetta Accomplish?

June 9, 2011 at 12:00 AM EDT
With Leon Panetta facing confirmation hearings over his secretary of defense nomination, Jeffrey Brown discusses how Panetta could handle major challenges within the massive defense budget with Gordon Adams, who supervised nation security budgets under President Clinton, and Heritage Foundation research fellow Mackenzie Eaglen.

JEFFREY BROWN: Last night, we debated the state of play on U.S. engagement in Afghanistan. Tonight, we focus on the other major challenge for the new defense secretary: the military budget, which is $730 billion for this year, more than double what it was in 2001.

And, for that, we get two views. Gordon Adams supervised national security budgets at the Office of Management and Budget in the Clinton administration. He now teaches at American University and is author of the book “Buying National Security.” Mackenzie Eaglen was a congressional staffer on defense issues and served at the Pentagon. She’s now a research fellow at The Heritage Foundation.

Welcome to both of you.

GORDON ADAMS, American University: Thank you.

JEFFREY BROWN: Gordon Adams, I will start with you.

Frame the debate that Leon Panetta is stepping into. Does everyone agree that some cuts are necessary, so it’s how much and how to do it?

GORDON ADAMS: Yes, I think almost everybody now believes we are at the edge of what you call a build-down in defense.

JEFFREY BROWN: A build-down?

GORDON ADAMS: And the question is going to be, how fast do you go? What things do you choose to make a priority? What period of time do you cover with it?

I don’t think anybody at this point is really arguing we either can or ought to increase the defense budget. And, frankly, with the end of the wars, and with attention on deficits and things like that in the general public, looking at defense as part of the equation we have to deal with to solve the debt and deficit problem is clearly where the Congress — much of the Congress is at, where the administration is at, and where the American people are.

JEFFREY BROWN: Will you — can we get an agreement on this part? And how would you frame where things are at?

MACKENZIE EAGLEN, The Heritage Foundation: Well, I would say, though, that we’re almost there.

President Obama, when he laid out his deficit reduction goals in his speech in April, said $400 billion from security spending, of which we expect the military to bear the majority of that.

But he knew that he had to have changes in foreign policy to justify any fundamental cuts, beyond sort of the tinkering with the defense budget that we have seen under Secretary Gates here and there, because, fundamentally, this president has surged in Afghanistan, sent troops to Libya, as well as Japan and Haiti for humanitarian relief missions.

And so what we are actually asking the military to do has grown every single year since 9/11. And so you cannot precipitously start cutting without justifying or changing something in our foreign policy. Even President Obama acknowledges that.

JEFFREY BROWN: And, just to again help people understand this budget, are those things you just named, is that the reason why the budget has gone up? Why has the budget gone up so much in 10 years?

MACKENZIE EAGLEN: Well, partly because we took a budget holiday in the 1990s in terms of buying equipment that the troops needed.

For example, we saw this manifested in Iraq, when service members families were sending body armor, and the vehicles were not up-armored to combat improvised explosive devices, for example.

So, we have seen the budget grow significantly since 9/11, but it’s been largely on what we call consumables, mostly related to current operations, as opposed to investing in the future.

JEFFREY BROWN: Would you agree with that? Because this is important in thinking about where we go from here.

GORDON ADAMS: Oh, it’s very important. And, in fact, I don’t fully agree with that.

Mackenzie is right. We did take what they called a procurement holiday in the 1990s. It was the right time to take it because we had a very good bunch of equipment there, tanks and new ships and things that had been bought during the Reagan administration back in the 1980s.

But, really, the reason that the defense budget has doubled and is now higher in constant dollars, which means setting inflation aside, than at any point in our history since the end of the Second World War, the real reason is because we went to war. We funded that war through extra budget appropriations called supplementals to the defense budget.

But, because we were at war, the Congress was quite unprepared to take a hard look at the basic defense budget, aside from what we were paying for war. And so, those costs also crept up at the same time as we were spending money on the war.

So, in fact, we have more than doubled the defense budget over the last 10 years. We have done it without serious scrutiny. So, at this point, it really is time for scrutiny and much of that can happen without jeopardizing our national security.

JEFFREY BROWN: Well, so, when the president talks about the $400 billion over 12 years, is that reasonable? Or is that not even enough?

GORDON ADAMS: Well, not only is that reasonable, but I would suggest that that — it may be the best that the Pentagon is going to do.

The president said $400 billion over 12 years. All these commissions that have been studying the debts and the deficit and making proposals about what to do, among other things, about defense have been saying somewhere between $500 billion and a trillion dollars over 10 years, which is shorter than the president’s 12 years.

Now, you can do that. In fact, you can probably do what the president said and still let the defense budget grow with inflation. But you could get those deeper cuts as well without jeopardizing American national security, and given the debt/deficit concerns, given the end of the wars, I think we’re likely on a deeper trajectory of cutting than the president has said so far.

JEFFREY BROWN: Do you think that is doable and a good thing to do, to go even more than $400 billion?

MACKENZIE EAGLEN: There are absolutely savings to be found inside the defense budget, starting with troop drawdowns in Iraq and Afghanistan. That is money that can be reinvested elsewhere in the federal budget or applied towards debt and deficit reduction.

Inside the defense budget, yes, there are areas ripe for examination and scrutiny. And I think that’s the only thing you can do with taxpayer money, every program should stand on its merit.

The challenge here is that Secretary Gates has made what he acknowledges were the easy cuts, because he said the only ones left are hard. The easy cuts tend to be things like weapons systems and equipment for our forces. But that is only one-seventh of the defense budget.

And, usually, while you kill that program, you don’t eliminate the need for something to be bought in its place. I would argue the real challenges here are structural, and they’re harder to get at. They’re in things like overhead. They’re in personnel. They’re in compensation. They’re in agencies and business processes, logistics.

A lot of the — that you can’t just go into a line item in the budget and find it. You actually have to make changes fundamentally. And these are the things that — and even Leon Panetta may not have time to do with just a year-and-a-half in office.

JEFFREY BROWN: Doing these things while maintaining national security, because that’s going to be the debate.

GORDON ADAMS: Yes. And I think it’s important to keep in mind that, in all of this atmosphere, we have doubled the defense budget and we have the only military in the entire globe that is capable of global operations, global deployments, global flying, global sailing, global communications, global infrastructure, global transportation.

We’re the only military that can do that. And, frankly, even with a trillion dollars over 10 years, which is only 15 percent of the currently projected budgets, we will still at the end of that process have all those same global advantages.

So, we’re starting from a very strong point. I think Mackenzie is right; there are a lot of things internally you can do in the budget. When we have got nearly a third of the force that’s never deployed because they are operating the back office, the infrastructure in the Defense Department, you can do an awful lot to clean that up and make savings.

JEFFREY BROWN: But do you agree that we can maintain all that we want to do, all that we should be doing, all that, politically, there will be calls to do, while making the very large cut? He’s talking about — you’re talking about much larger cuts than the president is talking about.

MACKENZIE EAGLEN: Right. That may be the area where we disagree the most.

I would be worried that you would cut past the fat and muscle — and into muscle and bone at that point with those types of cuts. Now, if it is done rationally, like I said, on the overhead side — but I’m concerned that those core capabilities, what’s basically made us a superpower, as the United States, a lot of the investment that was made in the ’80s, the ’90s in technology and even this decade, the things that give our military its global strength and reach, those aren’t birthrights.

They have to continuously be reinvested, and you have to continuously innovate and come up with new technologies and developments, things like drones that we have now. All of these things for the future, we still have to do that today.

And so I would be worried that we would over-focus on what I said was just one-seventh of the budget, which is basically the equipment, without looking at the rest of the areas in the budget, which — which, again, where we do agree are ripe for examination.

JEFFREY BROWN: And just — and just briefly, because you both watch the political process, all of these things are extremely politically charged, right? We see it every time we…

GORDON ADAMS: This is enormously difficult to do.

The services don’t like to give things up. The industry doesn’t like to give things up. Members of Congress have got things being made in their district that they don’t like to give up, bombers, ships, whatever they are, bases where people operate. It’s really hard to do.

If there is anybody who can pull this off, Panetta is a very good choice, because he understands budgets.

JEFFREY BROWN: You worked with him…

GORDON ADAMS: I worked with him for three years and I know him very well. He understands budgets. He understands security, especially after his stint at the CIA. And he understands the Congress.

As he himself said today, he’s a creature of Congress. They love him up there. He’s very effective up there.

JEFFREY BROWN: But, briefly, he is going to run into opposition in Congress.

MACKENZIE EAGLEN: Yes, but what we have seen under Secretary Gates is that you can cut the defense budget and get buy-in, basically, from Capitol Hill.

The secretary started his own reform efforts with a goal to save $100 billion. The White House this year asked for $78 billion from defense over a five-year period, and he went along with that. I don’t know about how he feels about the $400 billion, since he is leaving. But you can actually get the Hill to go along with it when they are smart cuts, as opposed to…


Mackenzie Eaglen, Gordon Adams, thank you very much.


GORDON ADAMS: Thank you.