Defense Department must prepare for deeper budget cuts: analysis.

Author:Berteau, David

Many analysts date the beginning of the current defense drawdown to August 2011, when the Budget Control Act [B CA) of 2011 was adopted.

But the decline in defense budgets has been under way for some time. Defense spending peaked in fiscal year 2010 at almost $700 billion, which consisted of $560 billion for the base budget and almost $140 billion for overseas contingency operations, or OCO. From that point, both the base budget and OCO have declined in real terms and, in the 2013-2017 budget request submitted by President Obama in February, declined in nominal terms from $530 billion to $525 billion for the first time since 9/11 as the Defense Department started implementing the BCA budget caps.

The $487 billion over 10 years defense drawdown imposed by the BCA followed a previous round of cuts by former Secretary of Defense Robert Gates of $400 billion in program reductions or terminations begun in early 2010 and $178 billion in claimed "efficiency savings" announced in August 2010. The Gates reductions and savings, though, still left modest budget growth in the Defense Department. The latest cuts are deeper.

The prospect of still another drawdown looms over the department, since the Budget Control Act mandates a sequester mechanism that will impose another $500 billion over 110 years in defense budget cuts unless Congress either reverses the law or approves by Dec. 31 a $1.2 trillion deficit reduction package of spending and tax cuts.

The Defense Department is coping with this succession of discrete defense drawdowns by action, by gimmickry and by denial.

When the Defense Department released in January its new "strategic guidance," President Obama said the "size and the structure of our military and defense budgets have to be driven by a strategy not the other way around." This assertion has been echoed by virtually all senior defense officials, including Joint Chiefs of Staff Vice Chairman Adm. James Winnefeld who said that "this was all driven by strategy" and that after assessing the geopolitical environment, the nature of warfare and "the fiscal environment we're in ... We've crafted a strategy that now can guide our budget decisions."

From a timing perspective, however, the new strategic guidance and the 2013-2017 budget request had to coevolve since they were prepared in parallel from September to early January. Decisions on cuts were reflected in the strategic guidance, and vice versa. The department undoubtedly iterated between the two processes--strategy formulation and budget...

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