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The Senate Armed Services Committee begins hearings today on the controversial nomination of Chuck Hagel for Secretary of Defense. If confirmed, one of the first things he will face at the Pentagon is a looming budget crisis on March 1. That is when across-the-board spending cuts would kick in, unless Congress and President Barack Obama agree on a plan to reduce the federal deficit before then. The effects of sequestration could be compounded later in March if Congress fails to pass a 2013 defense appropriation bill and extends the continuing resolution instead. Hagel says the cuts would be “devastating” to the Pentagon and harm military readiness. A panel joins Diane to discuss uncertainties over defense spending and how they could affect national security.
- Kate Brannen defense reporter at Politico.
- Gordon Adams professor at the School of International Service at American University, fellow at The Stimson Center, and former senior White House defense budget official in the Clinton administration.
- Thomas Donnelly defense and security policy analyst, director of the Center for Defense Studies at the American Enterprise Institute, and co-author of "Lessons for a Long War: How America Can Win on New Battlefields."
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Former Sen. Chuck Hagel goes before the Senate Armed Services Committee today. If confirmed as defense secretary, he could face automatic spending cuts on March 1. He says the cuts would be devastating to the Pentagon and harm military readiness.
MS. DIANE REHMJoining me to talk about the looming budget crisis at the Pentagon: Gordon Adams, professor at American University, former senior Clinton administration budget official for national security, Kate Brannen, a defense reporter for Politico and Thomas Donnelly, director of the Center for Defense Studies at the American Enterprise Institute. I hope you'll join us. Weigh in with your thoughts, your comments. Call us on 800-433-8850. Send us your email to email@example.com. Follow us on Facebook or send us a tweet. Good morning to all of you.
MS. KATE BRANNENGood morning, Diane.
PROF. GORDON ADAMSGood morning, Diane.
MR. THOMAS DONNELLYGood morning, Diane.
REHMGood to have you here. Kate, I'll start with you. There's been so much controversy about Chuck Hagel, his nomination as secretary of defense. What are you expecting this morning? What are you expecting in terms of that nomination?
BRANNENI think this morning, you'll see it's a big debut for a couple of the members on that committee: Sen. Inhofe, it's his first time as ranking member -- ranking Republican, Sen. Ted Cruz, a new senator from Texas who is firmly opposed to Hagel. They'll be using the committee, I think, to sort of introduce themselves in these positions. You're going to see, I think, a lot of theatrics, a lot of show. But at the end of the day, the vote will probably be close in the Senate, but most people think that Hagel will get confirmed and will take the job.
BRANNENWell, I think earlier on, a lot of people were looking to Sen. Schumer to see which way he would go. When he came out firmly for Sen. Hagel, that sort of showed Democrats will definitely get in line with the president on this one, which was up in the air for maybe a matter of days. And so it won't be as close as maybe people thought a couple of weeks ago. But you'll probably see pretty strong opposition from the Republican side.
REHMGordon Adams, how do you see it?
ADAMSI think he's likely to be confirmed. A lot of this, Diane, I see as political theatre. We have wonderful times with our political theatre in Washington, and this is one of those cases. I think the Republicans, particularly Senators Inhofe and Cruz, are likely to be very tough on him to day. There's a lot of questions that he's going to be asked about his views on Israel, his views on Iran, views on Afghanistan. He's going to be grilled very hard. And I heard Sen. Levin's opening statement this morning.
ADAMSHe's very -- made it very clear he intends to come down very, very quickly on issues of budget and sequester and where does the secretary stand in. And frankly, from my point of view, that's the major challenge that the secretary will have if he goes into this office and he's confirmed, is how do you manage a drawdown at the Defense Department. And I think Sen. Levin made it very clear that that's going to be an issue in today's hearing as well.
ADAMSUltimately, I think he's going to be confirmed. And I don't know that -- what the vote is going to be. It wouldn't surprise me to find 30 or 35 votes against, but that puts 60, 65, 70 votes in favor. And that's plenty adequate. It's very rare for a committee to reject a nominee. Sen. Tower was rejected, you'll remember, back in the 1980s.
ADAMSThat was rare that he was. And he had pushed a lot of members of the Senate the wrong way over the years, and they took it out on him. But that's extremely uncommon. So I think he will be accepted.
DONNELLYOh, I'll make it three, a consensus that he'll make it. Unlike the Tower problems, I mean, Chuck Hagel is not necessarily fondly regarded or remembered as a senator. But the Tower nomination was a scandal as well.
DONNELLYAnd the combination of the two is what probably did Sen. Tower in. And for all the objections and controversy about Sen. Hagel, it's not about his personal conduct or his financial disclosures or anything like that.
REHMExactly. Tom Donnelly, if Sen. Hagel is confirmed, talk about the budgetary challenges he's going to have to face soon as he takes office.
DONNELLYOh, that's true. I mean, he's inheriting a job that's going to be -- that anybody would find to be a real big challenge. The problems that the department faces are a result of the larger budget face-off that has any argument over spending and entitlements and taxes that we've been in the grip of for the last two years almost. And the Defense Department -- cuts to the Defense Department are the one thing that the two parties can agree on.
DONNELLYAnd Paul Ryan, the head of the Republican Budget Committee, really, in many ways the leading figure on this and the Republican Party basically acknowledged that sequestration cuts, which will take another $55 billion or so at the Defense Department this year, are likely to go forward. And that's going to have immediate and vague consequences for the U.S. Military.
REHMWell, and of course, Gordon, in a 2011 interview, Sen. Hagel said that the defense budget was bloated. The Pentagon needed to be paired down. Now, is he going to say the same thing today?
ADAMSI'll bet you a large amount of money, he won't use the word bloat, though that -- I'll bet an equally large amount of money that will be thrown at him during the hearing. So I have no doubt that there's going to be a question about bloat. You know, and he didn't really define it when he said that, but he faces, I think, a major management challenge. I think Tom is right here. This is, in my judgment, the biggest challenge he has. We're in a defense drawdown. Numbers are coming down.
ADAMSAnd, frankly, whether it's through a sequester or in general over the next few years, the defense budget is going to go down. And it's going to go down below what Sec. Panetta currently projects in the defense budget. So his big challenge is how do I get my arms around some major management issues in the Pentagon? How do I get the acquisition system under control and the cost of programs under control? How do I get the operations account, what they call operations and maintenance, which is really the back office if you think about it?
ADAMSIt's the way the Pentagon runs itself. It sets up training and education and buys fuel and cuts the grass at Fort Belvoir and serves the food at Bagram. All of those things that involve depots and bases and so on are all operating expenses. It is huge. And if there is bloat, so to speak, it's in that area. And it's getting your arms around it is tough.
ADAMSAnd he's got a huge challenge that Secretary Panetta and Secretary Gates before him and others have tried to cope with. And that's what do we do about the pay and especially benefit system that is beginning to eat the budget alive? And it's very hard to get this cost under control, largely for political reasons. So the management issue is the thing he's got to worry about.
REHMAnd, Kate, of course, at the time, he wasn't talking about sequestration. He was talking about other cuts.
BRANNENHe was. I think the Pentagon, too, and people in the industry would agree, for sure, there's bloat at the Pentagon. Maybe they won't say that publicly, but they'll certainly say it privately. I think the Pentagon's response would be, well, give us the time and the space to identify the bloat to make smart, strategic choices and sequestration and what they call a continuing resolution, sort of a temporary spending measure, which the Pentagon and the rest of the government is currently operating under, doesn't allow for those kinds of choices.
BRANNENThey don't allow -- it doesn't allow for the Pentagon to set priorities. Sequestration hits across the board. And so that's really, you know, the biggest challenge for them operating under those kinds of automatic cuts.
REHMNow, when you see a drawdown in Afghanistan, when you see Secretary of Defense Panetta talking about doing a different kind of warfare, if you will, and more of that responsibility shifting to the CIA to a small footprint, if you will, for the U.S., isn't that going to make a huge difference, Tom Donnelly?
DONNELLYWell, I think it will make a huge difference, perhaps not in the way that the administration intends. This kind of language reminds me of nothing so much as the kind of thing that Secretary of Defense Don Rumsfeld said at the beginning of the Bush administration, that we're going to, you know, be offshore balancers to use the geeky term and to use these new technologies. I'm very skeptical that they'll have the long-term effect that people imagine.
DONNELLYYou know, there are fabulous tools, very precise, but they don't have a long-term effect and -- particularly in places such as the Middle East, which is, you know, not to say on fire, but there are many crises across a huge part of the planet. Whether you can really affect the outcomes in Egypt or Syria or Mali or Libya, now in Iraq where al-Qaida in Iraq is getting off the mat or whether there will be a long-lasting effect in Afghanistan and Pakistan after we drawdown, I think is -- to me, it seems very unlikely, honestly.
ADAMSLet me answer the question, Diane, in a slightly different way. If you think about the major sort of areas of types of things we're asking the military to do, let's divide them into four. Let's say there's major war, there's small, irregular, you know, counterinsurgency, et cetera, type of things, there's presence globally and there's whatever the role is going to be with respect to the homeland.
ADAMSIf you think about those four areas that the Pentagon might be operating in, we're at a point where the likelihood of a major war, most people agree, a major invasion by the U.S. of some other country is pretty low likelihood. I won't say it's zero. It's never zero. But it's pretty low likelihood. We're at a point where presence is kind of ongoing activities. You have a lot. You have a little. You move it around. You're sailing.
ADAMSYou're flying. You're steaming. You're sometimes deploying at overseas bases. In the homeland area, the primary challenge for the Defense Department is really cyber security, which is not a force-intensive effort. The real question is irregular warfare, and that's the question you raised. These are the Special Forces and CIA. And what are they going to do?
REHMGordon Adams, he is professor in the School of International Service at American University. Short break here. We'll be right back.
REHMAnd welcome back. Sen. Chuck Hagel faces his confirmation hearings this morning. And indeed, he also faces the challenge of huge budget cuts if and when he gets to the Pentagon. Our guests today all believe he will. Kate Brannen, a defense reporter for Politico, Gordon Adams of American University, Tom Donnelly of the American Enterprise Institute. One of the biggest items on the defense budget is the single largest line item which is the F-35 program. The Pentagon itself has called the F-35 program acquisitions malpractice. Why is it still there, Kate?
BRANNENThe Pentagon is still quite firmly committed to the program, which some people will describe as three programs in one because the Air Force, the Navy and the Marine Corps are all buying different versions of this stealth fighter, which some people say are entirely different platforms, entirely different planes. So it's an enormous program.
BRANNENIn his advanced policy question, sort of his written testimony, Sen. Hagel vowed to take a close look at the program, a close look at the health of the program. So you can expect to see that from him. Just at the end of last year, Canada, who's an international partner on the program, there was news that they were out, and then that sort of got backtracked too. They're going to take an even closer -- sort of scrutinize their decision to invest in the program.
BRANNENSo without a doubt, within the Pentagon and with the partners around the world who are also looking to cut their budgets, you know, in your Europe and in Canada, you'll see this program face a lot more scrutiny. But I think the commitment to it, it's part of the new defense strategy that was introduced in January. It's sort of a key part of the Air Force than Navy's posture. So I don't see it going away. But it better measure up, I think.
REHMYou know, it's so interesting. This has been going on for years. It's billions and billions of dollars behind. Lockheed has been saying, we'll get it to you. We'll get it to you. Promises, promises. What's going to happen with it, Gordon?
ADAMSI think to some degree sadly, it's going to survive. There is a big reason, and there's approximate reason. The big reason is when you go through a drawdown and you bring down the budget, what you usually do with big programs like the F-35 is you do what sounds contradictory, you stretch and you shrink. That is to say you stretch out the rate at which you buy it, you shrink the number you buy, so instead of buying 29 in a year, buy 24 and then you stretch it out so you're buying them over a slow period of time.
REHMI want to know why we're buying this. Where is the political pressure for this (unintelligible) ?
ADAMSF-35 is contracted in about 40 states and almost all but a handful of congressional districts like most big programs. It's fairy dust for political purposes. It's also a program the Marine Corps really wants. They desperately want this aircraft to replace their AV-8B. So -- and they're a powerful lobby on Capitol Hill for this program. The Navy could buy F-18s and wait and see if something really works here. The Air Force will buy it because they want a low-cost fighter.
ADAMSSo it's the kind of thing where the services like it, the contractors like it, the local states and districts like it. And so it has a tremendous wave of political pressure that's going to support it. And the hidden secret is it's got these international partners, and the international partners want it. The Brits want it on their flight decks. The Canadians want it for their Air Force. And it gets really hard. And the last thing that supports it is for the American defense industry, this is the only low-cost, affordable cell fighter overseas. It's the one they can sale.
REHMWhy is it so far behind? Why has it gone billions and billions over budget?
DONNELLYThere are three fundamental reasons: one, the program was designed to be -- the plane was -- the program was structured to be able to invent and produce the plane together from the start. The Pentagon calls this concurrency. This program was an invention of the Clinton administration, and they felt a very strong need to field a new generation of fighters with stealth -- with very robust stealth capabilities so you can put stealth aircraft on aircraft carriers.
DONNELLYPast generations of stealth required laboratory-like conditions to take care of the codings. The thing about the F-35 is they can survive an assault water environment, and you can beat the daylights out of it, and it can still be a stealthy plane. So that's a huge advance. And so...
REHMA stealthy plane but not a healthy plane, yeah.
DONNELLYI'm not done yet. So they set a very high bar from the start. Then they -- so they got all the services to agree, and they drew in all these allies that Gordon was talking about not just European allies but East Asian allies. So this is a sort of free world fighter, and it's the only one that's available, and we organize this posse of nations.
REHMBut it's not available.
DONNELLYIt is available actually. The final recipe for this perfect storm was just what Gordon was talking about: mismanagement on the part of the government. When you say, I want it now, I want it brand new, but I'm going to take the money away. I'm not going -- I'm going to change my plan of acquisition essentially year to year. So it's -- look, the company is not free from -- and the suppliers are not free from guilt in this regard. But this is the outcome of inconsistent acquisition policy really now for 20 years.
REHMKate, how do you see it?
BRANNENWell, I definitely see on Capitol Hill to a growing impatience. Sen. McCain has, like, no patience for this program anymore, at least vocally. I don't know if he's putting it into law, but he will stand up and rant and rave against it. And the main issue is what Tom brought up, the concurrency. The fact that you're testing it at the same time you're buying it, and problems come up in the test that then you have to fix, acquiring more money, and the costs just keep going up. And so you see a lot of language on the Hill against this strategy of testing and buying at the same time.
REHMIs there an estimate as to how much this plane has cost thus far?
BRANNENI'm going to look to my left because I don't know that the latest is.
REHMAll right. Gordon.
ADAMSI know it's probably several tens of billions of dollars so far.
ADAMSAnd it's likely to be including the operations cost, a trillion dollars, but then it gets to the end of its life cycle. It's living demonstration, Diane, of something I call a law of two, 2 1/2. The law of two, 2 1/2 is almost everything we buy costs twice as much, takes twice as long and gives us half the performance we originally thought it was going to give us.
ADAMSAnd F-35 is fulfilling a long string of programs like this that go back decades.
REHMAll right. Go ahead, Tom.
DONNELLYJust look, I mean, part of this is just the cost of a modern airplane. Look what's happening with Boeing's Dreamliner which cost actually more than an F-35 and is having development problems. This is -- I mean, some of this is just engineering out the solution to the problem. And if you keep cheese pairing on the development costs and don't give adequate time for development to happen, then you're, you know, if you want to invent it and buy at the same time, you're asking for trouble.
REHMAll right. We could spend the whole hour talking about the F-35. We won't do that. Let's talk about how these cuts, if they do go into effect, could affect the various branches of the armed services, Kate.
BRANNENWell, the Pentagon is facing two sort of -- two problems right now, both of which happen in March. The first is sequestration. The deadline's March 1, and that's an across-the-board hit. There's very little flexibility in how it's applied across the services and within the service. So they have to cut training. Training would get cut the hardest because in order to protect funding for Afghanistan especially the Army and Marine Corps.
BRANNENThey have to cut particularly deeper into their other training programs for other contingencies. At the same time, the Pentagon and the rest of the government doesn't have a budget yet for 2013. So they're operating at 2012 spending levels. This is a huge problem for the Pentagon almost as bad as sequestration. I would say it's not quite as difficult. But it particularly hits what Gordon was talking about earlier, the operation maintenance accounts.
BRANNENAnd again, it's that same problem. In order to protect war funding, they've got to really cut deeper into their training hours. So this -- and also their equipment maintenance, so you'll see, you know, ship overhauls, Air Force flying hours scaled way back. And this affects what the military calls its readiness, its ability to be, you know, prepared to deploy, you know, given a moment's notice.
BRANNENAnd so the Army, the Air Force, the Navy, they are, on somewhat of a PR campaign that's lasted since the Budget Control Act, trying to convince Congress this is painful, that we won't be prepared by the end of the year for other contingencies. So -- but so far, it's still falling on somewhat deaf ears up on Capitol Hill.
REHMSo it comes down to a measure of national security as a whole, Tom.
DONNELLYHere's the guidance the chief of naval operations, Adm. Jonathan Greenert, is giving to the Navy if sequestration happens. There will be no deployments to the Caribbean or to the South American waters. They will limit their European deployments only to the ships that do the ballistic missile defense mission.
DONNELLYThey will reduce the overall number of ships and planes and days at sea. So whatever is out there will have less stuff, and it won't be there as long. They'll cease -- completely cease -- stateside training except for the units that are right about to deploy, and they'll lay off some more Navy civilians. And, you know, that's the effect that will go into effect March 1.
ADAMSI think that's actually putting the cart before the horse. As Kate said, the service chiefs have been on a jihad. They've especially been on jihad for the last two weeks, and I think that jihad is frankly theater. And it's theater -- look at the timing, around the timing when the old secretary is leaving and the new secretary isn't confirmed yet. I've been in this town a long time. That's right at the moment when the service chiefs strike and attempt to box in the secretary with respect to their budget.
REHMBefore he gets there.
ADAMSBefore he gets into the building, before he has a chance to set his own priorities in the operations and maintenance area, which is the area covered by the things that Tom was listing off. They have -- and here I'll disagree slightly with Kate. The greatest flexibility that you have in the sequester accounts is in the operations and maintenance accounts for reasons I could explain technically, but it would take too much time.
ADAMSWhat Greenert has done is take instructions from Secretary -- Deputy Secretary Carter, who asked for a plan by Feb. 1, which is tomorrow, and pre-empted the plan by announcing what he would do. And this is classic Washington Monument.
ADAMSI am going to take down and close the Washington Monument when the Department of the Interior budget is closed because that way everybody in Congress will scream because all the tourists from the streets will be unhappy. So we got a classic case of Washington Monument going on, and frankly Adm. Greenert is the most egregious offender.
BRANNENWell, the services are tasked with two things. I interviewed Deputy Defense Secretary Ashton Carter yesterday, and he has told them both to start taking immediate actions -- has authorized them already -- to slow spending, to prepare for the worst-case scenario, but slow spending immediately. So that means civilian hiring freezes, release temporary workers, fewer air show flying hours, scale back on unnecessary studies, reports, those kinds of things.
BRANNENBut then the second piece of guidance from Dr. Carter was and also plan for the worst-case scenario. And that's were some of these more dire situations come in, and that's if Congress doesn't act and pass a budget or solve sequestration.
REHMI thought it was interesting. He told you he'd give back a fifth of his pay each month as a gesture of solidarity to the 80,000 employees.
BRANNENHe did. Under -- if sequestration happens, the Pentagon has said it will have to rely on furloughs, DOD civilian furloughs. Every -- almost every DOD civilian, he's saying, would have to take off one day a week from April to October, and that amounts to about a 20 percent pay cut. And so he said, you know, it wouldn't apply to me because I'm a political appointee, but in solidarity, I'll hand over part of my pay.
REHMAnd you're listening to "The Diane Rehm Show." Let's open the phones. We've got lots of callers waiting. 800-433-8850. Let's go first to Kingsland, Ga. Good morning, John. You're on the air.
JOHNGood morning. Thank you. One of your guests continually refers to the F-35 as a low-cost fighter at $100 million a copy or whatever it is. In what sense is it a low-cost fighter plane?
ADAMSI'm not sure that was I who said that. That might have been Tom, but...
DONNELLYActually, it was you.
ADAMSIt is -- all costs are relative in the Department of Defense, and the relative here happens to be the F-22. So for -- ever since the 1970s, the Air Force has tended to have a program where they have one fighter that's highly sophisticated and highly expensive and another fighter that is relatively less sophisticated and less expensive, so in this case with the F-22, since we bought so few of them, running at a cost of three or $400 million per plane, $100 million per plane sounds cheap.
REHMAll right. To Winston-Salem, N.C. Good morning, Hayes.
HAYESGood morning, Diane. Thanks for taking my call.
HAYESThe reason I'm calling is that I recently read somewhere -- and I can't remember exactly where -- that the federal government maintains millions of square feet of warehouse space full of military and intelligence hardware that was never requested by the Pentagon and will probably never be used, but because it was built in congressman so-and-so's district or senator so-and-so's district, it was built anyway. And I'd like to know how that would affect the spending and the federal budget if that were looked at.
REHMNow, is that a fact you know?
ADAMSI do not know for a fact that there is equipment that was built that Congress asked for that the Pentagon didn't want and is held in warehouses. But I will say it's likely that there are a lot of warehouses, and they are full of an awful lot of stuff because the department and the services tend to want to have their inventory on hand when they can. It's part of this question that Sen. Hagel raised when he used the word bloat.
ADAMSThat is to say, how much of the back-office -- and the Pentagon has the biggest, proportionally, back-office of any major military in the world, according to a McKinsey study 2010 -- how much of that can you get your arms around? How much of that can you skinny down? And you don't frankly get it by saying, please, go out and be more efficient and come back to me and tell me how you're going to be efficient because that's no incentive at all.
ADAMSYou get it, frankly -- in my experience, having been at OMB for five years -- when the money goes down and the services then have to be efficient. So you take the money first, and they become efficient.
DONNELLYThat's a green eyeshade view of how to run an organization. I'd be really surprised if there are vast warehouses full of stuff that isn't being used, that people didn't want. First of all, over the last 10 years, we've used almost everything we could get our hands on. And, in fact, things like inventories of particularly precision-guided munitions and things like that are not that big. So the Defense Department runs on a thinner margin than a lot of people think.
REHMTom Donnelly of the American Enterprise Institute. When we come back, more of your calls and your emails.
REHMAs we talk about the defense budget, here's an interesting email from Mike here in D.C., who says, "Defense budget for 2012, approximately $925.2 billion, education budget, $121.1 billion. When will people recognize that as our populace becomes less educated, we become less competitive globally? Education is a huge part of our future national security. Who's going to invent the next stealth fighters?" Tom Donnelly.
DONNELLYWell, most of education funding comes from states. Education is the state's responsibility for the most part. I cannot recite, I'm sorry to say, the total state investment in education. But I would certainly agree with that. You know, the real -- if you are Willie Sutton and you wanted to go where the money was in the federal government, you would go to entitlement and transfer programs.
DONNELLYYou know, education and defense are both long-term capital investments that, you know, are intended to make American society better for everybody. And so we have to control our spending appetites but really rearrange our priorities and think about what's going to -- what's an investment for the future versus what's an investment in current consumption.
BRANNENI was going to say, you see that acknowledgment in the Pentagon and in the defense industry. Just earlier this week, news came out that the Pentagon wants to hire 4,000 more, I don't know, hire, but sort of develop 4,000 more cyber warriors for Cybercom. And from the experts that I talked to who do cyber training -- cyber security training, those people don't exist.
BRANNENThere aren't enough people with those foundational skills, and so there are programs funded by, you know, some of the big defense companies, funded by the states, cyber challenges to get high school students interested in these things. So I think at the Pentagon and within industry, you'd see a big support for more science and math spending.
REHMAll right. To Birmingham, Ala. Good morning, Larry.
LARRYGood morning. How are you this morning?
LARRYEvery time I hear your program, these people talk about government waste and that kind of thing, they don't really get specific. But I'd like -- I don't remember the man's name, a general, not more than three months ago, was demoted because he is -- he and his wife had been spending government funds extravagantly. And he was fighting his demotion because his pension, because he's going to retire, was going to drop from over $400,000 to like 360. What sort of general deserves a $360,000 per year pension?
BRANNENThat was one of the interesting things that emerged from the Petraeus scandal was the bizarre -- I call it bizarre lifestyle down in Tampa, you know, these kinds of over-the-top parties and pirate-themed parties and sort of all the entourage that surrounds some of the military generals. And the chairman of the Joint Chiefs of Staff, Gen. Dempsey, has promised to take a close look at this kind of bloat. Now, I don't think it would do much to solve the overall Pentagon budget problems, but it's certainly sort of a separate ethical problem that's worth looking at.
ADAMSIt raises a bigger problem, Diane, that is one of the three big challenges I said I think Secretary Hagel is going to face in managing drawdown at the Department of Defense and that is what we do broadly about military pay and military benefits. Some of which is a management issue in terms of cost to health program is pushing up towards $60 billion a year. That's almost 10 percent of the base budget at the Department of Defense. It's going to be a major challenge.
ADAMSBut we also have broken systems in retirement and in health benefits that secretaries have not tried for several generations to change and have had found it very difficult is the third rail politically. But if you want to say that the average military family of four is paying $500 a year for health benefits and the average family of four in the private economy is paying $5,000 for health benefits and enrollment fees, then you have to ask yourself, is there an equity issue here, and how do you control that cost?
ADAMSAnd the same is true for the pension and retirement system. You're in five years. You're out without a pension. You're in for 20 years, you get a pension, and you get it right away. Is that right? Is it affordable? So there's a bunch of really difficult tricky issues here.
REHMSure. Sure. Here's an email from Karen, who says, "Our new congressional representative, Jackie Walorski from Indiana, a Republican, voted against funding for Hurricane Sandy because she's against any deficit spending saying it threatens our country's long-term security. Yet when it comes to deficit spending for the Pentagon, she digs in her heels. What is it that really makes us secure?" Do you know about this, Kate?
BRANNENI don't know the specific instance, but it highlights the internal turmoil within the Republican Party. They're, you know, very much the ones driving the calls for deeper spending cuts which, without a doubt, lead you to turn your attention to the Pentagon. It makes up about half of the federal government's discretionary spending budget.
BRANNENSo you can't call for deeper spending cuts and not look at the Pentagon. But then you've got sort of your old school defense hawks, a lot of Senate Republicans. Sen. McCain and Graham are sort of the biggest champions who are clearly frustrated with their colleagues on the House side 'cause they know that they're the ones leading the charge against military spending.
REHMHow much discretion, Tom Donnelly, is the Pentagon going to have in terms of how it makes its cuts?
DONNELLYFor the sequester?
DONNELLYVery little. Two things: the law was written to apply to every budget activity which is, you know, a term of accountant speak that's a little bit loosey-goosey, but basically it means it has to be an across-the-board salami slice.
DONNELLYWell, no, just sort of mechanical...
DONNELLY...everybody takes a schwack.
DONNELLYHowever, the law also allow the president to exempt personnel accounts, about a third of the budget which he has done. And one of the big problems is that we've waited essentially halfway through the fiscal year to really determine the outcome. So you have to -- and the Pentagon knows that it has been coming sort of been a little bit preparing for it. But they basically have to eat most of the cuts in 6 months rather than 12 months. So by waiting, the impact on the department has been multiplied.
REHMAll right. To Orlando, Fla. Hi, Jay.
JAYHi, Diane, a couple of questions. One of them, we're talking the b-word, bloat. When I was back in the '70s in the Navy, we did K.P. We had our own cooks, our own dishwashers. From my understanding, all of that subcontracted to the private sector now. How much, you know, of this budget is actually going to civilian contractors?
DONNELLYWell, that used to be the case, but hard budget times mean now that soldiers and sailors are, again, doing these administrative tasks.
REHMDoing their own stuff.
DONNELLYWell, yeah, but they're paid at soldier rates not at...
DONNELLY...grass cutting or burger flipping rates.
DONNELLYSo the cost of the government is going up, and the burden on the force is going up. It's -- it is a -- that is a waste of taxpayer's money to have a highly trained, you know, solider or sailor spend a day flipping burgers or mowing the rocks.
ADAMSThere -- I think there's a different issue here. The issue is that we spend between 150 and $200 billion a year in what they -- what is usually called services contracting. And that's everything from Monmouth to Belvoir to serving the burgers at Bagram. We hire a lot of companies in the private sector to do this.
ADAMSWe also bring in several hundred thousand personal services contractors from the private sector who sit at a desk next to somebody else either in suit or in the uniform and look like a government employee, but, in fact, they're a private sector employee doing government-related work. That's costing us 150 to $250 billion a year.
ADAMSNow, if and when sequester happens, it's clear that the targets for a sequester, if it happens, are likely to be -- and secretary -- Deputy Secretary Carter said this. In the furlough area for civilian employees and in services contracting for the Department of Defense, that is not particularly a cost-saver, the services contracting.
ADAMSIt's a downstream cost-saver because you don't pick up the retirement benefits and all the health benefits for people who are coming inside -- in to do services contracting-related work. But it is an area of Pentagon spending that has swollen enormously over the past 20 years, starting with Bosnia and the Balkans.
BRANNENYou -- after Dr. Carter issued his guidance that clearly hits duty civilians really hard in the near term and over the course of the year, the Federal Workers Trade Union issued a really strongly worded letter back to the Pentagon saying, this is totally unfair. You're hitting your federal workers but you're not at all targeting the contractor workforce. And before you start furloughing us, maybe it should be a bit more equitable.
REHMTell me, from your perspectives, how likely you believe the sequester will come to pass. Tom.
BRANNENI saw yesterday Sen. Jim Inhofe from Oklahoma. He said he'd like to introduce legislation that gives the Pentagon flexibility within the sequestration cuts, which I thought was really interesting. He's one of the biggest advocates for military spending. And to me that showed just how far the conversation has gone. He would allow sequestration but with flexibility. So to me, that indicates it's far more likely than in December.
ADAMSChairman Ryan of the budget committee in the House, former vice presidential candidate has said it's going to happen. That's a Republican and a conservative Republican speaking. It betrays the divisions within the Republican Party in this issue. I think its exceedingly likely but. And the but is the real issue that they're going to confront is the March 27 deadline when the CR expires. The continuing resolution will go away, and they've got to fix the budget for fiscal 13.
ADAMSWhat seems to me quite likely is either some flexibility for the Pentagon or other departments, some adjustments in the spending levels vis-à-vis the caps in the Budget Control Act are likely to happen in the context of the four weeks between March 1 and March 21 when sequester ostensibly goes into action.
REHMDoesn't this sort of make you angry? Or doesn't this confuse the American public in a way that really makes our government operation look like a sham?
DONNELLYThis is a heck of a way to run a railroad.
DONNELLYOn the other hand, it does reflect a profound political difference in the country. And that's really about how much the government should spend and on what the government should spend taxpayer dollars. And I think until that larger issue is resolved, which is not imminent...
DONNELLY...that's certainly not -- well, someday it'll be solved one way or the other. It could be a long time and it could be very ugly. And as long as we can borrow money from ourselves at zero percent interest rates, we can kick the can down the road a long time. But in the meantime, you know, nobody can touch the taxes and entitlements issue. That's not resolved. That's really remains at loggerhead.
DONNELLYThe result is, as Kate described, the discretionary accounts, both defense but also domestic, which -- or have the road building programs, the things that are really -- that's where the Department of Education funding comes from. So these are the -- rather than touching entitlements for middle class and baby boomer retirements or tax rates for everybody, until that's resolved, the DOD and the domestic discretionary accounts are going to suffer.
REHMAnd you're listening to "The Diane Rehm Show." Here's an email from Jonathan, who says, "The outcry over any cuts to America's bloated military budget is ridiculous. We could cut and cut and still be outspending the world on weapons. Perhaps the problem is what we do with that many unemployed people. But I'm tired of seeing tax dollars used for a military industrial base out of control." Kate.
BRANNENIt's a good point. I think the Pentagon would say, you know, they're already -- through the Budget Control Act, they're required to cut $487 billion from projected growth over the next 10 years.
REHMAnd that's from projected growth.
REHMThat's not from existing operations.
BRANNENRight. I think what the Pentagon wants more than anything is just direction, its certainty. You know, tell us we need to cut $200 billion more, and we'll do it. We'll find it. Also, as long as the -- as Congress allows us to use all parts of our budget, whether that's pensions, you know, using base closures here in United States.
BRANNENLet us use all of the tools at our disposal to identify a blow, scale back and we'll do it. What they want more than anything is just certainty. And I think that's what Wall Street wants. I think that's what the American public wants. You know, tell us what's going to happen and...
REHMAnd do you think that that's what they might get coming full circle if Chuck Hagel is confirmed?
ADAMSI don't think they're going to get certainty yet because of the divisions that Tom Donnelly is talking about. But let me make this point in the context here, and that is that the Department of Defense is actually better positioned than almost any other agency in the federal government to deal with a declining budget, to deal with sequester.
ADAMSThey have more flexibility and sequester than any other department because of the flexibility in the operations and maintenance account, which is a third of their budget. It's very flexible. And they have now twice the size of budget that they had 10 years ago, 70 percent increase in constant dollars. And paying -- spending in the Pentagon per troop for operations and maintenance has more than doubled in the last 15 years.
ADAMSSo we are at an unprecedentedly high level of defense spending with an unusual degree of flexibility compared to other federal departments to deal with a drawdown and a building, which frankly has best practices in terms of planning and budgeting capacity in the federal government. So in talking about who's really going to suffer here departmentally, I think we focus too much attention on the defense department, which is better able to cope than most, and not enough on some of the other federal departments.
REHMKate, do you agree?
BRANNENI do agree. You know, when you look at the State Department, for example, it doesn't have a constituency on Capitol Hill. There is no one up there fighting for that budget, which is, you know, $40 billion compared to $500 billion at DOD. So -- and the defense industry has a lobby like, maybe not like no other but awfully strong here in Washington. And so they've not successfully yet campaigned against sequestration, but they've certainly put a pretty good fight.
REHMWell, we shall see. Thank you so much, Kate Brannen of Politico, Gordon Adams of American University, and Tom Donnelly of the American Enterprise Institute. Thank you, all.
REHMAnd thanks for listening. I'm Diane Rehm.
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