First Person

Budget Talk from the Pentagon Comptroller


Defense spending is expected to decline, possibly sharply. There have been big drawdowns before. What’s different now?
What is different is the seriousness of the economic crisis facing our nation. So we know we need to find a way to have an adequate national security and do it with less money.
 
You’ve said everything is on the table. Are there no red lines?
We’re still in a shooting war in Afghanistan. We’re still working to complete the military mission in Iraq. We’re supporting a mission in Libya. Even if all of those were to go away, unfortunately there are other countries that I think really pose some threats to us: Iran, North Korea. There are nonstate actors, such as al-Qaeda, that remain threats. There’s the cyberwar (in which) we are being attacked regularly. There are a lot of threats out there. The main redline is: We need to meet them.
 
Any specifics on cuts? For example, would you eliminate the U.S. Marine Corps or shrink the aircraft carrier fleet?
We’re not going to get rid of the Marine Corps. But would we look at smaller force structure? Yeah, absolutely. I’m not saying we’re going to get rid of a carrier, but we will have to look at aircraft, ships. We’re going to have to look at our strategy, take some modest additional risk that both the President and the Secretary (of Defense) can accept, and probably have fewer forces and a slower modernization program.
 
You’re reviewing cuts now of about $330 billion over 10 years. If the supercommittee fails, an automatic “sequester” would more than double the cut. Are you preparing for that?
We’re doing some broad “what if” drills. But we aren’t doing any detailed planning. Jack Lew, the director of the Office of Management and Budget, put it well on a blog when he said, look, that sequester, if the committee fails to do its job, is not meant to be policy. It’s meant to be an incentive to convince the Congress they really do need to pass a balanced deficit reduction plan.
 
You spend about $400 billion a year on contractor services. Is that in the mix?
Well, absolutely. The $400 billion is about two-thirds of our budget. It’s more than services in that 400; it’s all the weapons. But services are maybe half of that. We buy a lot of services from the private sector. We can’t run the Pentagon without contractors. We’re not going to get rid of them. But we are looking (at) support activities—we could probably cut a lot of data centers, for example, that are contracted to private companies. If we can consolidate them, we’ll probably save some money.
 
The Defense Business Board recommended a 401(k)-like system for military retirement instead of a pension. Is that worth considering?
It’ll be an option we’ll want to look at, but I’m not sure we want to do anything. We’ve got to pay a competitive wage for a job that’s pretty stressful and demanding, and we want high-quality people in the uniformed military. Both keeping faith with the troops and making sure we can still recruit and retain people are important principles, and I hope you’ll underscore we have not made any decisions.
 
Health-care premiums are expected to rise. Are there more proposals in the pipeline to reduce military health-care costs?
Everything is on the table, and that will have to include it. But there are some principles we’ll maintain. First and foremost, we’re not going to do anything that will impact the health care we provide to our military and retirees. Second, we’re going to have to be reasonable and fair with regard to any changes in benefits and phase them in.
 
We’ve reviewed past declines, post-Korea, post-Cold War. If you look at those, an automatic cutback of $825 billion that’s spread over 10 years doesn’t look all that scary.
The 10-year decline after the Cold War was about 25 percent. If you go back to the Korean War, it was about 40 percent. That was a long time ago. We have to acknowledge that some of the past drawdowns have not worked as well as they should have. We underfunded procurement after the Cold War. After Vietnam, we underfunded readiness, and we got the so-called hollow force. – Interviewed by Gopal Ratnam


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