Dispatches from the Front: Budget Process

Probing the Pentagon’s Fuzzy Math


Even as the Pentagon braces for leaner budgets to come, the $178 billion in savings it had already proposed are largely illusory, according to a Bloomberg Government study.

The Defense Dept. earlier this year touted savings that range from a U.S. Air Force plan to sock away $5 million by creating a Craigslist-like website for swapping spare parts to a Navy program to pare $4.7 billion from personnel costs by shifting 6,000 sailors onto ships from jobs ashore. About $106 billion, or 60 percent, of the $178 billion is unlikely to materialize, says BGOV defense analyst Kevin Brancato. His study reveals the difficulty the Administration and Congress will have in reining in defense spending long-term.

Pentagon bureaucrats—who tend to outlast Presidents and Defense Secretaries—are adept at shielding their programs from cuts and in the past have not been challenged to find meaningful savings. The Defense Dept.’s refusal to make tough choices now increases the likelihood that troops and weapons systems will face a less forgiving congressional budget process. “It’s not a matter of shaving a little bit off,” says Michael J. Bayer, chief executive officer of Dumbarton Strategies, a Washington consulting firm, and a former chairman of the Defense Business Board, a Pentagon advisory panel. “This really requires reengineering the enterprise.”

Spending on defense is expected to decrease at least $330 billion over the next decade under the debt-reduction bill President Barack Obama signed into law on Aug. 2, according to the Office of Management and Budget. Another $500 billion would be cut if a congressional supercommittee fails to find additional savings in other federal spending or its recommendations are rejected by Congress.

Pentagon officials regularly cite savings that can’t be traced, including already canceled or curtailed weapons programs, says Gordon Adams, a professor at American University in Washington who oversaw national security budgeting at the Office of Management and Budget under President Bill Clinton. Adams says former Defense Secretary Robert M. Gates made a mistake last year by letting the military services determine where to identify $100 billion in “efficiencies,” which they could then reinvest in higher-priority programs. “No one is going to cut very deep when they’re cutting themselves,” he says. Adams believes that congressional budget cutters could remove about $1 trillion, or 15 percent, of the $6.7 trillion forecast in defense spending over the next decade.

Real savings would come from reductions in personnel. More than a third of the active-duty force of 1.4 million troops never deploys. Overhead, including support staff and other noncombat positions, according to Adams, accounts for about 42 percent of the defense budget. “There’s not a business alive that does 42 percent overhead,” he says.

The BGOV study analyzed the $178 billion savings in the Pentagon’s five-year plan tied to the fiscal 2012 budget, which begins on Oct. 1. Brancato concludes that almost 60 percent of the proposals “are questionable because they lack detail, they include cuts that would have happened under existing practices, or they face likely challenges from Congress.”

Some are described with vague statements that make it difficult, if not impossible, to identify real savings. For instance, the proposed reductions include $11 billion for items with such descriptions as “many smaller efforts across the enterprise” and “numerous other changes across a variety of activities,” according to the study. Brancato’s analysis also notes that the Pentagon’s plan to save $6 billion by cutting 47,000 soldiers and Marines beginning in fiscal 2015 is questionable “because it depends on when U.S. forces leave Iraq and Afghanistan.”

Including the cost of the wars, defense spending has doubled in the past decade, to $691 billion in fiscal 2010 from $316 billion in fiscal 2001. “We’ve lost our ability to prioritize, to make hard decisions, to do tough analysis, to make trades,” said Navy Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, at a Jan. 6 press conference on the proposed budget.

Bayer said the Pentagon should use the looming budget crisis to pursue a proactive structural overhaul. As an example, he points to Ford Motor (F), which began reorganizing its operations before the recession, helping it survive an extended period of weak consumer demand. “There’s no magic, single solution,” he says. “It’s painful, it’s tough, it’s trench warfare with bureaucracy.”

The bottom line: A BGOV study has found that about 60 percent of the $178 billion in savings identified by the top brass is illusory.

McGarry is a reporter for Bloomberg News.

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