Before Trump’s early morning tweet that that the $716 billion defense budget was “Crazy!”, MilitaryTimes correspondent Leo Shane III asked “Is Trump really going to cut the defense budget?“
For the last month, Pentagon planners have been scrambling to rework their fiscal 2020 budget proposals in the wake of Trump’s surprise announcement that he would require all federal agencies to trim 5 percent off their spending for the current fiscal year.
The president said the Defense Department would be excluded from that requirement, but would eye a military appropriations target of $700 billion — far below the anticipated $733 billion level of military planners.
It is interesting how fragile the DOD is with respect to small changes in the budget plans. We find strong push-back from defense insiders that modest cuts will lead to large risks. Either you scale back military operations or you cut investment in new systems, and, as former DepSecDef Bob Work explained:
Because this came so late in the planning process, all the personnel costs are cooked … All the operations and maintenance money is set. So you have to go into modernization to find the money.
It’s not clear to me why, nearly a year out, our personnel and operations are basically fixed costs. Perhaps it is political unwillingness to constrain military operations — the military is at full operating tempo and still there are more requirements politicians want met. On the other hand, it seems that Congress and the DOD already skimps on O&M to the extent possible.
Or, as John Kenneth Galbraith said:
It is a cliche, much beloved of those who supply the diplomatic gloss for the military power, that not much can be done to limit the latter — or Its budget — so long as “American responsibilities” in the world remain unchanged. And for others It is a persuasive point that to reduce the military budget will require a change in foreign policy.
So that leaves the approximately $200 billion investment budget (RDT&E and Procurement). The problem here is, again, we are told our adversaries are catching up. While you can cut procurement quantities for savings, that also leads to higher unit prices because of reduced business bases and consequently higher overhead rates. And then that also forces the DOD to miss force structure mandates, like Congress’ 355-ship Navy. Well, how about producing more affordable, but still effective, ships?
For RDT&E, we have a bunch of established Programs of Record that are chewing through most of the money. You can’t really cut “quantities” out of them. Most are experiencing cost growth, so just asking them to stick to their budget is bad enough. If you don’t compromise by forcing cuts or cancellations to RDT&E programs, then all that’s left new programs, emerging ideas, prototypes, and so forth.
These guys don’t have major stakeholders yet, so even though they logically shouldn’t bear the weight, often they do. This is why, when the DOD talks about prototyping and new innovations, it asks for additional funding from Congress because it is unwilling to take a hard look at their existing programs. The sunk cost fallacy looms large.
Now, perhaps Trump’s tweet about reducing the “Arms Race” with Russia and China means not just standing firm with the $700 billion plan, but forcing a lower plan. What would that look like? I recently wrote about strategies for reducing the DOD budget. I imagine such a course would make the DOD uncomfortable, and more willing to innovate its management style.
Well, it looks like instead of lowering the budget, Trump ended up caving into demands from Rep. Thornberry and Sen. Inhoff and is now looking to increase the defense budget to $750 billion! Luckily the DOD is more flexible in the up direction than down.
So instead of a $16 billion cut from FY2019, the DOD might be looking at a $34 billion raise. That is twice as big of an increase as it was previously expecting. All is looking good for my prediction that the defense budget would meet or exceed the $733 billion mark, though no took me up on my $50 bet. Never bet against the ratchet effect.
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