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Deficits or Defense: The False Choice

By Steve Bell

Tuesday, September 23, 2014

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Policymakers seem to be gradually wakening to the fact that the sequester process that trimmed discretionary defense and non-defense accounts in the federal budget has begun to hurt. The impacts of sequestration are not only damaging to our national security, but also short-change investments in the future that affect projected economic growth.

BPC has been warning for some time that the economic and national security fallout from the sequester would, in time, become obvious and painful. In 2012, BPC released Indefensible, a report that explained the mechanics of the sequester. In 2013, we followed with From Merely Stupid to Dangerous, which explained that the full impact of sequestration was still in the future. Earlier this year, BPC teamed up with the American Enterprise Institute (AEI) to produce a chartbook examining the speedy increase in personnel-related spending that has squeezed out critical spending on modernization, operations and maintenance, and research and development. Coupling that reality with the constraints imposed by sequestration will lead to the lowest levels of critical uniformed manpower since the Eisenhower Administration 60 years ago.

Some policymakers have sought to justify the sequester mechanism by noting that federal deficits are declining in an attempt to conjoin the sequester with deficit reduction. That formulation presents a false choice. Deficits are declining from the historically high levels of the past four years. But, that decline has little to do with the accounts impacted by sequester. Indeed, the sequester hits, with rare exceptions, those federal spending areas that are smallest in size and slowest in growth. Sequester ignores the real villain of federal spending—entitlements, which comprise two-thirds of all federal spending.

Even generously attributing about $1 trillion in total deficit decline to the sequester over fiscal years 2013 to 2021, the United States debt, both that held by the public and the overall statutory debt, continues its inexorable climb to the highest levels of debt to Gross Domestic Product since World War II.

Within the past week, a number of former and current leaders of the U.S. military have echoed the analysis that sequestration will leave our military hollowed out. All of them emphasized that mindless budgetary cuts without strategic goals in mind will make the U.S. military vulnerable in the event of future crises. These statements about the defense budget in fiscal year (FY) 2015 and forward bring home the serious questions we raised about the future of spending on national security.

In an op-ed in the Washington Post, Michèle Flournoy and Eric Edelman, undersecretaries for defense policies under Barack Obama and George W. Bush, respectively, and leaders of think tanks that focus on defense policy, repeated the sentiment of the national defense panel – that the Budget Control Act of 2011 was a “serious strategic misstep.” Bipartisan agreement in Washington on any policy is rare and should be taken seriously.

Speaking last week at the Domenici Public Policy Conference, former CIA director and former Secretary of Defense Leon Panetta emphasized that uncertainty is the worst thing for the defense budget. He said that sequestration is going to lead to a force that is not ready when crisis demands it. He spoke of deterioration of U.S. military readiness as a result of air squadrons being grounded, ships going un-deployed, important maintenance being delayed, essential training being postponed, and 800,000 Department of Defense (DoD) employees being furloughed.

General Ray Odierno, chief of staff of the U.S. Army, put a finer point on exactly when the trouble would come. He said that the resumption of sequestration in fiscal year (FY) 2016 will, “be the breaking point,” causing a significant diminution in readiness. That forecast mirrors our own analysis.

Both Odierno and Panetta stressed that Congress has the power relieve budgetary uncertainty and to put the defense budget on the right track. Odierno spoke of 40 different members of Congress writing him letters demanding explanations for troop reductions in their home districts. His answer to each was the same: it’s because of sequestration.

Panetta was even more specific. He said that Congress “puts up barriers to be able to do reductions in a balanced way. They put up barriers to force reductions, they put up barriers to the BRAC process, they put up barriers to procurement reforms, and to compensation reforms.” He emphasized that the only thing left to cut was readiness – the ability of our military to quickly mobilize when situations calling for U.S. military involvement arise – and that seriously constrains the kinds of crises our military could respond to in the future.

As we have been emphasizing for some time, sequestration is no way to govern. Despite the fact that DoD may be able to find some amount of budgetary relief through creative use of funds designated for Overseas Contingency Operations (OCO), Congress seems to be cracking down on the use of OCO. Being more stringent about the use of OCO while simultaneously holding to the sequester caps may prove an untenable squeeze in the near future.

We strongly urge the next Congress to repeal the defense and non-defense sequester provisions in current law and, instead, get the courage to tackle the fastest growth in federal spending — health care and pension related entitlements throughout the budget.

Alex Gold contributed to this post.