FPI Analysis: The State of the Military and the State of the Union

January 20, 2015

In 2014, unexpected threats led the United States to call on its armed forces once again to stamp out terrorism and deter aggression. Thousands of troops returned to Iraq, while a campaign of airstrikes began to target ISIS. After Russia invaded Ukraine and annexed Crimea, the United States and its allies rushed to make a show of strength in Eastern Europe. However, while the responsibilities of the armed forces rapidly expanded, neither the president nor Congress acted to cancel the $1 trillion in budget cuts hanging over our military.

Tonight, in his State of the Union address, President Obama should declare that if sequestration continues, it would undermine our national security. He should explain that both the executive and the legislative branch have a unique Constitutional responsibility to provide for the common defense. He should pledge to work with both Republicans and Democrats to provide our troops with the resources they need to confront today’s growing threats and prepare for tomorrow’s unforeseen challenges.

Under the recently passed Consolidated and Further Continuing Appropriations Act (also called the “Cromnibus,”), the base budget for the Department of Defense (DOD) will decline by almost 2 percent in real terms, to $496 billion in 2015. Adjusting for inflation, this marks a 14 percent cut compared to the base budget from just five years ago, which amounted to $574 billion in constant dollars. In effect, the military will have to keep doing more with $80 billion less each year.

Searching for Savings in 2015

To save money, the Pentagon’s 2015 budget request made an array of proposals to limit the growth of pay and benefits for the troops and to retire a number of older weapon systems. In the new defense authorization and appropriations bills that it passed in December, Congress rejected most of these proposals.  Although lawmakers often had good reasons for rejecting specific proposals, Congress did not modify or repeal the sequestration-level spending limits that have forced the Pentagon to propose such cuts.

Limiting the Growth of Pay and Benefits

To ensure that the armed forces continue to attract the most talented men and women, Congress has increased the troops’ pay and benefits with the goal of achieving parity between compensation in the armed forces and the private sector. Since 1998 the average compensation provided to full-time personnel has risen by 76 percent.  Unfortunately, the Pentagon is reaching the point where the additional growth of pay and benefits would come at the expense of funding for  the equipment and training that troops need on the battlefield.

In its 2015 budget proposals, the Pentagon recommended several cuts to the package of benefits now provided to the troops, which would save $1.5 billion this year and a total of $22.8 billion over the next five years. Since DOD now spends more than $180 billion per year on pay and benefits, or one third of the Pentagon’s budget, the proposed cuts would have reduced the total by less than 1 percent. Specifically, the proposal recommended the following steps:

  • Instead of the 1.8 percent pay raise scheduled for 2015, increase pay by 1 percent. The House initially proved resistant, but accepted this proposal as part of the final package. This will be the second consecutive year of 1.0 percent growth.
  • Reduce the average value of full-time troops’ housing allowances from 100 percent to 95 percent of the cost of housing. Since the cost of housing tends to rise year to year, this could be accomplished by slowing the rate of the allowance’s growth rather than cutting it directly. To justify the cut, the Pentagon’s proposal pointed out that as recently as 15 years ago, the allowance covered only 80 percent of housing costs. Nonetheless, Congress only agreed to reduce the value of the value of the allowance to 99 percent of housing costs for 2015.
  • Increase copays by $10 to $15 for certain types of prescriptions filled through TRICARE, the military healthcare plan. Congress agreed to raise the copays, but only by $3.
  • Allow zero growth in the salaries of generals and admirals. The purpose of this measure was to demonstrate that military leaders are sacrificing alongside the troops. The expected savings are minimal, since there are few generals and admirals. Congress assented to the change.

Congress proved especially resistant to the Pentagon’s proposals because it did not want to initiate significant reforms before the impending publication of the final report from the Military Compensation and Retirement Modernization Commission. Chartered by Congress, the Commission will deliver its final report in late January.

Retiring Older Systems

In order to preserve funding for new programs, the Pentagon wants to retire or remove from service a number of older systems that have been in its inventory for several decades. The most contentious debate has focused on the Air Force’s A-10 Thunderbolt (popularly known as the Warthog), a heavily armored plane with a proven record of supporting troops on the ground. Congress also resisted the Navy’s proposals to save money by delaying essential maintenance on one of its aircraft carriers and by “laying up” several cruisers.

The debate over the future of the A-10 illustrates how deep budget cuts are forcing the military to shed capabilities that benefit today’s troops in order to preserve funding for future capabilities. While supporting the Pentagon’s plan to retire the A-10, Army Chief of Staff Gen. Ray Odierno still described it “the best close support aircraft” America has.  Moreover, the retirement of the A-10 will only save $4 billion over 5 years. Sympathetic to such arguments, Congress prohibited the Pentagon from retiring the A-10, although it will allow up to 36 A-10s to be placed on “backup flying status.” Congress also prohibited the Air Force from retiring four other types of aircraft, including 1950s-vintage spy planes and unmanned Predator drones.

The Pentagon also met resistance on the Hill when it tried to save $800 million by delaying the overhaul of one of its aircraft carriers, the USS George Washington. Often described simply as “refueling”, the overhaul consists of essential maintenance to an aircraft carrier’s nuclear power plant. With refueling, a carrier can remain in service for as much as 25 more years. Without it, a carrier will become inactive. Determined to keep the Washington active, Congress appropriated the $800 million for its overhaul. It also rejected a proposal to “lay up” half of the Navy’s cruiser fleet, instead permitting the Navy to place two cruisers in lay up status with the potential for additional lay ups to be approved in the future.

Together, the savings from the retirement of the A-10 and the delay of the Washington’s overhaul would have amounted to less than 0.5 percent of the Pentagon’s 2015 budget. If Congress reversed the deep cuts of the past few years, the military could easily maintain the A-10 and the Washington without compromising its plans for the future.

Using Wartime Funding as a Safety Valve

In the new appropriations bill, Congress secured an additional $3 billion for weapons purchases by shifting the cost of certain activities from DOD’s base budget to its supplemental wartime funding account, known as OCO, an acronym for “overseas contingency operations.” This $3 billion was sufficient to purchase 15 more electronic warfare planes, four more high-tech fighters, as well as upgrades for a dozen attack helicopters. Critics labeled the transfer as “sleight of hand” and called the supplemental account a “slush fund” that allows lawmakers “to semi-secretly bloat the defense budget with pork.” Shifting funds from the base budget to OCO is problematic, yet it has become one of the mechanisms that Congress employs to blunt the impact of sequestration. The additional $3 billion in question represents less than 5 percent of supplemental wartime funding, for which Congress appropriated $64 billion. If not for the additional $3 billion, the Pentagon’s budget for weapons purchases would actually have fallen by $2 billion compared to 2014.

In 2014, the Ryan-Murray budget deal provided the Pentagon with an additional $23 billion to mitigate the impact of sequestration. For 2015, it provided only $9 billion, thus creating additional pressure to employ unorthodox measures. This year there was no deal similar to Ryan-Murray, which means that sequestration will have its full impact in coming years if the president and Congress take no further action.

Conclusion

2014 was a year of unpleasant surprises. Once again, the country called upon the all-volunteer force to meet unexpected challenges to our national security. However, neither the president nor Congress made a concerted effort to reverse the deep cuts that have made it increasingly difficult for the military to address today’s threats while preparing for tomorrow’s challenges. It does not have to be this way. In his State of the Union address, the president has an opportunity to chart a new bipartisan path toward rebuilding our armed forces.

Mission Statement

The Foreign Policy Initiative seeks to promote an active U.S. foreign policy committed to robust support for democratic allies, human rights, a strong American military equipped to meet the challenges of the 21st century, and strengthening America’s global economic competitiveness.
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