The Defense Death Spiral

Why the Defense Budget is Always Underfunded

by Franklin (Chuck) Spinney, The Blaster

The courtiers in the Hall of Mirrors that is Versailles on the Potomac are always lining up to give a new Secretary of Defense advice on how to manage the Pentagon during the coming era of budget “constraints.” Most of this wisdom takes the form of platitudes of how important it is to have a strategy and to make the hard choices needed to budget for that strategy.

Follow up:

One of my all time favorites is Dr. Daniel Goure’s 14 July 2011 admonition to incoming Defense Secretary Leon Panetta on the web page of the Lexington Institute, a pro-defense “think tank” funded in part by defense contractors. Goure starts his advisory by saying:

Let’s be honest. The current U.S. defense program is underfunded, even at over $500 billion a year in the base budget and another $100 billion plus in contingency expenses.

Goure then goes on to discuss the need for vision, particularly concerning controlling personnel and health costs and avoiding duplication by transferring work done in government facilities, and by the military, to contractors. In other words, when times are tough, return to the old game of protecting industry at the expense of the soldier and the taxpayer.

Ironically, as the following chart shows, regardless of how you account for inflation, defense spending in 2011, when Goure was dispensing his advice, had reached the highest level since the end of WWII, far higher on an annual basis that the budgets to support the far larger, higher-tempo Korean and Vietnam Wars.

Yet Goure was correct about one thing. The defense program is underfunded. It's ALWAYS underfunded. But before dispensing advice on how to shovel money to his buddies in the defense industry, Goure should have explained how and why the highest budget since the end of World War II could possibly end up underfunding the current program. After all, the United States is engaged in a tough but relatively small war on terror, with far smaller forces and minuscule operational tempos compared to those deployed to either Korea and Vietnam.

Moreover, the United States no longer needs to spend a large part of the defense budget to maintain a large forward deployed conventional and nuclear forces to counter the threat posed by the Soviet Union. With a few minor exceptions, the United States is also fielding the smallest combat-coded force structures since 1950. Nevertheless, despite a defense budget that has almost doubled in inflation adjusted dollars since 1998, the Secretary of Defense is overseeing a defense program that is in the programmatic equivalent of a meltdown. Why?

If a new Defense Secretary wants to nurse the Pentagon into to health, he must come to grips with the real causes of the Defense Death Spiral — a problem I have been studying and writing about since the late 1970s.

The central management problem plaguing the Department of Defense — i.e., the meltdown of the entire defense program — can be characterized in a general sense as being produced by the mutually reinforcing effects of

  • Perpetual Modernization Problems — A gold-plated modernization program that cannot buy enough new weapons to modernize the force structures of the Army, Navy/MC, and Air Force, because the unit costs of new weapons always grow faster than budgets, even when budgets increase sharply, as they did in the 1980s and after 1998. Consequently new weapons always cost much more than their predecessors, and cannot replace the weapons in existing inventories a one for one basis; and therefore, the average age of of the weapons in the force structure increases over time, and eventually reaches to a point that forces decision makers to retire the oldest weapons without replacement; the end result being smaller and older forces. This evolution has been happening since the late 1950s.
  • Perpetual Readiness Problems — Continual budgetary pressure to reduce readiness and shrink force size to contain the growth of operating costs (from operating aging, more complex hardware, but also from the growing personnel costs of the all volunteer force) to free up funds to finance the bankrupt modernization program; and
  • Perpetual Decision-Making Problems — Corrupt and unauditable accounting, financial management, and program planning systems lubricate the degenerative process by making impossible to assemble the information needed to sort out and correct the first two problems.

As long as these three relations remain in place, the defense budget will always be underfunded. In fact, as I explained to Senator John Tower during testimony to Congress in 1983, “spending more money the same way actually makes matters worse.” A near doubling of the defense budget since 1998 has shown again that statement to be correct.

This is the fundamental management dilemma facing any new Secretary of Defense. Resolving it won’t be easy, because this trifecta of structural problems is only the outward manifestation of a bureaucratic engine powered by deeper behavioral pathologies. These pathologies built up insensibly over during the 40 years of industrial mobilization for the Cold War and are now seamlessly embedded in the iron-triangle culture of the Pentagon, the defense industry, and their wholly owned subsidiaries in Congress — the Military - Industrial - Congressional Complex or MICC (depicted in the following graphic).

One of the most important and oiliest lubricants keeping the money and power flowing smoothly throughout the MICC is the rotation of military officers and civilians through the notorious revolving door, shown at the center of the triangle. Most notorious are the military officers, especially generals (e.g.,described here, here, & here), who cash out to defense contractors (or hanger-on outfits like consulting companies, defense oriented think-tanks, etc.) and defense related congressional staffs. Less well appreciated are the senior civilian political appointees, like Daniel Goure (see bio) or incoming defense secretary Ashton Carter, who move back and forth among these poles, generally parlaying each move into a higher position on the slippery slope to more influence and wealth in the MICC.

The pernicious aspects of the revolving door are deep and troubling. It is a reflection of a comfortable club of shared interests that promotes its own wellbeing at the expense of the nation's wellbeing; it encourages a elite culture of arrogant entitlement, particularly at the highest levels. These entitlements are seen as rights to taxpayer dollars, even though the ‘entitlements’ generally stay within the letter of our lax ethics laws (which compliant Congresses and Presidents enact). One stunning example of this sense of entitlement came to light in February 2009, when Ashton Carter was being vetted for the job of Undersecretary of Defense for Acquisition, Technology, and Logistics. Bill Gertz of the Washington Times reported that

“Financial questions have been raised about Mr. Carter’s past activities, including government reimbursement for a taxi cab ride he took from Washington to his residence in Massachusetts, the officials said.”

But there is a lot more to Mr. Carter’s revolving door gambits: Attached beneath this posting is a report just issued by the Project on Government Oversight describing the stunning scale of Mr. Carter's revolving door hi jinks.

The result is a repetitive pattern of behaviour, or habitual modes of conduct, known as the defense power games (front loading and political engineering). The defense power games, together with the incentive structure of the MICC's revolving door (and its culture of entitlement) create their trifecta of external manifestations, and effectively turn the decision-making and program planning processes inward to disconnect the entire decision/policy making effort from external reality, including the threats it purports to cope with, the strategy alleged to meet those threats, and the shaping of force structures needed to execute the strategies. The resulting self-referential decision making engine — referred to by some wags in the Pentagon as a self-licking ice cream cone — spins away in the inwardly-focused death spiral portrayed by the following figure.

Simply repeating the same old empty platitudes about having a strategy and fitting forces and budgets to that strategy lead nowhere. The Pentagon's decision process that consumes millions of man hours each year to create this mess year after year — the Planning, Programming, and Budgeting System or PPBS — already is designed precisely to link threats to strategy to forces and then to budgets! The real problem is why it fails to do so year after year after year — which brings us back to a diagnosis of the decision-making pathologies themselves and the iron triangle in which they are embedded.

The repetitive pattern of these pathologies and their effects have been well understood and have been well documented since the early 1980s. Moreover, the programmatic meltdown the Defense Department is experiencing today was foreseen by the late 1980s and early 1990s. Nevertheless, with a few lonely exceptions, notably Senator Charles Grassley (R-Iowa), no one in leadership positions in the Pentagon, Congress, or the White House has taken any interest in correcting the Pentagon’s self destructive patterns of behavior.

For this reason, at the end of the 1980s, I decided the only thing I could do was to begin documenting these problems for posterity. My intent was to provide a contemporaneous track record showing how these problems were indeed foreseeable and how they could have been avoided, if the leaders in the Pentagon chose to make that effort. They did not — and today, the American public is reaping the Pentagon’s bitter harvest of shame — an underfunded defense program in chaos, even though is being funded by largest budgets since the end of World War II (after removing the effects of inflation). Those who blame this mess on the war on terror and out of control personnel and medical costs are selling snake oil to grease a continuation of this destructive pattern of business as usual.

This link, for example, will take you some of my more important unclassified reports and papers describing these problems: They explain why and how the Defense program has been in a continuous state of unraveling. They predicted what would happen if these behavioral pathologies were left on unaddressed. My June 2002 statement to Congress outlined a comprehensive plan for fixing these general decision-making problems. I don’t know if that plan will work, but at least it was designed to address the real causes of the underfunding problem.

TACAIR Case Study

No mission area reveals the Pentagon’s behavioral pathologies more clearly than tactical fighter aviation or TACAIR. As the Cold War was ending in the early 1990s, the Air Force, Navy, and Marine Corps wanted to embark on a new generation of high-cost, high-complexity fighter/attack aircraft (these became the F-22, F/A-18E/F, and the F-35 Joint Strike Fighter).

To summarize a somewhat complex story: In 1991, just as the Cold War was ending, the AF front loaded the F-22 by pushing it prematurely though decision-making milestone II into concurrent engineering and manufacturing development (EMD, aka Milestone II). This decision allowed the contractor (Lockheed Martin) to begin the construction of a social safety net by spreading dollars, jobs, and profits to many congressional districts, a power game known as political engineering. Front loading and political engineering are explained in Defense Power Games. Less than a year later, the Navy pulled off the same stunt by prematurely rushing the F-18E/F into EMD for the same reason [discussed here, here, and here]. Both airplanes were high-cost legacies of Cold War thinking. The objective of the decision-making game in each case was to turn on the money spigot and lock it open; in effect, the goal was to let the Cold-War cows out the Cold-War barn before its door closed.

It is important understand that the senior military and civilian decision makers in the Pentagon responsible for rushing these two decisions knowingly created a long term aging force-structure crisis. They knew beforehand that the Pentagon’s contractors could not possibly produce enough new F-22s and F-18E/Fs quickly enough (even in the unlikely event where there were no delays due to cost overruns and technical problems) to replace the 3,000-plus fighter/attack aircraft in the inventories on a timely basis. Consequently, decision makers knew before the fact that the average age of the older airplanes remaining in that inventory would rapidly grow to unprecedented levels and that the increased aging would lead to unpredictable increases in future operating budgets. They also knew before the fact that only way to slow down the increased rate of aging would be to approve a drastic reduction in the size of those inventories by retiring the oldest airplanes without replacement.

The senior decision makers responsible for these decisions also knew beforehand that the force-structure crisis created by the F-22/F-18E/F decisions would become the source of enormous extortionary pressure to approve the development two years later of yet a third high cost fighter/attack program — what was to become the problem-plagued F-35 Joint Strike Fighter — yet another Cold-War-inspired concoction of highly complex and costly technologies that is now the most expensive single weapons program in history.

Put bluntly, the disastrous ramifications of these reckless decisions were known before they were approved. If you don’t believe me, you can download and read my reports linked above. They describe how this was being done, while it was being done — they all can be found here in the subsection entitled “Specific Reports on Tactical Fighters.” Together, with my March 1996 essay, Defense Budget Time Bomb, the case of tactical aviation provides the clearest evidence of how the Pentagon bureaucracy, with malice of forethought, deliberately created the modernization crisis that metastasized after 2000 and is now staring the Secretary of Defense in face. But if you think I am cherry picking my data by focusing on TACAIR, a more general, albeit more complex picture of the same general pattern of decision making can be found in my unclassified 1998 briefing, Defense Death Spiral.

That, in a nutshell, is the dirty story of why the defense budget is underfunded, but you won’t hear this story from courtiers trying to ingratiate themselves with the new Secretary of Defense. Given that political pressure is mounting to cut back non-defense programs including Social Security, Medicare, education, infrastructure, etc., to reduce deficit, I submit the time has come to rein in the Pentagon’s out of control budget, to discipline its reckless behavior, and to force it to clean up its act.

Job 1 is to provide more reliable programmatic information to the Secretary of Defense, so he and his staff can figure out how to pull the Pentagon out of its death spiral. The only incentive to force this is to put the entire core budget at “risk,” say by placing the core (non-war related) budget on a downward sloping glide path of 2 to 4% per year (in current as opposed to inflation-adjusted dollars) until the Pentagon can produce audit-able books. That would simply bring it into compliance with Chief Financial Officers Act of 1990 and the Accountability and Appropriations Clauses of the Constitution. Given that every member of the Defense Department has taken a sacred oath to protect the Constitution, making the Pentagon conform to the requirements of the Constitution is hardly an onerous requirement.

Only with cleaner books can serious policy-making and strategic planning begin. Readers interested in a short primer written by defense insiders, with over 400 years of collective experience, on how to think about defense and what kinds of changes can and should be made once we have reliable information are referred to the The Pentagon Labyrinth: 10 Short Essays to Help You Through It.

Who knows, if we can force the Pentagon to think before it spends, the United States might be able to field a military that makes sense. But without closing the revolving door that ambition will remain a pipe dream.

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