By Stan Collender, NationalJournal.com
© National Journal Group Inc.
Tuesday, Oct. 16, 2007

I'm deeply troubled by "Blackwatergate," the steadily growing disaster involving a private company being paid hundreds of millions of dollars to provide security services in Iraq.

	There will be an increased rather than a decreased reliance on private contractors in Iraq and Afghanistan in the years ahead.

I'm a budget guy, so while others are mostly preoccupied with the nonbudgetary issues involved with a largely unrestricted company whose employees tote around automatic weapons and wear body armor, I can't help but think about how Blackwatergate is the result of the federal budget situation of the past 20 years or so.

And I'm absolutely haunted by the notion that the budget politics that led to Blackwatergate are not going away any time soon.

There has been strong political pressure in the United States to reduce the deficit for at least the past two decades. Eliminating the deficit became a formal requirement in the mid-1980s when Gramm-Rudman-Hollings made reducing the deficit the government's explicitly stated policy. While no longer required, it has been a political imperative ever since GRH and its successors were allowed to expire.

The deficit can be reduced either through spending cuts or revenue increases. But the budget politics of former House Speaker Newt Gingrich, R-Ga., and now George W. Bush have made it all but impossible to consider new taxes and fees. That has put the focus almost solely on spending.

Much of the public discussion on how to reduce the deficit has been directed at domestic spending. But the Pentagon budget has also been under constant pressure for the last 20 years.

The most immediate reductions can always be realized from personnel costs, so that has been the focus. Indeed, one of the key strategies to limiting the size of the Pentagon budget has been for the White House to underestimate both the nature of the military threat and the size of the force needed to meet it.

That has led to a predictable plan to rely on the reserves and National Guard. The reduced number of active-duty troops required that others be available to fill in whenever the need arose.

But the need to reduce the deficit through spending cuts also put pressure on the budgets for the National Guard and reserves, for which personnel costs are both a very substantial part of the amount being spent and the best way to get quick savings.

This strategy worked well until Afghanistan and Iraq. When the military activities did not end quickly, the active troops, National Guard and reserves were not in a position to supply the manpower to do everything that was necessary. As a result, some activities traditionally carried out by the military either could not be done or had to be done by someone else.

Coalition forces might have been the best and easiest answer. But for reasons on which I won't speculate, they either were unavailable or not available in sufficient numbers.

Increasing the number of American active-duty forces also might have been an answer; this was tried in part by increasing the length and frequency of deployments. But without a draft (which was politically prohibitive) or a dramatic increase in volunteers or recruitment (which didn't happen), that was not a truly viable option.

That provided the Pentagon with one real alternative: rely on private contractors like Blackwater to get the job done.

This is not that different from what a private sector company does in similar situations. Most companies try to keep personnel costs as low as possible by not hiring full-time employees until it's clear the increased workload is not just a temporary spike. Companies deal with short-term increases by doing things analogous to what the Pentagon has done in Afghanistan and Iraq: asking staff to work longer hours, hiring temps and subcontracting the overflow work to others.

That works well when the problem is temporary. But most of the options a company has are usually more expensive than hiring and maintaining its own workers when the uptick is permanent. Over time, profits, employee morale and the quality of work usually suffer when the accommodations designed to deal with a short-term problem stay in place. As a result, costs increase.

The White House continues to say that U.S. military activities in Iraq and Afghanistan will be needed for some time, so the strain on active forces, the National Guard and the reserves will continue. Coalition troops are being reduced rather than increased, a draft is out of the question, enlistment is static and the military has to pay bonuses to encourage troops to stay on after their current commitments end.

Blackwatergate highlights three federal budget issues.

First, unless the scope of the engagement changes dramatically, there will be an increased rather than a decreased reliance on private contractors in Iraq and Afghanistan in the years ahead. There will be few, if any, realistic alternatives for the Pentagon or Congress to consider.

The increased use of contractors will raise costs compared to what they would have been had the Pentagon had adequate troop strength in the first place.

The reliance on contractors may well grow further if there are additional calls for U.S. military operations while Iraq and Afghanistan continue and additional military functions will have to be carried out by contractors.

Second, it is likely to cost the Pentagon more to keep active-duty troops in the future because contractors like Blackwater will be offering them higher salaries and better working and living conditions than the military to do the same work. Who wouldn't seriously consider that alternative?

There is now an increased private sector demand for the skills and experience an individual gains in the military. Ironically, that demand will be coming from the government itself, which will be increasingly relying on the services of contractors. The Pentagon will be paying far more to get the services from private contractors than if it hired staff itself. The fact that the contractors will all be former members of the U.S. military whom the government had been paying less to do the same work will make the situation that much more bizarre.

Third, unless federal budget politics change drastically, there will continue to be a premium on projecting ongoing military spending as low as possible by underestimating the nature and extent of the threat and the troops needed to deal with it.

That means that emergency supplemental appropriations for activities that were entirely predictable will become even more common than they are now.

It also means that the U.S. will rely on firms like Blackwater for quite some time unless revenues and spending reductions become a politically acceptable way to pay for the increase in personnel costs that would result from a more realistic assessment.

-- Stan Collender is a NationalJournal.com contributing editor and managing director at Qorvis Communications in Washington, D.C. A frequent speaker on the budget and the economy to audiences across the country, he is also author of "The Guide to the Federal Budget." His blog, Capital Gains And Games, will be launched later this month. His e-mail address is secollender@nationaljournal.com.

[ Budget Battles Archives ]

Need A Reprint Of This Column?
National Journal Group offers both print and electronic reprint services, as well as permissions for academic use, photocopying and republication. Click here to order, or call us at 877-394-7350.