The Winners and Losers of Next Year’s Defense Budget

What was cut and what was spared in Defense Secretary Chuck Hagel’s budget-request preview.

Soldiers with the United States Army's 3rd Battalion, 41st Infantry Regiment are seen on a joint patrol with the Afghan National Army prepare for a joint patrol with near Command Outpost Siah Choy on March 28, 2013 in Kandahar Province, Zhari District, Afghanistan.
National Journal
Sara Sorcher Jordain Carney
Feb. 24, 2014, 12:41 p.m.

The blade hasn’t fallen yet, but De­fense Sec­ret­ary Chuck Hagel raised the ax Monday when he offered a sneak peek of the Pentagon’s planned budget for next year.

The Pentagon is ask­ing Con­gress for $496 bil­lion, $45 bil­lion less than it ori­gin­ally ex­pec­ted. Tucked in­side that budget trim­ming are a host of win­ners — pro­grams and pri­or­it­ies that the de­part­ment kept safe from cuts — and losers who will not be spared.

Noth­ing in Hagel’s plan, however, is def­in­ite. Con­gress still con­trols the purse strings, and the Pentagon’s fisc­al 2015 re­quest will un­doubtedly be changed as mem­bers and de­fense lob­by­ists use their pull to pro­tect their pri­or­it­ies — and try to shovel the spend­ing pain to someone else.

But it could be harder to get off the chop­ping block than to stay off of it. Here’s what got a head start Monday and what got left be­hind.

WIN­NERS:

Spe­cial-op­er­a­tions forces: The mil­it­ary’s elite spe­cial-op­er­a­tions forces, which bur­geoned after the Sept. 11, 2001, at­tacks and were at the fore­front of the U.S. fight against al-Qaida, will in­crease from their cur­rent level of 66,000 ser­vice mem­bers to 69,700. This is one key ex­ample of how the mil­it­ary, even in more aus­tere times, is try­ing to pro­tect, as Hagel put it, “cap­ab­il­it­ies uniquely suited to the most likely mis­sions of the fu­ture.”

Mil­it­ary re­tire­ment funds: While the Pentagon is of­fer­ing some mod­est re­forms to mil­it­ary be­ne­fits, over­all, Pentagon of­fi­cials have sworn off mak­ing changes to the mil­it­ary re­tire­ment sys­tem in next year’s budget — even though they want to curb its rap­id growth that threatens to usurp oth­er key pri­or­it­ies in a downs­ized de­fense budget.

{{ BIZOBJ (video: 4754) }}

After the quick — and bi­par­tis­an — back­lash in Con­gress to a pro­vi­sion in Decem­ber’s budget agree­ment that cut ap­prox­im­ately $6 bil­lion in mil­it­ary pen­sions, Pentagon of­fi­cials made it clear they would wait to pro­pose ma­jor changes un­til a com­mis­sion makes its re­com­mend­a­tions in Feb­ru­ary.

Bases: Hagel is call­ing for an­oth­er round of base clos­ures that could take place in 2017. The Pentagon des­per­ately wants to get rid of its ex­cess mil­it­ary bases and fa­cil­it­ies. However, es­pe­cially in an elec­tion year, the bases may es­cape un­scathed — and Hagel knows it. “I am mind­ful that Con­gress has not agreed to our BRAC re­quests of the last two years,” he said.

Navy cruis­er fleet: Half of the Navy’s cruis­er fleet is go­ing to be “laid up” — put in the shipyard — to be up­graded. This in some ways is a work-around, be­cause the Navy has pre­vi­ously tried to de­com­mis­sion some cruis­ers in­stead of provid­ing ex­pens­ive over­hauls, but Con­gress re­fused. The Pentagon’s pro­pos­al is a more cre­at­ive way to save some money short-term, be­cause the ships will not be op­er­at­ing — but these 11 cruis­ers will “even­tu­ally” be re­turned “to ser­vice with great­er cap­ab­il­ity and a longer life span.”

Cy­ber­se­cur­ity: Cy­ber spend­ing — from cy­ber­se­cur­ity to in­tel­li­gence gath­er­ing and re­con­nais­sance — will get a boost. Hagel said last week that the Pentagon is “ad­just­ing our as­set base and our new tech­no­logy.”

LOSERS:

The whole budget: The Pentagon is re­quest­ing $496 bil­lion to meet the budget caps Con­gress has man­dated. Des­pite the Pentagon’s hopes that steep budget cuts would dis­ap­pear, the budget agree­ment passed in Decem­ber only gave the de­part­ment a rather measly $9 bil­lion in se­quester re­lief for next year.

Still, in the hopes of fund­ing some crit­ic­al pri­or­it­ies, the Pentagon will sub­mit an “Op­por­tun­ity, Growth and Se­cur­ity Ini­ti­at­ive.” This “wish list,” as it’s already been dubbed, will out­line how it would spend $26 bil­lion on top of the Pentagon’s budget re­quest.

This sets up a polit­ic­al free-for-all on Cap­it­ol Hill as mem­bers try to cherry-pick their pri­or­it­ies. And Hagel said it would be “paid for with a bal­anced pack­age of spend­ing and tax re­forms” pro­posed in the rest of the pres­id­ent’s budget. We’ll see how that goes over.

The Army: Hagel’s budget calls for the Army to shrink dra­mat­ic­ally, to its low­est force size since be­fore World War II. The num­ber of act­ive-duty per­son­nel will drop from 520,000 to as low as 440,000 — a num­ber roughly con­sist­ent with what Army Chief of Staff Ray­mond Odi­erno has said is needed for the Army to ad­equately re­spond to threats around the world. Still, even as the U.S. ends an era dom­in­ated by long wars in Ir­aq and Afgh­anistan, the Army was pre­par­ing only to downs­ize, from a war­time peak of 570,000, to 490,000.

This big loser in the Pentagon’s budget re­quest could suf­fer even more if the budget cuts re­main in place. “If se­quest­ra­tion-level cuts are re-im­posed in 2016, the act­ive-duty Army would have to draw down to an end strength of 420,000 sol­diers,” Hagel said.

The act­ive-duty forces aren’t the only di­vi­sion be­ing rolled back in the budget re­quest. The Army Na­tion­al Guard would draw down to 335,000 sol­diers by 2017 from its cur­rent level of 355,000, and the Army Re­serves would drop to 195,000 from 205,000.

European bases: The Pentagon is well aware that clos­ing mil­it­ary bases of­ten leads to a los­ing fight with Con­gress. So it will pur­sue one loop­hole: clos­ing European bases, which it can do without con­gres­sion­al ap­prov­al.

The de­part­ment, Hagel said, will re­view — and pur­sue — re­com­mend­a­tions to close bases in Europe. The de­part­ment has cut its in­fra­struc­ture in Europe by 30 per­cent since 2000, he ad­ded.

Mil­it­ary com­pens­a­tion: The Pentagon is re­com­mend­ing a ba­sic 1 per­cent pay raise for mil­it­ary per­son­nel. The mil­it­ary’s top brass will see their pay frozen for one year — pre­sum­ably in solid­ar­ity with more-ju­ni­or ser­vice mem­bers. Fu­ture pay in­creases, Hagel said, will be “re­strained, though raises will con­tin­ue.”

Con­sid­er­ing that the Pentagon des­per­ately wants to curb the rap­id growth of mil­it­ary com­pens­a­tion and be­ne­fits, you could view the re­l­at­ively mod­est re­com­men­ded re­duc­tions in this area as a “win­ner.” But the back­lash from vet­er­ans groups — and many in Con­gress — will be quick and fierce. “Al­though these re­com­mend­a­tions do not cut any­one’s pay, I real­ize they will be con­tro­ver­sial,” Hagel ac­know­ledged. This is why Hagel has been meet­ing in per­son with these vet­er­ans groups. “I wanted to as­sure them that I want their in­put “¦ but we’re go­ing to pro­ceed.”

Hous­ing al­low­ances: These re­l­at­ively mod­est changes, in an era of budget pres­sure, could be con­sidered “win­ners.” But for the in­terest groups — and those in the mil­it­ary who love this be­ne­fit — there will be some key changes as the Pentagon scales back the growth of its tax-free hous­ing al­low­ances. Cur­rently, the mil­it­ary cov­ers 100 per­cent of ser­vice mem­bers’ hous­ing ex­penses, and will scale it back to cov­er­ing on av­er­age only 95 per­cent — with the re­main­ing 5 per­cent paid out of pock­et. However, it’s im­port­ant to re­mem­ber, as Hagel said, that mil­it­ary mem­bers, on av­er­age, in the 1990s paid for 18 per­cent of their hous­ing ex­penses.

Mil­it­ary gro­cery stores: The Pentagon is re­com­mend­ing slash­ing the dir­ect sub­sidies provided to mil­it­ary com­mis­sar­ies, which provide gro­cer­ies to mil­it­ary mem­bers, their fam­il­ies, and vet­er­ans at a dis­coun­ted price. The $1.4 bil­lion sub­sidy will be gradu­ally re­duced to $1 bil­lion in the re­quest — but the com­mis­sar­ies will still get free rent. The pri­or­it­ies will be to pre­serve com­mis­sar­ies more re­motely loc­ated. Des­pite the cuts, Hagel said, “they will be able to con­tin­ue to provide a very good deal to ser­vice mem­bers and re­tir­ees.”

Navy LCS ships: The Pentagon is dir­ect­ing the Navy to cut 20 of the lit­tor­al com­bat ships it was plan­ning to buy, from 52 to 32 ships. Hagel is “con­cerned that the Navy is re­ly­ing too heav­ily on the LCS to achieve its long-term goals for ship num­bers.”

In­stead, Hagel is press­ing the mil­it­ary to “dir­ect ship­build­ing re­sources to­ward plat­forms that can op­er­ate in every re­gion,” and fig­ure out wheth­er the LCS is the right ship to per­form in the Asia Pa­cific re­gion — where the ad­min­is­tra­tion is try­ing to re­bal­ance its dip­lo­mat­ic and mil­it­ary fo­cus.

Air Force’s A-10 fleet: Hagel wants to cut the Air Force’s A-10 fleet to save $3.5 bil­lion over five years. The A-10s, prized for their close air-sup­port cap­ab­il­it­ies, would have been re­placed by the F-35 some­time in the early 2020s, Hagel noted, and this pro­pos­al simply speeds up that out­come. Though Hagel called the A-10 “a 40-year-old single-pur­pose air­plane ori­gin­ally de­signed to kill en­emy tanks on a Cold War bat­tle­field,” don’t ex­pect it to go down without a fight in Con­gress. Re­pub­lic­an Sen. Kelly Ayotte of New Hamp­shire, whose hus­band was an A-10 pi­lot, is lead­ing the charge.

Army’s Ground Com­bat Vehicle: Hagel has ac­cep­ted the Army’s re­com­mend­a­tion to ter­min­ate the pro­gram — and has asked the Army and Mar­ine Corps lead­er­ship to “de­liv­er new, real­ist­ic vis­ions for vehicle mod­ern­iz­a­tion by the end of this year.” While the de­cision was not ex­actly a sur­prise, it’s worth not­ing the Army once said the GCV was crit­ic­al, and it will in­stead buy a cheap­er vehicle, likely an up­grade of the Brad­ley Fight­ing Vehicle.

WINNERS:

Spe­cial-op­er­a­tions forces: The mil­it­ary’s elite spe­cial-op­er­a­tions forces, which bur­geoned after the Sept. 11, 2001, at­tacks and were at the fore­front of the U.S. fight against al-Qaida, will in­crease from their cur­rent level of 66,000 ser­vice mem­bers to 69,700. This is one key ex­ample of how the mil­it­ary, even in more aus­tere times, is try­ing to pro­tect, as Hagel put it, “cap­ab­il­it­ies uniquely suited to the most likely mis­sions of the fu­ture.”

Mil­it­ary re­tire­ment funds: While the Pentagon is of­fer­ing some mod­est re­forms to mil­it­ary be­ne­fits, over­all, Pentagon of­fi­cials have sworn off mak­ing changes to the mil­it­ary re­tire­ment sys­tem in next year’s budget — even though they want to curb its rap­id growth that threatens to usurp oth­er key pri­or­it­ies in a downs­ized de­fense budget.

{{ BIZOBJ (video: 4754) }}

After the quick — and bi­par­tis­an — back­lash in Con­gress to a pro­vi­sion in Decem­ber’s budget agree­ment that cut ap­prox­im­ately $6 bil­lion in mil­it­ary pen­sions, Pentagon of­fi­cials made it clear they would wait to pro­pose ma­jor changes un­til a com­mis­sion makes its re­com­mend­a­tions in Feb­ru­ary.

Bases: Hagel is call­ing for an­oth­er round of base clos­ures that could take place in 2017. The Pentagon des­per­ately wants to get rid of its ex­cess mil­it­ary bases and fa­cil­it­ies. However, es­pe­cially in an elec­tion year, the bases may es­cape un­scathed — and Hagel knows it. “I am mind­ful that Con­gress has not agreed to our BRAC re­quests of the last two years,” he said.

Navy cruis­er fleet: Half of the Navy’s cruis­er fleet is go­ing to be “laid up” — put in the shipyard — to be up­graded. This in some ways is a work-around, be­cause the Navy has pre­vi­ously tried to de­com­mis­sion some cruis­ers in­stead of provid­ing ex­pens­ive over­hauls, but Con­gress re­fused. The Pentagon’s pro­pos­al is a more cre­at­ive way to save some money short-term, be­cause the ships will not be op­er­at­ing — but these 11 cruis­ers will “even­tu­ally” be re­turned “to ser­vice with great­er cap­ab­il­ity and a longer life span.”

Cy­ber­se­cur­ity: Cy­ber spend­ing — from cy­ber­se­cur­ity to in­tel­li­gence gath­er­ing and re­con­nais­sance — will get a boost. Hagel said last week that the Pentagon is “ad­just­ing our as­set base and our new tech­no­logy.”

LOSERS:

The whole budget: The Pentagon is re­quest­ing $496 bil­lion to meet the budget caps Con­gress has man­dated. Des­pite the Pentagon’s hopes that steep budget cuts would dis­ap­pear, the budget agree­ment passed in Decem­ber only gave the de­part­ment a rather measly $9 bil­lion in se­quester re­lief for next year.

Still, in the hopes of fund­ing some crit­ic­al pri­or­it­ies, the Pentagon will sub­mit an “Op­por­tun­ity, Growth and Se­cur­ity Ini­ti­at­ive.” This “wish list,” as it’s already been dubbed, will out­line how it would spend $26 bil­lion on top of the Pentagon’s budget re­quest.

This sets up a polit­ic­al free-for-all on Cap­it­ol Hill as mem­bers try to cherry-pick their pri­or­it­ies. And Hagel said it would be “paid for with a bal­anced pack­age of spend­ing and tax re­forms” pro­posed in the rest of the pres­id­ent’s budget. We’ll see how that goes over.

The Army: Hagel’s budget calls for the Army to shrink dra­mat­ic­ally, to its low­est force size since be­fore World War II. The num­ber of act­ive-duty per­son­nel will drop from 520,000 to as low as 440,000 — a num­ber roughly con­sist­ent with what Army Chief of Staff Ray­mond Odi­erno has said is needed for the Army to ad­equately re­spond to threats around the world. Still, even as the U.S. ends an era dom­in­ated by long wars in Ir­aq and Afgh­anistan, the Army was pre­par­ing only to downs­ize, from a war­time peak of 570,000, to 490,000.

This big loser in the Pentagon’s budget re­quest could suf­fer even more if the budget cuts re­main in place. “If se­quest­ra­tion-level cuts are re-im­posed in 2016, the act­ive-duty Army would have to draw down to an end strength of 420,000 sol­diers,” Hagel said.

The act­ive-duty forces aren’t the only di­vi­sion be­ing rolled back in the budget re­quest. The Army Na­tion­al Guard would draw down to 335,000 sol­diers by 2017 from its cur­rent level of 355,000, and the Army Re­serves would drop to 195,000 from 205,000.

European bases: The Pentagon is well aware that clos­ing mil­it­ary bases of­ten leads to a los­ing fight with Con­gress. So it will pur­sue one loop­hole: clos­ing European bases, which it can do without con­gres­sion­al ap­prov­al.

The de­part­ment, Hagel said, will re­view — and pur­sue — re­com­mend­a­tions to close bases in Europe. The de­part­ment has cut its in­fra­struc­ture in Europe by 30 per­cent since 2000, he ad­ded.

Mil­it­ary com­pens­a­tion: The Pentagon is re­com­mend­ing a ba­sic 1 per­cent pay raise for mil­it­ary per­son­nel. The mil­it­ary’s top brass will see their pay frozen for one year — pre­sum­ably in solid­ar­ity with more-ju­ni­or ser­vice mem­bers. Fu­ture pay in­creases, Hagel said, will be “re­strained, though raises will con­tin­ue.”

Con­sid­er­ing that the Pentagon des­per­ately wants to curb the rap­id growth of mil­it­ary com­pens­a­tion and be­ne­fits, you could view the re­l­at­ively mod­est re­com­men­ded re­duc­tions in this area as a “win­ner.” But the back­lash from vet­er­ans groups — and many in Con­gress — will be quick and fierce. “Al­though these re­com­mend­a­tions do not cut any­one’s pay, I real­ize they will be con­tro­ver­sial,” Hagel ac­know­ledged. This is why Hagel has been meet­ing in per­son with these vet­er­ans groups. “I wanted to as­sure them that I want their in­put “¦ but we’re go­ing to pro­ceed.”

Hous­ing al­low­ances: These re­l­at­ively mod­est changes, in an era of budget pres­sure, could be con­sidered “win­ners.” But for the in­terest groups — and those in the mil­it­ary who love this be­ne­fit — there will be some key changes as the Pentagon scales back the growth of its tax-free hous­ing al­low­ances. Cur­rently, the mil­it­ary cov­ers 100 per­cent of ser­vice mem­bers’ hous­ing ex­penses, and will scale it back to cov­er­ing on av­er­age only 95 per­cent — with the re­main­ing 5 per­cent paid out of pock­et. However, it’s im­port­ant to re­mem­ber, as Hagel said, that mil­it­ary mem­bers, on av­er­age, in the 1990s paid for 18 per­cent of their hous­ing ex­penses.

Mil­it­ary gro­cery stores: The Pentagon is re­com­mend­ing slash­ing the dir­ect sub­sidies provided to mil­it­ary com­mis­sar­ies, which provide gro­cer­ies to mil­it­ary mem­bers, their fam­il­ies, and vet­er­ans at a dis­coun­ted price. The $1.4 bil­lion sub­sidy will be gradu­ally re­duced to $1 bil­lion in the re­quest — but the com­mis­sar­ies will still get free rent. The pri­or­it­ies will be to pre­serve com­mis­sar­ies more re­motely loc­ated. Des­pite the cuts, Hagel said, “they will be able to con­tin­ue to provide a very good deal to ser­vice mem­bers and re­tir­ees.”

Navy LCS ships: The Pentagon is dir­ect­ing the Navy to cut 20 of the lit­tor­al com­bat ships it was plan­ning to buy, from 52 to 32 ships. Hagel is “con­cerned that the Navy is re­ly­ing too heav­ily on the LCS to achieve its long-term goals for ship num­bers.”

In­stead, Hagel is press­ing the mil­it­ary to “dir­ect ship­build­ing re­sources to­ward plat­forms that can op­er­ate in every re­gion,” and fig­ure out wheth­er the LCS is the right ship to per­form in the Asia Pa­cific re­gion — where the ad­min­is­tra­tion is try­ing to re­bal­ance its dip­lo­mat­ic and mil­it­ary fo­cus.

Air Force’s A-10 fleet: Hagel wants to cut the Air Force’s A-10 fleet to save $3.5 bil­lion over five years. The A-10s, prized for their close air-sup­port cap­ab­il­it­ies, would have been re­placed by the F-35 some­time in the early 2020s, Hagel noted, and this pro­pos­al simply speeds up that out­come. Though Hagel called the A-10 “a 40-year-old single-pur­pose air­plane ori­gin­ally de­signed to kill en­emy tanks on a Cold War bat­tle­field,” don’t ex­pect it to go down without a fight in Con­gress. Re­pub­lic­an Sen. Kelly Ayotte of New Hamp­shire, whose hus­band was an A-10 pi­lot, is lead­ing the charge.

Army’s Ground Com­bat Vehicle: Hagel has ac­cep­ted the Army’s re­com­mend­a­tion to ter­min­ate the pro­gram — and has asked the Army and Mar­ine Corps lead­er­ship to “de­liv­er new, real­ist­ic vis­ions for vehicle mod­ern­iz­a­tion by the end of this year.” While the de­cision was not ex­actly a sur­prise, it’s worth not­ing the Army once said the GCV was crit­ic­al, and it will in­stead buy a cheap­er vehicle, likely an up­grade of the Brad­ley Fight­ing Vehicle.

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