Wednesday, July 27, 2011

Red Lines, Fair Shares, and Inflection Points

The headlines this morning try to tell a story. Spencer Ackerman at Danger Room goes with the headline that reads Top Brass Unloads on Austerity Plan. Not to be outdone, Hugh Lessig of the Daily Press has the headline Military brass warns against deep cuts. Phil Ewing at DodBuzz has a similar headline that reads Vice chiefs bemoan readiness in bid to save budgets. If we were to read these headlines alone we might get the impression the proposed cuts to the Department of Defense was the story that came from the hearing, but unfortunately we would not be very informed if we didn't dig deeper.

The story from Tuesday's House Armed Service Committee's Readiness hearing isn't that military leaders do not want budget cuts - no government agency leaders like budget cuts. The real story is that the Department of Defense leadership sent a clear signal to political leaders where the red lines are and what those red lines mean. Representative Forbes choose the number - $400 billion - and each service defined what that red line means to them. Lets start with the Marine Corps.

FORBES: General, you have heard the same statements that we have heard about potential cuts from different sources, $400 billion to $1 trillion.

Assuming that we divided those equally and the Marine Corps had to take as much as $200 billion of cuts over the next 10 years, could you absorb those? And what would the impact be on the readiness state of the Marine Corps if that were to come your way?

DUNFORD: Chairman, we have taken a look at the figure of $400 billion and we've taken a look at what our fair share would be, if it would come down to the Department of Navy and we would take a cut of those reductions inside the Department of the Navy.

I think, within $400 billion, we would have some challenges in taking those cuts. I think, if they would exceed $400 billion, we would start to have to make some fundamental changes in the capability of the Marine Corps.
Did anyone else catch the important point that the Marine Corps has 'taken a look at what their fair share' of the cuts would be? If the military services have already divided the pie regarding the budget cuts before the strategic review is completed, then the Obama administrations strategic review is little more than a bullshit popsicle. General Dunford ultimately does not disclose the figure that would form the red line for "their fair share" of cuts, but if the strategic review is real and not the bullshit popsicle it appears to be, crossing the magic "fair share" total means "fundamental changes in the capability of the Marine Corps." That is a red line.

Forbes asks the same of the Air Force next.
FORBES: I'm looking right now at the average age of some of your fleet. And it could be a few years either way, but as I look at it, your strategic bomber's about 34 years old; tanker aircraft, 47; your airlift aircraft, 19.

What impact would those cuts have on the readiness for the Air Force?

BREEDLOVE: We have also looked at the conversation which is happening about our fair share of $400 billion. And it would cause us quite some concern in the recapitalization of just what you talk about, Mr. Chairman.

We do have an attack air fleet and a bomber fleet that is in bad need of recapitalization. And our plans throughout this period would be challenged by -- by those cuts.

Similarly to General Dunford, what we have looked at is that, in a $400 billion cut, our capacity would have to come down. We have determined that we will not go hollow.

When I came into the flying business in the '70s, I looked at what hollow was on Air Force bases as I walked down the line and saw holes in aircraft where there were no engines, and we had maintained a certain amount of infrastructure and iron but it was unflyable.

And we can't afford to go there with the requirements of our COCOMs today. So a $400 billion cut would force us to constrict our force in order to maintain a ready and fit force to fight.

And we come to almost the same conclusion that General Dunford did. Beyond $400 billion, we would have to go into a fundamental restructure of what it is our nation expects from our Air Force.
There is that phrase "fair share" again - adding more credibility to skeptics of legitimacy of any DoD strategic review by the Obama administration. Can anyone explain how a legitimate "roles and missions" analysis based on strategic thought leads to "fair shares" of budget pies?

General Breedlove has a good answer overall though, because he not only defines the red line as "beyond $400 billion" but also describes what a hallow force is. It is very smart, because by outlining what a hollow force looks like, the US Air Force positions themselves to make cuts that they deem necessary rather than allowing others to dictate - and this testimony makes clear the Air Force will choose to contract itself rather than spread itself out too thin to be effective. These signals are important because smaller Air Force means fewer planes, and fewer planes means local job impacts to specific districts.

Just like the Marines, the US Air Force makes clear that beyond their "fair share" of cuts the Air Force will have to go into a "fundamental restructure of what it is our nation expects from our Air Force." That is a red line.

Forbes then moved on to the Army next.
FORBES: General Chiarelli, again, thank you for being here. No-surprise question to you -- you've heard the questions that I've asked to General Dunford and also to General Breedlove. I'd like to ask you the same thing.

In your best professional military judgment, given the demands of the Army currently, are you currently able to provide the combatant commanders, all of our combatant commanders, with the resources they need to meet the operational requirements of the missions that they currently face?

CHIARELLI: No, we cannot meet all the other COCOM commander's validated demands. Those are prioritized through the global force management process. We work hard to meet them. We are not able to meet them all, and we help them manage that risk.

We are looking very, very hard at a $400 billion cut. We don't totally understand the total impact that's going to have on the force, but when you double that to $800 billion or more, you're reaching an area there that I think would definitely we'd have to look very, very hard at our strategy, what we can and cannot do.
The Army budget is currently enormous - two wars will do that. Even if we take just the baseline DoD budget, excluding the war costs, the Army budget for the last decade has held a higher percentage of the overall DoD budget than it has at any time since WWII, around 26%. What is noteworthy here is the Army doesn't really understand what the $400 billion budget cut figure means, but the red line for the Army is apparently $800 billion.

The Army also receives about $70 billion annually in war supplemental funding, so that might explain in part why $400 billion isn't too bad a hit to the service compared to the other services, but why closer $800 billion would be.

Finally, Rep Forbes brought up the issue with the Navy, but what is remarkable is the extraordinary detail that went into asking the question.
FORBES: Admiral, last question I'm going to ask is this. When Admiral Burke was here a little over a week ago, he said that the COCOM demand was for about 16 or 18 subs at any one time. He said we could only deliver about 10 subs at any one time, not because they didn't need them, but because that's all we could afford to deliver -- big difference.

I'm looking at the shipbuilding plan that has been submitted by the Navy in looking out. We had Admiral Willard testify before one of our subcommittees a little over a year ago that the Chinese now for the first time in our lifetime had more ships in their navy than we did in ours. And I know we can argue about capability, but at some point in time, numbers become capability.

The second thing we looked at is the Navy has said we needed a floor of 313 ships. Then they came back and somewhat tweaked that and said 328. You know, and we've chatted about this before, in the QDR independent panel that did an analysis on that number, they came up and felt we needed 346 ships.

Regardless of whether it's 313, 328 or 346, in CBO's review of the shipbuilding plan that has been brought forward, they asked the question how the numbers work out, because based on their numbers and the cost of the ships, they feel instead of going to 313, we could be going down to 270, 250, even 170, depending on the cost of the ships.

Here's the question I have for you. This year this committee put $14.9 billion in shipbuilding. The average over the last three decades, as you know, has been $15 billion that Congress has put in for shipbuilding. We know we can't supply enough subs right now for our combatant commanders' request.

We know, as you mentioned and also as CRS has come out and told us, if we were to delay a carrier, that carrier cost for either not building one or delaying them would increase not just our carrier cost, but the cost of our subs and the cost of doing the maintenance on our ships.

We also know that last year the Navy had a $367 million shortfall in their ship repair account. Admiral Burke, Admiral McCoy testified about a week or so ago that when we don't do the maintenance on the ships, we reduce the lifecycle for those ships, and we increase the cost of the maintenance.

The number differentiation on that shipbuilding plan is this. If we had the $15 billion, we can't reach even a 313-ship goal. You heard General Breedlove say when the Chinese say they're going to do something, they normally do it. And they're talking about building a lot of ships over the next few years.

My concern to you is if we are short already, and I think the numbers are between -- that we need $17 billion to $19 billion, so we could be short $2.5 billion to $19 billion, what in the world would the navy do on its shipbuilding plan, if you have to take further reductions coming down from some of these budget hits?

GREENERT: Well, Mr. Chairman, you really eloquently described the conundrum we're in, the balance.

FORBES: I try.

GREENERT: And it's really all about that balance.

If we have a reduction of a kind that was passed around here, $400 billion, $886 billion, without a comprehensive strategic review, a fundamental look at what we were asking our forces to do, without a change in activity, as I described, we won't be able to meet the global force management plan today. I'm pretty sure of that.

It will exacerbate our readiness trends, which you're familiar with. And if we have to go to force structure, reduction of force structure, which you mentioned, I'm concerned about the industrial base. You're familiar with it, and you know that it's a fragile item.
Later in testimony, this exchange also takes place.
FORBES: And, Admiral Greenert, the last question I have for you, going back to the numbers we were chatting about earlier on our shipbuilding plan, I think it would be fair to say that the Congress has been averaging about $15 billion over the last three decades.

This year, we put in $14.9 billion. As you know, CBO has come out with their report, suggesting that to follow your plan, you would need about $19 billion per year.

I think some of your earlier figures -- but I don't want to throw these at you -- show that we'd need about $17.3 billion. But let's just take the CBO figures.

How realistic do you think it is with the budgets that we're seeing and proposed cuts that we're going to have those kind of increases going into the shipbuilding plan over the next several years?

And if we can't come up with a realistic scenario of getting those dollars, does that mean our shipbuilding plan is not a realistic plan?

GREENERT: If I may, Mr. Chairman, I looked at the CBO report and as we know, in the -- in the -- the differences vary by year, a few are by tranche years (ph).

First 10 years, we're pretty close. It's about inflation indices, labor differences, cost differences, and really the foundation, if you will, or the assumptions put into the design of the ships. We vary slightly on what the future ship might look like.

But, nonetheless, to get to the -- to your question at hand, if we receive a reduction of the ilk we were talking about, $886 billion, and we have to reduce force structure, and we can't build ships to the level that we need to.

Then, you know, our shipbuilding plan, it gets back to strategy. I have to change the strategy. So we, as stated by all our leadership, we need a change in strategy.
Admiral Greenert had a great day on the Hill in my opinion, particularly considering he is in a somewhat difficult position with the CNO confirmation hearings looming. In his opening statement, ADM Greenert said this very interesting bit:
I can't tell you for sure, Mr. Chairman, if we're at an inflection point or a tipping point. But I can't -- but I don't see how we can sustain this pace of operations indefinitely and meet the readiness standards.

If we try to do so, I think it'll consume the expected service life of our force structure earlier than designed and planned, and we'll face a cascading increase in the cost to achieve the expected service life for those ships. And reaching that expected service life is a foundational element of our future ship inventory and, accordingly, our shipbuilding plan.
ADM Greenert nailed his testimony. The news folks can afford to be simplistic and frame headlines as a DoD vs the budget drama, but it is clearly more complicated than that. There are serious strategic and political issues on the table, and there is nothing simple about the challenges.

The approach Admiral Greenert consistently took was a strategic view calling for a strategic review. It's brilliant, because the Navy faces very difficult decisions and this approach results in burden sharing - specifically when the Navy takes the strategic road it shifts the burden of the political consequences onto elected leaders - and the consequences are enormous.

The shipbuilding industry in America is almost exclusively supported by the government sector, as it lacks the private sector alternative like the airline industry - for example. Loss in shipbuilding capacity by reduced government sector spending cannot be made up via other means, and neither Congress nor the Obama administration has a policy that could help the shipbuilding industry become more competitive globally in the private sector. When Admiral Greenert says he is "concerned about the industrial base," he is speaking directly to capacity now and into the future. Loss of that capacity will translate into regional impacts to economy likely to have election outcomes, and that is particularly true in states like Virginia and Florida.

The Navy needs the strategic review more than the other services do right now, and ADM Greenert has sent a clear message the Navy faces difficult choices, and only with a legitimate strategic review can the Navy make informed choices based on the budget cuts to the Navy. The decisions by the Navy must be guided by a political policy with a clear objective. In many ways, the US needs to decide whether we are Sparta or Athens, because in this economy the nation can no longer afford to be both.

ADM Greenert specifically used the phrase "inflection point," which I think is brilliant in describing exactly where the Navy - if not the nation - is today. Whatever the strategic review decides, what is clear is that Congress will want to have a copy of it for evaluation, because ADM Greenert made it pretty clear that while the Navy can adapt to the review decisions, the political consequences of the choices that will need to be made will be very real.

Did we learn anything? I think we learned a lot. We learned the Navy is standing on the red line. We learned that the 313-ship plan is almost certainly dead. We learned that ADM Greenert is going to present the Navy to Congress as guided by his strategy, and he has signaled that will probably be a new strategy for the Navy. We learned the demand for naval forces is around 400 ships, so the Navy is well below and unlikely ever to be sized to meet COCOM demands.

Most importantly, we learned that right now the Navy is at an inflection point, and the Navy has given clear indications the Tipping Point exists, potentially at $400 billion in budget cuts and absolutely at higher numbers.

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