Monday, January 28, 2013

Budget Thoughts

I don't really want to get too deep into the budget discussion yet because a memo (PDF) and a PowerPoint (PDF) isn't exactly a plan. I have only a few initial thoughts.

The memo and the PowerPoint were both written with the expectation they would leak to the media. This sets the expectation moving forward that everything will unfold in public.

The CNOs PowerPoint that breaks out State by State impact is written like one would write a highly political document. All indications are the Navy put the document together, but it very much looks like the White House is coordinating everything. Whether this is a good or bad thing is subject to interpretation.

The evil here is not sequestration, it is the Continuing Resolution. Even if OSD canceled the Joint Strike Fighter tomorrow, the Navy could not move money around from that program to any other budget to make up for any specific budget shortfalls, because the Continuing Resolution that is the current budget the Navy is operating under prevents exactly that type of big decision making or movement of money around the budget. The CR is probably written that way so that no politicians pet project gets canceled. The Continuing Resolution is the posterchild of bad governance.

Both political parties own sequestration, but in my opinion Democrats own more of it than Republicans since Democrats have not yet produced a single alternative to sequestration. Sequestration has not happened yet though, so right now Democrats simply own something that may or may not happen.

Both political parties own the Continuing Resolution, but in my opinion Republicans own more of it than Democrats and as of right now it is the current law. While it is true the Senate has not passed a budget in the lifetime of every child that will enter kindergarten this fall, the details of the Continuing Resolution have not been an important issue for Republicans who have been dead set in protecting industry interests over DoD interests. There are opinions out there that the Continuing Resolution is another example of how weak the leadership of Buck McKeon is as Chairman of the House Armed Services Committee and he has basically thrown the DoD off the boat in support of the House leaders priorities. It was noteworthy Defense News didn't name Buck McKeon to the top 100 individuals in Defense.

Either way, the Continuing Resolution prevents the services from preparing for sequestration because it prevents any significant movement of money inside the budget. The worst case scenario is a year long Continuing Resolution, and if combined with sequestration the damage will be much more significant than just sequestration.

All we can really say with certainty is that the Republican Party has changed over the last four years, and the CR and sequestration have revealed for anyone paying attention that the Republican Party is no longer the political party that represents the DoD as has traditionally been the case in American politics, although with the Continuing Resolution written as is today, the Republicans party is still very much the political party of the defense industry.

Regardless of the partisan politics, it is going to be a very difficult year for defense. A smaller budget for defense is not a bad thing by itself, indeed I believe the DoD budget is too high and taxpayer money is wasted today in defense spending absent strategy. It is my opinion the clear and present danger to the defense of the United States is not less money for defense, but poor governance by elected officials in the management of less money for defense.

As of right now, poor governance by elected officials in the management of less money for defense is exactly what is going on with the Continuing Resolution, and regardless of who folks believe is to blame politically, both political parties own some responsibility and deserve criticism for the way the DoD budget is being managed. It will be interesting to see how things unfold over the next several weeks, because with the White House apparently involved in the response process by the DoD, it could get pretty ugly.... indeed very politically ugly particularly when it becomes time for new political appointments and the administration likely has fewer extremely smart and well respected non-partisan experts carrying their water.

I have a theory that because Bob Work has been Undersecretary of the Navy that both the Obama Administration and the Navy has avoided a lot of public criticism from the greater naval community, which unlike the public think tank communities of the other services (particularly Army) who think tactically and primarily in terms of money/programs, naval thinkers tend to think about big picture strategy and foreign policy and historically have written criticisms that can come off the press with politically damaging blows to the confidence in political leaders (indeed George Bush took several hits from 2005-2008 from the naval centric community that were so devastating they land on John McCain as a second order of effect). Everything I am seeing from Obama's second term appears to be right out of the Jimmy Carter playbook for DoD management, starting with a politico heavy appointment list absent any truly respected defense expertise. History says that kind of poor governance will catch up with the Democratic Party in 2016.

I tend to believe that when Bob Work leaves in May(ish) (and I believe the absence of Hillary Clinton at Department of State will result in a similar effect), not too long after it is going to get ugly as the really smart people start to unload on the Foreign Policy and Defense establishment after holding fire for four years, and I won't be surprised at all if it is through those broadsides that a Republican Party foreign policy is reborn over the next 4 years. It really surprises me the Obama administration doesn't intend to appoint Bob Work to be SECNAV, because usually those guys are pretty smart about keeping the their opponents off guard. It is my opinion the Navy has been living in 4 years of the Bob Work Effect, which has basically provided a buffer effect from the really sharp criticisms from nearly every serious defense person in DC regardless of political affiliation. My sense is the Ray Mabus Effect is simply not going to get it done for the Administration, and in all likelihood neither will the Chuck Hagel Effect or the John Kerry Effect.

Now think about the future of defense - a bunch of politico type appointments with very few highly respected experts or elder statesmen, a year long continuing resolution, sequestration or budget cuts of similar size, and the current partisan political environment. I'm thinking the next four years are going to look and sound like a train wreck in slow motion for the DoD.

And yet I am still glass half full...

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