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Defense Review Doesn’t Skim, It Cuts Deep

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January 8, 2014

SecDef Chuck Hagel outlined the results of the Pentagon’s Strategic Choices and Management Review (SCMR) – a four-month directed review of budget planning options in light of sequestration.

The various SCMR budget cutting options were developed based on three budget scenarios:

  • the President’s FY 2014 budget submission which includes a $150 billion cut over ten years
  • an “in-between” budget that would reduce the Pentagon’s budget by $250 billion over ten year
  • a budget based on the full impact of the Budget Control Act’s sequester (approximately $500 billion over ten years 

The SCMR developed a package of cut options in three major areas:

  • management efficiencies and overhead reductions
  • compensation reforms
  • changes to force structure and modernization plans

The Pentagon has already started in one area. In late July, the Pentagon announced one initiative under way as a result of the SCMR – a 20 percent reduction in the DoD’s major headquarters
budgets. This initiative includes a goal of reducing civilian and military billets by 20 percent.   

Additionally, Hagel highlighted Congress’ reluctance to accept two budget cutting measures included in the FY 2014 budget submission – another round of base realignment and closure (BRAC) rounds and TRICARE fee increases.  

Hagel stated “DoD has no choice but to consider compensation changes of greater magnitude for military and civilian personnel” if the Pentagon is forced to face the fiscal challenges of a sequester-level budget.  Compensation options include (but not limited to):

  • increase military retiree health care use of private-sector insurance
  • change basic allowance for housing so currently serving pay more of their housing costs
  • reduce overseas cost of living adjustments
  • continue to limit military and civilian pay raises
  • eliminate civilian pensions for retired military personnel serving in the federal service
  • end subsidies for commissaries
  • restrict availability of unemployment benefits

Hagel reiterated that the Pentagon was “not announcing any compensation changes today” but did state that Chairman of the Joint Chiefs, General Martin Dempsey (USA), will lead an effort to develop a package of compensation cuts to the tune of $50 billion over the next decade. A parallel effort led by senior OSD staff will review civilian pay and benefits. 

End strength was also a big target for savings if the sequester continues. The SCMR options included downsizing the Army from a planned 490,000 to as low as 380,000; Marine Corps from 182,000 to as low as 150,000; and Army reserves from 550,000 to as low as 490,000.  

Force structure options included reducing up to five Air Force tactical squadrons, cutting the C-130 fleet and retiring older bombers. The Navy could see a reduction in the number of carrier strike groups from 11 to eight.   

Hagel discussed how the Pentagon will have to seek proper balance between capacity (measured in the number of brigades, ships, squadrons, and battalions) and capability (the ability to modernize weapons systems) before making recommendations to the President in the FY 2015 budget. 

Hagel closed stating, “If these abrupt [sequestration] cuts remain, we risk fielding a force that over the next few years is unprepared due to a lack of training, maintenance, and the latest equipment.” 

Congress needs to reconsider sequestration. Threatened budget cuts under the 2011 Budget Control Act were designed to be so onerous and senseless that a deal would be struck to prevent mindless budget slashing, with DoD shouldering 50 percent of the cuts.

Yet a budget deal was never reached. Here we are, over halfway through the first year of cuts, and there is too little discussion or movement toward securing a bipartisan agreement to avoid devastating sequestration effects not only for FY 2014, but for the next nine years.   

Congress and the administration need to act now so that the Pentagon can plan and execute both long- and short-term programs.  Military readiness and national security should not be used as pawns in the game of political brinkmanship.  

Send your legislators a MOAA-suggested message insisting on a bipartisan, balanced solution now.