The Build-Down

Political gravity has overtaken the Pentagon budget: what went up is coming down. Now we have no choice but to make choices in defense


IN 1980 RONALD REAGAN CAMPAIGNED AGAINST WHAT he would later call “a decade of neglect" in providing for the national defense. He decried the hollowing out of the armed services—the drop in rates of enlistment and re-enlistment, the curtailment of training exercises for fliers, sailors, and soldiers, and the damaging effect this misplaced austerity was having on morale. He pledged to do better by the active-duty servicemen. He also pledged to fund many new weapons systems, and in the course of his administration he added some that were undreamed of in 1980, notably the Strategic Defense Initiative. For year after year, as defense budgets mushroomed, it looked as if he could honor both these priorities. But then came the budget crisis and its legislative solution, the Gramm-Rudman-Hollings budget-reduction act. And suddenly the Reagan buildup yielded to a builddown, as the defense budget was cut in each of the past four years. Now the administration of George Bush, caught between his campaign promises of no new taxes and Gramm-Rudman-Hollings, must choose between Reagan’s two priorities. It can’t have all the new weapons systems that Reagan ordered and maintain the existing forces at a high level of readiness; the money just won’t stretch that far. The fear among some Pentagon-watchers in Washington is that the Bush Administration will sacrifice readiness to pay for the new weapons.

If that happens, then future historians may write an ironic postlude to the greatest peacetime military buildup in United States history. They may note that a $2.3 trillion buildup aimed at redressing the neglect of the active-duty forces was succeeded by a build-down that led to the worsening of the very problems that the buildup was supposed to eliminate.

Already signs abound that this is the shape of things to come. Operating costs since 1960 have consumed as much as 68 percent of the defense budget, but under Reagan they hovered around 55 percent. Since the Pentagon budget started dropping, in 1986, spending on bread-and-butter sustainability items—tactical missiles, munitions, spare parts—has fallen off three times as fast as defense spending overall. Having slipped down to a troop strength of 772,000, the active-duty army is now smaller than it has been at any time since the late 1970s. The air force will soon have one tactical wing fewer than it had in 1980. The navy will not achieve its 600-ship fleet; instead, it will actually slip from 574 ships next year to 571 in 1991. A big jump in military pay early in the 1980s helped increase enlistment and raise the quality of enlistees. But in a report released in February the Pentagon noted. “The combined impacts of low unemployment, civilian competition (both industry and post-secondary schools), declining youth population and budgetary restraints paint a bleak picture for success" in signing up high-quality recruits in the years ahead. This is the path back to the hollow forces of the 1970s. How did we get on it? Is that destination, in fact, something we should fear? Can we manage the builddown with more rationality than the buildup? Based on interviews with military officers, defense officials, and members of Congress, this article will explore these and other questions that, strangely, have not yet got the airing they deserve in political debate.

The Yawning Gap

ONLY FOUR YEARS AGO, UNDER THE ARCHITECT-INchief of the Reagan buildup, Caspar W. Weinberger, who was then the Secretary of Defense, the Pentagon’s budgeteers built into their five-year defense-spending blueprint the optimistic expectation that the department would have $439 billion to spend in 1989, and $478 billion in 1990. The Department of Defense actually received $290 billion in 1989, $149 billion less than it had once counted on. And having rejected President Reagan’s parting request for two percent annual real growth in defense spending over the next five years. President Bush asked only that defense keep pace with inflation next year. Now Bush and Congress have agreed on even less than that—$296 billion, which falls $182 billion short of what the Pentagon had expected, in the mid1980s, to spend for 1990.

In striving to square the circle of yesterday’s soaring assumptions and today’s stark budgetary facts of life, Pentagon planners had to carve some $300 billion out of their past fiscal assumptions to assemble the $1,678 billion fiveyear defense plan for 1990-1994. This is a deep, painful, gouging cut, but it is still not enough. For one thing, the Pentagon has packed $45 billion worth of un-itemized subtractions—a “negative funding wedge” — into the last three years of the new five-year plan. This is the sort of phony budget-cutting ploy that David Stockman, the former director of the Office of Management and Budget, has called “the magic asterisk.” At some point over the next few years actual programmatic cuts will have to be found to match the un-itemized subtractions.

For another, the new spending trajectory laid out by Bush—one year of “zero real growth,” followed by two years each of one percent and then two percent real growth—will amount to $1,621 billion over the five-year plan, or $57 billion less than the Pentagon expected when the plan was written, only a few months ago. If defense spending remains essentially flat for the next five years, as is entirely possible, this could force the military to cut $227 billion more. Add in the negative funding wedge, and the gulf between the five-year plan and reality yawns to $272 billion.

“The difference between a curve drawn flat and a curve going up at two percent a year can be very profound when scaled to the defense budget,” Senator Albert Gore, of Tennessee, who is a member of the Armed Services Committee, has said. “It is the difference between thinking you can scrape through until better times by finding a handful of sacrificial cuts and a view that says the hard times are here for a long time, and long-term adaptations must be made.”

What sort of long-term adaptations should be made? Tinkering at the edges will not do the trick, as the baseclosing exercise now under way illustrates. Eighty-six bases are to be closed, five more are to be closed in part, and another fifty-four are to have their missions changed— for a savings of only $694 million a year, if that much. Likewise, pledges to eliminate the many other inefficiencies that beset this nation’s way of doing military business, though welcome, won’t by themselves suffice to bridge the vast defense-budget gap. Bush’s directive ordering the Secretary of Defense to “develop a plan to implement the spirit as well as the letter of the [1986] Packard Commission report” falls into this category. It was David Packard, after all, who, as the deputy secretary of defense, presided in the early 1970s over the implementation of the procurement-reform recommendations made by the blue-ribbon Fitzhugh Commission. And yet when Packard returned to Washington in 1985 to chair his own blue-ribbon commission on acquisition reform, he grumbled that “defense procurement is in worse shape now than it was fifteen years ago.” Even if some real headway is made in transforming the system by which acquisitions are made, it is unlikely that the reforms will generate savings when economies will be most sorely needed.

Also not very promising are such budgetary techniques as two-year defense budgets and “multi-year procurement,” whereby Congress commits itself to long-term procurement of weapons rather than authorizing the continuation annually, as it now does for most programs.

Although Congress directed the Pentagon to start submitting biennial budgets in 1987, it has not committed itself to two-year appropriations, and likely never will, so long as non-military programs are handled on an annual basis. Trade-offs between categories of spending are fundamental to Congress’s annual budgetary horse-trading.

As for multi-year procurement, it has yielded $9 billion in savings since 1982, according to the Pentagon, which is asking permission this year to apply the approach to thirtytwo programs, with the hope of saving a further $8.5 billion through 1997. That is not a sum to be despised, but it would carry the department only a fraction of the fiscal distance required. In any event, while reaching out for more multi-year procurements with one hand, the Defense Department is stretching out production rates with the other. It is possible to save money in a given year by producing fewer weapons of a given type, but economies of scale are lost and total program costs are driven up.

In a study of the production rates of forty major weapons from 1983 to 1987, the nonpartisan Congressional Budget Office found that half the weapons were being turned out at rates “below—sometimes well below” the minimum economical levels. The Pentagon resorts to stretch-outs chiefly “to meet fiscal limitations imposed by the annual budget cycle,” the Budget Office noted. “The amount of total funding required in a given year takes precedence over economic considerations, even though buying larger quantities would reduce unit costs. Limitations on funding mean that unless a program is stretched out it may be necessary to cancel or defer other weapons programs.” None of the institutional players in Washington, however, is particularly good at canceling weapons programs. “Once the mission is defined for a piece of hardware, it just never goes away,” a defense examiner at the Office of Management and Budget told me.

For example, in a last-minute drive, late in 1987, to cut $33 billion out of the fiscal-1989 budget request, eighteen artillery, missile, and aircraft projects were terminated, for projected savings of $4.8 billion this year and another $46.9 billion in the “outyears” to come. But the bulk of those long-term savings—$39.8 billion—was supposed to arise out of the cancellation of the mobile single-warhead Midgetman missile. Sustained by the vociferous support of congressional Democrats, Midgetman is still alive, and vigorously competing with the Pentagon’s roughly $10 billion plan to place fifty of the ten-warhead MX missiles on rail cars. Similarly, the air force accrued some $2.2 billion in long-term savings last year by canceling its anti-satellite missile. This year, however, the navy requested $219 million over the next two years for its own anti-satellite missile project.

The point is that thus far efforts to close the spending gap have amounted to palliatives. The fundamental decisions about priorities and strategy have yet to be made.


OVER THE PAST EIGHT YEARS APPROXIMATELY $300 billion—roughly 14 percent of the total federal defense budget, including the Energy Department’s efforts in producing nuclear warheads—has been funneled into the procurement, operation, and maintenance of strategic nuclear weapons. Currently in the works or already deployed are two bombers, the B-1B and the stealthy B-2; two intercontinental ballistic missiles, the Midgetman and the MX; two sea-launched ballistic missiles, the Tridents I and II; and two types of air-launched cruise missiles, including, inevitably, a stealthy version.

The bills that are pending for some of these projects are not trivial. The total cost of 899 Trident II missiles, the first of which are to be deployed within the next year, is $35.5 billion. The cost of 132 B-2s is $68.1 billion, with requested annual appropriations for procurement approaching $3.4 billion in 1990 and $6.4 billion the following year.

Under a gentlemen’s agreement, the military services do not generally go gunning for one another’s programs in the councils of the Pentagon; budgetary logrolling, after all, is much easier when everyone pushes together. But the largesse that strategic nuclear weapons have enjoyed during the recent buildup has rankled the ground-warfare advocates, who have recently seen funding requests for the Strategic Defense Initiative exceed the army’s entire research-and-development budget. “No one denies the requirement for a credible nuclear deterrent,” the Association of the United States Army, a group of retired officers and service boosters headquartered in Arlington, Virginia, said in a report in 1987. But, the association asked, “do we really need more Trident II missiles, . . . a Stealth bomber following right on the heels of the B1B and a very expensive upgrade” of nuclear command and control systems? That kind of question was tantamount to heresy in the ReaganWeinberger years. But President Bush and his Secretary of Defense, Richard B. Cheney, are likely to be forced to wrestle with it as the build-down proceeds.

Of the $4.3 billion that the Pentagon says it will save over the next five years through non-nuclear program cancellations, half comes from dumping a dozen or so comparatively penny-ante projects (a sonobuoy program, for example) and half from the longexpected killing-off of an upgraded version of the navy’s A-6 attack plane. (At the same time, however, the annual funding requests for the A-6’s successor, the navy’s stealthy A-12, will soar to $1.2 billion in 1990 and $1.4 billion the following year.) Meanwhile, the services’ budgets are full of costly conventional-weapons programs poised to roar into full-scale production. The army is planning to spend $35 billion for some 2,100 LHX light helicopters (recently cut back from $66 billion for 4,900 choppers) and $12.3 billion for the Forward Area Air Defense system, the successor to the ill-fated DIVAD anti-aircraft gun, which was cashiered in 1985 for technical incompetence, after a $1.8 billion investment.

Besides the A-12—a “black” program, whose total cost is top secret—the navy is planning to buy a new fleet of SSN-21 attack submarines, at a cost of $18.9 billion for the first dozen boats. The Marine Corps wants 663 V-22 tiltrotor aircraft, for $25.9 billion. And the air force wants $11.6 billion worth of advanced medium-range air-to-air missiles, 211 C-17 airlifters, for $37.5 billion, and 750 stealthy advanced tactical fighters, for about $65 billion.

Defense analysts worry that the armed services and their pork-barreling friends in Congress, in their eagerness to get their prized hardware, will allow the readiness and sustainability of the forces to fall — the hollowing-out scenario. Readiness, which is a function largely of troop training, morale, and weapons maintenance, denotes the military’s ability to mobilize rapidly for war. Sustainability, which is a function largely of stocks of munitions and spare parts, denotes its ability to continue fighting once it has gone to war.

Though military readiness has long been a sacred cow on Capitol Hill, it labors under a burden. The annual budget deficit is measured by “outlays,” or actual spending. But because the money appropriated in a given year for procurement and R&D is released to contractors only gradually, comparatively little of it is spent during that year. More than a third of the defense dollars that will be spent in 1989 were actually appropriated in prior years. Funds appropriated for operations and maintenance and military pay go for current operations, however, and thus “outlay” much more rapidly. In striving to meet a GrammRudman-Hollings deficit target, Congress will find, therefore, that a program cancellation will affect this year’s outlays only slightly, whereas canceling or trimming a planned pay increase could save real money now.

Ready for What?

SOME DEFENSE INTELLECTUALS SUGGEST THAT WE should deliberately and selectively draw down readiness, today’s defense, to pay for all the hardware we have ordered, the sinews of tomorrow’s defense. Those making this argument predicate it on the abatement of the Soviet threat that presumably will flow from the troop reductions that Mikhail Gorbachev has announced and his proposals for military perestroika. If rampant “threat inflation" was the guiding principle of the buildup, no less rampant “threat deflation” may play a similar role in shaping responses to the build-down.

Edward N. Luttwak, at the Center for Strategic and International Studies, likens the services’ pouring funds into readiness, given the diplomatic and military climate of the late 1980s, to a hotelier’s placing fresh flowers in every room every day when none of his rooms has been reserved. Wiser, Luttwak says, to stop buying those flowers and save up for new furniture.

“In the current environment, why should you keep stocks of months of inventories at wartime rates if it doesn’t look like the threat is that immediate?” the former secretary of the navy John F. Lehman, Jr., told me recently. He added that “cutting back on readiness money doesn’t mean that you stint or keep less ready or less safe those forces that are out on the line.”

“I think there is some promise in that,” Les Aspin, the chairman of the House Armed Services Committee, says about this line of thinking. But, he cautions, “there’s a limit to how far you can go. Because if you reduce the readiness too far, you damage the morale of the troops. If there isn’t enough exercise money, people leave the services. If you don’t give pilots enough flying time, they go and fly for Delta Airlines.” A controlled readiness draw-down—as opposed to a willy-nilly, GrammRudman-Hollings-driven readiness draw-down—could prove tough to sell, both to Congress and to the commanders-in-chief. One Pentagon budget official told me recently, “There isn’t that much readiness to draw down. We haven’t been buying war reserves for the air force for two years now. You don’t save money by cutting your people and cutting their training just so you can keep money flowing to your contractors.”

Another scheme for stretching forces and budgets which is gaining currency is the possibility of transferring even more troops and missions from active-duty forces to the reserves. The U.S. military is already unusually dependent on its reserves, which now number almost 1.7 million, as compared with fewer than 1.3 million in 1980. Over the same span the active forces have grown only marginally. Because reserve forces generally drill only thirty-eight days a year, incurring lower operations, pay, and retirement costs, they are cheaper to operate—by as much as 40 percent—than their active-duty counterparts.

With the initiation of the “total force” policy in 1973, the United States restructured its military forces so that it could, and can, no longer go to war in a big way without calling up the National Guard and the reserves. Five of the army’s eighteen active-duty divisions would be battleready only if they were rounded out with a reserve brigade. Another ten army divisions are in the National Guard. A third of the air force’s tactical fighters are in the reserves, as are four fifths of the navy’s minesweepers and a third of the Marine Corps’s heavy-artillery batteries.

“The Pentagon’s prime responsibility is to keep technological leadership in all areas of national security,” the former Secretary of Defense Melvin Laird, who launched the total-force policy, told me in an interview. To preserve funding for this high-tech R&D and procurement, he added, “you’re going to have to rely more and more on reserves and National Guard as you face up ro some of these budgetary problems.”

Though the guard and the reserves have powerful advocates in Congress, an equally powerful institutional player—the active-duty military—is poised to resist this way of coping with the build-down. Earlier this year, in fact, precisely this issue was being debated in the Pentagon. Under congressional orders, the Defense Secretary’s Program Analysis and Evaluation Office (PA&E) drafted a report exploring ways in which reassigning aircraft to the reserves could both save money and help to cope with the flood of active-duty pilots leaving for higher airline salaries. Some 800 recently retired air-force pilots are lined up to get into reserve squadrons, which have run out of cockpits for all the takers. “Substantial savings” could be achieved by using 240 active-force tactical aircraft to fill out forty reserve squadrons from a reduced unit strength of eighteen aircraft today to a full strength of twenty-four aircraft, PA&E reported. Roughly a hundred of those fighters would be pulled out of units in Western Europe and given to reserve squadrons in the United States. Wartime supplies for those aircraft would be maintained at the European bases, however, and the reserve pilots would fly their planes back across the Atlantic during an alert.

A quarter of the air force’s 9,092 aircraft are already in the reserves. But they consume only an eighth of that service’s $23 billion annual operations budget. Even more economies would accrue from shutting down some 50 million square feet of air-force apron space and runways, according to PA&E, which estimated that the service has half again as much air-base infrastructure as it needs.

The active-duty air force was not thrilled with this draft study, and promptly began lobbying the Pentagon leadership to sign off on an alternative report, which concludes that the current air-force mix of active and reserve forces is just right. Among other points, the air force’s draft stresses that the “cost savings, if any” from transfers to the reserves will come only at the expense of reductions in operations.

That is undeniably true. As in so many other areas of potential savings, this trade-off between capabilities and cost will have to be carefully weighed if Congress or the Defense Department decides to cram the enhancement of the reserves down the active military’s throat. “There are savings to be had, but they come at the cost of a decline in capability,” Lawrence J. Korb, who served as the assistant secretary of defense for manpower and logistics from 1981 to 1985, told me recently. “There are no free lunches. As I’d try to tell people when I was in office, if money was no object, you’d have all active-duty military people and no reserves or civilians. But money is a problem.”

Spending Money “Smarter”

OVER THE PAST TWO YEARS THE PENTAGON LEADERship has directed that budget cuts be distributed proportionally among the four services. This evenhandedness means that the existing force configuration is simply stretched further to meet an already sprawling set of treaty commitments. It was this issue that prompted the abrupt resignation, early last year, of the secretary of the navy, James H. Webb, Jr. The Webb incident is an instructive paradigm for the range of issues that confront Washington in the era of the build-down. The commonly held view is that Webb stormed out of the Navy Department because the Secretary of Defense, Frank Carlucci, insisted that the service save $166 million in the fiscal-1989 round of budget reductions by retiring sixteen older frigates. Webb, formerly an assistant secretary of defense for reserve affairs, had wanted those ships consigned to the naval reserve, rather than sold off to foreign navies. But his broader complaint was that because of the need to play fair-is-fair in the Pentagon, Carlucci’s force-structure cuts were being levied with no eye to the larger strategy.

Webb said in an interview, “When I resigned, a number of people said, He just wants to spend more money.’ That’s not true—I wanted to spend money smarter. It we make the right strategic adjustments around the world, you can adjust the size of the army and tactical air forces and strategic airlift program without any problems. First you have to reduce the American presence around the world, in my view. But it would be foolish to reduce the size of the navy, and I felt strongly enough about it to quit.”

Mere service boosterism from a former navy secretary and ex-marine? Perhaps. But the fact remains that most of the army and air-force units stationed overseas at great expense are there to deal with what appears to be an increasingly unlikely contingency—a third world war with the Soviet Union. The navy, however, operates all over the world at a punishing tempo, continually showing the flag—and sometimes firing shot and shell—in direct response to evolving events.

Senator John Glenn, of Ohio, a member of the Senate Armed Services Committee, grew exercised when he complained to me about Washington’s collective failure to reassess the nation’s overall military strategy. “Our combat posture must be set up pursuant to a well-thought-out, well-defined national strategy and what our goals are around the world,” he said. “We can’t just go around forever saying, ‘It’s for the defense of the country.’ We can’t just buy the latest thing the salesmen are pushing at the Pentagon. Redefining our responsibilities around the world—that has to come first.”

It is precisely this sort of rethinking that could lend rationality to the build-down—and even transform a problem into an opportunity. But that would take an uncharacteristic access of “the vision thing" from a President who seems content to manage the status quo in defense even as its budgetary underpinnings are collapsing.