Pentagon Must Handle Spending Slowdown Responsibly, Lynn Says

NEW YORK, May 11, 2011 — Man­ag­ing a slow­down in defense spend­ing respon­si­bly will take more than being more effi­cient, Deputy Defense Sec­re­tary William J. Lynn III said here tonight.
As the keynote speak­er for the Roy­al Bank of Cana­da Defense and Aero­space Con­fer­ence, Lynn told an audi­ence at the Intre­pid Sea, Air and Space Muse­um that the Defense Depart­ment must find ways to spend sig­nif­i­cant­ly less, even in the midst of two active con­flicts and numer­ous oth­er com­mit­ments and threats.

“It would be desir­able to defer this chal­lenge until a some­what lat­er date, after the tran­si­tion in Iraq is com­plete and we are clos­er to hand­ing off the com­bat mis­sion in Afghanistan to local forces,” Lynn said. “But the deficit cri­sis doesn’t allow us that lux­u­ry. We need to get our fis­cal house in order, and we need to do it expe­di­tious­ly.” The deficit cri­sis, he said, is a mat­ter of nation­al secu­ri­ty.

“Our secu­ri­ty begins with a strong econ­o­my,” he explained. “Our abil­i­ty to exert glob­al influ­ence [and] pro­tect inter­ests abroad is threat­ened if we’re not able to reduce the deficit and to keep our nation­al debt with­in sus­tain­able bounds. No great pow­er can project mil­i­tary force with­out a sound econ­o­my. … Deficits are now approach­ing 10 per­cent of our econ­o­my, and aus­ter­i­ty mea­sures are required to have long-term health.”

Pres­i­dent Barack Oba­ma has made clear that painful cuts in fed­er­al spend­ing are nec­es­sary, Lynn said. “Every­thing has to be on the table: rev­enues, enti­tle­ments, domes­tic dis­cre­tionary spend­ing and defense spend­ing,” he told the audi­ence. “The defense bud­get alone can­not solve our deficit cri­sis. But it’s hard to envi­sion an over­all solu­tion — either eco­nom­i­cal­ly or polit­i­cal­ly — that does not include some con­tri­bu­tion from the 20 per­cent of gov­ern­ment spend­ing that goes toward defense.”

For the Defense Depart­ment to accom­plish this draw­down while engaged in Afghanistan and tran­si­tion­ing secu­ri­ty respon­si­bil­i­ty in Iraq — while still remain­ing ready to inter­vene else­where when nation­al secu­ri­ty inter­ests are at risk — pol­i­cy mak­ers and indus­try exec­u­tives alike will need to per­form “a high-wire act,” Lynn said.

“For [the Defense Depart­ment], how to slow defense spend­ing respon­si­bly while retain­ing the most effec­tive fight­ing force in the world is the cen­tral task,” he said. “For indus­try, how to adjust to a less-robust defense mar­ket while main­tain­ing tech­no­log­i­cal prowess is their cen­tral task.

“Togeth­er,” he con­tin­ued, “we must man­age our resources with­out hol­low­ing out our armed forces and with­out jeop­ar­diz­ing our indus­tri­al base. We must accom­mo­date fis­cal changes with­out under­cut­ting our mil­i­tary effec­tive­ness, now or in the future.”

The deputy sec­re­tary told the audi­ence that that nation has reached the fifth inflec­tion point in post-World War II defense spend­ing. The first three draw­downs came at the end of con­flicts: World War II, Korea, and Viet­nam.

“The fourth draw­down came in the mid-1980s, and was some­what anal­o­gous to the one we face today,” Lynn said. “Deficits dur­ing the ear­ly Rea­gan admin­is­tra­tion caused Con­gress to impose spend­ing caps, which led to defense reduc­tions, and those reduc­tions were accel­er­at­ed as the Cold War end­ed and the Sovi­et Union broke up.” All of the tran­si­tions had some­thing in com­mon, Lynn said: each time, the Defense Depart­ment suf­fered a dis­pro­por­tion­ate loss of capa­bil­i­ty and sub­se­quent­ly had to rebuild those capa­bil­i­ties, often urgent­ly and at great cost.

“And each time, the indus­tri­al base strug­gled to reverse course,” he added. “So in oth­er words, we’re 0-for-4 in man­ag­ing draw­downs to this point. To improve the play­ing field, we have to do bet­ter on this draw­down.”

Four broad lessons from pri­or draw­downs should apply this time around, Lynn said. The first, he said, is to make hard deci­sions ear­ly.

“Things are not going to get bet­ter,” he said. “There’s going to be less, not more, mon­ey in the future, and even well-man­aged pro­grams expe­ri­ence some cost growth. So if we can­not afford it now, we cer­tain­ly won’t be able to afford it when funds are tight. Giv­en our bud­get chal­lenges, it is irre­spon­si­ble to embark on pro­grams that we sim­ply can­not afford. We need to live with­in the resource lev­els that we’re going to have, and to do that we need to make the hard deci­sions now.” The sec­ond les­son, Lynn said, is that pure effi­cien­cies alone can­not gen­er­ate the need­ed sav­ings.

“By pure effi­cien­cies, I mean doing the same mis­sion, the same thing, just at less cost,” he explained. “We can gen­er­ate some sav­ings in that way. Cloud com­put­ing, I think, offers the poten­tial to hold down or even reduce infor­ma­tion tech­nol­o­gy costs while giv­ing us greater capa­bil­i­ty. But we’re not going to find enough of those pure effi­cien­cies to get the required sav­ings.”

That means elim­i­na­tion of pro­grams that are valu­able, but not valu­able enough to sus­tain in the fore­see­able bud­get envi­ron­ment, Lynn said. “The ’nice-to-haves’ must go,” he added. “We have to pare back to our core mis­sions, to the essen­tial goals the depart­ment needs to main­tain.” The third les­son from past draw­downs, the deputy sec­re­tary said, is the need to bal­ance reduc­tions.

“Reduc­tions focused on just a sin­gle area like oper­a­tional accounts hol­low out the force by depriv­ing it of the need­ed train­ing and main­te­nance resources,” he said. “Sim­i­lar­ly, dis­pro­por­tion­ate cuts in the invest­ment accounts just pro­duce a pro­cure­ment hol­i­day, which we then have to buy back at great cost at a lat­er time, prob­a­bly with some urgency.” To avoid that, Lynn said, bal­anced reduc­tions across force struc­ture, oper­at­ing accounts and invest­ment accounts are required. “We do not want to end up the process with a force of the same size that could do all of the things that we do now, just not as well,” he said. “We need to choose the capa­bil­i­ties we’re going to retain and choose the ones that we’re not going to retain.”

The final les­son from pri­or draw­downs is not to cut too much too fast, espe­cial­ly from core mis­sion mis­sions, Lynn said. “Rebuild­ing capa­bil­i­ties five, 10, 15 years from now comes with a cost mul­ti­pli­er, and cost is not the only price that we pay,” he said. “We pay for these deci­sions with the lives and wel­fare of our troops.”

Lynn cit­ed the post-World War II draw­down as an exam­ple, not­ing it caused U.S. forces to pay a high price in the ini­tial stages of the Kore­an con­flict. “We don’t want to make cuts today that we’re going to regret in the near or midterm future,” he said.

Defense Sec­re­tary Robert M. Gates antic­i­pat­ed the sit­u­a­tion and shift­ed the Pentagon’s fis­cal and strate­gic approach in accor­dance with the lessons from pre­vi­ous draw­downs, Lynn said.

“In the past two years, we have been mak­ing tough deci­sions and we’ve been been mak­ing them ear­ly,” he said, not­ing the depart­ment end­ed pur­chas­es of F-22 fight­er jets and C-17 trans­ports and ter­mi­nat­ed the pres­i­den­tial heli­copter pro­gram, which was over cost, behind sched­ule and had require­ments that exceed­ed its mis­sion needs.

The Defense Depart­ment also is clos­ing less-essen­tial orga­ni­za­tions, such as U.S. Joint Forces Com­mand, Lynn said, and has pro­posed con­di­tions-based reduc­tions in the Army and the Marine Corps begin­ning in fis­cal 2015 and 2016. Offi­cials are phas­ing the reduc­tions in over sev­er­al years, he added, to avoid pre­cip­i­tous cuts.

“If we con­tin­ue this same approach and take seri­ous­ly the lessons of his­to­ry,” he said, “we can avoid going 0-for-5 in man­ag­ing defense draw­downs.”

U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs)

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