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Acting Deputy Secretary Outlines Defense Budget Priorities

By Claudette Roulo
American Forces Press Service

WASHINGTON, Feb. 25, 2014 – Acting Deputy Defense Secretary Christine H. Fox took to the podium today at the 2015 Defense Programs Conference here to explain the strategic assumptions and analytic basis for the budget and program decisions contained in the department’s fiscal year 2015 budget request.

Click photo for screen-resolution image
Acting Deputy Defense Secretary Christine H. Fox speaks at the McAleese/Credit Suisse Fiscal Year 2015 Defense Programs Conference at the Newseum in Washington, D.C., Feb. 25, 2014. DOD photo by Marine Corps Sgt. Aaron Hostutler

(Click photo for screen-resolution image);high-resolution image available.

"About a year ago I addressed this gathering, and that was just as sequestration was going into effect, with the warnings of defense and industry leaders pretty much going unheeded at that point,” Fox said.

The Strategic Choices and Management Review directed by Defense Secretary Chuck Hagel delved into every corner of the budget to identify “how much could be saved, how quickly, and with what consequences for the military and [President Barack Obama’s] defense strategy,” she said.

Following the SCMR, the services were tasked with developing detailed sequestration-level budgets, Fox said.

"It's a good thing that the secretary required this grim, but necessary exercise,” she said. “While the department received some relief and stability through the Bipartisan Budget Act, under current law, sequestration will return in [fiscal year] 2016.”

Over the next five years, the budget plan proposed yesterday will provide $115 billion more for the department than sequestration would have, the acting deputy secretary said. And even though the department’s budget proposal is less than the president requested last year, it provides enough funding to execute the president’s defense strategy, fill readiness shortfalls and protect the most critical modernization efforts, she added.

"We think this budget is reasonable, realistic and responsible. And we see that it could provide our military, as well as industry, a degree of stability to help plan and invest for the future,” Fox said, though she acknowledged that department had to make some tough choices to craft the budget request.

In enacting managerial efficiencies, accurate comparisons can’t be drawn between the Defense Department and industry, Fox said.

"Political, legal and bureaucratic obstacles preclude the Defense Department -- indeed any federal agency -- from rapidly shedding people, infrastructure and missions, [especially] when national security is in play,” she said. The SCMR analysis showed that it takes years to realize savings from shrinking personnel end strength, and produces less in bankable savings than is commonly believed, she noted.

Where it was possible to achieve savings by cutting personnel, the department did so, Fox said, most notably by ordering a 20-percent reduction in the operating budgets of DOD’s major headquarters.

The department has achieved all it can in terms of civilian personnel cost reductions, the acting deputy secretary said, and military compensation, which makes up one-third of all defense spending, must be addressed. The SCMR found up to $40 billion in savings in compensation over the next five years, Fox said. “These included aggressive proposals that addressed compensation of all types -- pay and benefits, military and civilian, active and retirees,” she noted.

The drive for greater efficiency extends to the military services. Service chiefs were directed to identify $20 billion to $50 billion in potential savings to military compensation over the next five years, she said. The various analyses were pulled together, resulting in “some, frankly, relatively modest reform proposals submitted with the [fiscal] 2015 budget,” she added.

The choices the department made were difficult and are likely to be contentious, she acknowledged.

“They include limiting pay raises, slowing the growth in tax-free housing allowances, phasing out the federal subsidy for U.S. military commissaries, and consolidating TRICARE in ways that incentivize using the most affordable medical care available,” Fox said. “We expect these initiatives to save $11 billion over the next five years.”

While no one looks forward to closing bases or facilities, she said, the department estimates it has about 25 percent more infrastructure than it needs, Fox said, and addressing the department’s internal costs requires that something be done about this surplus. The department’s budget proposal includes funding for a base realignment and closure commission, to begin in 2017. The 2005 round of realignments and closures is now saving the department $4 billion annually, she noted.

These efforts alone are not enough to reduce the budget in the amount required by sequestration, or even to the level requested by the president, Fox said.

“It became clear that the combination of current and prospective readiness shortfalls, the emergence of more advanced military threats, and the potential for yet steeper budget cuts meant that the military would have to get smaller over the next five years,” she told the conference audience. The department is determined to avoid mistakes made in past drawdowns by ensuring that resources remain available for training, operations and maintenance even as the overall size of the force is reduced, she said. And the force size must come down to keep pace with modernization, she added.

“In many cases, we chose to absorb more risk with respect to capacity in order to ensure those forces were properly trained and remained clearly superior in arms and equipment,” Fox said.

In addition, the budget proposal protects wherever possible rapidly deployable, self-sustaining and long-range platforms that can strike from over the horizon, she said. Such platforms are particularly well-suited to the president’s strategic priorities, notably the rebalance to the Asia-Pacific region.

Much has been made of the proposed cuts to the Army’s end-strength, which would result in a force of 440,000 to 450,000 active-duty soldiers -- the smallest Army since before World War II, Fox said.

“I think it should be noted the night-and-day difference in capability, not only between today’s Army and the garrison force of the post-Depression era that was starved of any meaningful training or new equipment, but also between today’s Army and any major ground force in the world,” she said.

No discussion of ground maneuver capability is complete without including the Marine Corps, the acting deputy secretary said.

“Because the Marine Corps’ expeditionary, crisis-response and maritime focus is well-suited to strategic priorities, this budget protected the planned end strength of 182,000.”

The Navy offered “aggressive” efficiency initiatives to preserve as many of its ships as possible, Fox said. The proposed budget allows for an 11-carrier fleet, but if sequestration returns in 2016, the USS George Washington will be retired, leaving the Navy with 10 carriers. The ship is due for refueling and overhaul in 2016, but keeping the ship in the fleet would cost $6 billion, Hagel said during yesterday’s budget proposal announcement.

Concerns about whether the littoral combat ship has suitable protection and firepower to survive against a more advanced military adversary led Hagel to direct the Navy to conduct a study of the ship’s capabilities and survivability, Fox said. “And he directed the Navy to identify options for another more capable and lethal small surface combatant, consistent with the capabilities of a frigate,” she added.

In the realm of air power, Fox noted that the strategic environment “calls for more ability to strike over long distances from secure locations, whether that capability comes from bombers or missiles, manned or unmanned.” Therefore, the budget proposal protects funding for all three variants of the F-35 Lightning II joint strike fighter, the follow-on bomber, the new refueling tanker, missile defense and other systems, Fox said.

“We also recommended investing about $1 billion … in a promising next-generation jet engine technology, which will help us ensure a robust private sector capacity for this critical part of the defense industrial base,” she said. “However, the resources needed to buy these and other modern capabilities will only be available if we achieve savings elsewhere in the American defense enterprise -- and soon.”

The size and timing of sequester-level budget cuts make it impossible for the department to reduce overall spending without harming readiness, Fox said. The military’s technological edge will be placed at risk due to delayed and cancelled investments in modernization, she added.

“This creates real risks for national security, because we know the U.S. military’s dominance on the seas, in the skies and even in space can no longer be taken for granted going forward,” Fox said. “While the odds of a major conflict against another modern, comparably equipped, military power are relatively low, the consequences of being unprepared for such a contingency could be far more damaging.”

Sequestration’s cuts, combined with earlier budget efficiencies, have left the department with little room for further reductions, she said.

“With the proverbial low-hanging fruit gone, the weapons programs left in our much-constricted modernization pipeline are all truly, and in some cases, urgently needed for the future,” Fox said. “So, the issue here turns from strategic direction -- buying the right kind of capabilities -- on which I believe we now are on solid ground -- to execution. With a lower and potentially shrinking defense top line and investments squeezed by stubbornly high operating and personnel costs, the scrutiny will only get more intense on individual programs.”

(Follow Claudette Roulo on Twitter @rouloafps)

Contact Author

Christine H. Fox

Related Sites:
Transcript of Fiscal Year 2015 Budget Preview

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Hagel Outlines Budget Reducing Troop Strength, Force Structure

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