Pentagon Spending, Strategy and Sequester

KEY FACTS AT A GLANCE

Senator McCain and half of his GOP colleagues in the Senate and Reps. McKeon and Boehner and 72% of their GOP colleagues in the House voted FOR the law that explicitly set up these automatic defense cuts, which theyre now trying to blame on the President. [Roll call votes via Progress Report, 7/27/12] Presidents Reagan, HW Bush and Clinton resolved budget crises with a balanced approach that included spending reductions and new revenue. In the five years following the 1993 law, the U.S. economy created over 15 million new jobs and we were on course to eliminate the national debt within a decade. And it was the post-1993 military that performed so brilliantly in 2001 in Afghanistan and 2003 in Iraq. [Tom Harkin, 7/25/12] Were sequestration to be implemented, 17 million meals would NOT be served to needy seniors, 48,000 women would NOT receive cancer screenings, 51,000 veterans would NOT receive employment assistance. [Tom Harkin, 7/25/12] An independent, non-industry study concluded that the same amount of cuts in key domestic programs would produce greater job losses by a factor of 50 to 140 percent, not to mention the effect on indirect jobs in the service industry around these communities. [Robert Pollin et al, 12/11. Gordon Adams, 10/30/11] Raytheon CEO William Swanson, one of the few whos overseen previous defense drawdowns, suggests that scaremongering on defense jobs is problematic and overblown panicking. [Defense News, 7/22/11] In real terms, the Administrations defense budget actually grows slightly over the next decade. Only in Washington is a reduction in the rate of growth a cut. Previous presidents have overseen reductions in Pentagon spending some much greater than what is being discussed: Eisenhower oversaw a 53% reduction after the Korean War, Nixon 26% as he wound down the Vietnam War, Reagan and Bush (and Cheney) combined oversaw a 21% cut as part of debt reduction.. The military Clinton (and Powell) cut 18% after the Cold War was the one that performed so well in Afghanistan in 2001 and Iraq in 2002. [Glen Kessler, 2/14/12. Larry Korb, 1/9/12] Currently, total defense spending in real terms is higher than at any time since the end of World War II, and even 10 percent higher than the peak of the Reagan defense buildup. [Larry Korb et al, 9/10] Joint Chiefs Chairman Gen Dempsey has said, it makes no sense for us as a nation to have an extraordinarily capable military instrument of power if we are economically disadvantaged around the world. So weve got to rebalance ourselves. Former chairman Admiral Mullen has said defense spending has to be on the table. [Martin Dempsey, 1/12/12. Michael Mullen, 7/10/11]

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Recent polls show that Americans support strategic cuts in Pentagon spending, as much as 20 times the Presidents proposed 0.7 percent reduction, including 48% of independent voters and voters in districts with the most Pentagon projects who were no less willing to see reductions as part of deficit management. [Stimson Center via Suzy Khimm, 7/16/12. Gallup via William Saletan, 8/1/12] In the past decade, defense industry inefficiencies have cost the Department of Defense $50 billion on weapons that were canceled and in excess of $300 billion on completed weapons systems. Just last month it was announced that Refurbishing the nations B61 nuclear bombs, a major project at New Mexicos nuclear weapons labs, will cost $8 billion, double the federal governments estimate two years ago. [Larry Korb, 11/16/11. Dianne Feinstein via John Fleck, 7/27/12] We can save money by revisiting the sometimes exorbitant costs of outsourcing Pentagon jobs reports by the non-partisan Project on Government Oversight (POGO) found a 177,000 percent mark-up on a 4 cent metal pin and propose a 15% cut in outside service contracting that has tripled since 2001. [POGO, 6/28/11. POGO, 5/8/12] Military bases cannot be closed through a single-year budget process. [Lou Ortiz, 7/26/12]

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FOR MORE ON SUPPORTING FACTS AND STATEMENTS, SEE BELOW.

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Pentagon Spending, Strategy and Sequester

SUPPORTING FACTS AND STATEMENTS
1. Some in Congress are trying to find a back door instead of leading on the tough challenges they agreed to face to make a better tomorrow. Sequester was a bipartisan policy to force Congress to make hard choices instead of kicking the can down the road. Military leaders, including the top two at the Pentagon, have argued that its time for Congress to come to the table and find a comprehensive solution that includes revenue. Chairman of the Joint Chiefs of Staff General Martin Dempsey has argued for a balanced approach to tackling our deficit in the interests of national security: Speaking at a military town hall, Dempsey said, What weve said to Congress is in the interests of national security, they really ought to find some other way than sequestration to balance this budget, and it cant all be balanced on our backs. [Martin Dempsey, 3/10/12] Deputy Secretary of Defense Ashton Carter has urged Congress to find an overall budget package to avoid this irrational sequester: Carter told an audience at the conservative American Enterprise Institute, Sequester was supposed to be a trigger so irrational that the prospect of it would drive the leadership to do what was needed, which was to put together an overall budget package for the nations finances that could win wide support. [Ashton Carter via the Washington Times, 5/30/12.] Former undersecretary of defense Michle Flournoy has called for a balanced package that includes tax reform, spending cuts and more investment in things that drive American competiveness: The onus is really on Congress to exercise the discipline, the political courage, the pragmatism to reach a budget deal that avoids sequestration, which would impose draconian cuts in a mindless way that would have severe and negative impacts for our national security I think frankly we would be wise to spend our time trying to build a balanced package tax reform, spending cuts, and more investment in things that drive American competitiveness. [Michle Flournoy via the Cable, 5/15/12] Senator McCain and half of his GOP colleagues in the Senate and Reps. McKeon and Boehner and 72% of their GOP colleagues in the House voted for the law that set up the sequester, explicitly including the potential for automatic defense. This deal which explicitly included the potential for automatic cuts to defense received overwhelming support from Republicans. Boehner, House Majority Leader Eric Cantor (R-VA), Majority Whip Kevin McCarthy (R-CA), Budget Committee Chairman Paul Ryan (R-WI), Armed Services Committee Chairman Buck McKeon (R-CA) and 169 other House Republicans fully 72 percent of House Republicans voted for the deal. By contrast, only 95 Democrats exactly half voted for it. On the other side of the

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Pentagon Spending, Strategy and Sequester

Capitol, Senate Minority Leader Mitch McConnell (R-KY), Minority Whip Kyl (R-AZ), Senate Armed Service Committee Ranking Member John McCain (R-AZ) and 26 other Senate Republicans voted for the deal. [Roll call votes via Progress Report, 7/27/12] 2. The idea that Pentagon spending can be held harmless while forgetting Americas middle class and/or Americas overall economic health ignores common sense, American history. o Congressional report: A fairer solution is needed than one that has such a destructive impact on programs that promote the middle class, including our veterans, According to a recent report by Senator Tom Harkin (D-IA), Chairman of the Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education. The report states, [S]equestration would also have destructive impacts on the whole array of Federal activities that promote and protect the middle class in this country everything from education to job training, medical research, child care, worker safety, food safety, national parks, border security and safe air travel. These essential government services directly touch every family in America, and they will be subject to deep, arbitrary cuts under sequestration. A laid-off teacher is just as unemployed as a laid-off defense contractor. Nondefense discretionary (NDD) spending already has absorbed significant reductions through the 10-year spending caps in the Budget Control Act and other measures. By 2021, this category of spending will account for just 2.8 percent of the U.S. gross domestic product, its lowest level in more than 50 years. Today, NDD programs comprise about one-sixth of the Federal budget. It defies not only reason, but also fairness and equality, to suggest that we can erase our national debt by slashing critical priorities like education and medical research while holding Pentagon spending harmless and expecting the wealthiest among us to sacrifice nothing. A better, fairer solution is needed. Its the same way we solved our previous budget crises in 1982, 1984, 1990, 1993 with a balanced approach that includes both spending reductions and new revenue. We all agree that sequestration would be tremendously destructive. We all want to avoid it. That means we all must come together with good will to hammer out a balanced agreement that will not only prevent sequestration, but reduce our deficit and protect Americas families. Impacts of sequestration going into effect nationally include: 17 million meals would NOT be served to needy seniors 48,000 women would NOT receive cancer screenings 51,000 veterans would NOT receive employment assistance. [Report by Tom Harkin, Chairman of Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education, 7/25/12]

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Pentagon Spending, Strategy and Sequester

o Throughout our history, America has restored economic health with a balanced approach that incorporates revenues and smart spending cuts, including post-war Pentagon reductions. The Harkin report notes, A better, fairer solution is needed. Its the same way we solved our previous budget crises in 1982, 1984, 1990, 1993 under Presidents Reagan, HW Bush and Clinton with a balanced approach that includes both spending reductions and new revenue. In the five years following the 1993 deficitreduction law, the U.S. economy created over 15 million new jobs; not only did we balance the budget, we were on course to completely eliminate the national debt within a decade. We can repeat this success. We dont have to reinvent the wheel. And it was the post-1993 military that performed so brilliantly in 2001 in Afghanistan and 2003 in Iraq. Reagan Pentagon official Larry Korb notes that previous presidents have overseen reductions in Pentagon spending some much greater than what is being discussed: Eisenhower oversaw a 53% reduction after the Korean War, Nixon 26% as he wound down the Vietnam War, Reagan and Bush combined oversaw a 21% cut as part of debt reduction.. The military Clinton (and Powell) cut 18% after the Cold War was the one that performed so well in Afghanistan in 2001 and Iraq in 2002. [Report by Tom Harkin, Chairman of Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education, 7/25/12. Larry Korb, 1/9/12] o Military and security leaders have called for safeguarding investments in human capital starting with education as a foundation of American security (e.g. a recent Council on Foreign Relations task force led by Condoleezza Rice cited investment in education as critical to American security). Nor do they favor sheltering the Defense Department at the cost of exploding American debt or letting the deficit get out of control. To avoid these automatic defense cuts, though, the remaining best option is a balanced approach with smart cuts, including to the Pentagon, as well as additional revenues. [Council on Foreign Relations Task Force, 3/12. Mike Mullen via CNN, 8/27/10] 3. Pentagon leaders acknowledge Pentagon spending must be on the table; as Chairman Dempsey, Admiral Mullen and former Secretary Gates have pointed out, our economy is the foundation of our national security we can only be leaders abroad if we are strong at home. Charles Kupchan, professor at Georgetown University and senior fellow at the Council on Foreign Relations, explains, [R]enewing the nations economic health is vital to advancing its national security Reviving economic growth, reducing unemployment and income inequality, improving educationthese are prerequisites for rebuilding the economic base on which national power rests and restoring the political consensus

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Pentagon Spending, Strategy and Sequester

needed to guide U.S. statecraft. [Charles Kupchan, Winter 2012] General Martin Dempsey, Chairman of the Joint Chiefs of Staff, has argued that economic and military strength are interlinked: a robust military without a strong economy makes no sense: Dempsey told an audience at Duke University, We have come to grips fairly effectively, I think, with the interrelationship of the diplomatic, military and economic instruments. And if youre wondering why this is being our grand strategy is being renegotiated in terms of outcomes in the face of the nations budget crisis, its because, truly, we are only as strong as those three pillars diplomatic, military and economic can interrelate with each other to achieve a common outcome. And if one of those pillars is weakened, theyre all weakened. So it makes no sense for us as a nation to have an extraordinarily capable military instrument of power if we are economically disadvantaged around the world. So weve got to rebalance ourselves, and that is what I would suggest to you about the issue of grand strategy. [Martin Dempsey, 1/12/12] Our financial health is directly related to our national security, said former Joint Chiefs Chairman Admiral Mike Mullen in a 2010 interview with Fast Company magazine. [Mike Mullen via Fast Company, 5/1/10] Former Defense Secretary Gates said economic dynamism and military strength are linked, declaring the gusher of post-9/11 defense spending has been turned off. Speaking at the Eisenhower Library this weekend, Secretary Gates urged that when it comes to national security spending, the country should return to the values preached by its great military commander: common sense and fiscal discipline. Recalling Eisenhowers views on funding the countrys security needs, Gates cautioned that the U.S. could only be as militarily strong as it was economically dynamic and fiscally sound. According to Gates, while the 9/11 attacks may have opened a gusher of defense spending that nearly doubled the base budget over the last decadeGiven Americas difficult economic circumstances and parlous fiscal condition, military spending on things large and small can and should expect closer, harsher scrutiny. The gusher has been turned off, and will stay off for a good period of time, said the Defense Secretary. [Bob Gates, 5/8/10]

4. Lobbyists and corporate interests are trying to play politics with pink slips, threatening mass layoffs while defense CEOs get $25million salaries and taxpayer dollars go to their Washington lobbyists. Defense experts say even sequester-level cuts would mean less than 10% cuts to contractors. With two wars ending and an economy squeezing everyone, it is time to focus on managing the downturn protecting worker training and programs, and not multimillion dollar CEO payouts-- instead of running a horror show in the middle of an election.

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Despite recent budget shifts, times have been very, very good for Pentagon contractors and their bottom lines including compensation for contractor CEOs that exceeds those of Wall Street bosses. William Hartung and Stephen Miles explain, The simple truth is that there is absolutely no reason that any major Pentagon contractor needs to send out massive numbers of pink slips. In fact, despite recent budget shifts, times have been very, very good for Pentagon contractors. A recent Pricewaterhouse Coopers analysis reveals that the defense and aerospace industry saw yet another year of record revenue and profits in 2011. They add, If Lockheed truly believes it's time to start saving on personnel costs though, there is one obvious place to start. Last year, Lockheed Martin's CEO Robert J. Stevens took home $25.3 million in compensation, more than all but two Wall Street CEOs. How many employees could Lockheed keep on its payrolls if Mr. Stevens took a pay cut? [William Hartung and Stephen Miles, 6/25/12] Reagan-era Pentagon official Lawrence Korb and co-authors explain that defense companies are overstating the impact of automatic cuts. They write, While these tactics are designed to cause legislators and their constituents to panic, the fact of the matter is that defense companies are overstating the impact of sequestration. First, sequestration would require the Pentagon to reduce its budget by about 10 percent next year. While a 10 percent reduction in weapons procurement certainly would not be good news for defense contractors' bottom lines, it would hardly require companies to lay off their entire work force. Lockheed Martin, for example, would still be contracted to build new F-35s, if perhaps not as many as anticipated, and provide maintenance and spare parts for numerous aircraft already in service. [Korb, Rothman and Hoffman in Foreign Policy, 7/02/12.] Even some defense contractors, including Raytheons CEO, acknowledge that scaremongering about job cuts is overblown: Defense News reports, Raytheon CEO William Swanson emphasized the need to remain calm in the face of the cuts. This is all about not panicking, he said. This is about both feet on the ground, looking at it and making sure youre prepared. I realize some bad things will happen to good people out of this thing, but how do you minimize that? The best thing that we can do as a company is to be able to provide the best amount of security that we can for our workforce. Swanson, one of the few executives to publicly question some of the more dramatic declarations by the industry, is also one of the few who was in a senior position during the last defense downturn, a fact he emphasized. Ive lived through this, Swanson said. The light at the end of the tunnel is not a train. Im not a person who says, Oh woe is me. When you look at this situation, I understand the danger, but theres also an opportunity. And the smart companies, smart leaders, smart businesspeople know how to take advantage of opportunities. [William Swanson via Defense News, 7/22/12]

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Former senior White House official for national security budgeting Gordon Adams implores Congress to responsibly plan for the future instead of engaging in a horror show: The underlying budget problem is what needs to be addressed. Sens. Ayotte, McCain, and Graham need to call off their tour of fear, (carefully controlled to make sure only defense workers are in the audience and then callously announcing that MacDill is toast if a sequester happens, when they have no such specific information). The defense budget is going down; it is time to focus on managing the build-down instead of running a horror show in the middle of an election campaign. [Gordon Adams, 7/31/12] In 2012, Pentagon contractors have continued to increase the millions they spend on lobbying. The top five U.S. defense contractors increased spending on lobbying by a combined 11.5 percent in the first quarter of 2012 compared to the same quarter in 2011, a review of lobbying disclosure forms by Defense News found. [Defense News, 7/7/12] Facts belie the rhetoric: In truth, defense spending is a poor jobs engine money cut from other sectors would cost up to twice as many jobs, according to an independent, non-industry study. Robert Pollin and Heidi Garrett-Peltier of the University of Massachusetts, Amhersts Political Economy Research Institute found, In terms of assessing the employment effects of military spending on the economy, the most important question is not the absolute number of jobs that are created by spending, for example, $1 billion. It is rather whether spending $1 billion on the military creates a greater or lesser number of jobs relative to spending the same $1 billion on alternative public purposes, such as education, health care or the green economy, or having consumers spend that amount of money in any way they choose. As we show, in comparison to these alternative uses of funds, spending on the military is a relatively poor source of job creation. Indeed, our research finds that $1 billion in spending on the military will generate about 11,200 jobs. By contrast, the employment effects of spending in alternative areas will be 15,100 for household consumption, 16,800 for the green economy, 17,200 for health care, and 26,700 for education. That is, investments in the green economy, health care and education will produce between about 50140 percent more jobs than if the same amount of money were spent by the Pentagon. [Robert Pollin and Heidi Garrett-Peltier, 12/11] Sen. Lindsey Graham has admitted the follies of this line of argument; declaring earlier this year that defense manufacturing cannot primarily be a job creator for America. [Lindsey Graham via MSNBC, 2/14/12]

5. Military and national security leaders support the reductions in rate of growth of Pentagon budget proposed by the Administration. We should follow the advice of our

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Pentagon Spending, Strategy and Sequester

military leaders, not defense lobbyists. Joint chiefs Chairman General Martin Dempsey emphasized the militarys backing of these strategy-based reductions, saying, I want to make sure you know were not being victimized by this. This is something that we, the Joint Chiefs, have embraced as whats best for America. [Martin Dempsey, 1/12/12] Independent, nonpartisan experts advocate a thoughtful, comprehensive deficit reduction package that preserves BCAs planned reductions in the rate of Pentagon spending and implements further reductions gradually over time. Lieutenant General David W. Barno, USA (Ret.), Dr. Nora Bensahel and Travis Sharp of CNAS: The responsible way forward is clear: Congress should set aside sequestration as soon as possible and work to develop a thoughtful, comprehensive deficit-reduction package. The Budget Control Acts $487 billion level of defense cuts should stand, and any further cuts should be implemented gradually as part of a new deficit-reduction packagewhile keeping in mind the potential for greater national-security risk as the amount of cuts increases. [David W. Barno, Nora Bensahel and Travis Sharp, 1/26/12]

6. Our goal should be to make a stronger America waste, excessive relationships with lobbyists, and ineffective Pentagon programs do not strengthen America. Money to troops in the field will not be affected, according to a July 31 Office of Management and Budget memo. Politico reports, military personnel accounts would be spared the budget ax a development that has already sparked outrage among congressional defense hawks. [Politico, 7/31/12] There is room for reductions in Pentagon spending. For example, Lawrence Korb, Reagan-era Pentagon official and senior fellow at the Center for American Progress, has written that in the past decade, as a result of the industrys own business practices, the Defense Department spent $50 billion on weapons that were canceled. Cost overruns of weapons exceeded $300 billion. [Larry Korb, 11/16/11] We need to take a look at the sometimes exorbitant costs of outsourcing Pentagon jobs a non-partisan oversight group found a 177,000 percent mark-up on a 4 cent metal pinand they propose a 15% cut in outside service contracting that has tripled since 2001. The non-partisan Project On Government Oversight (POGO) found, Boeing charged the U.S. Army $1,678.61 for a plastic roller assembly that could have been purchased for $7.71 internally from the Department of Defenses (DoD) own supplies. In another transaction, a thin metal pin worth 4 cents that the DoD had on hand, unused by the tens of thousands, ended up costing the Army $71.01a markup of more than 177,000 percent. In all, Boeing overcharged the Army nearly $13 million in dozens

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Pentagon Spending, Strategy and Sequester

of transactions, jacking up the price on small, mundane parts in some cases up to thousands of times more than they were worth, according to a previously unavailable Inspector Generals (IG) report. In a separate POGO analysis, they write, Reducing reliance on service contractors in the DoD was a priority championed by former Secretary of Defense Robert Gates. The annual cost of DoD service contracts has nearly tripled since 2000, and there is evidence that many service contractors are performing inherently governmental functions. [POGO, 7/28/11. POGO, 5/8/12]

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