The delayed negotiations over looming cuts in federal expenditures that could slash defense spending by about $600 billion have forced the Pentagon to draft contingency plans in the event Congress and the White House fail to reach a deal.
On Jan. 10, outgoing U.S. Defense Secretary Leon Panetta ordered the military to draft cost-cutting plans so the Pentagon would be better prepared if large spending reductions are ordered. “We have no idea what the hell is going to happen,” Panetta said, according to CNN.com.
As part of the fiscal cliff deal announced last month Congress and the White House extended the deadline to negotiate a resolution to the planned cuts, known as sequestration, to March 27.
However, most experts agree that even if Congress makes a deal to avoid sequestration, the U.S. military will see less money in its budget. The real question is how steep the cuts are going to be.
In a report released earlier this month, Credit Suisse Aerospace and Defense Analyst Robert Spingarn outlined a scenario of incremental cuts spread over the next decade. In the report, entitled “Sequester Still Unresolved,” Spingarn projects cuts to defense of between $15 billion and $20 billion per year for the next ten years.
Military officials are already making predictions about how a leaner budget will change the nature of U.S. defense forces. In a recent op-ed published by AOL Defense, Air Force Secretary Michael Donley said these tighter budgets would force the Air Force and other service branches to evolve.
“Given the projected decline in defense budgets, we have made a strategic choice to trade size in order to protect a high quality and ready force that will improve in capability over time,” he wrote.
The looming cuts fit into an overall pattern in U.S. defense spending.
“We’ve had three major budget corrections: One after the Korean conflict, one after Vietnam and one after the first Gulf War,” Spingarn tells The Financialist. “Typically, we get in a war stance, we fight the war, and then we get in a post-war stance and curb our budget until we are confronted by a new national security reality.”
With fewer dollars to go around, there will likely be definite winners and losers in the upcoming budget battles.
“Overall, the Army is seen as the net loser because they have gotten a lot of attention,” explains Spingarn, who notes that the Army’s budget ballooned during the U.S. involvement in Iraq and Afghanistan. Already, the Army’s 2013 budget request of $184 billion for fiscal year 2013 is $18 billion less than what it received in 2012.
The cuts come amidst shifting priorities for the military. With troop withdrawals from Iraq and Afghanistan, the United States is focusing less on the Middle East and more on Asia and the Pacific. The move will likely change the main defense onus from the Army to the Navy. In a recent speech, Panetta said he expected the Navy would be deploying a majority of its warships to the Asia-Pacific region by 2020, “repostur(ing) forces from today’s roughly 50-50 split between the Pacific and the Atlantic to about a 60-40 split between those oceans.”
The pivot to Asia, designed to offset China’s rise to regional prominence, will require the Navy to upgrade its aging fleet with new aircraft carriers, submarines and other large vessels, explains Credit Suisse’s Spingarn. “We think the Navy is going to be well supported because of this realignment in the Pacific,” he explains.
In their report Spingarn and his team zeroed in on a number of ambitious programs likely to survive the budget cuts. One is the development of the Virginia class submarine. The ships each cost roughly $2.4 billion and the navy has ordered 33 of them, with nine currently operating.
Long-term budgetary constraints could delay, but not cancel, the development of the secretive “SSBNX” ballistic missile submarines set to replace the navy’s aging Ohio-class submarines. While not much is known about the program, the Pentagon says the submarines are scheduled to launch in 2031 and each one costs between $4.9 billion and $5.6 billion.
In addition to submarines, aircraft carriers will likely remain on the military’s shopping list. The ships are key to projecting U.S. power in the Asia-Pacific region. Already on the books is the 1,092-foot USS Gerald Ford class of carriers, the first of which is expected to rollout in five years.
In the air, the most important project remains Lockheed Martin’s F-35, a $400 billion fighter jet developed by an international consortium of contractors from the United Kingdom, Italy, Canada, Japan and a number of other countries. Despite repeated cost overruns, the fighter, which is slated to replace the F-16, remains a priority for the Pentagon. Recent positive comments by Air Force higher-ups, praising the performance of an early-stage model, bodes well for the program. Some 2,400 aircraft are on order, variations of which will operate as part of Air Force, Marine and Navy units.
Overall, Spingarn expects the Pentagon to push for shorter research and development cycles and use more off-the-shelf commercial technology, such as the KC-64A refueling tanker, which uses the airframes of the Boeing 767 200ER commercial aircraft.
Tighter budgets “will force people to be more efficient,” Spingarn says. “We will buy more of what we need and less of what we don’t need.”
Photo courtesy of: Lockheed Martin (Flickr)