SecDef Hagel Speech Lays Groundwork for Reform

Chuck Hagel’s first major speech as secretary of defense is receiving the sort of attention that one would expect. But the real news will be made when the Obama administration’s budget hits the streets, reportedly on April 10th. As the saying goes, “show me the budget, and I’ll show you your priorities.”

For now, Hagel’s speech at the National Defense University focused on the sorts of reforms pushed by his predecessors, Robert Gates and Leon Panetta, with mixed success.

Much more hard work, difficult decisions and strategic prioritizing remains to be done. Deep political and institutional obstacles to these necessary reforms will need to be engaged and overcome. 

…the military’s modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for.  We need…an acquisition system that…rewards cost-effectiveness and efficiency, so that our programs do not continue to take longer, cost more, and deliver less than initially planned and promised.

Of course, Hagel is right. There is still enormous waste and inefficiency within the Pentagon. The Army’s discovery of $900 million in unnecessary parts, and Sen. Tom Coburn’s Department of Everything report, remind us that not every dollar is spent wisely. In some cases, it appears that no one knows what has been spent, or why, which is why I’m a fan of a Pentagon audit.

A more restrained foreign policy would generate savings well in excess of $1 trillion over the next decade. Calls for other countries to do more to defend themselves finds favor within the scholarly community (e.g. here, here, here, and here), and with the American people. But Gates and Panetta rejected such a strategic shift. They were, no doubt, following the lead set by the president, who declared in his 2012 State of the Union address that the United States would continue to underwrite the security of the entire world (and, left unsaid, allow every other country to free ride on the backs of U.S. troops and U.S. taxpayers).

Short of a strategic shift toward self-reliance, however, Hagel has fixed on reforms that could produce significant savings. Specifically, “fiscal realities,” he explained,

demand another hard look at personnel – how many people we have both military and civilian, how many we need, what these people do, and how we compensate them for their work, service, and loyalty with pay, benefits and health care.

Unfortunately, and I’m sure that he knows this, reducing payrolls and reforming pay and benefits also happen to be the most difficult to achieve politically.

Democrats typically oppose cuts within the civilian workforce, part of what Hagel referred to as the “world’s largest back-office.” The number of civilians on the DoD payroll is 15 percent higher than in 2001, although it has come down slightly since the high point in 2011. Spending over that same period has grown at an even faster rate, up more than 25 percent in real, inflation-adjusted dollars. If Hagel is serious about cutting costs, temporary furloughs won’t be enough; the DoD civilian workforce must shrink permanently.

He must also tackle pay and benefits for active-duty military personnel, and health care spending, especially for working-age retirees. Gates famously said that “health care costs [were] eating the Defense Department alive,” but members of Congress have repeatedly blocked even minor reforms to TriCare for Life. Meanwhile, the mere suggestion of reforms to the decades-old military retirement system elicits fierce opposition.

But I think that we may be approaching the point, perhaps soon, when a bipartisan coalition steps in to apply the brakes. At an event that we hosted last month, I asked Barry Blechman of the StimsonCenter, Jacob Stokes from the Center for a New American Security, and Steve Ellis of Taxpayers for Common Sense, if there was any realistic alternative to major reform of the military’s pay and benefits. They all said that there was not.

If a dozen other DC think tanks are willing to admit publicly what is painfully obvious to even casual observers, that might provide sufficient political cover for members of Congress to allow such reforms to go forward.

At least, I would like to believe that it could. Just as General Motors is fast becoming a pension payment company that builds cars on the side, the U.S. military is becoming a pension and health care organization that occasionally fights wars.