A Perspective on the FY2014 Defense Budget: Another cliff ahead?

Like many Americans, you probably followed the high-drama and brinksmanship surrounding the “fiscal cliff” negotiations earlier this year. Lawmakers managed to get out of that pickle by simply adjusting a handful of tax rates for top earners.

What you may not know is that our national leaders will soon be confronted with yet another watershed moment—I call it the “readiness cliff”—that could imperil the security of the nation.

Take a close look at the readiness of our military services and you’ll see wreckage that spreads across all the military branches and the civilian industrial base that supports them.

Soldier, Marine, Sailor and Airman—meet sequestration. Historically underfunded, DoD’s operations and maintenance (O&M) account has barely managed to keep pace—by robbing Peter to pay Paul. Funding supplements have come from overseas contingency operations (OCO) funds and frequent reprogrammings from other Pentagon activities. But this year the O&M account took an additional blow when lawmakers allowed sequestration to kick in. The practical result: discretionary defense programs took a nearly 8 percent hit to program funding levels. Members of Congress have known since December 2011 that this was coming, but many seemed surprised when it happened.

Sadly, for all the bluster, lawmakers should know and expect that degraded readiness leads to increased training and safety accidents, and the resultant unacceptable damage to personnel and property.   

Lack of adequate O&M funding represents a “clear and present danger” to our U.S. military, and ultimately the entire nation. Painful sacrifices have already been made across each of the services, with more to come. Within the Army, the O&M shortfall is in excess of $13.8B. The Navy stated that the continuing impact of sequestration will mean that, “about two-thirds of the fleet will be less than fully mission-capable and not certified for major combat operations.”   The Air Force, too, reminded members of Congress that even if the FY2014 President’s budget request is adopted—a budget request that explicitly disregards this year’s sequestration cuts—the “maintenance…and sacrificed readiness levels caused by sequestration and 2011 Budget Control Act will not be made up.”

What’s really a shame is two-fold. First, the economic impact on small and mid-size companies that support maintenance of our military will be dramatic and long-lasting.  Cancelled ship maintenance and overhauls, deferred aircraft engine rework, and scrapped ground vehicle work has led to unpredictability and a downturn in business across our industrial base. If that isn’t enough, the erosion of confidence on the part of our war fighters, still slogging away after more than a decade of hard combat, is equally damaging. Our active troops and those getting ready to deploy are being asked to work harder, take greater risk, accept less ready platforms, but still do the same assigned mission.

Secondly, recent proposals to replace sequestration use Afghanistan war savings. Any “savings” from the war, if they truly do exist, need to be re-invested in O&M.

Residual funds, if there are any, should be a down-payment on the outstanding cost of resetting the force after the war. But that’s a cliff for another day.

Karl Van Deusen
Senior Vice President

Lisa Ellington

Big Thinkery, LLC, 1011 Kenilworth Court Northwest, Concord, NC, 28027