On February 9 the Obama Administration will deliver to Capitol Hill its fiscal 2017 budget request, which includes $583 billion for the Department of Defense. This being an election year, the president’s partisan opponents will complain endlessly about how the military is not being adequately funded before signing up for spending plans that largely reflect administration priorities. Little thought will be given to where defense spending is headed once Obama leaves office, because everybody in Congress is too eager to get home and start campaigning.
However, it isn’t hard to predict which features of the current defense posture are most likely to endure in the years ahead and which are at risk, based on how the political system has reconciled competing demands on the Treasury since the Cold War ended. Military pay and benefits will be robustly funded every year, activities that assure the armed forces are in a high state of readiness will get most of what they need, and modernization — the purchase of new weapons — will be slighted.
That’s bad news for a military that depends on cutting-edge technology more than its adversaries do, but it is especially bad news for the Air Force. The Air Force is counting on a big surge in spending on new aircraft to replace its decrepit fleet of Cold War fighters, bombers, tankers and other planes. Modernization of America’s air power has been so thoroughly neglected for the last 25 years that now everything needs to be replaced at once — even the trainers in which young pilots learn how to fly. The service has a plan for doing that, but it is unlikely to come to fruition.
Washington budgeteers often use the nautical metaphor of a bow wave to describe the turbulence generated by weapons plans that are too ambitious to fit within fiscal constraints, but since Air Force plans face greater risks than those of the Army and Navy, perhaps an aeronautical term would be more appropriate. The phrase “controlled flight into terrain” comes to mind. Unless some really big threat materializes to loosen up federal purse strings, there are just too many obstacles standing in the way of what the Air Force calls “recapitalization.” Here are five of them.
An oversized share of weapons spending. Todd Harrison, Washington’s leading expert on the defense budget, put out a report in January noting that Air Force programs are the main reason why Pentagon procurement accounts peak well above today’s levels in 2022-2023. The report showed that Navy and Marine Corps procurement spending barely budges between now and then while Army spending rises somewhat from a very low baseline, but Air Force procurement rises 73% from an already hefty level. Adding R&D outlays to Harrison’s procurement figures, a Congressional Budget Office report notes the Air Force share of defense acquisition spending rises from 38% in 2016 to 40% during the period 2021-2030.
That’s a big share for one service to get over such a prolonged period. The Army, in contrast, only gets 13% of the acquisition budget today, and CBO projects that share will fall in the next decade. But the Air Force’s outsized claim on Pentagon investment accounts is driven in part by the Obama Administration’s plans to focus U.S. strategy on the Asia-Pacific region, a shift that has already begun losing momentum due to challenges elsewhere. If the next administration finds its most pressing military concerns are concentrated in Eastern Europe or the Persian Gulf, how likely is it that the Air Force can defend its disproportionate share of weapons spending from other services? Not very.
A dismal fiscal outlook. I noted above that Air Force procurement of new weapons is expected to peak in 2022-2023. As chance would have it, that is precisely the same timeframe in which the Congressional Budget Office predicts federal budget deficits will again begin exceeding a trillion dollars annually. CBO says the Obama Administration scheduled weapons spending in that fashion to escape the strictures of the Budget Control Act that caps defense and domestic discretionary outlays: “a classic bow wave is being created by deferring acquisition because of constrained budgets while continuing to plan for substantial acquisition in later years.”
Past experience suggests planning that way increases the risks programs will be cut back or killed. By the time Air Force weapons outlays peak, the accumulated federal debt will be approaching $25 trillion, which means a 1% increase in interest rates would drive up the cost of debt service by $250 billion annually. Interest rates today are at historic lows, and CBO estimates they will nearly double through the end of the current decade. So what happens if interest rates return to average historic rates in 2022-2023, when baby boomers are putting peak pressure on federal entitlement programs? The answer is obvious: every other form of federal spending gets slashed to limit deficits, including weapons outlays.
A raft of fixed costs. The Future Years Defense Plan that will accompany the 2017 budget request to Capitol Hill next week exceeds congressionally mandated budget caps by about $100 billion through 2020. Unless the relevant legislation is amended, trims will need to be made in a range of programs so that they are in compliance with the law. But the defense plan also assumes a series of savings in military healthcare, retirement programs, housing allowances and other benefits that Congress has proven very resistant to adopting. So the administration’s plan is actually more out of sync with available resources than budget documents indicate.
In other words, the political system has saddled the Air Force with a raft of fixed costs that it cannot escape, and which will drain money from modernization accounts — the accounts that are easiest to cut when budgets don’t balance. For instance, at least a quarter of the Air Force’s 156 installations are not needed to sustain its planned posture, but Congress won’t let the service shut them. And when the service tries to retire aged aircraft to make way for next-generation airframes, that generates similar opposition. Maintaining unneeded assets in inventory, whether they be bases or planes, requires lots of personnel and money – especially if the assets are past their prime. All these costs are a drag on modernization.
An under-priced weapons plan. The military services always under-estimate what it will cost to buy new weapons. It’s a political game everybody plays to stuff as many programs into the budget as possible. Experience indicates cost overruns are most likely to occur in development, as the challenge of working with cutting-edge technology forces budgeteers to get more realistic about costs. So it has to be a concern that many of the programs in the Air Force modernization plan circa 2022-23 will be relatively new efforts. CBO says that the cost of new weapons typically rises 20-30% from initial estimates, meaning the Air Force would need billions of dollars more each year than it is expecting to execute the modernization effort.
The most sizable overruns will likely occur in the service’s second biggest aircraft program, the Long Range Strike Bomber. The winner of that program submitted an aggressive bid that was well below any of the service’s estimates for what a new bomber would cost, even though the company hadn’t integrated a manned strike aircraft in nearly 20 years. Air Force planners wisely decided to budget a much higher level of spending on the bomber than the winning bid would imply, but by 2022-2023 the plane will be in production and unit costs probably will be some multiple of the number the service anticipates. CBO says the customary way of dealing with such increases is to stretch out the program or buy fewer planes.
A political bias against modernization. A final constraint on the Air Force’s modernization program arises from the way in which the political culture prioritizes spending. With congressional elections occurring every 700 days or so, getting re-elected is always on the minds of legislators. So their default setting in key votes is to protect the programs that deliver the most benefits to the most constituents, particularly when those benefits will be delivered in the near term.
What this means in practical terms for defense is that the “consumption” aspects of the military posture — benefits, bases, etc. — are more vigorously protected in the political system than the investment aspects. The Air Force may desperately need a new bomber, but voting behavior isn’t likely to be shaped by the funding status of a weapon system that won’t be in production for years to come. Voters will be much more interested in hearing about the status of aging transports and tactical aircraft affecting jobs in their community. So when legislators have to make a choice between funding the Air Force modernization plan and keeping jobs alive at their local Air National Guard base, the decision will be not be hard to make.
This article was written by Loren Thompson from Forbes and was legally licensed through the NewsCred publisher network.