On the day after Halloween, Elizabeth Warren scared the hell out of everyone with her ten year $52 Trillion healthcare plan. $800 billion of the projected $20.5 trillion she identifies as required increased Federal spending would come from reduced defense spending.
While Warren's healthcare plan is unlikely to be passed any time soon, if ever, she is the first candidate to put a number on the potential scale of cuts to defense spending that nearly everyone expects to be proposed by a Democratic administration. Even the Trump Administration is looking to slow defense spending after FY 2021.
Warren's plan proposes to find most of the $800B by ending the use of Overseas Contingency Operations (OCO) funding for Pentagon needs. OCO funding has averaged ~$70B per year for the last several years, comprising ~ 10% of the total Pentagon topline.
- Defined as emergency spending, OCO funding has become a budget gimmick to get around Budget Control Act caps and has had less and less to do with the scale of actual overseas operations. It has been called a slush fund by both parties.
- Regardless of its gimmick status, OCO funding has become a key component of the Pentagon's measurably increased readiness, 39% increase in R&D spending and 14% increase in annual procurement spending that have taken place over the last three years.
The chart indicates the trends for baseline (red) and OCO (black) spending since 2012, the Trump Administration's proposed topline (orange) through 2024 and the scale of an $80B per year in reduction in the topline (blue).
Pentagon Topline $B
How would the cuts be made? Think tanks such as the Center for American Progress as well as countless Democratic administration defense hopefuls have begun working on possible Pentagon budget reductions. Some common themes have emerged. Some of these ideas could come to fruition regardless of who wins the election:
- "Quality over quantity." Modernized but smaller forces. The Commandant of the Marine Corps has openly discussed trading force structure of 15-20K from the current 186K Marines to pay for modernization. The Army will be more resistant but may have to face reductions of 30K or more from its force of 500K. Lasting topline reductions can only be achieved by reducing personnel and their training/equipment.
- Nuclear forces. Ground Based Strategic Deterrent (GBSD) being developed by NOC and a host of others (except BA) could be cancelled with a strategic decision to rely on a dyad vice the current triad that would also reduce Air Force infrastructure. Despite cost growth, the Colombia-class SSBN (GD) is a must do. The B-21 bomber (NOC) will be bought but probably in smaller quantities. The Long Range Standoff Weapon (LMT) and improvements to the B-61 bombs (BA) would appear to be candidates of nuclear force opponents.
- Shipbuilding. The Navy is now publicly admitting its current plan for 355 ships is unrealistic and should be closer to 310 (about 295 today). The plan for a fleet of 12 aircraft carriers (HII) is unlikely in the face of the $13B cost of the newest, the USS Ford. The Marine Corps has indicated it can live with less large amphibious ships (HII). Submarine construction (HII and GD) could grow. A new "Integrated Force Structure Assessment" (shipbuilding plan) is due out in December and will be the focus of further reductions in a different Administration.
- Aviation. The goal to build 2,430 F35s (LMT) is likely to be reduced to ~ 1,500 with annual buys reduced to ~72 from current 94. Plans to buy fourth generation F-15EX (BA) are dubious. Current Army plans to simultaneously develop two sizes of Future Vertical Lift (LMT, TXT) and reengine its existing H60 fleet (GE) are improbable.
- "Efficiencies." These are always trotted out and they never/never materialize to the extent promised. Accordingly, when the O&M bills come due, readiness suffers. Although forces are now on track to achieve long desired levels of readiness in 2021/22 there is unlikely to be sufficient O&M money to sustain those levels thereafter.
