The incoming Biden Administration is going to rewrite the Trump-prepared Pentagon Budget for FY 2022 (begins 1 October). Pentagon insiders are assuming that they will get guidance to reduce the topline by $60-70B. This would be -8.5 to 10% less than the current program of record assumption of ~ $722B.
- Given that, by law, the budget is due to Congress the first Monday in February, there will be enormous time pressure to get the budget over to Congress if it is to be passed by October 1.
Topline scenarios. The chart displays total Pentagon budget authority topline amounts (baseline and OCO) in solid lines. The Orange (naturally) dash line is the Trump-proposed topline while the Red is what a ~10% cut would look like assuming 2% inflation increases in the outyears. In Blue is a topline that is flat to the FY21 appropriation and stays flat. This would actually equate to ~$15B cut in buying power annually given 2% inflation but might be more palatable politically and would be initially easier to achieve programmatically. We will discuss topline scenarios and how they might be achieved in future notes.
Lending credence to a large cut scenario is the Biden Transition Team announcement last week that the current Deputy Secretary of Defense (and former DoD Comptroller), David Norquist, will be the acting Secretary of Defense and the comptrollers of the Military Departments will be the acting Service Secretaries (Army, Navy, Air Force) until the Senate confirms Biden's nominees.
- Using the comptrollers to fill these gaps is a smart move by Biden as these individuals are generally apolitical in the first place and will not resist new political guidance. At the same time they have been intimately involved in the production of the currently developed FY22 budget. These people "know where the bodies are buried." Clearly Biden wants to get big changes early and needs people in place who can move quickly.
- These Acting DoD leaders will be immediately supported by political appointees who have already been designated and who do not require Senate confirmation. These "chief of staff" and "special assistant" positions are critical to moving the bureaucracy and will begin work today. Senate-confirmed principals will filter in over the coming weeks/months.
A proposed first year reduction on this scale was accomplished in the first year of the Obama Administration.
- Just prior to its departure and very late in the budget cycle, the Bush Administration added $57B (~10%) to the planned FY 2010 Pentagon topline. The intent then was similar to recent Trump actions: try to perpetuate the policies of the outgoing Administration into the new Administration. The effort was frustrated when Obama retained Bush's SecDef, Robert Gates, and charged him with getting that $57B back out before the start of the fiscal year.
- Gates (with the help of yours truly) used the task as an opportunity to reorient the Pentagon away from "exquisite" programs. Gates had a clear strategic intent and key people in place who could make large moves quickly. In early April 2009, two months after the due date to Congress, Gates submitted his budget plan to kill or severely truncate 34 Major Defense Acquisition Programs, e.g., F-22s, F-35 second engine, Presidential helo, TSAT, Army Future Combat System, etc. Because of Gates' personal engagement, Congress approved 32 of the 34 changes that year. Gates managed to get the other two approved in the next two years.
There are significant similarities between 2021 and 2009.
- While not fully fleshed out, the incoming Biden team led by SecDef-designate Lloyd Austin and, very significantly, by DepSecDef-designate Dr. Kathleen Hicks have a clear strategic direction to produce better national security with less resources. In our note of 3 January, "Future Direction of Biden's Pentagon Begins to Clarify", we identified a series of articles authored by Dr. Hicks outlining some of the options to "Getting to Less." Hicks has led the Biden transition team that has been in place in the Pentagon since November apparently operating with little cooperation from the Trump Administration.
- As in 2009, we expect a 6-8 week delay in the submission of the FY 2022 budget during which time specific program changes that a) move toward the strategic direction of the new Administration and b) sum to the desired topline will be vetted and debated among the services, Joint Staff and the incoming political staff. These deliberations will be extremely close-hold. The 2009 process saw the first requirement for signed NDAs by Pentagon participants to include the most senior personnel.
- A more deliberative strategy-driven "roles and missions" process will begin this spring and continue into December with the intent of producing a bottoms-up, Biden-oriented Future Year Defense Program (FYDP) for FY 2023-27 and delivering it to Congress in February 2022.
- SecDef Austin will be expected to "carry the water" to Congress after his confirmation. Biden selected Austin because of how impressed he was by Austin's execution of the withdrawal from Iraq which was not that popular at the time. Who better to advocate force structure reductions than a 40 year Army veteran?
