US$ 130 Billion Hit for U.S. defense spending
About half of the $260 billion in U.S. defense spending cuts over the next five years will come from weapon modernization accounts, according to defense analysts.
Roughly $60 billion - about 25 percent - of the cuts will come from efficiencies, while another $60 billion or so will come from reductions in force structure, said Emerson Gardner, a retired lieutenant general who served as the principal deputy director of the Pentagon's Cost Assessment and Program Evaluation office until last year.
The remainder of the cuts are expected to target modernization coffers, which include procurement and research-and-development accounts, Gardner - now a senior defense adviser for Potomac Research Group - told an audience in New York Nov. 10 at the 2011 Defense Outlook Forum, hosted by Bank of America Merrill Lynch in association with Defense News.
The $260 billion figure refers to cuts already ordered, not potential further cuts resulting from congressional debt reduction.
Another defense analyst said he had heard the same figures from U.S. Defense Secretary Leon Panetta himself, who has been discussing them privately with various analysts in recent weeks.
Asked about these figures, Pentagon Press Secretary George Little wrote in a Nov. 10 email that "no decisions have been made, including on the percentage breakdown in cuts."
The figures offer a peek inside Pentagon officials' closely held budget development effort, which must trim more than $450 billion from the next decade's spending plans. These cuts were mandated by the Budget Control Act passed in August.
Panetta has said, most recently at a Nov. 10 briefing at the Pentagon, that about $260 billion of the reduction would come over the next five years.
Last month, he said the Defense Department would aim to save $60 billion over a half-decade by finding ways to operate more efficiently.
The secretary also said at the briefing that the Pentagon plans to soon wrap up its internal budget deliberations on the $260 billion reduction.
"My hope is that as we work through this, that we will put the entire leadership of the department
in the same place so that we can finalize this effort within the coming weeks," he said.
In recent months, the Pentagon has created a Strategic Choices Working Group, a top-level panel that is assessing the $450 billion in cuts. This is in addition to a comprehensive review of military strategy.
There is near-certainty that the reductions in planned defense spending over the next 10 years will exceed the hundreds of billions of dollars in cuts already mandated by the Budget Control Act. Yet DoD is neither considering the impact of nor making preparations for greater cuts, said David Berteau, an analyst at the Center for Strategic and International Studies.
"They've kind of forgotten how," Berteau said at the conference here. "It's been more than a decade since the Pentagon really put together a fiscally disciplined future-year defense program."
In addition to the $450 billion reduction to planned spending, DoD faces an additional $500 billion in cuts, if a congressional "supercommittee" of Democrats and Republicans fails to identify $1.2 trillion in federal budget cuts by Thanksgiving. These defense cuts through sequestration would total about $1 trillion over 10 years.
At the defense spending conference last week, most speakers said that they expect this panel of lawmakers to fail to reach a consensus.
"We think there's probably an 80 to 90 percent chance that that actually will be the case," Pierre Chao, managing partner at Renaissance Strategic Advisors, said in a presentation.
Chao said U.S. lawmakers are beginning to focus on the political advantages of sequestration.
"If there is a sequestration, it will force the administration to produce an FY13 budget that will be a complete horror show," he said. "It will be 4,600 pages of disaster embedded in, which is exactly what the political classes want to take around during an election season, to hold up that document and say to each other, 'If you elect me, I can make this document go away.'"
With the sequestration deadline rapidly approaching, President Barack Obama called Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas, co-chairs of the supercommittee, on Nov. 11 to receive an update on the panel's work thus far and to urge the group to reach a deal.
The committee has until Nov. 23 to approve a $1.2 trillion deficit reduction plan.
Both chambers of Congress have until Dec. 23 to pass the committee's recommendations.
If a deal is not reached, the across-the-board sequestration cuts would go into effect in January 2013.
Panetta, during the briefing last week, urged lawmakers to reach a deal to avoid sequestration and prevent the hollowing out of the military.
"A hollow military has the organizational structure, but lacks the people, the training and the equipment it needs to actually get the job done," he said. "It's a ship without sailors, it's a brigade without bullets, it's an air wing without enough trained pilots, it's a paper tiger."
$130B Hit for U.S. Modernization - Defense News