Forget Iran—Chuck Hagel’s Toughest Fight Will Be the Pentagon’s Budget

In the run-up to his confirmation hearing this week, Chuck Hagel has had to endure a coordinated campaign attacking his views on the simmering conflict between Iran and Israel. There’s no doubt that if Hagel is confirmed as Defense Secretary, Tehran’s nuclear program will eventually be one of his central challenges. But there’s another task that he will have to address first, one that’s perhaps even more important for the United States in the long-term: scaling the Pentagon’s budget to fiscal reality.

It’s inevitable that the next head of the Department of Defense will preside over massive cuts in the military budget. The spending targets already required by law are too large to be met through reductions around the margins of our current defense posture, and the additional cuts looming at the end of February promise to make the job far harder. The United States military will be forced not only to reduce its existing capabilities, as it has after every extended period of war, but also to choose among some of its longest-standing commitments. Even if the Senators who will be questioning Hagel, who has described the defense budget as “bloated,” don’t press him on this issue, one would hope that he has started to reckon with it.

Consider current projected spending. Excluding spending for ongoing wars (mainly in Afghanistan), defense spending will total about $562 billion in the current fiscal year. If that figure rose at the rate of inflation over the next decade, spending would reach $714 billion. But it won’t, thanks to the Budget Control Act of August 2011 that narrowly averted a default on the national debt: the BCA established caps below the rate of inflation for all categories of discretionary spending, foreign and domestic. As a result, defense spending is limited to $661 billion in 2022—$53 billion less than would be needed just to keep up with inflation.

There’s more. The BCA also called for an additional reduction in the deficit of $1.2 trillion between 2013 and 2022. After the “super-committee” failed to agree on how to do that, the law’s backup mechanism, “sequestration”—essentially, automatic cuts—came into play. This provision of the law would divide the $1.2 trillion evenly between defense and nondefense programs, an additional $492 billion of spending reductions in each of these sectors over the next ten years. (Reduced interest payments on the debt would make up the remaining $200 billion of the $1.2 trillion total.)

The fiscal cliff agreement pushed back the date on which sequestration goes into effect from December 31, 2012 until the end of February, and there’s a chance that sequestration could be defused (or at least softened) in the coming budget negotiation. Still, the bet on both sides of the aisle is that sequestration will become operative at the beginning of March. On top of the budget caps, it would reduce defense spending in 2022 to $605 billion—more than $100 billion below what would be needed to maintain the purchasing power of the military budget at 2013 levels. Just this year, military leaders would have to cut $60 billion from pre-BCA levels, more than 10 percent of projected expenditures. And they would have to cram those cuts into the remaining six months of the fiscal year. That’s the planning horizon that Chuck Hagel would face.

Meeting these targets would be even tougher than it looks. As Brookings defense expert Michael O’Hanlon observes in his recent book, The Wounded Giant, most military costs—including pay, health care, and environmental restoration—rise at a rate of about 2 percent more than inflation. There are plenty of economizing measures that are long overdue: the Pentagon could easily close more military bases and switch to more efficient personnel replacement strategies for ships at sea. Still, trimming the fat won’t get close to doing the job.

At the least, it’s likely that this we would be looking at immediate layoffs, including officers and enlisted personnel who have made a long-term commitment in the expectation of a reciprocal commitment from their country, and abrupt cancellation of numerous contracts in various stages of completion. And it would become impossible for the Pentagon to carry out all the missions currently assigned to it. If Hagel gets the nod, he will have to recommend major strategic choices in the face of the Pentagon’s budget constraints.

So what should he do? A case can be made that safeguarding the Persian Gulf, keeping the peace in East Asia, and guaranteeing the freedom of the seas ought to be America’s top priorities. Notably, they all involve naval and air power, far more than land-based forces. In theory, we could reduce our capacity to conduct full-scale land operations, relying more on special forces and technology to keep our enemies on the defensive. This course comes with real costs and grave risks, however—in the Middle East and on the Korean peninsula, among other hot spots—and would have to be the result of the most searching review of grand strategy since the late 1940s. We have not even begun to think this through.

Needless to say, urgent fiscal pressure is hardly a formula for sound defense policy-making. And I’ve written before about how I’m equally skeptical about huge cuts in the domestic portion of discretionary spending. So it’s worth considering what has brought us to this place. If Republicans refuse to put more revenues on the table while Democrats resist all but the most modest reforms in Medicare, we have only two choices—large deficits and a rising debt burden, or spending reductions that would gut public investment, defense, and the social safety net. As Bill Clinton would say, it’s arithmetic.

Right now, the political momentum is carrying us toward sequestration. It may well be that after we experience its effects for a year or so—on poor people as well as the nation’s defense—the politics of the budget would shift toward a more balanced approach. I’m sure that Chuck Hagel is hoping it happens as quickly as possible—before we damage ourselves in ways that would be hard to reverse.