Budget cuts force Pentagon to redefine priorities: What can't we afford to cut?

Long immune from cost-cutting measures as it fights two tough wars, the US military has now come under increasing pressure to rein in its budget.

This week, Defense Secretary Robert Gates offered some insights into how, precisely, the Pentagon will begin doing this.

The goal for now, as outlined last month by President Obama in his deficit reduction plan, is to hold the growth in national security spending below inflation over the next 12 years, which will require finding $400 billion worth of cuts from the defense budget over the same period of time.

First, however, the Pentagon must review its military commitments around the world, Mr. Gates said. “The new comprehensive review will ensure that future spending decisions are focused on strategy and risks, and are not simply a math and accounting exercise,” he added. “The overarching goal will be to preserve a US military capable of meeting crucial national security priorities, even if fiscal pressure requires reductions in the force’s size.”

Steps to budget-cutting

Defense officials say they will scour the budget and “be even more aggressive in curtailing bureaucratic excess and overhead.” But this will not reach the White House’s cost-cutting goals, Gates emphasized.

The Pentagon must also take a close look at programs like health care and retirement benefits that are driving “the dramatic increase in defense operating costs,” Gates said. This may not be politically popular, but as a sign of lawmakers’ commitment to bringing costs down, the House voted last week to raise premiums for individual service members’ health care coverage from $230 to $260 a year. This will be the first cost increase for Tricare, the military’s health plan, in 16 years.

This represents a mere fraction of the Pentagon’s exploding health care costs, which will probably continue growing at a rate of five to seven percent a year, says Todd Harrison, senior fellow for budget studies at the Center for Strategic and Budgetary Assessments.

Strategic review

Much more important will be a strategic review, “identifying options, for the president and the Congress, where the nation is willing to accept risk in exchange for reduced investment in the Department of Defense,” said Gates.

He called it the “hardest category, strategically – and I would say also intellectually.”

America has embarked on cost-cutting strategic reviews before. In the wake of the Korean War, the Eisenhower administration took what it called “the new look” at defense.

Eisenhower “made a shift in strategy from the Truman era, to focus more heavily on nuclear deterrence, and the threat of massive retaliation to deter conflict,” says Mr. Harrison. “If you look at the budgets between [fiscal year] 1955 to 1958, you see the Air Force and Navy procurement nearly double, and the Army budget went down to almost zero.”

Why? “The Army was struggling to catch up in a nuclear world,” Harrison explains. “And the budget reflected that shift in strategy.”

Now the Obama administration must go through a similar process. “Before you get to the ‘cut’ list, you have to say ‘What are the capabilities we’re going to need in the future? What are our highest priorities? And what are the low priorities that we’re going to do without?’ ” Harrison says. “And that’s where you should start.”

In launching the Pentagon’s review process this week, Gates issued what some perceived as an ominous warning: “If the political leadership of this country decides that it must reduce the investment in defense by hundreds of billions of dollars, then I don’t think we can afford to have anything that’s off the table.”