Analysis: DoD spending cut starting points

By Suzanne Kubota
Senior Internet Editor

Defense Department agencies and the armed services have a tall order from the secretary. Robert Gates has called for $100 billion dollars in spending reductions over the next five years.

Jim McAleese, defense analyst and principal at McAleese & Associates, told Federal News Radio that shouldn’t be a problem.

“I don’t think it’ll be that tough to achieve,” said McAleese, “even though there’s a lot of public concern and reaction to the Secretary’s directive.”

After all, said McAleese, as Gates pointed out at a speech at the Eisenhower Library “we’ve all benefited from basically a doubling of the funding in the DoD base budget since the war on terror began” in 2001.

McAleese said to expect two areas to remain pretty much as they are: force structure and modernization. “Importantly,” said McAleese, “what the Secretary has done instead is he’s targeted overhead, in the sense of what he considers to be excessive or duplicative headquarters and staff. What he calls ‘tail’ that’s not part of the tooth, not part of the critical immediate fight.”

McAleese said he also believes Gates was “disturbed” by the rate of growth in the Operations and Maintenance accounts.

McAleese said to watch for two main areas of cuts: certain hardware programs under Dr. Ashton Carter, the Under Secretary of Defense for Acquisition, Technology & Logistics (for a list of the programs, click here); and some areas of service contracting.

These include, said McAleese:

  • Logistics – “about a $8 billion dollar account”
  • Training – “that’s going to be $13 billion dollars”
  • Base operations – “at $24 billion dollars is going to be on the radar screen”
  • Facilities sustainment and restoration – “at about $10 billion dollars”

And McAleese concludes that with military personnel being pulled out of commercial services, to “expect more rounds additional rounds of insourcing coming up, presumably to be announced when the next budget comes out as well.”

Health Care

Federal News Radio asked McAleese about one obvious area where cuts could be made: health care.

The health care is paid for out of a DoD-wide account. This is beyond the control of the services, and it’s called the Defense Health Program. The secretary has been particularly frustrated by what he perceives as the growth in costs, literally to the point of almost $200,000 per Soldier, per Marine, to support not just in terms of the pay increases and benefits. These are important of course because you recruit the Soldier or Marine, but you re-enlist the family. But he’s been not upset about those costs, but he’s very upset about the doubling, and presumably tripling in the Defense Health Program. The premiums have not been allowed to be increased, by Congress. There’s a vast number of people that are entering the program. This is the “Tricare for Life” type issue. Effectively what we’re doing is we’re encouraging people to come into the service and then we are fundamentally paying for the health care for themselves and for the family, effectively for the rest of their lives. And so I think it’s that ‘tail’, that entitlement cost, that I think he’s looking to address. It’s a very sensitive issue to him, it’s a very sensitive issue to Congress, and I don’t want to get between them but it is clear there’s going to have to be some compromise eventually.

McAleese provided Briefing Charts to Federal News Radio on these topics. To read them, click here.

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