administra ♪[ music ] welcome to this week in defense news i am vago muradian. last week the obama administration previewed the highlights of a 5 year defense spending request that will be submitted to congress february 13th. leon pan net at that said the cuts would total over $259 billion over five years highlights include cutting nearly 75,000 active duty and marine corps personnel, maintaining the current bomber fleet, 11 aircraft carriernovel sea base to support forward deployed forces cut six fighter squadrons, retire aging airforce transport planes and cancel several programs including the c-27 transport and version of the global hawk

unmanned aircraft. investment in time and technology would be maintained and new bomber and missile subdevelopped, a joint fighter would be delayed to reduce program risk and save money is the administration on the right track will they deliver real savingcapability as hoped and how will u.s. congress respond i am joined by rick mays congressional editor, lauren thompson of the lexington institute. todd harrison center for strategic and budgetary assessment and tom shanker new york times welcome to the program. >> tom i would like to start off with you the overall question is a lot of us expected deeper cuts there was a lot of discussion the navy would go from 11 carriers down to 10 or 9, talk large portions of the air bomber fleet would be retired, that the joint strike fighter program was in deep jeopardy, what were the surprises here, decisions made were they the right decisions and were they hard choices end of the day >> right, vago if there is one

word to describe this budget proposal it is deliberate it will be up to your viewers to decide if that means wise or political. they did everything they had to do but in a very careful way. one third of the budget that is growing is personnel costs they are going to slow the rate of pay raises but not cut back. they are going to increase fees for health insurance for retirees but not make it even more than in the private sector. as you mentioned the joint strike fighter is getting slid right but not being cancelled so they did a little bit of all they had to do, just enough, but took no really dramatic decisions, although i am sure there will be some in congress who see it that way. >> on the other hand if you look at purchasing power in the defense budget, not the base budget but regular budget but also the war spending they are coming down over a 7 year period of 22% in purchasing power all most identical to the cut in 7 years after the vietnam war ended. >> todd. >> yeah, but you know, you've got to look at all the

different perspectives on this it is absolutely right if you include the funding coming down, significantically. >> war time sobole mental funding. >> right. >> -- war time supplemental funding. >> right. >> base budget is only down 2% from where we are currently at compared to their plan over that, 8 or 9% reduction so this is really, cutting back on growth and after, if they are able to keep to this plan the budget flattens out, if you look back in history of previous down turns we never had a budget that flattened out that quickly i think in all likelihood we will see further cuts in future years >> i agree. >> this is the 250 billionth cut not the 1 trillion everyone was fearing would happen. so this is like a small piece of what might be something much bigger that happens down the road. >> well, during the secretary pan et at that's remedical

report -- panettas remarks he went out of his way three times to say we need congress' approvele and gave the argument this is a finally tuned swiss watch no part can be taken out without the entire plan falling through rick, how is congress going to receive the plan. >> you will rarely hear me quote newt gingrich he used the words piassaba loney, i think piassaba low any is involved with reaction to this budget, some body called ate devastating cut we are never going to be able to survive this, endangered the nation, one congressman said weakness by 1,000 cuts they forgot this is the cut they voted for last year. yeah, so they have approved this, if they are surprised, oh, my god defense programs got cut what did they thing was going to happen. >> interesting point. >> when they cut the budget. so some of this is all posturing, posturing for something lighter down the road when they can declare [

overlapping voices ] >> like a presidential election >> they are posturing on both sides congressional republican side, they are posturing as end of the world. democratic side we are posturing we didn't have a choice congress made us do this. >> this is one incredibly controversial point that surfaced for the first time, panetta announced they are going to ask for another round of base realignment and closing. to be sure that is a way to save a lot of money but the political axiom those are in some body's congressional district that will be a huge fight if they can even pull it off. >> what is interesting you dig into the details on their proposal for another roundover base closures they did not bank on any savings from the base closures in the next 5 years you don't save money upfront when you close bases it costs you money they also didn't budget money to close bases. >> but in fairness those moneys wouldn't have to be spent within the next five years it is highly unlikely even if they got this thing rolling in the next year or two, the closure moneys are not really going the

really kick in. >> çexcept for two, two bases germany will close as two brigades come home,. but you are right. first of all if you propose base closures in an election year you will not get what you proposed secondly if you get what you proposed in some subsequent year, additional round of base closures you won't realize, any savings for a dekid or longer. >> -- decade or longer. >> i am not sure there is a strong mood in the house of representatives to cut defense, if you look at the buck mckeeon plan to save the department of defense from sequester he only has 25 cosponsors out of the house of representatives when you talk to him he is personally worried they may not vote with him if he tries to add money to defense i can see some of those people in an election year going home and saying i am voting even to cut bases maybe doing it before it happens but i can see the move between now and the election is

to at least pretend to be serious about cutting. >> let's go to the cutting deeply thing everybody who gave the briefings last week, secretary panetta, chairman dempsey and deputy secretary carter, kept stressing, that this is a carefully consorted, overall plan, let's not cut any more deeply than this. but and even though publicly everybody says there is no other back up plan, everybody is riding on this. publicly they tell you they have been burning late nights trying to figure out the second, third, fourth order wax what are those going to look like todd. >> yeah -- >> what else are they going to trade away to make this happen. >> let's stop at $259 billion in savings a quarter of that is supposed to come from efficiencies, from the 178 billion they banked on efficiencies in the last budget it is already stretching it it is risky to bank so much of the

future savings on efficiencies that haven't yet materialized so yes, they are going to have to look at fall back options, you know, that 11th carrier, they are going to have to look at that again the b 52 squadrons they will have to look at this again there is a whole list of things they will have to reopen. >> some efficiencies are real things they are talking about cutting staff which is going to be tough to do in an election year because those are voters, they are talking about capping civilian pay as part of efficiencies. that is already going to happen. there are some real parts of it. but also a lot in there about it efficiencies and combining enterprises. >> with the f 35s supposed to be efficiency move when it started, it originally was but there are some good government things in there for example everybody buys their own it services it is all a mish-mash if you did some sort of bulk purchasing as is intent you can get certain values from it but then again everybody has been promising -- >> the government can't buy a weapons system on time and

budget doing well buying a combined it service. >> exactly. >> it is not guilty going to save money. >> -- it is not going to save money. >> we

welcome back, lauren i want to go to you, there were obviously some program terminations here that happened some programs were slipped, overall, what do all of these moves mean, to industry? >> it is negative obviously for industry. for most of the major weapons integrators, i think the cuts to ship building were a little greater than we expected, two of the combat ships are going out of the 5 year plan one of the virginia class attack submarines is moving out, the next generation ballistic missile submarine is going to slip by two years although that might not seem like big stuff and really isn't cosmic, none the less it is billion offs dollars going away industry thought it was going to get. we are already beginning to see

the kind of slippage they said they would guard against. >> in many respects these delays drive up unit costs. >> f-35 is a perfect example although there are logical reasons for slowing down, in other words, for not doing production at a high rate, until you've done all the necessary testing on the other hand the whole business plan for that program, was focused on the notion of low unit cost when you buy them in small numbers each year the cost goes up. the problem is if there is not much they can do about it, given the budget's constraint if you want to move up those programs, the top end of the defense budget will not increase. >> so fundamental head room. >> you have to cut something else in order to do that. you still might have fights over weapons you didn't cut yet because it will be a knife fight in the armed services committee for whose weapon gets to survive. >> to their credit they did talk about the need for considering effects on the industrial base and what you are doing that might have long term consequences in terms of

closing different production utilities around the country. they said all the right things but the devil is in the details because the reality is, in this budget environment they can't protect all sectors. i think if you look at the detail what is you see here is a big story is not the amount we are going to be spending on defense but how a composition of the budget is shifting. it is basically çshifting away from capital investment and in the direction of various forms of consumption. a good example of that, the personnel part of the budget, a third of the budget taking a 9th of the cuts everything else and i think pro curement in particular, is going to take a disproportionate share of the cuts. >> let's go to the pallettability of some of what was announced on the personnel side of the equation. rick, how wise were some of the suggestions in terms of trying to tackle long term costs? there is a question about imcreasing fees and things like that on retirees and other folks is that the right kind of

way to control those costs over the long term? well t biggest way they are controlling personnel costs are strength cuts that is how you save money you shed people these are substantial cuts, and more savings potentially but you don't really have any choice they are talking about pay reform, basically pay reform would mean smaller pay raises for some people in future, they are talking about reform of military retired pay which won't effect current service members but will have an effect down the road in future of the military >> they did go to some length, folks would be grand fathered nothing would end up impacting folks in uniform now. >> which is the kind of promise they need to make so they don't destroy moral in the force but you don't have savings for 20 years in what you are doing there. none of this happens in a vacuum. one of the real challenges not just in an election year but for whoever wins all these soldiers will be sent home into a very bad economy so where is the trust, where is the promise

because they will be breaking some of the contracts and probably separating some soldiers before they were ready and that is not going to play well on main street or capitol hill. >> well, the large number of unemployment figures have been state municipal workers released by local government. >> this reflect what is is going on in the larger federal government and you know -- >> they haven't risked their lives for our country it is a little different. >> fine sure it is. but the reality is, military compensation system overall is ripe for reform we have known this study after study, commission after commission. the gates commission that proposed it all for us said you have to reform the pay, personnel and benefitthe promotion part otherwise it will eat you out of house and home. >> tom wrote a story last week on the budget, the personnel costs as he reported, the average amount of money that boast enlisted personnel and officers are making has gone kind of out of whack with where

the private labor markets are over the last 10 years to the point he reported the average lieutenant colonel was taking home $120,000 a year. >> the secretary panetta, chairman dempsey and even his predecessors said how important it is to get the balance right in this draw down. are they trying to do it more smartly for example the army bungled it up, and ended up with huge gaps in its capability, are they thinking about doing it smarter this time around. >> post cold war draw down they made a mistake and got rid of a whole generation of mid-grade officers and then realized oh, my god how do we get them back. one of the things the pentagon said this time, we are going to keep ncos, keep officers and everybody else is going to go. which makes you thing there will be generals out on the food lines looking for work but that is probably not going to happen probably just lower ranking people. >> generals tend to get hired though. >> we don't know under

conditions they will be separated they have not explained that yet. congress last year provided them some tools to make it easy, early retirement benefits authorized, separation pay for people who volunteer to go. it might not be bad but we don't know enough yet to know whether that will happen. >> tom. >> well, i thought you were going to -- i thought you were going to add something to that. >> i was simply nodding sagely

i'm back with rick mays of the military times, todd harrison center for strategic and budgetary and lauren and todd shanker of the new york times, to all of you, one of the sort of the crazy aunt with the running chain saw in the basement, it is probably a bad metaphor but is the threat of is sequestration do we know how likely it is at that point and what the overall aftermath will be and if people considered what the long term implications would be at the department if that happened. >> the one thing we can say for sure is they are not planning for it now, the current budget that they are about to come out with, and the defense strategy they have come up with, would be in secretary panettas words, thrown out the window if it would happen. they don't have a fall back

plan and as of now they say they are not working on one. this is a real possibility, i still don't think you know sequestration will happen but what is the alternative that avoids it,s if you are going to avoid sequester ration, you have to cut social medicaid, medicare none of those things are popular to do, especially in an election year. many people in the pentagon backed into the view, is he qwest ration is not going to happen -- quest ration is not going to happen because consequences would be so devastating however if we have a republican congress and democratic white house the system could be so paralyzed they can't escape sequestration. right now it is a legal mandate, it is legislated as law the question is will they

have enough flexibility to remand or repeal it. the house says we are not going to have it, senate says we are not going to have one. white house says we are not going to have one all they have not figured out is the sneaky gimmick -- >> the white house says we are not going to have one if they have a $1.2 trillion -- the beginning of the previous use down turn of spending started in 86, sequester of 5 .8% of defense. >> i still don't believe they will have one it won't be resolved until after the election. >> at the absolute 11th hour. >> tom over to you you mentioned something before the show started which i thought was a fascinating line. and you expressed concern about the danger of institutional, huberu in the pentagon. >> both dempsey and panetta, admit they are accepting a lot

of risk they think the new strategy can manage it, what is this new strategy? investment in special operations forces, cyber warfare capabilities, intelligent surveillance. >> unmanned aircraft. >> embracing next generation technology that is how they are hedging their bets i was in the pentagon on september 10th, 2001, when rums field gave a speech to pentagon employees saying, what i am going to invest in, special operations forces, cyber warfare and intelligent surveillance reconnaissance and leap ahead technologies, 24 hours later the enemy had a vote, it was all thrown out the window >> i would argue in the last 10 years we've refined all those capabilities, we've refined speck opens we have 65 isr or bits with unmanned aircraft we want to be able to surge so a lot of this -- >> they are so worried about it embedded in this budget are

reversing points. not reflection points they can turn on a dime and spend a billion dollars, to -- >> right because 9/11 was the precise opposite of what rums field was preparing for we might get the precise opposite again but to express something which some of the defense leaders said again the idea of reversibility and we are going to maintain full spectrum capabilities instead of taking anything off the table >> it is such a cliche but this nation is historically incapable of predicting the next war. >> that's exactly right. one year from now we probably won't have this deinnocence secretary we may not have this -- defense secretary we may not have this president and we may have sequestering. >> there is no sequestering it is not going to happen. >> todd >> i hop they find a way to avoid it it might happen it might get turned on and they have to turn it off. >> it is a great re-election

theme. >> and lauren has the last word coming up, why do you need to

the obama administration last week previewed major elements of the $259 billion in defense cuts included in the

five year spending request that goes to congress february 13th, the employee posed cuts proved far less dramatic than expected army and marine corps would lose 75,000 troops between them older aircraft and ships to be retired many programs would be delayed not killed, slipping programs rather than killing them allows for modernization wall be it more slowly and arguably less efficiently investment preserved for key future systems including a new bomber and bay lastic missile sub. they have maintained as much cable as possible without cutting too far. personnel costs account for 30% of the budget and growing annually but only make up 11% of proposed cuts and $60 billion in savings being projected by cutting waste and redundancy is more a goal than reality. based with a need to cut, administration deserves credit trying to do the right thing achieving these marks will be

difficult pentagon must tack tackle how -- tackle how it does business. >> thank for joining us for this week in defense news i am vago muradian, you can watch this online or e-mail me. i will be back next week at the same time until then have a great week >> woman: don't forget the yard work! >> o.k. >> announcer: with citibank's popmoney, dan can easily send money by email right from his citibank account. >> nice job, ben. >> announcer: well played, dan.

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