Secretary Hagel faces uphill fight in trimming Pentagon’s budget

Defense Secretary Chuck Hagel faces an uphill battle in tackling the military’s budget problems.

In his first month as Defense secretary, Hagel has called for a review of the military’s strategy and said it was time for “big choices” on the budget.

He said all options should be on the table, and focused not on cuts to the Pentagon’s overall budget, but on the way the money is being spent.

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“The biggest long-term fiscal challenge facing the department is not the flat or declining top-line budget, it is the growing imbalance in where that money is being spent internally,” Hagel said.

But some defense analysts are skeptical that Hagel will be able to convince a Congress perpetually in campaign mode to go along with difficult budget cutting items like increases in military health-care costs for retirees, or new rounds of base closures.

There is also skepticism that Hagel is committed to making all of the cuts he is suggesting.

Mackenzie Eaglen, a defense analyst at the conservative leaning American Enterprise Institute, noted that Hagel this week warned some “dramatic changes” could turn out to be “unwise, untenable, or politically impossible.”

She said those comments suggest Hagel is giving himself “a massive out from making real change” if he decides the cuts are unworkable.

The structural changes Hagel discussed this week are not expected to be included in the 2014 budget request that will be released on Wednesday.

Hagel’s strategy review and this year’s Quadrennial Defense Review are expected to be the two avenues for addressing bigger changes, which would then appear in the 2015 Defense budget.

But that would set up a congressional battle in 2014, an election year where lawmakers will be less likely to accept politically difficult cuts, said Lawrence Korb, a former DOD official and defense analyst at the liberal-leaning Center for American Progress.

“This is the year to do it,” Korb said of Pentagon budget reforms.

Hagel isn’t the first Defense secretary to eye cuts to Pentagon weapons budgets, benefits or the department’s overhead.

He has described his efforts as a continuation of former Defense Sec. Robert Gates’s attempts to cut the number of three- and four-star generals and Leon Panetta’s plans in 2012 to reduce the number of active-duty troops and propose base closures and healthcare fee increases.

Arnold Punaro, a retired Marine major general and former staff director of the Senate Armed Services Committee, testified at a congressional hearing last month that the three budget areas Hagel raised — acquisitions, compensation and overhead — were all “ticking time bombs” for the Pentagon.

Punaro told lawmakers that reforming the Pentagon’s compensation and overhead problems has not happened because “no one — including Congress — holds the Pentagon’s feet to the fire.”

Punaro said in an interview that he was pleased Hagel had identified the biggest problems in the military's budget.

"These are going to be very difficult, emotional issues to tackle, but we have to," Punaro said. "And I think Secretary Hagel deserves tremendous credit for his willingness to stick his head out and lead on this issue."

The most difficult area to tackle is likely to be compensation and benefits, which defense analysts have long identified as a major factor in rising costs.

Todd Harrison, a budget analyst at the Center for Strategic and Budgetary Assessments, wrote in a 2014 budget preview that compensation costs per active-duty service member have risen 57 percent in the last decade.

“Even if the cost per service member returns to its historical norm of 2.6 percent real annual growth, by FY 2021 total military personnel-related costs…could consume 46 percent of the DOD budget,” he wrote.

Hagel may have some added momentum to seek major changes because he faces a $500 billion budget reduction over the next decade under sequestration.

The Pentagon plans to cut its 2013 budget by $41 billion to deal with the cuts, and military officials have asked Congress for flexibility to make major changes in future years.

But budget analysts like Harrison are concerned that sequestration is not going to force either Congress or the Pentagon to start making difficult choices. Pentagon officials have said the 2014 budget coming out next week will be at pre-sequester levels, and both the House- and Senate-passed budgets were also at the higher dollar amount.

That could mean the Pentagon will face across-the-board cuts in 2014, too.

“If the FY 2013 budget process is instructive, Congress may prefer to let sequestration cut the budget rather than make the hard decisions itself,” Harrison wrote.

In the 2013 budget, Panetta sought to make some structural changes to save costs, including a request for two new rounds of base closures and increase in healthcare fees for military retirees. Both were rejected by Congress.

While budget analysts expect the Pentagon’s 2014 proposal to include similar measures, too, Congress does not appear to be budging.

The House Armed Services Committee, for instance, launched a pre-emptive strike against base closures at a hearing earlier this year, where lawmakers said they would reject any requests for new base closures in the United States.