Gates Launches ‘Comprehensive Review’ to Find $400 Billion in Defense Cuts
The U.S. Defense Department will begin a “comprehensive review” to find $400 billion in spending cuts as part of President Barack Obama’s plan to reduce the federal deficit.
The Pentagon will evaluate “missions, capabilities and America’s role in the world” and “identify alternatives for the president’s consideration,” Pentagon spokesman Geoff Morrell told reporters yesterday. “This is not just a math exercise.”
Making reductions of that scale through fiscal 2023 is an “ambitious goal,” he said.
The review ordered by Secretary of Defense Robert Gates, who in January proposed $78 billion in reductions for the next five years, will take months and would have its first impact on the fiscal 2013 budget, Morrell said.
“This process must be about managing risks associated with future threats and identify missions the country is willing to have the military forgo,” he said.
Todd Harrison, a defense budget analyst for the Washington- based Center for Strategic and Budgetary Assessments, which studies defense expenditures and national security strategy, said reaching that level of savings will require “more than just efficiencies.”
“It will require making hard choices about force structure, pay, benefits and modernization programs,” Harrison said. “There are no magic bullets.”
Defense Stocks Drop
Defense contractors were among the biggest decliners yesterday in U.S. markets. Lockheed Martin Corp. (LMT) fell 2.6 percent, Raytheon Co. (RTN) was down 2.9 percent, General Dynamics Corp. (GD) fell 1.5 percent, Northrop Grumman Corp. (NOC) dropped 2.1 percent and Boeing Co. (BA) was down 1.3 percent.
Gates met with Obama and Vice President Joe Biden in the Oval Office yesterday afternoon to discuss the president’s plan.
At the direction of the White House, and amid pressure to curb trillion-dollar federal deficits, Gates in January proposed cutting defense spending by $78 billion over five years. The $78 billion in cuts equals about 2.7 percent of a $2.91 trillion defense plan through 2016.
In a briefing last August, Gates told reporters: “My greatest fear is that in economic tough times that people will see the defense budget as the place to solve the nation’s deficit problems, to find money for other parts of the government.”
Holding Below Inflation
A White House fact sheet said the administration wants to achieve deeper reductions in security spending by holding growth in “base security spending below inflation.”
The fact sheet didn’t specify whether the Defense Department would bear all of the $400 billion goal or whether some cuts would fall on other security agencies, such as the Department of Homeland Security.
“Holding defense below inflation is a huge problem,” House Armed Services Committee Chairman Howard “Buck” McKeon, a California Republican, said in a statement.
The chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, “recently told our members that ‘we must not be exempt in the Defense Department from belt-tightening, but in truth there is little discretion about the security we provide our fellow citizens,’” McKeon said. “The president and Admiral Mullen can’t both be right.”
Two of the biggest areas of weapons spending that might be reviewed are the $14 billion, on average, that the Navy plans to spend annually on shipbuilding and Lockheed Martin’s F-35 fighter jet. The U.S. Government Accountability Office in a report said the F-35 is anticipated to require “unprecedented demands for funding,” averaging about $11 billion a year.
Military Chiefs
Morrell said Gates told the military service chiefs that “the announcement is the beginning of the process and not the conclusion. The outcome is still to be determined.”
Over the next five years, the administration forecasts the government will pile up a cumulative deficit of $3.8 trillion; over the decade, the cumulative deficits would rise to $7.2 trillion.
In addition to defense cuts, Obama proposed three other main components to reduce the debt, according to a White House statement: holding down domestic spending, curbing health-care costs and closing tax loopholes. The administration has released no details.
Morrell said Gates “has been clear that further significant defense cuts cannot be accomplished without future cuts in force structure and military capability.”
To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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