Coming Massive Defense Cuts—View From San Diego

In January Sequestration will kick in for the Federal Budget.   Think about how the Services will weight a distributive $100B cut between them, each year for ten years.  It's 16% of the Defense pie.  Then there is the non-defense side of the Federal Budget, which will be nicked for slightly less than $100B—highways, medical research, etc.

I am quoting the below OpEd in full, so I can make comments as it goes along. This is from the Sunday San Diego Union-Tribune Military Section. San Diego is a Navy town, so this has a naval flavor, but we will all see the impact of this "asteroid".

REAR ADM. GEORGE WORTHINGTON (USN, RET.)
SPECIAL TO THE U-T

The Department of Defense is looking at a coming decade of reductions - $100 billion a year off the top.  This won't be like a recruit sitting for his first cut of "Military White Sidewalls." Hair grows back fast.  A trillion-buck hack in 10 years will leave an indelible scar on service towns across America.

In case you missed the arithmetic, former Defense Secretary Robert Gates offered up $492 billion in defense cuts before he knew Congress would fail last summer to agree on budget cuts.  The default "reboot," called sequestration, is $1.2 trillion in cuts over a decade, of which Defense shoulders an added $620 billion.  The cumulative tab for Defense is more than a trillion over 10 years.

Each service will feel the hit in manpower reductions and curtailment in every budget category.  Research and development is usually one of the first casualties [think Hanscom AFB or the Army lab in Natick], because most R&D items are visions and dreams.  Operations and maintenance monies are a close second - simply turn off training, steaming hours, field exercises, flight hours, ships at sea, and keep gas-guzzling tanks at home.  Military construction will slow, affecting local contractors' hiring.  Shipbuilding will slow.  [Think Bath Iron Works, on the Kennebec River in Bath, Maine]

But before new keels are laid, afloat units will face retirement in numbers not seen since 1970, when Chief of Naval Operations Adm. Elmo Zumwalt bragged he slashed more ships off the roster than were sunk by the Imperial Japanese Navy in World War II.  It took a decade before the halcyon days of Navy Secretary John Lehman's "600 Ship Navy."

So far the Department of Defense has been gentle on its reaction.  Secretary Leon Panetta and Joint Chiefs of Staff Chairman GEN. Martin Dempsey have been measured in remarks before Congress.  After all, they work for the administration and are obviously aware the commander-in-chief, President Barack Obama, has vowed to veto any congressional attempt to lessen the cuts. 

"We can't say precisely how bad the damage would be, but it is clear that sequestration would risk hollowing out our force and reducing its military options available to the nation," Dempsey is quoted as saying.  "We would go from being unquestionably powerful everywhere to being less visible globally and presenting less of an overmatch to our adversaries, and that would translate into a different deterrent calculus and potentially, therefore, jeopardize the likelihood of conflict."  [One might hope that a reduction in forces would result in reduced Presidential foreign "adventurism", but there is no guarantee.  In 1950 we were down in forces and still stepped to defend South Korea, as we sent many of our State-side forces to Europe, where "the real treat" was.]

Panetta was equally tepid in his remarks.  He has few options:  He supports the president's decision or resigns.  We're not there yet, but at the same time neither Defense nor the Services have produced a "worst case" impact study on sequestration effects.

Some civilian organizations have proffered conclusions predicting doom.  The National Association of Manufacturers says Pentagon cuts could cost a million jobs - 750,000 private sector and 100,000 in manufacturing.  Our local Fermanian Business & Economic Institute presented its "San Diego Military Economic Impact Study" last month at the San Diego Military Advisory Council monthly breakfast . It is a pretty rosy outlook with a "hip check" to sequestration.  The report's Exhibit 23 is headed "Military Spending to Hold Steady in San Diego Region" - increasing from $19.1B in 2010 to $20.7B in 2013.  [On the local front, we have this from Lt Gov Tim Murray:

Massachusetts bases coupled with businesses in the defense and aerospace industries generate more than 120,000 jobs in the Commonwealth. Defense contracts awarded to Massachusetts companies have almost tripled since 2000…

He has also established the "Military Asset and Security Strategy Task Force".  Reporting on it, the Association of Defense Communities says that in 2011 the six bases and defense contractors gave us a $13.7 input to our economy.  Hanscom was credited with 8.4 Billion in direct, indirect and induced economic activity.]

More:  "Under any budget scenario, San Diego can be expected to fare better than most other regions which have a significant defense cluster although the region will certainly not be immune to the shrinkage of the defense budget."  Well, which is it:  an increase, flat line, or shrinkage?

Some reasons for Fermanian optimism:  the pivot on Asia splitting the Navy to a 60-40 balance between Pacific and Atlantic fleets, respectively. Another is the current emphasis on Special Operations Forces in the area that supports Naval Special Warfare headquarters and SEAL teams.  Other items include the unmanned aerial vehicles, cyber security, and energy conservation.  Let's look at the first two.

The "Asia pivot" reflects the administration strategy to shift emphasis away from Europe and the Middle East to the Western Pacific. Couple of points:  Congress gets a vote on where ships are home ported.  This affects not just hulls but families - schools, housing, travel funds, local businesses.  Congress hasn't spoken yet.  Next, the administration is paddling around seeking Pacific area ports and bed-down facilities for whatever assets will ultimately flow to the region.

Secretary Panetta recently visited Vietnam and the Philippines.  Are we going back to Subic Bay or Cam Ranh Bay?  And what effect will this new strategy have on the Chinese?  Will the Asia pivot rely on a Marine brigade in Australia?  A few new littoral combat ships (clunkers) in Singapore?  [Did the Admiral just call our new LCS, FREEDOM and INDEPENDENCE clinkers?  Yes, he most certainly did.]  Will there be enough ships to support a grand Asia strategy?  If sequestration hits as expected, the number of ships could be greatly scaled back.  I've seen Internet speculation of sinking to 236 ships - down from today's 285.  What if San Diego loses 20 ships over 10 years?

Special Operations Forces: all Navy SEALs do their training in Coronado.  Training lasts over a year.  There will probably be 2,600 SEALs total after Quadrennial Defense Review growth demands are met by 2014.  But special operations overall is a thimble full of assets compared with overall Pentagon line items.  The only people who know SEALs are even here are Hotel del Coronado visitors [I recommend lunch at the del Coronado] watching rock portage.  Special operations forces have no significant impact on Pentagon spending, which is good news for the SEALs but of little consolation to city fathers.  When the big hits come, they will land on those funding sectors I opened with.

So far, neither Defense nor Congress has crunched the numbers.  Defense has a host of operations analysts and MBAs to run the impact figures.  But Defense reports to the administration even in congressional hearings, where loyalty is always on view.  We can see what happens when a service chief (Army Gen. Eric Shinseki) strays off the reservation by offering a different view of numbers from the secretary's stated position.[We do have Rep Niki Tsongas on the House Defense Committee.]

For its part, Congress has the Congressional Research Service that does excellent work on staff studies.  Nothing yet from that quarter.  [We have Lt Gov Tim Murray's Task Force.  I note that there are, as of yet, no comments on either of the Lt Gov's blog posts.  The second one here.]

It's going to be a long hot summer.  Municipalities with significant military establishments like San Diego need to rely on outside organs to crunch the numbers.  The mayor and City Council don't have qualified staffs to do the research. Neither does SDMAC.

What's required is a worst-case scenario.  The sequestration hammer won't just strike the San Diego waterfront or North Island.  The ripple effect will be felt eastward throughout the county and into Orange.  Second-tier subcontractors who manufacture the "nuts and bolts" that go into shipbuilding will dry up.  Ship orders will slip; retirements will impact negatively; crews and families will be ordered out.

No one has studied this, but it's not difficult to assess the impact on San Diego, which as the Fermanian Impact Study revealed, one in four San Diegans has a defense-related job.  It's not looking secure at the moment.

Here in the Commonwealth we do have an executive order establishing a Task Force.  As it says at the bottom of the EO, "GOD SAVE THE COMMONWEALTH OF MASSACHUSETTS".

Regards  —  Cliff