As you'd imagine, lots of interesting stuff. Below are some extensive excerpts and brief commentary. If you have any interest in defense issues and where we're going, the whole speech is well worth your time.

First, the reality...the defense budget is not going back to "the good old" days anytime soon.

But, as I am fond of saying, we live in the real world. Absent a catastrophic international conflict or new existential threat, we are not likely to return to Cold War levels of defense expenditures, at least as a share of national wealth anytime soon. Nor do I believe we need to.

First, the world is different. Our primary adversary then was a comparably armed super power, bristling with millions of troops, tens of thousands of tanks, and thousands of advanced combat aircraft – not to mention a vast arsenal of nuclear weapons – that was poised to overrun Western Europe and could directly threaten our allies and interests around the globe.

I know – as head analyst at CIA I signed off on the studies of Soviet military power. The threats and potential adversaries America faces today and down the road are dangerous and daunting – for their complexity, variety and unpredictability. But as a matter of national survival, they do not approach the scale of the Soviet military threat that provided the political and strategic rationale for defense expenditures that consumed a significant portion of our economy.

Second, we’re not going to see a return to Cold War-level defense budgets, at least as a share of GDP, because America is different: Our economy, our demographics, and our fiscal predicament – whether measured in the size of debt and deficits, ratios of retirees to workers, or the share of the federal budget consumed by entitlements. The money and political support simply aren’t there.

In fact, under Gates the services have already done quite a bit of cutting.

The first stage, beginning in Spring 2009, dealt with procurement – the weapons the military buys or plans to buy in the future. We cancelled or curtailed modernization programs that were egregiously over-budget, behind schedule, dependent on unproven technology, supplied a niche requirement that could be met in other ways, or that simply did not pass the common sense test: A $200 billion future combat system for the Army that, a decade after IEDS and EFPs began to kill or maim thousands of our troops, was based on lightweight, flat-bottomed vehicles that relied on near-perfect information awareness to detect the enemy before he could strike. Or a missile defense program that called for a fleet of laser-bearing 747s circling slowly inside enemy air space to get off a shot at a missile right after launch.

All told, over the past two years, more than 30 programs were cancelled, capped, or ended that, if pursued to completion, would have cost more than $300 billion. At the same time, we made new investments in higher priorities related to the current wars and, in some cases, re-started efforts that filled a genuine military need for the future – such as a follow-on bomber for the Air Force, the Army’s Ground Combat Vehicle, and a new Marine amphibious tractor. We also invested in new technologies and capabilities to address emerging sophisticated threats. But our new starts and new investments are on a far more realistic footing that relies on proven technology and can be produced on time and on budget.

This process also forced the Pentagon’s leadership to confront this vexing and disturbing reality: since 9/11, a near-doubling of the Pentagon’s modernization accounts – more than $700 billion over 10 years in new spending on procurement, research and development – has resulted in relatively modest gains in actual military capability. In fact, most of the significant new capabilities that have come online over the past decade were largely paid for outside the base budget, via supplemental war requests. In particular, larger ground forces and specialized battlefield equipment such as MRAPs, body armor, and other gear.

Still, there's not post-Cold War like "Peace Dividend" (An awful concept that created a lot of problems. Just another gift from George H.W. Bush) because we have real procurement needs, in addition to ongoing operations.

I revisit this history because it leads to an important point for the future: when it comes to our military modernization accounts, the proverbial “low hanging fruit” – those weapons and other programs considered most questionable – have not only been plucked, they have been stomped on and crushed. What remains are much-needed capabilities – relating to air superiority and mobility, long-range strike, nuclear deterrence, maritime access, space and cyber warfare, ground forces, intelligence, surveillance and reconnaissance – that our nation’s civilian and military leadership deem absolutely critical. For example:

We must build a new tanker. The ones we have are twice as old as many of the pilots flying them;

We must field a next generation strike fighter – the F-35 – and at a cost that permits large enough numbers to replace the current fighter inventory and maintain a healthy margin of superiority over the Russians and Chinese;

We must build more ships – in recent years, the size of the Navy fleet has sunk to the lowest number since before World War II, and will get smaller as more Reagan-era vessels reach the end of their service life;

We must recapitalize the ground forces – the Army and Marines – whose combat vehicles and helicopters are worn down after a decade of war; and

At some point we must replace our ballistic missile submarines – a program that illustrates the modernization dilemmas we face.

Gates says they've already wrung out the low-hanging fruit in procurement and manpower.

As a result, starting last spring, we began to take a hard look at the department’s overhead costs, in particular the massive administrative and support bureaucracies – within the military services, and across the defense department as a whole. The purpose was to carve out more budget “headroom” that could be allocated to force structure and modernization.

The results of these efforts were, frankly, mixed. The military services, in my view, successfully leaned forward and found nearly $100 billion in efficiency savings – by closing facilities, combining headquarters, reducing energy costs, and much more – over five years and allocated those funds to make new priority investments and deal with higher than projected expenses. Across the department as a whole, we were able to save another $54 billion through freezing civilian staff and pay levels, eliminating one 4-star command and downgrading two others, eliminating or down-grading more than 350 generals, admirals, and civilian executive positions, reducing reliance on contractors, getting rid of unnecessary reports and studies, and more.

...So I believe there are more savings possible by culling more overhead and better accounting for, and thus better managing, the funds and people we have. But one thing is quite clear. These efficiencies efforts will not come close to meeting the budget targets laid out by the president, much less other, higher targets being bandied about. Some perspective is important. What’s being proposed by the President is nothing close to the dramatic cuts of the past. For example, defense spending in constant dollars declined by roughly a third between 1985 and 1998. What’s being considered today, assuming all $400 billion comes from DoD over 12 years, corresponds to a projected reduction of about 5 percent in constant dollars – or slightly less than keeping pace with inflation.

So maybe we need to try some radical new personnel strategies some of which will be very controversial, to say the least.

That is why I launched a comprehensive review last week to ensure that future spending decisions are focused on priorities, strategy and risks, and are not simply a math and accounting exercise. In the end, this process must be about identifying options for the President and the Congress, to ensure that the nation consciously acknowledges and accepts additional risk in exchange for reduced investment in its military.

Part of this analysis will entail going places that have been avoided by politicians in the past. Taking on some of these issues could entail:

Re-examining military compensation levels in light of the fact that – apart from the U.S. Army during the worst years of Iraq – all the services have consistently exceeded their recruiting and retention goals;

It could mean taking a look at the rigid, one-size-fits-all approach to retirement, pay and pensions left over from the last century. A more tiered and targeted system – one that weights compensation towards the most high demand and dangerous specialties – could bring down costs while attracting and retaining the high quality personnel we need; and

It will require doing something about spiraling health care costs – and in particular the health insurance benefit for working age retirees whose fees are one-tenth those of federal civil servants, and have not been raised since 1995.

And then the nub of the matter...what assumptions do you use to judge these competing interests and build the force?

For example, the assumption behind most of our military planning ever since the end of the Cold War has been that the U.S. must be able to fight two major regional wars at the same time. One might conclude that the odds of that contingency are sufficiently low, or that any eruption of conflicts would happen one after the other, not simultaneously. What are the implications of that with respect to force structure, and what are the risks? One can assume certain things wonÂ’t happen on account of their apparent low probability. But the enemy always has a vote.

These are the kinds of scenarios we need to consider, the kinds of discussions we need to have. If we are going to reduce the resources and the size of the U.S. military, people need to make conscious choices about what the implications are for the security of the country, as well as for the variety of military operations we have around the world if lower priority missions are scaled back or eliminated. They need to understand what it could mean for a smaller pool of troops and their families if America is forced into a protracted land war again – yes, the kind no defense secretary should recommend anytime soon, but one we may not be able to avoid. To shirk this discussion of risks and consequences – and the hard decisions that must follow – I would regard as managerial cowardice.

What he's basically saying there is don't simply cut 10% or whatever across the board. Some programs and very controversially, some whole services, are worth more than others. Taking the same amount of money or as a percentage of their budgets from the Army as the Navy maybe counterproductive if you think the near and midterm threats are basically going to be Air-Sea battle space affairs.

Of course anyone who predicted on September 10th, 2001 we'd be spending the better part of a decade involved in not one but two land wars in Asia would have been locked up in an asylum. Though in reality it's easier to build up a land-force than it is to reconstitute a navy.

Defense is like insurance, you grumble when you have to pay for it but when the storm comes, you're damn glad you have it. There's no magic formula so if we are going to err (and we inevitably will) we err on the side of more capability we don't use than not enough when we need it.

Gates is urging a serious look at what we have and where we think we'll be fighting in the next decade plus as well as a realistic look at what we do now that we're willing to no longer do (think soft power). Then and only then, make smart, tough cuts accordingly. Yeah, good luck with this administration and the realities of defense spending on Capitol Hill.

Posted by: DrewM at 04:51 PM | Comments (45)
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