StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



The Gordon Adams Archives

Posted by Gordon Adams

All my gratitude to Stan for his leadership and his invitation to me to write for CG&G.  All the other bloggers have taught me much.  And the defense budget debate and issues are only beginning to heat up; It will be a busy year next year.  Look forward to the budget going down more than Secretary Panetta thinks it will.  Look for it to decline more than $1 trillion over the next ten years, which is a more shallow build down than any of the previous three build downs (Korea, Vietnam, Cold War).  And expect the republic and its security to survive.  I will continue to write and blog on this in the next year.  Look for it at AOLDefense, The Will and the Wallet, Battleland, and the National Journal.  The journey continues. 

Posted by Gordon Adams

We are in the midst of a full-throated attack by our own Department of Defense and its supporters in the Congress, who are saying anything they can to scare the Congress into sparing defense budgets from further trimming.  it is a scary assault, in part because so many erroneous and irrelevant statements are being made simply to move the banner of fear ahead.

The latest round is the letter in the New York Times today from House Armed Services Committee Chair Buck McKeon, seeing to rebut the October 31 New York Times column Paul Krugman wrote on the impact of defense cuts on employment, similar to comments I made the same day on Capital Gains and Games.

Posted by Gordon Adams

Defense budgets go up and down.  They have ever since the end of the Second World War. We are in a build down today, one that is likely to continue for the next decade, reardless of what the Super Committee does, and regardless of the hard court press coming from the Pentagon, its allies in Congress (Chairman McKeon of the House Armed Services Committee), and, especially, the industry that manufactures weapons for the Department of Defense.

Posted by Gordon Adams

While the world of Washington, DC circulates around the work of the super committee (an Indonesian shadow play in my view), some of us are wondering what the defense budget will look like over the next decade.

My own view, consistent for the past two years, is that we are in a build down.  It really doesn't matter what the super committee does, we are still in a build down.  It will last the decade and, when we all turn around and look back, it will have produced defense resources that are at least $1 billion below what DoD forecasts today will be the defense budgets over the next decade.

And that will be normal; the past build downs have seen defense resources decline an average of 30% in constant dollars over ten years.  Right now, the Budget Control Act would lead to a build down of about eight percent, so historically very low.  We will get to at least 17%, because that is what $1 trillion represents, as a ten year reduction from the Pentagon's appetite.

Posted by Gordon Adams

The President's new plan for deficit reduction presented to the Super Committee today claims nearly 25% of its overall spending savings from cuts to defense, specifically, from winding down the wars in Iraq and Afghanistan over the next ten years. 

Set aside, for the moment, the absence of any clear plan for doing so in Afghanistan. Focus on the size of this number; sounds enormous.  And it is a phoney.

Posted by Gordon Adams

Secretary Panetta was on point yesterday when he warned against a sequester of defense funding beyond the first tranche of budget disciplne in the new debt agreement. 

But the point he was making is important.  What is not desirable is a sequester - a blunt, across-the-board reduction in agency budgets.  It is about the worst way to cut a budget I know, for it is not driven by planning and choice-making, just mechanics.

What is likely, however, is a deeper reduction in defense budgets than the $400 billion or so over the next decade currently in the debt agreement plan and being implemented by the Pentagon.  That's easy - we could provide DOD with inflation growth over the next ten years and the savings from the current Pentagon budget appetite would be more than $400 billion.

Posted by Gordon Adams

Rumor has it that the current deficit/debt discussions between the White House and the Republican House leadership may include $1 trillion in defense savings over the next ten years.  If this were true, it would be both good news and a manageable savings, since it constitutes roughly 15% of the total resources DOD currently projects for defense over the next ten budgets.

But it is not true.  Turns out to be a case of wasting the Congress' time with phoney cuts, abusing budget baselines, and a political fraud on the American people.  The trillion dollars, it turns out, is all based on the assumption that we will spend significantly less on the wars or any other combat deployments than the more than $1 trillion we have already invested.

Posted by Gordon Adams

It is Europe-bashing time again.  Outgoing Secretary of Defense Robert Gates is the latest in a very long string of US officials to tee off on the Europeans for not "carrying their share of the defense burden."  So easy for Americans to say, such an easy escape-hatch from our own economic and fiscal problems.

The reality is everyone's defense budget is coming down.  And as they come down, it is important to remember that not everyone in the world agrees with the US view that we have a God-given mission to provide global military and counter-insurgency operations in pursuit of the chimera of "global security," least of all the Europeans.  For more on my views, visit the national security experts blog of the National Journal, posted today.

Posted by Gordon Adams

As the defense budget creeps toward the table in budget discussions on the Hill, we are likely to be treated to more and more of a contest over cuts, savings, baselines, budget projections, and the like.  There is no more fun, or frustrating game, than trying to peel away the numbers we get from DOD and get to a transparent reality of what is really going on.

Posted by Gordon Adams

The House Armed Services Committee is marking up its defense bill for FY 2012.  There are lots of interesting provisions, like an open grant to the executive branch to engage in almost any kind of war it wants, anywhere, against anything it might consider a terrorist.  But from a budget perspective, the committee is clearly living in a parallel, and very unreal, universe.

The committee seems to think that the starting point for talking about defense spending is the $553 billion number the administration originally sent up in February.  But we entered a new world with the congressional decision to provide $529 billion to the Pentagon in the base budget for FY 2011. 

Were Congress to actually provide $553 billion for FY 2012, that would be growth of 4.5% in the defense budget, or roughly 3.0% real growth.    But the FY 2011 level they appropriated sent a clear message from the Congress: defense must participate in the overall effort to control federal spending. 

Posted by Gordon Adams

Leon Panetta may be glowing with the success in Abbottabad, but he will have to turn to the challenge of the defense budget in short order.  The House Armed Services Committee looks like it will push for as much funding as possible; Rep. Ryan ducked the issue in his budget resolution, but like the ghost of Hamlet's father, the problem will not go away. 

For my views, read the op ed column I did for the Washington Post this morning.

Posted by Gordon Adams

As he approaches his retirement in September, Adm. Mike Mullen, Chairman of the Joint Chiefs of Staff, continues to speak the truth about our fiscal problems, their impact on the military budget, and the consequences of ten years of continuous growth in defense spending.

He spoke to the Government Executive media group on April 28 and made four critical points policy-makers need to pay attention to, as the Congress returns from recess.

First, he sees the nation's "debt as the single biggest threat to our national security," a point he has made before and one the Congress will be grappling with as they approach the next stage of the budget resolution, the proposals that may emerge from the Gang of Six, and the forthcoming debate over the nation's debt limit. 

Posted by Gordon Adams

Leon Panetta is a superb choice for Secretary of Defense.  It's about bipartisanship and budgets, and he is master of both. 

He brings three key skills:

1) He knows budgets - broadly and deeply - after years as Budget Committee Chair, OMB Director, and Chief of Staff.  I worked with him closely in these positions, especially at OMB, and can speak to the depth of his knowledge.  He knows defense budgets, too, which I spent many hours discussing with him.  We are in a defense build down; he knows what that is about, having presided over one as OMB Director in the 1990s.

2) He is a user-friendly and decisive agency administrator.  This is not something one can say about all former members of Congress.  But he can act swiftly, learns quickly, is transparent and approachable; a good listener.  Every agency he has ever worked for has felt empowered by his leadership.  The Pentagon will need this in a build down; thihk Mel Laird in the 1970s.

Posted by Gordon Adams

Not many budget wonks worry about the other side of "security spending": the money we spend on civlian capacity to engage the world.  But it matters, and it will matter more once the US is out of Iraq and Afghanistan.  A project I am connected to at the Stimson Center - Budgeting for Foreign Affairs and Defense - is one of the places that does worry about it, because our civilian and military capabilities are synergistic, or should be.  BFAD runs a website - The Will and the Wallet - that is worth looking at for both defense and foreign policy wonks.  I have linke to it a number of times over the past year.

Posted by Gordon Adams

Updating my entry last Friday, we have recalculated the route to get to President Obama's proposed security spending reductions of $400 billion over twelve, yes, count them, twelve years.  Not a great step forward, and well below what Simpson-Bowles, Rivlin-Domenici, or Frank-Paul proposed last year, in fact, roughly a third of what they called for.

If you go to the Stimson Center's Budgeting for Foreign Affairs and Defense website, you will see our new calculation, based on the final FY 2011 budget agreement number for defense, which shows that maintaining DOD's buying power (increasing the budget every year by inflation) provides more than $428 billion in savings from the current DOD plan.  If one left that $28 billion on the table, one could even claim DOD funding would grow after inflation (a teeny, tiny amount), and still achieve Obama's goal.

Posted by Gordon Adams

The $400 billion in security budget reductions between FY 2012 and FY 2023 announced by President Obama on Wednesday turn out to be even easier than one thinks.  As the New York Times reports this morning, these aren't really cuts. Using research we did at the Stimson Center, the Times notes that simply holding DOD's budget growth to inflation over those years yields $401.7 billion in savings from the current OMB budget projections. The President's goal is reached and the defense budget is actually not cut; the Pentagon keeps all its purchasing power by rising with inflation.

We won't need a major strategy review to get to this target, even though the President promised one. 

Posted by Gordon Adams

We have definitively entered the era of budget discipline, starting with the most recent agreement on federal funding for the full 2011 fiscal year.  And the defense budget is finally beginning to head towards a draw-down, ever so gently.  And it is easy to do, with little or no sacrifice to our defense capabilities or our security (though the stalwart defenders of the faith would have you imagine otherwise). 

The defense appropriation passed last week with the bill funding the government.  It actually provided $5 billion more for defense than DOD received in FY 2010.  But it also fell $19 billion short of Gates' request, and $9 billion below the absolute minimum  of $540 billion the Secretary said would be needed "to properly carry out its mission, maintain readiness, and prepare for the future." 

Posted by Gordon Adams


(originally posted on The Will and the Wallet

For thirty-five years, the Egyptian people believed the myth and lived in fear, fear of the security forces and fear of the chaos and instability that might exist without a strong ruler.  They have just overcome that fear and created hope.   That collective psychic shift was the key to making the change they needed to bring about.

Posted by Gordon Adams

Ever since Secretary Gates announced (www.defense.gov/transcripts/transcript.aspx) his "cuts" in the defense budget - $78 billion over the next six years - people have been confused.  Last summer he said he was going to find more than $100 b. in savings over five years, through management "efficiencies in the DOD, but he was going to give the services back all that money for priority investments and forces.  When he announces his "cuts," did that mean the White House stepped in and took most of his savings away, leaving the services empty-handed?

Not really, but welcome to the wonderful world of defense accounting.  Secretary Gates now says (www.defense.gov/transcripts/transcript.aspx) he did find those $100 billion in efficiency savings, and he did give them back to the services to buy necessary services, as well and equipment and people, over the next six years. 

Posted by Gordon Adams

The Republican vote to roll spending back to FY 2008 levels nicely left the defense budget off the table.  Too bad; it's OK, even necessary to include defense in the overall effort, despite what Robert Kagan had to say in the Weekly Standard this week. (www.brookings.edu/articles/2011/0124_defense_budget_kagan.aspx).  He just cannot resist the desire to intervene, and doesn't think American can resist it either.  But we don't live in that era any more, especially not in the Cold War, when the desire to intervene had at least a fig leaf of strategic justification. And the fiscal situation is far more dramatic than he thinks.  Defense, along with entitlements, health care, and domestic spending all play a role in getting us into the problem and all will play a role in getting us out.



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