You could hear the joy cascading out of Washington DC to the surrounding provinces from the 2-yr budget deal last week. It does a lot of things, one of which is of central concern to most readers here, and that is the defense budget.
The Senate confirmed Mark Esper to be the nation’s new Defense Secretary in a 90-8 vote today, to be followed by an official swearing in this evening at the White House, giving the building it’s first confirmed Defense Secretary since former secretary Jim Mattis left in protest in December.
Esper’s official ascension from Army Secretary to Defense Secretary comes one day after Congress and the White House agreed on a massive two-year spending bill that finally kills the sequester spending caps, while giving the military something it has long begged for: budget certainty.
But that certainty comes at some cost.
The deal, which funds the Pentagon at $738 billion in fiscal 2020, falls short of the $750 billion the White House and Republicans have maintained the Pentagon needs to keep its modernization push moving forward, and slightly above the $733 billion House Democrats passed earlier this month in their version of the defense spending package.
While the new 2020 budget figure represents a 3 percent increase from the 2019 budget, that’s on the low end of the 3- to 5-percent real growth Esper and Chairman of the Joint Chiefs Gen. Joseph Dunford have said the Pentagon needs to keep its modernization efforts chugging forward. The real problems surface in the deal’s second year, when Pentagon funding inches up to $740 billion which — given inflation — would mean no real increase in spending.
By all means, celebrate while you can. In a quiet moment, take a seat on a nice piece of firm ground. You can feel, almost hear, what is coming – like a rolling beat of thousands of horses galloping towards you.
“I’m concerned that our increasing, fractious political process, particularly with respect to federal spending, is threatening our ability to properly defend our nation,” explained Coats. “Both in the short term and especially in the long term. The failure to address our long-term fiscal situation has increased the national debt to over 20 trillion [and] growing. This situation is unsustainable.”
Citing former Chairman of the Joint Chiefs of Staff Mike Mullen as the first military leader to identify the national debt as “the greatest threat to our national security,” Coats explained that leaders from both political parties—including former Secretaries of State Henry Kissinger and Madeleine Albright—have since made it a priority to resolve the crisis.
Give or take a few years, this is our high-water mark.
That is the pivot point for this post. Are we immune to what is coming? Are economics, politics, and demographics just social constructs – or are they very real things?
We all see the plans for 300-355 ships at some point in the future, but what if the gods of economics don’t want to play that game? Should we also, at least internally, wargame the Most Dangerous budget COA?
As I tell my children in their late-teens and early 20s all the time, “These are the good old days.”
I am of course, talking about the economy. They don’t remember the Great Recession as they were sheltered by age and their father’s Navy paycheck, and they know that. What I’ve tried to get them to understand something that one of my economics professors in the late 1980s saw coming and warned us all about; the Baby Boomer wave was going to drown us all and they need to be ready for it.
So must our Navy.
Let’s just look at the cold, hard numbers for three things; Interest on the debt; Medicare; Social Security;
Looking at projections by the Congressional Budget Office—Congress’ official federal scorekeeper—one sees that the federal budget is on a rapid collision course with out-of-control deficits. By 2025, the mere interest payments on the national debt are set to eclipse defense spending.
Medicare will run out of money sooner than expected, and Social Security’s financial problems can’t be ignored either, the government said Tuesday in a sobering checkup on programs vital to the middle class.
The report from program trustees says Medicare will become insolvent in 2026 — three years earlier than previously forecast. Its giant trust fund for inpatient care won’t be able to fully cover projected medical bills starting at that point.
Social Security’s moment of truth, when the money runs out to pay full benefits, isn’t until 2035, according to the latest official forecast released Monday.
The main Old-Age and Survivors Insurance Trust Fund would run out of cash a year earlier than that. But the program’s trustees say that if legislation is enacted to raid the far-smaller Disability Insurance fund — which wouldn’t go bust until 2052 under the latest projections — and divert the resources to retirement benefits, it would only buy one extra year.
So once the theoretical combined reserves, which now sit at nearly $2.9 trillion, are depleted in 2035, every current and future beneficiary at that point would be forced to take a 20 percent haircut from what they’d ordinarily receive.
Of course numbers may change and the day when the bill comes due may push to the right a little, but the math and demographics are merciless.
That assumes no signifiant economic downturns or additional spending. I don’t see anyone not promising new federal programs, so assume more pressure.
Where will the money come from when people start looking for it? It will come from defense.
What can that look like for our Navy?
Rapid declines in defense budgets with almost new ships put in mothballs has happened many times in history. A minor version of this was after the Cold War, but it can get much worse.
We don’t need to imagine too much, there is a benchmark out there we can use to come up with a number to plan with.
Depending on your source and measurement, a hull or two may change here there, but this graphic is useful.
Now let’s look at reverse engineering the smaller GDP and spending in the Mother Country to see what real pressures for domestic vs military spending at the end of a hard decade that the 2020s may be, would look like.
We’ve all read about how hard the Royal Navy is working to get the most of what she has this July – she did not get here by accident.
Our politicians will reach the same decision point as our welfare state groans under the baked-in demands that are coming due.
Let’s not use the larger approved numbers for the years to come as we don’t have comparable numbers for Great Britain, but let’s use what we do have, 2017 & 2018 numbers.
Let’s just look at three broad categories of ships; aircraft carriers, their escorts, and the submarine force … and yes, on the USA side I do not count LCS as a frigate equivalent … for reasons we all know. You can also nit-pic a number or two, but these are what we will have for planning purposes and any adjustments here and there in the end are simply rounding errors … so focus.
How would we get to such a place in a decade? History gives us plenty of examples, we don’t have to invent them. It could be less dire, but in this scenario looking at 2030 with only 6 CVN, 49 CG/DDG/FFG, and 38 SSN/SSBN total.
It isn’t impossible, and we need to think hard about what and where.
Heck, if that is too much, I’ll compromise with you as we used 2017/18 data. We’ll goose it in to not-so-Worst Case; 8 CVN, 65 CG/DDG/FFG, and 44 SSN/SSBN.
Take the smelling salts if needed – but think.
The accountants are waiting.
