DoD Budget Winners, Losers And Draws

Defense Secretary Chuck Hagel on Monday put forward a $496 billion spending plan for the Defense Department for the next fiscal year that has a lot more losers than winners, plus a few draws.

But, Hagel emphasized, it could have been much worse.

The blueprint that he outlined ahead of the White House’s expected budget rollout next Tuesday is the first spending plan to “fully reflect the transition DoD is making after 13 years of war,” he told reporters.

It scraps programs, reduces end strength and seeks to rein in compensation costs as the military adapts to new fiscal realities with the war in Afghanistan winding down.

But it also provides some relief from the cuts that would have been required next fiscal year under sequestration – a point Hagel drove home at the Pentagon on Monday as he sought to drum up support on Capitol Hill for some additional reprieve from the automatic cuts beyond fiscal 2015.

Here is POLITICO’s list of winners, losers and draws:

Winners

Special Ops

Hagel said the Pentagon plans to increase its special forces troops by more than 3,000 – from today’s 66,000 to 69,700 personnel.

“Our recommendations seek to protect capabilities uniquely suited to the most likely missions of the future, most notably special operations forces used for counterterrorism and crisis response,” he said.

And he added that special operations is an area the Pentagon wants to protect in future budgets.

Global Hawk

In what amounts to a major coup for Northrop Grumman, Hagel said the Air Force would keep flying the company’s RQ-4 Global Hawk surveillance drones – and retire its 50-year-old U-2 spy planes.

The decision, which he described as a “close call,” is a major reversal from the past few years, which saw the Air Force repeatedly propose halting its purchases of Global Hawk Block 30s in favor of its U-2s.

Northrop and its backers in Congress, including House Armed Services Committee Chairman Buck McKeon (R-Calif.), overturned the proposals, forcing the service to continue buying the Block 30s.

It appears Hagel has now bought into McKeon’s arguments about the merits of the platform, which is assembled in the California Republican’s district.

“With its greater range and endurance, the Global Hawk makes a better high-altitude reconnaissance platform for the future,” Hagel said.

Northrop hailed the decision.

The company “greatly appreciates recognition from the administration, Congress, the Department of Defense and the U.S. Air Force of the RQ-4 Global Hawk’s value as the most affordable and capable airborne ISR asset,” said spokesman Randy Belote.

Readiness

The ability of U.S. military forces to meet the demands of the national military strategy is so important that Hagel signaled a willingness to make unpopular cuts to troop numbers – solidly marking readiness as a winner in this budget.

“We chose further reductions in troop strength and force structure in every military service – active and reserve – in order to sustain our readiness and technological superiority,” Hagel said.

But first things first, he said: Sequestration needs to be turned off in future years.

“In the short term, the only way to implement sequestration is to sharply reduce spending on readiness and modernization, which would almost certainly result in a hollow force – one that isn’t ready or capable of fulfilling assigned missions,” Hagel said.

Cyber

Hagel also said he was willing to make tradeoffs in troop strength and force structure to focus on emerging technologies in fields like cybersecurity.

“We are repositioning to focus on the strategic challenges and opportunities that will define our future: new technologies, new centers of power and a world that is growing more volatile, more unpredictable and in some instances more threatening to the United States,” he said.

Pentagon officials have been warning of the dangers posed by cyberattacks from countries like China and Russia, and warding off these sorts of threats will be more and more important in future DoD budget offerings.

Moving forward, it’s crucial that the U.S. military maintain its “technological edge over all potential adversaries,” Hagel said.

Losers

Domestic bases

The Pentagon is calling for another round of base realignments and closures. But BRAC is a four-letter word to lawmakers trying to protect defense jobs in their districts, so it’s less clear whether Congress will go along with DoD’s proposal.

But Hagel hinted in his speech that opposition from Congress may not be enough to derail base closures this time around.

“If Congress continues to block these requests even as they slash the overall budget, we will have to consider every tool at our disposal to reduce our infrastructure,” Hagel said.

Last week, Rep. Adam Smith (D-Wash.) warned that the Pentagon may try to bypass Congress and make unilateral base cuts if lawmakers refuse to go along with BRAC. And Tim Ford, chief executive officer of the Association of Defense Communities, said that Congress and the Pentagon’s longstanding turf war over BRAC cuts could do more harm to domestic installations than good.

“There’s a huge disconnect between the two, and communities feel stuck in the middle,” he said. “Communities are concerned that what they’re going to experience without a BRAC will be much worse than a BRAC would be. So they’ve observed the back-and-forth, but in the end that’s not really helping the situation that they’re facing.”

A-10s

The much-beloved A-10 fleet of “Warthog” attack planes is a clear budget loser. Hagel called for retiring the entire fleet, which he says will save $3.5 billion over five years.

The aging A-10 fleet’s missions are slated to be taken over by the F-35 Joint Strike Fighter, but the program’s defenders argue that the F-35 doesn’t have the same abilities for close air support in war zones.

“The ‘Warthog’ is a venerable platform, and this was a tough decision,” Hagel said. “But the A-10 is a 40-year-old single-purpose airplane originally designed to kill enemy tanks on a Cold War battlefield. It cannot survive or operate effectively where there are more advanced aircraft or air defenses.”

There’s a significant amount of support for A-10s on Capitol Hill from Sen. Kelly Ayotte (R-N.H.) and other lawmakers and government watchdog groups, but they’ll have to mount a pretty serious campaign to save the planes this time around.

The A-10’s age is making it difficult and costly to maintain, Hagel added, and significant savings are only possible by eliminating the fleet.

“Keeping a smaller number of A-10s would only delay the inevitable while forcing worse trade-offs elsewhere,” he said.

U-2s

A big win for the Global Hawk is a big loss for the U-2, the Cold War-era reconnaissance aircraft made by Lockheed Martin.

Over the past few years, Air Force commanders have told Congress they couldn’t afford both their Global Hawks and their U-2s and that they preferred the U-2s.

No more.

The big question is whether the reversal is the result of practical realities – Congress didn’t appear to be budging in its support for the Global Hawk – or the result of changing economic factors. Hagel portrayed it as the latter.

“DoD has previously recommended retaining the U-2 over the Global Hawk because of cost issues,” he said. “But over the last several years, DoD has been able to reduce the Global Hawk’s operating costs.”

Service members and veterans

Smaller housing allowances. Lower subsidies for commissaries. A 1 percent pay raise for most military personnel, with no raise for general and flag officers. And increased fees and deductibles for military health care.

Hagel on Monday rolled out a number of cuts that’ll hit the wallets of service members and veterans – part of a plan to rein in the Pentagon’s personnel costs, which the Pentagon chief says threaten to crowd out spending on other priorities.

The proposals are certain to roil advocacy groups for service members and veterans, along with lawmakers up for reelection this fall – who will be especially reluctant to support any cuts that could open them up to attacks back home.

“Although these recommendations do not cut anyone’s pay,” Hagel said Monday, “I realize they will be controversial.”

Retired Air Force Col. Michael Hayden, the director of government relations at the Military Officers Association of America, said the group was studying Hagel’s proposals to determine the financial impact they would have on current and retired service members.

“We realize they’re in a tough predicament,” Hayden said of the Pentagon’s fiscal situation, voicing concern about proposals that would cut troop benefits.

Service members and veterans, though, escaped any cuts to their pensions after the spat with Congress over the issue earlier this year. Hagel said the department was holding off on any changes to military pension plans until the Military Compensation and Retirement Modernization Commission completes a study due next February.

“DoD continues to support the principle of ‘grandfathering’ for any future changes to military retirement plans,” Hagel said in his prepared remarks.

Littoral Combat Ship

Hagel dealt a major blow to the Navy’s Littoral Combat Ships made by Lockheed Martin and Austal USA, putting forward a plan that could set the program at 32 total ships, down from the previous plan of 52.

“We need to closely examine whether the LCS has the protection and firepower to survive against a more advanced military adversary and emerging new technologies, especially in the Asia-Pacific,” he said, directing the Navy to come up with alternate proposals for a small surface combatant.

The program’s one potential savior is Robert Work, the former undersecretary of the Navy who’s been nominated by President Barack Obama to be the new deputy Defense secretary.

Work is a major LCS advocate – and would hold big sway over Pentagon budget decisions in future years if he’s confirmed by the Senate.

Ground Combat Vehicle

The Ground Combat Vehicle was given a death sentence on Monday, with Hagel accepting the Army’s recommendation to terminate the program and redirect its funds toward developing a next-generation platform.

The GCV was intended to replace the Bradley Infantry Fighting vehicle, but has hit numerous speed bumps during its lifespan.

“I have asked the leadership of the Army and the Marine Corps to deliver new, realistic visions for vehicle modernization by the end of this year,” Hagel said.

But that’s not all bad news for BAE Systems and General Dynamics, which were both competing for the right to build the GCV. Upgrades to existing Army vehicles like the Bradley, the Abrams tank and the Stryker will likely pass some business their way.

Draws

National Guard

The Pentagon’s proposal is a mixed bag for the National Guard. Its troop strength will remain fairly steady through 2017, dropping from its current 355,000 to 335,000 soldiers in the Army National Guard.

During back-and-forth closed-door budget discussions, the Army had proposed the Guard drop as low as 315,000 troops, so the final number is better than it could have been.

The 5 percent recommended reduction in Guard and Reserve soldiers is smaller proportionally than the 13 percent cut to active-duty soldiers, but it will only be possible if Congress turns off sequestration, Hagel said.

But the Guard lost on helicopters: All of its AH-64 Apache helicopters will be assigned to active units to replace the retiring OH-58 Kiowa Warriors and “JetRanger” training helicopters used at Fort Rucker in Alabama.

In return for the 8 percent cut to its chopper fleet, the Guard will get UH-60 Black Hawks to bolster its disaster relief and emergency response missions. And the Army will also sustain the Guard’s fleet of Light Utility Helicopters for now – but that fleet would need to be cut by 50 helicopters if sequestration persists, Hagel said.

Army

For the Army, it was all about expectations.

The service was expected to take a big hit this fiscal year. But the hit announced by Hagel wasn’t as bad as it could have been.

Active-duty Army end strength will go down to a range between 440,000 and 450,000 soldiers, a reduction from its current number of 520,000.

But like with the National Guard, it could have been worse. The Pentagon was contemplating cutting the Army’s end strength as low as 420,000 – and could have to go that low if sequestration remains in place for fiscal 2016 and beyond.

“The Army must accelerate the pace and increase the scale of its post-war drawdown,” Hagel said. “The Strategic Choices and Management Review and the QDR both determined that since we are no longer sizing the force for prolonged stability operations, an Army of this size is larger than required to meet the demands of our defense strategy.”

The Army also benefits from the Army National Guard’s helicopter fleet, so the post-land conflict budget didn’t gut the service as much as it could have.

Aircraft Carriers

The Navy will maintain an 11-carrier fleet – for now.

Hagel said there were no plans next fiscal year to retire the George Washington, despite earlier reports.

But the Navy could be forced to make plans to retire the carrier in fiscal 2016 ahead of a scheduled nuclear refueling and overhaul, especially if Congress fails to stave off future rounds of sequestration.

“Keeping the George Washington in the fleet would cost $6 billion,” Hagel said. “So we would have no other choice than to retire her should sequestration-level cuts be re-imposed.”