As much as one-third of President Obama’s goal of reducing defense spending by $400 billion may be achieved by cutting overhead, putting more risk on contractors and eliminating overlapping and marginal programs, former Defense Secretary Robert Gates said before leaving office.
“The sort of back-of-the-envelope numbers we’ve run would suggest we could get at least a third of the money we need,” or more than $120 billion, Gates said June 29. His successor, Leon Panetta, was sworn into office Friday. “We can probably get out more efficiencies and marginal programs — or where we have redundancy in the services,” Panetta said. “For 2012 and 2013, my hope is the cuts won’t be too deep, but I think that there is more room with efficiencies.”
“I don’t think we will be able to get a significant portion of the $400 billion in 2012 or 2013, so the question is … what can we identify, where if we make changes today we can generate some real returns,” he added.
Still, Gates said he wasn’t “sanguine” that the long-term savings can be achieved. “This is going to be hard,” he said. “Tough choices are going to have to be made, and I want the Congress and president to understand what those tough choices are.”
Among those choices might be adjusting U.S. strategy to allow for force-structure reductions and tackling “politically sensitive” areas such as working military retiree health-care premiums, said Gates, whose last day in office was Thursday.
“It’s a little late in the defense planning process to make major changes to fiscal 2013 so the good news could be that fiscal ’13 is not cut as deeply as some fear,” said Byron Callan, a defense analyst at Washington-based Capital Alpha Partners.
“Defense budget reductions can’t just fall on investment — there will be an impact on all accounts, given the magnitude of savings being sought,” he said.
The Congressional Budget Office said in a report that the primary cause of long-term budget growth will be rising operations and support costs. Those include “significant increases” in military and civilian compensation of about 1.5 percent a year — to $495 billion in 2030 from a projected $350 billion in fiscal 2012.
– Bloomberg News
