American Enterprise Institute

January 17, 2007

[Edited transcript from audio tapes]

1:45 p.m.	Registration
2:00	Introduction:	Gary J. Schmitt, AEI
	Panelists:	Frank Hoffman, U.S. Marine Corps Center for Emerging Threats and Opportunities
		Loren Thompson, Lexington Institute
		Robert Work, Center for Strategic and Budgetary Assessments
	Moderator:	Thomas Donnelly, AEI
3:30	Adjournment

Proceedings:

Gary Schmitt:  First of all, thank you for coming this afternoon.  The panel’s title is, “Do Numbers Matter?  The Crisis in Military Resources.”  I’m Gary Schmitt, I’m a resident scholar here at the American Enterprise Institute, and director of the program on advanced strategic studies.

The core question we want to address today is “Are we providing the military with adequate resources?”  Let me give you a hint at the answer to that by shilling for the new book that we just published, which is, Of Men and Materiel, The Crisis in Military Resources, that Tom Donnelly and I edited and co-wrote the introduction to, and our panelists were key contributors to. 

Speaking of our contributors, let me go ahead and introduce our panelists today.  On my far right, and co-author and co-editor of this volume, is Tom Donnelly, who is a resident fellow here of Defense and Security Studies at AEI, the author of numerous books and articles, and also is now a contributing editor of the Armed Forces Journal. 

Next is Frank Hoffmann, who is a research fellow at the U.S. Marine Corps Center for Emerging Threats and Opportunities, has written extensively on the Marine Corps, and a former Marine infantry officer himself. 

Next up is Bob Work.  Bob is also an ex-marine, and currently a senior analyst at the Center for Strategic and Budgetary Assessments, where he writes on defense transformation, maritime affairs, and defense strategy.  He’s done numerous studies for the Department of Defense Office of Net Assessment, participated and contributed to the 2006 QDR, and, again, was also, himself, a marine. 

And finally, to my direct right is Loren Thompson, known to everybody who reads newspapers here as the most widely- quoted defense expert outside of Mike O’Hanlan [laughter].  I’m just joking.  Loren is Chief Operating Officer for the Lexington Institute, and Rensselaer Security Studies Program, he’s taught at Georgetown, and at Harvard, and, again, is widely known as an expert in defense and security affairs.

Now, what I want to do as an introduction is not go through the particulars of arguments about each of the services or the Pentagon in general, but rather set the stage of why we thought this particular set of studies was required and the book was published.  The first thing I would like to begin with is that when I first came here about a year or so ago, Chris DeMuth, the President of AEI, wanted to design a program that would tackle important security topics, but topics that weren’t necessarily on the front page.  And so, one of the first things that I thought it necessary to take a look at, and I thought was largely being ignored, although in the last month or so, less so, was the issue of the core defense budget, and what I consider to be the deficit in spending on military resources, both men and materiel. 

Tom and I then designed a project in which we asked our friends here on the panel to contribute essays on each of the services of the Marine Corps that talk about what, in fact, each of the services of the Marine Corps would need to carry out our current national security strategy, not worrying so much about trying to fit it in today’s budget. But today’s budget actually is the problem.  Now, that some of this is obviously counter-intuitive, for many of you it may not be, since a lot of people here work in this industry, but the fact of the matter is, despite the increase in defense spending, the buildup of military resources, or the resources dedicated to our military, have created something of a hollow buildup. 

The budget has grown substantially since 9/11, but the truth is, if you were to take away the supplementals for the wars, the current level of defense burden is basically a little bit over 3% of GDP, that is to say, it’s about at the same level that the Clinton administration left it in 2000.  So, our defense burden, actually, in real-term numbers, that is, when you account for inflation, the actual increase in that core defense budget, again, minus the supplementals and other things, has only gone up about 20%.  So, despite the vast increase in resources that we, the taxpayers, are providing the Pentagon and our military services, the reality is, most of that money is going for personnel costs, operations, and the war.  The underlying defense budget, in fact, has remained pretty flat. 

Now, the problem with that, of course, is one that is pretty simple, which is, during the 8 years of the Clinton administration, there were drastic cuts in terms of the size of the military, but also the level of procurement was never sufficient to sustain the kind of military that our national security strategy called for.  Many of you will remember that the Clinton administration itself set a procurement figure of $65 billion as a necessary target for procuring the necessary weapons systems and planes and ships to maintain our military, but that, in fact, they only reached that $65 billion target in the year 2000. 

Now, others put that target figure substantially higher.  The Joint Chiefs internally put the figure at something like $75 billion.  And the Congressional Budget Office in the year 2000 put the figure at $90 billion.  So, by the end of the Clinton administration, there was a really quite substantial deficit both in terms of men and materiel when it came to our military.

Now, the Bush administration entered office or was on the campaign trail saying that help was on its way.  And the truth is, with the exception of personnel salaries and benefits, the help didn’t arrive.  Now, there’s a variety of reasons for that, some having to do with the views of the former Secretary of Defense Donald Rumsfeld about the need for transformation to come first, then, of course, then 9/11 happened and the expenses of the war pushed catching up with the deficit and procurement off the table. 

But the reality is, of course, if you were to go back and sort of say, if the CBO figure is a justifiable one of $90 billion that they set in 2000, to sustain a steady-state level of procurement, you would recognize that the Bush administration has only hit that figure once in the 7 years that it’s had control over the budget.  And, in fact if you adjust for inflation, it hasn’t met that target once. 

So, now, we’re not only left with the Clinton deficit, but we have another deficit that’s been produced by the Bush administration in the same field, and new CBO figures suggest that the target should be something like $115-$140 billion a year.  But there’s nothing in anybody’s projected budgets that accounts for that kind of level of defense spending when it comes to procurement. 

So, the bottom line is, something has to give.  Either our grand strategy has to be rethought, but before we do that, recognize the fact that both the Clinton administration and the Bush administration came into office with ideas of playing less of a role on the world stage, and both have left office with the view that they couldn’t do that, and they have to have a military capable of having the kind of global presence and capacity that we have today.

So there’s a big hole, and there’s a procurement crisis, and a military resource crisis, I think, that’s coming our way.  And so this is one of the issues, that, again, when Chris DeMuth asked me to take over this program, was to take a look at these kinds of issues that, even though they’re not on the front page, in fact, we’re going to have significant ramifications for our military and for our national security strategy in the years ahead.  With that as an introduction, let me turn things over to Tom Donnelly who’s going to moderate our presentations.  Tom?

[Moderator]: Tom Donnelly:  Thank you very much, Gary.  I’m not only serving as the referee and the moderator, I’m going to fill in as the Army presenter in this murderer’s row, as it were, and I’ll bat cleanup.  I’ll reserve that position for myself.  So, really, just to keep things moving along, what we’re going to do is go down from Loren to Bob, to Frank, to me, and without further ado or need of further introduction, Dr. Thompson, if you’ll be so kind as to start us off.

Loren Thompson:  Well, thank you, Mr. Donnelly.  I’d just like to say up front that describing us as a murderer’s row strikes me as sort of a slur against murderers, but, anyway, as the author of the Air Force chapter in the book that we’re releasing today, I set two tasks for myself. 

The first was to try to describe the continuous erosion of US air or aerospace power since the fall of the Berlin Wall.  And the second was to try to describe the peculiar dynamics that prevailed in Donald Rumsfeld’s Pentagon, which not only failed to arrest the decline in US airpower, but actually made the problem worse.  You know, I often hear a lot of people today describing President Bush as a poor leader, and it makes me wonder whether they’re aware of how well the economy is doing. 

The aftermath of the stock market meltdown at the beginning of his administration, just like the aftermath of 9/11, could have been a lot worse than it has actually been.  Nonetheless, Donald Rumsfeld’s tenure as Secretary of Defense has been a true disaster for America’s military, and the fact that Dick Cheney thinks otherwise should be viewed with a certain element of suspicion, since I think you can chart the recent decline of American military power to the point when Dick Cheney actually held the same position as Secretary of Defense. 

During his brief, four-year stint as Defense Secretary, Cheney killed a hundred major weapons programs.  He bragged about it at the time -- everything from the Abrams tank to the Seawolf submarine.  And he did it with a minimum of reflection or analysis.  It was Cheney who terminated the B-2 bomber at a mere 20 planes.  It was Cheney who began the downward spiral in the F-22 fighter program.  It was Cheney who slashed the C-17 Airlifter, even though that plane is now generally regarded to be the best plane of its kind that was ever built.  Cheney’s excuse, and it was a powerful excuse, was that the Cold War had ended and the world seemed headed for a prolonged period of peace.  That same excuse was invoked by President Clinton’s Defense Secretaries to rationalize their own low investment in new weapons programs. 

One consequence of this trough in demand was that military aircraft production in the United States, which had averaged 262 planes per year during the 1970s and the 1980s, fell to about 60 planes per year during the 1990s.  And so the Air Force’s fleet began aging.  And it aged.  And it aged.  It aged to a point where today the average aircraft in the US Air Force inventory is older than the average Navy warship.  An air fleet that averaged about eight years of age a generation ago now averages 24 years.  And if the Air Force gets every single aircraft that is in its current modernization program, its air fleet is going to go on aging in the next decade to an average airframe age of 30 years. 

Now, these trends were already quite apparent when Donald Rumsfeld returned to the Pentagon for his second run as Defense Secretary in 2001.  So, many observers, myself included, assumed that he would act to arrest the decay.  What they failed to realize is that Rumsfeld and his advisors were enthralled of a concept called military transformation.  It was sort of a public sector variant of dot-com mania, and it led candidate Bush in 1999 to propose skipping a generation of military technology. 

Since Cheney and Perry and Cohen had kind of already done that, they had canceled an entire generation of weapons systems, Bush’s campaign trail pronouncement was dismissed as rhetorical flourish at the time, but it wasn’t.  Rumsfeld wanted to spend a lot of money on research, on new ideas, but not spend a lot of money on traditional weapons systems, things he considered to be industrial age or sunset weapons. 

So over the next six years, senior policymakers steadily resisted Air Force efforts to buy new manned aircraft, preferring instead to invest in networks and satellites and unmanned vehicles.  In fact, if all of Rumsfeld’s initiatives on manned aircraft had been implemented as he proposed them, then every single military aircraft production line in the United States, except one, would have been closed by the beginning of the next decade  -- every single one, except for the Joint Strike Fighter. 

By the time the Pentagon completed its second Quadrennial Defense Review under Donald Rumsfeld’s leadership, here’s the situation that the Air Force faced:  its F-22 fighter program was scheduled for early termination, even though the 500 F-15s it was supposed to replace were all flying under flight restriction due to age-related metal fatigue.  Its fleet of aerial refueling tankers averaged over 40 years of age with no replacement program in place despite years of wrangling.  Its inventory of long-range bombers had shrunk to barely 180 aircraft, most of which were manufactured during the Kennedy administration.  Its two active production lines of cargo planes were both scheduled for shutdown despite a shortage of flexible airlift.  And its fleet of reconnaissance aircraft had no replacement program in sight, even though the existing fleet was based on planes developed in the 1950s.  The service couldn’t even afford to buy a suitable new search and rescue aircraft, opting for a conventional helicopter rather than a faster, longer-range tilt rotor. 

American airpower thus fell to a low ebb under Donald Rumsfeld.  The situation, summed up by the experience that a friend of mine, a General who was commanding Operation Northern Watch in Iraq, had.  He was flying his F-15C, supposedly our top-of-the-line fighter over Iraq in 1999, and all of a sudden all of the cockpit indications go out.  The fuel gauge falls to zero. He thinks he’s going to die.  He doesn’t, he makes it back to the airbase at Incirlik, and then he discovers two things: he discovers, A) that the wiring in his fighter is so old that the insulation has rotted away and is shorting out, and B) that he is flying the same fighter he flew as a young captain in the Pacific 20 years earlier.  Really a metaphor for what had happened to American airpower.  But wait, there’s more.  Today, his son, a young lieutenant, is now flying the same plane in the Pacific 30 years after it was built. 

Back in 1999, when President Bush made that campaign speech about skipping a generation in military technology, he titled his remarks, “A Period of Consequences”.  But we have now arrived at a period of consequences for American airpower.  After 20 years of neglect by both American political parties, we have reached a point at which the Air Force that prevented any American soldier from being killed by an enemy aircraft for half a century may not be up to that task in the future.  Other countries have begun to field tactical aircraft that can match the performance of our existing fighters, and they are also fielding modern, sophisticated, integrated air defense systems, surface-to-air missiles, that very few non-stealthy aircraft could escape from. 

We got an indication of what lay ahead in 1999, the same year that President Bush gave that speech, when Serbia, a country which spends less than a year on defense than NATO does in a day, managed to shoot down a first-generation stealthy fighter.  And it also managed to scare most of the European tactical aircraft in the theater out of its airspace.  NATO commanders were so concerned about Serbian air defenses that they ended up flying intercontinental bombing missions from Missouri to Serbia using B-2 bombers because they were so worried about putting non-stealthy aircraft over Serbia.  We’re talking about Serbia here, not Russia or China. 

We got another indication of what lay ahead in 2004 when pilots from the Indian Air Force repeatedly defeated American F-15s in joint exercises using a combination of new technology and new tactics.  Now it’s true the Indians had a numerical advantage in those exercises, but you know, that’s kind of what you expect in a war.  You don’t expect to outnumber an enemy in its home airspace. 

Another harbinger of things to come can be seen in the growing number of Air Force planes that are being grounded or restricted due to cracking, due to corrosion, and parts obsolescence.  As we speak, structural concerns have forced flight restrictions of one sort or another on all the Air Force’s F-15s, all of its B-1 bombers, dozens of tankers, and dozens of transport aircraft.  Those problems are going to grow worse in the future because a fleet that was built mainly in the Reagan era or earlier is beginning to wear out.  If we don’t accelerate current plans to replace our Cold War aircraft, we are facing a catastrophic loss of global air power in the near future. 

I estimated in my chapter than an increase in annual procurement outlays of about $10 billion would be sufficient to resolve this problem.  As of today, I just looked at the numbers this morning, I believe the Air Force’s procurement dollars amount to about five percent of the entire defense budget, not counting Iraq.  So we’re not talking a huge amount of money here, but the money needs to go into four areas. 

First of all, continued production of the F-22 Raptor fighter at the rate of about twenty per year through the next decade.  Second, continued production of the C-17 and the C-130 Transport to support ground forces through the next decade.  And keep in mind, they may be Air Force programs, but we’re basically buying them for the Army.  Third, expedited production of next-generation aero refueling tankers to replace Eisenhower-era airframes as soon as possible.  Fourth, and finally, expedited development of a new long-range bomber that can provide speed, persistence, and survivability, unavailable in the existing force.

I should note in closing that my chapter also contains a significant amount of detail about the rather parlous state of America’s military space program.  But it seems to me that the problem with the space program is not lack of money, it’s lack of management talent.  So, I’m not going to go into that here today.  When we get to the core of our global airpower, the planes that support global knowledge, mobility, global strike capabilities, the challenge there really is a simple lack of money.  We either spend more, or in the very near future, we lose our most important war fighting advantage.  Thank you.

Moderator:  Thank you, Loren, that was genuinely an excellent presentation.  I hope the rest of us achieve the same standard, although we don’t have the measure of reequipping the Deptullah family as a measuring stick to go by.  Bob, will you please proceed?

Robert Work:  Thank you.  When I reviewed the state of the US Navy, I came to a much different conclusion than Loren did.  Since the end of the Cold War, and a national security policy era that I refer to as the joint expeditionary era, the Navy has undergone an extremely broad and comprehensive transformation from what the Navy constantly calls the Total Ship Battle Force, or TSBF, to something that I refer to as a Total Force Battle Network, or TFBN. 

Now, the TSBF, the Total Ship Battle Force, that’s been associated with two previous national security eras, when they oversaw all sides of the battle fleet, the number of ships in the fleet, and the number of capital ships in the fleet were the primary measures of US Naval capability.  It was an era of many naval competitors.  And the US was either fighting to get to the top of that group of competitors, or fighting to stay there once it got there. 

Now, with the collapse of the Soviet Union, the US Navy found itself absolutely alone at the top of the global naval food chain.  And as a result, like Loren said and everyone else, there was a Cold War demobilization, which was fully expected, and a vaunted 600-ship navy which beat the Soviet Navy without firing a shot, rapidly began to shrink.  The base force called for a fleet of approximately 451 ships, but Admiral Kelso, who was the first CNO of the post-Cold War era, didn’t believe that the Navy would ever be able to hold there because, as Gary and Tom have pointed out, he concluded that the size of the fleet would be determined in the future less by war fighting requirements than it would be by the overall size of the budget. 

So the fleet really started to go down, and without any naval competitors with which to compare itself, the Navy started to compare itself with past US battle fleets.  So whenever they went through 400 ships, this is the lowest size the fleet has been since x years.  When they went through 350 ships, this is the lowest it’s been since this.

In 1997, the fleet reached 365 ships.  It was still falling.  And the Navy leaders were quite alarmed and decided they had to set an absolute floor for the post-Cold War naval demobilization.  And in the 1997 QDR, they set that floor at 300 ships, and declared it a redline through which the Navy could not afford to fall without risking the national security of the United States.  However, the Navy, even though they accepted the 300-ship Navy called for in the 1997 QDR, they simply were psychologically unprepared to accept such a small fleet. 

They could not, as a proud service that had become the number one naval power in 1945 and had remained there since, believe that they could do their global responsibilities with only 300 ships.  So they started what was to ultimately become a decade-long effort to garner support for a larger battle fleet.  In 1999, Admiral Murphy, then the Commander of the 6th Fleet, in a morning breakfast with Defense writers, stated that unequivocally the Navy needed 460 ships, and he denigrated the street fighter, which was at that time the envy of all of the transformationalists.

In 1999, the Schiphols 2, a surface combatant study, said that we needed 145 combatants, rather than the 116 approved in the QDR.  Soon after that, a JCS attack submarine study said we needed between 68 and 72 boats instead of the 50 that were approved by the QDR.  In 2000, and the first time that the Navy had to present to Congress a plan, a 30-year shipbuilding plan for their 300-ship Navy, they inserted a thinly-veiled repudiation of the 300-ship fleet in a section they referred to as the 360-ship reduced risk fleet.  But still, the calls that the Navy had for a larger fleet fell on deaf ears.  In the 2001 QDR, the next QDR, essentially approved the 1997 QDR with the exception of adding 5 SSNs.  So about a 307-ship Navy.

Immediately thereafter, Admiral Clark, then CNO, unveiled his plans for a 375-ship global CONOPS navy, a substantial 22% expansion of the fleet.  Now, Admiral Clark was extremely successful in getting more money, but it was all being siphoned off to the long war.  There was no more money for procurement.  So, as a result, he had to make some very unsavory decisions from his perspective, in that he had to get rid of all of the Spruance destroyers, long before the end of their 35-year hull lives, and even ordered the decommissioning of the first five Ticonderoga-class guided missile cruisers at about 18 years of service, and all of these ships had been designed for 35 years. 

As a result, the fleet fell right through the 300-ship redline that the Navy had established, and settled at about 280 ships.  But by 2005, Admiral Clark had come to terms with the fact that the US Navy had actually increased its position as the number one naval power in the world. 

Two things happened over this time where the Navy was fighting so hard for a larger fleet.  First, all the other navies in the world were shrinking even more dramatically than the US Navy.  And the second thing that happened was a guided weapons warfare revolution that was five decades in the making.  And so, when you combined this with new information in networking technologies, and new combat systems like the Vertical Launch System, the fleet evolved into what Admiral Clark referred to as a FORCEnet, a battle network where all these capabilities came together to apply combat power. 

So, if you count the 278 TSBF that exists today, you would say, “Wow, this is the smallest navy since the 1930s.”  But if you think of it as a Total Force Battle Network, it has 10,000 VLS cells, and has the theoretical capacity to strike 10,000 aim points per day from its deployable aircraft carriers.  So the 10,000-cell, 10,000-aim-point fleet just dwarfs the capability of any potential naval competitor on the horizon.  And, unlike the Air Force, the ships are relatively young because we got rid of all the old ships in the 90s. 

So, for example, when the last of the 84 AEGIS/VLS combatants is commissioned in 2011, the average age of fleet will only be 13 years, which is far less than the aircraft that are in the Air Force or the Navy, for that matter.  So, I believe Admiral Mullen finally said, “Look, let’s stop fighting for a larger fleet.  Let’s go for a 313-ship fleet.”   And I believe it is proof positive that the Navy leadership has finally come to terms with the fact that a 300-ship battle fleet is an enormously capable battle fleet, and the best in the world by a wide margin.

So the key challenge for the Navy is how do you build a 313-ship on these very, very low budget plans that Gary went over?  Now, when I did this chapter, I said, “Well, there’s two ways you could go about this.  You could fight for more money, and just build the plans as they exist.”  Or I wanted to show what the Navy might have to do if it was forced to stick within the budgets that are now forecast, and it’s quite dramatic.

Now, the way they can do this is to leverage their staggering lead in the naval competition.  They are, without a doubt, way, way out in front.  So they’re operating with a big chip lead.  So, they can afford to make bets, they can fold hands, they can do a lot of things and never, never, never be worried about losing the chip lead.  And so, I believe the Navy has the potential to do what I call the strategy of the second move, and that is plan on making major step changes in the future when the challenge really starts to get bad, and that strategy puts a higher emphasis on maintaining the design and industrial base than it does on building expensive ships, a very small number of expensive ships, and preparing for capability jumps in the future. 

So, for example, I recommend establishing a complex aviation ship capital fund and establishing a fixed building rate of one nuclear-powered aircraft carrier every five years, which would result in a 10-ship fleet rather than the 11 now called for in the Navy’s plan, and a big deck Amfib every three.  The industrial base can support that, it is achievable, and it would result in a steady-state force of 10 CVNs, and 12 to 13 smaller ships, and if we had to increase capacity we would be able to do so. 

For the submarine force, I would build only 10 Virginias between FY12 and FY18 instead of the 18 now planned, going instead of 2-2-2-2-2, two a year, I’d go 2-1-2-1-2-1, and I would free up that money to design what I call a new undersea war fighting system with a large, broad hull that could potentially do both SSN- and SSBN-type missions, but particularly designed to handle UUVs, ROVs, small manned vehicles, etc. 

I’d just like to point out that for the first time in fifty years, there is no submarine and design in the submarine design bases in extremis, and therefore doing this would allow the base to go forward.  For large surface combatants, I would cancel the DDG 1000 after the first two authorized, designate them as fleet test ships, and continue producing the very, very capable Arleigh Burke DDG 79 and start designing a new, large battle network combatant to be ready in around 2016 so that it could start to replace the Ticonderogas when they reach the end of their retirement age. 

For small combatants, right now the Navy plans to build 6 LCSs a year but stop an FY 16 for 14 years.  Well, that’s no industrial stability at all.  I would build four continuously, and what would happen is, you would either be able to go beyond 55 ships, stop at 55, give allies older LCSs, but you’d keep the industrial base hot throughout, and if you had losses, etc., you’d be able to replace them. 

I’d divert money from the MPF(F), the Maritime Pre-positioning Force Future, which was designed for a problem that is probably not going to happen, and continue building the very good LPD-17s, resulting in an amphibious landing force that can carry three marine expeditionary brigades and keeping the MPF in its current role.

Now, I’d be happy to explain my rationale for any of these recommendations in the question and answer.  Suffice it to say, for those of you who are unmoved that the number of ships in the TSBF is no longer as important as it used to be, this plan would actually result in a fleet of about 340 ships.  It would be larger than the fleet the Navy now plans for.  And it would be cheaper, more affordable, and would set us up for competition in the future.  Thank you.

Moderator:  Thank you, Robert.  Frank, we do have a high  threshold test of competence to meet.  I think we have to talk about not a matter of maintaining supremacy on land and on sea, but possibly reestablishing it on land.  I’m sorry I was in error, or on sea.  So I hope you’ll —

Frank Hoffman:  You’re going to count on the Marine Corps to do that instead of the Army.

Moderator:  Well, you’re going to tell me how the Marine Corps can do it, and I’ll tell you how the Army can save the situation once it’s gone to hell.

Frank Hoffman:  Thanks.  I’m really very happy to be here today.  I’m happy that you all share our interest in an adequately-sized and modern military.  My chapter’s a little bit different than both my predecessors.  I started by taking a look at the QDR and looking at the strategic framework and the security environment in the future, and then try to examine some alternative Marine Corps to see what would best match up with the security environment, and the Marines are presented with quite a paradox in the QDR. 

When you read the front half of the document, it looks like a bright group of pretty smart people, some of whom are friends of mine.  Kind of laid out a future security environment that was quite at odds with some of the pre-9/11 and pre-Iraq dispositions of the Secretary of Defense and his team.  They laid out a world of irregular adversaries, asymmetric threats, a very challenging and complex environment.  But the back half, unfortunately, in the document, the one that modernized or adequately provided resources, comes from a different group of people, or a different group of authors, apparently, because they did some surprising recommendations that actually do undercut land superiority, and they’re quite inconsistent with the secure environment they had laid out.  So I spent quite a bit of time at that. 

You would have expected events in Afghanistan and Iraq to have redefined the Pentagon’s perspectives and its priorities, and its transformation program, away from a heavy technology-oriented agenda, towards a broader program that prepared the military in its totality, the entire Joint Force for protracted conflicts against asymmetric threats. 

But it did not do that.  In fact, for the QDR, for the Marine Corps, it cut 5,000 marines out of the end strength despite several parameters it had set up that would have led you to believe it was going to go the opposite way.  So we’re quite surprised at that.  The report claims to give greater emphasis to the War on Terror and irregular warfare, including long-duration, unconventional warfare, counter terrorism, counter insurgency, and military support for stability and reconstruction, but you have to look really, really hard to find a dime to support any of that.

Furthermore, the report claims that, for the foreseeable future, steady-state operations, including operations as part of the long war, and associated rotation and sustainment requirements will be the main determinant for size in US forces.  And when you take that statement, you look at it, you say, “Geez. If that’s really true, if the long war and the rotation basis are going to be the basis for the size of the military, obviously the Army and the Marine Corps are going to get larger.”  But they don’t.  In fact, they both get a little bit smaller.  So it’s really at odds with it.

And the second part of my paper kind of deals with the secure environment and brings up a debate that we had here on this stage, I think last April, between Max Boot and myself when we tried to examine the future.  Max, a dear friend to many of us, asked the question, “What do you want the Marine Corps to do in the future?”  And Max said, “Hey, I went down to Camp Lejune, I saw a really lovely amphibious exercise one time, lots of choreography, it was really neat, but it was an anachronism.”  He said it looked like a cavalry charge in the 30s. 

And I tried to explore that a little bit pretty extensively, from a strategic perspective, not from the AEGIS systems or not from the dollars available, but just what do we get from a nation for having a forcible entry capability?  Is it really an anachronism?  Should the Marine Corps really focus on becoming a small wars force and go back to its roots in the 1930s?  And after examining it, looking at the nature of the world, and the fact that geography doesn’t change, I really came down against Max’s perspective. 

This country gains four or five significant strategic benefits from having a very robust Marine Corps capable of conducting forcible entry operations.  And we should size or build these capabilities based on their strategic value, not necessarily what fits in the budget, or what looks good today.  We need to look over a projected period of time, and it’s my argument that we’re going to find this amphibious capability to be more important in the next 20 years than we have in the last 20 years for a number of reasons. 

And the first of the strategic rationale, I’d like to make the point that I don’t think we’ve fired an ICBM in the last 20 years, and I don’t recall reading in the paper that we sunk a submarine, but I’ve not seen anybody recommending getting rid of ICBMs, and I’ve not seen anybody yet recommending getting rid of submarines – some of them might have wanted to try.  So it’s -- we keep these capabilities and their strategic capabilities because they influence people’s behaviors and they change the way that some states act, and I think a forcible entry capability in the next 20 years is going to do the same thing in several key areas. 

And the first of which is it provides a credible deterrent.  It’s one thing to bomb somebody or think that you can have standoff warfare and precision-bomb their key, critical pieces of their infrastructure.  But it’s something else when you’re going to take away something that somebody holds dear, or if you’re going to execute a regime change, and sometimes to do that you’re going to have to knock someone’s door down and break into their country.  So the fact that we have that opportunity and that capability in the kit bag of our strategic capabilities is of some value. 

Another value that I found, and this comes out of the QDR, the QDR said we should be looking for concepts that generate costs for our opponents that don’t necessarily cost us a lot.  And a forcible entry capability requires an enemy to do certain things.  He’s got to spread out his defenses, and cover a lot of areas where you can pierce, and so it generates costs for him, it raises his threshold, he’s got to extend his defenses, and he’s got to buy certain capabilities, he’s got to either push us off or to extend our own attack forces. 

If you don’t have that kind of capability, if the enemy gets to focus all of his investments into one area, because we can’t come from the sea, we’re only going to come from the air, then these old bombers that General Deptullah’s son is going to be flying become the focus for their investment, and they get to buy radars, and they get to buy anti-air systems and invest all their money in that one chip, and negate what might be the only tool we might have left.  So I see a lot of value into using forcible entry operations to generate costs for our opponents.

We also need to insure our access into certain areas and regions of the world, and some of those areas can only be taken out or opened up through forcible entry operations.  We can’t count on third-party individuals or third-party states’ overflight rights, and negotiate basing and port facilities for every single operation in extremis when we have to do things.    And a forcible entry capability, the ability to move the Army and the Marine Corps by sea, and project ourselves into foreign shores, is something that I think is going to be more and more useful in the future. 

In the past, we had the Cold War alliances and had a basing structure.  We’ve substantially lost most of that basing structure.  And we do not have the glue of the Cold War to give us the alliance structure that we had in the past.  So again, access is probably going to be harder to gain, and it’s going to have to be taken sometimes by forcible entry forces.

And, finally, the President and the SINKS want freedom of action.  They don’t want to be tied down, they’d like to have the ability to go places, buy a few days of time before projecting, they need that freedom of action, the ability to buy time and not make a lot of political moves too early.  And sea-based power projection forces are very, very valuable for giving SINKS and the President that kind of freedom of action. 

So at the end of the day, I ended up designing a Marine Corps.  It turned out to be about 195,000 people large, and a Marine Corps that the force structure was only set up to do forcible entry operations.  It’s a little heavier Marine Corps, it’s got more tanks, it’s got the amtracks, it’s got the V-22 that is the lust of the Marine aviators, it has a very strong armor capability.  In some ways it looks something like the Army today in some respects. 

And that was the first part of the paper.  And that transition into this small wars perspective that Max had brought up, and I examined that in some detail, and I designed a Marine Corps that I thought might be good for today’s threat, that would have certain capabilities that we find very useful today against the kind of enemies we’re currently seeing in the Middle East. 

You know, Max made the point that the Marines were very well placed to play a leading role in this kind of irregular conflict.  He wanted us to leave our glorious World War II heritage further behind.  And I examined that requirement, and kind of laid out its own force structure for that.  There’s things the Marine Corps could do to increase its capacity, it could lighten up, it could get rid of some tanks, rely upon the Army for that, it could lighten up some of its artillery, it could buy a different NEXUS systems, it wouldn’t need the expeditionary fighting vehicle if it was only going to do small wars. 

So I kind of lightened it up, and I provided some capabilities for stability and reconstruction, information operations, perhaps some more UAVs, which we find very useful in Iraq today, and laid out that as a specific force.  And that, too, if you want to keep the kind of rotation basis necessary, is going to be a lighter force and perhaps a less expensive force, but it came out also to about 195,000 people.  So you have these two options: you can go completely forcible, or you can have a completely light Marine Corps if that’s your choice, but if you want to have it properly sized and have the right rotation base to kind of do the things we’re doing today, it’s going to be about 195,000 people. 

And the Marine Corps’ current, permanent strength right now is 175; we’re up in the 180s.  Fortunately Mr. Gates, apparently in short order, has somehow read our book in advance and endorsed many of our findings since he last week called for a Marine Corps that is just a bit over 200,000.  And there’s not too much Delta between my force and that force. 

So, somebody maybe read our galleys, or Mr. Donnelly took them over to the Pentagon, or something like that.  I’m not quite sure.  But I think if we just had one or the other, I’d think we’d be opening ourselves up for some risk.  If we had a Marine Corps that could only do small wars and we know would augment work with the Army, I think we’d be leaving ourselves open in future theaters. 

Many of our friends in many places where we have vital interests are far from our shores, and the way to get there, quite frankly, is going to be largely by sea, and the forcible-entry Marine Corps is a big component of that. So if you only had a small wars Marine corps, you’d be leaving yourselves very much open, I think, for some pretty severe strategic risk.  And if you had a Marine Corps that only did forcible entry, then it wouldn’t be there to work with SAAF and work with the army in some places where we find ourselves today where the Marine Corps kind of complements what the Army could do. 

So I ended up arguing for a hybrid to avoid those two extreme positions and ended up with a synthesis of those two forces, what I called the Hybrid Force.  And as I see future warfare, the small wars era is going to be very lethal, it’s going to be very protracted, it’s going to be very deadly, it’s nothing that you necessarily want constabulary forces or small wars forces necessarily for.  You need something that’s got a little bit of punch, that’s got a little bit of a deterrent, anyway, and it’s going to have some force protection capacity, and it’s going to have to have some armor capacity to deal in some cities, which is the location and the locus of most conflicts in the 21st Century.

So I ended up synthesizing those things and I think that is the best thing for this country.  If I could wrap up, a simplistic choice of a big versus small wars is flawed.  Our ability to predict the future is arguable, and this is to suggest that interstate warfare in history’s dustbin is a stretch that I’m not willing to make.  Many other prognosticators for the last 100 years have said, “State conflict is over.” 

And every claimant that has made that statement has been made a fool.  State-based conflict is less likely but it’s certainly not extinct.  Tomorrow’s conflicts are not going to be easily classified into conventional or irregular.  They’ll be hybrids, and we need a hybrid force, I think, to deal with that.  And I think the Marine Corps is probably one of the more exemplars of that capability in the 21st Century. 

So I ended up concluding that the QDR should have been favorable to the Marine Corps, and instead of right-sizing us and rebalancing us, it should have actually reinforced our hybrid capabilities, and it should have increased the Marine Corps substantially, and it should have dealt with some of the modernization shortfalls, the same things that Secretary Gates is now asking for. 

Overall, to me, it’s clear that the United States needs both a forcible-entry force as well as a force that can competently increase or address lethal irregular adversaries.  The Army and SOCOM make very clear contributions here.  Both need to be plussed up, I understand that, but I think that neither can fulfill their own requirements and pick up the forcible entry mission or the entire small wars mission for our country.  And certainly not increasing both of them leaves us, I think, open to a lot of strategic risks. 

So, fortunately, I think it’s very fortunate that we already have this unique capability in the Marine Corps, a force that can do both, that can transition from regular to irregular warfare, can transition from sea to shore, and can transition from high-end combat to doing stability operations in a place like Ramadi or Falluja, or go backwards.  I think that’s a very unique capability, and something I think the Marines really excel at. 

So really what I’m offering in this paper is basically what I call a “twofer”.  We buy two forces really for the price of one, and I think that’s the best deal for the nation that we can offer you.  Thank you very much.

Tom Donnelly:  Thanks, Frank.  I’ve got a number of goals to accomplish before I give my remarks on the state of the US Army.  One, I want to underscore that all the presentations reflect the papers, in that we asked everybody to take really a strategic approach to defining the requirements for the services, and as Frank suggested, our past defense reviews haven’t always accomplished that task, so you have people with a diverse range of recommendations, hardly a one-size-fits-all approach to this, but all driven by an argument about what the strategic requirement for American military power is going forward.

Secondly, I have to do a brief commercial and recommendation for Fred Kagan’s paper, which is actually the Army paper in the book, and I want to particularly emphasize the overall approach that Fred took.  His paper is very much trying to work out a different approach for the United States Army, one that’s keyed rather to the land force and Army requirements for a long war rather than a first-battle approach, which has very much been the approach that the Army has taken actually in the entire post-Vietnam period. 

And certainly our experience over the last couple of years suggests that wars are not the same thing as battles, and you can overwhelmingly win the first battle in which you engage, yet be in grave danger of actually losing the war, that is, being defeated politically.  So Fred’s paper is actually a quite elegant working out of what that means, and I commend it to you very strongly. 

Having taken such a high road in my opening remarks, what I’d really like to do is now transition down to the low political road because I think in the last week or couple months or so, there’s emerged a consensus that, at last, almost five-and-a-half years after September 11th, that American land forces, and in particular the United States Army, need to get larger.  This is very much probably a post-Rumsfeld phenomenon, but the President has said a number of times most recently in his speech announcing the new strategy for Iraq that the back end of success in Iraq is very much increasing the size of the land forces. 

Frank referred to the 202,000 rec mode for the Marine Corps.  The Army, according to Secretary Gates, is supposed to be bumped up to about 547,000, and I’d like to talk a bit about that a little bit farther down the road. 

But this is a position that has a broad political consensus.  Hillary Clinton thinks that increasing the size of the Army is a good idea.  Even the New York Times thinks that increasing the size of the Army is a good idea, and on Christmas Eve, they wrote that, “Larger ground forces are an absolute necessity for the sort of battles America is likely to fight during the coming decades.”  I find myself only rarely in agreement with The New York Times editorial page, but you have to take your friends where you can get them. 

The question is how this process is going to play out because this is something, even with the best intentions, if we do it in the wrong way, I particularly fear we politically rob Peter to pay Paul.  We’re going to make the situation worse strategically rather than better. 

So I’d kind of like to begin with the question of what this might cost, because too often, in Washington, and particularly in what is essentially a peacetime environment politically in Washington, that’s the measure that our political class or the lenses through which they look when it comes to the Defense Department.  And I think this is a very treacherous and tricky road for the Army to try to navigate and one that again has a lot of pitfalls and potholes in it.  So, although there appears to be a lot of support from the Democratic Party for increasing the size of the Army, I think that the budget season that we’re about to enter is going to unravel this to a certain degree, and although the President has actually finally come out in favor of increasing the size of the Army, the Republican Party is likewise kind of all over the lot and when they actually begin look at the numbers, there’s going to be some sticker shock and some uncertainty as well. 

The President is himself kind of a political leper almost in his own party.  Current Congressional leadership, having those leaders who have survived the past election and the scandals leading up to it, are not as strong as they once were, so the Republican Party is in no mood to goosestep in formation behind the President.  And the Presidential candidates are likewise not exactly party men, people like John McCain, or Washington outsiders like Mitt Romney, or a guy like Rudy Giuliani, who is a bit of both. 

So, again, when you look at this, as I am possibly too prone to do as kind of a political equation, it’s a very uncertain terrain.  Obviously, both parties are equally trying to position themselves as the party of fiscal discipline. Six years of Bush’s big government conservatism has kind of flummoxed the politics of parsimony, if I could put it that way, and of course, entitlement spending has mushroomed particularly with the drug benefit program. 

So the budget problem is really quite daunting.  And the only big pot of money under which the government has any discretion is the defense budget, and here too, the picture’s been clouded over the last couple of years by the Emergency Supplemental Appropriations used to pay for the war in Afghanistan and Iraq, and, to an important degree, for the reset and the reequipping of the land forces, and, in particular, the Army.  Not that that’s been able to keep pace with the level of wear and tear and destruction in the forces. 

There was an interesting piece in the Washington Post a month or so ago about the situation at Army depots.  Essentially, there are two divisions’ worth of tanks and Bradleys waiting to be repaired at both the major depots that do that work.  So equipment-wise, the Army is falling farther behind rather than catching up, despite the war supplementals and the big dollars that have been appropriated in an emergency way to pay for the war.

So the question is, with all this behind-the-curtain fiscal concern, how’s this going to come out?  So I think, you know, again, to look possibly through the wrong end of the telescope, the politics of the budget are going to be – this is a very dangerous moment where the politics of the budget can actually be the driving force that shapes an overdue expansion in the land forces more broadly and in the Army in particular.  The second question that I would ask, of maybe four questions, is obviously related to the cost, and that’s how big the expansion ought to be. 

Secretary Gates has advanced this 547,000 number, and the rule of thumb appears to be that for every additional 10,000 troops, at least the personnel costs, the recruiting, equipping and training, not probably the initial equipment, that is, buying tanks and Bradleys and other major pieces of gear, is somewhere in the range of $1.2 to $1.5 billion per year so we’re talking about serious money.  And I would say that the 547,000 figure is way too low.  First of all, and is always apparently the case with the Bush administration, there’s a lot less to that number than meets the eye. 

The number advanced by Secretary Gates was an increase in end strength in the active force of 65,000 soldiers, but he was double-counting 30,000 already added temporarily as part of the Army’s reorganization and modularization program.  So the real increase, the net increase in the active force is really only going to be 35,000.  And if we look at our experience over the last five years, and while a lot of people still delude themselves that this pace of operations is an anomaly, my good friends and relatives at Defense News, for example, in editorializing against an increase in the Army and in land forces, somehow supposed that this condition is going to magically resolve itself. 

Maybe it will.  Maybe we’ll all get lucky, or maybe the Army will be struck by lightning, and the pace of operations will diminish.  But I think that’s a bad planning assumption, and I think, certainly, the past five years, where our assumptions about reductions in forces in operations in the Middle East, have not proven themselves to play out, ought to be the position that we depart from.  And we do have a lot of experience.  Essentially, if you count mobilized Guardsmen and reservists, we have five years’ experience where the size of the actual active force is somewhere between 600,000-625,000.  That’s been the case for a number of years now, and I don’t see any reason to assume, as a planning factor, that that number is going to go down. 

Secondly, it’s also clear that that force is too small to really successfully complete the mission in Iraq, complete the mission in Afghanistan, and those missions are likely to continue for a long time.  And, oh, by the way, the Middle East is hardly a stable situation when one looks outside Iraq and Afghanistan. 

So the likelihood that there will be reason to deploy land forces in the next decade or so – because we’re talking about a decade-long process of increases in the size of the force – I think, strongly suggest that we try to take the long view for a change, and if we get lucky, and the requirements that we place on our soldiers and Marines turn out to be less than anticipated, that’ll be a unique situation, at least in our recent experience.

And, as Frank suggested, how we size the Army depends a lot on what we expect the Marine Corps to do.  The Marine Corps didn’t necessarily want to get involved in long-term operations in Iraq, but it’s had to do so, and, again, as a planning factor, I think it would be foolish to think that the Marine Corps is not going to take an important, long-term large-scale role in operations throughout the Middle East.  So even though it’s probably better to assume that the Marine Corps is going to take a significant role, the big burden, and the sustained burden, and what we buy an army for, are fighting long wars, and sustained operations over a period of years. 

The fourth factor, and getting down to really the nub of things, is what the mission’s going to be for the Army.  Again, I think we have five years’ worth of experience that don’t provide a perfect straight line platform that we can project into the future.  On the other hand, it’s quite arguable that the situation could get more demanding rather than less demanding.  As Frank suggested, a kick-down-the-door regime change capability is absolutely essential for the United States. 

Nobody wanted to fight the Iraq war this way.  On the other hand, nobody wanted to live in a world with Saddam Hussein.  We spent a dozen years, after the first Gulf war, trying to figure out what to do about Iraq.  It’s not as though we weren’t constantly engaged militarily.  We weren’t being shot at, and shooting back.  So this is a capability that needs to be resident, not only in the Marine Corps, but in the United States Army.

But secondly, as we have learned to our very great sorrow, that’s simply the price of admission.  Real victory is measured by success in the stability, constabulary, nation-building, the operations, the missions that come afterwards, and, again, as suggested earlier, what some of the measuring sticks and our first success ought to be. 

The final question is what kind of force is required.  What’s the quality of the force?  And in this regard, I particularly want to talk about the materiel piece of the equation, and I think, importantly, talk about the future combat system program, because if there’s any procurement program – it’s even wrong to call it a program. 

The future combat system essentially is Army modernization, and we have to come to that understanding.  It’s not a platform.  It’s not really a single program.  It’s an over-arching concept for Army modernization, and if you don’t like the FCS program, what you’re really saying is that you want to postpone for yet almost another decade Army modernization. 

Secretary Rumsfeld has probably canceled relatively few programs compared to Secretary Cheney, but those that he has cancelled have hit the Army the hardest.  And I would argue that the merits of the particular programs that he’s cancelled, but it does mean that all the eggs in the basket of Army modernization reside in the FCS program and it’s important.  And one of the things we’ll be doing at AEI in our Landpower Project in the coming year is to try to understand and explain what’s going on with that program.  Too much of the Washington dialogue on that has focused simply on the structure of the program, trying to understand what does it mean to be a lead systems integrator or focused on the protector technological challenges. 

The question that we need to be asking ourselves is what this capability brings to the force in the field.  What’s the value to the soldier or to the war fighter?  And, in particular, what is the value of the network, so to speak, in an irregular warfare environment?  And I think the Army has structured the program in order to be able to address those questions, but it is essential in this coming season, when the Congress and the political class and the Washington community starts talking about how to increase the size of the Army, increase the capacity of American land forces, that it’s got to begin with a deeper understand of what FCS is and what FCS is not.

To conclude, I would say this is a legacy item for the Bush administration.  This administration has committed the United States to an ambitious strategy in the Middle East, but it has tried to do so essentially on the cheap, so the cost of defeat is great, if not greater than it was four or five years ago in the aftermath of September 11th, when the president took the country down this road.  But the means used necessary to fight the war successfully, and again, quite beyond Iraq, have been insufficient to meet the task. 

The challenge has fallen disproportionably on the land forces and disproportionably among the land forces onto the Army.  This is the moment where I think we’ll try to start fixing that problem, but it is essential to do this right.  The tendency will be, because of budget pressures, to take money out of other services, to take money out of Army modernization, simply to pay for the end strength increases that everybody accepts are badly needed.  So I hope this is a moment where our book will chart our way forward.  I cannot confirm that Secretary Gates has read it or not read it or been briefed on it, but if he had read it, he wouldn’t have picked 547,000 as the right number for the Army. 

So we’re entering on a debate about how to restructure America’s armed forces for the strategic realities that we face, and this is the contribution that we’re trying to make with the book.  So with that closing remark, we’ll begin the Q&A session.  I would ask everybody, please, to wait for the microphone, identify yourself for the purposes of the transcript, and try, please, to ask a question and direct your question to a particular panelist if you want to do so. 

So, yes, sir, we’ll start.  You’re the first one.

David Hearne:  I’m David Hearne, with Defense Daily, and Space and Missile Defense Report.  I wonder if the panel could provide us with a benchmark.  Democrats have been talking variously about different kinds of cuts that they would like to make in defense programs.  Obviously, many democrats have a base that is expecting things to happen in domestic programs that have not, in the twelve years that republicans have run Congress, so I wonder if you could provide us with – before the cutting starts, with a benchmark. 

What amount of money would we need to cover all the programs that are currently extant, such as FCS, such as the 313-Ship Plan, such as Raptor, Tanker, and the others?  What would it cost above the roughly – what is it? -- $500 billion total that we’re spending now, including Iraq, and then beyond that, a second number?  Take the first number that you’re giving us, and add to that how much you would need to provide new transformational systems, and then we see how far short of that we are, as things unfold this year.

Moderator:  Gary, would you like to give the five percent solution, and then we’ll –

Gary Schmitt:  Again, this is back of the envelope, but if you actually take out the – when you add the supplementals, that’s when you get a little bit over four percent of GDP, the defense burden.  If we’re going to be in a war, we’re going to have supplementals of the size that we’ve been having, which I expect we’ll have for the next couple of years.  I think it’s inevitable that if you want to do everything that we think is required, you’re talking about another percentage of GDP. 

Now, everybody understands that that’s incredibly difficult to do politically.  Nevertheless, the question has to be raised.  If you want to have a military that’s capable of doing the things that, I think, both democrats and republican administrations want to do, then that’s what you’re going to be faced. 

Absent that, you’re going to wind up with a military that in some ways is going to be critically short in critical areas.  Just in a ballpark figure, I think the CBO analysis of this is a fair estimation which is, on procurement alone, right now, we should be at 120 to 140 billion for steady-state procurement, which means that we’re somewhere between 20 and 30, 40 billion dollars short in procurement alone, a year.  So that’s a sort of rather direct number. 

Now, I would think that – sort of catching up with the Army, you’re talking about several billion dollars a year.  Well, they’re talking about 17 billion dollars for the next couple of years.  I think the Air Force needs another five billion.  The Navy, probably, even if the budget stays flat, the Navy has a real problem, which, as Bob points out, in his chapter, which is that they have all these expectations about the reason why they can do what they want to do is because they have all these optimistic expectations about all their other costs, and all the other areas of the Navy staying constant, which isn’t going to happen. 

So the Navy has to be plussed up as well, and the Marines are going to have to be plussed up.  If you’re going to add Marines, you’re going to be adding new systems so, again, you get back to the fact that, at least in procurement alone, you’re talking about 20 billion dollar more wedge a year, just to sort of begin to catch up in procurement. 

Moderator:  Loren, I see your light on.

Loren Thompson:  The Air Force has a very succinct answer.  It says it’s twenty billion dollars short, per year, across the period 2008-2013.  I asked the Chief of Staff just yesterday how much of that is procurement.  He said half of it.  So it’s ten billion dollars short, in procurement, per year, across the forward years defense plan.  The rest of it is money that is not so much for investment is it’s activities such as operations and personnel, where for various reasons they’ve lost ground on Rumsfeld’s watch, and they need to recover that buying power.  But as for straight investment, it’s about ten billion a year.

Robert Work:  For the last twenty years, the Navy has averaged about eleven billion dollars per year in ship construction costs.  That includes the amount of money that they would need to do nuclear refueling for submarines and aircraft carriers.  They planned on spending 15.4 billion in FYO7 dollars over a thirty-year period to build a 313-ship Navy, but I believe that every outside analyst – every analyst outside the Navy believes that is an extremely optimistic figure. 

As Gary said, the plan assumes that personnel costs will be frozen and not rise, that their O&M costs will rise no faster than the rate of inflation, that R&D costs will go down and not rise faster than the rate of inflation, that there’d be no cost overruns in any ship at any time.  And as we’ve seen with the LCS program, that’s the cheapest ship that you can possibly build, and you have problems on the first ship of class.

So CBO has looked at this and said they believed they would require 22 billion dollars a year steady state to build that fleet.  And if you take a look at the aviation accounts, which they want to have the B-22, the two versions of the JSF, the MMA, helicopters, CH53K, I would estimate you probably need another five billion a year, steady state, to really fully fund the procurement costs for aviation.  So like Loren, I would say that the Navy could easily eat up an extra 20 billion dollars a year to execute the plans as they exist now.

Frank Hoffman:  Mine was pretty simple.  It’s 3.5 billion dollars a year.  It’s 2 billion dollars a year to pay for 20,000 more Marines per year, and 1.5 billion dollars in procurement, which it basically doubles the average Marine Corps procurement budget from 1.5 to 3.0.  There’s a big assumption in there about the resetting budget.  Right now the Marine Corps started last year at about 16 billion dollars in the hole for equipment that’s broken, used up, expended, well ahead of its life cycle.  I think we got six to seven out of that out of the last year’s supplemental, so I don’t know what the ’08 supplemental would give us to do that.  So I could play a little bit with that.  But the flat answer that I had calculated was 3.5 a year for both people and modernization.

Moderator:  Just to try to address some of the other aspects of your question, I can’t exactly predict what the democrats are going to do, but based on their past, and, in particular, some of the proposals that came out of the Kerry campaign, Senator Kerry also wanted to at least nominally increase the size of the land forces, and his proposal was to pay for that by reductions in national missile defense programs. 

Whatever the wisdom of that approach, I think, budgetarily, the numbers just simply don’t add up, and even if you think that the numbers advanced by the services are inflated for whatever reason, it’s just a huge amount of money, the gap between – even a more conservative estimate of the requirements is, and what the current top line is. 

So it’s going to be a real question, not just for the democrats, but for the republicans and for the president to figure out how to not only get us out of the hole we’re in, but stop digging.  So it’s a tough political question with no easy answers.

Loren Thomson:  But I mean, Tom, do you have a number for the Army?

Moderator:  Well, look, the Chief of Staff of the Army has suggested a couple of pretty big numbers including a get well bill of something like 38 billion dollars per year, and a steady-state modernization deficit of something on the order of ten billion dollars, and that was well before it was agreed that the force needed to be expanded.  So I think it’s very difficult to get a hold of what the real requirement for the Army is, and a lot of it depends on how big you really want the force to be.

Loren Thompson:  The only reason I put that question to you is because I think that sometimes we have these conversations – it sounds like the money amounts we’re talking about is too much is not enough, you know?  And if you listen to what we’re saying here, service by service, this sounds to me like less than one half of one percent of GDP.

Moderator:  Look, I would agree.  It also depends on how you count for wartime spending.  I think you can argue it both ways, that operations in a time of war can be regarded as separate from the baseline, the defense budget.  The problem has been – is that in sort of a lot of these two things, the real bill-payer has been the institutional services and the modernization accounts. 

So I don’t really care how we count the dollars so much as that we are clear about restoring and preserving a defense institution that’s strategically adequate, and then we figure out how to pay for it when we use it.

Gary Schmitt:  Let me just add.  If you add up sort of what everybody had to say, in talking about the future programs, you’re talking about sixty billion dollar, basically, increase.  And then if you toss in the catching up that has to be done, you’re probably adding another forty billion.  So on the order of about 100 billion is what you would need to do to serve both catch up, at least initially, and then also provide for the future forces as people have laid them out here.  So – it’s a big number.  On the other hand, you know, we’re at war, and we’re spending a little bit over four percent of GDP.  I mean, you know, who in their right mind thinks that when you’re at war, that you get to spend four percent of GDP and you don’t run your military down the tubes? 

Moderator:  Again, just by way of comparison, for fifty years of cold war, we spent somewhere on the order of six to seven percent of GDP, not accounting for surges in Vietnam or Korea and stuff like that.  But we assume that our base force, if you will, the core military that we needed, which was itself meant to be a covering force to buy time for a general mobilization in the event of World War III in the Central Plain, or where the war with the Soviets was going to be.  So, this is a force that we could surely afford consistent with economic growth.  It’s well within our capacity and these trade-offs of, again, trying to squeeze a few billion dollars out of our missile defense program in order to put a band-aid on some other requirement, just strike me as the wrong metric. 

This gentleman over here.

Stanley Kober:  Stanley Kober with the Cato Institute.  James Madison once proposed that war should not be financed by debt, that no generation should be allowed to contract a debt to finance a war.  I don’t know how you write a rule for a generation, but how about a rule in which you say if you vote for war, and you vote to finance it out of current revenue, that you don’t go into debt, and that would concentrate the mind so that people would know this is serious.  You’ve got to come up with the funds for this.  I’ve never seen this discussed.

Loren Thompson:  Madison said that before or after the Whitehouse burned up? 

Tom Donnelly:  Shoot, I was going to say that. [laughter]

Loren Thompson:  You know, we reached a point in World War II where we were spending 39 percent of GDP, and I don’t know who you would’ve gone to borrow that amount of money other than the American people.  I don’t think you could have generated it out of current revenues.  We borrow money for everything.  I think the real question is whether we pay it back expeditiously, or whether we continue to do funny things with our fiscal accounts that ignore the realities of our actual obligations. 

The point I was making in the previous question about what a relatively small amount of money the Air Force and the other services need to get well, is that in the context of a – what – fourteen trillion-dollar economy?  Thirteen, fourteen, we’re not talking about very large amounts of money here, but the consequences of not spending them in a focused way could be horrendous. 

Moderator:  Look, I would just add that it essentially depends on the kind of war that you’re embroiled in.  Again, a World War II kind of war is kind of almost kind of a classic capital investment.  However, long, drawn-out and particularly irregular kinds of war seem to me to be the kind of conflict that you need a very professional regular establishment.  It’s something that they’re going to be doing every day for a long time to come, so it needs to be something that’s built into the essential structure and financing of the government, so I would say – and while it would be reasonable to borrow to finance the needed expansion, that we need to be able to sustain this. 

I think, again, over a fifty-year period, or generation-long effort, and so it’s something that the government is going to be doing, and ought to structure its finances to accommodate for a generation to come.

Frank Hoffman:  I think you made a good point about people making a sacrifice and acknowledging what the cost of these costs are up front, and I would agree with you, and I would like to see it done for social programs as much as common security programs like drug benefit – that we voted with no real income to pay for that as well.  So more of a pay-as-you-go approach, at least being transparent about what the costs are.

Christian Lowe:  Christian Lowe, with the Politico.  I’m going to quote-shop here.  Tom, you did a good job of painting a picture of the perfect storm up on Capitol Hill, but I’m not going to let you off that easy, and I’m going to make Frank and Bob and Loren chip in as well.  What are the trade-offs?  Not only the force increase, but also there’s a major recognition of readiness problems within the services for units that are back home -- this idea that the Marine Corps does something called “cross-leveling”, which means, essentially, robbing Peter to pay Paul.  I want to see if I can get some inter-service fighting going on up here.  What has to give?  Let’s go down the row here – in order to pay for the procurement dollars that are needed?

Tom Donnelly:  Actually, I think what’s most likely to give and what should give is fiscal discipline.  It’s possibly lamentable, but the fiscal problems in the country are much larger than the fiscal problems of the Defense Department, and this would seem to be the wrong time to start fighting the war from an accountant’s perspective. 

One hopes that as we go forward in Iraq, we’re going to be doing a counter-insurgency campaign in the correct fashion, and that’s something I would be willing to defer immediately paying for while still hoping that again, over the long haul, that the nation’s finances need to be – the government’s finances need to be adjusted to accommodate a larger military.  But, in this sort of game of budgetary chicken, I’m waiting for somebody, either in the Whitehouse or in the executive branch or in the Congress, to show that they really put fiscal discipline at the top of their priority list, and nobody’s ever really quite done that. 

 Robert Work:  Well, in the spirit of inter-service rivalry, it seems to me the decision to increase the size of the Army and the Marine Corps has to be made from a strategic perspective of how you believe the long war will be fought, rather than on establishing a rotational base for a campaign, a central front, which we assume the campaign, hopefully, will draw down over time.  Essentially, what we’re doing is we have strategy by troop rotation, so if you go for a 90,000 troop rotation, you’re going to get 30,000 troops, I mean a 90,000 increase will get you 30,000 on the troop rotation, which is about eight combat brigades.  And so you have to ask yourself, well, would that really make a difference in Afghanistan and over a steady state of having eight brigades there on a daily basis? 

And I’m not certain that you can make that case yet.  So to me, you have to say, what is the strategy and for services that really require long lead times to build capital-intensive forces, your strategy had better be right, because if you guess wrong, you can really find yourself in a hum, whereas, in a general mobilization, I think you can increase the size of the Army and the Marine Corps relatively faster. 

So right now, I’m not certain that I would argue for a 90,000 troop increase.  I believe there needs to be some troop increase to do cross-leveling, but I’m not certain what that is.

Frank Hoffman:  Let me push back a little bit on my former boss, Bob.  Just to make it clear that we’re – I don’t think we’re increasing manpower as much as resizing it back to what it should have been.  What we had was a few decades of technology delusions.  He had some illusions about short wars, rapid dominant operations, and there was a great budget pressure.  As manpower costs per unit went up, there was a pressure to reduce the number of manpower to kind of compensate it.  Health care costs have increased dramatically.  Personnel costs, recruiting costs have kind of been driven up.  And so every time that manpower budget kind of gets squeezed. 

This cumulative impact for both the Army and the Marine Corps, in addition to the cuts that we were directed to take, has been to push down the size of those forces, and I think the reality of the operations in the past has caused us to have to reset that. 

I want to push back on a comment Bob made about capital costs.  Making a Marine lieutenant colonel or a sergeant major, a company first sergeant, you know, it takes me about fifteen years to get the right guy, properly trained and educated with the right experience there.  So that’s a long-term investment, too.  And for the Marine Corps, roughly a fifteen billion dollar organization, you know, ten billion bucks is people costs, and the larger Marine Corps is going to cost more. 

Where that comes from – we’ve all been arguing here, needs to come from, we think, by increasing the top lines a bit.  I don’t mind if the president’s tax cuts are rescinded.  I don’t mind if we re-look at the word “entitlements”.  I don’t like the word “entitlements”.  Kind of freezes off some things.  We’re going to see a huge increase – same time we’re talking about this modernization, end strength growth and resetting costs having to be dealt with, we’re going to see a large number of the baby boomers start retiring, starting to look for their entitlement checks, and those expectations – there’s a social compact there.  Some of that’s by choice that we need to address.  And we may have to go as far as to look at how we recruit or attract manpower. 

I’m into alternative models of attracting people to national service.  That might be one way of bringing in lots of young people for some period of time at a lower cost and then paying professionals who stay – professional wage to attract them and retain them.  So there’s some things we can do with inside the fence, but I think what we’ve all been arguing with is that there are significant shortfalls across the board from different investment decisions and different pressures.  In ground forces, we’ve been pushed down, and reality is that those were mistakes. 

That needs to be readdressed.  There’s aging equipment in the Air Force, clearly, and that needs to be addressed.  We need some stark priorities.  Is it growing the force?  Is it modernizing the current force?  And is it refitting and resetting the broken force that we’ve left at the depot? 

Moderator:  Gary, Loren has his light on.

Loren Thompson:  Well, Christian, it started with your inner service rivalry focus.  If I talked to the senior leaders of the Navy and the Air Force, they say FCS doesn’t make much sense.  And if I talk to senior leaders of the Army and the Air Force, they say, well, DDG 1000 doesn’t make such sense.  And if I talk to the Navy and the Army they say, well, F-22 doesn’t make such sense, which tells you we’re not going to stop any of those things.  They’re all going to cancel each other out, and we’re going to build them all, okay? 

So the question is, where is the money really going to come from?  It ain’t going to come from entitlements, that’s for sure.  And it isn’t going to come from fiscal responsibility unless there’s some sort of genetic transplant for the electorate.  It’s going to come from getting out of Iraq. 

That’s what’s going to happen.  We’re going to leave Iraq, and the military services are going to get to save some of that money for other purposes.  That’s the most likely outcome, not just because of the difficulty of getting the money from other places, but also given the way the war is going.  We’re probably coming to the end of a war, here, and it will free up some money. 

Gary Schmitt:  Well, I was going to make another comment, but I’ll jump on that one, so we can have even more fights from up here.  I think if we get out of Iraq, we’ll be right back in the Middle East in some other fashion, in any case.  I’m not sure we’ll get that savings that possibly could come from pulling the plug on the Iraq war. 

The second thing is, look, to play the statesman a little bit, why should we give you an answer about how the services should try to beat each other up?  The truth is, we squeezed the military inordinately over the past decade and a half, and it’s very hard now to find extra funds to sort of swap out.  I mean if you cancel F-22 – first of all, you’re not going to cancel it because there has to be something to replace the F-15s.  The ships – we’re not at 280, we’re at 278.  We now have more admirals than we do ships.  So there’s only so much squeezing you can do. 

The bottom line is, look, when we went to an all-volunteer force, we made a contract with people that joined that force that not only would they have a sort of a decent life for putting their life on the line, but we’d provide them with equipment and support necessary to do their jobs.  And we’re falling down on that task.  And so the next five-six years, I don’t see how we’re going to get around facing this dilemma.  I mean, that’s the point of the book is that while we’re all focused on the wars of Afghanistan and Iraq, and we do, in fact, have an increased defense budget, the truth is, it’s not keeping up with that commitment we made to the military when those people joined the services.

Loren Thompson:  Yes, one little detail.  I just wanted you to understand what I was saying about Iraq, Christian.  To quote the late Les Aspin out of context.  I’m not saying we can’t stay in Iraq, and I’m not saying we shouldn’t stay in Iraq.  I’m just saying we won’t.  We’re getting out.

Moderator:  Yeah, whatever, Loren.  Walter Burns.

Walter Burns:  I’ve been amazed by these big numbers and now you’re going to hear a voice from World War II, and how indifferent we were to costs.  I was in a carrier.  If the plane came in and missed the wire and went into the barrier, even though it might have been possible to put it on an elevator, and put it down on the hangar deck and fix it, over the side it went.  An F6F I think cost about ninety thousand dollars.  What it would cost and what that meant in today’s dollars I don’t know, but the point was that we were simply indifferent to it.  Over the side.  Clunk!  I don’t know whether we’d do that today. 

Loren Thompson:  Well, in today’s dollars that would be somewhere north of two million dollars for the airplane.  But the difference is they turned out hundred of thousands of airplanes in World War II.  As of right now, our plan is to build 183 F-22s.  That was where Rumsfeld left us.  F-22 – each additional F-22 will cost you about 110 million dollars, not counting the engines, with the engines, 130 – that’s roughly what a Boeing 767 would cost you.

Walter Burns:  I think we would hesitate before we pushed that overboard.

Loren Thompson:  Right, if you could get enough guys to push that hard.

Tom Donnelly:  Walter, I would just also say we were a lot more willing to spend American lives in World War II.  Different kind of war, entirely different society in many ways.  We have made the choice as a society to recruit a professional long-service force in a way that burdens the rest of us, or unburdens the rest of us, so we can go about our normal middleclass lives.  That’s probably the best way to fight this war.  I wouldn’t want to take conscripts down the street of Ramadi or look in the hills above Kobel or someplace like that.  It’s just a recipe for, again, getting Americans killed for no good purpose. 

So we have the force that we have.  It reflects a compact between the American people and people in uniform, and in some way, as Gary suggested, the nickel and diming of the budgets and the failure to replace equipment to make it possible for people to push a point over to the side when it needs to be pushed over to the side.  So many of these aircraft that Loren talked about might be better pushed over the side into the ocean rather than flown with dials that go out and stuff like that.  So we’re pushing our people and their gear really quite hard and it’s a much more brittle force than we fielded in World War II, and that’s dangerous. 

Loren Thompson:  But let’s keep in mind, World War II is a real war.  Our survival was on the line.  Democracy was on the line.  People were willing to make any sacrifice because they might lose everything if we lost.  In this war, the more equivalent of elective surgery.  We didn’t have to do it.  And if we’d said to people, you’re going to have to give up your prescription drug subsidy, or some other entitlement, we wouldn’t have a war.  We wouldn’t have gone, because people wouldn’t have been willing to do it.

Moderator:  Okay.  Was there another question?  We’re running short.  Okay, yes, one more would be fine. 

Russ Beulin [sounds like]:  I’m Russ Beulin.  I’m with the Department of the Navy, and I was just struck – all of you talking – I didn’t hear much about finding efficiencies or better ways of doing things within the Department.  We have 1.4 million active duty, something less than a seventh of the Marine theater, and that’s really hard to keep going.  Average personnel cost, I don’t know how you count, something like $100,000 a head for a force, on average, in their twenties, with a high school diploma.  I didn’t hear any sense from any of you that there was readjustment reprioritization focusing efficiency in the department to cover a lot of this.

Moderator:  Who wants – first?

Loren Thompson:  I’ve got many opinions, but I do have an opinion on that.  It’s probably a little different than what you’re expecting, although I think we need a bigger Army.  It does occur to me that if we were sending more soldiers over to Iraq that could speak the language, maybe we wouldn’t need a bigger Army.  We’re trying to do this with technology and with numbers, and we’re ignoring some of the most obvious things that would increase the efficiency of our fighting force.  Maybe that’s because we didn’t realize we were going to be there for this long, but – although we spent all this money on armored Humvees, we got a lot of people and more going, we’re still in the situation where we don’t know what that guy across the street is shouting at us. 

It’s hard to believe you win a war that way.  So maybe there’s some fairly simple things we could be doing that we’re not doing that would allow us to get past a lot of this expenditure without really breaking the bank.

Frank Hoffman:  I’m jaded.  I’ve been in town since 1983.  I have a business school degree.  I’ve been in the Department of the Navy since 1978, and management efficiencies is just another part of the delusion that we’ve been chasing our tail after with.  I’m sure there’s something someplace that we go after all the time, but technology was part of that management and efficiency, and it’s proven to be part of the problem, not part of the solution.  Things like language, boots on the ground, people on the street, substituting technology for people’s been part of the problem.  There’s probably some lard in some places, things inside the Department that we could do probably a little bit better, but to think that’s going to provide the – like acquisition reform.

You know, I’ve been through those, I’ve been on two commissions, I’ve served on the Hill, the Defense Department, you know, I’ve had enough of acquisition review boards or different studies on that.  I just don’t see it there.  That’s another dead end to look down into.

Moderator:  I would try hard to be even more jaded than Frank, but, look, I would also add that, in fact, the technological revolution that Loren and Bob talked about, in particular, has produced incredible efficiencies.  The idea that a fleet, half the size of what it was a decade or so ago, could even arguably be more capable than the fleet it replaced – I mean, if that’s not an efficiency, I don’t know what it is.  Likewise, the number of bombs it takes to drop a bridge is exponentially smaller than it was a generation ago. 

What does remain resistant to efficiency, and which we found ourselves less effective than we need to be, and that’s, obviously, the kinds of missions like Iraq and Afghanistan.  And I would just say, apropos of Loren’s comments, that training a guy to be a competent soldier who also speaks Arabic, or Pashto, or Dari or, you know, a non-Romance language.  There’s a lot of effort and cost that’s associated with that, so creating a soldier who’s effective on this kind of a modern battlefield is not something that can be done by management efficiencies, I don’t believe. 

Robert Work:  Yes, I actually took your question to be more a statement on equality, rather than efficiency.  In other words, as I take your question, all one million people in the military, regardless of what they do, or what they were trained for, would be eligible to go into line infantry units into Iraq, or drive trucks, or whatever. 

In other words, everyone would be equally ready to be tasked and sent.  That, to me, just is not anywhere near – we already have, I think, 18,000 sailors doing things on the ground.  We have 10,000 airmen, I believe.  We have contractors.  So we are asking people, but ask every single person, regardless of what they are, okay, get ready to go to Iraq and drive trucks, or whatever – I just don’t think is reasonable. 

In terms of efficiency, the Navy’s plan – I think the Department of the Navy is at the leading edge on trying to squeeze efficiency out of every dollar it has, but it gets you to a point where you make assumptions like – O&M costs won’t go up, because we’ll be efficient.  Personnel costs won’t go up because we’ll be efficient.  R&D costs won’t go up because we’ll be efficient.  And you get yourself into a position where you make a plan that sounds efficient, but is totally unexecutable. 

So I really – right now, I think what the navy and the Air Force and the Army and the Marines are really faced with is – what they are being asked to do, they don’t have the money to do.  No amount of efficiency would take up for that.  So you either have to adjust the mission, or you have to increase the money.

Moderator:  Thank you all very much for your patience, and thanks most of all to the panelists and the authors for their contributions to a book that I know Gary and I are both quite proud of.  I hope you all read it and pass it along to Secretary Gates.  Thank you.

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