Testimony By Andrew Krepinevich, Executive Director, Before The House Budget Committee
Defense Strategy and the Defense Budget
A defense strategy’s principal purpose is to minimize the overall risk to national security, both by addressing those challenges that exist in the near term, and by preparing now for those challenges that will emerge over the longer term. A defense strategy does this by informing the allocation of resources — the means available to achieve the strategic end of minimizing the nation’s security risks. The strategy that currently informs the allocation of our defense resources was developed in the Pentagon’s Quadrennial Defense Review (QDR).

As it serves as the blueprint for resource allocation, it is extremely important to “get the strategy right.” Unfortunately, nearly all of the recent debate over the defense budget has concerned “How much is enough?” to fund the QDR program. Very little discussion has focused on the more critical question of “How wisely are we spending?” our defense dollars.

This is regrettable, as the QDR strategy that guides the use of defense funding has some major flaws. The Defense Department continues to focus the vast majority of its resources on familiar threats, requiring “traditional” kinds of forces, despite the fact that future challenges to our security are likely to be very different from those we face today, and thus require very different kinds of forces and equipment. This prospective change is the result of both the geopolitical revolution marked by the end of the Cold War, and the ongoing military revolution (or “revolution in military affairs”). The latter is related especially to the dramatic advances being made in information-related technologies.

My testimony provides some observations on the two questions raised above: “How much is enough?” and “How wisely are we investing?” with emphasis on the latter. It concludes that:

• The additional funding proposed by the Clinton Administration to shore up the readiness of today’s force is, in many respects, warranted. However, it is far from clear that locking in future pay raises for the military, and returning to the pre-REDUX retirement system offer the best ways of attracting and retaining quality people for our armed forces.

• The administration’s modernization plan does not take into sufficient account the very different security challenges (and capabilities) that are emerging as a consequence of the ongoing geopolitical and military revolutions. Far too much emphasis is placed on modernizing U.S. forces to meet today’s threats, and far too little on preparing for the very different emerging threats that will confront us in the not-too-distant future. This can be seen in a procurement budget that focuses on producing a few major systems in large numbers, and in an RDT&E budget that is projected to decline by 17 percent in real terms over the Future Years Defense Program (FYDP).

• A budget strategy is needed that will allow the military to reduce the high level of uncertainty that exists with respect to future threats and emerging capabilities, and that creates capability options that can be quickly exercised once the future threat environment comes into clearer focus.

Higher Operation and Maintenance (O&M) Costs
First, after years of “O&M migration” — shifting funds intended for modernization accounts to cover O&M funding shortfalls — the administration has taken a more realistic view of funding requirements for O&M activities. O&M funding covers the costs of fuel, spare parts, depot maintenance and other activities critical to the day-to-day operation of the military, as well as most Department of Defense (DoD) infrastructure activities, such as base operations and health care. Over the years this has been the area of greatest cost growth within the Defense Department. Given this trend, last year’s Future Years Defense Program (FYDP) appeared to substantially underfund O&M. This fact became increasingly apparent over the course of last year. For example, in 1998 Air Force mission capable rates for major weapon systems fell to about 10 percent below their 1991 levels, due to spare parts shortages and other factors. Likewise, in 1998 Army tank crews fell short of their training goals by some 22 percent (measured in tank miles per year), while Navy aircraft crews fell 15 percent below their goals for flying hours.

The administration’s new request represents a reasonable estimate of the funding required to sustain high levels of readiness in FY 2000. At $103.5 billion, it would provide far more O&M funding per troop than the Defense Department provided in FY 1990, the year the United States began sending forces to the Persian Gulf in preparation for Operation Desert Storm. This is true even if one subtracts that portion of the O&M budget allocated to tasks which some observers have argued are not closely related to traditional military missions, such as contingency operations, environmental clean up at military bases and drug interdiction.

It is less clear whether the funding levels projected for the latter years of its FY 2000-05 defense plan will be adequate. In real terms, O&M costs per troop have tended to increase over time. Moreover, the idea that O&M costs will continue to increase might find support in DoD’s projection that the average age of many aircraft, ships and other weapon systems in its inventory will grow by 20-25 percent over this period. The military’s O&M costs would also obviously increase if U.S. forces are deployed to Kosovo for peacekeeping duties. On the other hand, the administration’s latest budget proposal clearly provides far more for O&M activities over the next six years that was projected to be provided in last year’s defense plan. And, if DoD’s plans for outsourcing and other reforms are aggressively pursued and successful, the level of funding projected in the administration’s plan for O&M over the longer term may prove to be adequate.

Declining Recruitment and Retention
Second, recent problems with recruitment and retention have persuaded the administration to increase military compensation. Both the Navy and the Army fell short of their recruitment goals last year, and the Navy and the Air Force have experienced declines in retention, especially among pilots. Although these problems are centered primarily in certain military skill categories, the administration is right to take these trends seriously. The administration has decided to address these personnel problems, in part, by providing substantially higher military pay raises and improved retirement benefits. Figures released by the Congressional Budget Office (CBO) suggest that this plan could add some $37 billion to DoD’s costs over the next 10 years. The Senate recently passed a bill, S. 4, that would provide even more generous pay raises and retirement benefits. CBO has estimated that this plan would cost about $55 billion over the coming decade.

There are some very positive elements in the administration’s proposed compensation package. These include the 4.4 percent across-the-board pay raise in FY 2000, substantial targeted pay raises, and various initiatives to improve recruitment and retention. Taken together, these measures would add some $10 billion to the Defense Department’s costs over the next six years. They would also send a powerful signal to the men and women of the armed forces about the commitment of the administration and Congress to ensuring adequate compensation, not only next year, but over the long term as well.

Perhaps the most problematic element of the administration’s plan is its proposed repeal of REDUX, the Military Retirement Reform Act of 1986. Under current law, personnel who joined the military on or before July 31, 1986 can retire after 20 years of service at 50 percent of their basic pay. Under REDUX, those who joined after that date will be able to retire after 20 years at only 40 percent of basic pay. The administration’s proposal would raise retirement benefits back to 50 percent of pay after 20 years for all military personnel. This change would cost about $6 billion over the next six years and some $1.5 billion a year thereafter.

However, according to recent studies by CBO and the General Accounting Office (GAO), there is very little evidence that the existence of REDUX has been responsible for the recent declines in retention. We should also be cautious about repealing REDUX, in part, because its provisions closely track the recommendations of seven different commissions and study groups in its treatment of retirees with 20 years of service. The recommendations of these groups, which met between 1947 and 1986, differed in many respects. But every one of the groups recommended that the immediate retirement benefits received by personnel leaving after 20 years of service be reduced to less than 50 percent of basic pay. They made this recommendation because they believed that providing this annuity was seriously harming the Services’ ability to retain individuals beyond their 20-year service point.

It is possible that, nevertheless, REDUX should be repealed (perhaps on equity grounds). But any change in the military retirement system of this magnitude should be made only after the likely effect of the change and other possible options for changing military retirement have been thoughtfully, and deliberately, considered. This probably means deferring any action on retirement benefits until next year.

The Senate bill would provide even more generous benefits for military personnel who retire after 20 years. It would also create a thrift savings plan for certain military personnel and increase funding for veteran’s readjustment benefits by nearly $5 billion over the next six years and by some $2.5 billion a year over the longer term. As with the administration’s plans for changing military retirement, it would be a mistake for Congress to act on the proposed changes in the Senate bill before it has had time to thoughtfully review those proposals.

The other main flaw in the Senate bill is that it contains a provision that would lock the Services into providing what may turn out to be excessively large military pay raises in future years. It would do so by requiring, by law, that future pay raises be set at one-half a percentage point above the employment cost index (ECI), a measure of salary changes within the overall civilian workforce. To be sure, pay raises larger than those called for in the administration’s proposal may prove necessary in coming years. But it is also possible that the Services’ problems with recruitment and retention will be stemmed by the raises included in the administration’s plan, the use of improved deployment patterns that reduce personnel tempo (such as the Air Force’s Air Expeditionary Force concept), and other non-pay related changes, or by a downturn in the civilian economy. In any event, the Services should not be legally locked into providing what could turn out to be overly large pay raises for the indefinite future — especially on the basis of a measure as suspect, in terms of its relevance to military pay, as the ECI.

More for Modernization
Third, the administration has decided to expand some acquisition programs and, in particular, to more fully fund its national missile defense (NMD) efforts. Acquisition funding accounts for the smallest share (about 25 percent) of the administration’s proposed $112 billion increase for defense. As noted above, the administration’s latest defense plan provides substantially more for O&M than the previous plan. However, if history is any guide, it is likely that future O&M costs will prove at least somewhat higher than projected, even under the latest plan. Military personnel costs may also prove higher if S. 4 is adopted or, even if it is not, if higher pay raises prove necessary in the future in order to stem persistent declines in recruitment and retention. As such, it is unlikely that the Defense Department will be able to increase military procurement by 37 percent over the FYDP, as projected in the administration’s plan, unless the topline for defense is further increased, or cuts in force structure or readiness are accepted. Nevertheless, because of the substantial plus-ups provided in the new plan for the O&M and military personnel accounts, there may be less “migration” from procurement to these other accounts in the future than there has been in the recent past.

Other Ways of Tackling the Funding Shortfall
As noted above, if one assumes the QDR provides us with the optimal blueprint, or strategy, for minimizing the overall risk (i.e., near- and long-term risk) to our national security interests, then increased funding for defense may be the appropriate response to the plans-funding mismatch. However, in addition to increasing the budget, there are also several other means for addressing the problem.

One is to increase the efficiency with which currently programmed funding is used. Initiatives designed to squeeze greater efficiencies out of the defense budget have been staples of DoD management, particularly since the end of the Reagan defense buildup. While such endeavors are laudable, they have typically only yielded a small fraction of the savings projected for them. The QDR, for example, called for two additional rounds of base closures to reduce excess infrastructure. It also argued that greater efficiencies could be realized by competing more of the work that has, in the past, been reserved for government depots. Several such efficiency initiatives are currently under way in the Pentagon, with Secretary Cohen’s Defense Reform Initiative at the forefront. Unfortunately, the current program-funding mismatch is, in part, a product of the Defense Department’s “banking” of hoped-for efficiency savings before they are realized.

Another means for reducing the program-funding mismatch is to convince our allies to shoulder a greater share of the burden of providing for our common security interests. Always a difficult proposition, ally burdensharing does not seem to have been a significant element in the QDR’s funding strategy, or in more recent efforts by the Defense Department, to redress its budget problems.

Still another way to shrink the Pentagon’s program funding deficit is through more innovative approaches to operating. This is different from trying to meet existing requirements more efficiently. Rather, it involves meeting existing requirements by operating in very different ways. A good example is the opportunity the Navy currently has before it to adopt innovative ways of conducting forward presence operations by periodically substituting converted Trident SSBNs (SSGNs, or conventional precision-missile carriers) for carrier battle groups.

Finally, we might agree to accept some increased risk in our ability to execute the existing strategy. For example, we might accept a higher level of risk in our ability to respond in the event that two major theater wars (MTWs) erupt nearly simultaneously. Or we might decide to be more selective in that part of the administration’s strategy of Engagement and Enlargement that pertains to U.S. involvement in peacekeeping operations.

Summary
The above discussion suggests that the administration’s latest budget proposal may go a significant way toward addressing near-term readiness concerns and closing DoD’s long-term plans/funding mismatch. However, the fact that there is a significant funding gap in the current defense plan does not necessarily mean that more money should be provided for defense, even if the emergence of significant budget surpluses make such increases appear more feasible than in the recent past. Indeed, if one believes the QDR strategy is seriously flawed, then the remedial courses of action described above may not increase our security, or will do so in a very ineffective way. Indeed, a strong case can be made that the long-term risks to U.S. security could be better minimized with a revised defense strategy and plan that would require little additional funding.

My principal concern here is that we are not implementing the changes in our approach to modernization that these revolutionary times demand. While there appears to be a consensus among senior national security officials that transformational change is needed, it is not yet adequately reflected in our modernization strategy or programs. For example, the QDR yielded three future U.S. force “options” for consideration. But these options did not represent different U.S. modernization programs; rather, they essentially offered the choice of executing essentially the same modernization program at three different rates of change. It is a modernization program that emphasizes the pre-transformation threat environment, while according insufficient attention to what is likely to be a far more dangerous post-transformation conflict environment.

Consequently, our modernization effort will produce a force that is likely to depreciate rapidly over the next two decades, while its principal value will be realized during a period of relatively low risk to the national security. If this occurs, the consequences may be severe. At best, we would probably be forced to recapitalize the force, at great expense. At worst, we could see our vital security interests placed in jeopardy. In short, while the current modernization program likely suffers from a serious program-funding mismatch, the primary problem with our approach to defense modernization is not, at its core, budgetary in nature, it is strategic.

How Wisely Are We Investing?
Why Transformation?
There are two fundamental factors driving the need for transformation. The first is that, over the next decade or two, our military will likely confront very different challenges from those we faced during the Cold War, or during the Gulf War. Potential adversaries have strong incentives to present us with different military problems than did Saddam Hussein during the Gulf War, and increasingly, with the diffusion of military technology, they will have the capability to do so.

The need for a transformation strategy also is being stimulated by a growing awareness on the part of a number of leading military organizations, ours included, that the world is entering into a period of military revolution. This century has witnessed two such periods of military revolution. The most recent is the nuclear weapon-ballistic missile revolution of the 1940s and 1950s. An earlier revolution occurred in the 1920s and 1930s, and was characterized by the transformation of warfare on land, which culminated in the blitzkrieg; at sea, with the rise of naval aviation and carrier battle groups; and in the air, with the emergence of strategic aerial bombardment. Such periods are characterized by discontinuous leaps in military effectiveness, the result of an integration of new military capabilities, doctrine and organizations. With respect to modernization, there are dramatic shifts in the military “tools” available to commanders: carriers displace battleships, tanks displace horse cavalry, etc. Moreover, entirely new capabilities and corresponding new military operations arrive on the scene: the submarine and strategic submarine blockade; bombers and strategic aerial bombardment; radar and integrated air defenses are but a few examples.

We must ask ourselves: What are the emerging and declining systems of this military revolution? How do we ensure that the emerging dominant “sunrise systems” get into the hands of our commanders? How do we avoid investing too early in promising new systems that may quickly depreciate in effectiveness, as the technologies on which they are based continue to advance rapidly, or as the challenges to our security change? How do we divest ourselves of declining “sunset” systems, or at least avoid locking ourselves into large quantity purchases of such systems, with their 30- or 40-year life spans? How do we hedge against the uncertainty of not knowing which new systems will prove decisive and which will decline in value?

These issues take on greater importance given that the Defense Department confronts this era of transformational change with limited resources. There is the risk that if the wrong transformation path is chosen for modernization (or if no attempt is made at transformation), it will prove difficult, if not impossible, for the Pentagon to buy its way out of its mistakes.

Moreover, it is important to begin the transformation process soon. It is no exaggeration to say that, given the time it takes to field new military systems, develop new doctrine, and field test new combat organizations, the U.S. military twenty years hence is already being formed (and limited) by decisions being made today. Regrettably, the Defense Department’s modernization effort remains predominantly focused on improving its capabilities to conduct power-projection operations against a threat similar to that which was encountered during the Persian Gulf War, both in terms of scale and character.

In summary, rather than undertaking a military transformation, we continue to pursue a modernization strategy that was set principally by the momentum developed over forty years of Cold War with the Soviet Union, and that severely discounts the revolutionary changes under way in the geopolitical environment and in military-related technologies. The result is that the current defense program will produce a slightly smaller, but similar U.S. military as compared to the one called for by the QDR’s proximate ancestors, the Clinton Administration Bottom-Up Review (BUR) force, and the Bush Administration Base Force.

Modernization for What? Identifying Emerging Threats
How should we think about modernization in a period of transformational change? Of primary importance is a sense of the emerging threats to our security, and the operational challenges it will pose to the U.S. military. Only then is it possible to get a sense of the optimal mix of military capabilities commanders will need in order to be effective in the future. If the new operational challenges are not identified, the Defense Department may persist in “baselining” its future requirements based on its Gulf War experience. Indeed, much of the wargaming that supported both the 1993 Bottom-Up Review and the 1997 QDR were oriented on Desert Storm-like contingencies in the Persian Gulf and on the Korean Peninsula.

New Challenges: The Case of Power Projection and the “Anti-Access” Challenge
Take the case of power-projection operations. Joint Vision 2010 states that “power projection . . . will likely remain the fundamental strategic concept of our future force.” However, relying on experiences from an eight-year old conflict to determine forces for future contingencies in a rapidly changing competitive environment seems unlikely to provide the kind of insights needed for a modernization program to support military transformation. The U.S. military’s traditional method of deploying air and ground forces at or through ports and airfields is almost certain to be invalidated by the growing proliferation of national and commercial satellite services and missile technology. National and commercial satellite services will allow even regional rogue states to monitor U.S. deployments into forward bases, and (unless one makes heroic assumptions regarding advances in missile defenses) hold them at risk through the deployment of large numbers of ballistic and cruise missiles. Senior U.S. military leaders have already voiced strong concern over our ability to deal with such a contingency. General Ronald Fogleman, then Air Force Chief of Staff, observed that

Saturation ballistic missile attacks against littoral forces, ports, airfields, storage facilities, and staging areas could make it extremely costly to project U.S. forces into a disputed theater, much less carry out operations to defeat a well-armed aggressor. Simply the threat of such enemy missile attacks might deter U.S. and coalition partners form responding to aggression in the first instance.

Over the past ten years, it has become evident that proliferating weapon and information technologies will enable our foes to attack the ports and airfields needed for the forward deployment of our land-based forces.

I anticipate that the next century will see those foes striving to target concentrations of troops and materiel ashore and attack our forces at sea and in the air. This is more than a sea-denial threat or a Navy problem. It is an area-denial threat whose defeat or negation will become the single most crucial element in projecting and sustaining U.S. military power where it is needed.

[I]s, by far the trickiest part of the American operational problem. This is the proverbial “Achilles heel.” India needs to study the vulnerabilities and create covert bodies to develop plans and execute operations to degrade these facilities in the run up to and after commencement of hostilities. Scope exists for low cost options to significantly reduce the combat potential of forces operating from these facilities.

Other Emerging Challenges
In its report to the Congress, the National Defense Panel identified several other new operational challenges the U.S. military will likely encounter in a post-transformational world. These challenges were derived from an examination of major geopolitical, military-technical, demographic, and economic trends. They include:

• Projecting power far inland;

• Defending U.S. assets in space, and denying enemy access to space;

• Defending the U.S. homeland from nontraditional forms of attack, to include irregular force use of weapons of mass destruction (WMD), and attacks on the information infrastructure; and

• Evicting enemy forces from, and controlling, urban terrain.

Elements of a Modernization Strategy
A modernization strategy that supports military transformation must take into account the fact that transformations typically take several decades to play out. Indeed, today even those military systems that are placed on a “fast track” for development and fielding often take ten years or more to reach forces in the field. Considerable additional time is required to determine how best to employ new military systems, and to make the appropriate force structure adjustments. Periods of military revolution also are characterized by an increased risk of strategic surprise, such as that which occurred, for instance, with submarine warfare early in this century, and which might occur again with the onset of anti-access capabilities and competition in space. Given these considerations, senior Defense Department leaders must begin now to develop and execute a transformation strategy if the U.S. military is to be prepared for the very different kinds of challenges they see confronting the armed forces over the long-term future.

Finally, military revolutions typically find the effectiveness of certain military systems in rapid decline. The displacement of the battleship by the aircraft carrier is but one example. However, it is far from clear in advance which military systems, operational concepts, or new force structures will work, and which will not. Put another way, not only will a transformation strategy need to be initiated soon, it also will have to take into account military-technical uncertainty. How might a modernization strategy account for this?

For a start, the military services will have to tap into rapidly advancing technologies to develop new military systems that can be applied within the framework of new operational concepts (e.g., long-range precision strike) executed by new kinds of military organizations. It is this combination of technology, emerging military systems, new operational concepts and force restructuring that often produces the discontinuous leap in military effectiveness characteristic of military revolutions. Thus greater emphasis should be placed on our R&D efforts in support of “wildcatting”: experimenting with a limited (but operationally significant) number of a wide variety of military systems, as well as operational concepts, and force structures, with the goal of identifying those that are capable of solving emerging strategic and operational problems, or exploiting opportunities, and of eliminating those which are not.

Wildcatting has been a hallmark of successful modernization transformation strategies. For example, the 19th century military transformation at sea saw wooden ships powered by sail yield to ships constructed with metal hulls and powered by turbine engines. During that transformation, among the 30 vessels of the Royal Navy fit to take a place in the line of battle in 1870, there were three types of steam engines, four screw arrangements, 16 varieties of armor protection, 18 hull models, and no fewer than 20 scales of armament. Similarly, during the rapid advances in aviation technology that occurred in the 1920s and 1930s, the U.S. military developed and flight–tested 12 medium and heavy bombers, and nearly 70 attack, fighter and trainer aircraft. None, however, were produced in great numbers.

This reveals a second element of a successful modernization strategy for transformation: to avoid being “locked in.” Lock-in occurs when limited resources are spent to purchase a system in large numbers. The result both narrows the range of options (as fewer types of systems are procured) for dealing with emerging challenges, and locks the force into the current state of technological advancement. Resources that could have supported exploring a wider range of systems and sustaining continued advances in technology are, instead, locked into the existing force. This may work well if we “guess right” (i.e., if the fielded force serendipitously turns out to be the “right” force to meet the post-transformation challenges), and if the rate of technological advance slows. If not, we will have committed ourselves to a single-point solution in a very uncertain world. We will have either bought the wrong systems, or the “right” systems prematurely — before the rapidly advancing technologies that enable them have matured.

The U.S. Navy understood this well in the 1920s and 30s, during the transformation from a battle fleet centered around battleships to one focussed on carrier battlegroups. It was unclear whether naval aviation would be optimized by spreading it throughout the fleet (e.g., having a few aircraft on every surface combatant), or concentrated on aircraft carriers. Moreover, it was also unclear what kind of carrier would be optimal. Consequently, the Navy created options for itself by wildcatting. It invested in three classes of carriers, but only produced four carriers in all. It also experimented with aircraft on carriers and on surface ships, and even tried working with dirigibles.

On the other hand, Britain’s Royal Navy, which emerged from World War I with a dominant lead in carrier aviation, chose to lock itself in to existing technology by keeping its carrier force. The result is that the Royal Navy had to absorb operations, maintenance and personnel costs, which limited funding for R&D on naval aviation (which was progressing rapidly), and on new carriers that might have optimized the potential of air power at sea. Moreover, Royal Navy carriers depreciated rapidly in effectiveness as more powerful naval aircraft (requiring bigger carriers) came on the scene. The Royal Navy also saw U.S. Navy and Imperial Japanese Navy, who entered the competition in naval aviation at a much later date, become dominant in this new form of warfare.

Not only has wildcatting been an effective element of a modernization transformation strategy within Services, but increasingly among them as well. Thus the Army, Navy and Air Force each had ballistic missile programs in the 1950s. The Air Force program led, ultimately, to the Minuteman ICBM, a key element of the U.S. nuclear strike mission force. The Army program was instrumental in the birth of the space program, and the Navy program led to the Polaris submarine and the nuclear ballistic missile submarine force, a cornerstone of U.S. nuclear deterrence.

The end result of each of these wildcatting efforts was the creation of strategic “options” on a range of military capabilities. These options could be used both to dissuade prospective competitors from resuming a high level of military competition and, in the event dissuasion or deterrence failed, exercising those options to prevail in the competition itself. It is important to note that creating such options need not involve a defense budget “train wreck.” Recall that the U.S. military developed the foundation for strategic aerial bombardment, the carrier navy, modern amphibious warfare, and mechanized air-land operations during the relatively lean budget years of the 1920s and 1930s. What it does imply, however, is a different set of strategic — and budget — priorities.

For example, it is not yet clear how the military will surmount the “anti-access” challenge to power-projection. A solution may be found in Air Force long-range aerospace precision-strike operations. Or strikes from a Navy task force comprising a “distributed” capital ship (i.e., from carriers, arsenal ships and Trident “stealth battleships” fitted with hundreds of vertical launch systems for long-range PGMs, all linked by an expanded version of the Navy’s Cooperative Engagement Capability battle-management network and Marine Hunter Warrior “infestation” forces) may be critical to defeating enemy anti-access forces. Perhaps a critical role will be performed by highly networked, distributed Army forces employing long-range missiles, dispersed air and missile defenses, and unmanned combat aerial vehicles (UCAVs). Or it may be that a combination of these capabilities is needed to meet the challenge, or perhaps something quite different. Our modernization strategy must provide for an opportunity for the Services to experiment — alone and in combination — with a wide variety of systems in an attempt to solve this problem before it emerges as a threat to our interests.

Unfortunately, the administration’s modernization effort seems to be at odds with historical precedent. The Defense Department’s FYDP proposes ramping up serial production of a relatively few systems, thus exacerbating the lock-in effect, while cutting RDT&E funding by roughly 17 percent in real terms over the FYDP, thereby reducing opportunities to engage in wildcatting.

Wildcatting is often informed by a vigorous level of field experimentation. Properly done, such experimentation can help reduce uncertainty by determining what systems and forces are best able to meet emerging operational challenges. Supporting experimentation and innovation in a period of great change and uncertainty also implies a heightened tolerance of honest failure. If a “no mistakes” approach to transformation is adopted, the result will likely be a smaller, but similar, U.S. military, as strong incentives will exist to deviate as little as possible from what is “proven” to be effective in today’s military. In effect, the misplaced desire to maximize efficiency may well crowd out the innovation that will enable transformation.

Having said this, what remains unclear is how several of the major pillars of the Defense Department’s current modernization program will help the military meet emerging operational challenges. If forward bases, ports and airfields are at high risk of destruction or pre-emption early in a conflict, how will we forward deploy our relatively short-range tactical air forces? Our heavy digitized divisions? Will we be able to move our new class of carriers through choke points like the Strait of Hormuz, or even the Taiwan Strait, at an acceptable risk? Yet our modernization program calls for the military to spend tens — and in some cases — hundreds of billions of dollars to deploy new tactical aircraft, upgrade our tank fleet and launch a new class of carriers.

There is a profound disconnect here. As our military leaders have said, future adversaries will almost certainly present us with a very different set of problems than we saw over eight years ago in the Persian Gulf. In pursuing the current modernization strategy, we may be locking ourselves in to military capital stock that will depreciate rapidly in value far in advance of its expected life cycle. At the same time we are also crowding out investment in wildcatting opportunities, such as going forward with the arsenal ship and Trident conversion, fielding a dramatically different Army division, exploring more fully the systems that could enable the Marine “Hunter Warrior” concept, and facilitating the Air Force’s transformation to a “space and air force.” In short, our current modernization strategy risks locking us in to single-point solutions that assume away uncertainty, instead of investing in options that hedge against it.

A transformation modernization strategy should also take into account the need to create incentives for industry to support the military’s efforts in this area. The recent consolidation of the industry has actually reduced such incentives. Fewer competitors means less competition, and hence less innovation. Today in the name of efficiency the Defense Department has attempted to settle on a relatively few number of systems and to produce them in fairly large quantities, so as to minimize cost. Defense firms have strong incentives to lock in long production runs on these relatively few systems, thereby guaranteeing a steady stream of revenue, and little incentive to experiment with their own R&D funds to develop new military systems. A transformation modernization strategy would place a higher priority on providing a wider range of systems to our commanders. However, industry consolidation has made this a difficult proposition, and it is not clear what approach to modernization might undo its more pernicious effects.

Over the past two centuries the commercial sector has played an important role in successful transformation modernization strategies. Commercial advances in steam engines helped fuel the naval transformation of the nineteenth century. The rapid rate of technological growth in aviation, radio, and mechanization in the commercial sector during the interwar years helped underwrite a transformation in war. Joint Vision 2010 declares that “the emerging importance of information superiority will dramatically impact how well our armed forces can perform its [sic] duties in 2010.” Consequently, a modernization strategy for transformation will have to exploit the rapid advances that are being made in the commercial sector in information technologies.

This should not be surprising. Each military transformation over the last hundred years or so has seen a corresponding transformation of the defense industrial base, as new firms with new skills have entered the field (much as new military systems and organizations characterize transformation).

Moreover, any transformation modernization strategy also should explore how we might tap into the “dual-use” capabilities being created in the commercial sector. For example, the armies of the mid-nineteenth century exploited the commercial sector’s construction of railroad and telegraph networks to boost their effectiveness. So, too, should we consider how we might best exploit the “information railroad” being put into space, the fiber optic networks being created on earth, and the “armor plating” being developed by the commercial sector to defend its information assets, among other things.

A core competence of our transformation modernization strategy will be our ability to dominate time-based competition. With the technologies that underwrite transformation being far more broadly available than those that supported the nuclear transformation (i.e., nuclear weapons and ballistic missiles), it will likely be increasingly important to translate commercial technologies into military capabilities more rapidly and effectively than our enemies. Moreover, with geopolitical and military-technical uncertainty being so high, we may have relatively little warning of the appearance of post-transformational threats. The more our transformation modernization strategy allows us to avoid “lock in,” the more wildcatting we do to create an array of options, and the more innovative our defense industrial sector, the greater will be our ability to meet the post-transformation threats to our security. As noted above, however, our defense modernization effort actually promotes lock-in, and discourages wildcatting. Compounding the problem, the time elapsed from program inception to initial operational capability often stretches beyond a decade.

To be sure, a transformation modernization strategy will require additional funding. The National Defense Panel, in advocating a transformation strategy, called for $5-10 billion a year to begin the process. Of course, some of this funding might be offset if the Defense Department avoids premature lock-in to serial production of new systems (save in those instances where such systems offer a true “leap ahead” improvement in military effectiveness), and as military system divestiture candidates are identified. To date, however, promising new capabilities are being put on the back burner or, worse yet, cancelled in an attempt to sustain a modernization strategy that cannot likely be maintained without a major increase in modernization funding. Even if fully funded, however, such a strategy could fail precipitously when confronted by post-transformation challenges.

Conclusion
It is likely that at least some funding will have to be added to DoD’s O&M and military personnel accounts in FY 2000 to address near-term readiness problems. However, DoD’s procurement plans should be subjected to a rigorous strategic review. The purpose of such a review should be to determine not only how well major new modernization programs contribute to meeting today’s challenges, but also how well they will contribute to meeting the emerging threats that will characterize the post-transformation security environment.

The administration’s current modernization plan (which the Defense Department would apparently like to accelerate) would see us purchasing major new weapons platforms with life spans measured at 20-30 years or longer, without having determined how effective they might be against emerging threats. To be sure, we may continue to rely heavily on our legacy forces — tanks, short-range tactical aircraft, and carriers — far into the future. On the other hand, we will almost certainly need to develop new kinds of systems and forces needed to sustain our military effectiveness. What we do not need is to put the modernization budget cart before the strategy horse. Rather than investing in modernization along traditional lines, we need to take counsel of our own words: we are living in revolutionary times, both in a geopolitical and in a military-technical sense. We must take the change, the uncertainty, and the opportunity that such times offer in crafting a budget strategy to modernize the U.S. military.

What this means is that, before proceeding with its modernization strategy, the Defense Department needs to explain to Congress and the American people how it plans to meet tomorrow’s challenges, as well as today’s. A collaborative effort by DoD and congressional leaders provides one example of how to do just that. Last year Atlantic Command was given the responsibility for joint experimentation. The goal of such experimentation should be to determine how the U.S. military can best organize, train, and equip itself to deal with the very different challenges noted above before they emerge, and before we ramp up our procurement spending. That will mean placing a wide range of military systems in the hands of commanders. An accelerated program of joint and Service experimentation focused on future challenges can best inform how U.S. forces will need to operate, and what mix of forces will be needed. This, in turn, can provide DoD and Congress with a far better sense of those current programs that should be sustained, those that should be terminated or put on the back burner, and those new military systems whose development should be accelerated.

In summary, it is neither necessary, nor prudent, to accelerate the modernization of U.S. forces as currently called for in the QDR, or in the Joint Chiefs’ proposal. The key is to fund a robust — but far from “budget busting” — program of vigorous experimentation (to include prototyping some systems not in the current plan) to ensure that both today’s and tomorrow’s forces will be ready for the challenges that will confront them.

© 1999 Center for Strategic & Budgetary Assessments. All Rights Reserved.