Strategy and Force Planning

in a Time of Austerity
On 13 February 1989, GEN Colin Powell, while transitioning from
national security advisor to commander of US Army Forces Command,
addressed the reality of strategy: All of the sophisticated talk about
grand strategy is helpful, but show me your budgets and I will tell you
what your strategy is.1 What General Powell meant is that the definition of the US role in the world and its strategic goals flow from budgets,
not the other way around. This commentary fleshes out General Powells
observation by focusing on the means part of the ends, ways, and
means of strategy to explain how austerity affects force planning and
strategy. It then describes todays austere budgetary environment by first
examining budget reductions as a general matter and concludes with the
current strategic options that will likely characterize the contemporary
discussion of US strategy and force planning.

Decremental Spending
The defense budget system works most smoothly, of course, when
budgets are growing, not shrinking.2 The Department of Defense (DoD)
budget has grown in 49 of 63 of years.3 With each years budget providing
the baseline from which the next years increases take off, ever-increasing
budgets do not demand strategic reassessments. Budget debates concentrate on where best to allocate any increases. Decreasing budgets obviously
are more challenging. They require the articulation of a strategy, but
that rarely happens, and even more rarely does strategy shape budgets.
Rather, bureaucratic infighting tends to result in across-the-board rather
than tailored budget cuts. With decremental spending, there is rarely an
obvious reduction of strategic ends to guide the reduction in means. As
budget expert Allen Schick explains, Decrementalism diverges from incrementalism in at least three significant ways. Decremental budgeting is
redistributive rather than distributive; it is less stable than incremental
decisions; and it generates more conflict.4
An adapted version of this paper will appear in American Grand Strategy and the Future of U.S. Land
Power (Washington: Strategic Studies Institute, forthcoming). Reprinted with permission from National
Defense University Press, Strategic Forum 287, May 2014.
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As a practical matter, budgeting in austere times is different because

of the context in which decisions are made. With an increasing budget,
advocates of particular programs argue for increases to those programs
from the overall increase to the budget. If successful, they can ask for still
more funding in the following year; alternatively, programs that were
not favored previously may receive additional funding in the following
years increment to compensate for smaller, earlier increases. In contrast,
with a decreasing budget, a reduction that is taken in one year may not
insulate a particular service or program from continued or increased
reductions in the future. Quite the contrary, if a program survived with
a 10 percent cut last year, the reduced level is the new baseline for next
years budget negotiation. This places a premium on defense leaders
understanding the long-term budgetary conditions as defining a reality
in which, they hope, strategy can be made realistic. Strategy involves far
more than budgets. But budgets consume attention.
Even if the budget system could be used to make relevant cuts, political, institutional, bureaucratic, and other factors can lead to retaining obsolete weapons, forces, bases, and concepts, even though they are
likely not the most effective way to accomplish the ends of grand
strategy with the means available. As Carl Lieberman states, Decrementalism tends to apply cuts broadly, but often fails to establish clearcut priorities for reducing expenditures. Moreover, in a period of decremental spending, powerful political forces are likely to seek exemptions
from proposed reductions for their preferred agencies or programs.5 In
the extreme, austerity may cause political leaders to scramble to preserve
constituent interests, military officers to fight to protect pet projects, and
decision makers to placate the demands of competing groups, leaving
no one to focus on the security needs of the nation. Consequently, during a period of austerity, when it is most important to maximize the
effectiveness of each defense dollar, billions can be diverted to goals that
may not provide the most effective contribution to national security. In
austere times, this political reality has a bigger impact on the national
strategy than in periods of budgetary growth.

Todays Austerity
The austerity in national security spending is a function of a drawdown
from the wars in Iraq and Afghanistan, the need to reduce all parts of the

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budget to address the federal fiscal crisis, and a concomitant reprioritization of effort to support a new, albeit incompletely defined, strategy.
The fiscal crisis largely stems from the often polarizing and challenging
national debate concerning the appropriate size of the federal government. This debate implicitly concerns the US role in the world as well.
As figure 1 shows, the gap between spending (top line) and tax revenue
(lower line) represents the deficit, which has averaged about 2 percent of
gross domestic product (GDP) during nonrecession years.6 The deficit
expands during recessions (with spending up to maintain government
programs and revenues down due to fewer workers paying taxes) and
shrinks as the economy grows, even achieving surpluses, as it did from
1998 to 2001. On average, prior to the 200809 recession, the United
States was taxed at about 1819 percent and had nonrecession federal
spending averaging about 2021 percent of GDP. While not ideal, this
2 percent fiscal gap was manageable.

Figure 1. US federal spending and revenue as a percent of GDP, 19702022.

Data compiled from Council of Economic Advisors, Economic Report of the
President (Washington: GPO, 2013), tables B-80 and B-1 for FY 19702013;
and Congressional Budget Office (CBO), Budget ProjectionsFebruary 2013
Baseline Projections (Washington: CBO, 5 February 2013), table 1.

With the 2008 recession, leaders of both major political parties took
significant and unprecedented action with the American Recovery and
Revitalization Act in February 2009. This stimulus bill authorized
$787 billion (5.67 percent of GDP) for infrastructure spending, needbased aid, and tax expenditures, increasing government spending to 25
percent of GDP and reducing tax revenue to 15 percent of GDP. This
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exacerbated the national debt, which now exceeds 100 percent of GDP
for the first time since World War II.7
The fundamental question of means that confronts the nation is to the
right side of figure 1. The 201323 lines reflect the Congressional Budget
Office (CBO) projection for the federal budget, optimistically assuming
there is no recession in the future. The gap between 19 percent of GDP
in revenue and 2223 percent of GDP in spending cannot be sustained
indefinitely. Consequently, there is substantial need to reduce all forms of
spending, including defense spending. To make matters worse, increasing
numbers of the baby boom generation are now over 65, living longer, and
receiving Social Security and growing Medicare benefits.
Over the past 50 years, federal government spending has seen an increase in the size of the social safety net (entitlements) and a decrease
in defense. In 1960, for example, 52 percent of the federal budget was
spent on national defense and 21percent on entitlement programs. Today, the roles have more than reversed, with defense comprising just
18 percent and entitlement spending totaling 60 percent of the 2013
budget. Consequently, as reflected in figure 2, as federal spending on
defense is reduced, the growth in individual payments or government
health care spending will likelyand rapidlyabsorb any reductions in
defense spending.

Figure 2. Components of US federal spending, 19682012. Data from Council

of Economic Advisors, Economic Report of the President, table B-79.

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The United States has had this problem beforein 1983when the
nation was in a significant recession, Social Security was rapidly becoming
bankrupt, and the national deficit and debt were approaching historically high peacetime levels. The difference was that political leaders,
primarily Republican president Ronald Reagan and Democrat speaker
of the house Tip ONeill, found a way to solve the fiscal crisis through
compromise, facilitated by a commission headed by Federal Reserve
chairman Alan Greenspan and bipartisan cooperation between Senators
Patrick Moynihan (DNY) and Robert Dole (RKS), which significantly reformed Social Security and extended its solvency by more than
50 years. Reagan and ONeill had to accept higher taxes, lower benefits,
and other reforms, but they solved the problem.8
Unfortunately, the political environment today is characterized by
extreme polarization which significantly limits the chances for coherent
strategic choices to enhance national security. Instead of compromise,
national leaders narrowly averted a debt ceiling crisis with the Budget
Control Act (BCA) of 2011, which prescribed sequestration. Sequestration was viewed as so draconian and counterstrategic that it would
force political leaders to compromise, but it failed to do so. As a result,
when confronted with a fiscal cliff in January 2013, Congress delayed
sequestration until 1 March and then allowed budget formulas instead
of coherent policy to dictate federal spending. The government shutdown and the difficulty in extending the debt ceiling in October 2013
reflect the continuing political paralysis in Washington. The MurrayRyan Bipartisan Budget Act in December 2013 forestalled an immediate
crisis in 2014, but it does not provide substantial movement toward a
comprehensive solution in the future.
Without a national consensus on the systemic budgetary challenges,
cuts in defense programs will have little impact on the national fiscal
crisis. If cutting an Army or Marine division saves $5 billion per year,
such savings would represent merely $5 billion in entitlement reform
that would not be required, tax revenues that would not be raised, or
domestic programs that would not be cut.
What should be done under these economic and political circumstances with regard to force planning? First, defense leaders need to
engage in a credible dialogue about austerity as part of a grand strategy
that includes seeking fiscal balance. As defense spending is cut, those
savings should be used for deficit reductionthat is, to improve the nations
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fiscal position and not for other political priorities. Second, defense leaders
should not only notice but also focus on other parts of government because of their effects on national security. Arguably one of the greatest
threats to US national security is the unchecked expansion of entitlements without commensurate revenues which leads to increased federal
debt, retarded national growth, and further austerity. While some might
argue the military should not comment on domestic programs or entitlement spending, it is not only appropriate, but also essential that military
leaders provide their best judgment about the impact of those programs
on economic security and national defense. Finally, within this context,
defense leaders still need to make strategic choices with regard to
national security priorities.

Current Challenges
Strategy in an age of austerity must carefully consider current defense
spending and the levels from which proposed reductions begin. First,
the historical approach to DoD spending has been for the Army to
receive roughly 25 percent of the defense budget, almost consistently for
the past 60 years. The exceptions have occurred when Army spendingas
a percent of the overall DoD budgetincreases in support of combat
operations during wartime. The fiscal year 2014 budget reflects that
return to the 25-percent level, as shown in figure 3. As sequestration was
imposed, it affected all DoD budget accounts, except military pay and a
few other programs, with a proportional reduction of spending.9 It was
certainly not a strategic decision on how best to take the cuts. It was
the easiest, albeit least thoughtful, method of imposing across-the-board
reductions of the defense budget.
Understandably, defense leaders thought that imposition of cuts
through sequestration was the absence of a strategy, and Secretary of Defense Chuck Hagel directed DoD leaders to conduct a strategic choices
and management review (SCMR) to help ensure the Department of
Defense is prepared in the face of unprecedented budget uncertainty . . .
[and] to understand the impact of further budget reductions on the Department and develop options to deal with these additional cuts.10 In
addition to identifying specific management reforms, overhead reductions, and proposed reductions to military compensation, the SCMR

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50%
45%
40%

Air Force
Navy

35%
30%
25%
20%

Army (at 25% level)

15%
10%
5%

Defense Wide

19
56
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58
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60
19
62
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64
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66
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68
19
70
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72
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74
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76
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78
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80
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82
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84
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86
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88
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90
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92
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94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18

0%

Figure 3. Budget shares by service, 19562018. Data from DoD Comptroller,

National Defense Budget Estimates for FY 2014, table 6-13.

identified, but did not decide between, two broad options going forward,
each of which would represent a distinct strategic direction. Secretary
Hagel outlined these options as follows.
Approach one concentrates on technology and acquisition and trades
size for high-end capability:
The Army would be reduced from the 490,000 currently planned to
between 380,000 and 450,000 active-duty Soldiers for the future force.
The Navy would be reduced from 11 carriers to 8 or 9 carriers.
The Marine Corps would be reduced from 182,000 to between
150,000 and 175,000 active-duty troops.
Modernization would continue, especially against anti-access/areadenial threats with long-range strike, submarine cruise missiles,
joint strike fighters, and special operations forces.
Approach two concentrates on force structure and trades high-end
capability for size:
The Army, Navy, and Marines would generally retain projected sizes
to sustain capability for regional power projection and presence.
Modernization programs would be canceled or curtailed, with
slower growth in cyber and other programs.
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Defense writ large, in effect, would take a decade-long modernization holiday.

Such decisions dictate strategy, as General Powell noted in 1989. While
Secretary Hagel made no decision between these approaches, these kinds
of choices illustrate substantial tradeoffs among defense priorities and
imply the nations strategy. Either approach would be substantially different from the current cuts and would represent a fundamental strategic
choice. Mark Gunzinger of the Center for Strategic and Budgetary Assessments argues that the 1993 bottom-up review was the last time the
Pentagon created a new vision for how the U.S. military should prepare
to meet the nations security challenges.11 If adopted, either of the
SCMRs fundamental approaches would have a similar strategic impact
on national defense to that of the 1993 bottom-up review, which provided the general vision for DoD force planning over the past 20 years.
For those looking for a strategic choice, the Quadrennial Defense
Review (QDR) 2014 was disappointing. Instead of articulating a clear
choice, it made the force smaller overall and emphasized the calamitous
impact of continuing sequestration-level cuts. In an uncharacteristically
blunt section of the QDR titled Implications and Risks of SequestrationLevel Cuts, the report concludes:
The return of sequestration-level cuts in FY2016 [the current law] would significantly reduce the Departments ability to fully implement our strategy. . . .
[R]isks associated with conducting military operations would rise substantially.
Our military would be unbalanced and eventually too small and insufficiently
modern to meet the needs of our strategy, leading to greater risk of longer wars
with higher casualties. . . . Ultimately, continued sequestration-level cuts would
likely embolden our adversaries and undermine the confidence of our allies.12

In this QDR, the DoD has forestalled making fundamental strategic

choices and instead has declared to Congress and the public that if we
follow the current law, we will have longer wars, more casualties,
emboldened adversaries, and undermined confidence in our nations
security. This statement of the consequences of budget decisions made
without considerations of strategy could hardly be clearer. It appears to
be falling on deaf ears.
When the nation eventually does make a strategic choice, it is worth
noting from a budgetary standpoint that approach two described by
Secretary Hagel is more consistent with most of the defense decisions
that have been made by the United States in previous postwar periods. The

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need for military engagement in the world as either a global superpower or

the leader of the West during the Cold War has meant that procurement
budgets either rose or fell much more rapidly than the overall defense
budget (see fig. 4) as services relied less on always replacing the latest
equipment. Instead they continued research and development (R&D)
and then procured equipment if and when funding became available.13
The contrast is clear as the procurement line in figure 4 (dashed line)
has much greater annual fluctuations (both up and down) than either
the defense budget as a whole (heavy solid line) or military personnel
spending (light solid line). Since it is unlikely that the armed forces will
confront a technologically superior military competitor in the next
decade, deferring fleet-wide procurement of new technology may be the
best way to allocate scarce funding in the near future.

Figure 4. Annual changes in spending components, 19602018. Data from

DoD Comptroller, National Defense Budget Estimates for FY 2014, table 6-8.

The best example of deferring modernization was the Army during

the 1970s when it maintained its force structure of 16 divisions and
770,000 Soldiers but had little money for modernization. GEN Creighton
Abrams, chief of staff of the Army at the time, put its limited R&D
funding into the Big Five weapon systems: the Abrams tank, Bradley
fighting vehicle, Blackhawk and Apache helicopters, and Patriot missile.
He also streamlined Army organizations, improved acquisition practices,
and revitalized training. Then, when funding was available in the 1980s,
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procurement could be increased to provide the basic systems that remain

the mainstay of the service today. Some investment in R&D as a hedge
against technological surprises is appropriate, but during this period of
strategic uncertainty and fiscal austerity, large-scale procurement should
not be funded at the expense of forces that can shape the current international environment. And, as Russian expansionism shows, the international environment is neither static nor unthreatening.
Strategy and force planning concepts are fundamentally different in a
time of austerity, because the defense budgeting process that may work
with spending increases has significant problems executing budget reductions. To make strategic choices effectively, leaders must understand the
context of their decisions, which includes the current US fiscal and political
circumstances that make strategic planning extremely difficult. As a result,
the absence of strategy was implemented through the sequestration cuts
imposed by the BCA of 2011, which reduced spending across the board.
There remains a chance for coherent strategic choices, and the Department of Defense has identified fundamental choices in the SCMR. But,
so far, the DoD has avoided making those choices in the 2014 QDR,
preferring to wait until there is greater relief from sequestration-imposed
austerity. If a strategic choice is made, it may help resolve the connection
between ends, ways, and means and be an important step forward in
developing an effective US grand strategy.
BG Michael J. Meese, PhD, USA, Retired
Chief Operating Officer
American Armed Forces Mutual Aid Association
Former head of the Social Sciences Department,
US Military Academy
Notes
1. Colin Powell, The Changing Foreign Policy Environment, lecture to the Woodrow
Wilson School at Princeton University, 13 February 1989.
2. For further insights into decremental spending, see Michael J. Meese, Defense Decision Making under Budget Stringency: Explaining Downsizing in the United States Army
(PhD diss., Princeton University, 2000).
3. Of the 49 years of growth, more than half (32) included real (inflation-adjusted) growth
and 17 included nominal growth. Calculations based on DoD Comptroller, National Defense

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Budget Estimates for FY 2014 (Green Book) (Washington: DoD, May 2013), table 6-1, recording
changes in total obligational authority from fiscal years 1948 to 2013.
4. Allen Schick, Incremental Budgeting in a Decremental Age, Policy Sciences 16 (September 1983): 125.
5. Carl Lieberman, Making Economic Policy (Englewood Cliffs, NJ: Prentice-Hall, 1991), 19.
6. Calculations based on data from Council of Economic Advisors, Economic Report of
the President (Washington: Government Printing Office, 2013), tables B-80 and B-1 for fiscal
years 19702013 (hereafter EROP); and Congressional Budget Office (CBO), Budget Projections
February 2013 Baseline Projections (Washington: CBO, 5 February 2013), table 1.
7. Calculations based on EROP, table B-79. The 2013 national debt is estimated at $16.7
trillion, which is 107.7 percent of gross domestic product (GDP). Of this total, $11.9 trillion
(77.5 percent of GDP) is debt held by the public, and the balance is the portion of debt held
by government agencies (such as trust funds).
8. See Robert G. Penner, The Greenspan Commission and the Social Security Reforms
of 1983, in Triumphs and Tragedies of the Modern Presidency: Seventy-Six Case Studies in Presidential Leadership, ed. David Abshire (Westport, CT: Praeger, 2001), available at http://www
.thepresidency.org/storage/documents/Greenspan_Commission_and_Social_Security
_Reforms.pdf.
9. Sequestration could have also affected military pay, but Pres. Barack Obama chose to
exempt military personnel from the automatic reductions for both fiscal years 2013 and 2014.
See Andrew Tilghman, Military Pay to Be Exempt from Sequestration in 2014, Army Times,
9 August 2013.
10. See Statement on Strategic Choices and Management Review as delivered by Secretary
of Defense Chuck Hagel, Pentagon Press Briefing Room, Wednesday, July 31, 2013, http://
www.defense.gov/Speeches/Speech.aspx?SpeechID=1798.
11. Mark Gunzinger, Shaping Americas Future Military: Toward a New Force Planning
Construct (Washington: Center for Strategic and Budgetary Assessments, 2013), ii.
12. Quadrennial Defense Review 2014 (Washington: DoD, 2014), 53.
13.Calculations based on DoD Comptroller, National Defense Budget Estimates for FY
2014, table 6-8.

Disclaimer
The views and opinions expressed or implied in SSQ are those of the authors and
are not officially sanctioned by any agency or department of the US government.
We encourage you to send comments to: strategicstudiesquarterly@us.af.mil.

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