WSJ | Defense Nominee Is Budget Warrior

June 10, 2011 § 3 Comments

Leon Panetta awaits confirmation. // Getty Images

By NATHAN HODGE, June 9, 2011

Secretary of Defense Robert Gates’s mandate when he took office in late 2006 was to fix Iraq. His successor faces another difficult challenge: help fix the federal budget.

Central Intelligence Agency chief Leon Panetta, President Barack Obama’s pick to head the Pentagon, faces a Senate confirmation panel Thursday. The former congressman is a shoo-in for Senate approval, but Washington insiders expect the hearing may offer new clues about plans to rein in federal spending.

Defense-industry officials, lobbyists and congressional aides predict Mr. Panetta will either accelerate or even increase the $400 billion in cuts that the White House has already ordered at the Pentagon over the next 10 years. Proponents of stable military spending worry that Mr. Panetta’s background as President Bill Clinton’s budget director, coupled with the anti-deficit mood in Congress, could signal the end of a variety of weapons programs.

“Gates was sticking up for military spending, but Panetta, coming from [the Office of Management and Budget], is going to have a pretty sharp pencil,” said a defense-industry lobbyist. “So people are pretty nervous.”

Added to the mix is a debate over Afghanistan war strategy, which has become entwined with questions about whether the current, manpower-intensive counterinsurgency approach is cost effective. The administration is deciding how many troops to begin withdrawing next month, and Mr. Panetta’s testimony may telegraph White House thinking. A congressional aide said discussion of troop numbers “is going to take up a lot of time at the hearing.”

“I expect to see more activity on federal spending and federal revenues than on a new national-security strategy over the next year,” said Matthew Leatherman, a defense-budget analyst at the non-partisan Stimson Center.

The U.S. military budget, currently around $700 billion a year, including the cost of the wars in Iraq and Afghanistan, is the largest share of the federal budget after the combined costs of Social Security, Medicare and other mandatory benefits. Total federal spending for the year ending Sept. 30 is expected to reach $2.6 trillion.

Defense spending has grown dramatically since the terror attacks of Sept. 11, 2001. The $691 billion spent in fiscal 2010 was more than double the inflation-adjusted $316 billion in fiscal 2001. Yearly percentage increases in defense spending crested at 7.9% in fiscal 2008, and the administration budget plan in February projected no annual growth in base, or non-war, defense spending by fiscal year 2015. The $400 billion cuts to projected spending would go further, requiring real declines in the base defense budget.

Mr. Gates, who is due to leave office at the end of the month, was perceived as a defender of the Pentagon’s interests in internal administration debates.

Speculation now centers on what Mr. Panetta’s priorities will be and if he will shake up the top civilian leadership within the Department of Defense.

Analyst Jim McAleese expected to see a “night-and-day difference” between the management styles of Messrs. Gates and Panetta, and predicted Panetta would take on the politically charged issues of military pay, pensions and healthcare.

A Pentagon working group is currently reviewing roles and missions for a report that is likely to shape budget for the fiscal year that begins Oct. 1, 2012, which is to be submitted to Congress in February.

Mackenzie Eaglen, a defense-budget expert at the conservative Heritage Foundation, said the debt-ceiling debate could even lead Congress to slice money from the Pentagon’s fiscal 2012 budget request, which is working its way through the legislature.

Some lawmakers have already recommended cuts beyond what Mr. Obama asked for fiscal 2012. A draft version of the defense appropriations bill prepared by the GOP-controlled House would provide $530 billion for the Pentagon’s base budget, $9 billion below the president’s request.

WSJ | Defense Nominee Is Budget Warrior

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