Issue Date: September 06, 2004
Special Report: Danger signs
With dire warnings of ‘death spirals’ and ‘perfect storms,’ the Air Force faces what experts say could be its biggest crisis to date
By Gordon Trowbridge and Laura M. Colarusso
Times staff writers
The Air Force is facing a “perfect storm” of financial pressures, a volatile mix that defense experts say means a future of fewer airmen in uniform and fewer aircraft on the flight line.
A combination of factors, from the rising cost of prescription drugs to the rising cost of complex weapons systems, has made nearly everything the Air Force buys — both airplanes and labor — more expensive.
At the same time, outside influences like looming retirement costs for baby boomers, a slower economy and ballooning budget deficits mean there almost certainly will be less money available for expensive defense programs.
The impact: Air Force leaders are on the brink of making difficult tradeoffs, including decisions on whether to slash important modernization programs or cut personnel, perhaps dropping thousands of airmen from what many believe is already an overworked force. Navy officials have delivered their answer to a similar set of problems — and the result will be a force reduced by 60,000 sailors by early next decade.
If the Air Force took a similar course, it could mean an early end to thousands of careers, and more work plus limited options for those who remain.
“Part of the solution is almost certainly” to cut airmen, said defense analyst Stephen Kosiak of the Center for Strategic and Budgetary Assessments, a Washington, D.C., think tank.
The budget math is compelling: Military planners say every 10,000 airmen means roughly $1 billion a year in personnel costs. The Air Force already is battling for more Raptors, struggling to find money for its planned Joint Strike Fighter buy, desperate for more tankers and airlifters — making that $1 billion or more for personnel a tempting target.
“You literally have two options: buying fewer things or buying fewer people,” said Christopher Hellman, a defense budget expert at the Center for Arms Control and Non-Proliferation, a think tank based in Washington, D.C. “Choices that have been delayed for years are now being forced upon the services.”
Though predicting the future is difficult, future cuts could go far beyond the Air Force’s ongoing effort to cut more than 20,000 airmen. That effort aims to get the service within the manpower ceiling of about 360,000 troops set by Congress. What is likely on the way, these analysts suggest, is a permanent lowering of that ceiling, something the Navy already is doing.
Even then, experts say, no amount of personnel cuts is likely to free up enough scarce cash to buy all the new airplanes the Air Force has planned. From expensive tactical warplanes, such as the F/A-22 and Joint Strike Fighter, to airlifters and tankers, the money simply isn’t available to buy everything on the Air Force shopping list, experts like Kosiak say.
“Even cutting force structure probably won’t allow the Air Force to go forward with all its modernization plans,” Kosiak said.
The Air Force is making plans to retire hundreds of F-16 fighter jets already in its inventory. Defense News, citing defense industry sources, reported in August that the Air Force and Navy plan to scale back their buys of the F-35 Joint Strike Fighter by one third.
If the Air Force is forced to cut back on planned buys of the F/A-22, F-35, C-17, new tankers and other aircraft, it will continue a decades-long pattern of a shrinking — if still potent — air fleet, one forced to maintain more and more aging airplanes because the service can’t afford to replace them.
That pattern — dubbed a “death spiral” by one of the leading critics of defense budget planning — means a smaller, older fleet that tests the limits of just how much the Air Force can do with how little.
Something’s gotta give
To be sure, the Air Force has not formally announced cuts in people or aircraft or in its plans to buy modern new planes.
In response to questions on the issue, Chief of Staff Gen. John Jumper issued a written statement focusing on the service’s current “force shaping” cuts of more than 20,000 troops. “We need people who want to serve our Air Force and meet our requirements to stay,” Jumper said in the statement. It did not address the longer-term question of whether, when those cuts are complete next fall, more might be necessary as the bills for new airplanes come due.
But Air Force leaders have addressed the issue in the past. In February, Secretary James Roche told lawmakers on the House Armed Services Committee, “we see our Air Force getting smaller as we introduce new, highly capable manned and unmanned systems.”
Predicting the future on these issues is a perilous effort, because the ultimate answers depend on everything from the ingenuity of low-level Air Force planners to the upcoming presidential election to the performance of the U.S. economy a decade or more from now.
But even the Air Force’s biggest supporters see difficult decisions ahead.
“It’s not just the Air Force. We all face this challenge,” said retired Lt. Gen. Donald Peterson, now the head of the Air Force Association, a private advocacy group. Peterson acknowledged that without continued growth in defense budgets, “we’ve got to give one way or the other,” either in people or equipment.
Across the hall in the Pentagon and across the Atlantic Ocean, the Air Force can see examples of how other military organizations have tackled similar challenges.
Two weeks ago, a senior Navy personnel official revealed a plan to cut 60,000 sailors by 2011, a plan the Navy freely admits is necessary if it’s going to be able to afford the new aircraft and ships it needs.
That the Navy was planning to reduce its manpower wasn’t news, but the size of the cuts – more than double what had earlier been discussed — alarmed supporters like the Fleet Reserve Association, an advocacy group for Navy spending.
Some of the measures the Navy will use, such as early retirement boards for officers and senior NCOs, are likely to raise unpleasant memories of the 1990s drawdown, when thousands of military members were kicked out of uniform. Rear Adm. Gerald Talbot, the personnel official who discussed the plan, said the Navy doesn’t want to repeat those mistakes, but that would probably require millions of dollars in early-retirement benefits.
Even overseas, a similar set of circumstances is prompting deep cuts in the United Kingdom’s military: Prime Minister Tony Blair’s government has said it wants to cut more than 20,000 uniformed and civilian defense workers and three Royal Air Force squadrons, along with army and navy force cuts.
A perfect storm brews
To Peterson and other U.S. military supporters, the solution to the Air Force’s dilemma is clear: Defense budgets must grow fast enough to allow the Air Force to buy its planes and keep its people.
“The nation has got to make a decision about supporting the force or not,” said Peterson, who argues the nation is still spending a relatively small slice of its economic output on defense.
But outside analysts suggest the budget picture is only likely to darken. Understanding why requires a tour through the messy world of federal budget politics.
Since the late 1990s, and especially since the terrorist attacks of Sept. 11, 2001, the defense budget has skyrocketed. The nation will spend about $454 billion on defense this year, according to the federal Office of Management and Budget. That’s 45 percent more spending, in inflation-adjusted dollars, than in 1999.
At that pace, budget analysts say, the Air Force probably still would have to make modest cuts in people or procurement. Unfortunately for the Air Force, almost no one expects that pace to continue.
“It’s possible defense budgets will keep going at the pace they’ve set since 9-11, but it’s probably not the way to bet,” said Kosiak, the CSBA analyst.
The reasons have almost nothing to do with the Air Force. For example, the looming retirement of the baby boomer generation will soon begin placing enormous pressure on federal spending, as the aging Americans begin to tap Social Security, Medicare and other federal entitlements.
And the government already is spending billions of dollars more than it’s taking in — $670 billion this year, according to the latest estimate. Whether the blame lies with recession and terrorist attacks, as Republicans argue, or with Bush administration tax cuts, as Democrats allege, no one believes such massive deficits can continue for long — meaning that at some point, spending is likely to slow.
Air Force Lt. Gen. Duncan Mc- Nabb, the service’s outgoing deputy chief of staff for plans and programs, told a defense conference earlier this year that the combination of budget pressures is a “perfect storm” that will hamper the Air Force’s ability to buy what it needs.
Hellman of the Center for Arms Control and Non-Proliferation said that while many in the Air Force hope that Congress provides more money to bail the service out of its budget crunch, such hopes may be naïve.
“The GOP is more interested in tax cuts than fighter aircraft,” he said. Likewise, Democrats in Congress or a future Kerry administration are likely to put more emphasis on cutting the deficit and on social spending.
Ballooning personnel costs
The budget equation is only part of the problem. At the same time the available money is likely to shrink, the cost of fielding airmen and aircraft is growing, and the service is spending more to buy less.
On the personnel side, something that has undoubtedly helped military families and retirees — significant boosts in pay, allowances and benefits — is now adding to the crunch.
With recruiting and retention in the doldrums during the late 1990s, Congress and the Defense Department began boosting compensation: targeted pay raises for NCOs, higher housing allowances, bigger enlistment and re-enlistment bonuses. The result: Pentagon spending per service member on pay and benefits went up by more than 40 percent from 1999 to 2003, or about four times as fast as inflation.
Benefits for retirees, and particularly health-care spending, may be an even bigger drain. Tricare, the military health system, saw a 7 percent increase in new users in 2003, despite the fact that the number of troops in uniform remained flat. Tricare officials attribute the jump to military retirees and their families switching to Tricare from private programs. The Bush administration’s 2005 budget request for health programs is more than $17 billion, about 13 percent bigger than 2004’s.
“The costs of military personnel have gone up a lot in the last five years, especially with the expansion of Tricare, the repeal of the redux retirement system and some pay table reform which didn’t cut anybody’s salary and boosted a lot of people’s,” Kosiak said.
What makes that especially tough on the budget, Kosiak said, is that much of the increase is in the form of health-care entitlements — promises of future benefits that, from a political and moral standpoint, would be hard to roll back.
So if the Pentagon can’t reduce the amount of money it spends per airman, the obvious choice is to cut the number of airmen.
Such cuts are much more appealing than they used to be. Hellman points out that personnel cuts yield not only short-term financial gains — immediately reduced spending on pay and benefits — but also increased savings over time, as fewer troops in uniform yield fewer retirees drawing health and retirement benefits in years to come.
Again, Air Force supporters argue that cutting active airmen to pay for benefits to retired troops is no solution.
“We’ve had to spend a lot of money to take care of … retirees and veterans, and that was the right thing to do,” said AFA’s Peterson. “I think we have to shift more of the budget now to the active force. I don’t think we can put ourselves in an either-or position.”
Another possible either-or: The needs of other services, especially the Army.
Heavily burdened by wars in Iraq and Afghanistan, the Army is in the midst of what it calls a temporary manpower increase of about 30,000 soldiers. Many in Congress have argued for a permanent increase, which the Bush administration has rejected. Sen. John Kerry, the Democratic nominee for president, has proposed a permanent increase of 40,000 ground troops.
Spending for a bigger Army might seem to increase the budget pressures on the Air Force. But, Hellman said, budget politics often don’t work that way.
“If you see an increase in the Army, I would submit that Navy and Air Force backers would look for their piece of the pie, too,” he said. “I have yet to see any of the services say, ‘We know the other guy needs money, so take some of ours.’.”
Terminal aircraft costs
Personnel expenses are, of course, only one side of the equation. Weaponry also is becoming a spend-more-for-less proposition. The phenomenon is known among a small but vocal group of defense analysts as the “defense death spiral,” an accelerating pattern that finds the services, and the Air Force in particular, with rapidly aging weaponry and less of it.
The concept is most closely associated with Chuck Spinney, a former Pentagon analyst and author of a briefing on the issue that has assumed scriptural status among Pentagon critics.
Spinney’s hypothesis is that budget pressures combined with poor acquisition decisions are causing the Air Force to shrink and age. This revelation came to light during the post-Vietnam drawdown, Spinney said, when the Pentagon slashed the procurement budget. Fewer new airplanes meant the existing fleet had to stay in service longer, making it more expensive to maintain — and therefore leaving even less money to buy new aircraft. Less procurement money meant older planes stuck around even longer, increasing maintenance costs and repeating the cycle again and again.
Jacques Gansler, a former undersecretary of defense for acquisition, technology and logistics in the Clinton administration, helped popularize the “death spiral” phrase.
“We increasingly have to spend more on maintenance and less and less on modernization,” Gansler summed up. “Eventually we end up with very old equipment that doesn’t work, and we’re spending all our money on trying to maintain it because we don’t have any new equipment.”
Gansler, vice president of research at the University of Maryland, estimates that about $1 billion would be taken out of acquisition programs annually to cover maintenance costs above what the services optimistically budgeted.
Spinney argues that next-generation weapons cost more than the systems they replace, a view substantiated by Kosiak’s estimation that new weapons typically cost 2 to 3 percent more than their predecessors after inflation is factored in. The $170 million F/A-22 jet is a perfect example, Spinney says, because the Air Force could buy for that price almost five F-15s, which cost about $34.7.
Add to that the instability of contractor cost estimates and the problem compounds. Again, Raptor provides the critics a prime example.
“In the beginning, we were told that the Air Force would buy 800 aircraft for $40 billion, an estimate that was soon reduced to 750 aircraft for an increased $64.2 billion price tag,” Eric Miller, a senior defense analyst for the Project On Military Oversight, wrote to Congress in April 2003. “In 1991, the number of aircraft that amount would purchase declined to 680; in 1997, 339; and last year, only 303. Last month, the [Government Accountability Office] reduced the estimated number of buys to only 276.”
No easy fix
Because of the issues with buying new jets, aircraft must stay in the inventory longer — sometimes much longer than their anticipated service lives, as in the case of the KC-135 aerial refueling jet — and the average age of the fleet rises.
According to the Air Force’s annual statistical digest, the average age of the active duty fleet has risen steadily since 1974. Thirty years ago, the average age was 9.6 years. By 2000, that number had increased to 21.2 years, and it’s still climbing. Today, it’s closer to a 23-year average, Air Force Secretary James Roche has said.
Isolating the price tag related to aging aircraft is tricky, but few disagree with the basic math. The older an aircraft is, the more expensive it is to maintain.
Roche has said aircraft maintenance costs are rising, with some fleets experiencing a 7 to 13 percent spike annually above inflation.
The solutions are unpopular, Spinney and Gansler say.
“They can alleviate the pressure in the near term by shrinking the force,” Spinney said. “They’re not willing to address the fundamental problem, and that is operating costs and procurement costs are growing faster than budgets. They’re not willing to discipline the contractors.”
The Air Force already has made cuts of the type Spinney and other critics describe, and more are likely on the way.
Air Force and industry officials say the service is drawing up plans to retire close to 600 of its F-16s and a handful of its F-15 fighters, a moved designed to free up money that would otherwise be spent on maintaining and upgrading the aging jets. The Air National Guard, which operates some of the oldest F-16s, would bear the brunt of the cuts at a time when the military is leaning hard on the Guard to perform homeland defense missions such as combat air patrols.
The Air Force also has asked Congress to retire 10 of its 51 F-117 Nighthawks. Two years ago, the Air Force retired 33 of its 93 B-1 bombers because they could not afford to keep the fleet combat-ready.
And the Air Force’s spending plan for 2006 to 2011 includes about one-third fewer JSFs than planned, Defense News reported.
Most independent observers believe — and a few high-ranking Air Force officers agree — that the Air Force will get smaller, but few can predict how small.
McNabb, the outgoing chief of plans and programs, said in a June 22 speech that aircraft retirements are on the way.
“As we modernize … we can retire substantial numbers of legacy ‘tails,’” McNabb said. “We save on long-term operations and maintenance costs, and, even though we are physically smaller, we actually increase our net capabilities.”
Gen. Hal Hornburg, commander of Air Combat Command, concurred a day later, but was unable to say at what point the Air Force will be too small.
“I predict that we will be significantly smaller in the next 20 years,” he said, adding that smaller does not mean less capable, because the F/A-22 and JSF have stealth and integrated avionics and, therefore, will be better than the F-15s and F-16s they replace.
But there are those who argue that numbers of aircraft is a capability in itself.
“You can replace only so much force structure with capability,” said a Pentagon civilian with knowledge of Air Force plans. The official spoke on condition of anonymity because of the sensitivity of speaking publicly on the issue. “It’s tough to know how far you can go with it.”
Right now, the Air Force says it has funding to buy 277 F/A-22s — 104 short of the 381 officials say they need to fully equip 10 Air Expeditionary Forces. And the Air Force wants the F/A-22 to be the service’s premier air superiority weapon and defend the homeland against cruise missile threats.
“The F/A-22 has great capability,” the Pentagon official said. “But how is the Air Force going to do so many things with the F/A-22 when they have so few F/A-22s?”
http://www.airforcetimes.com/story.php?f=1-AIRPAPER-319165.php
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