The Budget Deal’s New Winners and Losers at D.O.D.
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The Fiscal Times
December 17, 2013

There is growing hope that the budget deal passed by the House last week will also pass the Senate, giving federal agencies a firm idea of just how much money they'll have to spend for the first time in years.  

Hope that the budget will pass is especially strong at the Pentagon, where officials have been warning for months that sequester, combined with planned spending reductions, would hamper U.S. readiness. Before the budget passed, DOD’s budget would be slashed from $527 to $475. If the deal passes the Senate, DOD's budget would be $498 billion.

Related: Hagel Picks a Fight with the Pentagon, Congress

This means that DOD's will avoid cuts that military planners warned would be calamitous. Still, with $29 billion less, some at DOD are going to feel pain and there are clear winners and losers.

Winners

Chuck Hagel - There were some in Washington that didn't believe Hagel had the chops to make the difficult decisions necessary to reform DOD spending. Now, he'll be able to delay or completely eliminate many of the hard choices he was faced with.

Hagel's relief was evident in his comments after the House budget deal was passed.

“This agreement does not solve all of DOD's budget problems, but it helps us address our readiness, especially in 2014, with putting more money back into training in particular, and procurement,” Hagel said after the House passed the bill. “It also gives us some new certainty and predictability for our planning, for our budgeting over the next two years, which is particularly important.”

The Air Force and the Navy - In the past, the Pentagon had downplayed inter-service rivalries by giving each roughly the same base budgets to the Army, Navy and Air Force. Hagel warned last month that those days are coming to an end.

“We’re challenging every past assumption, every past formula," Hagel told The New York Times.

Two factors hint that the Air Force and Navy will benefit from this change. First is the pivot toward Asia. As the recent air space dispute with China showed, air superiority is very important in that part of the world. That benefits the Air Force.

The Navy benefits because of the shift from a large war model to a small one. More and more operations are going to be conducted by Special Forces, which reside primarily in that branch.

The Defense Industry - Defense industry groups have been warning about the dangers of sequestration for nearly a year. But their relative silence to the budget deal is a sign of relief. There will be cuts to programs, but those cuts aren't nearly as bad as what they were expecting.

In fact, they urged the budget be passed before the House voted on it in a letter signed by the heads of eight industry groups. 

“On behalf of the companies and members of the Aerospace Industries Association, the Air Force Association, the Association of the United States Army, the Navy League of the United States, the National Defense Industrial Association, the National Guard Association of the United States, and the Shipbuilders Council of America, we urge you to take up and pass" the defense budget, they wrote.

Related: The 3 Biggest Losers in a Slashed Defense Budget

LOSERS

Veterans – Some vets would be negatively impacted immediately. It contains a cost of living adjustment cut equal to one percent of inflation. After they turn 62, the one percent kicks back in.

Related: Vets’ Programs on the Chopping Block As DOD Cuts Back

This adjustment is just the start of cuts to veterans programs. Some, like the Veterans Employment and Training program, which helps veterans find jobs in the private sector, has lost $4 million since sequestration began. The Marine Corps tuition assistance program has already been subject to two cuts due to sequestration. More cuts like these are expected in the near future.

Soldiers - The average soldier is also going to lose out. Hagel has warned repeatedly that cuts to pay, health care benefits and other forms of compensation need to be cut. And many long-time defenders of the military on Capitol Hill have shown a willingness to tackle compensation reform.

"Without serious attempts to achieve significant savings in [compensation] – which consumes roughly half of the DOD budget and is increasing every year – we risk becoming an unbalanced force," Hagel said in a key November speech. "One that is well-compensated, but poorly trained and equipped, with limited readiness and capability."

The Army and Marines - DOD's focus on air superiority and Special Operations lessens the importance of the Army and Marines in the future. Hagel has already outlined a number of changes to how the Army trains and equips its troops. Right now, the Army plans to reduce the size of force from 570,000 to as low as 380,000 over the coming years. At the same time, the Marines would be cut from 200,000 to 150,000.

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An editor-at-large for The Fiscal Times, David Francis has reported from all over the world on issues that range from defense to border security to transatlantic relations.