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UNCLASSIFIED
US Special Operations Command
The “New” Fiscal
Environment
(The anticipated fiscal
environment)
ASMC Luncheon
September 2009
Mr. Mark Peterson
U.S. Special Operations Command
Chief Financial Officer/Comptroller
The overall classification of this briefing is:
Unclassified
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Ver 4c
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The Future has arrived
(Sooner than expected !)
"I would argue that the
most serious threat to the
United States is not
someone hiding in a cave
in Afghanistan or Pakistan
but our own fiscal
irresponsibility.”
CBS 60 Minutes, March 2007
David Walker
GAO Comptroller General
Nov 98 – Mar 08
“The fiscal wake-up tour”
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The Economy is a National Security Issue
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The Fiscal Environment
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Federal
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Department of Defense
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The New Administration
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THE FEDERAL VIEW
The United States Constitution entrusts the `power of the purse' to
the Legislative Branch of the United States.
-------------------------------------------------------------------------------------------------• Article I, section 8: Congress is empowered “[t]o lay and collect
Taxes, Duties, Imports, and Excises to pay the Debts and provide for
the common Defense and General Welfare of the United States.”
• Article I, Section 9: “[n]o money shall be drawn from the Treasury,
but in Consequence of Appropriations made by Law.”
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2009 Federal Budget
Discretionary vs. Entitlement
Approximately $3 Trillion Dollars

Sixty-two percent of the
Federal Budget is
mandatory spending
(including interest)
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DOD Budget is more
than 56% of all Federal
discretionary spending
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Some parts of DoD
“Discretionary” spending
acts like an “entitlement”
(e.g., Military Health Care and
Retirement)
Source: FY 2009 Budget of the United States Government
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The Fiscal Environment
(Historical View compared to GDP)
Downward Pressure
4% GDP
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$568B
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Key Players in the Federal Discussion
Director of OMB Peter Orszag
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President Obama
“Peter has been one of our nation’s leading voices on
budgetary issues…he doesn’t need a map to tell him
where the bodies are buried in the federal budget. He
knows what works, and what doesn’t.” President Obama
commenting on Mr. Orszag as the new Director of OMB, November 25, 2008
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Project for National Security Reform
(PNSR)
The Project for National Security Reform recently published its report
highlighting the need for a “whole-of-government strategic planning
document that outlines national objectives, priorities, and specific actions for
improving interagency coordination and operational planning.
- Resource implications: Shift of DoD $$ to other Agencies
“Our country is wearing concrete shoes in a security
environment that demands speed and agility. The need for
fundamental reform is urgent and the consequences of inaction
are dire.” James Locher III, PNSR Executive Director
National Security Advisor
James Jones
Dennis Blair &
UNCLASSIFIED James Locher III
Key participants of the PNSR effort included retired Admiral
Dennis Blair, Director of National Intelligence and retired
General Jim Jones, National Security Advisor
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Federal Summary

The National Economy is a National Security Issue

Wake-up call came early: Recession and failure of the mortgage and
banking industry. Unemployment will continue to rise.
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Short Term: The domestic economy will take priority over all other
funding issues in the Federal Government.
 All Budget decisions will be heavily influenced by the Recession
 Next major issue will be the FY 2011 President’s Budget (How much can
we afford for Defense - -and what kind of Defense?)
 Anticipate a historic Budget fight for PB-2011 as Agencies wrestle over
scarce dollars

Long Term: Entitlement spending must be addressed. Health care
reform will be initial focus with tax increases and “means testing” an
inevitable part of the equation (personal opinion).
 Funding the “full instruments of national power” for security issues will
be a theme in the FY 2011 President’s Budget
Fiscally
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speaking: we are in “uncharted” waters as a nation
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THE DEPT OF DEFENSE VIEW
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President meets with Senior military leaders
“It’s bad….but not nearly
as bad as the economy”
- Informal remarks by
President Obama after
receiving briefs on the
current situation in Iraq and
Afghanistan with the Joint
Chiefs of Staff. ‘Meet the
Press’ 2/2/09
President Obama meets with the Chairman of the Joint Chiefs of Staff and the
Service Chiefs on January 28, 2009.
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FY 2010 DoD Budget
(Current dollars in Billions)
Totals
Base FY 2001 – FY 2009
GWOT FY 2001 – FY 2009
Enacted Total
3,639
884
4,519
DoD Base Budget & Non-GWOT Supps.
GWOT Funding
Source:
FY 10 / 11 OCO Request
PBR 11 Position
DRDW Warehouse Database FY 2001 – FY 2011, Government Accounting Office FY 2001- 2009 GWOT
GWOT Request Information Database (GRID), FY11 Request in PresBud “The New Era” Feb 2009
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Numbers may not add due to rounding
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DoD Top-Line Budget
1948 – 2010
(FY 2009 Constant Dollars in Billions)
(FY 2009
$ in Billions)
9-11,
Afghanistan,
Iraq
750
Korea
Reagan
Build-Up
Vietnam
Cold War
Ends
500
250
0
1948
1958
1968
1978
1988
1998
2008
Notes: FY 1949 – 2010 data includes supplementals, as applicable
Source: Department of Defense National Defense Budget Estimates for FY 2008, Budget Authority in 2009 Constant Dollars
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DRAFT PRE-DECISIONAL
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5/23/2017 2:11:05 AM
President’s DoD Budget Submit
with FYDP Projections
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800
High Point
Constant FY 08 $ (Billions)
700
Supplemental/GWOT
Overseas
Contingency
Operations
600
500
Actual
400
Carter
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Reagan I
Reagan II
G. Bush
Clinton I
Clinton II
G.W. Bush I
Fiscal Year
President
submitting budget
G.W. Bush II
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
200
1980
300
Obama
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Key DoD Leader perspectives
“We must have the courage to make hard choices.
Any necessary changes should avoid across-theboard adjustments, which inefficiently extend all
programs.”
Secretary Gates testifying before the SASC on Jan 29, 2009.
{Referring to FY-10 budget discussions and noting
procurement and acquisition reform as one of the biggest
challenges facing the pentagon}
Robert Gates, Secretary of Defense
‘The global financial crisis is threatening U.S.
security options abroad. The financial meltdown
will force a delicate balance between national
security and federal budgets.’
Paraphrased by USA Today, Feb 3, 2009
Admiral Mullen, Chairman of Joint
Chiefs of Staff
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-----------------------“We’ve got to fund the wars we are in. The most
expensive part of our budget is our people, and
there isn’t a lot of flexibility with respect to people
unless you start reducing forces.”
Adm Mullen indicating that the procurement budget will likely
be the bill-payer as the Department puts its PB-10 budget
together.
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Key OSD Leader perspectives
“The defining principle of the Pentagon’s new National
Defense Strategy is balance. The U.S. cannot expect to
eliminate national security risks through higher defense
budgets…The military and civilian elements of the U.S.
national security apparatus have responded unevenly
and have grown increasingly out of balance.” - SECDEF
SECDEF Gates from, “A Balanced Strategy: Reprogramming the
Pentagon for a New Age” Foreign Affairs, Jan/Feb 2009
SECDEF Gates and
Prior SECSTATE Rice
“Rebalancing the overall Defense portfolio to ensure that the joint
force is as effective in irregular warfare as it is in traditional
warfare requires focused efforts in three key areas:
(1)
Growing SOF capacity while maintaining quality standards
Reorienting general purpose force (GPF) capabilities toward
irregular warfare while maintaining the capability of GPF
(2)
(3)
ASD SO/LIC&IC
Michael Vickers
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Promoting increased integration between SOF and GPF”
Mr. Vickers congressional testimony before the HASC subcommittee on
terrorism and unconventional threats and capabilities, February 2008
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New Administration Transition Brief
(Five primary cost drivers requiring attention)
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Manpower & Entitlements
 Fully loaded personnel costs account for 50% of the DoD baseline
budget. Healthcare costs (for active duty and retirees) noted as rising at
an unsustainable rate.
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O&M costs continue to increase
 Improve supply chain and energy consumption
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Excessive Overhead (tooth-to-tail ratio) – 42% rate
 Includes management functions, personnel support, central training –
considered to be “taxing combat capability.”
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Force Structure/End-Strength
 Adjust force for new “strategic intent”
 Primary QDR issue – Ms. Flournoy Influence
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RDT&E and Procurement
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USD Policy
Michelle Flournoy
Acquisition Reform (again)
 “Cannot reset force, modernize, and transform all portfolios” – tough
choices required
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DOD Summary
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Serious divestment discussion required (process used?)
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Greater accountability of resources (prior, current, future funds)
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Acquisition Reform will be highlighted (again)
 Reduction in major procurement accounts
 “Hollow Force” versus “Smaller Force” ?
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Preparation for a different kind of war (6 points)
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Influence the force structure through the next QDR
What does “Rebalance” really mean?
Affordability will be a major factor
Interagency role will be revisited
Role of Guard and Reserve forces
Joint focus with serious look at “roles and missions”
– Interdependent to provide true joint capabilities
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The economy and will drive a smaller DoD Budget
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Questions ?

BGEN Charles G. Dawes, General Purchasing Agent for the Army
Expeditionary Force, testifying before Congress, 1921
“Sure we paid…we would have paid horse prices for sheep if sheep
could have pulled artillery…It’s all right now to say we bought too
much vinegar or too many cold chisels, but we saved the civilization
of the world…Hell and Maria, we weren’t trying to keep a set of
books. We were trying to win a war!”
You will always
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be asked to give an account of how you spent your funds