Suppressed Pentagon Study Identified $125 Billion of Potential Savings

Policy Memo
Monday, December 12, 2016

Many politicians, including the president-elect, have focused their efforts to improve the federal government’s finances on the elimination of waste, fraud and abuse. While such reforms would be woefully insufficient to address the nation’s broader fiscal challenges, a 2015 report uncovered last week suggests there remains ample opportunity to save money in the Department of Defense. 

The 2015 report, which was produced by a task force of corporate executives and consultants known as the Defense Advisory Board, identified reforms to the Pentagon’s bureaucracy that could have saved $125 billion over five years. Had the report’s recommendations been implemented, the board claims savings could have been achieved without laying off any federal employees or compromising military capability. In fact, the report recommended reallocating these funds to improve military capabilities through additional troop training and hardware purchases. 

Defense officials, however, feared that publication of the report would compromise their case that the tight discretionary spending caps imposed by the Budget Control Act of 2011 (and subsequently adjusted by the Bipartisan Budget Acts of 2013 and 2015) were jeopardizing national security. While the spending caps originally imposed by the BCA were widely accepted, the tighter sequester-level caps – which were triggered when lawmakers failed to agree to more comprehensive fiscal reforms – have been considered too tight by many budget and defense policy experts. Yet the savings identified in this report would have been enough to mitigate over two-thirds of the difference between the original and sequester-level defense spending caps over the same five-year time period. 

Both lawmakers and the incoming administration should carefully consider the recommendations in this report, and others like it, as they seek to reduce inefficiencies in the federal government. As one Pentagon official argued when the report became public, many of its recommendations are unrealistic -- not because the Pentagon was unwilling or unable to execute them, but because most lawmakers are supportive of programs that spend money in their districts regardless of whether the Defense Department thinks they are necessary to benefit national defense. Members of Congress must be willing to make hard choices if they want to claim the savings identified in the report. 

It is also important that policymakers not let this one report obscure the need for greater reforms throughout the federal budget. Even if the report’s recommendations were implemented in their entirety, $125 billion would only be enough to reduce the federal budget deficit by 4 percent over the next five years.  

The larger problem is a growing disparity between federal revenues and spending, particularly as changing demographics increase the costs of old-age programs such as Social Security and Medicare. Reducing waste, fraud, and abuse is an admirable goal that should be vigorously pursued by the next Congress and the next administration. It is not, however, a panacea for the nation’s fiscal challenges – those can only be solved by structural reforms to the nation’s tax code and entitlement programs.