Washington D.C. is all about politics, policy and procedure. The Department of Defense receives plenty of political and policy attention, but few care to look at the procedures. It’s not sexy. It doesn’t raise campaign funds. But that is precisely what needs fixing. The incoming Trump administration needs to begin shifting the defense budget away from baseline budgeting to a zero-based budgeting model.
Defense advisors recently voiced plans to rebuild the military with reallocated funds earned by cutting bureaucracy and wasteful spending within the DoD. But American Enterprise Institute defense analyst Mackenzie Eaglen rightly calls this plan a fantasy. There is simply not enough fraud, waste and abuse to yield the $55 to $60 billion per year in new money needed for Trump’s ambitious reinvestment plans, she argues. This historically inadequate snark-hunt approach to the budget process too often defines how elected officials try to balance a budget.
Zero-based budgeting is an alternative system proven to decrease expenditures and improve efficiency within private sector companies and public institutions. This budget method identifies wasteful spending and helps purge unnecessary expenses by obligating each department to justify its proposed spending each and every year. This method automatically eliminates the practice of carrying over the budget from the previous year. And that’s important since the current baseline budgeting system requires the government to set the previous year’s spending as the starting point for the next year’s budget.
Under the current system, preparers assume all of the same programs and operating procedures, and only adjust the following year’s expenditures to account for actual spending in the current year, inflation and population growth. Since inflation and population growth are almost always positive, the budget almost always rises.
This automatic carryover of expenses under baseline budgeting actually encourages spending. Defense officials regularly exhaust their funds in a period known as “use it or lose it” so as to ensure they do not lose money in future budgets. Researchers found that federal procurement spending was five times higher in the last week of the fiscal year than the weekly average for the rest of the year, and the quality of the projects was scored well below average.
Zero-based budgeting, while initially time-consuming, has saved large corporations 10 percent to 25 percent, according to independent studies. And those savings are more sustainable over a longer period than traditional cost reduction methods, such as lower level workforce reduction and outsourcing. If the DoD achieved just a 10 percent savings over the entire organization, those savings would amount to $53 billion.
The zero-based budgeting model could be tested within the DoD by applying it first to the bloated bureaucracy. The growth in civilian and staff numbers continues to exceed what is necessary, while the number of general and flag officers positions has increased disproportionately to the personnel they oversee:
- Roughly 2,000 GFOs oversaw 12 million military personnel in 1945.
- Now, nearly 900 GFOs oversee 1.3 million active duty personnel.
- In fact, over the past 30 years, the military’s end-strength deployable/fieldable forces has decreased 38 percent, but the ratio of four-star officers to the overall force has increased by 65 percent.
A 10 percent cut among general and flag officers and their staffs alone could save nearly $11.5 billion over 5 years.
Now critics will say that other sectors of government should be forced to adopt such a procedure. And we agree. But a successful annual or even biannual implementation in the DoD first would provide the bipartisan incentive necessary for officials to adopt the process elsewhere. After all, imagine the impact of a stringent budget process that required all government agencies to justify everything they spend. The annual requirement to defend each and every expenditure as necessary and worthwhile would cause an agency like the EPA to collapse under the weight of its own uselessness.
The traditional government budgeting system is simply not working. Zero-based budgeting could specifically help refocus defense priorities by ensuring money is spent in areas that promote readiness. A biannual application may also improve the outcome. Successful implementation in the DoD would encourage Congress to target other departments of government that would have a difficult time justifying their existence.
Based on a recently released NCPA study “A New Budgeting Approach for the Defense Department.”
Allen West is a retired Army Lieutenant Colonel and is the Executive Director of the National Center for Policy Analysis.
Dr. David Grantham is a Senior Fellow at the National Center for Policy Analysis.
Editor's Note: Mr. Allen West will be a featured speaker at the Media Research Center's 2017 Caribbean Cruise in February.