Wednesday, November 1, 2017

The Department of Defense and Saving Taxpayers' Money

We all know that the United States has a significant military presence around the world, however, a recent estimate by the current Secretary of Defense, Jim Mattis, suggests that there may be ways of reducing taxpayers' exposure to maintaining the military's global inventory.  Unfortunately for American taxpayers, little of that saving will end up reducing the Pentagon's overall spending patterns.

Let's look at some background first.  According to the most recent version of the Base Structure Report - Fiscal Year 2015 issued by the  Under Secretary of Defense for Acquisition, Technology and Logistics, the Department of Defense is one of the federal government's larger holders of real estate, managing a global real estate portfolio that consists of the following:

- 561,975 assets (buildings, structures and linear structures) - these include hospital and medical facilities, administrative facilities, operating and training facilities, maintenance and production facilities, research and development facilities, residential facilities of all types and supply facilities

- these facilities are located on 4855 sites around the globe

- these sites cover an area over 24.9 million acres

To qualify as an individual entry into the Base Structure Report, a site located in the United States must be larger than 10 acres in size and have a Plant Replacement Value greater than $10 million.  Sites located in foreign countries must be larger than 10 acres in size or have a Plant Replacement Value greater than $10 million.

Installations are defined as a military base, camp, post, station, yard, centre, homeport facility or any other activity undertaken under the auspices of the Department of Defense including leased space that  supports DoD activities.  Here is a table showing the number of active installations controlled by each branch of the U.S. military:

Here is a graphic showing the geographical distribution of Department of Defense sites around the world:

Of the 4855 sites, 4154 are located in the United States, 114 are located in American territories, 181 are located in Germany, 122 are located in Japan and 83 are located in South Korea.

Here is a table that breaks down the Department of Defense physical assets into buildings, structures and linear structures and assesses a plant replacement value to each (in billions of dollars):

The total replacement value for the 276,770 buildings, structures and linear structures owned by the Department of Defense is $879.37 billion with buildings being worth a total of $585.07 billion, structures being worth a total of $131.22 billion and linear structures being worth a total of $163.08 billion.

Lastly, here is an inventory of land controlled by the Department of Defense for each branch of the U.S. military:

As you can see from the Base Structure Report for 2015, the Department of Defense has a very extensive real estate portfolio that is worth roughly a trillion dollars when the value of land is included.  Obviously, all of this infrastructure costs untold tax dollars to maintain and upgrade.

A recent letter from Defense Secretary Mattis to William Thornberry, Chairman of the House Committee on Armed Services suggests that the DoD has excess infrastructure capacity as shown here:

In the October 2017 Department of Defense Infrastructure Capacity report, we find the following table listing the infrastructure excess capacity by service:

Using 32 metrics of infrastructure, the report found that when comparing base loading in 1989 to base loading in 2019, the Department of Defense had 22 percent excess infrastructure capacity compared to projected fiscal year 2019 force levels. 

While you might think that the savings realized by shuttering 22 percent of the excess infrastructure capacity means that the Department of Defense's budget would decline, such is not the case.  In the report, we find the following:

"The strategic environment has undergone fundamental changes.  In spite of our unique position as a global power with worldwide interests and military capabilities this change has redefined the range of challenges we must confront.  Uncertainty is inherent in assessing future threats.  Therefore, the potential for surprise should inform all planning efforts. 

In general, opponents understand they cannot conventionally match U.S. military power.  Therefore, they will take time to identify U.S. vulnerabilities and act accordingly.  We expect current and future adversaries, both state and non-state, will adopt a range of asymmetric and grand strategic capabilities and methods intended to circumvent our military advantages.  Future opponents will seek to engage us by acting both indirectly and directly along a vast spectrum of domains, including cyber, economic, space, air, land, sea, and undersea.  Above all, the enemy will seek to do the most harm with the least amount of risk.  

Our principal challenges are represented by an array of traditional, irregular, catastrophic, and disruptive methods and capabilities employed by state and non-state actors.  Combined, these reflect the four persistent challenges we must prevail against in this uncertain era.  There are often no hard boundaries distinguishing one of these categories from another.  While the capabilities and methods within each differ, the most dangerous circumstances are those in which we are facing, or will face, multiple challenges simultaneously."

In the final line of the report we find this:

"The longer authorization (to reduce spending on infrastructure) is delayed, the longer the Department will be forced to expend valuable resources on unnecessary facilities instead of weapons systems, readiness, and other national security priorities." (my bold)

As stated in his letter to the House Committee on Armed Services, the new methods of warfare and technologies that have been adapted by the U.S. military to fight wars are going to consume all of the savings gained by reducing excess infrastructure, shifting fiscal resources from buildings, structures and linear structures to battle readiness.  Basically, U.S. taxpayers can pretty well assure themselves that the Pentagon's spending is going nowhere but up and that the latest moves to reduce spending will just see the savings funnelled elsewhere in the "Pentagon's world".

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