Pentagon Fires at Budget Targets That Can’t Be Hit: Peter Orszag

http://www.bloomberg.com/news/2012-01-11/pentagon-fires-at-an-unhittable-budget-target-commentary-by-peter-orszag.html

At some point in every negotiation over fiscal policy, once the high-minded speeches and other pleasantries have been delivered, the disagreeable details poison the atmosphere. Everyone is in favor of tax and entitlement reform, after all, until they see the specifics.

The reaction to the cost-cutting strategy that Defense Secretary Leon Panetta revealed last week suggests this is about to happen with regard to Pentagon spending.

Let me be very clear: Substantial efficiencies can and should be wrung from the defense budget, and Panetta’s approach has many attractive features. But the strategy he sketched out -- most of the details have yet to be provided -- reveals the underlying tensions that arise whenever significant defense cuts are promised.

Officially, we have committed to about $1 trillion in defense savings over the next decade, split roughly evenly between the reductions called for by the debt-limit deal in August and the additional ones triggered by the failure of the supercommittee in November. The Panetta strategy is aimed at delivering only the first half of this $1 trillion.

In the abstract, reducing defense costs seems pretty simple: Just cut back on some of the really expensive equipment. The cost of building the F-35 fighter, for example, has been estimated at more than $100 million per plane. The new littoral combat ship, designed to operate in coastal regions, is projected to cost about $600 million per ship.