Pentagon's Hale Still Optimistic About a Budget 'Micro-Deal'

Chopping defense spending at a time of budget uncertainty poses risks to military readiness that might not be obvious to the general public, the Pentagon’s comptroller said on Thursday. “It’s like buying an insurance policy with a greatly raised deductible -- if you have to make a claim, there will be great regrets,” Defense Undersecretary Robert Hale said at the inaugural Defense One Summit put on by Atlantic Media in Washington.

“In this crazy period of time, the enormous budget uncertainty is taking its toll,” Hale said. “Planning gets replaced by planning, and we don’t know where we’re headed. We don’t do well under any particular plan.”

The comptroller said he remains “cautiously optimistic” that negotiators in Congress will come up with a “micro-deal” that would lift some of sequestration and perhaps limit defense cuts to $20 billion-$25 billion rather than the $50 billion required under the 2011 Budget Control Act. “The specific number is less important than the certainty,” he said.

Hale described how the cuts will substantially risk force readiness, reduce procurement along with investment in research and development, and threaten recruitment and retention of mid- and junior-level talent.

“At the moment, planners are looking at budget ranges that are pretty wide,” Hale said. Budget planning and long-term strategy are being done “concurrently” and coordinated by the same senior leaders doing the coming installment of the Quadrennial Defense Review, he said. “I don’t remember ever seeing this much uncertainty.”

(Read more: After the Shutdown, Uncertainty Still Plagues Pentagon)

Last year, the Pentagon held off planning for sequestration on the assumption that the sword of Damocles might never fall. But Hale said this year the planning has to assume the possibility that across-the-board cuts could continue. He said he has no regrets about the way in which his team and the Obama White House sounded the alarm about the harm from sequestration. “Think of the situation a year ago, when sequestration was postponed two months and the amount changed. Almost all of our planning done a year ago would have been wrong.”

Hale also revealed that he lost a bet with Joint Chiefs of Staff Chairman Gen. Martin Dempsey on whether the shutdown would actually occur. (Hale had to buy Dempsey a bottle of scotch.)

Executing the inevitable cuts will involve trimming procurement as well as research, development, testing and evaluation, which will risk a repeat of the 1990s “procurement holiday” that may be tough to recover from, Hale said.

He also said he worried about the “low morale” of the Pentagon’s civilian workforce due to hiring freezes, pay freezes and the recent shutdown. “People were wondering whether they have a job, and whether they want the job,” he said. He added he pictures many -- particularly non-senior employees -- sitting around the kitchen table with their spouses and wondering “whether we want to go through it again,” especially when the economy is “pepping up” and bringing new recruitment competition from the private sector.

Retirements are evident anecdotally, “but I don’t think there’s an avalanche yet,” he said, “though we could lose some of our best.”

Asked about charges from some in Congress that the Defense Department is “arrogant,” Hale said, “we have a good working relationship. I don’t recall we turned down any meetings. Maybe it’s that we just don’t know some of the information they’d like to have, such as where things are going and what our plans for sequestration are. But frankly,” he added, “we’re feeling our way toward” how to implement the sequester. “They may not like the answers they’re hearing.”

One area where many lawmakers clearly disagree with Pentagon leaders is on President Obama’s proposal for another round of the Base Closure and Realignment Commission. “Yes, we need another BRAC because there’s no practical way to close or realign bases outside of BRAC,” Hale said. “I understand it’s a tough political vote, but it’s an important one.”

Hale expressed frustration with the challenges of getting the Pentagon’s books ready for auditability by coming deadlines set by Congress and the Defense secretary, saying officials have good data on obligated funds but not on cost, and adding, “It is harder than I expected.”