Joe Mazzafro: Deficit Deal and Impact on the US IC

03 Economy, 10 Security, 11 Society, Blog Wisdom, Budgets & Funding, Cultural Intelligence, Government, Intelligence (government), IO Impotency, Military
Joe Mazzafro



At  the time of the July edition of Mazz-INT Blog, the government was tied in a knot over coming to grips with how to get long term spending under control so there would be the political conditions to raise the debt ceiling on August 2nd; NATO forces  were engaged in a seeming stalemate in Libya to remove Gadhafi from power;  there was rising concern about corruption in the Karzai “government” in Afghanistan; near open confrontation between Islamabad and the Washington over continuing US unilateral drone attacks against Al Qaeda and Taliban leadership inside of Pakistan; and the US Intelligence Community (IC) was finishing a quiet but well deserved victory lap for taking out Osama bin Laden.  As August begins I am happy to report that Bin Laden remains dead —– with increasingly negative impacts for Al Qaeda, but little else as changed.

So what to discuss with you that is worth your time?  As Eddie Layton,  Nimitz’s N2 throughout WWII, was famous for saying “the biggest alligator is the one closest to you” which means to me the debt crisis and its impact on the on the IC.  As I write this on 31 July, the Executive and Legislative branches are struggling to figure out how to raise the debt ceiling so the US government will not be in default on August 3rd when you are likely to be seeing these ramblings.  So let’s focus on how debt crisis will likely impact the IC.

In the short run the ideological debate about whether to use spending cuts or tax increases to reduce the US debt has hamstrung the IC from spending FY 11 money that came available after the Continuing Resolution (CR) was lifted on April 8th as there is the very real possibility that some of that money will be taken back as a down payment on debt reduction.  Making the situation worse is the continuing debt ceiling goat rope that all but insures FY 12 will commence with another CR on October 1st.  What this nets out to is the IC (as well as other parts of the government) effectively operating at or about FY10 funding levels  – – – –  without anybody in the White House having to recommend a cut or the Congress needing to take a vote on budget cuts.  Sounds like risk free politics to me!

If not in the next 48 hours, the US government will eventually take action to raise the debt ceiling so at least interest on money already borrowed can be paid, but until that happens the IC along with all other branches of government needs to brace for direction from the Secretary of the Treasury to provide funds from current accounts to pay for immediate bills vice any new spending.  At this point there is serious concern about salary payments being deferred.  This makes it difficult, I would think, to seriously consider execution options for FY 11 funds beyond war needs and essential sustainment costs.

Presumably the threat of the equity markets tanking in combination with citizen outrage will cause both houses of the Congress and the White House to see the need to compromise so the debt ceiling can be raised before time runs out on Augusts 2nd, but this will result in at least a trillion dollars (not so long ago a billion dollars was real money) of cuts over the next decade with more to follow.  Undoubtedly this means double digit percentage cuts for the IC in FY 13 if not FY 12 and going forward for several years (The size of which is a matter of considerable debate between the Office of the Director of National Intelligence (ODNI) and the Office of Management and Budget (OMB)).  The extraction of the peace dividend in the early 1990s resulted IC budget reductions of approximately 26% according to DNI Clapper in an era when the economy was expanding, unemployment was less than 6%, oil cost were under $40 a barrel and the national debt was less than 50% of GDP.  Given today’s poor economic conditions and the deficit being at more than 90% of GDP, the “guesstimated” range of cuts to the overall IC budget of $80 billion are between 10 and 30% a year over perhaps as long as a decade, which raises the question of how can the IC best deal with funding reductions that will inevitably be deep and sustained?

Several studies, including INSA’s publicly available “Smart Change,” along with comments from the ODNI in various forums show general agreement on the following:

  • All elements of the IC are not equal so  spreading cuts equally across the entire IC will result in the serious degradation of important capabilities, i.e.,  avoid incremental “salami slicing” to reach budget reduction goals
  • Painful cuts are not like wine  —– they do not go down better with time, so taking them sooner than later at least leads to stability
  • Target personal cuts on management staffs that add little in the way of capabilities; avoid buy outs as these encourage the best people to leave government service
  • Look for redundancies caused by rapid expansion of the IC since 2003
  • Husband resources for the future (e.g. Research and Development (R&D); targeted new hires; infrastructure recapitalization, etc)
  • Community reorganizations usually lead to institutional and personnel churn not to efficiency and dollar savings

As with slashing the federal deficit, everybody is for a list like the above until you start identifying what to actually cut, so let’s put some specifics on the table to consider:

  • Suspend all investment in new ISR platforms until analytical capacity is able to examine at  least 75% of what is being collected today
  • Fence 5% of the IC budget for R&D and another 5% for infrastructure modernization and have IC agencies compete for access to this funding
  • Reduce security costs by shifting from a manpower intensive (and apparently ineffective) compliance based model to an information technology centric behavior based approach
  • Within the next five years consolidate all service GDIP funded intelligence production centers (ONI, NGIC, NASIC, MCIA) under DIA leaving the services to manage MIP resources only
  • Under the MIP, terminate service specific instances of the Distributed Common Ground System (DCGS) in favor of a single DCGS program for all of DoD run by a Defense IC Executive Agent
  • Within three years close the Joint Intelligence Task Force — Counter Terrorism (JITF-CT) run under DIA executive agency and move its functional responsibilities to the National Counter Terrorism Center (NCTC)
  • Starting with headquarters and oversight staffs cut IC personnel end strength by 20% over the next five years in a way that will preserve generational diversity across the IC while insuring that IC contractors are reduced by an equal or greater amount
  • Identify major acquisition programs for termination that will result in at least $10 billion of savings over the next five years

Of course to get real savings without “salami slicing I could also recommend shuttering a large national intelligence agency that I see as increasingly anachronistic, but that would lurch the IC to close to organizational change  that most see as counterproductive and unlikely to be considered, in the near term at least

I am under no illusion that cuts like these go well beyond fat and probably into IC muscle sinew,  but even a 30% cut of the IC budget means a top line of $56 billion dollars, which is larger than the defense expenditures of all but two or three nations.  Properly allocated and managed an IC budget of more than $50 billion should be sufficient for providing for the security of our Nation – – – – and some of our allies.

That’s what I think; what do you think?

See orginal at AFCEA, Comment as desired.

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