Navy's Deterrence Fund Is Just Another Washington Budget Gimmick

Last week, the Navy quietly scored a $100 billion victory against the Army and Air Force. The advancement of the Columbia-class nuclear ballistic missile submarines into a new program phase triggered a congressional provision to move its funding from the Navy shipbuilding account to a defense-wide account called the National Sea-Based Deterrence Fund. It remains unclear whether appropriators were aware of this impending move, given that they specifically refused to sanction it in this year’s still-pending defense appropriations bill or the latest continuing resolution to keep the government open. Yet the Navy and its congressional backers continue to willfully mislead the public about how the National Sea-Based Deterrence Fund will “save” money. In reality, while Congress and the Navy can save billions on this program by using innovative contracting authorities, the Deterrence Fund itself is merely a budgeting gimmick that would relieve the Navy of paying for its new $96 billion ballistic missile submarine replacement program entirely on its own.

Normally, Navy ships are paid for from within the Navy budget. When we bought the current fleet of ballistic missile submarines in the 1970s and 1980s, the Navy paid for them out of its own accounts. Yet today, because the Navy faces the prospect of tight budgets, its leaders argue that it should not have to pay for these new ballistic missile submarines solely because they are “national assets.” The Navy wants Congress to move the funding for the Columbia-class subs out of its budget so that the total cost of the shipbuilding account appears lower than it actually is.

However, someone still must pay the bills.

If the overall Pentagon budget does not grow or even grows only modestly with inflation plus a point or two, this means that the Air Force and Army end up paying for the new subs by canceling, delaying, or shrinking their own programs and priorities — setting up a virtual caste system in the Department of Defense.

Even acceding to the truth that the Navy’s ballistic missile submarine force is a “national asset,” it still should not be paid for with defense-wide money. If policymakers glance around the military for a brief moment, they are bound to bump into a “national asset” quite often. The Air Force spends billions of dollars each year to procure, maintain, and operate the military’s satellite constellation, which benefits each branch of the military equally and also undergirds a significant portion of our daily lives with assured precision timing and navigation for everyone from the FAA to the financial markets and traders.

Using the Navy’s same logic, why should the Air Force be forced to pay for that military-wide (and commercial economic) benefit? Or, better yet, why should the Air Force pay for buying and flying its cargo aircraft fleet, which largely serves to move Army forces around the world? Alternatively, why should the Army itself pay for supporting homeland disaster response?

Regardless, the argument just doesn’t hold up when highlighting the fact that the Air Force maintains the two other legs of the nuclear triad. This circular argument that the other services should pay for one service’s “national” capability falls apart quickly when it is clear all of the branches of the military do this to varying degrees. Either they all pay for them out of hide or every national asset moves into a wider slush fund or mega-account to buy this type of equipment. However, letting just one capability of one service steal dollars from the others who similarly offer cross-service benefits in other ways is just a tired Washington budget gimmick that helps no one in the long run.

Funding any of these programs with defense-wide dollars is a bad idea. Doing so pits America’s military services against each other at a time at which inter-service competition is already high as a result of a continuously shrinking defense budget and no letup in missions. Early in 2016, the Air Force finally came around to the Navy’s budget play by demanding that its new nuclear-capable bomber and intercontinental ballistic missiles be welcomed into a Pentagon-wide strategic deterrence fund, the creation of which Secretary of Defense Ash Carter now supports. As Senator McCain cautioned, “I’m not sure every new weapons system then wouldn’t warrant the same kind of special treatment.” How far will these shell games go? Before you cry hyperbole: in discussions about the Deterrence Fund, Coast Guard Commandant Admiral Paul Zukunft described his new icebreakers as “strategic assets” and key Coast Guard thinker Scott Truver went one step further, bestowing upon them the “national asset” designation.

A National Sea-Based Deterrence Fund that moves money for the program off the Navy’s balance sheet is unwise in execution (although politically savvy). Yet proponents, such as recently retired House Armed Services seapower subcommittee chairman Randy Forbes (R-VA) and ranking member Joe Courtney (D-CT), continue to tout the ability of the fund to save taxpayers money. This is technically true only because Congress put the real money-saver — innovative contracting authorities — inside the same legislative section as the Deterrence Fund itself.

These authorities are good policy, and they are independent of, not dependent upon, the Deterrence Fund. By allowing the Navy to lock in orders early and buy in bulk — like how Costco keeps its prices so low — it could shave almost $8 billion off the $96 billion submarine program. Yet Congress could simply keep that provision to pursue cost savings and delete the part of the legislation that will shift funding from the Navy’s shipbuilding account and force the rest of the Pentagon to pay for it.

The two provisions have nothing to do with one another. Suggesting otherwise is artfully, but willfully, misleading.

The Deterrence Fund is the bureaucratic budgeting gimmick that slips through the cracks but ends up leaving the next generation of planners with significant negative consequences. All four of America’s military services face a significant procurement crunch in the 2020s; the Navy is far from alone in this. If the Navy gets its way and moves the full Ohio Replacement Program out of its account, the effect on Air Force and Army modernization will be devastating.

Rep. Forbes has discussed the Deterrence Fund in depth and appears to be most concerned about the potential cost savings. If this is right, Congress and the Department of the Navy should work together to rewrite the legislation by deleting the portion that moves funding out of the Navy shipbuilding account to a defense-wide account and leaving the expanded cost-saving contracting authorities in place. Also, appropriators need to keep a more watchful eye on their authorizing counterparts, who show no resistance to their efforts at using a Deterrence Fund even after appropriators repeatedly quashed it.

Mackenzie Eaglen is a resident fellow in the Marilyn Ware Center for Security Studies at the American Enterprise Institute, where she works on defense issues. Rick Berger is a research associate at the Marilyn Ware Center.