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How to Save Some Defense Dollars

Put MEADS out of its misery.

11:35 AM, Dec 29, 2010 • By GARY SCHMITT
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For those of us who have been arguing against cutting the U.S. defense budget and, indeed, arguing instead that it’s too low as is, we’re used to our critics saying that we never have met a defense expenditure we don’t like, that we have no ideas for how defense monies can be better utilized, or that we never seem to find a program that ought to be cut. 

How to Save Some Defense Dollars

None of that is true, of course. For example, many of us have argued that savings can be found in cutting back the rate of growth in military health and personnel benefits. It’s just a fact that personnel costs associated with the all-volunteer force continue to rise exponentially and are eating up an ever-increasing share of the Pentagon’s budget. Although no one should object to giving those who serve in the military and their families their due, especially in a time of war, there is broad agreement that recent increases mandated by Congress may have been generous to a fault. Or, to take another example, few would argue with the decision to end procurement of the new multi-mission destroyer, the DDG-1000 (Zumwalt class), at three ships. As impressive a vessel as the DDG-1000 is in its ability to deliver fire-support for land operations, further buys no longer made sense from the perspective of the Navy’s changing mission requirements—in particular, in the face of the growing air and missile threat from China. Moreover, the high cost of procuring additional Zumwalt-class destroyers would have precluded building new Aegis-enabled destroyers needed to address those threats. Ending the program was a tough decision to make but, ultimately, it was the right one. Again, where savings can be made without undermining the military’s ability to meet key threats, they should be.

A similar decision is facing the Army now in connection with the Medium Extended Air Defense System (MEADS). MEADS is a program designed to give American and European forces a follow-on air defense system to the Patriot Missile Air Defense System, with capabilities against tactical ballistic missiles, cruise missiles, and other air-breathing threats. Conceived in 1995, the program is a tri-national program involving Germany, Italy and the United States. However, MEADS’s cost and its marginal increase in overall capability over an upgraded Patriot system has lead many in the Army’s senior leadership to the conclusion that the program ought to be terminated.  Nor is the Army alone in its doubts about MEADS’s future. In the recently passed FY11 Defense Authorization bill, Congress added language strictly restricting additional expenditures for the program until the Secretary of Defense decided whether the program should go forward and, in conjunction with that decision, examined alternatives to MEADS. The expectation is that the Secretary of Defense will make a decision at the beginning of next year.

The right decision is to end the program. Doing so will not be without its costs. If the United States was to terminate the program unilaterally, the expected termination fees would run close to $1 billion; although, if done in conjunction with Italy and Germany—both of whom are themselves looking to cut back on defense spending and see MEADS as a possible candidate for doing so—the cost to the U.S. for ending the program would be cut approximately in half. And there is reason to believe that Germany and Italy can be eased into taking this step by offering both countries slices of the manufacturing pie (that is, jobs) for producing upgraded Patriots. 

Still, even if one had to pay the higher termination bill, ending MEADS in favor of continued deployment of an upgraded Patriot would be cost saving. First, estimates for continued development and testing of MEADS range from $1.85 billion to nearly $2.5 billion. Second, the cost for a single MEADS fire unit will run well over $300 million, while a modernized Patriot fire unit comes in at less than $80 million. If fully deployed, at the expected rate of fielding a new battalion a year starting in 2018, MEADS’s total procurement cost will amount to approximately $15 billion. In contrast, procuring the same number of modernized Patriot units will cost less than a third the total of MEADS. Keeping the MEADS program alive in a time of budget constraints will almost certainly lead to cuts in other Army programs to pay for this single program.

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