The incoming secretary of defense’s mission is to preside over a Pentagon build-down that will be driven by financial, not national security interests.  That view, according to a powerful member of the U.S. House of Representatives, puts the country on “the fast track for decline.”

Last week, Rep. Buck McKeon (R.-Calif.), chairman of the House Armed Services Committee, spoke at The Heritage Foundation to set the stage for a significant budget showdown with Leon Panetta, President Barack Obama’s choice to replace outgoing Secretary of Defense Robert Gates.

Previously Obama said we can make cuts in national security “while still keeping ourselves safe,” and then proposed a $400 billion defense build-down over 10 years.

But McKeon rejected the President’s proposed cuts, accusing him of flinching “from positions of responsibility as the global order tremors.”  The congressman accepts the need to do some “housekeeping.”  For example, he would end funding for the troubled Medium Extended Air Defense System and instead direct that money toward the Ground-Based Midcourse Defense system.

Panetta, 72, the outgoing CIA director, comes to the defense budget showdown fully armed for battle.  Previously he served as director of the White House budget office for President Clinton and on the House budget committee.  His connections on both sides of Capitol Hill (he served in Congress from California for eight terms), remain strong.

Gordon Adams, a professor at American University who once worked for Panetta, told the New York Times that Panetta “knows how to draw a line, he knows how to hang tough, he knows when to concede, and he knows when to close a deal.”  He will need those skills to convince the service chiefs and Republican hawks such as McKeon to accept Obama’s defense cuts.

Panetta takes the Pentagon’s helm after most of the easy cuts were made, however.  Secretary Gates already cut 30 weapons programs and forced the armed services to find $78 billion in efficiencies.  But Obama’s new round of cuts, warns Gates, will lead to real reductions in “force structure and military capability.”

That makes Panetta’s task a tightrope walk between a boss looking for deep cuts and a skeptical and hawkish Republican House during a time of war.  That is why it would be understandable if Panetta tried to take the easy political path—slash service budgets a fixed percent or mandate reduced force structures, and gut recapitalization no matter the consequences.

Fortunately, Obama gave Panetta time to review the cutting options, and let’s hope he uses it wisely.  “We need to not only eliminate waste and improve efficiency and effectiveness,” Obama said, “but conduct a fundamental review of America’s missions, capabilities, and our role in a changing world.”  The President promised to make specific decisions after the review is complete.

Panetta’s review should include suggestions this column identified two weeks ago, along with radical adjustments to critical processes and a realignment of the tooth-to-tail imbalance in order to “eliminate waste and improve efficiency and effectiveness.”  These suggestions promise significant and long-term savings.

First, two weeks ago this column called for a 21st century military transformation act targeting service efficiencies by collapsing functional capabilities.  It recommended a parallel—Pentagon and congressional—review process for defense roles and missions in order to balance military capabilities and the defense budget.  And it called for a new base realignment and closure round focused on reducing excess capacity without up-front costs.  These goals remain valid but don’t go far enough.

Second, Pentagon budget, accounting, and acquisition processes need reform.

Secretary Gates outlined the Pentagon’s budget problem.  “Budgets are divvied up and doled out every year as a straight-line projection of what was spent the year before,” Gates told an audience at the Eisenhower Library in Abilene, Kan., in 2010.  He  went on to explain that “very rarely is the activity funded in these areas ever fundamentally reexamined.  That needs to change.”

Former Secretary of Defense Donald Rumsfeld targeted the Pentagon budgeting process for reform as well.  The Pentagon’s 40-year-old planning, programming, and budgeting system, or PPBS, is “a relic of the Cold War” and “one of the last vestiges of central planning on Earth,” Rumsfeld told a Pentagon audience in 2001.  He called for a streamlined process that is quicker, cheaper, and more flexible, but only limited reform has taken place over the past decade.

The Pentagon’s budgeting process is complicated by broken bookkeeping and financial management processes.  The Government Accountability Office (GAO) testified that the Pentagon’s accounting and financial management systems are problem-plagued and have never been completely audited.  This costs the taxpayers many billions each year due to waste, fraud, and abuse, according to a 2009 GAO report.  Sen. John McCain (R.-Ariz.) said, “We owe it to our men and women in uniform and the American taxpayer to fix the Pentagon’s broken bookkeeping without further delay.”

Secretary Gates called for major acquisition reform too.  “Major weapons programs devolve into pursuing the limits of what technology will bear without regard to cost or what a real-world enemy can do,” Gates said.  He said the process leads to $20 million howitzers and $2 billion bombers, which means we can afford far fewer weapons than we need due to the scores of billions spent for research and development that will never, ever reach production.

Finally, the Pentagon needs to rebalance its tooth-to-tail ratio by retooling its bloated bureaucracy through eliminating redundancies and roles and missions that contribute little to real defense.

The military bureaucracy begs for scrutiny.  Gates said that by comparison, the private sector has flattened and streamlined its middle and upper echelons.  But the Pentagon continues to maintain a top-heavy multilayered hierarchy that eschews 21st century realities.  For example, Gates said that the gap between him and a line officer may be as high as 30 layers.

Rumsfeld indicated that successful modern businesses are leaner and less hierarchical, and therefore more nimble in the face of change.  “Business enterprises die if they fail to adapt, and the fact that they can fail and die is what provides the incentive to survive,” Rumsfeld said.  President Ronald Reagan quipped that government programs are the closest thing to eternal life on this Earth.

One way to curb the bloated bureaucracy in the Defense Department is to reduce the number of generals, admirals, civilians, and political appointees who drive up operating costs because of extra staff and amenities. 

The top-rank-heavy services have unnecessary staff duplications too.  The services use separate but parallel staffs for their civilian and uniformed chiefs.  These staffs work with the same issues and perform the same functions.

Redundant staffs and functions are common across the department.  There are dozens of offices of general counsel, public affairs, and legislative affairs.  Each service has a surgeon general, and there are three exchange systems and a separate commissary system.

The tooth-to-tail problem is also evident in combat organizations.  The Army is structured around brigade combat teams, which begs the question of why the service needs so many division and corps headquarters.   

The 1986 Goldwater-Nichols Reorganization Act created joint forces commands to bring all service components under one oversight roof.  Last year Gates announced his intention to close the Joint Forces Command in Norfolk, Va., and distribute half its capabilities to other commands.  Additional closures and consolidations are warranted.

Panetta comes to the Pentagon to build down national security, but let’s hope not by putting it on the “fast track for decline,” as McKeon fears.  The nation cannot continue to spend close to $160 billion a year for wars, however it seems that most of the cuts must be crafted out of the baseline budget while ignoring the fact that the Bush-Obama buildup in defense was unlike any that came before.  If political expediency rules and the same budget cuts of the past become reality—it could be disastrous for the nation.