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New CBO Study Projects Rising Unbudgeted Defense Costs for Next 20 Years February 3, 2010

Posted by Alexander Brozdowski in Analysis.
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The CBO recently released a report on the long-term implications of the FY 2010 defense budget passed in December 2009.  CBO estimates that real defense costs will, on average, exceed planned baseline projections by about $59 billion annually for the next 20 years.[1] The baseline is effectively CBO’s illustration of how DoD expects its budget planning to play out through 2028, holding current law and policy constant and applying the price assumptions of DoD’s plans for 2010 and beyond.

CBO itself is not a policy shop and so makes neither recommendations nor budgetary policy forecasts. However, it would be difficult to interpret indefinitely rising real defense costs in virtually every category as a fiscally sustainable trend. The probability that costs are set to exceed current DoD budgeting planning should lead the reader to consider not whether defense spending ought to increase further to match burgeoning projections, but instead whether DoD’s already-vast resources might be allocated more efficiently to maintain the national defense.

Here are some highlights from the text of the report, predicting real increases in almost every major category of defense spending.

  • The report attributes roughly 35 percent of the total unplanned excess to war costs, including the 30,000 troop increase expected to be engaged in “overseas contingency operations” through FY 2028. A significant portion of the remainder comes from failure to account for probable rises in DoD personnel real pay, benefits, maintenance costs for aging equipment, and new equipment R&D costs. Total defense costs in real terms are projected to rise almost every year out to 2028, eventually rivaling the peak spending levels of the Iraq War during FY2007.

  • “…carrying out DoD’s 2009 plans for 2010 and beyond…would require defense resources averaging at least $573 billion annually (in 2010 dollars) from 2011 to 2028” (p. 1).

  • “Including unbudgeted costs increases the projection to an annual average of $632 billion, or 18 percent more than the regular funding requested for 2010” (p. 1).
  • “In CBO’s base projections, four main factors account for the greater resources required in the long term to sustain the 2010 budget plan:
    • The likelihood of continued real growth in pay and benefits for DoD’s military and civilian personnel;
    • The projected increases in the costs of operation and maintenance for aging equipment and for newer, more complex equipment;
    • DoD’s plans to develop and field advanced weapon systems to replace many of today’s military systems that are nearing the end of their service life; and
    • Investments in new capabilities, such as advanced intelligence, surveillance, and reconnaissance systems, to meet emerging security threats” (p. 3).
  • “Over the longer term, carrying out DoD’s plans for 2010 would push [operations and support (O&S)] funding from $324 billion in 2010 to $425 billion in 2028…increasing from 61 percent to 72 percent of the total budget.” O&S is “the sum of the appropriations for military personnel, operation and maintenance (O&M), and the revolving funds” (p. 5).
  • Regarding development and acquisition of increasingly complex, new weapons systems, “All such costs have increased in the past and are likely to do so in the future” (p. 7).
  • “CBO projects continued real growth in military and [DoD] civilian pay” (pp. 10) and in “new or enhanced military benefits,” especially retirement benefits (p. 11).
  • “Under DoD’s plans for 2010, the department’s medical funding will grow from $46 billion in 2010 to $90 billion by 2028, CBO estimates, for a real increase of 97 percent compared with the 2010 amount.” The vast majority of these cost increases (over 95%) would come from care and prescriptions, not uniformed medical personnel pay increases (p. 14).

[1] Note: All costs and cost changes are presented by the CBO in real terms, calculated in 2010 dollars.

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