Posts Tagged ‘Budget’
Carl Conetta. PDA Briefing Memo #55, 18 July 2012.
Efforts to cull savings from the US defense budget for purposes of deficit reduction have been stymied by Pentagon claims that any significant cut might have “devastating” or even catastrophic” effects. However, a review of global defense spending data by the Project on Defense Alternatives shows that America and its allies outspend potential rivals by a margin of four-to-one.
Moreover, according to the PDA review, the United States carries much more than its share of the allied defense burden, as measured by percentage of Gross Domestic Product allocated to defense. Together, the United States and its close allies worldwide spent $1.23 trillion on their armed forces in 2010 – more than 68% of the global total. But had the burden been shared equally among the allies based on GDP, the United States could have reduced its military spending by one-third (33%), including spending for war. This proportion substantially exceeds the Pentagon budget cuts mandated under the sequestration provisions of the Budget Control Act.
Stephen Miles and William D. Hartung. Center for International Policy Fact Sheet, 17 July 2012.
Nearly all of the purported “cuts” to the Pentagon’s budget are actually reductions in the rate of growth, rather than true cuts in funding levels. In reality, even if sequestration is fully enacted as planned under the 2011 Budget Control Act, the Pentagon’s base budget would only return to 2006 levels (adjusted for inflation), which at the time was among the highest levels of spending since World War II.
The Pentagon has asked for $525 billion in funding for fiscal year 2013 — a reduction of only $6 billion from the current year. The Pentagon budget would then resume its upward climb, rising to $567 billion in 2017. As former Assistant Secretary of Defense Lawrence J. Korb has noted, “even when adjusted for inflation, Panetta’s reductions halt the growth in the Pentagon’s budget, but they do not bring the budget down much from its current level.” And while Congress has yet to enact funding for fiscal year 2013, it appears ready to increase the Pentagon’s budget, replacing the Defense Department’s extremely modest reductions with another year of growth.
Current reductions must also be measured against the unprecedented growth in Pentagon spending over the past 13 years. Since 1998, the Pentagon’s base budget has grown by 54% (adjusted for inflation). Moreover, with the country turning the page on a long decade of war in Iraq and Afghanistan, the planned reductions represent a historically small drawdown when compared with those following the end of Korea, Vietnam, and the Cold War.
Project on Defense Alternatives, 29 June 2012.
How much is enough spending for the Pentagon? By various measures, the United States has outspent the next nine, 14, or 21 countries combined. What is perhaps more telling is that most of those other countries are staunch US allies.
* International Institute for Strategic Studies
** Stockholm International Peace Research Institute
*** PPP = Purchasing Power Parity, a measure that facilitates international budget comparisons by adjusting exchange rates to reflect the relative domestic buying power of national currencies.
Notes: The IISS column presents officially reported spending in USD at 2010 exchange rates, with two exceptions: China and Russia. For these, the number is an estimate of actual spending. The second column is SIPRI’s estimate of actual expenditures, also shown in USD at 2010 exchange rates. The PPP column converts estimates of actual expenditures into approximate purchasing power, mostly drawn from SIPRI data. For China and Russia, it also shows an IISS estimate of purchasing power, thus producing a range. Purchasing power calculations improve on estimates that use exchange rates alone. However, PPP ratios are based on comparisons between national economies as a whole, not the defense sectors specifically. This can overstate military purchasing power when a nation’s military sector is much more advanced than its economy overall or when a nation depends heavily on international arms purchases.
Comments: The biggest spenders of concern to the United States are Russia and China, although neither are considered US adversaries today.
• America and its top spending allies outpace these two countries taken together by margins exceeding three-to-one.
• America alone spent more than twice as much as these two countries in 2010, by some measures. By other measures, it outspent them combined by nearly four-to-one.
The review draws on data compiled by the International Institute for Strategic Studies (IISS) in London and the Stockholm International Peace Research Institute (SIPRI), both regarded as world leaders in the field of defense assessment.
Neither IISS nor SIPRI accept Chinese or Russian official defense budget numbers at face value. Their estimates seek to capture unreported military expenditure from other parts of the Chinese and Russian economy. Both also offer alternative estimates that aim to correct for exchange rate distortions when comparing nations at very different levels of economic development – although these corrections may somewhat over state the “purchasing power” of military budgets.
Differences in the IISS and SIPRI methods, and the difference between corrected and uncorrected exchange rate estimates, account for the range given in number of countries whose combined budgets equal that of the United States. The answer ranges from nine to 21 countries — and all but a few of these are US allies.
Sources: International Institute for Strategic Studies, The Military Balance 2012 (London, 2012); Stockholm International Peace Research Institute, SIPRI Yearbook 2011 (Oxford, 2011).
HTML version of this table www.comw.org/pda/120618-Military-Spending-Comparison.html
A Project on Defense Alternatives Commentary, 26 June 2012.
After years of touting the necessity of guns over butter, the defense establishment has changed its tune. With the official US unemployment rate stuck at over 8 percent, Pentagon flaks are now boldly declaring that “guns are butter.” The Department of Defense as a social program? It’s a cynical ploy as William Hartung and Stephen Miles point out in this article.
Here are the Pros and Cons on the story:
• A National Association of Manufacturers study released last week says Pentagon cuts will mean substantial jobs loss in the defense sector.
• At the same time, cutting defense spending may be among the least painful ways to trim the Federal deficit. This two minute video by Chris Hellman of the National Priorities Project explains why. His data is from a study by the Political Economy Research Institute at UMass.
• A $1 billion cut from the education sector will result in more than twice as many jobs lost as a $1 billion cut from the defense sector.
• We could cut $50 billion from the defense budget next year, put $25 billion to deficit reduction and put $25 billion into education and have a net increase of more than 20,000 jobs. That’s a win-win fiscal deal.
For more on Pentagon spending and jobs see this background compilation: The Pentagon Budget and Jobs.
Stephen M. Walt. Foreign Policy, 18 April 2012.
There’s an overwhelming case for removing these archaic and unnecessary weapons from the European continent. Ideally, we would do this as part of a bilateral deal with Russia, but we ought to do it even if Russia isn’t interested.
Couldn’t agree more!
Galrahn. Information Dissemination, 27 March 2012.
The Navy has put 7 cruisers up for early retirement. Keep in mind that all 7 cruisers put up for early retirement in FY13 and FY14 are capable of being modernized for ballistic missile defense…It is fairly obvious to this observer that the Navy put these cruisers on the chopping block precisely because they expected Congress to swoop in and save the 6 cruisers the Navy wants to save, and allow the Navy to dump the amphibious ships and no one will care. Cruisers are shiny toys that represent power projection, and these specific cruisers have a significant future ahead of them if the money was to be found and made available for the US Navy to keep them.
William Hartung. Foreign Policy in Focus, 26 March 2012.
Romney’s proposal implies that the Pentagon is essentially an entitlement program that should receive a set share of our total economic resources regardless of what’s happening here at home or elsewhere on the planet. In Romney World, the Pentagon’s only role would be to engorge itself. If the GDP were to drop, it’s unlikely that, as president, he would reduce Pentagon spending accordingly.
Carl Conetta. PDA Briefing Memo #54, 23 March 2012.
On 13 February 2013, President Obama put down the administration’s marker in the budget debate for 2013. The President’s request proposes a budget pie about as large as the one adopted in 2008. However, comparing the 2013 request to the sum appropriated in 2008 shows that the Pentagon is being offered a bigger slice this time around.
• The administration’s budget request for FY 2013 rolls discretionary spending back to the level of 2008 in nominal terms.
• War spending is slated to decline substantially from the 2008 level. However, much of the savings is cycled back into peacetime security spending, which increases.
• Comparing 2008 and 2013 shows the budget plan to increase the proportion of non-war discretionary dollars devoted to National Defense – up from 50% to 52%.
“Security basket” gains ground
How does the President’s new budget reshape federal priorities?
This is best understood by comparing it to the 2008 budget, which was the last budget fully enacted before President Obama took office. Also, the 2013 budget request approximately rolls back discretionary spending to the 2008 level in nominal terms. (If we take inflation into account, there’s a real reduction; still, the nominal similarity of the two budgets helps us to discern the change in priorities, if any).
The table shows the differences in budget allocation between the 2008 budget and President Obama’s 2013 budget request. For there to be “real” (inflation-corrected growth) sums must rise by at least 8% from 2008 levels.
What do we see comparing the 2013 request with the 2008 appropriation?
• Discretionary spending declines, but this is due largely to the reduction in war spending. In fact, the decline in discretionary is not as great as the decline in war spending. Take war out of the picture and the result is that discretionary spending increases in nominal terms. (However, it does not increase as much as inflation for the 2008-2013 period, which is 8%.)
• Looking at the discretionary “Security Basket” as initially defined by the Budget Control
Act to include National Defense, International Affairs, Veterans, and Homeland Security, we see it growing by 12% – which exceeds the rate of inflation.
• Within the “Security Basket,” National Defense (mostly the Pentagon plus some weapons spending in the Department of Energy) grows by 10.3% – slightly more than the rate of inflation.
• By contrast, the “Non-security Basket” (which is everything else) declines by 3.2% in nominal terms – and by considerably more in “real” or inflation-adjusted terms
• As a result of these changes in allocation, “Security Basket” spending would grow as a proportion of all discretionary spending. National Defense spending, a subset of “Security,” would also grow proportionately.
In the President’s 2013 request, three members of the “Security Basket” get bigger shares than in 2008 and one sees its share decline. The winners are National Defense, International Affairs, and especially Veteran Affairs. The loser is Homeland Security.
A hypothetical alternative
What might have the FY 2013 budget looked like if the proportion devoted to defense and security had been held to their 2008 percentages?
• Using 2008 proportions, the 2013 “Security Basket” would be set at $677.4 billion, which is $35.9 billion less than actually requested.
• Using 2008 proportions, National Defense spending would be set at $532.4 billion – which is $18.4 billion less than planned. The Pentagon base budget is part of this and would be set at $508 billion, which is $17.5 billion less than actually requested.
• Had the “Non-security Basket” been held at its 2008 proportion, it would receive $381.1 billion, which is $35.9 billion more than requested in the administration’s budget. This amount has been moved from non-security to security funding.
There are two provisos to the above analysis:
First, the analysis assumes that war spending for 2013 will not rise before the fiscal year ends; and
Second, the analysis does not take into account the undue migration of approximately $4 billion in personnel costs from the base budget to the Overseas Contingency Operations (OCO) fund. If we disallow this shift of base budget costs to the OCO account, the 2013 Pentagon request is not $525.4 billion, but $529.4 billion. And this implies a greater growth in the Pentagon’s budget slice than reported above.
Historical Tables, Budget of the United States Government – Fiscal Year 2013 (Washington DC: White House Office of Management and the Budget, 2013), Table 5.4 Discretionary Budget Authority by Agency 1976-2017
Analytical Perspectives, Budget of the United States Government – Fiscal Year 2013 (Washington DC: White House Office of Management and the Budget, 2013), Table 32-1 Policy Budget Authority and Outlays by Function, Category and Program.
Analytical Perspectives, Budget of the United States Government – Fiscal Year 2010 (Washington DC: White House Office of Management and the Budget, 2010), Table 26-1 Policy Budget Authority and Outlays by Function, Category and Program.
Carl Conetta. Project on Defense Alternatives Briefing Memo #54, 23 March 2012. A comparison of discretionary spending in 2008 and 2013 shows an increased tilt toward the “Security Basket” and National Defense. http://defensealt.org/GTaHbL
Winslow Wheeler. AOL Defense, 16 March 2012.
The US defense budget is not just dominant; it is operating at a level completely independent of the perceived threat…America’s defense budget strategists declare it will be “doomsday” if we size to anything less than five times China and Russia combined.
Benjamin H. Friedman and Charles Knight. The National Interest, 6 March 2012.
A war tax or an effective cap on war spending can serve as a disincentive to reckless war making.
Charles Knight, commentary, 24 February 2012.
The Pentagon, the Obama administration, and many members of Congress hope that cuts to the defense budget stop with those mandated in the first stage caps of the 2011 Budget Control Act and made more specific in the President’s recently announced FY13 budget plan. As Reuters has reported the Obama FY13 budget shifts away from an austerity frame, partially adopted in 2012, to instead emphasize a program of higher taxes on the rich, a continuing tax cut for wage earners, and public investments in infrastructure, education and police services.
It is safe to predict that most all Republicans and some Democrats in Congress will join to block the President’s tax/revenue enhancement programs and domestic economic investments. The political stalemate on further deficit/debt reduction that followed passage of the BCA last year will remain in place through the remainder of 2012.
Even if we assume that after this year’s election Congress will find a way to avoid the particulars in the so-called “sequester” (second-stage) provision of the 2011 Budget Control Act, the pressure for deeper cuts will remain.
To see why the pressure for more defense cuts will continue into next year we need look no further than a new report from the Committee for a Responsible Federal Budget called Primary Numbers: The GOP Candidates and the National Debt. Their analysis shows that in 2021 the fiscal plans the GOP candidates will yield the following national debt levels as percentages of GDP:
- Gingrich – 114%
- Santorum – 104%
- Romney – 86%
- Paul – 76%
By odd coincidence Ron Paul’s plan and President Obama’s plan both end up at a debt level of 76% of GDP in 2021. Of course, the two plans get there by very different mechanisms. Obama’s plan relies substantially on increased revenue (including tax increases) and Paul’s mostly on spending cuts, including deeper cuts in the defense budget.
What makes the Pentagon budget vulnerable after the election is that the centrist Democratic president and the libertarian Republican candidate have positioned themselves as the most fiscally conservative, while the leading Republican contenders are looking like spend and don’t tax radicals.
Gingrich grabs for the mantel of Reagonomic fiscal policy by favoring an increase of national debt to 114% of GDP. Santorum is a close second at 104% of GDP. By comparison, Romney appears moderate at 86% of GDP, 13% higher than Obama or Paul. Romney is in favor of increasing military spending.
The problem for the Pentagon is that both Obama’s and Romney’s plans are politically unrealistic and very unlikely to be implemented. Obama keeps the debt low largely through tax increases — which will not happen if Congress remains controlled by Republicans. A failure to raise new revenues will be critical. If the Administration were able to get higher taxes on the rich it would facilitate holding DoD cuts to the level of the FY13 plan. Failure to achieve these tax increases will mean two things: 1) it will be much harder to get a domestic investment program (even if the Democrats do better than expected in November) and 2) the attractiveness to a significant portion of liberals and conservatives of additional DoD cuts will continue.
Romney, on the other hand, plans to keep taxes low and increases defense spending — therefore his fiscal plan depends on deeper cuts in domestic spending and substantial cuts to entitlements. Given that domestic spending has been cut to the bone in most accounts and entitlement programs have survived all conservative assaults to date, Romney’s plan seems equally unlikely. For more on the limits of the Romney plan see Ezra Klein here.
So there is every reason to believe that after this year’s election powerful fiscal conservatives who can see beyond the partisan nonsense will look hard again at the Pentagon’s budget to find things to cut. This condition means that the nation will remain open to strategic adjustment for some years to come.
Craig Whitlock. Washington Post, 15 February 2012.
As the Obama administration reorients its military strategy toward Asia and the vital maritime trade routes in the Pacific, the bulk of the responsibility will fall on the Navy, which was largely sidelined during the land wars of the last decade.
But the Navy will have to perform its mission in Asia with fewer ships in coming years than it had anticipated. Under President Obama’s proposed defense budget, the Navy will retire nine ships early and cut or delay the purchases of 16 others over the next five years.
While I suspect that it is likely that “the Navy will have to perform its mission in Asia with fewer ships in coming years” due to continuing budget pressure on ship building, the Chief of Naval Operations presently insists that the Navy will have at least as many combat ships as it has now (286) and will continue to grow toward its goal of having well over 300 ships. In any case, the new strategic guidance suggests the Pacific Fleet will have priority for assignment of ships. It seems more likely that the Atlantic Fleet will take the hit.
Josh Rogin. Foreign Policy, 15 February 2012.
The Pentagon’s new budget request moves $3 billion of military pay and benefits out of the base budget into the war budget in an accounting maneuver experts and congressional staffers say is meant to get around legally mandated budget caps…
Project on Defense Alternatives, 13 February 2012.
Comparing the President’s requested budget authority for the Pentagon “base budget” in two successive budgets (FY-2012 and FY-2013) shows a reduction of nearly $490 billion in the years of comparison 2012-2021. This is a subtraction from last year’s plan and not from the CBO baseline, however.
• 2012-2021 cumulative spending in FY-2012 plan = $6.14 trillion
• 2012-2021 cumulative spending in FY-2013 plan = $5.65 trillion
There are other ways to measure progress in bringing fiscal responsibility to defense budgeting:
– Taking the 2012 spending level and holding it steady over the period 2012-2021 with increases for inflation only would produce a cumulative total of $5.82 trillion.
– Taking the 2011 spending level and holding it steady with increases for inflation would produce for 2012-2021 a cumulative spending total of $5.9 trillion.
Either of these might be used as alternative yardsticks for measuring the administration’s austerity efforts in the defense field — and both suggest a more modest rollback: $170 billion over ten years and $250 billion, respectively.
Project on Defense Alternatives, 13 February 2012. Measured against recent spending levels, the new ten-year plan for Defense base budget spending shows only modest savings. One table. http://defensealt.org/GXMlQO
Office of the Under Secretary of Defense (Comptroller), February 2012.