The Pentagon and Deficit Reduction: FY-2012 Budget Retains Exceptional Level of Defense Spending

Project on Defense Alternatives Briefing Memo #43
PDA Briefing Memo #47
01 March 2011

 

Section 1. Past and Future Change in US National Defense Spending & Budget Share  (3 tables)

Section 2. New Obama Budget Plan Gives Pentagon Bigger Budget Slice  (2 tables)

Section 3. Fixed in Place: The post-1998 Boon in US Defense Spending  (3 charts)

Section 4. Defense Spending and the Production of US National Debt, 2001-2010  (2 tables)

 

Full document download, all sections & Executive Summary

 

EXECUTIVE SUMMARY

 

President Obama’s 2012 budget plan maps out a future of steady increases for the National Defense account (apart from war costs, which the budget presumes will decline).  The budget sets the base or peacetime portion of national defense to rise from $551.9 billion in 2010 to $637.6 billion in 2016 – a boost of about 15.5%.  This increase exceeds the expected rate of inflation by about seven-tenths of a percent per year.

 

The new budget fixes in place and extends the unprecedented rise in defense spending since 1998.  Even apart from war costs, the Pentagon budget has risen by nearly 50% in real terms over the past 12 years.  With war costs added, it has risen by more than 91% in real terms.  For now and the foreseeable future, the 2012 plan sets base defense spending at levels that in real terms exceed the average during the Reagan years, when Cold War spending peaked.

 

The new budget request largely disregards the proposals on defense savings put forward last year by the President’s bipartisan Fiscal Commission and other policy groups.  These sought to rollback previous plans for base defense spending over the 2012-2016 period by $300 billion to $450 billion total.   Instead, the FY-2012 budget rolls back previous plans by only $75 billion.   (By contrast, it rolls back the previous plan for non-defense discretionary spending by $125 billion.)

 

As suggested above, the rollback in planned future defense spending does not entail an actual reduction from current (2010) levels.  Instead, it is merely a downward revision in planned increases.  In accord with the FY 2012 plan, the base portion of national defense spending will average $58 billion more per year during the 2012-2016 period than it did in 2010.  (Last year’s plan would have tacked an additional $15 billion per year, on average, to that increase.)

 

The new budget plan also re-balances the allocation of federal dollars among discretionary accounts.  Looking forward from 2010 to 2016, the National Defense slice (including war costs) gradually declines on the assumption that war costs drop dramatically from about $160 billion today to $50 billion in 2016.  However, looking at just the non-war portion of defense spending, a different picture emerges:  The proportion of discretionary funds allocated to the base national defense budget actually rises from about 50% today to 53% in 2016.  In effect, the plan takes most of the savings that it supposes will come from winding down the wars and transfers them to the peacetime portion of the defense budget. 

 

Since the late 1990s, defense’s share of discretionary spending has been growing.  So the current plan continues this trend.  And, in fact, it goes further in this direction than the budget plan presented last year (before the deficit-reduction campaign took hold).  This, because the new plan extracts deficit savings disproportionately from non-defense discretionary accounts.  By contrast, the President’s Fiscal Commission had implied more equal treatment for defense and non-defense accounts.

 

Certainly, the contribution of defense to the nation’s current debt problem is significant.  The most recent year in which the federal budget ended with an on-budget surplus was 2000.  During the 10 years that followed, $7.9 trillion was added to America’s gross federal debt.  Taking the budget in 2000 as a spending baseline, the federal government spent $9.9 trillion dollars above the year 2000 level during 2001-2010.  Of this, discretionary spending above the 2000 baseline was $4.25 trillion.  Defense was responsible for more than 56% of this additional discretionary spending and 24.3% of the additional federal spending overall.  Only about half of this additional spending is attributable to war.

 

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CONTACT – Project on Defense Alternatives 617-547-4474

♦ Carl Conetta cconetta(at)comw.org

♦ Charles Knight cknight(at)comw.org

 

 

ADDITIONAL RESOURCES

♦ Pentagon Resists Deficit Reduction: Rollback in Planned Budget Falls Short of Deficit Reduction Goals.  Memo #46, 30 Jan 2011

♦ Experts Letter on Defense Spending to the National Commission on Fiscal Responsibility and Reform. 18 November 2010.

♦ Debt, Deficits, and Defense: A Way Forward. Report of the Sustainable Defense Task Force. 11 June 2010.

♦ An Undisciplined Defense: Understanding the $2 Trillion Surge in US Defense Spending.  Briefing Report #20, 18 January 2010.