A “Flat” Budget

Recent, present, and projected defense spending leaves little doubt about the once and future base budget of the U.S. military. “We’re within a billion dollars of last year, which itself was within a billion dollars of FY 2010,” said Russell Rumbaugh, co-director of the Budgeting for Foreign Affairs and Defense program at the non-partisan Henry L. Stimson Center. “We’re now three years into a flat budget. What that means is, in real terms, the defense budget is eroding. We’re already in the drawdown. It’s already happening.”

The factor driving down the budget is, of course, the growing national debt and the annual deficit, which has exceeded $1 trillion in each of the last three years – the highest federal deficits, in terms of GDP percentage, since World War II.

Despite its relative flatness, the defense base budget, which generally experienced real annual increases of 3 to 4 percent after 9/11, is also one of the highest since World War II. In fact, the $533 billion base budget requested by the Obama administration for FY 2012 surpassed the Cold War peak of $531 billion in 1985. Congressional discussions earlier in the year were heavily influenced by the Aug. 2 passage of the Budget Control Act, a political solution to the debt-ceiling crisis that introduced several complex mechanisms for reducing future deficits. One of the simpler measures was simply to place caps on FY 2012 discretionary spending. Since the Budget Control Act was passed after the House had approved its version of the defense budget, but before the Senate had approved its own, the conference committee was compelled to come in at a number closer to the Senate’s version.

Another complicating factor for future budgets is the November failure of the Congressional Joint Select Committee on Deficit Reduction – the “super committee” – to agree on the further spending cuts that would have prevented self-imposed sequestration, or automatic cuts, from being triggered. As of now, these mandatory cuts will reduce $1.2 trillion from federal spending over the next decade.

The first round of automatic cuts is scheduled to take effect in Jan. 2013. As Harrison points out(www.csbaonline.org/wp-content/uploads/2011/11/2011.11.02-Five-Defense-Sequestration-Facts.pdf) , sequestration would cause the base defense budget to fall 14 percent from 2010 to 2013. When coupled with cuts associated with the redeployment of troops from Iraq and Afghanistan, this would amount to about a 30 percent reduction in defense spending, comparable to the post-Korea and post-Vietnam reductions.

Harrison also points out that in Washington, one of the few people who seems to be taking the threat of sequestration seriously is Obama, who has pledged to veto any attempt by Congress to legislate its way around its self-imposed cuts unless the proposal contains the $1.2 trillion of deficit reduction originally charged to the super committee. Defense Secretary Leon Panetta, who has warned about the damage sequestration would do to military readiness, publicly supports the president’s pledge.

Judging from their behaviors, White House and Pentagon budget planners, as well as members of Congress, don’t seem to believe sequestration will happen – at least to the programs they’re most interested in protecting. “Their working assumption right now is that somehow they’re going to get saved at the last minute,” Harrison said, “and sequestration won’t actually be allowed to go into effect. They’re planning on it. And Congress can do that. They make their own rules, so they can override sequestration if they want to. In the past, when we’ve had similar sequestration threats, that’s what Congress has done.”

There’s also a huge loophole in the Budget Control Act for the Defense Department: War funding is specifically exempted from sequestration. This creates an incentive for the Pentagon to simply move items from the base budget into a supplemental war appropriation – a practice that has been an issue throughout the wars in Iraq and Afghanistan.