Decoding the Defense Budget

A Tornado of Misinformation
April 3, 2017

Mackenzie Eaglen
Resident Fellow
Marilyn Ware Center for Security Studies
Congress and the defense budget
Budget Resolution
The House/Senate Budget Committees release budget resolutions by April 15. Budget
resolutions merely set guidance for appropriators; they are a framework.

Authorizations

The Senate and House Armed Services Committees (HASC/SASC) each write versions of the
National Defense Authorization Act (NDAA), a policy vice spending bill. This legislation only
authorizes Pentagon budget authority and provides specific guidance. These bills do not give
the military any money.

Appropriations

The Senate and House appropriations committees actually cut the check from the Treasury
for the Department of Defense. While the appropriations committees often defer to HASC and
SASC on many matters, their word on spending priorities is final.

In recent years, appropriators have often compiled individual appropriations bills (12 in all), but
passage has normally waited for an omnibus in which all of them are combined.
Defense budget timeline
White House Budget Armed Services Appropriations
& DoD Committees Committees Committees

Spring-summer:
hearings &
authorization Oct 1: government
(NDAA) drafting/ fiscal year 2018
February 15: markup begins.
presidents April 15:
budget (PB) budget Spring-summer: Appropriations must
submission resolution due appropriations be passed or year
drafting & starts with continuing
markup resolution.

Recess
Jan Feb March Apr May June July Aug Sept Oct Nov Dec

DoD submits FY18 budget here, The NDAA has passed for over 50 Recently, appropriators have
but has been working on FY19 years straight. It is normally finished bills by autumn, but have
budget since the start of FY17. conferenced over the summer been unable to pass them in
and passed in the fall. regular order.
Defense appropriations timeline in recent years

Continuing resolutions leave defense spending at last years levels. Given how much changes
year from year, this normally amounts to temporary cuts and permanent delays.

CRs prevent DoD from starting new programs, increasing purchase rates, or realigning
spending.

Days spent by DoD under a CR since FY01

250

APR 200

150

100
DEC 75-day avg

50

OCT 0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
The Budget Control Act
The Budget Control Act initially set limits, or caps, on discretionary spending to achieve $1 trillion
in savings split between defense and domestic discretionary from 2012 to 2021.

The rest of the overall $2.1 trillion in debt reduction was to be identified by the Super Committee.
When that failed, consequences intended to be uniquely hurtful to maximize motivation to
actually cut a deal kicked in.

First, the BCA created new lower spending caps know as revised BCA caps.

Second, it threatened to enforce this new, lower cap by across-the-board cutswhich happened
in 2013an occurrence known broadly as sequestration and an exceedingly damaging long-
term event for DoD.

The BCA has been modified 3 times since enactment.

In 2012, the American Taxpayer Relief Act gave the Pentagon $26 billion in relief.
In 2013, the Ryan-Murray deal provided $31 billion of relief split between 2014 and 2015.
In 2015, the Obama-Boehner deal provided $56 billion of relief split between 2016 and 2017.

The BCA returns in October 2017, as does the debt ceiling increase.
Different types of defense spending
Always ask your sources what
type of spending theyre
including to get the best idea
of how theyre doing their
calculations.

Only you can prevent a

confusing defense budget
debate.

Types of defense $$$:

050
051
Discretionary only
OCO
Some combination
Inflation-adjusted numbers

The array of different

analytical combinations
makes it hard to deliver
accurate information to the
public.
Different types of defense spending
As a general rule, it is best to use 050
discretionary spending because the Budget FY 2017 050 Total: $619B
Control Act caps are defined in this manner,
which means that Congress normally uses this CO
7 O
number. FY1

Congress authorized/appropriated about $9 $68B

billion above the presidents request in extra
OCO spending in fiscal year 2017.

OCO (Overseas Contingency Operations)

funding is principally used for war-related costs
and sometimes called war spending, $551B
supplemental spending, or emergency
spending. It does not count against the BCA
caps.
FY17 Base Defense Spending
The usage of OCO is circumscribed by (Also BCA Cap)
regulations from OMB. Generally, it cannot be
spent on procurement or research projects that
do not have a direct tie to ongoing conflict.
OCO spending per year (inflation-adjusted $B)

200
Most OCO funding in Iraq/
Afghanistan was used for
150 exigent & perishable
needs.
100

50

0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

OCO spending decreased naturally as the wars in Iraq and Afghanistan wound down.

But recently, pressure from the Budget Control Act pushed DoD to include enduring activities
in OCOabout $30+ billionthat dont directly relate to ongoing conflicts.
Overall DoD spending trends 1948-2016 (inflation-adjusted $B)

800

700
OCO
600

500

400

300

200

100

0
Defense spending broken down by account
Operations and maintenance (O&M)
FY16 Total
covers daily operating costs: training, Defense Budget
maintenance, fuel, etc, as well as
Pentagon civilians & the Defense Research and Military
Health Program. Procurement & development $9B construction &
R&D together misc
Military personnel (MilPers) pays for are called
the basic salaries and bonuses of modernization. $70B
military personnel. Military
Personnel

Procurement covers the purchase of $148B

Procurement
weaponry, from ships to spare parts. $121B
Research and development (R&D)
Operations
supports development of the and
equipment of tomorrow. Maintenance
$249B
Military construction (MilCon) &
family housing cover the costs of
building new infrastructure.
Spending by military department over time

Navy department funding includes % base budget by service

all Marine Corps funding. (no OCO, no defense-wide)
Air Force funding includes pass- ARMY NAVY AIR FORCE
through money for classified
national security programs not run by 39%
the Air Force.
37%

When you take these accounts out 35%

(not shown here), service share of the
33%
base defense budget has remained
relatively equal since the start of the 31%
all-volunteer force.
29%
Each service receives about a third 27%
of the total base budget.
25%
2018 base defense budget proposals
Gates 2012
FY18 Budget : $661B
McCain/Thornberry
FY18 Budget: $640B
+$112B
+$91B
Trump
PB18 Budget: $603B
Obama
FY18 Budget: $585B
+$54B

+$36B

Budget Control Act

Cap: $549B

Note: All numbers are 050 base spending without overseas contingency operations funding (OCO) for fiscal year 2018.
Defense budget comparison: 2017 enacted (expected) vs. 2018 requested

Total FY17: $643-649B Total PB18: $668B

+2.9%
Trump FY17 OCO Supp: +$5B
Trump FY18 OCO: +$65B

NDAA Authorized FY17 OCO: +$68B

Trump FY18 Base:

+$54B
Trump FY17 Base Supp: +$25B

Budget Control Act Caps $551B $549B

Note: All numbers 050 incl. overseas contingency operations funding (OCO) for fiscal years 2017/2018. Both base additions in green require amendment of BCA.
Current issues in defense: What is readiness?
Military readiness is a very real determinant of deterrence and success in combat, but its measurement is
complex and varies by service.

Readiness is typically defined as near-term readiness, a function of training and maintenance and
mostly a matter of funding the operations and maintenance account. But the overall readiness equation
includes many more variables such as:

Future readiness or having enough training for high-end conflicts and enough modernized
weaponry to compete down the line.

Overall readiness can also be a function of having enough people to man units at acceptable
levels.

Readiness includes the maintenance of the militarys fleets of inventory such as ships, aircraft and
vehicles.

Following the BCA, the service chiefs have principally focused their public comments on readiness
challenges.

Their takeaway: The military can continue to do exactly what its doing today, but its not big
enough, trained/maintained enough, or modern enough to do anything else, today or tomorrow.
BACKUP
Current issues in defense: What is an unfunded priorities list?

Unfunded priorities lists or requests had been

customary for years but changed in scope
depending on the Secretary of Defense. But
the FY17 NDAA now requires that the military
submit them to Congress each year.

The lists include emergent needs and

programs left on the cutting room floor when
the internal DoD budget was finalized
normally about $5-10 billion more for each
service.

These are intended as a realistic way for the

services to convey to Congress what their
immediate needs are.
Perennial issues in defense often surface as policy debates

BRAC or Base Realignment and Closure

Social policy fights (e.g., Women in combat, LGBT, transgender issues for military
& contractors)

Civilian workforce (e.g., hiring freeze, pay for performance)

Waste, fraud, abuse & audits (Defense acquisition reform is permanent focus)

Missile defense & nuclear triad issues

GITMO or Guantanamo Bay

Third offset strategy (i.e., Pentagons future technological investments)

Resources
OUSD(C) (http://comptroller.defense.gov/Budget-Materials/)
Contains all official Pentagon budgetary documents back to FY98

Selected Acquisition Reports (http://www.acq.osd.mil/ara/am/sar/)

Yearly tracking over major defense acquisition programs (about 45% of procurement budget)

CRS (https://fas.org/sgp/crs/)
CRS delivers nonpartisan congressional/DoD explainers & weapons systems trackers

CBO (https://www.cbo.gov/topics/defense-and-national-security)
Annual budget analysis, shipbuilding analysis, & moregreat for long-term trends

OMB (https://obamawhitehouse.archives.gov/omb/budget/Historicals)
Best source for GDP data and official admin budget data

Congress.gov/House Repository
Committees often post explanatory reports & summaries
Advanced Google search w/ .ppt selector and acronyms or names of officials
Besides press, most official military data is lurking in PPT presentations