Transcript FY2010 Defense Budget: Issues for Congress

Long-Term Trends in the Defense
Budget
Stephen Daggett
Specialist in Defense Policy and Budgets
May 5, 2010
Overview of Main Points
1) Trends in DOD budget –
• Procurement the “bill payer” in past declines
• Norm since 1955 is growth of about 2% per
year above inflation per troop in base budget
2) Growing costs require difficult choices just to
stay in place
3) No real growth or declining budgets would
require trade-offs
• Limit personnel & O&M costs? DOD has tried.
• Trim weapons procurement? Usual answer.
• Reconsider size of the force? May be on the
table, but requires adjustments in strategy.
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Constant FY2011 $ in billions
DOD Discretionary Budget Authority
and Outlays, FY1950-FY2015
700
600
Budget Authority
Outlays
500
400
300
200
100
0
FY1950
FY1960
FY1970
FY1980
FY1990
FY2000
FY2010
Fiscal Year
Note: FY2010-FY2015, Administration projection, includes projected war costs.
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Total DOD Budget by Title, FY1948-FY2015:
Procurement Has Been the “Bill Payer” in
Past Declines (includes war costs)
300
FY2011 $ in Billions
250
Procurement
200
Military Personnel
O&M
150
100
R&D
50
MilCon/Fam Hsing
0
FY1948
FY1958
FY1968
FY1978
FY1988
FY1998
FY2008
Fiscal Years
Note: FY2010-FY2015, Administration projection, includes projected war costs.
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DOD Budget Authority per Active Duty
Troop: FY1955-FY2015 (base budget)
400
BA Per Troop
Constant FY2011$ in 000s
350
Trend: +1.9% per year
300
250
200
150
100
50
0
1955
1965
1975
1985
1995
2005
2015
Fiscal Year
Note: Base budget only, not including war costs
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Six Factors Driving Up the Cost of
Defense
1) Increase in personnel pay and benefits:
FY1998-FY2009 = 45% above inflation
2) O&M grows 2.7% per year above base
inflation
[1 & 2 discussed, 3-6 in additional slides]
3)
4)
5)
6)
Generational cost growth in weapons
Underestimation of weapon costs
Reorganization of Army/lessons of wars
Expanded range of threats/challenges
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Military Personnel Compensation Per Active
Duty Troop, FY1972-FY2009, Indexed to
FY1972, Adjusted for Inflation Using CPI
160
MilPers per Troop Index
1972 = 100
ECI from FY1982
140
120
100
80
FY1975 FY1980
FY1985 FY1990
FY1995 FY2000
FY2005
Fiscal Year
CRS-7
DOD Operation & Maintenance Per
Troop, FY1955-FY2015 (base budget)
180,000
160,000
Constant FY2011 $
140,000
O&M $ per Troop
Trend: +2.7% per year
120,000
100,000
80,000
60,000
40,000
20,000
0
1955
1965
1975
1985
1995
2005
2015
Fiscal Year
Note: Base budget only, not including war costs
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DOD Base Budget with No Real
Growth: FY2010-FY2020*
(constant FY2010 $ in billions)
Other $24 Bn.
$500
$400
Acquisition
$186 Billion
35%
$300
$200
$100
Operation &
Maintenance
$186 Billion
34%
Other $17 Bn.
Acquisition
$127 Billion
24%
Operation &
Maintenance
$243 Billion
45%
Military
Personnel
$141Billion
26%
Military
Personnel
$151Billion
28%
FY2010
FY2020
$0
*Assumes 0.7% annual growth in MilPers, 2.7% annual growth in O&M.
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Alternatives if No Real Growth or
Real Decline in Defense
1) Reform pay & benefits system?
•
•
E.g., less for retirement
Issue: Why take risk (current system worked)
2) Limit O&M & weapons costs?
•
•
DOD has tried repeatedly
Would be worse without continuing efforts
3) Reduce new weapons procurement?
•
•
Usual answer, but only for short term
Okay with force drawdown, but then must recover
4) Reconsider size of the force?
•
•
Difficult until withdrawals from Iraq/Afghanistan
Requires adjustments in strategy
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Additional/Backup Slides
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National Defense Outlays % GDP:
FY1950-FY2016
FY1952: 14.2%
12.0%
% GDP
FY1968:9.4%
8.0%
FY1965: 7.4%
FY1987: 6.2%
FY2011: 4.9%
4.0%
FY1980: 4.7%
FY2002: 3.0%
0.0%
FY1950
FY1960
FY1970
FY1980
FY1990
FY2000
FY2010
Fiscal Year
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Note: FY2010-FY2015, Administration projection, includes projected war costs.
Weapons Recapitalization Rates:
FY1985 vs. FY2008
1985
2008
∆
338
56
-282
34
0
- 34
Other Fixed Wing
211
153
-58
Rotary Wing
354
373
+19
87,113
13,471
-73,642
2,414
1,258
-1,156
56,551
32,276
-24,275
Satellites (Unclassified)
10
1
-9
Ships
23
7
-16
Tactical Fighters
Bombers
Missiles
Tracked Combat Vehicles
Tactical Vehicles
Procurement + R&D = $213 billion in FY1985, $244 billion in FY2008, both in FY2008 prices
Source: Adapted from Cecil Black, Boeing Corporation, January 2008
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GAO: Accuracy of Cost Estimates
Grows Worse
2000 portfolio
2005 portfolio
2007 portfolio
2008 portfolio
75
91
95
96
Total planned commitments
$805 Billion
$1.5 Trillion
$1.6 Trillion
$1.6 Trillion
Commitments outstanding
$390 Billion
$905 Billion
$875 Billion
$786 Billion
Change to total RDT&E costs from
first estimate
27 percent
33 percent
40 percent
42 percent
Change in total acquisition cost
from first estimate
6 percent
18 percent
26 percent
25 percent
Estimated total acquisition cost
growth
$43 Billion
$206 Billion
$301 Billion
$296 Billion
Share of programs with 25 percent
or more increase in program
acquisition unit cost
37 percent
44 percent
44 percent
42 percent
Average schedule delay in
delivering initial capabilities
16 months
17 months
21 months
22 months
Portfolio Size
Number of programs
Portfolio Performance Indicators
Source: Annual GAO reviews of selected acquisition programs.
CRS-14
Increased Ground Force
Requirements
• 92,000 increase in Army and MC endstrength = + $13 billion/year
• Army “Modularization” = $52 billion ++
• Lessons of the war:
• Force protection
• Communications (every Marine in Anbar
to have a radio)
• Transportation (trucks, helicopters)
• National Guard combat units to be
equipped as part of rotation base
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Source: Department of Defense briefing slides, August 2004
CRS-16
2006 QDR Objective – Shift in Focus
Irregular
Defeat
Terrorist
Extremism
Catastrophic
Counter
WMD
Defend
Homeland
“Shifting Our Weight”
Shape
Choices
Today's
Capability
Portfolio
Traditional
Disruptive
Source: DOD briefing on 2006 Quadrennial Defense Review, February 3, 2006.
CRS-17
Breakdown of Increases in Military Pay and
Benefits per Troop, FY1998 to FY2009
$80,004
$80,000
$2,672
OTHER MILPERS
$5,484
$70,000
$12,659
Constant FY2009 $
$60,000
$55,208
$3,408
DEATH GRATUITIES/
SURVIVOR BENEFITS/
HAZARD INSURANCE
CONCURRENT RECEIPT
ACCRUAL/ SPECIAL
DISABILITY COMPENSATION
$4,976
$50,000
RETIREE 65- AND OVER
HEALTH CARE ACCRUAL
$11,442
$11,288
$2,630
$40,000
RETIREMENT ACCRUAL AND
SOCIAL SECURITY TAXES
$3,387
$4,174
PERMANENT CHANGE OF
STATION TRAVEL
$30,000
SPECIAL/INCENTIVE PAY
AND ALLOWANCES
$20,000
$39,079
$33,518
BASIC ALLOWANCE FOR
HOUSING
$10,000
BASIC PAY/ SUBSISTENCE/
SEPARATION PAY
$0
FY1998
FY2009
Fiscal Year
Note: Base budget only, not including war costs
CRS-18
Breakdown of Increases in Military Pay and
Benefits per Troop, FY1998 to FY2009
FY1998
FY2009
% Change
$33,518
$39,079
+17%
BASIC ALLOWANCE FOR HOUSING
$4,174
$11,288
+170%
SPECIAL/INCENTIVE PAY AND ALLOWANCES
$3,387
$4,976
+47%
PERMANENT CHANGE OF STATION TRAVEL
$2,630
$3,408
+30%
$11,442
$12,659
+11%
RETIREE 65- AND OVER MEDICAL ACCRUAL
$0
$5,484
NA
CONCURRENT RECEIPT ACCRUAL/ SPECIAL
DISABILITY COMPENSATION
$0
$2,672
NA
$26
$106
+300%
$104
$333
+221%
$80,004
+45%
BASIC PAY/ SUBSISTENCE/ SEPARATION PAY
RETIREMENT ACCRUAL AND SOCIAL SECURITY
DEATH GRATUITIES/ SURVIVOR BENEFITS/
HAZARD INSURANCE
OTHER MILPERS
TOTAL ACTIVE DUTY MILITARY PERSONNEL PAY
AND BENEFITS
Note: Base budget only, not including war costs
$55,280
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Acquisition per Troop: FY1955FY2013 (base budget only)
140,000
Acquisition $ per troop
120,000
Trend: +2.2% per year
Constant FY2011 $
100,000
80,000
60,000
40,000
20,000
0
1955
1965
1975
1985
1995
2005
Fiscal Year
Note: Base budget only, not including war costs
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Contact Information
Stephen Daggett
[email protected]
202 707-7642
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