CBO Projects a Large Gap Between the Costs of DoD’s Plans and Funding Available Under the Budget Control Act
Today, CBO released an analysis of the long-term implications of the Department of Defense’s (DoD’s) five-year budget plans. CBO projects that the costs of those plans would exceed the funding limits established by the Budget Control Act of 2011 (BCA) by an average of about $60 billion to about $90 billion a year between fiscal years 2014 and 2021, depending on the cost assumptions used in the projection.
CBO’s Analysis of DoD’s Plans
CBO analyzed DoD’s Future Years Defense Program (FYDP), a detailed statement of DoD’s plans and the estimated costs of those plans that the department submits along with its annual budget request. The latest FYDP, issued in April 2013, spans the years 2014 through 2018. Because decisions made in the near term can have consequences for the defense budget well beyond that period, CBO—at the request of the Chairman and Ranking Member of the Senate Budget Committee—examined the FYDP and projected its budgetary impact through 2028. The FYDP describes DoD’s plans for its normal (“base budget”) activities, such as the development and procurement of new weapon systems and the day-to-day operations of the military and civilian workforce. It leaves aside the war in Afghanistan and other nonroutine military activities that are funded separately.
CBO produced two projections of the costs of DoD’s plans. The first, the “CBO projection,” used CBO’s estimates of the costs of military activities and the extent to which those costs will change over time; those estimates reflect DoD’s experience in recent years. The second projection, the “extension of the FYDP,” started with DoD’s estimates of the costs of its plans through 2018 and extended them beyond 2018 using DoD’s cost estimates if they were available and CBO’s projections of price and compensation trends for the overall economy if DoD’s estimates were not available.
According to the CBO projection:
- The cost to implement DoD’s 2014 plans would grow at an average annual rate of 1.0 percent, after adjusting for inflation, from 2014 to 2028. Much of that growth would be caused by the rising costs of military health care, development and procurement of new weapon systems, compensation of the department’s military and civilian employees, and various operation and maintenance activities.
- Costs from 2014 through 2028 would be, on average, about $30 billion per year higher (after adjusting for inflation) under the CBO projection than under the FYDP and its extension (see the figure below).
Compliance with the Budget Control Act
Under either projection, the costs of DoD’s plans would significantly exceed the limits set by the automatic enforcement procedures under the Budget Control Act, which constrains discretionary appropriations through 2021. Specifically, if DoD continues to receive its historical share of the national defense budget (95.5 percent over the past decade), CBO’s analysis yields these conclusions:
- Under the CBO projection, the cost of DoD’s base-budget plans for 2014 through 2021 would average about $88 billion a year higher (in nominal terms) than the funding that would be provided to DoD under the limits set by the BCA’s automatic enforcement procedures. (That gap would average about $81 billion a year after adjusting for inflation.)
- Under the FYDP and its extension, the cost of DoD’s base-budget plans for 2014 through 2021 would average about $59 billion a year higher (in nominal terms) than would be available to DoD under the limits set by the BCA’s automatic enforcement procedures. (That gap would average about $54 billion a year after adjusting for inflation.)
- Even with the BCA’s automatic enforcement procedures in effect, DoD’s base budget in 2014 would be larger than it was in 2006 (after adjusting for inflation) and larger than the average base budget during the 1980s, a decade that included a large military buildup. After 2014, the BCA will allow the base budget to grow very slowly in real terms through 2021.
A future post will examine different approaches that DoD could use to address the growing gap between the projected cost of its plans and the funding permitted under the BCA.
David Arthur and Daniel Frisk are analysts in CBO’s National Security Division. Many other analysts from that division and from CBO’s Budget Analysis Division contributed to the study.