Discretionary Spending

Function 050 - National Defense

Reduce Funding for Naval Ship Construction to Historical Levels

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-2021 2017-2026
Change in Planned Defense Spending                        
  Budget authority 0 -3.8 -2.0 -3.8 -4.6 -5.0 -5.4 -5.9 -6.3 -6.7 -14.2 -43.5
  Outlays 0 -0.2 -1.1 -1.5 -2.4 -3.1 -3.8 -4.4 -4.9 -5.4 -5.2 -26.8

This option would take effect in October 2017.

Estimates of savings displayed in the table are based on the 2017 Future Years Defense Program and CBO’s extension of that plan.

The Navy’s fiscal year 2017 shipbuilding plan calls for buying 254 new ships over the next 30 years at an average cost of $17 billion per year in 2016 dollars. Including the costs of all activities funded by the Navy’s shipbuilding account, such as refueling nuclear-powered aircraft carriers and outfitting new ships, the average annual cost of implementing the plan is $18.8 billion. That amount is 18 percent more than the average of $15.9 billion per year (in 2016 dollars) that the Navy has spent on shipbuilding over the past 30 years.

This option would decrease spending on naval ship construction to the 30-year average. Specifically, the option would reduce the number of ships that the Navy is scheduled to purchase over the next 30 years from 254 to 180, cutting the number to be purchased between 2017 and 2026 from 86 to 75. The cuts would affect several types of ships in the Navy’s fleet: surface combatants, attack submarines, amphibious ships, and combat logistics and support ships. The number of aircraft carriers, however, would remain unchanged to comply with the Congressional mandate that the Navy maintain a force of 11 such ships. The number of ballistic missile submarines also would not be affected by the cuts, because Navy officials consider those ships their highest acquisition priority. If funding for ship construction was reduced to the 30-year average, the need for discretionary budget authority would be reduced by $44 billion through 2026. Outlays would fall by a total of $27 billion over that period, the Congressional Budget Office estimates.

An argument in favor of this option is that the Navy would still have a powerful fleet in 2026 and beyond. Because ships take a long time to build and then serve in the fleet for 25 to 50 years, even with the cuts the size of the fleet would grow by nearly the same amount through 2026 under this option as it would under the 2017 plan. Today, the fleet numbers 272 ships. Under the Navy’s 30‑year plan, the fleet would grow to 309 ships by 2026 before dropping to 292 ships in 2046. Under this option, the fleet would grow to 308 ships in 2026, and then it would steadily decline to 231 ships in 2046.

An argument against this option is that it would further decrease the size of the fleet over the next 30 years when the fleet has already shrunk over the past 30 years. Since 1987, the number of ships in the fleet has fallen by more than 50 percent—from 568 to 272. With a smaller fleet, the Navy may not have the forces that it needs to implement its war plans if a conflict was to erupt. The Navy’s shipbuilding plan is based on the 2014 update to its 2012 force structure assessment, which concluded that the fleet should comprise 308 ships. That is the minimum number of ships that the Navy has determined it needs in its fleet in order to deploy an adequate number of ships overseas in the event of a conflict. At any given time, some ships are undergoing long-term maintenance or are in the early stages of training and thus are unavailable to be immediately deployed, so the Navy must maintain more ships in the fleet than it would need to fight. Some observers, pointing to the increasing assertiveness with which Russia and China conduct foreign relations, have noted that the world appears to be entering an era of renewed competition between major powers. Decreasing funding for shipbuilding and substantially reducing the size of the fleet would, over the long run, result in the Navy’s having fewer ships than it says it needs to protect the United States’ interests overseas in the event of a conflict with another major power.

Another argument against this option is that it could lead the Navy to reduce its overseas presence. Today the Navy operates more than a third of its fleet—or about 100 ships—overseas. If the fleet was smaller, it is likely that fewer ships would be based overseas in peacetime. The Navy could, however, maintain the same level of presence with a smaller fleet by stationing more ships overseas, increasing the practice of crew rotation, or extending the length of deployments. But those measures would cost money and, in the case of longer deployments, place greater stress on the crews that operate the ships.