Long-Term Implications of the 2019 Future Years Defense Program

In most years, the Department of Defense (DoD) produces a five-year plan, called the Future Years Defense Program (FYDP), that is associated with the budget it submits to the Congress. This report describes CBO’s analysis of the 2019 FYDP, which was issued in April 2018 and summarizes DoD’s expectations about the costs of its plans from 2019 through 2023. Because decisions made in the near term can have consequences for the defense budget in the longer term, CBO projected the costs of that plan through 2033.

DoD’s Budget Plans for 2019 Through 2023

The 2019 FYDP comprises DoD’s budget request for 2019 and its planned budgets for 2020 through 2023. The 2019 budget request called for $686 billion in funding for DoD. Of that total, $617 billion was for the base budget, which funds normal, peacetime activities, such as day-to-day operations and the development and procurement of weapon systems. The remaining $69 billion was for the overseas contingency operations (OCO) budget, which is intended to fund temporary, wartime activities, such as those associated with the conflicts in Afghanistan, Iraq, and Syria. (Appropriations enacted in September 2018 provide DoD with $616 billion in base-budget funding and $69 billion in OCO funding for 2019—approximately the same amounts that the Administration requested.) Adjusted for inflation, the total amount DoD requested (and received) for 2019 was 1 percent more than what was appropriated for 2018.

Under DoD’s 2019 FYDP, total annual costs (measured in 2019 dollars) would remain about the same over the 2020–2023 period as in 2019. However, DoD plans to make an "OCO-to-base" shift that would move the cost of many enduring activities currently funded in the OCO budget into the base budget. As a result, costs included in the base budget would be, on average, $47 billion higher per year (about $665 billion), and costs included in the OCO budget would be reduced by about the same amount. Over that period, DoD’s annual base-budget costs would be greater than in any year over the past several decades. DoD intends to offset any real growth (that is, growth after removing the effects of inflation) in its costs through 2023 with savings from improving the efficiency of its operations. However, plans in the 2019 FYDP for an increase in the number of military personnel may make it difficult to prevent real increases in spending over that period.

In several areas of DoD’s base budget, costs have historically grown more rapidly than DoD projected in the 2019 FYDP. For example, increases in the costs of military and civilian compensation are smaller in the 2019 FYDP than they have been in recent experience. Similarly, DoD has frequently underestimated costs in other areas, such as the acquisition of weapon systems. To assess the possible effects of such factors, CBO prepared an alternative estimate of the costs of implementing DoD’s 2019 plans that incorporates policies and patterns of growth that are more consistent with the changes in costs DoD has experienced over the past several decades. Using estimates based on those trends, CBO projects that total costs from 2019 through 2023 would be about $85 billion (or 3 percent) higher than indicated in the 2019 FYDP.

National defense funding for the 2019–2021 period is subject to caps set by the Budget Control Act of 2011 (BCA) as modified by the Bipartisan Budget Act of 2018. The funding DoD requested for its base budget in 2019 (and the amount that was later appropriated) adhered to the cap for that year. However, the caps are significantly lower after 2019. Estimated base-budget costs in the FYDP would exceed DoD’s historical share of the caps by $129 billion in 2020 and $123 billion in 2021, measured in 2019 dollars. (OCO funding is not constrained by the BCA’s caps.)

CBO’s Projection of DoD’s Costs for 2024 Through 2033

On the basis of DoD’s estimates, CBO projects that the costs of DoD’s 2019 plans would increase steadily after 2023: The base budget would reach $735 billion (in 2019 dollars) by 2033, an increase of 11 percent in real terms over those 10 years. Several factors would contribute to that increase:

• The costs of compensation for military personnel, which have grown faster than inflation in 20 of the past 30 years;
• The costs of operation and maintenance (O&M), which have also grown steadily in real terms (after adjusting for changes in the size of the military) over the past several decades; and
• The acquisition of weapon systems, including several new types of aircraft and enough ships to increase the size of the Navy’s fleet, and the development of land-based weapon systems to fulfill the Army’s objectives for modernization.

About 25 percent of the total growth from 2024 through 2033 would be in military personnel costs, 55 percent in O&M costs, and 20 percent in costs to develop and purchase weapon systems.

Using estimates based on historical trends, CBO projects that DoD’s total costs from 2024 to 2033 would be about $395 billion (or 6 percent) greater than the amounts projected on the basis of DoD’s estimates. Total costs from 2019 through 2033 would be about $480 billion (or 5 percent) greater.

Uncertainties in Projections of DoD’s Plans

The possibility that cost estimates might be inaccurate is not the only source of uncertainty when projecting DoD’s long-term costs. The projections of base-budget costs in the FYDP and CBO’s extended projections through 2033 are estimates of the long-term costs of executing the specific plans that DoD articulated in its 2019 budget and supporting documents. If those plans change as a result of factors such as international events, Congressional decisions, and unanticipated advances in technology, DoD’s costs would probably change as well. Furthermore, even if DoD’s plans generally remained unchanged, many program-level policies that underlie DoD’s projections of its costs may not come to pass. For those reasons, CBO’s projections should not be viewed as predictions of future funding for DoD; rather, the projections are estimates of the costs of executing the department’s 2019 base-budget plans without changes.

Costs for OCO are highly uncertain because they depend on how ongoing conflicts evolve and whether new conflicts arise. This report does not include projections of OCO costs.