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Congressional Budget Office

Prospects For DoD's Budget Over
The Next Decade
Presentation to TechAmerica Procurement Policy Meeting
January 24, 2014

David E. Mosher
Assistant Director of CBO for National Security
Outline

• Fiscal Situation
• Implications of Budget Control Act
• Internal Pressures on DoD's Budget

• Approaches for Scaling Back DoD’s Plans

CONGRESSIONAL BUDGET OFFICE

1
Deficits or Surpluses Under CBO's Baseline
for FY 2014
Percentage of GDP

CBO's Baseline
Projection

Source: Congressional Budget Office, Options for Reducing the Deficit: 2014-2023, November 2013. An updated version of
this figure appears in Congressional Budget Office, The Budget and Economic Outlook: 2014 to 2024, February 2014.

CONGRESSIONAL BUDGET OFFICE

2
Outline

• Fiscal Situation
• Implications of Budget Control Act
• Internal Pressures on DoD's Budget

• Approaches for Scaling Back DoD’s Plans

CONGRESSIONAL BUDGET OFFICE

3
Projected Costs of DoD’s FY 2014 Plans Compared
with Funding Caps
Billions of FY 2014 dollars

Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013

The gap between DoD’s FYDP plans and the BCA caps
averages about $60 billion to $90 billion a year
CONGRESSIONAL BUDGET OFFICE

4
Outline

• Fiscal Situation
• Implications of Budget Control Act
• Internal Pressures on DoD's Budget

• Approaches for Scaling Back DoD’s Plans

CONGRESSIONAL BUDGET OFFICE

5
CBO's Projection of FY 2014 Defense Budget
Request by Appropriation Title
Billions of FY 2014 dollars

Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013

CONGRESSIONAL BUDGET OFFICE

6
Each of the Three Major Categories of the Defense Budget
Has Its Own Momentum
■ Costs of developing and buying weapons have been, on
average, 20 percent to 30 percent higher than DoD’s initial
estimates
■ Costs of operation and maintenance per active-duty service
member have been steadily increasing since at least 1980,
excluding the cost of the wars in Iraq and Afghanistan
■ Costs for compensation of military personnel – including
health care benefits for service members and retirees– have
been rapidly increasing since 2000
The mismatch between DoD’s plans and the BCA caps is
accentuated by these internal pressures in DoD’s budget
CONGRESSIONAL BUDGET OFFICE

7
Example of Cost Growth in Acquisition Programs:
The Navy’s Shipbuilding Program

Source: Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2014 Shipbuilding Plan, October 2013

CONGRESSIONAL BUDGET OFFICE

8
Example #2:
Growth in O&M per Active-Duty Service Member

Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013

CONGRESSIONAL BUDGET OFFICE

9
Growth in Pay and Benefits of Military Personnel:
The Military Medical System
Billions of FY 2014 dollars

Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013

CONGRESSIONAL BUDGET OFFICE

10
Outline

• Fiscal Situation
• Implications of Budget Control Act
• Internal Pressures on DoD's Budget

• Approaches for Scaling Back DoD’s Plans

CONGRESSIONAL BUDGET OFFICE

11
CBO Examined Four Approaches to
Scaling Back DoD’s Plans ($90 billion/year gap)
Sources of Reductions (Billions of 2013 dollars)
Option 1:
Preserve Force Structure; Cut Acquisition and Operations

140

Option 2:
Cut Acquisition and Operations; Phase in Reductions in Force Structure
140

120

120

100

100

80

80

60

60

40

40

20

20

0

0

140

Option 3:
Achieve Savings Primarily by Cutting Force Structure

Option 4:
Reduce Force Structure Under a Modified Set of Budget Caps

140
120

120
Reductions
Required Under
Existing Caps

100
80

100
80

60

60

40

40

20

20
0

0
2013 2014 2015 2016 2017 2018 2019 2020 2021
Reduction from Cuts to Operations

2013 2014 2015 2016 2017 2018 2019 2020 2021

Reduction from Cuts to Acquisition

Reduction from Cuts to Force Structure

Source: Congressional Budget Office, Approaches for Scaling Back the Defense Department’s Budget Plans, March 2013

CONGRESSIONAL BUDGET OFFICE

12
Illustrative Force Structure Reductions for
Selected Unit Types Under CBO Options
Active and Reserve Units under DoD’s Plans for 2017

BCTs
Planned force,
2017

Carriers

66

11

Amphibious
Marine
Ships
Regiments
33

Fighter
Sqdns**

Airlift
Sqdns**

93

20

11

Cuts Under the Options by 2021 (CBO’s Cost Projection*)
Option 2

7

1

4

2

11

3

Option 3

16

3

8

3

22

5

Illustration assumes that reductions are spread evenly across all four services.
* Reductions are about one-third smaller under DoD’s costing assumptions.
** Air Force squadrons (sqdns) are notional units consisting of 12 aircraft.
Source: Congressional Budget Office, Approaches for Scaling Back the Defense Department’s Budget Plans, March 2013

CONGRESSIONAL BUDGET OFFICE

13
Bibliography of Related CBO Studies
■ Costs of Military Pay and Benefits in the Defense Budget
(November 2012)
■ Approaches for Scaling Back the Defense Department’s
Budget Plans (March 2013)
■ An Analysis of the Navy’s Fiscal Year 2014 Shipbuilding Plan
(October 2013)
– Latest of annual series

■ Long-Term Implications of the 2014 Future Years Defense
Program (November 2013)
– Latest of annual series

■ Approaches to Reducing Health Care Spending by the
Department of Defense (January 2014)

CONGRESSIONAL BUDGET OFFICE

14

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Prospects For DoD's Budget Over The Next Decade

  • 1. Congressional Budget Office Prospects For DoD's Budget Over The Next Decade Presentation to TechAmerica Procurement Policy Meeting January 24, 2014 David E. Mosher Assistant Director of CBO for National Security
  • 2. Outline • Fiscal Situation • Implications of Budget Control Act • Internal Pressures on DoD's Budget • Approaches for Scaling Back DoD’s Plans CONGRESSIONAL BUDGET OFFICE 1
  • 3. Deficits or Surpluses Under CBO's Baseline for FY 2014 Percentage of GDP CBO's Baseline Projection Source: Congressional Budget Office, Options for Reducing the Deficit: 2014-2023, November 2013. An updated version of this figure appears in Congressional Budget Office, The Budget and Economic Outlook: 2014 to 2024, February 2014. CONGRESSIONAL BUDGET OFFICE 2
  • 4. Outline • Fiscal Situation • Implications of Budget Control Act • Internal Pressures on DoD's Budget • Approaches for Scaling Back DoD’s Plans CONGRESSIONAL BUDGET OFFICE 3
  • 5. Projected Costs of DoD’s FY 2014 Plans Compared with Funding Caps Billions of FY 2014 dollars Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013 The gap between DoD’s FYDP plans and the BCA caps averages about $60 billion to $90 billion a year CONGRESSIONAL BUDGET OFFICE 4
  • 6. Outline • Fiscal Situation • Implications of Budget Control Act • Internal Pressures on DoD's Budget • Approaches for Scaling Back DoD’s Plans CONGRESSIONAL BUDGET OFFICE 5
  • 7. CBO's Projection of FY 2014 Defense Budget Request by Appropriation Title Billions of FY 2014 dollars Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013 CONGRESSIONAL BUDGET OFFICE 6
  • 8. Each of the Three Major Categories of the Defense Budget Has Its Own Momentum ■ Costs of developing and buying weapons have been, on average, 20 percent to 30 percent higher than DoD’s initial estimates ■ Costs of operation and maintenance per active-duty service member have been steadily increasing since at least 1980, excluding the cost of the wars in Iraq and Afghanistan ■ Costs for compensation of military personnel – including health care benefits for service members and retirees– have been rapidly increasing since 2000 The mismatch between DoD’s plans and the BCA caps is accentuated by these internal pressures in DoD’s budget CONGRESSIONAL BUDGET OFFICE 7
  • 9. Example of Cost Growth in Acquisition Programs: The Navy’s Shipbuilding Program Source: Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2014 Shipbuilding Plan, October 2013 CONGRESSIONAL BUDGET OFFICE 8
  • 10. Example #2: Growth in O&M per Active-Duty Service Member Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013 CONGRESSIONAL BUDGET OFFICE 9
  • 11. Growth in Pay and Benefits of Military Personnel: The Military Medical System Billions of FY 2014 dollars Source: Congressional Budget Office, Long-Term Implications of the 2014 Future Years Defense Program, November 2013 CONGRESSIONAL BUDGET OFFICE 10
  • 12. Outline • Fiscal Situation • Implications of Budget Control Act • Internal Pressures on DoD's Budget • Approaches for Scaling Back DoD’s Plans CONGRESSIONAL BUDGET OFFICE 11
  • 13. CBO Examined Four Approaches to Scaling Back DoD’s Plans ($90 billion/year gap) Sources of Reductions (Billions of 2013 dollars) Option 1: Preserve Force Structure; Cut Acquisition and Operations 140 Option 2: Cut Acquisition and Operations; Phase in Reductions in Force Structure 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 140 Option 3: Achieve Savings Primarily by Cutting Force Structure Option 4: Reduce Force Structure Under a Modified Set of Budget Caps 140 120 120 Reductions Required Under Existing Caps 100 80 100 80 60 60 40 40 20 20 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 Reduction from Cuts to Operations 2013 2014 2015 2016 2017 2018 2019 2020 2021 Reduction from Cuts to Acquisition Reduction from Cuts to Force Structure Source: Congressional Budget Office, Approaches for Scaling Back the Defense Department’s Budget Plans, March 2013 CONGRESSIONAL BUDGET OFFICE 12
  • 14. Illustrative Force Structure Reductions for Selected Unit Types Under CBO Options Active and Reserve Units under DoD’s Plans for 2017 BCTs Planned force, 2017 Carriers 66 11 Amphibious Marine Ships Regiments 33 Fighter Sqdns** Airlift Sqdns** 93 20 11 Cuts Under the Options by 2021 (CBO’s Cost Projection*) Option 2 7 1 4 2 11 3 Option 3 16 3 8 3 22 5 Illustration assumes that reductions are spread evenly across all four services. * Reductions are about one-third smaller under DoD’s costing assumptions. ** Air Force squadrons (sqdns) are notional units consisting of 12 aircraft. Source: Congressional Budget Office, Approaches for Scaling Back the Defense Department’s Budget Plans, March 2013 CONGRESSIONAL BUDGET OFFICE 13
  • 15. Bibliography of Related CBO Studies ■ Costs of Military Pay and Benefits in the Defense Budget (November 2012) ■ Approaches for Scaling Back the Defense Department’s Budget Plans (March 2013) ■ An Analysis of the Navy’s Fiscal Year 2014 Shipbuilding Plan (October 2013) – Latest of annual series ■ Long-Term Implications of the 2014 Future Years Defense Program (November 2013) – Latest of annual series ■ Approaches to Reducing Health Care Spending by the Department of Defense (January 2014) CONGRESSIONAL BUDGET OFFICE 14