Presentation by Matthew Goldberg, Deputy Assistant Director for CBO’s National Security Division, to the Manpower Roundtable. If the Congress rejects certain cost-saving proposals of the Administration that it has not accepted in the past, and if costs for weapon systems continue to rise as they have in the past, funding required to implement the Administration’s plans for the Department of Defense would exceed the funding caps set by the Budget Control Act of 2011 by $162 billion (in 2016 dollars) over the 2017–2020 period.

1. Congressional Budget Office
Presentation to the Manpower Roundtable
(Arlington, Virginia)
May 3, 2016
Matthew Goldberg
Deputy Assistant Director for National Security
This presentation contains data from and includes other information published in CBO’s Updated Budget Projections:
2016 to 2026 (March 2016), www.cbo.gov/publication/51384; The Budget and Economic Outlook: 2016 to 2026
(January 2016), www.cbo.gov/publication/51129; and Long-Term Implications of the 2016 Future Years Defense
Program (January 2016), www.cbo.gov/publication/51050.
Prospects for DoD’s Budget
Over the Next Decade

2. 1CONGRESSIONAL BUDGET OFFICE
The U.S. Fiscal Situation

3. 2CONGRESSIONAL BUDGET OFFICE
CBO projects the budget outlook if
current laws governing taxes and
spending generally remain unchanged.
Relative to the size of the economy,
mandatory spending and interest
payments are projected to rise while
revenues remain relatively flat.

4. 3CONGRESSIONAL BUDGET OFFICE
Total Revenues and Outlays
Percentage of Gross Domestic Product
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026
0
4
8
12
16
20
24
28
0
4
8
12
16
20
24
28
Outlays
Revenues
Average
Outlays,
1966 to 2015
(20.2%)
Average
Revenues,
1966 to 2015
(17.4%)
Actual Projected

5. 4CONGRESSIONAL BUDGET OFFICE
CBO projects that, under current law,
the deficit would remain slightly below
3 percent of gross domestic product (GDP)
through 2018, but then start to rise,
reaching 4.9 percent in 2026.

6. 5CONGRESSIONAL BUDGET OFFICE
Total Deficits or Surpluses
Percentage of Gross Domestic Product
Actual Projected
Deficits
Surpluses
Average
Deficit,
1966 to 2015
(-2.8%)
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026
-10
-8
-6
-4
-2
0
2
4
-10
-8
-6
-4
-2
0
2
4

7. 6CONGRESSIONAL BUDGET OFFICE
In total, three components of the
budget—Social Security, the major health
care programs, and net interest—are
projected to rise from 11.8 percent of GDP
in 2016 to 15.4 percent in 2026.

8. 7CONGRESSIONAL BUDGET OFFICE
Spending and Revenues Projected in CBO’s Baseline,
Compared With Actual Values in 1966 and 1991
Percentage of Gross Domestic Product

9. 8CONGRESSIONAL BUDGET OFFICE
Those three components of the budget—
Social Security, the major health care
programs, and net interest—account for
83 percent of the total increase in outlays
(in nominal terms) over the coming
decade.

10. 9CONGRESSIONAL BUDGET OFFICE
Components of the Total Increase in Outlays in
CBO’s Baseline Between 2016 and 2026
Total Increase
in Outlays:
$2.5 Trillion
(In nominal dollars)
All Other Programs
(17%)
Net Interest
(23%)
Social Security
(28%)
Major Health Care Programs
(32%)Medicare
(20%)
Other
(12%)

11. 10CONGRESSIONAL BUDGET OFFICE
Debt held by the public is projected to
increase from 75 percent of GDP in 2016
to 86 percent at the end of 2026.
At the end of 2026, federal debt would be
the highest as a percentage of GDP since
just after World War II.

12. 11CONGRESSIONAL BUDGET OFFICE
Federal Debt Held by the Public
Percentage of Gross Domestic Product

13. 12CONGRESSIONAL BUDGET OFFICE
The Budget Control Act and the
Department of Defense

14. 13CONGRESSIONAL BUDGET OFFICE
The Budget Control Act of 2011 (BCA) placed
separate caps on defense and nondefense
discretionary funding through 2021.
Roughly half of discretionary spending is for
national defense, and almost all of that is
carried out by the Department of Defense (DoD).

15. 14CONGRESSIONAL BUDGET OFFICE
The BCA was amended three times to raise
the caps:
• The American Taxpayer Relief Act of 2012
raised the caps for 2013
• The Bipartisan Budget Act of 2013
raised the caps for 2014 and 2015
• The Bipartisan Budget Act of 2015
raised the caps for 2016 and 2017

16. 15CONGRESSIONAL BUDGET OFFICE
Funding for overseas contingency operations
(OCO) is not constrained by the caps.
Such funding was originally intended for
operations in Iraq, Afghanistan, and elsewhere.
In practice, the Congress has provided
OCO funding for other purposes.

17. 16CONGRESSIONAL BUDGET OFFICE
Development of DoD’s Fiscal Year 2016 Budget
Billions of Dollars

18. 17CONGRESSIONAL BUDGET OFFICE
In his 2016 budget, the President
proposed total funding (base budget plus
OCO) for DoD of $585 billion.
The National Defense Authorization Act
(as enacted) authorized $581 billion, and
the appropriations ended up matching that
amount—some $4 billion less than the
President had proposed.

19. 18CONGRESSIONAL BUDGET OFFICE
Relative to the President’s 2016 budget
request, the operation and maintenance
(O&M) appropriation was cut by $7 billion
(3 percent), and the procurement
appropriation was increased by $4 billion
(4 percent).

20. 19CONGRESSIONAL BUDGET OFFICE
The main procurement increases were the
following:
• 11 additional F-35 Joint Strike Fighter aircraft
• 5 additional F/A-18E/F Super Hornet fighter aircraft
• 7 additional E/A-18G Growler aircraft
• 4 additional MQ-9 Reaper unmanned aerial vehicles
• Incremental funding for 1 Arleigh Burke-class
destroyer ($1.0 billion)
• 1 Joint High Speed Vessel
• 1 Afloat Forward Staging Base

21. 20CONGRESSIONAL BUDGET OFFICE
DoD’s Five-year Plan (2016–2020) and
CBO’s Extension to 2030

22. 21CONGRESSIONAL BUDGET OFFICE
DoD’s Future Years Defense Program (FYDP)
gives its detailed funding plan over a five-
year window.
The FYDP is submitted to the Congress
annually along with the President’s budget;
the FYDP for 2016–2020 accompanied the
President’s 2016 budget.
CBO projected the costs of DoD’s plans
through 2030.

23. 22CONGRESSIONAL BUDGET OFFICE
CBO’s projection was based on DoD’s cost
estimates in the 2016 FYDP as well as
DoD’s longer-term estimates, if available.
Total costs would be higher if they were to
grow at rates similar to those observed in
DoD’s recent budgets.

24. 23CONGRESSIONAL BUDGET OFFICE
CBO’s analysis was not a forecast or
prediction of future budgets.
Rather, CBO estimated the resources
needed to implement the programs and
policies that would be put into place in the
2016–2020 FYDP time frame.

25. 24CONGRESSIONAL BUDGET OFFICE
OCO funding has been a significant share of
DoD’s budget during the past fifteen years.
The 2017 President’s budget request
includes OCO funding of $59 billion for DoD.
$5 billion of that request is for what are
ordinarily base-budget activities, including
procurement.

26. 25CONGRESSIONAL BUDGET OFFICE
The 2017 OCO request is not reflected in
CBO’s analysis of the 2016 FYDP but will be
included in CBO’s upcoming analysis of the
2017 FYDP.

27. 26CONGRESSIONAL BUDGET OFFICE
Costs of DoD’s 2016 Plans in the Context of the
Budget Control Act of 2011, As Amended
Billions of 2016 Dollars
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
0
100
200
300
400
500
600
700
800
Base Budget
Base-Budget Plus
Overseas Contingency
Operations Funding
Actual
FYDP
Period
Beyond the
FYDP Period
Estimate of Base-
Budget Funding
Available to DoD
Under the
Budget Control
Act of 2011
Projection Using
DoD's Cost
Assumptions

28. 27CONGRESSIONAL BUDGET OFFICE
DoD’s estimates of the costs of the 2016 FYDP
exceed the BCA’s limits by a total of $107 billion
(in 2016 dollars) from 2017 to 2020.
CBO projects a steep increase in acquisition
costs starting in 2021, suggesting that
weapons development and procurement is
being deferred until beyond the FYDP period.

29. 28CONGRESSIONAL BUDGET OFFICE
Costs of DoD’s Plans, by Appropriation Category
Billions of 2016 Dollars

30. 29CONGRESSIONAL BUDGET OFFICE
The Congress has not always approved
DoD’s plans to cap military pay raises
below the growth rate of the employment
cost index (ECI), increase fees for military
health care, or initiate another round of
base realignment and closure (BRAC).

31. 30CONGRESSIONAL BUDGET OFFICE
Areas Where Costs of DoD’s 2016 Plans Could Be
Higher Than DoD’s Estimates
Total Increase
2016–2020 2016–2030
Areas in Which Different Policies May Be Adopted
Increase Military Pay at the Rate of the ECI Instead of the
Lower Rate Assumed by DoD for 2017 Through 2020 13.4 73.9
Increase Civilian Pay at the Rate of the ECI Minus
0.6 Percentage Points (Average Since 2007) Instead of the
Lower Rate Assumed by DoD for 2017 Through 2020 5.0 29.0
Do Not Implement DoD's Proposals to Consolidate
TRICARE Plans and Increase Various Fees 3.0 13.3
Do Not Implement DoD's Proposal to Institute
TRICARE for Life Annual Enrollment Fees 0.4 1.4
Fund Military Construction at Historical Levels
(Adjusted for Force Size) 9.4 9.4
________ __________
Subtotal 31.2 127.0
Billions of 2016 Dollars

32. 31CONGRESSIONAL BUDGET OFFICE
During the past several decades, the costs
of developing and procuring new weapon
systems have averaged 20 percent to
30 percent more than DoD’s initial estimates.

33. 32CONGRESSIONAL BUDGET OFFICE
Areas Where Costs of DoD’s 2016 Plans Could Be
Higher Than DoD’s Estimates (Continued)
Total Increase
2016–2020 2016–2030
Areas in Which Costs Could Be Higher
Acquisition Costs for Major Programs Grow as
They Have in the Past 22.7 155.5
Operation and Maintenance Costs (Adjusted for Force Size)
Grow as They Have in the Past 2.7 35.7
________ __________
Subtotal 25.4 191.2
All Areas Combined
Total 56.6 318.3
Billions of 2016 Dollars

34. 33CONGRESSIONAL BUDGET OFFICE
If the Congress rejects certain cost-saving
proposals that it has not accepted in the
past, and if costs for weapon systems
continue to rise as they have in the past,
funding required to implement the
Administration’s plans would exceed the
BCA caps by $162 billion (in 2016 dollars)
over the 2017–2020 period.