Bloomberg Businessweek - December 7, 2011, By Tony Capaccio
Dec. 7 (Bloomberg) -- The White House and Pentagon are near agreement on a draft five-year defense budget that flattens expenditures though 2017, with the lowest war spending since 2004, according to an Office of Management and Budget document.
The OMB also endorses a Navy plan to delay by two years start of construction on the Huntington Ingalls Industries Inc. CVN-79 John F. Kennedy aircraft carrier, and provides $508 million to bankroll the new U.S. Office of Security Cooperation in Iraq. OMB said the White House has yet to decide on whether defense civilian employees and military personnel will get a pay raise.
Defense spending in 2013 would be reduced 1 percent from this year’s pending $525.3 billion budget request before growing annually 1.8 percent in 2014, 2.3 percent in 2015, dropping to 1.9 percent in 2016 and increasing 2.2 percent in 2017, according to the 23-page document, a Nov. 29 OMB “pass-back” budget to the Pentagon. Bloomberg News obtained the document.
“This is the first time the Obama Administration has proposed a defense budget for the coming year that is less than the previous year,” said Todd Harrison, a defense budget analyst for the non-partisan Center for Strategic and Budgetary Assessments in Washington.
The percentage increases are expressed in “nominal growth,” not adjusted for inflation. The OMB numbers apply only to Pentagon spending. Pentagon budget officials plan to conclude the process by Dec. 20.
The White House and Pentagon also have agreed to $82.54 billion in war funding for 2013 and $50 billion “placeholder” amounts through the remainder of the plan.
The $82 billion assumes 68,000 troops in Afghanistan through that fiscal year. There are 97,000 today. The request is the lowest for war spending since fiscal 2004, when the Pentagon requested about $69 billion, according to comptroller data.
“The $82.5 billion requested is consistent with the number of troops they are projecting,” Harrison said. “Over the past six years, the cost per troop in Afghanistan has averaged about $1.2 million per-troop per-year, and that’s precisely what this budget works out to on a per troop basis.”
The OMB data outlines the distribution of the initial $261 billion in reductions mandated by the Budget Control Act: $27.5 billion in fiscal 2012; $46.8 billion in fiscal 2013; $53.3 billion in 2014; $52.7 billion in 2015; $54.6 billion in 2016 and $53.5 billion in 2017.
The basic defense-only “topline” numbers currently are: $523.8 billion in 2013; $533.0 billion in 2014; $545.5 billion in 2015; $555.9 billion in 2016 and $567.9 billion in 2017.
The overall 2012-2021 defense plan calls for $5.652 trillion in spending, according to OMB. OMB calculated that the total Budget Control Act-mandated defense cut over those years is $488 billion -- or about an 8.5 percent overall decrease.
“This budget fits within the initial budget caps agreed to in the Budget Control Act,” Harrison said. “It does not fit under the caps imposed by sequestration, which would reduce the base budget by about $54 billion below the amounts currently projected for each year,” he said, referring to the potential for another $500 billion in automatic cuts.
“This clearly indicates the Pentagon and the White House are not preparing a budget that would comply with sequestration,” he said.
Russell Rumbaugh, a defense budget expert with the Stimson Center in Washington, said the new OMB guidance is “realistic” given the budget caps.
“Although it doesn’t keep pace with inflation,” the OMB guidance equals only a 6 or 7 percent reduction at the end of 10 years -- way below past build-downs. We’re probably still staring at another reduction at some point, although it may only happen each year,” Rumbaugh said.
The CVN-79 is the second of the Gerald R. Ford class carriers Huntington Ingalls is building in Newport News, Virginia.
The Navy proposal “would extend the funding profile from the original eight to 12 years,” OMB said. The Navy would start construction in 2015. Initial JFK construction started last year.
OMB spokesman Ken Baer in an e-mail said, “We are in the middle of a long and deliberative budget development process, and no final decisions have been made. Until that process is complete and the 2013 budget is released, we cannot comment on rumors and pre-decisional materials.”
--Editors: Terry Atlas, Jim Rubin.
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