Battling with budgets
In coming months, Congress will consider Bush administration requests for over $500 billion for defence programmes, including funds in the regular defence budget for Fiscal Year (FY) 2006 and supplemental appropriations for current costs of ongoing military operations in FY2005:
• On 7 February, the administration released its budget request for FY2006, which runs from 1 October 2005 to 30 September 2006. It includes $442bn for national defence, of which $421bn is for the Department of Defense, $17bn for Department of Energy nuclear weapons programmes, and $3bn for the defence-related programmes of other agencies, such as civil defence. It does not include projected funding for operations in Iraq, Afghanistan or elsewhere in FY2006.
• On 14 February, the administration submitted a request for supplemental appropriations of $82bn, of which $75bn is to cover military operations through the remainder of FY2005. The other $7bn is for non-defence programmes – mostly reconstruction assistance to Iraq and Afghanistan run by the State Department, and about $1bn for Tsunami relief activities.
• It is likely that additional money will be requested later to cover costs of Iraq and Afghanistan operations in the first few months of FY2006. Last summer, Congress provided a down-payment of $25bn for military operations in FY2005 as a bridge between the start of the fiscal year and the time it would take to provide supplemental funding.
As substantial as it is, the regular FY2006 budget is marginally smaller than the Pentagon had originally planned. This has prompted some complaints from Congress that it is not large enough. In December, the White House Office of Management and Budget (OMB) instructed the Pentagon to trim its defence programme for the six-year period from FY2006–FY2011 by a net of $30bn. OMB also directed the Pentagon to add money to some programmes. The largest addition was $5bn annually from FY2007 through FY2011, $25bn in all, to cover the costs of reorganising the army within the regular defence budget. These costs are included in the FY2005 supplemental appropriations request and will once more be in a supplemental in FY2006, but not thereafter. To achieve net cuts of $30bn while absorbing the OMB additions, the Pentagon had to trim over $55bn from its six-year plan, of which $5.9bn was in FY2006.
Many of the cuts are controversial in Congress and there has been speculation about what they may presage. By February 2006, the Pentagon is to complete its next Quadrennial Defense Review (QDR) of long-term strategy and force planning. It has already begun to develop a new strategic ’framework’ that is expected to guide the QDR. Though not yet fully articulated, this gives the lowest priority to forces designed to defeat ’traditional’ threats from regional military powers. The premise is that such threats are unlikely and that existing forces are more than capable of coping with them. Some see the recent Pentagon programme cuts as the first round of reductions in weapons designed for traditional force-on-force military warfare.
Defence budget trends
Leaving aside supplemental appropriations to cover war costs, the FY2006 budget is about 4.5% above the regular, FY2005 non-war budget, or just above 2% higher after adjusting for inflation. Projections show about the same, modest rate of growth over the next six years. This comes after several years of substantially higher growth. Between FY2000, the last budget controlled wholly by the Clinton administration, and FY2006, the non-war budget has grown by about 45% in nominal terms, or about 22% after inflation.
Much of the increase, however, has gone simply to pay for the cost of recruiting and retaining troops and of operating the force that was inherited from the Clinton era. A comparison of the FY2006 request with the actual FY2000 budget, broken down by titles of the annual defence appropriations bill, is instructive. Of the $131bn increase in the Pentagon portion of the budget, $77bn, almost 60%, is in the ’Military Personnel’ and ’Operation and Maintenance’ accounts. In effect, this is the cost of maintaining the current force, without significantly increasing the pace of weapons modernisation. The remaining 40% of the increase has still permitted substantial increases in weapons procurement and, particularly, in R&D. But as budgets level off, annual increases in the future will largely go to maintain current forces. Thus, as the December budget decisions reflected, increases in one part of the budget – in this case in the army – will inevitably come at the expense of weapons acquisition for other elements of the force.
The big increase in military personnel costs between FY2000 and FY2006 is an important story in itself. Beginning with the FY2000 defence authorisation bill, Congress has approved substantial pay and benefits increases, partly with administration concurrence and partly over its objections. The increases include five years of pay rises of 0.5% above an economy-wide index of wage costs; three rounds of ’pay table reform’ that gave much larger increases in middle grades to improve retention of skilled personnel; a plan to eliminate differences in on-base and off-base housing costs; and big increases in retirement benefits, including, notably, a programme under which military retirees aged 65 and over will have access to Pentagon-provided healthcare over and above what all retirees receive through Medicare. Taken together, these changes have increased active duty personnel cost by more than 30%, after adjusting for inflation, since 1999. Lately, the administration has warned against additional increases in benefits, particularly for retirees, as a drain on other defence priorities.
Supplemental questions
Overall, the FY2005 supplemental defence appropriations request reflects a very large increase over FY2004. Appropriations for operations in Iraq, Afghanistan and elsewhere last year amounted to about $67bn, including $2bn that was used in FY2004 out of the $25bn that Congress provided as a ’bridge’ fund in the FY2005 defence appropriations bill. The $23bn left from that, added to the $75bn now being requested, raises the FY2005 total to about $98 billion, a $30bn increase. This is not because of any increase in the number of troops deployed in Iraq and elsewhere or an increase in the pace of operations. Rather, the increase is because the Pentagon is asking for substantial amounts for programmes not funded earlier, or funded at more modest levels. The major increases include:
Overall, the FY2005 supplemental defence appropriations request reflects a very large increase over FY2004. Appropriations for operations in Iraq, Afghanistan and elsewhere last year amounted to about $67bn, including $2bn that was used in FY2004 out of the $25bn that Congress provided as a ’bridge’ fund in the FY2005 defence appropriations bill. The $23bn left from that, added to the $75bn now being requested, raises the FY2005 total to about $98 billion, a $30bn increase. This is not because of any increase in the number of troops deployed in Iraq and elsewhere or an increase in the pace of operations. Rather, the increase is because the Pantagon is asking for substantial amounts for programmes not funded earlier, or funded at more modest levels. The major increases include:
• $7bn to train and equip Iraqi police and for related costs, funds which had previously been provided through the State Department, plus $2.2bn for internal security forces in Afghanistan;
• $5bn for army reform plus $400m for organisational changes in the marine corps;
• $6.3bn to replace equipment used in Iraq and Afghanistan;
• $1.4bn more than last year to refurbish equipment; and
• $2.8bn more than last year to procure ammunition, missiles, and up-armoured vehicles for the conflicts.
The request also includes, as provided last year, funds to pay for about 30,000 active duty troops that are being kept over normal service ’end-strength’ levels. These additional troops are being maintained in part to provide a rotation base for Iraq, and in part to provide a buffer as the Army reorganises.
The main issue concerning the supplemental is whether some of the items in the request should, instead, be financed in the regular defence bill. Traditionally, supplementals have been used to replace lost material and to refurbish worn equipment. In some cases, however, the services are financing things in the supplemental – particularly Unmanned Aerial Vehicles and munitions – that otherwise would be contained in the regular budget. But more importantly, the war in Iraq has revealed long-term shortcomings in the Army – including shortages of munitions and of equipment like up-armoured Humvees, and an organisational structure that could not support overseas rotations efficiently – that the administration is trying to fix on an urgent basis with supplemental funding. Some of these are one–time costs, but others will recur in future budgets. To the extent these are recurring expenses, the supplemental is masking either shortfalls in the long-term defence plan or budget trade-offs that will have to be addressed in the future.
FY2006 budget programme cuts
The main issue in early debate about the budget has been over cuts in major weapons programmes that the Pentagon imposed in December. These include:
• Terminating production of the C-130J airlift aircraft after FY2006.
• Reducing the number or deployable aircraft carriers from 12 to eleven by decommissioning the USS John F. Kennedy.
• Reducing navy shipbuilding dramatically, including a one-year delay in funding the next, new aircraft carrier (CVN-21); building only one rather than two DDX destroyers a year; reducing attack submarine procurement to one per year rather than three every two years; and deleting a large amphibious ship from the FY2008 plan.
• Terminating F-22 fighter procurement after FY2008.
• Trimming some satellite and related programmes.
• Reducing, in the largest cut, missile defence funding by $5bn over six years, mainly by halting development of a new high-acceleration rocket to intercept enemy missiles in the boost phase.
Critics of the cuts to the navy have been particularly vocal. The current careful division of work among the major shipyards may be jeopardised, overhead costs of building the remaining ships will grow, and the fear is that one or more shipyards may eventually be closed. Moreover, the planned rate of ship production will not sustain a navy of the current size in the long term; statistically, about 8 ½ new ships per year are needed and this year’s budget funds only four. Navy officials seem to have decided on a smaller force of large combatants bolstered by more small warships for near-shore operations, but they have not explained their plans in any detail to Congress.
Congressional support for the C-130, which outfits National Guard units all over the country, has historically been strong. Recently, senior Pentagon officials have said that they are reviewing the programme and will finally decide on the basis of a study of mobility requirements that is currently underway in the Pentagon. For its part, the air force has vigorously opposed the F-22 cut, although so far to little effect.
Other issues are also on the agenda in Congress. Last year, Congress increased the statutorily established end-strength of the army by 23,000 and of the marine corps by 3,000. This year several key congressional leaders, from both parties, have again called for additional increases in the size of the army. The administration remains opposed because of the high cost of additional personnel. There is also support in Congress for increased personnel pay and benefits. The administration has proposed an increase in death benefits for troops in combat zones, but Congress will probably extend it to all troops. There is also considerable support in Congress for adding health benefits for non-deployed reservists, a potentially very expensive prospect.
The QDR
As noted, the December programme cuts may be seen as potential harbingers of more extensive reductions in military forces for ’traditional’ conflicts in the coming QDR. Cuts in the F-22 and the navy clearly constitute reductions in forces intended for traditional challenges. Navy officials have acknowledged that plans are being shaped by an effort to redesign forces to be more relevant to future challenges; thus littoral conflict and the concept of sea-basing of forces, to assist power projection, are being emphasised. Reorganisation of the army is an attempt to cope the shift to combating irregular threats.
Any effort to assess what programmes the Pentagon might elect to address what the QDR will call ‘disruptive’ or ‘catastrophic’ challenges would at this stage be purely speculative. Senior officials have begun discussing both offensive and defensive space operations, and related programmes may receive renewed emphasis. Intelligence, surveillance, and reconnaissance technologies, human and technical intelligence capabilities, counter-terrorism forces, and defence against chemical, biological, and radiological weapons, may all get a boost. But how far the Bush administration will go in restructuring military forces in view of its new, evolving vision of strategy remains to be seen.
