As young children, our parents sometimes give us an allowance to teach basic budgeting skills. You can’t spend more than your parents give you or else you’ll get in trouble. Well, a few years ago, Congress gave the Pentagon strict limits on its annual allowance, but the Department has struggled to stay within that budget.
In advance of the Pentagon’s annual budget request, which usually is submitted during the spring, a senior defense official, Alan Estevez, confirmed that the Department plans on blowing through the budget caps next year. “We’re going to propose a budget next January and it’s going to be above sequestration levels.”
When Estevez refers to “above sequestration levels,” he means above the legal spending limits that Congress has placed on the federal discretionary budget via legislation called the Budget Control Act (BCA). However, the Pentagon continues to propose funding levels that exceed the authorized amounts.
Earlier this year, when the Pentagon first submitted its budget for Fiscal Year 2015, military planners proposed spending $115 billion more than is allowed by the spending caps over the next five years. Now, Estevez is confirming that the Pentagon will indeed follow through on its pledge to blow through its allowance. “We’re obviously planning a budget above sequestration, similar to what we put forward in [Fiscal Year] ’15,” says Estevez. This coming year, in Fiscal Year 2016, the Pentagon will propose spending more than $60 billion above the amount authorized by Congress.
While the Pentagon admits that it wants to spend $115 billion more than is allowed, an independent government watchdog says that, in reality, the Pentagon wants to spend even more than that. According to the nonpartisan Congressional Budget Office (CBO), which objectively analyzes the federal government’s long-term spending plans, the Pentagon actually would spend $182 billion more than is allowed over the five-year period from FY 2015 through FY 2019. That’s because CBO has a more realistic way of evaluating Pentagon spending plans.
Although the Pentagon typically budgets on a five-year timetable, referred to as the Future Years Defense Plan (FYDP), CBO further analyzed the following two years of the budget window, Fiscal Years 2020 and 2021. During those following two years, the Pentagon is proposing spending an additional $150 billion more than is allowed under the BCA spending caps. Taken together, “the cumulative cost of DoD’s base-budget plans for 2015 through 2021 would be higher in nominal terms by $332 billion, or about $47 billion a year, than the funding that would be provided to DoD under the limits set” in law, says CBO.
In other words, according to its plans, the Pentagon wants to spend $332 billion more than is legally allowed over the next seven years. The good news is that, according to CBO, this deficit is “about half as large” as the deficit that the Pentagon proposed in its budget last year. The bad news is that the Pentagon relied on phantom savings that have already vanished in order to lower this deficit.
The Pentagon was able to lower its projected spending levels from last year to this year primarily by proposing to reduce the size of the active-duty force and cancel or defer specific acquisition programs. The Pentagon’s FY 2015 budget counted on savings that would accrue from the Army downsizing its active end strength, the Navy deferring the refueling of the George Washington aircraft carrier, and the Air Force forgoing the planned replacement of the combat search and rescue helicopter. Yet the Pentagon, in fact, has already walked back on all three proposals, and will not accrue savings from any of them.
The Pentagon also counted on other savings that have not materialized, including reforms to compensation and retirement benefits; the cancellation of legacy weapon systems; and the consolidation and closing of excess military infrastructure. The bottom line is that each year for the past three years the Pentagon has planned on accruing budget savings that it knows very well will not manifest.
Besides examining the Pentagon’s five-year budget, CBO also objectively analyzes the Navy’s 30-year shipbuilding plan. CBO routinely finds that the Navy vastly underestimates the costs necessary to carry out its long-term shipbuilding plans. In last year’s plan, the Navy estimated that it would spend $504 billion, or about $16.8 billion a year, to purchase new vessels over the next three decades. When calculating its long-term budget, the Navy does not include costs associated with refueling nuclear-powered aircraft carriers or outfitting new ships, both of which come out of the same shipbuilding budget used to purchase new vessels.
Due to the more realistic and objective forecasting that CBO employs, it has found that the Navy will actually spend closer to $580 billion over the next thirty years to purchase newly constructed vessels, which averages at $19.3 billion per year. When CBO includes the costs to refuel aircraft carriers and outfit new ships, the annual cost rises to above $21 billion.
According to CBO, the Navy will need $76 billion more than it has budgeted over the next three decades to complete planned purchases. When compared with historic shipbuilding trends over the last thirty years, CBO estimates that the Navy is planning on spending 38 percent more than it has received historically when adjusted for inflation.
One specific program, the SSBN(X) submarine, is causing the Navy a lot of budgetary heartburn. According to CBO, “The design, cost, and capabilities of the SSBN(X)—the submarine class slated to replace the Ohio class—are among the most significant uncertainties in the Navy’s and CBO’s analyses of the cost of future shipbuilding.” All told, the Navy estimates the total cost of the SSBN(X) program to be around $77 billion, while CBO’s pegs the overall cost at closer to $87 billion.
Even more troubling, however, is the fact that even if one accepts the Navy’s lowball SSBN(X) estimate, the service still has a $60-billion funding shortfall in the 2020s as a result of the program, for which it is seeking a special, off-the-books supplemental appropriation. If left unaddressed, the Navy would be required to prioritize investments between its strategic (nuclear) submarines and conventional assets like aircraft carriers and Virginia-class attack submarines.
Shipbuilding supporters in Congress have suggested creating a special, defense-wide account outside of the shipbuilding budget, called the Sea-based Deterrence Fund, from which to fund the SSBN(X). This is an unwise idea for a couple of reasons, first because it would limit oversight of Navy shipbuilding programs, and second because it would create a precedent for the other services to argue that their programs should also receive special treatment.
The Air Force, for instance, is facing a funding bow wave, similar to what the Navy will experience in the 2020s, resulting from the need to replace an aging fleet of ICBMs and strategic bombers. If the Navy gets its way with a defense-wide SSBN(X) fund, the Air Force will surely follow suit and lobby for a special account for its new bomber and ICBM recapitalization programs.
A much better idea, and one for which the Project On Government Oversight has long advocated, is to reduce the planned number of SSBN(X) from twelve to eight vessels, which would still provide a robust sea-based deterrent. Under the New START agreement, the United States can only deploy a little over 1,000 warheads on submarines, and each of the eight SSBN(X) boats can carry sixteen missiles for a total of 1,024 warheads. Reducing the planned buy by four vessels could save at least $18 billion in operations, maintenance, research, and procurement costs over ten years, and up to $122 billion in savings over the 50-year lifecycle of the program.
None of this analysis touches upon the Pentagon’s off-budget Overseas Contingency Operations (OCO) account, which the Department has successfully used to offset pressure in its base budget. While this account is supposed to be used to fund short-term contingencies and other unexpected war costs, it has instead become a slush fund.
According to CBO, of the Pentagon’s most recent war budget request, which was submitted before operations against the Islamic State began, only half would be used to “pay for operations and support of U.S. forces in Afghanistan.” The remaining $30 billion would be used to support other activities at the Pentagon. Now, the Department has requested an additional $5.6 billion to fight the Islamic State.
The Pentagon needs to stop playing games with its budget, whether by planning to spend more than it knows it will receive, underestimating the costs of its long-term procurement plans, or hiding the true costs of its activities through the OCO slush fund.
Sometimes, as kids, it’s tough for us to live within our allowance. Well, it’s past time for the Pentagon to learn this simple childhood lesson.