The non-partisan Congressional Budget Office, the new force in Washington policy debates amid fears over sky-high federal deficits, said defense budgets must grow by at least 6 percent beginning next year to pay for weapons programs currently on the books. The base defense budget would have to increase to an average of $567 billion annually for two decades; the 2010 budget request was $534 billion.
While a 6 percent increase in defense spending might not appear all that high - the defense budget had been increasing by nearly 8 percent a year since 2001 - it looms large when viewed in the context of sluggish U.S. economic growth, record deficits, and the need to pay interest on that growing pile of debt.
Higher defense spending is driven by four factors: first, rising labor costs due to ever higher pay and benefits; second, higher bills to repair and maintain war worn equipment; third, costly new weapons programs; and fourth, buying new intelligence and surveillance assets, said CBO’s Matthew Goldberg, in his testimony Wednesday before the House Armed Services Committee. Increased pay and benefits to military and civilian personnel is the key driver here.
While Goldberg listed weapons cost growth as a factor in higher budgets, CBO actually shaved $25 billion from DoD’s projected investment accounts (investment spending includes procurement funds and research and development spending). The savings come from Defense Secretary Robert Gates’ recent weapons cancellations. With those cuts, CBO projects investment spending to drop to $177 billion by 2013, down from $194 billion in the base budget in 2009.
Still, defense budgets will continue to see big increases even with Gates’ cuts. Put simply, labor costs are killing DoD’s investment plans. Military healthcare alone costs over $47 billion a year and the Center for Strategic and Budget Assessment’s projects healthcare spending to nearly double in ten years.
CBO’s figures are based on pretty rosy assumptions of labor cost growth, particularly medical expenses, as well as weapons cost inflation. It also excludes the costs of the wars in Iraq and Afghanistan (CBO’s projections makes the totally unrealistic assumption that only 30,000 U.S. troops will be deployed overseas by 2013, so I’ve left out the unbudgeted costs for the wars). Still, defense budgets are the highest in real terms this country has ever seen and President Obama is projected to spend more on defense than any other president.