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 April 2012 

Lt. Gen. Lawrence P. Farrell, Jr., USAF (Ret)Defense Budget: Some Clues Have Emerged, But More Uncertainty Ahead

April 2012

by Lt. Gen. Lawrence P. Farrell, Jr., USAF (Ret) 

The political season is upon us, and much of the rhetoric adds little visibility to the direction for defense. If one looks beyond the 2012 election, there are several political and budgetary hard points, some of which will drive and even trump strict defense budget considerations.

There are also fine details emerging from the defense budget, which are sure to roil the debate. Remember, Congress has to act on and pass the budget before it gets to the president for signature.

So far, we know that the Defense Department’s base budget request for fiscal year 2013 is $525 billion — down from $541 billion in 2012 — with $89 billion for overseas contingency operations. The base budget remains flat out to 2017, with no inflation protection, at approximately $523 billion per year. OCO funding is not projected beyond 2012. Recall that the services, the Army especially, are dependent on OCO funding not “falling off a cliff.”

There is a fairly even drop of about 5 percent from 2012 to 2013 in the major accounts. Only research-and-development spending comes down at about half the rate of the other accounts. When OCO is factored in, procurement ends up with about 10 percent of the take. It should be noted that the procurement share of the budget is 18 percent but its share of cuts is 38 percent. The Air Force and Army pay most of the bills. The Air Force, with 11 percent of the budget, pays 23 percent of the bill. The Army, with 18 percent of the budget, pays 53 percent of the bill. The Navy comes out best with a 25 percent share of the budget but paying only 7 percent of the bill.

One can trace these shares and reductions directly to the president’s “pivot to Asia” strategy. The Air Force pegs its cut of A-10 squadrons to the strategy, which backs away from a full two-war demand. The Air Force also says that with a reduced force, it must rely more on multirole assets (read F-35), versus single-mission assets like the A-10.

The Army’s cuts to manpower translate to fewer requirements for vehicles and combat support. This decrease is directly related to the strategy which explicitly backs away from extended stability operations.

The Navy retains 11 carrier battle groups, but retires some cruisers and a mix of old support ships such as oilers. Left unsaid is where Navy force structure goes with the low ship procurement rate programmed across the 2013-2017 budget.

Finally, there are new details on the changes to healthcare for military retirees. Analysts had predicted that these cuts would only apply to future retirees, but they will apply to existing retirees as they are phased in over five years.

Both Tricare Prime and Tricare for Life, both of which are entitlements, will be tiered, based on retirement pay. Tricare premiums for retirees earning more than $45,179 increase by 345 percent over five years: from $460 per year to $2,048.  Tricare for Life goes from zero to $475 per person per year in five years. A family of four from the previous example transitions from Tricare Prime to Tricare for Life and still pays approximately $2,000 per year plus picking up the mandatory Medicare payments to qualify for Tricare for Life. Keep in mind that these are proposed changes to an earned benefit —an entitlement. No civilians have been asked for this level of sacrifice. Congressional leaders have been especially critical about these budgetary provisions.

Now to the political and budgetary hard points. The current Congress is faced with a proposed president’s budget that still has a large deficit. Few on either side of the political spectrum are comfortable with a national debt that exceeds 100 percent of the U.S. Gross Domestic Product. 

Next is sequester. If left unchanged, another $500 billion to $600 billion comes out of defense. This has to be addressed quickly, either by a lame duck Congress or the new 2013 Congress. Administration officials have stated that they have not considered sequester in this budget, but that if any action must be taken on sequester, it will begin in middle to late summer. Stay tuned for this one.

Finally, there is the great turbulence in the Middle East, and in Afghanistan. The Arab Spring uprisings have not brought regimes more supportive of the United States. Note especially Egypt in this category. Now the debate is over what, if anything, the United States ought to do about Syria and Iran. Much pressure is being exerted on the Obama administration to engage in Syria. And with the recent statements by the president and by the Israeli prime minister on Iran, the way ahead is most uncertain there.

Turning to the recent extended conflicts, Iraq’s prospects tend to lean in the direction of Iran, and the most recent controversy and turbulence in Afghanistan make the direction there more than uncertain.

Roll in an election year on top of all this and the prospects for the defense budget being passed as proposed are slim.

And one is left to wonder if a budget will be passed at all, or if a continuing resolution will be left for the next administration and Congress to sort out. In the meantime, U.S. forces remain engaged in many arenas and the demands for resources in the near term will not abate.

A final thought: If the sequester or other additional cuts to defense must be addressed, the strategy itself will need to be modified. Any discussion that emerges on modifications to strategy will presage more cuts to the budget. Keep an eye on that one.


Please e-mail your comments to lfarrell@ndia.org.

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