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For at least the past decade, mismatches have often occurred between plans for the military forces (both personnel and equipment) that Administrations proposed to field and the financial resources available to support those forces. Recent studies by the General Accounting Office and other organizations have argued that the same circumstances apply to the Administration's Future Years Defense Program covering the 1995-1999 period.

At the request of Congressmen Floyd D. Spence and Ronald V. Dellums, Chairman and Ranking Minority Member of the House Committee on National Security respectively, this Congressional Budget Office (CBO) paper analyzes the factors that could lead to a near-term mismatch between defense plans and budget resources. It also addresses the long-term budgetary implications of modernizing the Bottom-Up Review force structure. Three related CBO memorandums ("The Costs of the Administration's Plan for the Air Force Through the Year 2010," "The Costs of the Administration's Plan for the Army Through the Year 2010," and "The Costs of the Administration's Plan for the Navy Through the Year 2010") present CBO's estimates of the Administration's plan for each military department. In keeping with CBO's mandate to provide objective, nonpartisan analyses, this paper makes no recommendations.

Rachel Schmidt of CBO's National Security Division prepared the analysis under the supervision of Cindy Williams, R. William Thomas, and Neil M. Singer. The paper draws on two earlier assessments of the Administration's Future Years Defense Program by Lane V. Pierrot and Michael A. Miller.

A number of other CBO staff made important contributions. Amy Belasco conducted much of the research on the centralization of the Department of Defense's operation and maintenance activities. Amy Plapp estimated the cost of military and civilian pay raises and the savings associated with lower levels of civilian personnel William P. Myers analyzed the data on annual growth in total costs of weapon systems for which selected acquisition reports are submitted to the Congress. Estimates of the long-term costs for the military services were prepared by Ivan Eland, Frances Lussier, and Lane Pierrot. Other components of CBO's long-term cost estimates were prepared by Ellen Breslin Davidson, Victoria Fraider, Wayne Glass, Raymond Hall, David Mosher, William Myers, Amy Plapp, and Rachel Schmidt. Kent Christensen, Wayne Glass, James Homey, Philip Joyce, David Mosher, and Lisa Siegel also provided valuable assistance. The author wishes to thank Amy Belasco, James L. Blum, Deborah Clay-Mendez, Ivan Eland, Frances Lussier, Michael Miller, William Myers, and Lane Pierrot for their helpful comments on earlier drafts. Richard L. Fernandez reviewed the paper for accuracy.

Leah Mazade edited the paper, with assistance from Christian Spoor. Judith Cromwell prepared it for publication.

Robert D. Reischauer
Director
January 1995
 
 

INTRODUCTION AND SUMMARY

THE ADMINISTRATION'S PLAN FOR 1995 THROUGH 1999

• Avoiding a Hollow Force Structure
• The Status of Military Readiness Today

CHANGES SINCE THE FYDP WAS RELEASED

• Congressional Actions
• Possible Additional Adjustments for Covering Higher Inflation Costs
• Actions by the Administration

OTHER PRESSURES ON THE FYDP'S "TOP LINE"

• "Nontraditional" Defense Spending
• Cost Growth in Acquisition Programs
• The Next BRAC Round

HOW LARGE IS THE SHORTFALL IN THE FYDP?

ADDED COSTS OF FORCE STRUCTURE UNDER THE BOTTOM-UP REVIEW BEYOND 1999

• Approximate Size of Increases to Accommodate Modernization Needs
• CBO's Outlook for the Federal Budget Deficit

OPTIONS FOR ADDRESSING THE SHORTFALL

• Increase Defense Spending
• Limit DoD's Responsibilities
• Do Business More Efficiently
• Options That Reduce Capabilities

INTRODUCTION AND SUMMARY

The Future Years Defense Program (FYDP) is a classified document that shows how current and future defense spending would be allocated among the combat and support elements of U.S. military forces. As the term is used here, it reflects the Administration's planned spending priorities for the Department of Defense (DoD) for fiscal years 1995 through 1999. For at least the past decade, there has often been a mismatch between the force structure (the number of military personnel, aircraft, ships, tanks, and other equipment) that an Administration proposes to field and the financial resources available to support those forces. Several analysts argue that a similar mismatch exists in the current FYDP.

The Congressional Budget Office (CBO) has been asked on several occasions over the past year to analyze the fit between proposed levels of defense spending and the Administration's plan. In testimony before the House Armed Services Committee in March 1994, CBO stated that although the Administration's most recent plan was subject to certain risks, its blueprint for defense spending seemed roughly sufficient to support the military forces envisioned in the Bottom-Up Review through 1999--the last year of the FYDP.¹ In an April 1994 analysis, CBO outlined two clear risks to the Administration's plan: that inflation would drive up pay and other defense costs and that DoD would not be able to reduce its infrastructure as quickly as it had planned.² Since those analyses were released, the Congress has approved higher military and civilian pay raises for 1995 than those included in the Administration's budget and made plans to reduce overall levels of discretionary spending (a category that includes most of the defense budget) over the next four years. It has also become clear that the Administration will need additional resources to finance a sizable round of base closures and realignments in 1995 if it hopes to reduce costs for defense infrastructure. The combination of these factors as well as recent estimates of the magnitude of DoD's potential shortfall have reignited debate over the size of the defense budget. This paper, which is a continuation of CBO's earlier fiscal analyses, aims to provide information for those discussions.

This document is available in its entirety in PDF.

1. Congressional Budget Office, "Planning for Defense: Affordability and Capability of the Administration's Program," CBO Memorandum (March 1994).

2. See Chapter 3 in Congressional Budget Office, An Analysis of the President's Budgetary Proposals for Fiscal Year 1995 (April 1994).

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