The Changing Challenges of U.S. Defense Spending

The attached report is an updated and corrected analysis of US dfense spending.  The US ability to outspend its enemies has long been a key advantage of the American way of war. This advantage has increased with time. President Bush’s decision to engage in a Global War on Terrorism (GWOT) in the aftermath of 9/11 has been followed by a period of steady increases in Pentagon baseline spending, in addition to constantly larger GWOT budgetary supplementals.
 
DoD’s discretionary base spending in both Budget Authority (BA) and Budgetary Outlays (BO) increased by more than 60 percent between FY2001 and FY2008. To keep things in perspective, however, recent levels of spending in constant dollars are similar to those during other wartime periods such as Vietnam or Korea, and only slightly larger than the levels present at the end of the Cold War.

The actual level of total spending has been raised far beyond the baseline request by an increasing reliance on large “war supplementals.” Funds appropriated through these less scrutinized funding mechanisms have come to represent more than a third of DoD baseline spending in the FY2008 budget request ($141.7 billions for GWOT supplemental, compared to the $481.3 billions for baseline spending). Almost a quarter of all the money requested for defense has been classified as “emergency” spending.

This growing reliance on supplemental funding has had a serious negative impact on the development of long-term defense programs and budgets. It has made it progressively more difficult the develop a future year defense program (FYDP) that properly funds multiyear efforts such as force reset, long-term readiness, increases in manpower, or force transformation when a large share of their money comes as a war supplemental.