This week, the House has passed and the Senate is expected to pass a revised budget plan for the next two years proposed by House Budget Committee Chairman Paul Ryan, R-Wis., and Senate Budget Committee Chairwoman Patty Murray, D-Wash. For the Pentagon, the deal represents not only a chance for Congress to return to a "regular order" appropriations process that would lead to more predictable funding levels, but also a slight plus-up in funding from sequestration-level reductions (automatic budget cuts implemented by Congress in the Budget Control Act).
The budget would restore about $32 billion of the Pentagon's roughly $500 billion bill under sequestration. The relief – which would come in the form of a little over $22 billion in 2014 and about $9 billion in 2015 – would give the military some breathing room in the near term while avoiding deeper long-term cuts, as several other "fixes" had previously proposed. While this agreement is a positive step towards unwinding the sequester, the Defense Department's budget woes are simply lessened, not eliminated.
As a recent report from the Congressional Budget Office demonstrates, the Pentagon is facing a host of budgetary challenges that will persist even in the absence of full sequestration. CBO analysts estimate that the Pentagon would exceed its allotted spending under the pre-sequester Budget Control Act caps by $283 billion from 2014 to 2021.
A major factor driving CBO's estimate is the Department of Defense spending on people, which is likely to be substantially higher than current Pentagon projections. While the president's budget incorporates several cost-saving measures into its calculations, including TRCIARE fee adjustments, CBO assumes Congress will not approve these changes.
In fact, CBO found that the Pentagon underestimates its future costs in real terms, on average, by about $19 billion per year between 2014 and 2018, due in part to Congress' unwillingness to go along with proposed changes to select health care fees. Given that language rejecting the administration's most recently proposed TRICARE changes has already emerged as part of the 2014 defense policy bill, there is ample reason to assume CBO is more accurate in its assumptions than Pentagon leadership.
Similarly, the CBO found that the Pentagon's acquisition costs will consistently outpace its projections. Historically, these numbers have averaged 20 to 30 percent higher than initial estimates. The coming years are unlikely to be an exception.
Complicating the picture is the looming procurement "bow wave." As CBO notes, the Pentagon disproportionately employed cuts to weapons systems and equipment to pay for reductions mandated under the Budget Control Act in 2011. This is contributing to a situation where a large number of major programs all enter full-rate production close together when there is not nearly enough money in future plans to pay for these simultaneous bills. This is especially true for the Air Force, which must recapitalize its fighter, bomber and tanker fleets quickly.
While any money that the military can reclaim is good news, the recent analysis by the Congressional Budget Office highlights clearly how the Defense Department continues to struggle to meet budgetary targets, even prior to sequestration. The reality is, for all its promise, the Ryan-Murray budget agreement still only addresses less than 7 percent of the defense sequester. Much more work needs to be done to lift the specter of sequestration once and for all – including Congress approving unpopular but long overdue bureaucratic reforms within the Pentagon bureaucracy.