Publications

As the economy begins to emerge from the deepest recession since the Great Depression, the federal government faces a dire fiscal situation. In fiscal year (FY) 2009, the budget deficit rose to a record high of $1.4 trillion, and it is forecasted to reach as high as $1.6 trillion in FY 2010. These record deficits are due in no small part to increased spending on fiscal stimulus programs and a sharp reduction in tax revenues due to the recession. But underlying the current fiscal situation is a structural deficit that the economic downturn has only exacerbated. A telling indicator of this is that one of the fastest growing items in the budget is net interest on the national debt. According to OMB projections, in FY 2018 the federal government will begin spending more on net interest payments than on national defense for the first time in modern history.

The Obama administration today unveiled its defense budget request for Fy 2011, which totals $549 billion in discretionary funding for the peacetime costs of the Department of Defense (DoD) and $4 billion in mandatory funding. In addition to the “base” budget, the administration also requests $159 billion for Overseas Contingency Operations (OCO) and $26 billion for national defense activities in the Department of energy and other agencies. altogether, the total national defense budget request is $739 billion for FY 2011. The budget also includes a supplemental request for $33 billion in additional funding for OCO for the remainder of FY 2010.

Next week the Obama administration will release the 2010 Quadrennial Defense review (QDR) and FY 2011 defense budget request. This comes as DoD strives to balance the demands of the ongoing wars in Iraq and Afghanistan with the need to reset the force and prepare for future adversaries, all while the nation emerges from the most severe economic downturn since the Great Depression. The federal government’s record budget deficits will likely exert downward pressure on government spending, including defense spending, for years to come. This is a dramatic shift from the high rate of growth the base defense budget experienced over the past decade, which allowed the Department of Defense to postpone making many difficult decisions—a luxury that is not likely to be afforded in the coming years. This backgrounder places the defense budget within the context of the United States’ overall fiscal outlook, reviews how defense dollars have been allocated over the past decade, and highlights budgetary and programmatic issues that will complicate DoD’s planning over the Future year Defense Program.

The deployment of additional troops to Afghanistan over the coming months will require additional funding in Fiscal Year 2010 (FY10). It is difficult to precisely estimate the cost that will be incurred by the deployment due to a variety of factors including the composition of the forces deployed and the specific mission they are given. The adversary also has a say in determining the operational tempo of our forces, and thus the costs incurred in terms of such items as fuel, ammunition, and equipment. Still, historical trends in the cost of the wars in Iraq and Afghanistan can provide a useful guide for making such an estimate.

On June 25, 2009, the full House passed its version of the fiscal year (FY) 2010 national defense authorization act. The Senate passed its version of the bill on July 23, 2009. This Update provides a brief assessment of how these two bills compare, both to each other and to the administration’s request, and what issues remain to be resolved during conference. The administration’s defense budget request is still working its way through the House and Senate appropriations process.

Classified or “black” programs appear to account for about $35.8 billion, or 17 percent, of the acquisition funding included in the fiscal year (FY) 2010 Department of Defense (DoD) budget request (see Table, page 3). This total includes $18.1 billion in procurement funding and $17.7 billion in research and development (R&D) funding. These figures represent 14 percent and 22 percent, respectively, of the total funding requested for procurement and R&D in FY 2010. Among other things, this analysis finds that: