April 10, 2009

How to Worry About the Budget in Ten Easy Steps

Tom Donnelly, after chastising me for not keeping close enough tabs on "the international neo-conservative conspiracy," answered my call and pointed me to this piece in the Weekly Standard. He also provided the following ten-step process for analyzing the defense budget:

  1. You measure defense spending by how many dollars make their way across the Potomac from the Congress to the Pentagon.
  2. Since 9/11, a lot of that money has not been in the baseline budget, but in the "emergency" supplemental appropriations.
  3. The supps have mattered even more in recent years, because a lot of procurement money -- and even the funding for the end-strength increases in the Army and Marine Corps -- for force "reset" and gear like MRAPs is also included. Politicians really like "emergency" supplementals because they don't get counted against the deficit. (One should never underestimate the role of accounting rules in strategy.)
  4. In 2008, the supplemental was a whopping $188 billion. When added to the baseline budget, total DOD spending was about $670 billion. Remember that number.
  5. Along with its 2010 budget plan, the Obama Administration proposed a second half of the 2009 supplemental -- $75 billion. That added to the first part -- $65 billion -- which was requested by the Bush Administration last year. So the total supp for 2009 is supposed to be $140 billion. Remember that number, too. Also note that Democrats in Congress liked voting on multiple supplementals per year because it was a vehicle for get-out-of-Iraq legislation, even though they never won any of those votes. Republicans learned to like them, too, once they were sure they would win the votes, for the same reason. All parties loved it, because the public and the press couldn't keep track of the total; voting on $90 billion twice looks better than voting on $180 billion once.
  6. The total planned DoD spending for 2009 -- that is, baseline budget plus supp -- should be about $650 billion, and that's a third number to keep track of, if you can manage it. So, in nominal dollars (and not counting for inflation), the Pentagon will have about $30 billion less in 2009 than in 2008.
  7. Why?
  8. The big change is that the 2009 supp of $140 billion is a lot less than the 2008 supp of $188 billion. That's fine if you stop fighting (or just operating; the cost of withdrawing from Iraq is equal or greater than staying in Iraq and a gallon of gas costs the same whether you're driving north to Mosul or south to Kuwait City), or "resetting" the force or buying MRAPs. But does anyone who reads AM think that -- with a surge in Afghanistan -- the pace of operations is going to go down that much? I have a bridge with your name on it.
  9. In 2010, the year that Gates has been talking about this week, the "baseline" budget is being "raised" by about $10 billion over what the Bush plan called for (though chopped about $60 billion from what Gates asked the JCS to come up with last November). The supplemental is supposed to go down by...wait for it...$10 billion. Those dollars just danced across your spreadsheet from the column marked "supplemental" to the column marked "baseline." But the number at the bottom right corner -- the one that tallies the number of dollars arriving at the Pentagon? -- is just $660 billion. Not much more than 2009 in nominal terms, and probably not any more counting for inflation; indeed, if inflation is more than 1.5 percent (and how likely is that if we keep borrowing or printing money?) it's a net loss over 2009. Also, 2010 is supposed to be the year of the final bug-out from Baghdad and the "decisive" year in Afghanistan; do we believe that the pace of operations and deployments will be a lot less then, too?
  10. Finally, the serious %$#@ hits the fan in 2011. Baseline budget stays flat, supplementals fall all the way to $50 billion. In the accountants' eyes, we've won in Iraq and Afghanistan. No more the "era of persistent conflict," I guess; the QDR will explain how we're "balancing risks" in a really neat and clever way. Also, thanks to the stimulus package and all the other good stuff that the administration's got on tap, economic good times are here to stay. The only down side is that the feds are spending about 17 to 18 percent of GDP on social entitlements and another 4 or 5 percent on serving the massive federal debt. No money left (less than 3 percent of GDP) for military spending, whether on people or gold-plated weaponry.