LegiStorm

Summary:

This report analyzes President Obama's FY2013 defense budget request and the long-term deficit reduction issues relevant to congressional discussion of that request. Congressional action on the FY2013 defense budget will be analyzed in a separate report. The FY2013 Department of Defense (DOD) budget request includes a total of $613.9 billion in discretionary budget authority: $525.4 billion for the so-called "base budget" (excluding operations in Afghanistan and Iraq), and $88.5 billion for war costs or "Overseas Contingency Operations" (OCO). Overall, that request is $31.8 billion less than was appropriated for DOD in FY2012, with most of the reduction accounted for by the continuing drawdown of U.S. forces in Afghanistan (see Table 1 and "Overseas Contingency Operations (OCO)"). Apart from declining war costs, the base budget request is $5.2 billion below the corresponding FY2012 appropriation, and it would mark the first decrease in Pentagon spending (excluding war costs) since FY1998. Moreover, the request is $45.3 billion lower than the amount the Administration had projected a year earlier that it would request for the FY2013 base budget (see Figure 1). That reduction reflects caps on discretionary spending that were established by the Budget Control Act (BCA) of 2011, enacted in August 2011. All told, funding caps established by the BCA are intended to reduce projected federal spending by more than $900 billion over the 10 years from FY2012-FY2021. The FY2013 DOD base budget request incorporates some policy initiatives intended, at least in part, to anticipate future budgets which will be lower (because of deficit reduction efforts) than DOD had planned. The proposed departures from previous plans are congruent with a new strategic concept, unveiled in January 2012, which the Administration says is intended to reflect both lower budgets and a global security environment that is different from the past decade's focus on Iraq and Afghanistan. For example, the FY2013 budget includes the first increment of a three-year plan to reduce the size of the active-duty Army and Marine Corps by 102,400 troops—a 7.2% reduction (see Table 4); the Administration bases these reductions on the premise that new, large-scale, long-term ground force deployments, such as those in Iraq and Afghanistan, are unlikely (see "A Smaller but Ready Force"); savings of $9.6 billion as a result of so-called "efficiency" initiatives (see "Reductions in Overhead and Support Costs"); several actions intended to increase the focus of DOD operations on the Pacific region (see "‘Pivot' Toward the Pacific"); and several initiatives intended to slow the growth of military compensation and health care (see "Personnel Costs"). Other long-term issues also may be matters of discussion in Congress. A key issue is whether additional cuts in defense spending, beyond those required by the initial limits on discretionary spending in the BCA, should be considered as a part of further deficit reduction measures. In addition to the $900 billion worth of deficit savings resulting from the BCA's spending caps, the act also requires additional deficit reduction measures totaling at least $1.2 trillion through 2021, (resulting in a total spending reduction through FY2012 of $2.1 trillion). Unless Congress either revises the BCA or agrees to an additional $1.2 trillion worth of reductions by January 2013, the BCA mandates automatic cuts in spending, equally divided between defense and nondefense expenditures (see "Longer-Term Budget Issues"). In FY2013, the automatic cuts may be imposed through a process of sequestration in which an across-the-board percentage cut is imposed on each program in the budget, either (1) to yield the required $1.2 trillion worth of additional cuts or (2) to make up the difference between whatever lesser reduction Congress agrees to and the $1.2 trillion target. Senior DOD leaders have warned that sequestration would have a devastating impact on defense capabilities, and some members of Congress have argued for legislation that would exempt DOD from a sequester. President Obama has said he would veto any legislation that exempted defense, however. While few deny that sequestration would be disruptive, the prospect of automatic cuts in spending is seen by most as a vital incentive for Congress to reach a balanced deficit reduction agreement.