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The Increasing Costs of the Department of Defense

The document discusses the increasing costs of the Department of Defense (DoD) budget over time. Three major contributors to rising costs are increased compensation for military personnel, higher operation and maintenance costs per service member, and rising unit costs for new weapon systems. The DoD budget is projected to continue growing under current plans and strategies. Some options to address rising costs include finding savings in specific areas like pay and benefits, weapons acquisition reform, and reducing overhead, or scaling back the military's role in national security strategy.

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Congressional Budget Office
Southern Economic Association Annual Meeting
Washington, D.C.
November 19, 2018
David A. Arthur
National Security Division
The Increasing Costs of
the Department of Defense
1
CBO
Sources: Department of Defense, National Defense Budget Estimates for 2019; Congressional Budget Office, Analysis of the Long-Term Costs of the Administration’s Goals for the
Military (December 2017), www.cbo.gov/publication/53350.
Historical Funding and Projected Costs for the Department of
Defense (DoD)
DoD’s 2019 Future
Years Defense
Program (FYDP)
describes its budget
plans through 2023.
CBO’s most recent
projection of DoD’s
costs beyond that
“FYDP period” is
based on DoD’s
2018 goals.
2
CBO
Sources: Department of Defense, National Defense Budget Estimates for 2019; Congressional Budget Office, Analysis of the Long-Term Costs of the Administration’s Goals for the
Military (December 2017), www.cbo.gov/publication/53350.
Historical Funding and Projected Costs for the Department of
Defense, Normalized for Changes in the Size of the Military
3
CBO
Sources: Department of Defense, National Defense Budget Estimates for 2019; Congressional Budget Office, Analysis of the Long-Term Costs of the Administration’s Goals for the
Military (December 2017), www.cbo.gov/publication/53350.
Historical Funding and Projected Costs of 2019 Plans, by Category
of the Defense Budget (Base Budget Only)
4
CBO
 Costs for compensation of military personnel — including health care benefits
for active-duty and retired service members — have been rapidly increasing
since 2000.
 Costs of operation and maintenance per active-duty service member have
been steadily increasing since at least 1980.
 New weapon systems tend to be more expensive than the ones they replace.
Three Major Contributors to the Increasing Cost of Defense
5
CBO
Source: Congressional Budget Office, Growth in DoD’s Budget From 2000 to 2014 (November 2014), www.cbo.gov/publication/49764. Costs are shown in 2014 dollars.
Sources of Growth in Military Personnel Costs, Fiscal Years 2000
to 2014
Costs grew even as the
number of military personnel
decreased 2 percent from
2000 to 2014.
Similar growth has continued
since 2014.

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The Increasing Costs of the Department of Defense

  • 1. Congressional Budget Office Southern Economic Association Annual Meeting Washington, D.C. November 19, 2018 David A. Arthur National Security Division The Increasing Costs of the Department of Defense
  • 2. 1 CBO Sources: Department of Defense, National Defense Budget Estimates for 2019; Congressional Budget Office, Analysis of the Long-Term Costs of the Administration’s Goals for the Military (December 2017), www.cbo.gov/publication/53350. Historical Funding and Projected Costs for the Department of Defense (DoD) DoD’s 2019 Future Years Defense Program (FYDP) describes its budget plans through 2023. CBO’s most recent projection of DoD’s costs beyond that “FYDP period” is based on DoD’s 2018 goals.
  • 3. 2 CBO Sources: Department of Defense, National Defense Budget Estimates for 2019; Congressional Budget Office, Analysis of the Long-Term Costs of the Administration’s Goals for the Military (December 2017), www.cbo.gov/publication/53350. Historical Funding and Projected Costs for the Department of Defense, Normalized for Changes in the Size of the Military
  • 4. 3 CBO Sources: Department of Defense, National Defense Budget Estimates for 2019; Congressional Budget Office, Analysis of the Long-Term Costs of the Administration’s Goals for the Military (December 2017), www.cbo.gov/publication/53350. Historical Funding and Projected Costs of 2019 Plans, by Category of the Defense Budget (Base Budget Only)
  • 5. 4 CBO  Costs for compensation of military personnel — including health care benefits for active-duty and retired service members — have been rapidly increasing since 2000.  Costs of operation and maintenance per active-duty service member have been steadily increasing since at least 1980.  New weapon systems tend to be more expensive than the ones they replace. Three Major Contributors to the Increasing Cost of Defense
  • 6. 5 CBO Source: Congressional Budget Office, Growth in DoD’s Budget From 2000 to 2014 (November 2014), www.cbo.gov/publication/49764. Costs are shown in 2014 dollars. Sources of Growth in Military Personnel Costs, Fiscal Years 2000 to 2014 Costs grew even as the number of military personnel decreased 2 percent from 2000 to 2014. Similar growth has continued since 2014.
  • 7. 6 CBO Source: Congressional Budget Office, An Analysis of the Obama Administration’s Final Future Years Defense Program (April 2017), www.cbo.gov/publication/52450. Operation and Maintenance (O&M) Costs per Active-Duty Service Member O&M includes the cost of most DoD civilians’ salaries, goods and services, fuel, maintenance, and contractors. The rate of increase in these costs has been higher since 2001. They nearly tripled from 1980 to 2017.
  • 8. 7 CBO Source: Congressional Budget Office, Growth in DoD’s Budget From 2000 to 2014 (November 2014), www.cbo.gov/publication/49764. Costs are shown in 2014 dollars. Some Sources of Growth in Operation & Maintenance Costs, 2000 to 2014
  • 9. 8 CBO Source: Congressional Budget Office, An Analysis of the Obama Administration’s Final Future Years Defense Program (April 2017), www.cbo.gov/publication/52450. Projected Costs of the Military Health System Military health care costs have approximately doubled since 2000.
  • 10. 9 CBO  Technological sophistication has grown. For instance, compare the B-52 bomber with the B-2 stealth bomber.  Purchase quantities have fallen to equip a smaller force. For instance, there were 101 attack submarines and 39 ballistic missile submarines in 1986; today, there are 52 attack submarines and 18 ballistic or cruise missile submarines.  Purchase rates have fallen. During the 1980s, the military bought 355 fighters per year, on average; 105 per year are currently planned for the F-35. Unit Costs for Weapon Systems Are Rising
  • 11. 10 CBO Source: Congressional Budget Office, An Analysis of the Navy's Fiscal Year 2019 Shipbuilding Plan (October 2018), www.cbo.gov/publication/54564.  CBO estimates that the Navy’s 2019 shipbuilding plan will cost more than the Navy estimates.  The plan would fall short of meeting the service’s inventory goal for some types of ships.  Historical average funding would be insufficient to cover the shipbuilding contained in the plan. An Example of Growth in Weapon Acquisition: The Navy’s Shipbuilding Program
  • 12. 11 CBO Source: Congressional Budget Office, An Analysis of the Navy's Fiscal Year 2019 Shipbuilding Plan (October 2018), www.cbo.gov/publication/54564. Average Annual Costs of New-Ship Construction Under the Navy’s 2019 Plan
  • 13. 12 CBO Source: Congressional Budget Office, The Budget and Economic Outlook: 2018 to 2028 (April 2018), www.cbo.gov/publication/53651. The Broader Context: Deficits or Surpluses Under CBO’s Baseline Projections Percentage of Gross Domestic Product
  • 14. 13 CBO Sources: Congressional Budget Office; Department of Defense, National Defense Budget Estimates for 2019; Stockholm International Peace Research Institute, SIPRI Military Expenditure Database, www.sipri.org/databases/milex. Contexts for Thinking About the Size of the Defense Budget
  • 15. 14 CBO  Do nothing. Accept current defense strategies, plans, and costs as generally appropriate and necessary for today’s international security environment.  Try to find savings in specific areas. – Slow the growth of pay and benefits. – Reform how weapons are developed and purchased. – Reduce overhead.  Constrain DoD’s overall budget and let internal forces find the savings.  Scale back the role of military force in the national security strategy. Possible Responses to the Increasing Cost of Defense