The Defense Department is losing billions of dollars for each month of fiscal 2022 that it operates on a continuing resolution, and its next budget will not get any easier, national security analysts said at a forum Monday.
That could mean killing or cutting back a handful of new Army weapon systems, among other programs.
With Congress moving to push back a decision on fiscal 2022 funding, federal agencies are coping with the fiscal automatic pilot known as a CR, forcing them to spend at fiscal 2021 levels with limited exceptions.
The current CR expires on Feb. 18. Both chambers will soon vote to replace it with yet another CR to keep the government operating through March 11.
In the meantime, the Defense Department is spending 1.7 percent less than the increase President Joe Biden had planned for fiscal 2022, not to mention the minimum 5 percent increase that most representatives and senators agreed to authorize in the defense policy law for this year. Despite that authorization, Congress must still enact a defense appropriations law before the increase takes effect.
At the same time, inflation is further eroding the value of the Pentagon’s funding. Prices have risen at about a 5 percent annual rate, versus the approximately 2 percent predicted in the fiscal 2022 budget.
According to Mackenzie Eaglen, a senior fellow with the American Enterprise Institute think tank, the Defense Department’s budget is shrinking by $4 billion to $6 billion a month because of these factors.
And Eaglen is not convinced that lawmakers are more likely to resolve their differences by March 11 than they have been since fiscal 2022 started on Oct. 1.
The Pentagon has never before had to operate for a full year on a CR, but the odds are growing that this might be the year that pattern breaks.
“If they can’t get there now, I don’t know if they can get there ever,” Eaglen said at the forum hosted by the Center for Strategic and International Studies.
Every federal department faces pressures under a continuing resolution. While the Pentagon has enjoyed strong bipartisan support for near-record post-World War II spending in recent years, it has some unique constraints under a CR.
For one, the fiscal 2022 National Defense Authorization Act, the policy law Congress passed in December, authorizes a 2.7 percent across-the-board raise for military personnel. But without appropriations to pay for it, officials have had to find the money elsewhere, said Thomas Spoehr, an analyst with the Heritage Foundation, a conservative think tank.
This CR “is really biting, really hurting DoD,” Spoehr said.
Another unusual feature of CRs for the Pentagon is the fact that it must spend its so-called operations and maintenance accounts in the year Congress appropriates the funds for them. So whenever fiscal 2022 appropriations arrive, the Defense Department must spend scores of billions of dollars in just a few short months. Those accounts cover the costs of everything from civilian salaries to upkeep of facilities and equipment.
“It leads to inefficient behavior,” said Todd Harrison, a defense budget maven with the Center for Strategic and International Studies who believes Congress needs to clear legislation that would give the Pentagon more flexibility to carry over operations funds into a second fiscal year.
Harsh fiscal 2023 choices
Sometime next month the Biden administration is expected to unveil its next budget request.
That document will reflect the fact that the Pentagon will have to reckon with intense internal cost pressures.
Inflation, for one, is not expected to subside significantly in fiscal 2023.
The analysts said they will be watching closely to see what inflation assumptions the White House Office of Management and Budget builds into the fiscal 2023 federal budget. If President Joe Biden doesn’t include in his budget a forecast for significant inflation — more than 2 percent, at minimum — then the budget documents will overstate the Pentagon’s buying power under the proposal, they said.
In addition to general inflation, Biden and lawmakers will face pressure to offer servicemembers and nearly 750,000 Defense Department civilians a pay raise that tracks inflation. The Federal News Network reported Friday that the administration will propose a 4.6 percent pay increase for the federal civil service, the level at which private sector salaries have grown in the past year. Military raises usually move in line with civilians’, though Congress has occasionally given servicemembers larger pay increases.
At the same time, the cost of military housing and subsistence allowances is also increasing.
Given these budgetary pressures, something will have to give, and there was some agreement among the analysts as to what.
End strength — or the required number of people in uniform in the services — will probably go down, the analysts said, although they disagreed on how much.
Some older weapons will be retired, and Congress has recently gone along with these proposals more than usual, they said. But Spoehr said there are fewer systems that are obviously of little use now, compared to a few years ago.
Some of the cuts the analysts expect — such as a possible halt to spending on deployment of a lower-yield nuclear warhead for a submarine-launched missile —would yield minimal savings.
The most agreed-upon target for budget cutters to garner larger savings was the category of Army modernization programs.
Two in particular were called out as being at risk. One was the Optionally Manned Fighting Vehicle, which would replace Bradley Fighting Vehicles.
The other is a helicopter known as Future Attack Reconnaissance Aircraft, which Harrison said is hard to justify to the degree that Russia and China are the potential high-end enemies.
In a battle against those adversaries, he said the so-called FARA helicopter would not “get anywhere near the fight.”
Spoehr said the Army, which faces the highest bill for personnel costs because it has the most troops, has lost 10 percent of its budgetary buying power, even after accounting for inflation, in the last four years.
“I think the Army’s going to be squeezed again in 2023,” said Spoehr, a retired three-star Army general. “I don’t know that they’re going to have any choices. They are down to the bone.”