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Top general says Biden budget’s low inflation assumption is wrong

Mark Milley nonetheless called the proposed $813 billion national security plan 'a major step in the right direction'

Joint Chiefs of Staff Chairman Mark Milley testifies before the House Armed Services Committee on April 5.
Joint Chiefs of Staff Chairman Mark Milley testifies before the House Armed Services Committee on April 5. (Tom Williams/CQ Roll Call)

Defense Department leaders, in testimony Tuesday, defended the Biden administration’s fiscal 2023 defense budget proposal as “robust,” but America’s top military officer acknowledged the risk that inflation could undercut the plan.

The president’s new budget would increase Pentagon spending by 2 percent over the fiscal 2022 level, which is itself a 7 percent increase over fiscal 2021. But with inflation running at nearly 8 percent now, worries abound in Congress that the fiscal 2023 defense budget — even if it would be one of the costliest since World War II — could amount to a cut after inflation is factored in.

If inflation does not subside significantly, even the president’s proposed 4.6 percent across-the-board pay increase for military personnel could leave troops with less buying power.

Army Gen. Mark Milley, the chairman of the Joint Chiefs of Staff, told the House Armed Services Committee Tuesday that the budget was built on a flawed assumption about prices. 

“This budget assumes an inflation rate of 2.2 percent, which is obviously incorrect, because it’s almost 8 percent,” Milley said. “It might go up, it might go down, but most forecasts indicate it’s going to go up and it could level out at 9 or 10 percent. Who knows, but it’s clearly higher than what the assumption was in this budget.”

Milley’s assessment could strengthen the hand of defense hawks as they seek to boost the Pentagon’s fiscal 2023 appropriations above President Joe Biden’s request when members write defense spending legislation later this year.

Mike McCord, the Pentagon’s comptroller, testified Tuesday that, while inflation is raging now, no one knows what prices will be like in six months, when fiscal 2023 starts, or in 18 months, when it ends. 

But Mike D. Rogers of Alabama, the committee’s top Republican, in his opening statement, said it is a safe bet that inflation in fiscal 2023 will be higher than 2.2 percent and military spending would effectively go down as a result. 

“To get an average of 2.2 percent next year would require months of unprecedented low inflation,” Rogers said. “Everyone here knows that’s not going to happen. That means every dollar of increase in this budget will be eaten by inflation. Very little if anything will be left over to modernize or grow capability.”

‘Robust’ request

The president’s request for national security spending in fiscal 2023 is $813.4 billion. Of that, $773 billion would go to the Pentagon, while the rest is for nuclear weapons programs at the Energy Department and other initiatives. 

In fiscal 2022, the Pentagon got $756.6 billion, including $14.3 billion in so-called emergency spending for arming Ukraine, resettling Afghan refugees, responding to natural disasters and a massive fuel leak in Hawaii.

Despite the inflation concerns, Milley and Defense Secretary Lloyd J. Austin III defended the president’s fiscal 2023 request as sufficient for the military to execute its missions.

“The joint force will deliver modernization and readiness for our armed forces and secure the people of the United States at the fiscal year ‘23 budget request of $773 billion,” Milley said. “I believe this budget is a major step in the right direction.”

Austin, for his part, called the budget “robust” and said: “We can address our needs with what’s in this budget.”

Armed Services Chairman Adam Smith, D-Wash., reiterated his view that, while the total amount of spending is important, more attention must be paid to ensuring that money is spent “more efficiently and effectively.”

‘We have got to do better’

Still, lawmakers from both parties expressed concerns since the budget was submitted on March 28 about not just the overall level of spending and inflation’s effect on it, but also particular aspects of the request. 

These include a reduction in the overall number of servicemembers — so-called end strength — plus retirements of large numbers of aircraft and ships and proposed cancellation of a nuclear armed cruise missile for the Navy, a system that Milley said Tuesday he supports continuing. 

Of all these issues, the Navy’s budget to build and maintain warships appears to be the biggest concern for members from both parties.

The fiscal 2023 Navy budget would subtract a net 15 ships from the fleet, because the budget proposal would add nine major battle force vessels but would retire 24 ships that Austin said are too costly to operate for what they deliver in combat capability. 

“At no point in the next five years does the size of the Navy increase” under the Biden plan, Rogers said. 

Rob Wittman of Virginia, the top Republican on the Seapower and Projection Forces Subcommittee, said the budget for new vessels is “grossly irresponsible.”

Democrats agreed with parts of the GOP critique of the Navy budget.

Democrat Joe Courtney, the subcommittee’s chairman, noted that the proposed $28 billion shipbuilding budget is the first in six years to exceed the enacted level. But Courtney, many of whose eastern Connecticut constituents work for Navy shipbuilder General Dynamics Electric Boat, criticized the request for two sealift ships as inadequate. “We have got to do better,” he said.

And California Democrat John Garamendi said more needs to be spent upgrading public shipyards.

One Democrat who is a strong advocate of more defense spending, Elaine Luria of Virginia, a Navy veteran whose district includes Naval Station Norfolk, made her displeasure with the request clear in a March 29 tweet.

“I have delayed putting out a statement about the Defense Budget because frankly it would have been mostly full of words you might expect from a Sailor, but here goes: It sucks,” Luria said.