Growing or Declining?: Defense Budgets, Baselines, and the Art of Spin
It is definitely spin season for the budget, especially the defense budget. Bloomberg's Tony Capaccio (www.bloomberg.com/news/print/2011-01-05/pentagon-could-see-modest-growth...) reports today that the DOD base budget (excluding war costs) request for FY 2012, due in February (but leaking already, for the sake of spin) will be $554 billion, which he calls "modest growth" over this year.
Tony has been spun, but ya have ta follow the bouncing baseline ball to see how. A DOD base budget of $554 billion would only be growth over FY 2011's budget if the defense budget for FY 2011 were frozen at the FY 2010 level of $531 billion. But this would be a significant cut of more than 3% this year from the $549 billion the Pentagon asked for and zero growth over FY 2010. Figure there will be inflation; that's a budget cut.
Of course, the problem is that the FY 2011 budget level has not been set and, as I noted yesterday (www.capitalgainsandgames.com/blog/gordon-adams/2094/defense-budget-reset), the new Republican House leadership has put defense on the table, along with everything else. So the baseline for FY 2011 from which anyone would measure the FY 2012 request is unknown. But it is almost certain to be a cut of some kind.
Hence the baseline problem folks will be spinning around for the next month or so.
So let's go back to what the Pentagon said it wanted in for its base budget in FY 2011: $549 billion. That's the number defense planning was based on - all their decisions on weapons, support, pay, etc., were built around that number. Now the FY 2012 number looks different - $554 billion is less than one percent growth over DOD's budget request for FY 2011. Less than one percent doesn't even keep up with inflation, which OMB projects at over 1.5% and DOD projects (for defense) at over 2%. That's a cut from the planned and programmed baseline, which is exactly what Gates did not want when he announced his efficiencies initiative last summer.
Probably why Gates has to come back (tomorrow) with some more program and efficiencies adjustments. And perhaps the masters of spin are trying to tell folks inside the Pentagon they are getting more, when they are actually getting less than they planned for.
(Thanks to my Stimson colleague, Matt Leatherman, for helping work the numbers.)
Excess Inflation -- It's Fine for Defence, but not for Health?
"inflation, which OMB projects at over 1.5% and DOD projects (for defense) at over 2%."
It appears the reason they are getting "less than they planned for" is that their contractors are charging them excess rents.
Strangely, we don't hear demands to "bend the cost curve" for this spending.
Defense budget is hardly
Defense budget is hardly being cut at all with all those under the table subsidies. Also didn't Gates already cancel off some projects? That means in net, the remaining projects has a gain - again hardly a cut by any means.
Who's Spinning Whom?
Sorry, but it doesn't look to me as though Capaccio has been spun.
True, there is no FY 2011 budget. Capaccio acknowledges that. In the absence of an actual budget, what would the most accurate baseline measure be? Would it be 1) what DoD asked for with respect to the FY 2011 budget (asking is not always getting) or would it be 2) what the DoD is expected to spend in FY 2011 based on continuing appropriations? I say the latter, and apparently this is also the approach Capaccio has taken. I think he clearly spells it out when he wrote:
"Calculating exactly to what extent the $554 billion represents (he refers here to the FY2012 anticipated request) real growth for the Pentagon is difficult because there has not been final passage of a fiscal 2011 funding bill. The Pentagon is operating under stopgap legislation through March 4 that keeps spending at approximately the fiscal 2010 level, or about $530.8 billion, Daggett said.
The unfinished fiscal 2011 appropriations legislation now totals about $525.2 billion, Daggett said. That’s about $24 billion less than what the Pentagon requested.
Congress may add some of that money back in. An increase to $554 billion would represent growth of about 4.5 percent in nominal terms, or about 2.5 percent after adjusting for inflation, Daggett said".
Based on this, the anticipated FY 2011 funding may actually be LESS than the FY 2010 funding. Thus, by using FY 2010 funding as a surrogate for FY 2011 funding and spending one may actually be underestimating the extent of growth from FY 2011 to FY 2012.
You seem to acknowledge and agree to this when you wrote:
"Of course, the problem is that the FY 2011 budget level has not been set and, as I noted yesterday (www.capitalgainsandgames.com/blog/gordon-adams/2094/defense-budget-reset), the new Republican House leadership has put defense on the table, along with everything else. So the baseline for FY 2011 from which anyone would measure the FY 2012 request is unknown. But it is almost certain to be a cut of some kind."
How true. But that was also Carpaccio's point. But, after acknowledging the obvious, you resorted in the last paragraphs of your post back to the DoD's budget request for FY 2011 even though everyone knew, and now knows even more so, that that was not realistic. A bouncing ball indeed, but it seems you are some fancy dribbling yourself.
If I would extend the logic you apply here, had the Pentagon asked for a $1 trillion budget for FY 2011, then the amount for FY 2012 would really look like a serious cut. You wrote the the Pentagon based its FY 2011 spending on the amount of funding they requested. That's misleading for two reasons. First, I'm certain the Pentagon's original plans accounted for the possibility they would get less than they asked for FY 2011. Second, as time went by without a budget, these expectations have been scaled back even further.
Finally, I would ask, who is to blame for failure to have a FY 2011 budget that would have prevented this ball from bouncing? You know the answer to that. Failure to pass a budget has been a major policy shortcoming as well as a huge tactical error.