The Defense Budget and the Budget Control Act: Frequently Asked Questions

Defense Spending and the Budget Control Act Limits Amy Belasco Specialist in U.S. Defense Policy and Budget June 3, 2015 Congressional Research Service 7-5700 www.crs.gov R44039 Defense Spending and the Budget Control Act Limits Summary Limits July 22, 2015 (R44039) Jump to Main Text of Report

Contents

• Defense Spending Limits and the Budget Control Act (BCA)
• Alternate Approaches to BCA Caps
• Congressional Choices
• Adapting to BCA Spending Limits
• Raising Defense Spending Limits
• Lowering Long-term Defense Spending Plans
• Defense Spending Complies with BCA Caps for FY2012-FY2015
• The BCA Spending Path and the FY2016 Request
• The Story for DOD
• Defense Department Concerns
• The FY2016 Budget Resolution and BCA Caps
• Distinguishing Between Base and OCO Funds
• Using OCO Funds as a Safety Valve
• FY2016 Budget Resolution and FY2016-FY2021 Caps
• BCA Revised Caps in Historical Perspective
• Buildups and Drawdowns in Defense Spending
• Trends in DOD Spending
• Different Types of Savings
• Temporary or Short-Term Savings
• Designating Funds as OCO
• Recurring Savings Affect Later Years
• Restraining Military Pay Raises and Compensation
• Force Structure Savings Grow Over Time
• Savings from Delay
• The F-35 Joint Strike Fighter
• Savings Requiring Upfront Investments
• GAO Evaluation of Base Closure Savings
• CBO Assessment
• Efficiencies: Definitions and Concerns
• Concerns Raised About Efficiency Savings
• DOD's FY2013 Sequester Experience
• How Sequestration Works
• Predictions and Experience
• Flexibility Available to DOD to Mitigate Sequestration
• DOD's Plan for Complying with BCA Limits
• DOD's Plan Emphasizes Modernization Cuts, Protects Support Activities
• Potential Changes in Army Force Structure
• DOD's Approach to Modernization Cuts
• DOD Individual Weapon System Cuts under BCA Limits
• Operations and Maintenance: Readiness vs. Other Support
• Uncertainties Facing DOD
• CBO Projections of the Cost of DOD's Plan
• Rising Cost per Troop

Figures

• Figure 1. The BCA and Changes in National Defense Spending Plans
• Figure 2. Gap Between BCA Limits and DOD Plans Narrows
• Figure 3. BCA Revised Caps and FY2016 Budget Resolutions
• Figure 4. National Defense Spending FY2016-FY2025, Base and OCO-Designated
• Figure 5. Department of Defense Spending: FY1950-FY2025
• Figure 6. DOD Spending Including Both Base Budget and Emergency/OCO
• Figure 7. Trends in Types of DOD Spending in the Base Budget
• Figure 8. DOD Budget and BCA Cuts: FY2015-F2019
• Figure 9. Cost Per Troop, FY1980-FY2016 Request
• Figure 10. Trends in Average Per Troop Cost by Type of Spending

Tables

• Table 1. FY2016 President's Budget (PB) Plan and BCA Caps for National Defense
• Table 2. FY2016 President's Budget Plan and BCA Caps for DOD
• Table 3. FY2016 Budget Resolution and National Defense BCA Caps
• Table 4. Changes in F-35 Plans, FY2012 President's Budget (PB) vs. FY2016PB
• Table 5. Implementation of DOD's FY2013 Sequester
• Table 6. Sequester Cuts by Type of Spending
• Table 7. DOD's Savings Plan for FY2015-FY2019 By Service
• Table 8. DOD's BCA Savings, FY2015-FY2019, Modernization vs. Personnel Operations, and Support
• Table 9. DOD's Plan for Achieving BCA Modernization Savings, FY2015-FY2019: RDT&E and Procurement
• Table 10. DOD's Cuts to Individual Weapon Systems under BCA Caps: FY2015-FY2019
• Table 11. DOD's Plan for Achieving BCA Operation & Maintenance Savings, FY2015-FY2019 by Category
• Table 12. Selected Bibliography of Reports and Studies on Reducing Defense Spending
• Table B-1. Adjustments in BCA Spending Caps
• Table C-1. CBO Baseline, Administration Defense Plans and BCA Defense Limits

Appendixes

• Appendix A. How BCA Defense Spending Limits Are Set
• Appendix B. Raising BCA Caps in FY2013-FY2015
• Appendix C. Defense Plans Partly Adapt to BCA Spending Limits
• Appendix D. Selected Bibliography of Ways to Reduce Defense Spending

Summary

Enacted on August 1, 2011, the Budget Control Act (BCA) as amended (P.L. 112-75, , P.L. 112240, 112-240, P.L. 113-67) sets limits on defense spending between FY2012 and FY2021 that are playing a significant role in the debate about the appropriate level of defense spending. Each year, if Congress enacts a spending level that exceeds BCA caps for the defense base budget, the President is required to sequester or levy across-the-board cuts to each type of defense spending to meet the BCA caps. These spending levels are sometimes referred to as revised or “sequester” "sequester" caps. War-designated funding (for “"Overseas Contingency Operations”") is not subject to BCA caps. Under these limits, national defense spending decreased from the $578 billion requested in the FY2012 President’'s Budget to $553 billion in FY2012 and $518 billion in FY2013, including a sequester. In the next two years, Congress complied with revised BCA caps, providing $521 billion in FY2014 and the same amount in FY2015, thus basically setting a nominal freeze in spending for three years (without an increase to cover inflation). At the FY2015 low point of the BCA path, defense spending would be equivalent in real terms (the same purchasing power) to the level between FY2007 and FY2008 and would be somewhat below the recent FY2010 high point. For FY2016, the BCA caps for defense are slated to rise from $521 billion to $523 billion, a continuation of the nominal freeze for the base budget. In FY2016, the President requested funding of $561 billion, $38 billion above the BCA defense cap. To the extent that FY2016 enacted appropriations for defense exceed this cap, a sequester will be triggered, requiring largely across-the-board decreases under current law. Following the nominal freeze, BCA caps provide annual increases in defense spending starting in FY2017 that average $13 billion, rising from $523 billion in FY2016 to $644 billion by FY2021, the last year of the BCA caps. These increases would provide sufficient funds to more than offset the effects of inflation, setting defense spending at about .005% real growth each year through FY2021. The current debate in Congress has centered on whether to (1) adjust the BCA defense caps upward; (2) move base budget spending to accounts designated for Overseas Contingency Operations (OCO) that are not subject to spending limits; (3) reduce the defense spending in the Administration’ Administration's request to comply with BCA revised caps; or (4) use some combination of these approaches, all in order to avoid a sequester. While DOD and other policymakers contend that BCA caps could make it difficult to meet future threats, other policymakers argue that defense spending could be reduced to comply with the caps and still provide DOD with the necessary capabilities. The recently passed conference version of the FY2016 budget resolution would meet sequester caps by transferring $38 billion from the defense base budget request to accounts designated for Overseas Contingency Operations that are exempt from the caps. This approach has been characterized as budget gimmickry and has reignited debate about whether war funding is a “ "slush fund.”" The House-passed version (H.R. 1735) of the FY20166 National Defense Authorization Act (NDAA) moves $38.2 billion in Operation and Maintenance (O&M) funds requested in the base budget request to funds to be designated as OCO, and the Senate-reported version moves $39.0 billion in the same fashion. The Administration signaled that the President’s Congressional Research Service Defense Spending and the Budget Control Act Limits 's advisors will recommend a veto of both H.R. 1735 and S. 1376S. 1736 in part because of these transfers, which are characterized as risking “"undermining a mechanism meant to fund incremental costs of overseas conflicts and fails to provide a stable, multi-year budget on which defense planning is based.” To count as OCO and be exempt from BCA caps, individual accounts in appropriations bills must include an OCO designation and the President must designate such funds as OCO after enactment. It is not clear whether the Administration would do that. The recently reported FY2016 Defense Appropriations bill (unnumbered) also moves $38.3 billion from the base request to OCO-designated accounts. Since enactment, both Congress and the Administration have adapted to the BCA caps. While Congress has raised the caps in the near term to ease DOD’s adjustment, it has left intact caps in later years. The Administration has made substantial adjustments to BCA limits by reducing its defense budget plans, shrinking the savings required to meet BCA caps for the decade from $1.0 trillion in savings to $180 billion. With four of the ten years of the BCA limits completed, the gap between the FY2016 Administration plan for total defense spending and BCA limits now in effect has narrowed. Over three-quarters of the savings needed are already incorporated in current Administration plans as of the FY2016 budget. To close this gap for the six remaining BCA years, Congress would have to reduce the Administration’s FY2016 plan by an average of 5% instead of the 16% originally required. There are a variety of savings approaches that DOD could take to adapt to BCA spending limits, such as: • temporary cuts (as were typical of the FY2013 sequester); • recurring savings from force structure decreases or compensation restraints: both would contribute enduring savings; and • efficiency savings that reduce the cost of carrying out various programs and activities. In a report to Congress last year, DOD outlined how it would meet the 4% cut of $115 billion in BCA cuts for FY2015-FY2019, its planning horizon at the time. DOD’s plan would rely heavily on cuts to its modernization programs, and would make significant cuts to service readiness programs. In adapting to the BCA, DOD faces uncertainties in its future projections of cost, exacerbated by long-term trends in rising costs per troop that it is beginning to reverse. Congressional Research Service Defense Spending and the Budget Control Act Limits Contents Defense Spending Limits and the Budget Control Act (BCA) ........................................................ 1 Alternate Approaches to BCA Caps .......................................................................................... 3 Congressional Choices .............................................................................................................. 3 Adapting to BCA Spending Limits .................................................................................................. 3 Raising Defense Spending Limits ............................................................................................. 4 Lowering Long-term Defense Spending Plans .......................................................................... 5 Defense Spending Complies with BCA Caps for FY2012-FY2015 ......................................... 6 The BCA Spending Path and the FY2016 Request ......................................................................... 7 The Story for DOD .................................................................................................................... 8 Defense Department Concerns ................................................................................................ 10 The FY2016 Budget Resolution and BCA Caps............................................................................ 12 Distinguishing Between Base and OCO Funds ....................................................................... 13 Using OCO Funds as a Safety Valve ....................................................................................... 14 FY2016 Budget Resolution and FY2016-FY2021 Caps ......................................................... 15 BCA Revised Caps in Historical Perspective ................................................................................ 17 Buildups and Drawdowns in Defense Spending ..................................................................... 18 Trends in DOD Spending ........................................................................................................ 20 Different Types of Savings ............................................................................................................ 21 Temporary or Short-Term Savings .......................................................................................... 22 Designating Funds as OCO ..................................................................................................... 23 Recurring Savings Affect Later Years ..................................................................................... 23 Restraining Military Pay Raises and Compensation ......................................................... 23 Force Structure Savings Grow Over Time ........................................................................ 25 Savings from Delay ................................................................................................................. 26 The F-35 Joint Strike Fighter ............................................................................................ 26 Savings Requiring Upfront Investments.................................................................................. 27 GAO Evaluation of Base Closure Savings ........................................................................ 28 CBO Assessment ............................................................................................................... 29 Efficiencies: Definitions and Concerns ................................................................................... 29 Concerns Raised About Efficiency Savings ...................................................................... 31 DOD’s FY2013 Sequester Experience .................................................................................... 31 How Sequestration Works ................................................................................................. 32 Predictions and Experience ............................................................................................... 32 Flexibility Available to DOD to Mitigate Sequestration ................................................... 34 DOD’s Plan for Complying with BCA Limits ............................................................................... 36 DOD’s Plan Emphasizes Modernization Cuts, Protects Support Activities ............................ 38 Potential Changes in Army Force Structure ...................................................................... 40 DOD’s Approach to Modernization Cuts .......................................................................... 41 DOD Individual Weapon System Cuts under BCA Limits ............................................... 42 Operations and Maintenance: Readiness vs. Other Support .................................................... 44 Uncertainties Facing DOD............................................................................................................. 45 CBO Projections of the Cost of DOD’s Plan ........................................................................... 46 Rising Cost per Troop.............................................................................................................. 46 Congressional Research Service Defense Spending and the Budget Control Act Limits Figures Figure 1. The BCA and Changes in National Defense Spending Plans ........................................... 6 Figure 2. Gap Between BCA Limits and DOD Plans Narrows ....................................................... 9 Figure 3. BCA Revised Caps and FY2016 Budget Resolutions .................................................... 13 Figure 4. National Defense Spending FY2016-FY2025, Base and OCO-Designated .................. 17 Figure 5. Department of Defense Spending: FY1950-FY2025 ..................................................... 18 Figure 6. DOD Spending Including Both Base Budget and Emergency/OCO.............................. 19 Figure 7. Trends in Types of DOD Spending in the Base Budget ................................................. 21 Figure 8. DOD Budget and BCA Cuts: FY2015-F2019 ................................................................ 39 Figure 9. Cost Per Troop, FY1980-FY2016 Request .................................................................... 47 Figure 10. Trends in Average Per Troop Cost by Type of Spending.............................................. 48 Tables Table 1. FY2016 President's Budget (PB) Plan and BCA Caps for National Defense .................... 7 Table 2. FY2016 President's Budget Plan and BCA Caps for DOD .............................................. 10 Table 3. FY2016 Budget Resolution and National Defense BCA Caps ........................................ 16 Table 4. Changes in F-35 Plans, FY2012 President’s Budget (PB) vs. FY2016PB ...................... 27 Table 5. Implementation of DOD’s FY2013 Sequester ................................................................. 35 Table 6. Sequester Cuts by Type of Spending................................................................................ 36 Table 7. DOD's Savings Plan for FY2015-FY2019 By Service .................................................... 38 Table 8. DOD’s BCA Savings, FY2015-FY2019, Modernization vs. Personnel Operations, and Support ............................................................................................................. 39 Table 9. DOD's Plan for Achieving BCA Modernization Savings, FY2015-FY2019: RDT&E and Procurement........................................................................................................... 41 Table 10. DOD's Cuts to Individual Weapon Systems under BCA Caps: FY2015-FY2019 ......... 42 Table 11. DOD's Plan for Achieving BCA Operation & Maintenance Savings, FY2015FY2019 by Category .................................................................................................................. 45 Table 12. Selected Bibliography of Reports and Studies on Reducing Defense Spending ........... 59 Table B-1. Adjustments in BCA Spending Caps ........................................................................... 53 Table C-1. CBO Baseline, Administration Defense Plans and BCA Defense Limits .................... 55 Appendixes Appendix A. How BCA Defense Spending Limits Are Set ........................................................... 50 Appendix B. Raising BCA Caps in FY2013-FY2015 ................................................................... 52 Appendix C. Defense Plans Partly Adapt to BCA Spending Limits.............................................. 55 Congressional Research Service Defense Spending and the Budget Control Act Limits Appendix D. Selected Bibliography of Ways to Reduce Defense Spending ................................. 59 Contacts Author Contact Information........................................................................................................... 63 Acknowledgments ......................................................................................................................... 64 Congressional Research Service Defense Spending and the Budget Control Act Limits Defense Spending Limits and the Budget Control Act (BCA) "

The FY2016 House-passed Defense Appropriations bill (H.R. 2685, H.Rept. 114-139), passed on June 11, 2015, and the Senate-reported bill (S. 1558, S.Rept. 114-63) both move $37.5 billion from the base request to OCO-designated accounts in Title IX. In statements of Administration Policy on both H.R. 2685 and S. 1558, OMB Director, Shaun Donovan, states that the President's senior advisors would recommend a veto of these bills for the transfer as well as other reasons, as well as recommending a veto of "any other legislation that implements the current Republican budget framework, which blocks the investments needed for our economy to compete in the future."

This raises the possibility that all appropriations bills could face a veto prospect. The Senate was unable to bring up its DOD appropriations bill earlier in July, and discussion is ongoing about the need for a budget deal that would raise BCA caps with offsetting reductions elsewhere. If a deal is not reached, the prospect arises of a continuing resolution and possible government shutdown in October when the fiscal year begins.

To count as OCO and be exempt from BCA caps, individual accounts in appropriations bills must include an OCO designation and the President must designate such funds as OCO after enactment. It is not clear whether the Administration would do that. The recently reported FY2016 Defense Appropriations bill (unnumbered) also moves $38.3 billion from the base request to OCO-designated accounts.

Since enactment, both Congress and the Administration have adapted to the BCA caps. While Congress has raised the caps in the near term to ease DOD's adjustment, it has left intact caps in later years. The Administration has made substantial adjustments to BCA limits by reducing its defense budget plans, shrinking the savings required to meet BCA caps for the decade from $1.0 trillion in savings to $180 billion.

With four of the ten years of the BCA limits completed, the gap between the FY2016 Administration plan for total defense spending and BCA limits now in effect has narrowed. Over three-quarters of the savings needed are already incorporated in current Administration plans as of the FY2016 budget. To close this gap for the six remaining BCA years, Congress would have to reduce the Administration's FY2016 plan by an average of 5% instead of the 16% originally required.

There are a variety of savings approaches that DOD could take to adapt to BCA spending limits, such as:

• temporary cuts (as were typical of the FY2013 sequester);
• recurring savings from force structure decreases or compensation restraints: both would contribute enduring savings; and
• efficiency savings that reduce the cost of carrying out various programs and activities.

In a report to Congress last year, DOD outlined how it would meet the 4% cut of $115 billion in BCA cuts for FY2015-FY2019, its planning horizon at the time. DOD's plan would rely heavily on cuts to its modernization programs, and would make significant cuts to service readiness programs. In adapting to the BCA, DOD faces uncertainties in its future projections of cost, exacerbated by long-term trends in rising costs per troop that it is beginning to reverse.

Defense Spending and the Budget Control Act Limits

Defense Spending Limits and the Budget Control Act (BCA)

Enacted August 2, 2011, the Budget Control Act (BCA, P.L. 112-25) sets limits for National Defense spending for each year from FY2012-FY2021 that applies to the base budget. War spending—designated by both Congress and the President as for “emergencies” or for “Overseas "emergencies" or for "Overseas Contingency Operations”" (OCO)—is essentially exempt from these caps.1 1 Since enactment, the appropriateness and potential effects of the BCA spending caps on defense spending have generated a vigorous debate. Passed by strong majorities in both houses—269-161 in the House and 74-26 in the Senate—the spending limits reflected concerns about increases in the federal deficit.2 2 In return for a $2.1 billiontrillion increase in the debt limit, the BCA reduced the Congressional Budget Office (CBO) baseline for total discretionary spending by the same amount by setting annual limits for FY2012-FY2021 that, if necessary, would be enforced by a sequester. The decrease to the deficit focused almost entirely on the discretionary spending that is appropriated annually and makes up about one-third of total federal spending; the two-thirds of the budget for direct or mandatory spending, primarily for entitlement programs like Social Security and Medicare, was not affected. To achieve the $2.1 trillion in required savings, the Budget Control Act set “"initial caps”" that would reduce discretionary spending by $1.0 trillion over the ten-year decade, FY2012FY2021FY2012-FY2021—with half for defense and half for nondefense. A second tranche of savings was to be based on a plan to be developed by the congressionally established, bipartisan, Joint Committee on Deficit Reduction (or Super Committee). When that committee was unable to develop a plan to ensure these savings, the BCA provided that a second set of “"revised caps”" or “"Joint Committee limits”" would go into effect for National Defense, budget function 050 that is comprised primarily of the Department of Defense or DOD (budget function 051) and “nondefense”"nondefense" or all other discretionary programs. For FY2013, the Act required that the President order a sequester to reduce the enacted level for defense by the amount specified.33 Under a sequester, OMB calculates the pro rata percentage cut to each type of spending or program that is necessary to reach the BCA limit and cancels that budget authority.4 4 (For more detail, see Appendix A.) Appendix A.) 1 The caps are raised to accommodate this spending; see §251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 (hereinafter BBEDCA). Caps are set in terms of Budget Authority (BA). All figures are BA unless listed otherwise. 2 BNA, Daily Report for Executives, “U.S. Budget CBO Projects Deficit to Shrink Again But Warns Slow Economy Likely to Persist,” 8-25-12. 3 OMB, Sequester Preview Report to the President and Congress for Fiscal Year 2014 and OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2014, p. 3, April 10, 2013, May 20, 2013. 4 OMB, Final Sequestration Report to the President and Congress for Fiscal Year 2012, January 2012, p. 3; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/ sequestration_final_jan2012.pdf. Congressional Research Service 1 Defense Spending and the Budget Control Act Limits After FY2013, a sequester is required only to the extent that annual enacted appropriations breach or exceed separate defense and nondefense “"revised caps” or “limits”" or "limits" set in the BCA. The breach would be eliminated by the sequester. Some commentators refer to these limits as “sequester” "sequester" caps, presumably because spending above these levels would trigger a sequester (for more detail, see Appendix A). ). The President’'s request for FY2016 exceeds the BCA cap by $38 billion. If Congress were to enact that amount, a sequester would be triggered. Congress is currently debating its response, which could range from raising the caps themselves with new statutory language, to cutting defense spending to comply with the cap, to designating base budget spending as Overseas Contingency Operations (OCO) to avoid breaching the caps. S.Con.Res. 11, the FY2016 budget resolution, H.R. 1375, House-passed FY2016 National Defense Authorization Act (NDAA), S. 1376S. 1376, the Senate-reported NDAA all propose moving and designating $38 billion in funds requested in the base budget as for OCO so as to avoid a sequester. To be exempt from BCA caps, funds must be designated as OCO in both appropriations act language and by the President after enactment.5 5 The President has signaled that his advisors would recommend a veto of either H.R. 1375 or S. 1376S. 1376 in part because of this reliance on transferring base funds to OCO, which is characterized as “ "undermining a mechanism meant to fund incremental costs of overseas conflicts and fails to provide a stable, multi-year budget on which defense planning is based. . . [and] ignores the longtermlong-term connection between national security and economic security and fails to account for vital national security functions carried out at non-defense agencies.”6 "⁶ This report uses the terms “"BCA revised limits”" or “"BCA caps”" to refer to the BCA caps as amended by the American Taxpayer Relief Act (ATRA, P.L. 112-240) and the Bipartisan Budget Act (BBA, P.L. 113-67) that Congress must meet to avoid a sequester.77 Unless indicated otherwise, all figures are budget authority (BA) for the defense base budget, which excludes funds designated as emergency or for OCO that are not subject to BCA caps. In testimony by defense spokesmen, these BCA spending limits or revised caps are often used to refer to two different dilemmas faced by Congress: • reducing defense spending to ensure compliance with BCA caps to avoid an across-the-board reductions; or facing the potential effects of a sequester itself on the defense programs and activities if Congress does not meet the limits. 5 §251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985. OMB, Statement of Administration Policy, ” S. 1376 – National Defense Authorization Act for FY 2016, June 2, 2015; https://www.whitehouse.gov/sites/default/files/omb/legislative/sap/114/saps1376s_20150602.pdf; see also, OMB, Statement of Administration Policy, “H.R. 1735 – National Defense Authorization Act for FY 2016;” “https://www.whitehouse.gov/sites/default/files/omb/legislative/sap/114/saphr1735r_20150512.pdf. 7 In its report, the Office of Management and Budget, responsible for reporting BCA spending limits, refers to the initial caps as the “original limits,” and to adjustments to those limits as “Joint Select Committee on Deficit Reduction Enforcement,” and the lowered or revised caps as “Revised Limits;” see OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015, p.4; http://www.whitehouse.gov/sites/default/files/ omb/assets/legislative_reports/sequestration/2016_sequestration_preview_report_president.pdf. 6 Congressional Research Service 2 Defense Spending and the Budget Control Act Limits activities if Congress does not meet the limits.Alternate Approaches to BCA Caps Congress could respond to the current, statutory FY2016 defense spending caps with various approaches, including: • transferring funds from DOD’'s base budget to OCO-designated accounts that are not subject to caps, as proposed in the conference version of S.Con.Res. 11, the FY2016 budget resolution; • reducing the President’'s request by $38 billion or 5.6% through targeted cuts in order to comply with BCA limits; • enacting some targeted cuts and relying on a small (1-2%, for example), sequester to comply with BCA caps; • enacting the request and relying entirely on an across-the-board sequester to meet BCA spending limits; or • raising current defense and nondefense caps by some amount and complying with those caps. Congressional Choices To help frame these choices about how to respond to the BCA revised or “sequester”"sequester" caps on defense spending, this report • explains congressional adjustments of the caps and Administration reactions; • describes the Administration’'s position and DOD concerns; • analyzes defense spending levels in the FY2016 annual budget resolution; • places BCA caps in historical perspective; • outlines different types of savings that could help comply with the caps; • analyzes DOD’'s current plan for compliance, and • describes budget uncertainties faced by DOD in responding to spending limits. Adapting to BCA Spending Limits BCA caps are set in terms of National Defense (budget function 050), of which DOD constitutes about 95%.88 The story for DOD (budget function 051) follows the same lines as for National defense. The discussion below focuses on National Defense; later sections focus on DOD, which is the center of the defense spending debate. Between FY2012 and FY2015, the gap between the Administration’'s defense spending plans and the BCA spending limits narrowed. Based on CBO’'s estimate, the original BCA limits required a 8 Defense-related programs in the Department of Energy for nuclear weapons and the Department of Justice for counter-terrorism make up most of the remainder. Congressional Research Service 3 Defense Spending and the Budget Control Act Limits reduction to National Defense spending for the decade by about 14% or $860 billion compared to continuing the FY2011 enacted level in real terms (steady-state spending with an adjustment for inflation).99 CBO and OMB generally compare budget requests to a “"current services”" baseline that reflects the prior year’'s enacted level plus an adjustment for inflation.10 10 Compared to the President’'s FY2012 budget plan submitted before passage of the BCA, BCA caps would reduce defense spending for the base budget by $1.0 trillion or about 16%. This gap is greater because the Administration’'s FY2012 ten-year plan incorporated an annual average of just below 1% growth for defense that was to be concentrated in the first three years.11 11 By the FY2016 request, the savings gap—compared to the Administration’'s ten-year plan—had shrunk from 16% to 5%. This change resulted from a combination of raising caps in the American Taxpayer Relief Act (ATRA, P.L. 112-240) and the Bipartisan Budget Act (BBA, P.L. 113-67) and Administration decisions to submit lower defense budget plans. These actions • raised the spending limits for FY2013, FY2014, and FY2015 easing the year-toyearto-year cuts required; and • reducing the savings needed by lowering defense spending plans in successive budgets between FY2012 and FY2015. While the adjustments in ATRA and BBA were significant in the near term, the reductions themselves were modest for the decade, requiring $54 billion, or 1% less savings. The original $1.0 trillion in defense savings needed compared to the FY2012 President’'s budget plan became $963 billion with these adjustments.12 12 Raising Defense Spending Limits Although ATRA retained the requirement for a sequester in FY2013, it reduced the amount from $54.5 billion for defense to $42.5 billion. At the same time, ATRA softened the scheduled $62 billion cut between FY2012 and FY2013, splitting the reduction over two years rather than one. Instead, ATRA mandated decreases of $36 billion in FY2013 and $20 billion the following year. Congress left later years intact. Signed by the President on December 26, 2013, the BBA raised the ATRA National Defense caps for FY2014 from $498 billion to $520 billion, a $22 billion increase. For the following year, the 9 CBO, Letter from Douglas Elmendorf, Director to Speaker of the House, John Boehner and Majority Leader of the Senate, Harry Reid, “CBO Estimate of the Impact on the Deficit of the Budget Control Act of 2011,” August 1, 2011; http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/123xx/doc12357/budgetcontrolactaug1.pdf. The defense share is half of the total reduction of $2.1 trillion over the decade. BCA limits are set at the budget function level, or National Defense (budget function 050); the Department of Defense (DOD) makes up about 95% of that total. 10 When the BCA caps were enacted, CBO uses those statutory limits as its “baseline” estimate. 11 CRS calculation based on OMB, FY2012 Analytical Perspectives, Table 32-1; http://www.whitehouse.gov/sites/ default/files/omb/budget/fy2012/assets/32_1.pdf. 12 See OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015, p.4; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/ 2016_sequestration_preview_report_president.pdf. Congressional Research Service 4 Defense Spending and the Budget Control Act Limits for FY2014 from $498 billion to $520 billion, a $22 billion increase. For the following year, the BBA raised the earlier ATRA limit from $512 billion to $521 billion, a $9 billion increase. BCA caps remained the same for FY2016 through FY2021.13 13 Together these changes set defense spending at a nominal freeze (without adjustments for inflation) between FY2013 and FY2016. (For more details, see Appendix B.) .) Lowering Long-term Defense Spending Plans While changing BCA caps reduced the gap between the pre-BCA Administration plans by a relatively small amount, the lower defense budget plans submitted by the President narrowed the gap by some $780 billion. These reductions reflect Administration and DOD decisions to reduce force structure, slow modernization plans, propose compensation restraints, delay readiness improvement plans, and adopt various efficiencies (see “DOD’"DOD's Plan for Complying with BCA Limits”). Limits"). From FY2013-FY2015, the gap between the Administration’'s budget plans and the BCA caps narrowed as the Administration incorporated additional savings into its plans. Figure 1 shows shows how total funding requests for FY2012-FY2021 changed under successive President’'s budgets for National Defense. DOD funding levels changed in comparable ways. • The FY2013 budget fell by $519 billion from $6.4 trillion to $5.9 trillion; an additional $497 billion in savings would be needed to comply with caps. • The FY2014 plan declined by another $93 billion to $5.8 trillion; requiring $372 billion more savings to comply. • The FY2015 plan decreased by another $188 billion to $5.6 trillion; requiring $185 billion more in savings; and • The FY2016 budget remained at $5.6 trillion, requiring $185 billion more in savings.14 13 See OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015, p.4; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/ 2016_sequestration_preview_report_president.pdf. 14 CRS calculations based on OMB and DOD data, and CRS estimate of DOD’s share of BCA limits; includes the $26 billion separate request for DOD in the Administration’s Opportunity, Growth and Security Initiative (OGSI) fund. Congressional Research Service 5 Defense Spending and the Budget Control Act Limits savings.¹⁴

Figure 1. The BCA and Changes in National Defense Spending Plans (in billions of dollars of budget authority) Sources: OMB data shown in annual volumes of the Analytical Perspectives, and statutory language in the BCA, ATRA, and the BBA. With four of the ten years of the BCA limits completed, the gap between the FY2016 Administration plan for total defense spending and BCA limits now in effect has narrowed. Over three-quarters of the savings needed are already incorporated in current Administration plans as of the FY2016 budget. To close this gap for the six remaining BCA years, Congress would have to reduce the Administration’'s FY2016 plan by an average of 5.4% (Table 1). ). Defense Spending Complies with BCA Caps for FY2012-FY2015 By reducing the Administration’'s request and with the FY2013 sequester required by the BCA, National Defense spending (050) met BCA caps from FY2012 through FY2015, totaling • $552 billion in FY2012, • $518 billion in FY2013 (post-sequester), • $520 billion in FY2014, and • $521 billion in FY2015 (see Table 1). ). After decreases in FY2012 and FY2013, the BCA limits set defense spending at a nominal freeze for three years (the same spending level without adjustments for inflation) that would rise slightly to $523 billion in FY2016. After that, defense spending is slated to rise by an average of $11 billion a year to $610 billion in FY2021, sufficient to cover expected inflation (Table 1). ). Congressional Research Service 6 Defense Spending and the Budget Control Act Limits The BCA Spending Path and the FY2016 Request This year, as in the past three years, President Obama proposed to raise caps for both defense and nondefense and substitute “"spending cuts, tax loophole closers, and program integrity measures included in the Budget.”15"¹⁵ Thus far, Congress has shown little interest in such a trade-off. For National Defense, the President proposes raising the BCA cap by $38 billion in FY2016 to match the request of $561 billion for the base budget. In later years, the President proposes to raise defense caps by about $10 billion annually, reaching $610 billion in FY2021, $20 billion above the current $590 billion statutory cap (Table 1).The President also proposes to extend the caps from FY2021 through FY2025 with annual increases of $13 billion. In FY2016, the gap between the BCA limit and the FY2016 President’'s Budget (PB) request is $38 billion, requiring a 6.8% reduction to avoid a sequester. The savings gap would gradually decline to between 3% and 4% in later years although savings in earlier years could contribute to those needed in later years. In real terms (converting all dollars to FY2016 purchasing power), meeting the BCA caps would require an average decrease of 5% over the next six years (Table 1). ). It is not uncommon for Congress to appropriate 5% less funding than requested by DOD. In the 63 years between FY1950 and FY2012, Congress provided DOD with 5% less than requested in about one-quarter of the years. Smaller reductions of 3% to 5% occurred in 11 years, or another 18%. So over 40% of the time, DOD received appropriations of 3% to 5% below its request.16 16 Table 1. FY2016 President's Budget (PB) Plan and BCA Caps for National Defense (in billions of dollars of budget authority and %) Paths Actuals Budget Plan National Defense (050) Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total: 12-21 Total 16-21 598 610 5,634 3,518 FY2016 and BCA Caps in Nominal Dollars FY2016PB 555 518 520 521 561 573 584 592 15 See “In addition to cancelling the 2016 mandatory sequestration order and replacing the automatic mandatory reductions required in future years, the 2016 Budget adjusts upward the 2016 through 2021 defense and nondefense caps from where they otherwise would be under Joint Committee reductions . . . [substituting] by a balanced package of spending cuts, tax loophole closers, and program integrity measures included in the Budget;” on p. 8 of OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/ 2016_sequestration_preview_report_president.pdf. 15 For previous proposals, see “The President stands by the compromise offer he made to Speaker Boehner in December 2012. This Budget includes all of the proposals in that offer. These proposals would achieve nearly $1.8 trillion in additional deficit reduction over the next 10 years, bringing total deficit reduction to $4.3 trillion. This represents more than enough deficit reduction to replace the damaging cuts required by the Joint Committee sequestration” in Office of Management and Budget, FY2014 Budget,” Reducing the Deficit in a Smart and Balanced Way,” pp. 35-36; http://www.gpo.gov/fdsys/browse/collection.action?collectionCode= BUDGET&browsePath=Fiscal+Year+2014&searchPath=Fiscal+Year+2014&leafLevelBrowse=false&isCollapsed= false&isOpen=true&packageid=BUDGET-2014-BUD&ycord=0. 16 Calculation by CRS based on congressional action on the DOD Appropriations bill in those years. Congressional Research Service 7 Defense Spending and the Budget Control Act Limits Paths BCA Capsa Actuals 555 518 Budget Plan 520 521 523 536 549 562 576 590 5,451 3,336 FY2016PB less BCA Caps in Nominal Dollars In $ 0 0 0 0 38 37 35 30 22 20 183 182 In % 0.0% 0.0% 0.0% 0.0% 6.8% 6.4% 6.0% 5.1% 3.7% 3.3% 3.3% 5.4% FY2016 and BCA Caps In FY2016 Dollars FY2016PB BCA Capsa 583 542 536 530 561 563 563 559 554 554 5,546 3,354 583 542 536 530 523 527 529 531 534 536 5,370 3,180 FY2016PB less BCA Caps in FY2016 Dollars In $ 0 0 0 0 38 36 34 28 20 18 176 175 In % 0.0% 0.0% 0.0% 0.0% 6.8% 6.4% 6.0% 5.1% 3.7% 3.3% 3.1% 5.0% Sources: OMB, “Policy Budget Authority and Outlays by Function, Category, and Program” Table in FY2013FY2016

Paths

Actuals

Budget Plan

National Defense (050)

Fiscal Year

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Total: 12-21

Total 16-21

FY2016 and BCA Caps in Nominal Dollars

FY2016PB

555

518

520

521

561

573

584

592

598

610

5,634

3,518

BCA Caps⁰

555

518

520

521

523

536

549

562

576

590

5,451

3,336

FY2016PB less BCA Caps in Nominal Dollars

In $

0

0

0

0

38

37

35

30

22

20

183

182

In %

0.0%

0.0%

0.0%

0.0%

6.8%

6.4%

6.0%

5.1%

3.7%

3.3%

3.3%

5.4%

FY2016 and BCA Caps In FY2016 Dollars

FY2016PB

590

542

536

530

561

563

563

559

554

554

5,551

3,354

BCA Caps⁰

590

542

536

530

523

527

529

531

534

536

5,376

3,179

FY2016PB less BCA Caps in FY2016 Dollars

In $

0

0

0

0

38

36

34

28

20

18

176

175

In %

0.0%

0.0%

0.0%

0.0%

6.8%

6.4%

6.0%

5.1%

3.7%

3.3%

3.2%

520%

Sources: OMB, "Policy Budget Authority and Outlays by Function, Category, and Program" Table in FY2013-FY2016 Analytical Perspectives volumes of the budget, OMB, Table 10.1 in FY2016 Historical volume for GDP price index, and Department of Defense, Table 2-1 in FY2016 National Defense Budget Estimates for adjustments to exclude war spending, and OMB,. Converted to FY2016 dollars based on chained GDP price index in Table 10.1 in FY2016 OMB, FY2016 Historical Tables, February 2015; https://www.whitehouse.gov/omb/budget/Historicals.

Notes: CRS calculations on OMB and DOD documents. BCA caps refers to spending limits in Budget Authority as amended by ATRA and the BBA. Totals may not add due to rounding.

Much of this year'FY2016 Historical volume for GDP price index. Notes: CRS calculations on OMB and DOD documents. Reflects budget authority. CRS used the GDP price index to convert nominal dollars into FY2016 dollars. a. BCA caps refers to spending limits as amended by ATRA and the BBA. Much of this year’s debate on the FY2016 budget resolution focused on how to respond to BCA caps for DOD. This debate about the appropriate level of defense spending in FY2016 and in later years years has continued this summer and is likely to continue into the summer andthis fall as Congress considers the National Defense Authorization Act (NDAA), and annual Department of Defense (DOD) and Military Construction/Veterans Affairs appropriations acts. This rest of this report analyzes BCA limits for DOD (051), which makes up the bulk of National Defense and is the chief focus of congressional concerns. This report does not address nondefense spending, which is subject to similar spending limits.17 The Story for DOD The story for DOD follows the same path as for National Defense. DOD’s reactions to BCA caps have changed over time. With the submission of the FY2013 budget, DOD’s ten-year spending plan for the BCA decade fell by $487 billion, and the needed to comply with BCA caps fell from

Both the FY2016 House-passed Defense Appropriations bill (H.R. 2685, H.Rept. 114-139), passed on June 11, 2015, and the Senate-reported bill (S. 1558, S.Rept. 114-63) would move $37.5 billion from the base request to OCO-designated accounts in Title IX to avoid breaching the cap since OCO-designated funds do not count against BCA caps. The House version spreads the transfers of the five titles – military personnel, Operation & Maintenance (O&M), RDT&E and procurement, while the Senate version concentrates transfers among military personnel, O&M and procurement programs.¹⁷

In statements of Administration Policy on both H.R. 2685 and S. 1558, OMB Director, Shaun Donovan, states that the President's senior advisors would recommend a veto of these bills for the transfer as well as other reasons, as well as recommending a veto of "any other legislation that implements the current Republican budget framework, which blocks the investments needed for our economy to compete in the future." This presents the possibility that all appropriations bills could face a veto prospect. The Senate was unable to bring up its DOD appropriations bill earlier in July, and there is discussion of the need for a budget deal that would potentially raise BCA caps in order to avoid a continuing resolution or a possible government shutdown in October when the fiscal year begins if Congress and the President do not reach agreement on spending limits.

The rest of this report analyzes BCA limits for DOD (051), which makes up the bulk of National Defense and is the chief focus of congressional concerns. This report does not address nondefense spending, which is subject to similar spending limits.¹⁸

The Story for DOD The story for DOD follows the same path as for National Defense. DOD's reactions to BCA caps have changed over time. With the submission of the FY2013 budget, DOD's ten-year spending plan for the BCA decade fell by $487 billion, and the needed to comply with BCA caps fell from 16% in the FY2012 budget to 9% (Figure 2). DOD suggested that this initial adjustment “"is hard, but manageable.”18."¹⁹ Additional savings of $482 billion would be needed to meet BCA caps. 17 CRS Report R41965, The Budget Control Act of 2011, by Bill Heniff Jr., Elizabeth Rybicki, and Shannon M. Mahan and CRS Report RL34424, The Budget Control Act and Trends in Discretionary Spending, by D. Andrew Austin. 18 Department of Defense, “Defense Budget Priorities and Choices,” p. 1, January 2012; http://www.defense.gov/news/ Defense_Budget_Priorities.pdf. Congressional Research Service 8 Defense Spending and the Budget Control Act Limits

Figure 2. Gap Between BCA Limits and DOD Plans Narrows (in billions of dollars of budget authority and % of remaining years) Sources: CRS calculations based on P.L. 112-75, , P.L. 112-240, , P.L. 113-67, and OMB Table 32-1, 31-1, and 28-1 in OMB's annual Analytical Perspectives to estimate DOD share of National Defense (050) total. With the additional $90 billion savings incorporated in the FY2014 DOD plan, the gap between the plan and the BCA as amended shrank to $331 billion over the next eight years of the BCA decade. The savings gap fell from 9.4% to 7.3%. DOD now warned that this change “"led to significant ongoing and planned reductions in military modernization, force structure, personnel costs, and overhead expenditures,”" but that it still complied with the President’'s strategic guidance. 19 20 The FY2015 DOD plan trimmed another $186 billion reducing the savings gap to about $175 billion, now requiring an additional 5.1% for FY2015-FY2021 to comply with BCA limits ( (Figure 2).²¹).20 DOD characterized this spending level as allowing “"the military to protect and advance U.S. interests and execute the updated defense strategy – but with somewhat increased levels of risk for some missions.21 22 In FY2016, BCA caps are slated to increase from $496 billion to $499 billion, and then to rise by about $11 billion annually from FY2017-FY2021, reaching $563 billion in FY2021. DOD’s 's FY2016 request of $534 billion exceeds the FY2016 cap by $36 billion and by $170 billion for the remaining BCA years. The FY2016 Administration plan did not incorporate additional savings, and the gap rose slightly to 5.1% or $165 billion (Figure 2 and Table 2). In its FY2016 Budget Overview, DOD argued that only the Administration's plan would be ). 19 DOD, Defense Budget Priorities and Choices, Fiscal Year 2014, p. 1, and p. 10, April 2013; http://www.defense.gov/pubs/DefenseBudgetPrioritiesChoicesFiscalYear2014.pdf. 20 This figure includes the $26 billion requested for DOD in the Opportunity, Growth and Security Initiative fund. 21 Department of Defense, Fiscal Year 2015 Budget Request: Overview, Figure 1-1 and p.7-7, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf. Congressional Research Service 9 Defense Spending and the Budget Control Act Limits In its FY2016 Budget Overview, DOD argued that only the Administration’s plan would be adequate to respond to recent geopolitical developments, including the Islamic State offensive, the Ebola virus outbreak, and Russian actions in the Ukraine, and to execute the updated defense strategy - but with somewhat increased levels of risk for some missions. . . [concluding that the] QDR [Quadrennial Defense Review] strategy cannot be executed at sequester-levels of funding.22 23 (For more detail, see Appendix C.) .) Defense Department Concerns Although Secretary of Defense Ashton Carter recently testified that DOD’'s planned budget has met over three-quarters of the savings needed to comply with the BCA, DOD now argues that making the remaining reductions would have serious consequences.2324 In testimony about potential effects of meeting BCA caps that would require a $36 billion decrease to DOD’s 's request, and further reductions from their plan in later years, DOD witnesses contended that complying with BCA caps would • jeopardize the military’'s ability to carry out the national military strategy because of cuts in force structure, and other changes;24 • 25 delay reaching “"full-spectrum”" readiness, the broader training that prepares troops for large-scale combat operations; • slow modernization efforts; and • exacerbate these problems if Congress rejects DOD proposals for compensation and health care reform and other proposals that are incorporated in budget plans.25 26 Table 2. FY2016 President's Budget Plan and BCA Caps for DOD (in billions of dollars of budget authority and %) Department of Defense (051) Paths Fiscal Year Actuals 2012 2013 Budget Plan 2014 2015 2016 2017 2018 2019 2020 2021 Total: 12-21 Total 16-21 FY2016 and BCA Caps in Nominal Dollars 22 DOD, “United States Department of Defense Fiscal Year 2016 Request Overview,” p.1-1, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pd f. 23 Testimony by Secretary of Defense Ashton Carter before Senate Appropriations Committee, Subcommittee on Defense, transcript, “President Obama’s Fiscal 2016 Budget Request for Defense, “ May 6, 2013. 24 For a full discussion of DOD concerns about BCA caps and meeting the national military strategy, see DOD, 2014 Quadrennial Defense Review, March 4, 2014; http://www.defense.gov/pubs/2014_Quadrennial_Defense_Review.pdf; see also statements by the Service Chiefs of Staff, Senate Armed Services Committee, Hearing, “Impact of the Budget Control Act of 2011 and Sequestration on National Security;” http://www.armed-services.senate.gov/hearings/15-0128-mpact-of-the-budget-control-act-of-2011-and-sequestration-on-national-security. 25 DOD, Overview: Fiscal Year 2016 Budget Request, p. 2-1ff, p. 6-5ff, passim, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/ FY2016_Budget_Request_Overview_Book.pdf. Congressional Research Service 10 Defense Spending and the Budget Control Act Limits Department of Defense (051) FY2016PB 530 495 496 496 534 547 556 564 570 581 5,372 3,354 BCA Limitsa 530 496 496 496 499 512 524 536 550 563 5,201 3,184 FY2016 President’s Budget (PB) Plan less BCA Caps In $ 0 0 0 0 35 35 33 28 20 18 170 170 In % 0.0% 0.0% 0.0% 0.0% 6.6% 6.4% 5.9% 5.0% 3.6% 3.2% 3.2% 5.1% FY2016 and BCA Caps In FY2016 Dollars FY2016PB 558 518 511 504 534 538 536 533 528 528 5,288 3,198 BCA Limitsa 558 518 511 504 499 503 505 507 509 511 5,124 3,034 FY2016 President’s Budget (PB) Plan less BCA Caps in FY2016 Dollars In $ 0 0 0 0 35 34 31 27 19 17 164 163 In % 0.0% 0.0% 0.0% 0.1% 6.6% 6.4% 5.9% 5.0% 3.6% 3.2% 3.1% 4.9% Sources: OMB, “Policy Budget Authority and Outlays by Function, Category, and Program” Table in FY2013FY2016

Department of Defense (051)
Paths	Actuals				Budget Plan
Fiscal Year	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	Total: 12-21	Total 16-21
FY2016 and BCA Caps in Nominal Dollars
FY2016PB	530	495	496	496	534	547	556	564	570	581	5,372	3,354
BCA Limits	530	496	496	496	499	512	524	536	550	563	5,201	3,184
FY2016 President's Budget (PB) Plan less BCA Caps
In $	0	0	0	0	35	35	33	28	20	18	170	170
In %	0.0%	0.0%	0.0%	0.0%	6.6%	6.4%	5.9%	5.0%	3.6%	3.2%	3.2%	5.1%
FY2016 and BCA Caps In FY2016 Dollars
FY2016PB	564	518	511	504	534	538	536	533	528	528	5,294	3,197
BCA Limits	564	518	511	504	499	502	505	507	509	511	5,129	3,033
FY2016 President's Budget (PB) Plan less BCA Caps in FY2016 Dollars
In $	0	0	0	0	35	35	31	27	19	17	164	164
In %	0.0%	0.0%	0.0%	0.0%	6.6%	6.6%	5.9%	5.0%	3.6%	3.2%	3.1%	5.1%

Sources: OMB, "Policy Budget Authority and Outlays by Function, Category, and Program" Table in FY2013-FY2016 Analytical Perspectives volumes of the budget, OMB, Table 10.1 in FY2016 Historical volume for GDP price index, and Department of Defense, Table 2-1 in FY2016 National Defense Budget Estimates for adjustments to exclude war spending, and OMB, Table 10.1 in FY2016 Historical volume for GDP price index Notes: CRS calculations on OMB and DOD documents. BCA caps are set for National Security. CRS estimated the DOD share each year based on the Administration’'s budget request that year using the OMB table above. Reflects budget authority. CRS used the GDP price index to convert nominal dollars into FY2016 dollars. a. Totals may not add due to rounding. a. BCA caps refers to spending limits as amended by ATRA and the BBA. After adapting to a nominal freeze in spending since the FY2013 sequester, DOD appears to be particularly concerned about continuing that freeze for another year and then receiving average annual increases of $11 billion through FY2021 that would more than cover inflation. Under BCA caps, DOD spending would rise from $496 billion in FY2015 to $499 billion in FY2016, and then to $581 billion by FY2021 (Table 2). ). During a hearing on the impact of sequestration, Chair of the Senate Armed Services John McCain asked the Service Chiefs whether they would be able to execute the current 2014 Defense Strategic Guidance under “sequestration”"sequestration" or revised BCA caps. Each Service Chief responded “"no.”" The service chiefs did not provide a list of those programs and activities that would be cut as requested by the Chair.26 Each27 Each of the witnesses provided some examples of the impact of potential cuts that would be necessary, in their view, to reach BCA caps in FY2016 and later years. In 2014, DOD sent Congress a report about how and where spending would be reduced to comply with caps but did not explain how particular cuts would prevent the military from responding to potential military crises envisioned in the national strategy (see “DOD’s Plan for Complying with BCA Limits”). 26 Senate Armed Services Committee, Statements and transcript,“Hearing on the Budget Control Act and Sequestration,” January 28, 2015; Department of Defense, Quadrennial Defense Review, 2014; 3-4-14; http://www.defense.gov/pubs/2014_Quadrennial_Defense_Review.pdf. Congressional Research Service 11 Defense Spending and the Budget Control Act Limits "DOD's Plan for Complying with BCA Limits"). Connecting defense funding levels and the national strategy is complex and depends on how and where reductions are taken. There is a wide range of views on ways to reduce defense spending to meet BCA spending limits and what the impact of those decreases would be (see Appendix D). ). The FY2016 Budget Resolution and BCA Caps This spring’'s debate about the spending levels for defense in FY2016 and the next decade pitted defense hawks, worried about the effect on defense of reductions necessary to comply with BCA caps, against deficit hawks, concerned about increasing the deficit if BCA constraints are lifted. As a result of concern over the effect on defense as well as preventing a sequester, the House and Senate budget resolutions (H.Con.Res. 27 and S.Con.Res. 11) both recommended adding a total of $96 billion for Overseas Contingency Operations (OCO), including $89 billion for DOD and $7 billion for State Department/USAID programs.27 28 This would add $38 billion to DOD’'s $51 billion war request by designating funds requested in its base budget as being for OCO. Since these additional OCO-designated funds would not count against BCA caps, defense spending would be raised to the level requested without triggering a sequester.28 29 OCO-designated funds would rise from the $57 billion requested for the Afghanistan war and new efforts to combat the Islamic State or ISIS to $96 billion (including the $7 billion for the State Department). For DOD, OCO-designated funds would constitute 16% of the total rather than the 8% requested (Figure 3). ). The conference version of the FY2016 budget resolution on S.Con.Res. 11 adopted this approach, providing $523 billion for the National Defense base budget, complying with BCA caps, and another $96 billion in OCO-designated funding for DOD and the State Department.2930 The total for defense was $1 billion above the President’'s request. While amounts in the budget resolutions are not binding, the House Appropriations Committees adopted these figures in its 302(b) allocations that govern the markup of individual bills by their subcommittees. The Senate Appropriations Committees has not yet published its 302(b) allocations.30 27 See Table 3 and Table 4 in S.Rept. 114-14, and Table 1 in H.Rept. 114-47; see also §104, Functional Categories for National Defense (050) and Overseas Contingency Operations (970) in the conference version of S.Con.Res. 11. 28 Under budget law, OMB raises budget caps to accommodate funding designated as OCO. The $57 billion and $96 billion in OCO-designated funds include $50 billion for defense and $7 billion for the State Department in the request, and the $96 billion includes $89 billion for defense and $7 billion for the State Department in the House and Senate budget resolutions. 29 Conference agreement on S. Con., Res. 11 as printed in Congressional Record, April 29, 2015, Table 4, p. H2545. 30 The 302(b) allocation split amounts for DOD between the DOD and Military Construction/Veterans Affairs subcommittees. See House Appropriations Committee, H. Rept. 114-, “Revised Suballocation of Budget Allocations for Fiscal Year 2016,” May _, 2015, http://appropriations.house.gov/uploadedfiles/fy2016-revised302b.pdf. CQ/Roll Call, “Senate Appropriators Launch Initial Work on Spending Bills,” by Tamar Hallerman, May 12, 2015; http://www.cq.com/doc/4680825?0. The 302(b) allocation divides amounts for DOD between the DOD Appropriations subcommittee and the other subcommittees. Congressional Research Service 12 Defense Spending and the Budget Control Act Limits subcommittees. The Senate Appropriations Committees has not yet published its 302(b) allocations.³¹

Figure 3. BCA Revised Caps and FY2016 Budget Resolutions (in billions of dollars and % of total) Sources: Bipartisan Budget Act, H.Con.Res. 27 as passed by the House, H.Rept. 114-47, , S.Con.Res. 11 and S.Rept. 114-14; and conference version of S.Con.Res. 11. . Notes: Figures include discretionary budget authority for base and OCO National Defense spending. Secretary of Defense Ashton Carter, DOD Comptroller Michael McCord, and the service chiefs all expressed concerns about providing DOD with a one-year increase using OCO-designated funds, saying this approach was not a “sustainable”"sustainable" path, and therefore would not alleviate their concerns.3132 A one-time spike, without assurances of longer-term increases, could complicate defense planning. OMB Director Shaun Donovan signaled the President’'s opposition to this approach, stating that the FY2016 budget resolution would Damage national security by funding national defense with gimmicks in the near term, shortchangingshort-changing it altogether in the long term, and singling out key non-defense national security programs for deep cuts relative to the President’'s budget. . . [and] As the Secretary of Defense and the Chairman of the Joint Chiefs have explained, this is both bad budgeting and harmful to military planning.32 33 Distinguishing Between Base and OCO Funds Under budget law, spending is classified as for an “emergency” or OCO if 31 Inside Defense, “ Comptroller: $90B OCO Account Proposed in House Budget Blueprint ‘Not the Solution,” 3-2415; http://insidedefense.com/defensealert/comptroller-90b-oco-account-proposed-house-budget-blueprint-not-solutionupdated; and Defense News, Ash Carter: House Budget Undermines Long-Term Planning, by Paul McLeary 4:33 p.m. EDT March 26, 2015; http://www.defensenews.com/story/defense/2015/03/26/defense-budget-congress-carter/ 70487034/. 32 OMB, Shaun Donovan, Director “Congressional Republican Budget Conference Agreement Cuts Programs that Support the Middle Class, Working Families, and National Security,” April 30, 2015; https://www.whitehouse.gov/blog/2015/04/30/congressional-republican-budget-conference-agreement-cuts-programssupport-middle-cl. Congressional Research Service 13 Defense Spending and the Budget Control Act Limits • • "emergency" or OCO ifCongress includes statutory language designating funds as emergency or OCO in individual accounts; and the President subsequently designates the funds, generally in a letter to Congress. 33 34If Congress and the President designate funds as “emergency” or “OCO”"emergency" or "OCO" appropriations, then OMB raises BCA limits to accommodate that funding.3435 This effectively exempts war funding from the caps. Determining which funds are OCO-related is not necessarily based on particular criteria but rather on whether both the congressional and executive branches have designated the funding that way. Both OMB and DOD issue budget guidance and regulations with criteria for what qualifies as war-funding that are to be followed by DOD in developing their budgets. Once funding is appropriated with an emergency or OCO-designation by both Congress and the President, the funds are available to be spent regardless of their purpose. Since the 9/11 attacks, both Congress and the President have designated as emergency or OCO funding items that may not be consistent with guidance, for purposes ranging from childcare centers to reorganizing the Army to funds transferred from DOD’'s base budget request.35 36 Amounts designated in defense appropriations acts as “emergency” or “OCO”"emergency" or "OCO" have ranged from about $2 billion to $12 billion, typically falling in the $6 billion to $8 billion range each year. In FY2014, for example, Congress moved $9.2 billion in O&M funding requested in DOD’'s base budget to Title IX war funding where it was designated as OCO.36 37 Using OCO Funds as a Safety Valve At the same time as DOD and Congress have been using OCO designations as a “"safety valve” " for the base budget, some Members have raised concerns that war funding may be a “"slush fund” " and have proposed stricter controls.3738 One sign of a desire to place some constraints on use of the OCO-designation was Section 409 included in the Senate-passed budget resolution (S.Con.Res. 11 11). Under that section, any Senator could raise a point of order on a provision in a bill, joint resolution, amendment or conference report if the amount for OCO-designated spending 33 §251 (b)(2)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) includes this designation procedure. See also discussion in CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by Amy Belasco. 34 See, for example, Table 1 and pp.3-5 in OMB, “Final Sequestration Report to the President and Congress for Fiscal Year 2015,” January 15, 2015; https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/ sequestration/sequestration_final_january_2015_president.pdf. 35 See Table 5 and sections “War Funding and Budget Controls” in CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by Amy Belasco. DOD’s monthly Cost of War reports have included a table listing all war-designated funding not tracked since FY2008. Presumably, DOD excludes this funding in order to use actual experience to estimate future spending without including these funds. 36 Ibid. 37 Politico, “War budget might be permanent 'slush fund' “by Jeremy Herb and Bryan Bender, 3/24/15; http://www.politico.com/story/2015/03/war-budget-might-be-permanent-slush-fund-116367.html; see also CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by Amy Belasco. Congressional Research Service 14 Defense Spending and the Budget Control Act Limits resolution, amendment or conference report if the amount for OCO-designated spending exceeded $58.0 billion in FY2016 (the President’'s request level) or $59.5 billion in FY2017. This provision was dropped in the conference version of the resolution.38 39 The House-reported version of the FY2016 budget resolution (H.Con.Res. 27), Section 513 also appeared to reflect concerns about broad use of the OCO designation. It set up a “"Deficit Neutral Reserve Fund”" for OCO and provided that any OCO-designated funds above $73.5 billion and up to $94 billion could be provided only if offsets other than additional revenues were provided. In other words, OCO-designated funding would be capped at $73.5 billion–below the $94 billion in the reported version—unless the additional amounts were offset by reductions in other spending. During floor consideration, the House dropped this provision and added $2 billion to its OCO allocation in order to match the $96 billion included by the Senate.39 40 An alternate approach would be to raise the BCA caps themselves. The conference version of S.Con.Res. 11 included a Senate-proposed provision that would set up a “"Deficit Neutral Reserve Funds to Strengthen America’'s Priorities”" that would permit “"enhanced funding for national security or domestic discretionary programs provided such funding would not increase the deficit over the period of the total of fiscal years 2016 through 2025.”40"⁴¹ Such increases would have to be “ "paid for”" or offset by higher revenues or decreases in mandatory spending. FY2016 Budget Resolution and FY2016-FY2021 Caps Another important role of the FY2016 budget resolution is to set a ten-year path for defense spending for FY2016-FY2025. Compared to the BCA caps applying to the National Defense base budget for FY2016-FY2021, • the House-passed resolution exceeded BCA caps by $229 billion; • the Senate version matched the caps; • the Conference would comply with BCA caps; and • the President’'s budget request exceeded the caps by $182 billion (Table 3). Table 3. FY2016 Budget Resolution and National Defense BCA Caps

(in billions of dollars of discretionary budget authority)

FY2016-FY2021 Totals

By Category

BCA Caps

FY2016 PB

H.Con.Res. 27

S.Con.Res. 11

Conference

Base

3,336

3,518

3,565

3,336

3,336

Base vs. Caps

0

182

229

0

0

OCO-designated

—

193

231

231

380

Base and OCO Total

—

3,711

3,796

3,567

3,716

Sources: H.Con.Res. 27, S.Con.Res. 11). 38 §409 in S.Con.Res. 11 as passed by the Senate gave the Chair of the Senate Budget Committee the prerogative to decide whether a particular provision is subject to this point of order. Unless 60 Senators agree to waive the point of order, the OCO-designated funds in a particular account would be struck, and the process could continue until funds did not exceed the §409 limit. Senate Budget Committee, Draft Concurrent Resolution of the Budget for Fiscal Year 2016, H.Rept. 114-0; http://www.budget.senate.gov/republican/public/index.cfm?a=Files.Serve&File_id=c7aa8422-0e7745db-964e-7676b22cdef0; and Concurrent Resolution on the Budget for Fiscal Year 23016, 114-111; http://www.budget.senate.gov/republican/public/index.cfm?a=Files.Serve&File_id=5389a308-6d7b-45fc-b8e7e6db453eaf9a. For pre-conference, see CQ Roll Call, “GOP Hawks May Get Final Word on War Spending in Budget,” by Paul M. Krawzak, 4-16-15. 39 See H.Rept. 114-47, p. 150 and §513 in the House-reported version of H.Con.Res. 27; see also Function 970 in §102 of the House-passed version for the increase in OCO funds from $94 billion to $96 billion. According to press reports, Senator McCain considered but decided against proposing an amendment to delete this point of order; Politico,” A procedural requirement will make it hard for the Pentagon to ever get the extra money,” by Jeremy Herb and Seung Min Kim, 3/23/15. 40 §4302 in conference version of S.Con.Res. 11 and §302 in S.Con.Res. 11 as passed by the Senate. Congressional Research Service 15 Defense Spending and the Budget Control Act Limits Table 3. FY2016 Budget Resolution and National Defense BCA Caps (in billions of dollars of discretionary budget authority) FY2016-FY2021 Totals By Category BCA Caps Base FY2016 PB H.Con.Res. 27 S.Con.Res. 11 Conference 3,336 3,518 3,565 3,336 3,336 0 182 229 0 0 OCO-designated — 193 231 231 380 Base and OCO Total — 3,711 3,796 3,567 3,716 Base vs. Caps Sources: H.Con.Res. 27, S.Con.Res. 11, and Conference version of S.Con.Res. 11, Table 28-1 in OMB, FY2016 FY2016 Analytical Perspectives, February 2015; https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/28_1.pdf. . Notes: CRS calculations based on above; adjusts OMB’'s FY2016 figures to exclude war request. In terms of OCO-designated funds, both H.Con.Res. 27 as passed by the House and S.Con.Res. 11 11 as passed by the Senate exceeded the President’'s request by the $38 billion requested in the FY2016 base budget that the resolution proposes would be designated as OCO and hence exempt from BCA caps (see earlier discussion). For the rest of the period, both the House and Senate versions adopted the $27 billionbillion placeholder for OCO-designated funds in the President’'s FY2016 budget request, bringing the total for the BCA period to $231 billion compared to the President’s 's request of $193 billion (Table 3). ). In the conference version of S.Con.Res. 11, Congress proposes to increase the amount that would be OCO-designated from $231 billion to $380 billion by including annual amounts from FY2016FY2021FY2016-FY2021, $187 billion above the President’'s request. OCO-designated funds would exceed the request by • $38 billion in FY2016 and FY2017, • $36 billion in FY2018 and $31 billion in FY2018, and • $23 billion in FY2020 and $21 billion in FY2021.41 42While the President recently modified the drawdown of U.S. troops in Afghanistan this year, the goal to reduce to reduce U.S. troops in Afghanistan to an embassy presence of 1,000 by the beginning of 2017 did not change.4243 For this reason, war funding is likely to decline in FY2017. It appears that the FY2016 budget resolution may assume a continuation in later years of its FY2016 proposal to transfer funds requested for the defense base budget to war funding. For the FY2016-FY2025 decade, the FY2016 budget resolution is $178 billion below the President’s 's Budget request for the base budget and exceeds that request by $196 billion for OCO-designated funding (Figure 4). ). 41 CRS calculations based on Conference version of S.Con.Res. 11 and Table 28 in OMB, FY2016 Analytical Perspectives; https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/28_1.pdf. 42 The White House,”U.S.-Afghanistan Joint Statement,” March 24, 2015; https://www.whitehouse.gov/the-pressoffice/2015/03/24/us-afghanistan-joint-statement. Congressional Research Service 16 Defense Spending and the Budget Control Act Limits The House-passed version of the FY2016 National Defense Authorization Act (H.R. 1735) also moved $38 billion from the base budget request to funds to be designated as OCO.

Figure 4. National Defense Spending FY2016-FY2025, Base and OCO-Designated (in billions of dollars of budget authority) Sources: Conference version of S.Con.Res. 11, Table 28-1 in OMB, FY2016 Analytical Perspectives, February 2015; https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/28_1.pdf. . Notes: CRS calculations based on sources above. BCA Revised Caps in Historical Perspective To put BCA caps in perspective, Figure 5 shows DOD appropriations for its base budget (excluding wars) over the past seven decades expressed in FY2016 dollars so as to exclude inflation. Since its previous low point, DOD’'s base budget grew from $403361 billion in FY1998 to $567 $588 billion in FY2010, its most recent high point in FY2016 dollars. Over that span, annual defense spending grew by $164227 billion or 4163% in real terms (Figure 5). ). After more than a decade of real growth, DOD spending began to decline under BCA limits from its previous high point in FY2010 to a low point of $588 billion in FY2010 (above the Reagan-era peak of $560 billion) to a low point in FY2016 of $491 billion, a decrease of $7697 billion or 13% 16% in real terms (all in FY2016 dollars). Critics of the BCA limits often make this comparison. After FY2016, defense spending would grow by about $11 billion annually, enough to cover projected inflation (Figure 5). ). From a longer-term perspective, BCA spending limits place DOD’'s base budget resources at between FY2007 and FY2008 level in real terms, a relatively high level. Except for the 1985 peak during the peacetime buildup under then-President Reagan, DOD spending has generally been well below the FY2007 and FY2008 level, hovering closer to $400 billion annually (Figure 5).

). Congressional Research Service 17 Defense Spending and the Budget Control Act Limits Figure 5. Department of Defense Spending: FY1950-FY2025 (in bllions of FY2016 budget authority) Sources: Historical data from Table 5.1 in OMB, FY2016 Historical Tables; supplemental and emergency funding for wars from DOD, Financial Summary Tables, Table 2-1 in DOD’s 's FY2016 National Defense Budget Estimates, , and other sources. Converted to FY2016 dollars used chained GDP index in Table 10.1 in OMB, FY2016 Analytical Perspectives. Buildups and Drawdowns in Defense Spending Except for the peacetime buildup in the early 1980s during the presidency of Ronald Reagan, defense base budget spending typically rises during wartime and falls for several years afterwards. Much but not all of previous wars have been funded with emergency appropriations. In the later stages of wars, funding has been included in the base budget in later years of the conflict.4344 For the Afghanistan and Iraq wars, funding has been consistently designated as either emergency or for OCO (Figure 6). (This discussion uses DOD rather than National Defense figures because of the focus on war funding.) 43 CRS Memo, “Funding for military contingency operations in the regular defense appropriations bills in the 1990s,” by Stephen Daggett, April 6, 2005. Congressional Research Service 18 Defense Spending and the Budget Control Act Limits

Figure 6. DOD Spending Including Both Base Budget and Emergency/OCO (in billions of FY2016 budget authority) Sources: DOD and OMB historical data and budget projections. ; see Table 1 and Table 2. Except for the Korean War, the Afghanistan and Iraq wars show a sharper buildup and shallower drawdown. In real terms, total DOD spending (base and war) grew by 8494% by FY2010, well above the 5461% increase during the Vietnam War and the 6556% increase of the Reagan buildup. DOD’ DOD's FY2016 plan projects a 2330% drawdown, less thanabove the 3125% decrease after the Vietnam War, and below the 34the 33% decrease after the Reagan buildup in response to the end of the Cold War ( (Figure 6). ). The Afghanistan, Iraq and new Islamic State or ISIS (Operation Inherent Resolve) wars have been exclusively funded in supplemental emergency or OCO funds, which are not subject to budget constraints. Some observers, DOD spokesmen among them, have acknowledged that some war funding would more appropriately be part of its base budget.44 45 In recent years, DOD principals, as well as other policymakers, have called for distinguishing base and OCO costs in order to help ensure more realistic choices about the long-term affordability of DOD plans. One important step would be to distinguish temporary war-related costs from long-term, enduring requirements, such as maintaining large numbers of military personnel in the Central Command region that have been funded as war costs. DOD contends that 44 See CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by Amy Belasco. Congressional Research Service 19 Defense Spending and the Budget Control Act Limits this transition “"will not be possible if the sequester-level discretionary spending caps remain in place.”45 "⁴⁶ Transitioning longer-term “war”"war" expenses to the base budget may be more difficult under budget caps because it could crowd out other programs. At the same time, war funding, particularly for procurement, has contributed to meeting base budget requirements over the past 14 years, often earlier than planned. For example, the Army used war funding to modernize and upgrade almost its entire armored vehicle fleet sooner than anticipated because of the additional wear and tear of war operations.4647 For the same reason, depot maintenance of equipment has been carried out earlier than planned. For these types of expenses, DOD’'s OCO funding may, in fact, help reduce future requirements, reducing pressure on the defense budget. Trends in DOD Spending DOD may also be concerned about BCA spending limits because the history of drawdowns shows that typically, procurement accounts are tapped to adjust to overall reductions to protect Operation and Maintenance (O&M), some of which funds the readiness of current forces. Procurement is often called the “"bill payer”" and varies in consonance with overall increases and decreases, signaling perhaps that there is more discretion to adjust the pace of modernization than to make changes to ongoing training and support costs (Figure 5). 7). This role may also reflect DOD’'s preference for delaying modernization during tight times because it can be reversed fairly easily when more funding becomes more available, rather than cutting force structure, perceived to be more difficult to restore. It may also reflect the relative persistence of funding levels for O&M support activities, perceived to be largely “fixed”"fixed" costs of running military installations. 45 DOD, United States Department of Defense Fiscal Year 2016 Request Overview, p. 7-1, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_ Request_Overview_Book.pdf. 46 Stimson Center, Russell Rumbaugh, What We Bought: Defense Procurement from FY01 to FY10, October 28, 2011; http://www.stimson.org/books-reports/what-we-bought-defense-procurement-from-fy01-to-fy10/. Congressional Research Service 20 Defense Spending and the Budget Control Act Limits Figure 7. running military installations.

Figure 7. Trends in Types of DOD Spending in the Base Budget (in billions of FY2016 dollars) Sources: Calculated by CRS using OMB, Table 5.1 and Table 10.1 in Sources: Calculated by CRS using OMB, Table 5.1 and Table 10.1(chained GDP price index) in FY2016 Historical Tables; OMB, FY2016 FY2016 Historical Tables; ; https://www.whitehouse.gov/omb/budget/HistoricalsHistoricals; totals adjusted to exclude emergency and Overseas contingency Operations as shown in Table 2-1 and Table 7-5 in Department of Defense, Office of the Under Secretary of Defense (Comptroller), National Defense Budget Estimates for FY 2016, March 2015; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY16_Green_Book.pdf. Notes: FY16_Green_Book.pdf. Notes: In this figure, the total for DOD’s base budget is divided by estimated average strength for active-duty forces; this calculation treats costs for reservists as part of overall costs for active-duty because of their support role. Budget Authority is deflated by GDP price index for Defensethe chained GDP in OMB, Table 10.1 in FY2016 Historical Tables Tables, converted from FY2009 to FY2016 dollars by CRS. Different Types of Savings While DOD believes that reductions to meet BCA caps would jeopardize its ability to meet the national military strategy, other policymakers and observers have offered alternative perspectives. Many think tanks, CBO, GAO, and other organizations have examined and proposed a wide range of alternate ways to reduce defense spending. Some proposals reflect different military strategies while others accept the current strategy but propose different force structures. Others propose changes to military compensation, modernization paths, and support activities. Proposals begin from different baselines, rest on different rationales, could have different effects on programs, and provide different types of savings (Appendix D). ). While most studies focus on potential programmatic impacts, this report examines the timing, duration, and pros and cons of different types of savings, specifically • temporary, short-term savings; • recurring savings that continue and may grow over time; • savings from delay; Congressional Research Service 21 Defense Spending and the Budget Control Act Limits •

savings from delay;

saving requiring upfront investments; • efficiencies that reduce implementation costs; and • across-the-board sequester cuts. In assessing savings proposals, it’'s important to identify the baseline against which savings are measured. For DOD, the baseline is its Future Years Defense Program (FYDP) including the budget request plus four years, currently FY2016-FY2020. The President’'s budget also sets a “ "defense topline”" or annual total for a ten-year period including the request. DOD’'s budget generally incorporates savings from proposed compensation or other reforms, which may require congressional approval. The section below looks at the characteristics and the advantages and disadvantages of each type of savings. CBO’ CBO's steady-state baseline generally projects a spending path that continues the most recently enacted level with an adjustment for inflation so as to provide the same level of resources. With the requirement for “"automatic reductions”" required by the BCA since FY2013, CBO’'s baseline now reflects BCA caps.47 48 Temporary or Short-Term Savings During the FY2013 sequester, DOD adopted several changes to produce short-term, sometimes temporary savings, with limited effects, and without necessarily changing goals or policies. According to a GAO assessment, most DOD’'s sequestration cuts were temporary including: • furloughing 650,000 civilian employees for six days in order to save $1.2 billion;48 • 49 cancelling or shortening unit training for those units not preparing to deploy; • postponing planned depot maintenance of equipment or repair and non-urgent renovations of facilities; • reducing or delaying purchases of weapon system or modifications; and • delaying testing and development of weapon systems.49 50 While some of these decisions—like cancelling training—resulted in lost training opportunities, others—like depot maintenance or repair plans or letting weapon system contracts several months later than planned—did not reflect policy decisions and had temporary effects. For longer-term savings, DOD would need to make explicit decisions about the size of the civilian workforce, the acceptable size of depot maintenance backlogs, or the size or scope of weapon system purchases or R&D programs. 47 See Table 3-6 in CBO, Budget and Economic Outlook: Fiscal Years: 2014-2024, 2-4-14; http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf. 48 See Table 5 and p. 51 in GAO, Report to the Chairman, Committee on the Budget, House of Representatives, 2013 Sequestration: Agencies Reduced Some Services and Investments, While Taking Certain Actions to Mitigate Effects, March 2014; http://www.gao.gov/assets/670/661444.pdf. 49 GAO, Sequestration: Observations on the Department of Defense’s Approach in Fiscal Year 2013, GAO-14-177R, Nov. 7, 2013; http://www.gao.gov/assets/660/658913.pdf. Congressional Research Service 22 Defense Spending and the Budget Control Act Limits or R&D programs. Designating Funds as OCO Another source of savings that could prove to be temporary is the current proposal in the conference version of the FY2016 budget resolution (S.Con.Res. 11 as passed by both houses) that transfers base budget funds to OCO as a way to meet BCA spending limits and avoid a sequester. OCO funding is expected to fall because of the President’'s commitment to reduce U.S. troops in Afghanistan to an “embassy”"embassy" presence of about 1,000 by the end of 2016.5051 Although the President recently announced a delay of several months in the drawdown from 9,800 troops to 5,000 in FY2015, that change would not affect likely spending in FY2017.51 52 Although there is no consensus about how long OCO-designated funds may continue, Defense officials have opposed this budget resolution proposal because it gives them no confidence that an increase in FY2016 would be continued in later years. A one-time spike would also be inconsistent with DOD’'s commitment to gradually “migrate”"migrate" long-term, war-related costs to its base budget if BCA caps are raised.52 53 Recurring Savings Affect Later Years In some ways, recurring savings may be the most beneficial type of savings because expenses are lowered not only initially but in later years, and sometimes build up over time with full implementation. Recurring savings would therefore reduce savings needed in later years. Restraining Military Pay Raises and Compensation Reducing annual military pay raises is a good example of recurring savings that decrease costs in the short term as well as in later years. In FY2016, for the third year in a row, DOD proposed to raise military pay by 1.3% rather than the 2.3% that would match the Economic Cost Index (ECI), a labor index that sets pay raises unless adjusted by the President or Congress. DOD estimates that this decision would save $700 million in FY2016 and $4.3 billion for FY2016FY2020 compared to its previous baseline that assumed ECI increases.53 50 DOD, United States Department of Defense Fiscal Year 2016 Request Overview, p. 7-2, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pd f; Inside the Pentagon, “July deadline missed, DOD Planning To Release OCO Budget 'Migration Guidance' This Fall,” August 13, 2014; http://insidedefense.com/Inside-the-Pentagon/Inside-the-Pentagon-08/14/2014/dod-planningto-release-oco-budget-migration-guidance-this-fall/menu-id-148.html. 51 The White House, “U.S.-Afghanistan Joint Statement,” March 24, 2015; https://www.whitehouse.gov/the-pressoffice/2015/03/24/us-afghanistan-joint-statement. 52 Defense News, “Ash Carter: House Budget Undermines Long-Term Planning,” by Paul McLeary, March 26, 2015; http://www.defensenews.com/story/defense/2015/03/26/defense-budget-congress-carter/70487034/; Inside Defense,” Comptroller: $90B OCO Account Proposed In House Budget Blueprint 'Not The Solution,' “ March 24, 2015; http://insidedefense.com/defensealert/comptroller-90b-oco-account-proposed-house-budget-blueprint-not-solutionupdated; Inside Defense, “COCOM Chiefs: Increasing OCO Funds Not Efficient Solution To Budget Problem,” March 19, 2015; Tuesday, March 24, 2015; http://insidedefense.com/node/168215; DOD, FY2016 Overview, p. 7-9. 53 See Figure 6-3 in DOD, “Overview: Fiscal Year 2016 Budget Request,” February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/ FY2016_Budget_Request_Overview_Book.pdf. Although Section 1009 (c) of Title 37 provides an automatic annual increase in basic pay, indexed to the ECI, the President can specify an alternate amount as he did in FY2014 and FY2015; see p. 8 – p. 9 in CRS Report RL33446, Military Pay: Key Questions and Answers, by Lawrence Kapp and Barbara Salazar Torreon. Congressional Research Service 23 Defense Spending and the Budget Control Act Limits DOD’FY2016-FY2020 compared to its previous baseline that assumed ECI increases.⁵⁴ DOD's larger package of compensation recommendations includes other ways to reduce current and long-term costs by • limiting basic housing allowances; • reducing the commissary subsidy; • consolidating TRICARE, DOD’'s health care system; and • reforming TRICARE by raising co-pays and requiring an enrollment fee from military retirees for Tricare for Life. DOD estimates that altogether, these compensation reform proposals would save $1.7 billion in FY2016 and $25.4 billion for the FY2016-FY2020 period. These savings are incorporated in DOD’ DOD's budget plan and therefore would not provide additional savings to meet the current gap between BCA caps and DOD’'s FY2016 request.54 DOD’55 DOD's proposals are a response to the expansion of military benefits and the awarding of pay raises above the ECI over the past decade. Some observers say that restraint is appropriate at this time because military personnel are currently paid more than 90% of the average pay of civilian employees of comparable age and experience whereas the DOD goal is to match the pay of 70% of equivalent civilians. Another sign that compensation is at least adequate is DOD’'s success in meeting or exceeding its recruiting and retention goals.5556 Slimmer pay raises also create permanent savings by lowering the base to which later increases are applied. The January 2015 recommendations of the Military Compensation and Retirement Modernization Commission (MCRMC) call for revamping military retirement, providing military health care for dependents and retirees through a system like that available to civilian government employees, and changing “"Quality of Life”" programs like commissaries and childcare.5657 Because their proposals were released after submission of DOD’'s budget, these recommendations were not taken into account in the FY2016 DOD request. The commission The commission estimates that adopting its entire package of proposals would save $4.8 billion in FY2016 and $7.1 billion annually by FY2017, with total savings of $31.8 billion for FY2016FY2020FY2016-FY2020 (in FY2016 dollars).5758 If Congress were to adopt the commission’commission's health care proposal, some of DOD’'s proposals might no longer be relevant, such as changes in co-pays. Other savings, like DOD’'s proposed TRICARE enrollmentenrollment fee, are not included in the commission’commission's proposals. To calculate the savings, overlapping savings incorporated in DOD’'s current budget could be subtracted, and MCRMC savings would be substituted depending on the particular proposals adopted by Congress. 54 See Figure 6-3 in DOD, “United States Department of Defense Fiscal Year 2016 Request Overview,” February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/ FY2016_Budget_Request_Overview_Book.pdf. 55 See discussion on p. 11-p.14 in CRS Report RL33446, Military Pay: Key Questions and Answers, by Lawrence Kapp and Barbara Salazar Torreon; CBO, “Growth in DOD’s Budget from 2000 to 2014,” November 2014; http://www.cbo.gov/sites/default/files/cbofiles/attachments/49764-MilitarySpending.pdf. 56 Military Compensation Retirement Modernization Commission, Final report, p. 2, January 2015; http://www.mcrmc.gov/public/docs/report/MCRMC-FinalReport-29JAN15-HI.pdf. 57 These estimates are net savings, taking into account upfront costs. See Ibid. p. 255. Congressional Research Service 24 Defense Spending and the Budget Control Act Limits adopted by Congress. Force Structure Savings Grow Over Time Reductions in force structure—the size of military forces—create recurring savings that build up over time and then continue indefinitely unless reversed. For example, in 2013, the Army decided to draw down its forces by reducing the number of active-duty personnel from 490,000 to 450,000. This action lowers military personnel and Operating and Maintenance (O&M) costs as fewer personnel need to be paid and supported with savings building up as personnel leave and are not replaced. (Most savings estimates do not include potential procurement savings if weapon system and support equipment buys were adjusted to reflect modernizing the equipment of the same portion of the force as originally planned). Recent Army budgets include but do not identify savings from this 40,000 decrease in the number of active-duty strength that is to be achieved by FY2018. The rationale for the decrease is the change in the President’'s National Military Strategy, which calls for no longer preparing to conduct long lasting ground wars.58 59 Under the Army’'s plan, the number of Brigade Combat Teams (BCTs) is slated to fall from 38 in FY2014 to 30 in FY2016.5960 A CBO report estimates that annual savings per BCT could range from $1.2 billion to $1.6 billion in military personnel and O&M funds, depending on the type.60 61 Assuming an average of $1.4 billion for the eight brigade combat teams would yield annual recurring savings of $11.2 billion after full implementation. (This estimate does not include potential procurement savings.) While this type of savings has the advantage of contributing to savings needed in later years, some would argue it has the disadvantage of not being quickly reversible. Recent experience during the Afghanistan and Iraq wars has demonstrated that the Army can, in fact, expand fairly quickly if necessary. Smaller recurring savings would accrue as the services implement DOD’'s initiative to decrease headquarters costs (military and civilian personnel, contractors, facilities) by 20%, which is expected to save $5 billion over the next five years. The rationale for this type of “efficiency” "efficiency" initiative is that growth in headquarters staffing over the past decade was due primarily to the Afghanistan and Iraq wars, and so could be trimmed as the wars wind down.61 58 Department of Defense, “Defense Budget Priorities and Choices,” p. 1, January 2012; http://www.defense.gov/news/ Defense_Budget_Priorities.pdf. 59 Department of the Army, Fiscal Year (FY) 2016 Budget Estimates, Volume I, Operation and Maintenance, Army, Justification of Estimates, p. 1-p. 200, passim, February 2015; http://asafm.army.mil/Documents/OfficeDocuments/ Budget/budgetmaterials/fy16/opmaint//oma-v1.pdf. Department of the Army, Fiscal Year (FY) 2016 Budget Estimates, Volume I, Military Personnel, Army; http://asafm.army.mil/Documents/OfficeDocuments/Budget/budgetmaterials/ fy16/milpers//mpa.pdf. 60 See Figure 2-1 in CBO, Approaches for Scaling Back the Defense Department’s Budget Plans, p. 18, March 18, 2013; CBO defines “direct” costs as compensation and operational costs; indirect costs as those attributable to units such as transportation and maintenance, and overhead costs, as those attributable to the services such as recruiting and administrative support; http://www.cbo.gov/sites/default/files/cbofiles/attachments/43997_Defense_Budget.pdf. This figure includes direct, indirect, and overhead costs. 61 Department of Defense, Fiscal Year 2015 Budget Request: Overview, p. 1-2, 4-2, 7-12, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf. Congressional Research Service 25 Defense Spending and the Budget Control Act Limits Savings from Delay Afghanistan and Iraq wars, and so could be trimmed as the wars wind down.⁶² Savings from Delay Faced with making reductions, DOD often delays weapon system purchases by “"stretching out” " programs, purchasing fewer units than planned in the near-term but generally retains the original acquisition objective or total buy. What are the effects of program delays? Critics argue that lower production rates are inefficient because per unit costs may be higher when production rates are lower. The cost penalty depends on the stage of the program, the size of the reduction, the amount of capacity established, and the potential for making adjustments. Stretch-outs are also criticized for delaying improvements in capabilities and requiring the services to rely on older systems for longer periods. Small decreases in quantity may yield significant savings and at the same time, have limited effects on unit cost or capability. An often-cited concern, recently voiced by some observers, is that production delays may create a “ "bow-wave”" or put pressure on overall procurement budgets in later years as peak production rates for multiple major weapon systems converge. The likelihood of a “"bow-wave”" depends on the plans and schedules for other major programs, as well as whether the services adjust longtermlong-term acquisition objectives in response to budgetary pressures.6263 Production plans often shift over the ten-to-twenty-year acquisition cycles typical of major weapon systems in response to changes in threats, technology, and budget. The F-35 Joint Strike Fighter A recent example of substantial savings from stretching out plans is the F-35 fighter aircraft program, the largest weapon system program in terms of total cost in DOD history. The program includes three different versions being built for the Air Force, Navy, and Marine Corps. Because of management and technical problems, as well as spending limits, Congress has reduced the size of F-35 purchases in the past four years. Begun in FY2001, estimated procurement cost is now $338.9 billion (in FY2015$) to buy 2,457 F-35 aircraft over about 40 years—a 50% increase from the original estimate. Projected lifetime operating and sustainment costs would add over $1 trillion to the total program cost.63 64 A recent GAO assessment cites “"significant cost and schedule growth, as well as performance shortfalls,”" due to the program’'s concurrency where initial production occurs before developmental testing is completed. GAO continues that concurrency can increase the risk of design changes and cost of retrofits after production has started . . . one practice that has perpetuated the unsatisfactory results that have persisted in acquisitions through the decades.64 62 See, for example, Inside Defense, “Kendall: Current Strategic Forces Modernization Plans Unaffordable without Topline Relief,” April 14, 2015; http://insidedefense.com/defensealert/kendall-current-strategic-forces-modernizationplans-unaffordable-without-topline. 63 See p. 83 in GAO-15-342SP, Defense Acquisitions: Assessments of Selected Weapon Programs, reissued on April 9, 2015; http://www.gao.gov/assets/670/668986.pdf; and p. 6 and p. 19 in CRS Report RL30563, F-35 Joint Strike Fighter (JSF) Program, by Jeremiah Gertler. ` 64 GAO-15-342SP opcit, p. 54. Congressional Research Service 26 Defense Spending and the Budget Control Act Limits through the decades.⁶⁵ This assessment, along with program office concerns about software development, engine and aircraft durability, maintainability, and logistics information, has raised the issue of the affordability of the program.65 66 Between FY2012 and the FY2016 request, the number of F-35s to be purchased by all three services fell from 217 in the FY2012 plan to 127 in the FY2016 plan, a decrease of 90 aircraft. This 41% drop in quantity was coupled with 32% in savings, or $10.8 billion. While this change reflects a dramatic change in production plans in the near-term, the effect on the overall program is relatively small—a 6% slippage in the schedule (Table 4).⁶⁷ ).66 Table 4. Changes in F-35 Plans, FY2012 President’'s Budget (PB) vs. FY2016PB (in number of aircraft and billions of dollars) Change in Overall Program FY12-FY15 President's Budget Plans Quantity $ Quantity To Complete $ to Complete Total Program Total $ FY2012 217 $33.7 2,017 $199.5 2,443 $269.0 FY2016 127 $23.0 1,895 $225.1 2,443 $318.0 Change in Quantity: FY16 v. FY12 -90 -$10.8 -122 $25.6 0 $49.0 -41% -32% 13% 0% 18% Change in %: FY16 v. FY12 -6% Sources: P-40 Exhibits for the F-35 aircraft in FY2012 and FY2016 DOD budget exhibits including F-35 A in Aircraft procurement, Air Force, Joint Strike Fighter (STOVL) and Joint Strike Fighter (CV) in Aircraft Procurement, Navy, and P-1 Exhibits for quantities. Notes: Includes F-35 program for the Air Force (A), the Marine Corps (B) and the Navy © versions. Program dollar values reflects Weapon system cost shown in P-40 exhibits, includes advance procurement, excludes initial spares because data is not available for F-35Bs and F-35Cs in FY2016. This table does not include aircraft purchased before FY2012. Stretching out the F-35 program, with its multiple technical problems, could be attractive because the additional time could help ensure that problems would be resolved before production is ramped up, avoiding additional costly retrofits. The effects on future capability could be marginal since technical problems would need to be resolved in any case. For other modernization programs with high cost and technical risks, a decision to delay and stretch out production in order to meet spending limits could be perceived as an acceptable risk. The case for savings by delay could differ in cases where production is going smoothly. Savings Requiring Upfront Investments The closing of a military installation may offer a good example where eventual savings that persist indefinitely require significant one-time, upfront costs. Shuttering a military installation 65 Ibid. p. 84. Ibid. and CRS Report RL30563, F-35 Joint Strike Fighter (JSF) Program, by Jeremiah Gertler; see also GAO-15-364, GAO, F-35 Joint Strike Fighter: Assessment Needed to Address Affordability Challenges, “Highlights,” April 2015; http://www.gao.gov/assets/670/669619.pdf.. 66 Table 3 does not include aircraft bought in previous years. Congressional Research Service 27 Defense Spending and the Budget Control Act Limits requires transferring military personnel, disestablishing and moving equipment and activities, remediating environmental contamination, and possibly adjusting facilities elsewhere to receive those activities that continue. Savings result primarily from reducing the number of military and civilian personnel, as well as avoiding the need for upkeep of unnecessary infrastructure. It may take several years before savings offset such implementation costs. Since 1988, DOD has carried out five rounds of base closures. The first four rounds—in 1988, 1991, 1993 and 1995— were designed to cut excess capacity created by the one-third drawdown in military personnel in response to the end of the Cold War. DOD argued that savings from base closures should be applied to meet other DOD modernization and readiness goals. In contrast, the 2005 round of base closures was intended to consolidate bases in support of transformation. All rounds were to be completed within six years and eventual savings were to exceed implementation costs.67 For the fourth year in a row, DOD is pressing Congress to provide statutory authority for another round of base closures, arguing that savings from eliminating an estimated 20% excess capacity due to the ongoing downsizing of forces could be better spent to preserve critical DOD programs.68 In its FY2015 budget plan, DOD incorporated a total of $1.67 billion for FY2015FY2019 to support a FY2017 BRAC round, beginning with less than $10 million a year through FY2017, and then rising to $590 million in FY2018 and $1.0 billion in FY2019.69 In its FY2016 request, DOD included $10.5 million in FY2016 for initial studies.70 Base closures are controversial because of the economic impact on communities, as well as the difficulties in estimating future savings and implementation costs. Based on assessments of experience with the first four rounds—where the rationale was savings rather than other DOD goals—there appears to be fairly firm evidence that net savings can be expected. In 1998, Congress required that DOD report the status of implementation costs and savings for the first four rounds, and that CBO and GAO evaluate that report.71 GAO Evaluation of Base Closure Savings In its report, DOD found that for the first four rounds, its actual implementation costs was $22 billion, compared to its initial estimate of $23 billion. Based on a new analysis, DOD estimated that savings for the first four rounds were likely to higher than originally estimated: $7.1 billion rather than $5.7 billion annually.72 67 DOD, The Report of the Department of Defense on Base Realignment and Closure, Required by Section 2824 of the National Defense Authorization Act for Fiscal Year 1998, P.L. 105-85, April 1998 (hereinafter, DOD, Base Closure Review, 1998); http://www.defense.gov/pubs/brac040298.pdf. 68 DOD, Fiscal Year 2015 Budget Request: Overview, p. 2-4 to p.2-5, March 2014; http://comptroller.defense.gov/ Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf. 69 DOD, Base Realignment and Closure Fiscal Year (FY) 2015 Budget Estimates, March 2014, p. 8; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/budget_justification/pdfs/05_BRAC/ FINAL_FY15_BRAC_Summary_Book.pdf. 70 DOD, Base Realignment and Closure Fiscal Year (FY) 2016 Budget Estimates, February 2015; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/budget_justification/pdfs/05_BRAC/ FINAL_Book_BRAC_Exec_Sum_FY2016.pdf. 71 Section 2824 of the 1998 National Defense Authorization Act (P.L. 105-85). 72 DOD, Base Closure Review, p. iv, p. 6, p. 8, p. 48, 1998; U.S. General Accounting Office. Military Bases: Review of DOD’s 1998 Report on Base Realignment and Closure, p. 3, November 1998; http://www.gao.gov/assets/230/ 226562.pdf. For example, DOD did not include long-term environmental remediation costs or offsetting savings from (continued...) Congressional Research Service 28 Defense Spending and the Budget Control Act Limits GAO questioned the accuracy of both DOD’s costs and savings estimates. Because of “data and records weaknesses,” GAO characterized DOD’s estimates as providing a rough approximation of costs and savings rather than a precise accounting. DOD’s data systems do not capture all savings associated with BRAC actions, nor has DOD established a separate system to track BRAC savings.73 GAO also questioned the methodology of DOD’s new savings estimate as well as DOD’s decision to apply savings in later budgets to other purposes, because this made the tracking of savings difficult. GAO was also concerned because it was unclear whether military and civilian positions were eliminated or personnel shifted to other tasks. DOD refers to such savings as “cost avoidance” where new requirements are funded with other savings. Nevertheless, GAO concluded that These issues do not negate the fact that DOD can expect substantial savings from BRAC, although they have had some effect on overall savings and, if included in DOD’s accounting, would cause some increase in the time required for savings to fully offset costs. 74 CBO Assessment CBO did not attempt to verify DOD’s figures but agreed with GAO that implementation costs could be somewhat higher because not all costs were included.75 CBO voiced confidence in DOD’s original savings estimate of about $5.0 billion annually (in 1999 dollars) but questioned DOD’s new estimate. CBO, like GAO, noted the difficulty in segregating the effect on savings of other actions that affect costs such as changes in workload, or other budget reductions.76 Despite weaknesses in DOD’s estimates, CBO, like GAO, concluded that DOD’s report provides rough but credible estimates of the total recurring savings from past BRAC rounds, the aggregate level of excess capacity in the United States, and the potential savings from future BRAC rounds.77 Efficiencies: Definitions and Concerns Defense “efficiency” savings are defined in different ways by different organizations, policymakers, and observers. For example, a Stimson Center report counts as “efficiencies” not only cuts to “overhead” or “back-office” functions but also changes to military compensation.78 In (...continued) land sales or leases, which proved to be lower than anticipated. 73 GAO/NSIAD-96-67, Military Bases: Closures and Realignment Savings Are Significant but not Easily Quantifiable, p. 2, April 1996; http://www.gao.gov/assets/230/222465.pdf. 74 U.S. General Accounting Office. Military Bases: Review of DOD’s 1998 Report on Base Realignment and Closure, p.27, and p. 28-p. 30; see also GAO/NSIAD-97-67. 75 CBO, “Review of the Report of the Department of Defense on Base Realignment and Closure,” July 1998; http://www.cbo.gov/sites/default/files/brac98.pdf. 76 CBO, “Review of the Report of the Department of Defense on Base Realignment and Closure,” p. 3, July 1998. 77 Ibid, p. 5. 78 Stimson, “Managing the Military More Efficiently: Potential Savings Separate from Strategy,” passim, 5-13-13; http://www.stimson.org/images/uploads/research-pdfs/Managing_the_Military_More_Efficiently.pdf. Congressional Research Service 29 Defense Spending and the Budget Control Act Limits its Budget Overview, DOD also uses a fairly broad definition, with proposals ranging from reducing management headquarters and enhancing competition for contracts to terminating and restructuring weapon systems.79 A CBO report defines “efficiencies” more narrowly as reducing the “cost of operations . . . without eliminating or curtailing activities if more efficient ways of conducting operations could be found.”80 This definition focuses on savings from changing how an activity is carried out without reducing services or benefits provided. DOD identifies $188.5 billion in “efficiency” savings since enactment of the BCA. According to its tally, • the FY2013 request included $60 billion in savings through FY2017; • the FY2014 request included another $35 billion in savings through FY2018; • the FY2015 request included $93.5 billion in savings through FY2019; and • the FY2016 request does not identify additional savings.81 DOD’s FY2012 request, pre-dating the BCA, included another $178 billion in anticipated savings, of which $100 billion were generated by the services and applied to other programs, and $78 billion was produced by defense agencies and used to meet topline decreases. Unlike later efficiency efforts, DOD identified savings in the budget year and planning period associated with individual initiatives.82 Because these savings were incorporated in DOD’s FY2012 budget plan, they would not contribute to meeting BCA caps. While DOD acknowledges the importance of pursuing efficiencies by “eliminating duplication, reducing management headquarters and overhead, tightening personnel costs, enhancing contract competition, terminating or restructuring weapons programs and consolidating infrastructure” to reduce the ‘cost of doing business,’” it emphasizes that “The Department has learned from prior drawdowns that it is impossible to generate all the needed savings just through efficiencies.”83 79 Department of Defense, Fiscal Year 2015 Budget Request: Overview, passim, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf in DOD, United States Department of Defense Fiscal Year 2016 Request Overview, passim, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/ FY2016_Budget_Request_Overview_Book.pdf. 80 CBO Approaches for Scaling Back the Defense Department’s Budget Plans, p. 28, March 18, 2013; http://www.cbo.gov/sites/default/files/cbofiles/attachments/43997_Defense_Budget.pdf. 81 See p. 4-1 in Department of Defense, Fiscal Year 2015 Budget Request: Overview, passim, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf; and for lack of additional savings in FY2016, see DOD, United States Department of Defense Fiscal Year 2016 Request Overview, passim, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/ FY2016_Budget_Request_Overview_Book.pdf. See also, Opcit, CBO, Approaches, p. 28, 2013. 82 Office Of the Under Secretary of Defense (Comptroller), Department of Defense, Department of Defense Efficiency Initiatives, Fiscal Year 2012 Budget Estimates; http://comptroller.defense.gov/Portals/45/Documents/defbudget/ fy2012/FY2012_Efficiency_Justification_Book.pdf. 83 Department of Defense, Fiscal Year 2015 Budget Request: Overview, p.1-2, and p.1-3, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf; and p. 1-3 in DOD, United States Department of Defense Fiscal Year 2016 Request Overview, passim, February 2015. Congressional Research Service 30 Defense Spending and the Budget Control Act Limits Based on DOD’s tally of $188 billion in efficiency savings incorporated in its FY2013-FY2016 budgets plans, about 25% of the total decreases in DOD’s budget plans to meet BCA caps from FY2012-FY2021 is expected to result from efficiencies. Because DOD has not presented the savings for the budget and future years, it is difficult to identify the effects of these initiatives on budget plans. Concerns Raised About Efficiency Savings Some observers have voiced skepticism about whether anticipated efficiency savings materialize, citing not only the difficulty in tracking savings but also the commitment of military and civilian managers, many of whom focus primarily on DOD’s core defense missions.84 Acquisition reforms, another type of efficiency savings, such as DOD’s “Better Buying Power” initiative, are also notoriously difficult to track because of the multiple factors affecting weapon system costs. Former Secretary of Defense Donald Rumsfeld testified in June 2001 that DOD, like any “organization in the public or private sector,” could “by better management, operate, at least 5% more efficiently if given the freedom to do so,” and so save $15 billion annually at that time.85 Many other policymakers and think tank studies have estimated similar savings from a wide range of efficiencies (Appendix D). In evaluating proposed efficiency savings, it would be useful for Congress to receive the following information in annual budget requests: • estimates of year-by-year savings in both dollars and personnel (military, civilian, or contractor work-years); • tracking of those savings in previous and later years; • identification of those responsible for implementation; • potential obstacles to reaching savings; • adjustments to savings estimates as a result of experience; and • programmatic effects. DOD’s FY2013 Sequester Experience If Congress is not able to meet BCA caps, in whole or in part, the Defense Department would face largely across-the-board sequestration cuts levied by OMB. Defense officials voiced alarm about the effects of both the funding levels—deemed inadequate—and the sequestration process itself—considered to be indiscriminate. The two issues are often conflated.86 84 CSBA, Promoting Efficiency in the Department of Defense: Keep Trying, But Be Realistic, by Robert Hale, January 2002; http://www.csbaonline.org/wp-content/uploads/2011/03/2002.01.25-DoD-Efficiency.pdf. 85 Secretary of Defense, Donald Rumsfeld, “Statement to House and Senate Armed Services Committees,” June 28. 2001; http://www.defense.gov/Speeches/Speech.aspx?SpeechID=384. 86 Politico Pro, “The sequestration monster myth,” By Jeremy Herb, 4/12/15; http://politico.pro/1ynD964. Congressional Research Service 31 Defense Spending and the Budget Control Act Limits It is not unusual for Congress to rely on small 1% to 2% across-the-board cuts to meet budgetary limits.87 Sequestration has raised greater concern because of the size of potential cuts. While a small reduction may not appreciably affect programs, a reduction of 5% could make contract plans more difficult to execute or force delays in planned activities. In FY2013, DOD was faced with implementing a $37.2 billion sequester cut that was applied to $527.6 billion in budgetary resources, an average cut of 7.1%. At the same time, DOD had more flexibility than expected in how to apply cuts to particular programs and accounts. How Sequestration Works Budgetary law requires that fifteen days after the end of a congressional session OMB issues a final sequestration report based on appropriations enacted at that time, which could be individual, consolidated, or a continuing resolution appropriation act. To the extent that appropriations for defense exceed the BCA revised cap for that fiscal year, the President is required to identify for each account the amount to be sequestered.88 Budgetary law requires that the same percentage cut be levied on individual program, projects, and activities (PPAs). For investment programs (procurement and RDT&E), a PPA is defined as an individual program (or program element) as identified in justification materials submitted to Congress. For O&M activities, Congress has defined a PPA at the account level for each activeduty and reserve component, a much broader level. In addition, the President is allowed to exempt Military Personnel accounts entirely.89 In the case of defense spending, sequester cuts are applied to “total budgetary resources,” which include • new Budget Authority (BA) for base funding in the current fiscal year, • new BA for funding designated as Overseas Contingency Operations/Global War on Terror (OCO/GWOT), • unobligated balances (funds not yet under contract) from prior years for both base and OCO funds, and • exemptions for military personnel accounts excluded by the President.90 Predictions and Experience Faced with the upcoming sequester, then-Deputy Secretary of Defense, Ashton Carter, issued guidance to the services and defense agencies in January 2013. This guidance required DOD components to begin implementing measures that will “help mitigate our budget execution risks” by • fully protecting funding for wartime operations and Wounded Warrior programs; 87 These are generally included in general provisions. The caps are raised to accommodate funds designated as emergency or for Overseas Contingency Operations (OCO); see Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), §251, §254 (a) and (f). 89 §255 (f), §258B, and 255 (f) of the BBEDCA. 90 See §253(d), §255 (f) §258B, and §256 (k) in the BBEDCA. 88 Congressional Research Service 32 Defense Spending and the Budget Control Act Limits • protecting “to the extent feasible” programs associated with the new strategy, readiness programs, and family programs; • reducing the civilian workforce through a hiring freeze, releasing temporary hires, and considering a furlough with mission-related exceptions; • protecting urgently required war-related investment and reviewing other investment to avoid penalties associated with cancellations; and • curtailing lower priority programs such as base operations, facilities sustainment, travel and training.91 This action helped DOD to begin adjusting to the likely cuts before OMB’s order was issued on March 1, 2013, and implemented on March 27, 2013.92 While the services followed DOD guidance, its spokesmen testified to dire effects. The Air Force predicted that one-third of its fighter and bomber force would be grounded, depot maintenance backlogs would grow, and contract plans for weapon systems would be disrupted. The Army cited drastic personnel cuts, and cancelled training exercises. DOD Comptroller Robert Hale stated that effects on readiness would be devastating.93 A year later, in its report on the effects of sequestration, GAO concluded that DOD’s guidance to the services focused cuts on lower priority areas to limit readiness impacts, and that most of DOD’s actions made short-term effects. For example, GAO found that • the Army curtailed training for units not scheduled to deploy; • the Air Force temporarily stopped training operations for combat forces but then resumed in July 2013; • depot maintenance was deferred by the services; • installations deferred facility upgrades and delayed renewing contracts; • the services reduced and delayed weapon system and RDT&E contracts; and • civilians were furloughed for six days rather than the 22 days originally expected.94 Overall, GAO concluded that 91 Deputy Secretary of Defense, Ashton Carter, “Handling Budgetary Uncertainty in Fiscal Year 2013,” January 10, 2013. 92 §901(b) and (c) in P.L. 112-240. 93 Army News, “Panetta: Severe cuts in ops if sequester occurs,” by Marcus Weisgerber, 1-10-13; http://www.armytimes.com/news/2013/01/dn-panetta-says-severe-cuts-ops-sequester-011013/; Air Force, “Sequestration Implementation Plan,” Briefing to Congress, 2-16-13; Yahoo.com, “Air Force Says Spending Cuts Hit Combat Aircraft,” May 7, 2013. Yahoo.com, “Army Warns Of Steeper Reductions in Troop Numbers.” by Richard Lardner, April 23, 2013; American Forces Press Service, “Hale: Sequestration Devastates U.S. Military Readiness,” by Cheryl Pellerin, May 10, 2013. 94 GAO, Report to the Chairman, Committee on the Budget, House of Representatives, 2013 Sequestration: Agencies Reduced Some Services and Investments, While Taking Certain Actions to Mitigate Effects, p.78-p. 81, March 2014; http://www.gao.gov/assets/670/661444.pdf. Congressional Research Service 33 Defense Spending and the Budget Control Act Limits Generally, DOD’s approach to sequestration was a short-term response focused on addressing the immediate funding reductions for fiscal year 2013. DOD was able to reduce spending levels for the remainder of fiscal year 2013 without making permanent changes, such as adjusting the size of its forces or canceling weapon systems programs.95 Flexibility Available to DOD to Mitigate Sequestration DOD had more flexibility than might be apparent in implementing sequester cuts because it could • draw on both new BA and unobligated BA from prior years; • tap war funding as well as its base budget; • exempt military personnel; • allocate cuts to O&M across an entire account; and • redirect funds to areas harmed by sequester through reprogramming. In addition, the sequester was applied to the $527.2 billion appropriated for DOD, which was $2 billion above the request. The sequester amount also turned out to be lower than originally because ATRA reduced the amount from about $53 billion to $41 billion. That amount was further reduced by $3.7 billion to $37.2 billion because of a provision in budgetary law that permits “credits” in those cases when final appropriations are below the post-sequester amount in the sequestration order.96 At the same time, the FY2013 sequester was difficult to implement because the sequester cut of $37.2 billion required a 7.1% average cut to total budgetary resources.97 In addition, the sequester order was issued on March 1, 2013, halfway through the fiscal year when a continuing resolution was still in effect, increasing uncertainty. DOD had more flexibility because it could draw on three sources of funds: unobligated balances from prior years ($62.2 billion), new BA for the base budget ($392.4 billion in base budget funding excluding military personnel accounts); and funds designated as Overseas Contingency Operations ($73.0).98 Sequester cuts were taken from all three sources for each individual 95 GAO-14-177R, Sequestration: Observations on the Department of Defense’s Approach in Fiscal Year 2013, p. 3, Nov. 7, 2013); http://www.gao.gov/assets/660/658913.pdf. 96 For original estimate, OMB, Report Pursuant to the Sequestration Transparency Act of 2012 (P.L. 112-25), p. 7, September 14, 2012; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/stareport.pdf; see §253(f) in the BBEDCA; amount provided by OMB. OMB was required under ATRA to calculate the sequester on March 1, 2013 based on an annualized level of the Continuing Resolution in effect at the time. Sec. 253(f) of the Deficit Control Act of 1985 provides that if the final enacted level is below the post-sequester amount in the order, then the agency receives a “credit” for savings in excess of sequester savings. For example, if the final appropriation was $90, and the post-sequester amount as calculated was $100, then DOD received a “credit” of $10 applied to the sequester total. OMB data identify $3.7 billion in DOD credits that reduced the sequester to $37.2 billion. Amount of credit provided by OMB. See also, Department of Defense, Office of the Under Secretary of Defense (Comptroller), Department of Defense Report on the Joint Committee Sequestration for Fiscal Year 2013, June 2013; http://comptroller.defense.gov/execution/Sequestration/Unclassified_Published_Sequestration_Final.pdf. 97 Table 1 in GAO-14-177R. 98 Amounts from DOD table provided to CRS. For exemption of military personnel, see Acting Director of OMB, Jeffrey D. Zients to Speaker of the House, John H. Boehner, “Notification letter to exempt military personnel from a sequester, July 31, 2012.” Figures from table provided to CRS by DOD. Unobligated BA is available from DOD procurement, Research, Development, Testing & Evaluation (RDT&E), and Military Construction funds are available (continued...) Congressional Research Service 34 Defense Spending and the Budget Control Act Limits procurement or RDT&E program and each O&M account, with individual cuts targeted to areas where funding was less needed. Table 5. Implementation of DOD’s FY2013 Sequester (in billions of dollars of budget authority and %) Category FY2013 New BAa Prior Year Unobligated Balancesb Totalb Available Resources Base $392.4 $56.0 $448.4 OCO $73.0 $6.2 $79.2 Total $465.4 $62.2 $527.6 Sequester Cuts Base -$26.2 -$5.8 -$32.0 OCO -$4.8 -$0.4 -$5.3 Total -$31.0 -$6.2 -$37.2 % Sequester Cut Base -6.7% -10.3% -7.1% OCO -6.6% -7.0% -6.7% Total -6.7% -10.0% -7.1% Source: CRS analysis of table provided by Office of the Secretary of Defense, Comptroller, showing allocation of sequester reductions by account, by base and OCO, and by new BA and unobligated balances, November 24, 2014. Notes: a. New BA or Budget Authority refers to funds appropriated by Congress for the upcoming fiscal year. b. Unobligated balances are BA appropriated in previous years that has not yet been obligated, i.e., put on contract. DOD discriminated in how much it drew from each source. To reach the sequester amounts, DOD took a 10% cut to unobligated balances compared to a 6.7% cut to new BA appropriated in FY2013. This enabled DOD to protect new BA that would be available for a longer period of time than old BA appropriated in prior years. DOD often reprograms unobligated balances for new requirements when those funds are close to the end of their life and may lapse and be returned to the Treasury (Table 5). Somewhat surprisingly, in light of guidance to protect funding related to combat operations, DOD

President's Budget Plans

FY12-FY15

Change in Overall Program

Total Program

 

Quantity

$

Quantity To Complete

$ to Complete

Total

$

FY2012

217

$33

.7

2,017

$199

.5

2,443

$269

.0

FY2016

127

$23

.0

1,895

$225

.1

2,443

$318

.0

Change in Quantity: FY16 v. FY12

-90

-$10

.8

-122

$25

.6

0

$49

.0

Change in %: FY16 v. FY12

-41%

-32%

-6%

13%

0%

18%

Sources: P-40 Exhibits for the F-35 aircraft in FY2012 and FY2016 DOD budget exhibits including F-35 A in Aircraft procurement, Air Force, Joint Strike Fighter (STOVL) and Joint Strike Fighter (CV) in Aircraft Procurement, Navy, and P-1 Exhibits for quantities.

Notes: Includes F-35 program for the Air Force (A), the Marine Corps (B) and the Navy © versions. Program dollar values reflects Weapon system cost shown in P-40 exhibits, includes advance procurement, excludes initial spares because data is not available for F-35Bs and F-35Cs in FY2016. This table does not include aircraft purchased before FY2012.

Stretching out the F-35 program, with its multiple technical problems, could be attractive because the additional time could help ensure that problems would be resolved before production is ramped up, avoiding additional costly retrofits. The effects on future capability could be marginal since technical problems would need to be resolved in any case. For other modernization programs with high cost and technical risks, a decision to delay and stretch out production in order to meet spending limits could be perceived as an acceptable risk. The case for savings by delay could differ in cases where production is going smoothly.

Savings Requiring Upfront Investments

The closing of a military installation may offer a good example where eventual savings that persist indefinitely require significant one-time, upfront costs. Shuttering a military installation requires transferring military personnel, disestablishing and moving equipment and activities, remediating environmental contamination, and possibly adjusting facilities elsewhere to receive those activities that continue. Savings result primarily from reducing the number of military and civilian personnel, as well as avoiding the need for upkeep of unnecessary infrastructure.

It may take several years before savings offset such implementation costs. Since 1988, DOD has carried out five rounds of base closures. The first four rounds—in 1988, 1991, 1993 and 1995—were designed to cut excess capacity created by the one-third drawdown in military personnel in response to the end of the Cold War. DOD argued that savings from base closures should be applied to meet other DOD modernization and readiness goals. In contrast, the 2005 round of base closures was intended to consolidate bases in support of transformation. All rounds were to be completed within six years and eventual savings were to exceed implementation costs.⁶⁸

For the fourth year in a row, DOD is pressing Congress to provide statutory authority for another round of base closures, arguing that savings from eliminating an estimated 20% excess capacity due to the ongoing downsizing of forces could be better spent to preserve critical DOD programs.⁶⁹ In its FY2015 budget plan, DOD incorporated a total of $1.67 billion for FY2015-FY2019 to support a FY2017 BRAC round, beginning with less than $10 million a year through FY2017, and then rising to $590 million in FY2018 and $1.0 billion in FY2019.⁷⁰ In its FY2016 request, DOD included $10.5 million in FY2016 for initial studies.⁷¹

Base closures are controversial because of the economic impact on communities, as well as the difficulties in estimating future savings and implementation costs. Based on assessments of experience with the first four rounds—where the rationale was savings rather than other DOD goals—there appears to be fairly firm evidence that net savings can be expected. In 1998, Congress required that DOD report the status of implementation costs and savings for the first four rounds, and that CBO and GAO evaluate that report.⁷²

GAO Evaluation of Base Closure Savings

In its report, DOD found that for the first four rounds, its actual implementation costs was $22 billion, compared to its initial estimate of $23 billion. Based on a new analysis, DOD estimated that savings for the first four rounds were likely to higher than originally estimated: $7.1 billion rather than $5.7 billion annually.⁷³

GAO questioned the accuracy of both DOD's costs and savings estimates. Because of "data and records weaknesses," GAO characterized DOD's estimates as

providing a rough approximation of costs and savings rather than a precise accounting. DOD's data systems do not capture all savings associated with BRAC actions, nor has DOD established a separate system to track BRAC savings.⁷⁴

GAO also questioned the methodology of DOD's new savings estimate as well as DOD's decision to apply savings in later budgets to other purposes, because this made the tracking of savings difficult. GAO was also concerned because it was unclear whether military and civilian positions were eliminated or personnel shifted to other tasks. DOD refers to such savings as "cost avoidance" where new requirements are funded with other savings.

Nevertheless, GAO concluded that

These issues do not negate the fact that DOD can expect substantial savings from BRAC, although they have had some effect on overall savings and, if included in DOD's accounting, would cause some increase in the time required for savings to fully offset costs. ⁷⁵

CBO Assessment

CBO did not attempt to verify DOD's figures but agreed with GAO that implementation costs could be somewhat higher because not all costs were included.⁷⁶ CBO voiced confidence in DOD's original savings estimate of about $5.0 billion annually (in 1999 dollars) but questioned DOD's new estimate. CBO, like GAO, noted the difficulty in segregating the effect on savings of other actions that affect costs such as changes in workload, or other budget reductions.⁷⁷

Despite weaknesses in DOD's estimates, CBO, like GAO, concluded that DOD's report provides rough but credible estimates of the total recurring savings from past BRAC rounds, the aggregate level of excess capacity in the United States, and the potential savings from future BRAC rounds.⁷⁸

Efficiencies: Definitions and Concerns

Defense "efficiency" savings are defined in different ways by different organizations, policymakers, and observers. For example, a Stimson Center report counts as "efficiencies" not only cuts to "overhead" or "back-office" functions but also changes to military compensation.⁷⁹ In its Budget Overview, DOD also uses a fairly broad definition, with proposals ranging from reducing management headquarters and enhancing competition for contracts to terminating and restructuring weapon systems.⁸⁰

A CBO report defines "efficiencies" more narrowly as reducing the "cost of operations . . . without eliminating or curtailing activities if more efficient ways of conducting operations could be found."⁸¹ This definition focuses on savings from changing how an activity is carried out without reducing services or benefits provided.

DOD identifies $188.5 billion in "efficiency" savings since enactment of the BCA. According to its tally,

• the FY2013 request included $60 billion in savings through FY2017;
• the FY2014 request included another $35 billion in savings through FY2018;
• the FY2015 request included $93.5 billion in savings through FY2019; and
• the FY2016 request does not identify additional savings.⁸²

DOD's FY2012 request, pre-dating the BCA, included another $178 billion in anticipated savings, of which $100 billion were generated by the services and applied to other programs, and $78 billion was produced by defense agencies and used to meet topline decreases. Unlike later efficiency efforts, DOD identified savings in the budget year and planning period associated with individual initiatives.⁸³ Because these savings were incorporated in DOD's FY2012 budget plan, they would not contribute to meeting BCA caps.

While DOD acknowledges the importance of pursuing efficiencies by "eliminating duplication, reducing management headquarters and overhead, tightening personnel costs, enhancing contract competition, terminating or restructuring weapons programs and consolidating infrastructure" to reduce the 'cost of doing business,'" it emphasizes that "The Department has learned from prior drawdowns that it is impossible to generate all the needed savings just through efficiencies."⁸⁴

Based on DOD's tally of $188 billion in efficiency savings incorporated in its FY2013-FY2016 budgets plans, about 25% of the total decreases in DOD's budget plans to meet BCA caps from FY2012-FY2021 is expected to result from efficiencies. Because DOD has not presented the savings for the budget and future years, it is difficult to identify the effects of these initiatives on budget plans.

Concerns Raised About Efficiency Savings

Some observers have voiced skepticism about whether anticipated efficiency savings materialize, citing not only the difficulty in tracking savings but also the commitment of military and civilian managers, many of whom focus primarily on DOD's core defense missions.⁸⁵ Acquisition reforms, another type of efficiency savings, such as DOD's "Better Buying Power" initiative, are also notoriously difficult to track because of the multiple factors affecting weapon system costs.

Former Secretary of Defense Donald Rumsfeld testified in June 2001 that DOD, like any "organization in the public or private sector," could "by better management, operate, at least 5% more efficiently if given the freedom to do so," and so save $15 billion annually at that time.⁸⁶ Many other policymakers and think tank studies have estimated similar savings from a wide range of efficiencies (Appendix D).

In evaluating proposed efficiency savings, it would be useful for Congress to receive the following information in annual budget requests:

• estimates of year-by-year savings in both dollars and personnel (military, civilian, or contractor work-years);
• tracking of those savings in previous and later years;
• identification of those responsible for implementation;
• potential obstacles to reaching savings;
• adjustments to savings estimates as a result of experience; and
• programmatic effects.

DOD's FY2013 Sequester Experience

If Congress is not able to meet BCA caps, in whole or in part, the Defense Department would face largely across-the-board sequestration cuts levied by OMB. Defense officials voiced alarm about the effects of both the funding levels—deemed inadequate—and the sequestration process itself—considered to be indiscriminate. The two issues are often conflated.⁸⁷

It is not unusual for Congress to rely on small 1% to 2% across-the-board cuts to meet budgetary limits.⁸⁸ Sequestration has raised greater concern because of the size of potential cuts. While a small reduction may not appreciably affect programs, a reduction of 5% could make contract plans more difficult to execute or force delays in planned activities. In FY2013, DOD was faced with implementing a $37.2 billion sequester cut that was applied to $527.6 billion in budgetary resources, an average cut of 7.1%. At the same time, DOD had more flexibility than expected in how to apply cuts to particular programs and accounts.

How Sequestration Works

Budgetary law requires that fifteen days after the end of a congressional session OMB issues a final sequestration report based on appropriations enacted at that time, which could be individual, consolidated, or a continuing resolution appropriation act. To the extent that appropriations for defense exceed the BCA revised cap for that fiscal year, the President is required to identify for each account the amount to be sequestered.⁸⁹

Budgetary law requires that the same percentage cut be levied on individual program, projects, and activities (PPAs). For investment programs (procurement and RDT&E), a PPA is defined as an individual program (or program element) as identified in justification materials submitted to Congress. For O&M activities, Congress has defined a PPA at the account level for each active-duty and reserve component, a much broader level. In addition, the President is allowed to exempt Military Personnel accounts entirely.⁹⁰

In the case of defense spending, sequester cuts are applied to "total budgetary resources," which include

• new Budget Authority (BA) for base funding in the current fiscal year,
• new BA for funding designated as Overseas Contingency Operations/Global War on Terror (OCO/GWOT),
• unobligated balances (funds not yet under contract) from prior years for both base and OCO funds, and
• exemptions for military personnel accounts excluded by the President.⁹¹

Predictions and Experience

Faced with the upcoming sequester, then-Deputy Secretary of Defense, Ashton Carter, issued guidance to the services and defense agencies in January 2013. This guidance required DOD components to begin implementing measures that will "help mitigate our budget execution risks" by

• fully protecting funding for wartime operations and Wounded Warrior programs;
• protecting "to the extent feasible" programs associated with the new strategy, readiness programs, and family programs;
• reducing the civilian workforce through a hiring freeze, releasing temporary hires, and considering a furlough with mission-related exceptions;
• protecting urgently required war-related investment and reviewing other investment to avoid penalties associated with cancellations; and
• curtailing lower priority programs such as base operations, facilities sustainment, travel and training.⁹²

This action helped DOD to begin adjusting to the likely cuts before OMB's order was issued on March 1, 2013, and implemented on March 27, 2013.⁹³

While the services followed DOD guidance, its spokesmen testified to dire effects. The Air Force predicted that one-third of its fighter and bomber force would be grounded, depot maintenance backlogs would grow, and contract plans for weapon systems would be disrupted. The Army cited drastic personnel cuts, and cancelled training exercises. DOD Comptroller Robert Hale stated that effects on readiness would be devastating.⁹⁴

A year later, in its report on the effects of sequestration, GAO concluded that DOD's guidance to the services focused cuts on lower priority areas to limit readiness impacts, and that most of DOD's actions made short-term effects. For example, GAO found that

• the Army curtailed training for units not scheduled to deploy;
• the Air Force temporarily stopped training operations for combat forces but then resumed in July 2013;
• depot maintenance was deferred by the services;
• installations deferred facility upgrades and delayed renewing contracts;
• the services reduced and delayed weapon system and RDT&E contracts; and
• civilians were furloughed for six days rather than the 22 days originally expected.⁹⁵

Overall, GAO concluded that

Generally, DOD's approach to sequestration was a short-term response focused on addressing the immediate funding reductions for fiscal year 2013. DOD was able to reduce spending levels for the remainder of fiscal year 2013 without making permanent changes, such as adjusting the size of its forces or canceling weapon systems programs.⁹⁶

Flexibility Available to DOD to Mitigate Sequestration

DOD had more flexibility than might be apparent in implementing sequester cuts because it could

• draw on both new BA and unobligated BA from prior years;
• tap war funding as well as its base budget;
• exempt military personnel;
• allocate cuts to O&M across an entire account; and
• redirect funds to areas harmed by sequester through reprogramming.

In addition, the sequester was applied to the $527.2 billion appropriated for DOD, which was $2 billion above the request. The sequester amount also turned out to be lower than originally because ATRA reduced the amount from about $53 billion to $41 billion. That amount was further reduced by $3.7 billion to $37.2 billion because of a provision in budgetary law that permits "credits" in those cases when final appropriations are below the post-sequester amount in the sequestration order.⁹⁷

At the same time, the FY2013 sequester was difficult to implement because the sequester cut of $37.2 billion required a 7.1% average cut to total budgetary resources.⁹⁸ In addition, the sequester order was issued on March 1, 2013, halfway through the fiscal year when a continuing resolution was still in effect, increasing uncertainty.

DOD had more flexibility because it could draw on three sources of funds: unobligated balances from prior years ($62.2 billion), new BA for the base budget ($392.4 billion in base budget funding excluding military personnel accounts); and funds designated as Overseas Contingency Operations ($73.0).⁹⁹ Sequester cuts were taken from all three sources for each individual procurement or RDT&E program and each O&M account, with individual cuts targeted to areas where funding was less needed.

Table 5. Implementation of DOD's FY2013 Sequester

(in billions of dollars of budget authority and %)

Category

FY2013 New BA^a Prior Year Unobligated Balances^b Total^b

Available Resources

Base

$392

.4

$56

.0

$448

.4

OCO

$73

.0

$6

.2

$79

.2

Total

$465

.4

$62

.2

$527

.6

Sequester Cuts

Base

-$26

.2

-$5

.8

-$32

.0

OCO

-$4

.8

-$0

.4

-$5

.3

Total

-$31

.0

-$6

.2

-$37

.2

% Sequester Cut

Base

-6

.7%

-10

.3%

-7

.1%

OCO

-6

.6%

-7

.0%

-6

.7%

Total

-6

.7%

-10

.0%

-7

.1%

Source: CRS analysis of table provided by Office of the Secretary of Defense, Comptroller, showing allocation of sequester reductions by account, by base and OCO, and by new BA and unobligated balances, November 24, 2014.

Notes:

a. New BA or Budget Authority refers to funds appropriated by Congress for the upcoming fiscal year. b. Unobligated balances are BA appropriated in previous years that has not yet been obligated, i.e., put on contract. DOD discriminated in how much it drew from each source. To reach the sequester amounts, DOD took a 10% cut to unobligated balances compared to a 6.7% cut to new BA appropriated in FY2013. This enabled DOD to protect new BA that would be available for a longer period of time than old BA appropriated in prior years. DOD often reprograms unobligated balances for new requirements when those funds are close to the end of their life and may lapse and be returned to the Treasury (Table 5). Somewhat surprisingly, in light of guidance to protect funding related to combat operations, DOD cut its OCO-designated accounts by the same percentage as its base funding—by 6.7% (Table 5). ). It is not unusual for a certain amount of war funding to lapse.99 (...continued) to be obligated for two, three, and five years respectively; in other words, contracts can be written for goods or services over that period of years, often called the “life” of the funds. 99 See CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by Amy Belasco. Congressional Research Service 35 Defense Spending and the Budget Control Act Limits 100 The decision to take larger amounts from unobligated balances helped shield new BA for procurement, which was cut by 3.0%. The benefit to RDT&E account was less, presumably because the pool of unobligated balances was smaller. O&M accounts, available only for one year, could not be shielded in this fashion. And while military personnel accounts were protected, this increased cuts to other spending. New BA for Military Construction and Family Housing accounts were not protected, and cut by 16% (Table 6Table 6). Overall, new BA shown in Table 5 was cut by 4.7% compared to an overall cut of 7.1% to total defense budgetary resources. Table 6. Sequester Cuts by Type of Spending (in billions of dollars of budget authority and %) FY2013 Base Budget Request Seq. Cut to new FY2013 BA Seq. Cut in % vs. Request Military Personnel $135.1 $0 0.0% Operation and Maintenance $208.8 -$14.8 -7.1% Procurement $98.8 -$3.0 -3.0% RDT&E $69.4 -$5.4 -7.8% Revolving Funds and Other $2.1 $0.1 4.7% Military Construction $9.6 -$1.5 -16.0% Family Housing $1.7 -$0.1 -7.5% $525.4 -$24.5 -4.7% Title DOD Total Source: CRS calculations based on data provided by DOD. DOD’s Plan for Complying with BCA Limits How might DOD meet BCA reductions to their current plan? According to DOD, BCA reductions over the past four years were met by • efficiencies achieved through “more disciplined use of defense dollars” (better contracting and reducing overhead), • changes in force structure (e.g., reducing the size of the Army to reflect a reduced likelihood of long ground wars), • slowing modernization, • restraining military pay raises, and • modification of health care benefits.100 100 Department of Defense, Defense Budget Priorities and Choices, passim, January 2012; http://www.defense.gov/ news/Defense_Budget_Priorities.pdf. Congressional Research Service 36 Defense Spending and the Budget Control Act Limits In April 2014, DOD submitted a report that described the programs and activities that DOD would cut to meet the $115 billion decrease from the FY2015 request to comply with BCA caps from FY2015-FY2019.101 Based on this plan, DOD concluded that if sequestration-level cuts [BCA spending limits] persist, our forces will assume substantial additional risks in certain missions and will continue to face significant readiness and modernization challenges. These impacts would leave our military unbalanced and eventually too small to meet the needs of our strategy fully.102 DOD’s report anticipates enactment of its FY2015 request, which complied with BCA caps.103 To meet the spending limits, DOD programs and activities would have to be cut by 4.3% or $115 billion from FY2016 through FY2019. DOD did not address FY2020 and FY2021, the last two years of the BCA limits because they were outside their planning window. 104 As is often the case with changes to DOD spending levels, DOD’s plan generally distributes BCA cuts in proportion to the each service’s share of the budget: • 23% for the Army, • 30% for the Navy and Marine Corps, • 31% for the Air Force, and • 16% for defense-wide agencies. Over the five-year period, each service would be cut close to the overall average of 4.3%, with

Title

FY2013 Base Budget Request

Seq. Cut to new FY2013 BA

Seq. Cut in % vs. Request

Military Personnel

$135

.1

$0

0

.0%

Operation and Maintenance

$208

.8

-$14

.8

-7

.1%

Procurement

$98

.8

-$3

.0

-3

.0%

RDT&E

$69

.4

-$5

.4

-7

.8%

Revolving Funds and Other

$2

.1

$0

.1

4

.7%

Military Construction

$9

.6

-$1

.5

-16

.0%

Family Housing

$1

.7

-$0

.1

-7

.5%

DOD Total

$525

.4

-$24

.5

-4

.7%

Source: CRS calculations based on data provided by DOD.

DOD's Plan for Complying with BCA Limits

How might DOD meet BCA reductions to their current plan? According to DOD, BCA reductions over the past four years were met by

• efficiencies achieved through "more disciplined use of defense dollars" (better contracting and reducing overhead),
• changes in force structure (e.g., reducing the size of the Army to reflect a reduced likelihood of long ground wars),
• slowing modernization,
• restraining military pay raises, and
• modification of health care benefits.¹⁰¹

In April 2014, DOD submitted a report that described the programs and activities that DOD would cut to meet the $115 billion decrease from the FY2015 request to comply with BCA caps from FY2015-FY2019.¹⁰² Based on this plan, DOD concluded that if

sequestration-level cuts [BCA spending limits] persist, our forces will assume substantial additional risks in certain missions and will continue to face significant readiness and modernization challenges. These impacts would leave our military unbalanced and eventually too small to meet the needs of our strategy fully.¹⁰³

DOD's report anticipates enactment of its FY2015 request, which complied with BCA caps.¹⁰⁴ To meet the spending limits, DOD programs and activities would have to be cut by 4.3% or $115 billion from FY2016 through FY2019. DOD did not address FY2020 and FY2021, the last two years of the BCA limits because they were outside their planning window.¹⁰⁵

As is often the case with changes to DOD spending levels, DOD's plan generally distributes BCA cuts in proportion to the each service's share of the budget:

• 23% for the Army,
• 30% for the Navy and Marine Corps,
• 31% for the Air Force, and
• 16% for defense-wide agencies.

Over the five-year period, each service would be cut close to the overall average of 4.3%, with slightly greater cuts to the Air Force and slightly lower cuts to Defense-wide (Table 7). ). Some observers might expect different shares in light of the new strategy deemphasizing ground wars and projecting a greater role of the Navy in the pivot to Asia. Others might expect a greater emphasis on cutting defense agencies, which are perceived as performing primarily “overhead” "overhead" functions that would receive lower priority in tight times. DOD might argue that it had already taken efficiency cuts that could affect defense agencies, as well as proposed health care savings funded in the defense-wide accounts, some of which Congress adopted. 101 This period covers DOD’s Future Years Defense Program (FYDP) as of the FY2015 budget request. Department of Defense, “Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request,” p. 1-2, April 2014; hereinafter, DOD, Estimated Impacts; http://www.defense.gov/pubs/ 2014_Estimated_Impacts_of_Sequestration-Level_Funding_April.pdf; hereinafter, DOD, Estimated Impacts, April 2014. 103 This does not include additional funds requested for DOD separately in the Opportunity, Growth, and Security Initiative account. 104 Ibid. p. 2-1; the FY2015 request complies with BCA caps if the additional $26 billion requested for DOD in a separate Opportunity, Growth, and Security Initiative (OGSI) is excluded: Congress did not address the OGSI request. 102 Congressional Research Service 37 Defense Spending and the Budget Control Act Limits funded in the defense-wide accounts, some of which Congress adopted. Table 7. DOD's Savings Plan for FY2015-FY2019 By Service (in billions of dollars and %) FY2015-FY2019 Service DOD Plan Total Total Caps Cuts % Cut Service Shares of From DOD Plan FY15-FY19 Total BCA Cuts Army $637.4 -$26.4 -4.1% 24% 23% Navy $798.0 -$34.6 -4.3% 30% 30% Air Force $760.6 -$36.2 -4.8% 28% 31% Defense-wide agencies $488.9 -$18.0 -3.7% 18% 16% -$115.0 -4.3% 100% 100.0% TOTAL $2,685 Source: Department of Defense, “Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request,” April 2014;

Service

FY2015-FY2019

% Cut

Service Shares of

 

DOD Plan Total

Total Caps Cuts

From DOD Plan

FY15-FY19 Total

BCA Cuts

Army

$637

.4

-$26

.4

-4

.1%

24%

23%

Navy

$798

.0

-$34

.6

-4

.3%

30%

30%

Air Force

$760

.6

-$36

.2

-4

.8%

28%

31%

Defense-wide agencies

$488

.9

-$18

.0

-3

.7%

18%

16%

TOTAL

$2,685

-$115

.0

-4

.3%

100%

100

.0%

Source: Department of Defense, "Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request," April 2014; http://www.defense.gov/pubs/ 2014_Estimated_Impacts_of_Sequestration-Level_Funding_April.pdf. . Notes: CRS analysis of data in tables on p. 2-1 in report above. DOD assumes no cuts to its FY2015 request. DOD’ DOD's Plan Emphasizes Modernization Cuts, Protects Support Activities Activities Unlike the proportional shares in cuts for each service shares, DOD’'s plan calls for cuts to investment accounts (Procurement, RDT&E, and Military Construction/Family Housing) that fund modernization that are twice their share of the budget. At the same time, Personnel and Support activities (Military Personnel and Operation & Maintenance), which comprise two-thirds of the budget, would take one-third of the cuts (Figure 8).¹⁰⁶ ).105 105 DOD, Estimated Impacts. Congressional Research Service 38 Defense Spending and the Budget Control Act Limits Figure 8. DOD Budget and BCA Cuts: FY2015-F2019 (as % of total) Sources: Department of Defense, “ Sources: Department of Defense, "Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request,”" April 2014; http://www.defense.gov/pubs/ 2014_Estimated_Impacts_of_Sequestration-Level_Funding_April.pdf. . While the FY2015-FY2019 total of $928 billion for investment would be cut by 8%, the $1.8 trillion in Personnel, Operations, and Support would be cut by 2% (Table 8). ). Table 8. DOD’'s BCA Savings, FY2015-FY2019, Modernization vs. Personnel Operations, and Support (in billions of dollars and %) Total FY2015-FY2019 Appropriation Title DOD Plan Total Total Caps Cuts Investment $928 -$72.4 -8% Procurement $550 -$48.3 -9% RDT&E $337 -$17.9 -5% $42 -$6.2 -15% $1,756 -$42.8 -2% $678 -$2.7 0% O&M/Family Housing $1,078 -$40.1 -4% TOTAL $2,685 -$115.2 -4% Mil.Con./Family Housing Personnel, Operations, & Support Mil. Personnela % Cut Sources: Department of Defense, “Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request,” April 2014;

 

Total FY2015-FY2019

Appropriation Title

DOD Plan Total

Total Caps Cuts

% Cut

Investment

$928

-$72

.4

-8%

Procurement

$550

-$48

.3

-9%

RDT&E

$337

-$17

.9

-5%

Mil.Con./Family Housing

$42

-$6

.2

-15%

Personnel, Operations, & Support

$1,756

-$42

.8

-2%

Mil. Personnel^a

$678

-$2

.7

0%

O&M/Family Housing

$1,078

-$40

.1

-4%

TOTAL

$2,685

-$115

.2

-4%

Sources: Department of Defense, "Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request," April 2014; http://www.defense.gov/pubs/ 2014_Estimated_Impacts_of_Sequestration-Level_Funding_April.pdf. . Notes: CRS analysis of data in table on p. 2-2 of report above. DOD assumes no cuts to its FY2015 request. Congressional Research Service 39 Defense Spending and the Budget Control Act Limits DOD’ DOD's emphasis on meeting BCA caps primarily by slowing modernization is only one of a number of ways to achieve the BCA savings necessary to avoid sequesters. In a March 2013 report, the Congressional Budget Office outlined four different options to achieve BCA savings, each with different emphases: • Preserve force structure and take equal cuts from acquisition (modernization) and operations (general operations and civilian pay); • Split cuts between force structure, phased-in, and acquisition and operations; • Cut primarily force structure; or • Cut primarily force structure but shift timing of BCA caps.106 107 Other scenarios—with a different mix of reductions—would, of course, be possible, with Congress ultimately making the decisions each year about where and how to change defense programs and activities to comply fully or partly with current BCA spending limits. Potential Changes in Army Force Structure The main force structure cut due to BCA limits in DOD’'s report would be a decrease in the number of active-duty Army combat brigades from the 29 currently planned for FY2016 to 24 in FY2019. This would entail a decrease of 30,000 in the number of active-duty military personnel from 450,000 in FY2017 to 420,000 in FY2019. According to DOD’'s report, this reduction would be be reviewed further in subsequent budget cycles. If Congress acts to support the out year PB15 [President’' Budget for FY2015] topline, the Department will maintain the Army at a force of 970-980K (440-450K Active, 335K National Guard and 195K Reserve).107 108 The report does not identify the associated savings, which could be roughly $6 billion once fully implemented.108 DOD’109 DOD's FY2016 request does not comply with BCA caps or include this change. Army leadership has strongly objected to cutting active-duty personnel to 420,000 stating that 450,000 active duty is the “"smallest acceptable force to implement the defense strategy”" and that a 420,000 soldier active force provides “"insufficient capacity; cannot implement defense strategy.”109"¹¹⁰ Despite the high priority given by the Army to retaining its current force structure plan, DOD’s report says additional Army military personnel would be cut under BCA limits. 106 CBO Approaches for Scaling Back the Defense Department’s Budget Plans, Summary Figure 2 and p. 3-p.6, March 18, 2013; http://www.cbo.gov/sites/default/files/cbofiles/attachments/43997_Defense_Budget.pdf. 107 See DOD, Estimated Impacts, p. 3-1, April 2014. The report states “Army force structure is shown in Figure 3-1. There would be no changes from PB15, as submitted, to BBA/BCA [under sequester cap limits].” 108 This is a rough estimate relying on CBO factors. 109 See Figure 3-1 in Department of Defense, “Estimated Impacts,” p. 1-2, April 2014. For Army position, see Army Briefing, “Army Force Mix: Least Risk, Best Value,” January 6, 2014, p. 5 as quoted in CRS Report R42493, Army Drawdown and Restructuring: Background and Issues for Congress, by Andrew Feickert. Congressional Research Service 40 Defense Spending and the Budget Control Act Limits DOD’'s report says additional Army military personnel would be cut under BCA limits. DOD's Approach to Modernization Cuts Each of the Service Chiefs voiced considerable concerns about the effects of BCA funding limits on modernization, including both the adequacy of total investment spending and the effects on individual weapons systems.110 DOD’111 DOD's plan appears to give greater priority to shielding RDT&E, particularly science and technology, than procurement from reductions. Cuts to procurement would be 9% compared to 4% for RDT&E. Shares of cuts and the investment total were not proportional. While RDT&E programs took 16% of the cuts, it made up 30% of investment funds. Procurement accounted for 84% of the cuts and made up 70% of the investment total. Within RDT&E, science and technology, DOD protects its basic research programs by levying smaller cuts (-3%) than in programs dedicated to the development of specific weapons (-6%) (Table 9).¹¹² ).111 Among procurement programs, combat systems, munitions, and communications and electronics to arm and support those systems would be cut by 8% to 9% whereas support to weapon systems—maintenance, training and support, modifications for upgrades and spare and repair parts—would be cut by 6%. An undefined “other”"other" account would be cut more heavily, by 17% or almost twice its overall share of investment programs (Table 9). ). Table 9. DOD's Plan for Achieving BCA Modernization Savings, FY2015-FY2019: RDT&E and Procurement (in billions of dollars and %) FY15-FY19 Plan $ as of FY15PB FY15-FY19 $ Cuts % Cut Shares of Plan Cut Shares RDT&E Total $264.1 -$10.8 -4% 30% 16% Systems Developmenta $203.6 -$9.2 -5% 23% 14% Technologyb $60.5 -$1.6 -3% 7% 2% Procurement Total $622.6 -$55.4 -9% 70% 84% $218.0 -$17.8 -8% 25% 27% $94.6 -$8.5 -9% 11% 13% Maintenance, Training & Support, Modifications and Spares and Repair Partse $162.3 -$9.2 -6% 18% 14% Nondefense and Other $147.7 -$19.9 17% 30% TOTAL $886.7 -$66.2 100% 100% INVESTMENT CATEGORY Science & Combat Systemsc Munitions, Communications & Electronicsd -13% -7% Sources:

INVESTMENT CATEGORY

FY15-FY19 Plan $ as of FY15PB

FY15-FY19 $ Cuts

% Cut

Shares of Plan

Cut Shares

RDT&E Total

$264

.1

-$10

.8

-4%

30%

16%

Systems Development^a

$203

.6

-$9

.2

-5%

23%

14%

Science & Technology^b

$60

.5

-$1

.6

-3%

7%

2%

Procurement Total

$622

.6

-$55

.4

-9%

70%

84%

Combat Systems^c

$218

.0

-$17

.8

-8%

25%

27%

Munitions, Communications & Electronics^d

$94

.6

-$8

.5

-9%

11%

13%

Maintenance, Training & Support, Modifications and Spares and Repair Parts^e

$162

.3

-$9

.2

-6%

18%

14%

Nondefense and Other

$147

.7

-$19

.9

-13%

17%

30%

TOTAL

$886

.7

-$66

.2

-7%

100%

100%

Sources: CRS analysis based on data in Figures 4-1 through 4-3 in Department of Defense, Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request, April 2014; http://www.defense.gov/pubs/2014_Estimated_Impacts_of_Sequestration-Level_Funding_April.pdf. 110 Senate Armed Services Committee, Transcript “The Impacts of Sequestration on National Defense,” January 28, 2015. 111 DOD Estimated Impacts, p. 4-2, April 2014. Congressional Research Service 41 Defense Spending and the Budget Control Act Limits . Notes: DOD assumes no cuts to its FY2015 request. a. a. Systems development is RDT&E related to specific weapon systems. b. b. Science & Technology is basic research not associated with a specific weapon system. c. “ c. "Combat systems”" includes procurement of aircraft, warships, tracked vehicles and special operations forces equipment; includes some minor procurement. d. d. These categories are part of "minor procurement," and sustain weapon systems. e. e. These categories are part of "minor procurement," and support weapon systems. DOD Individual Weapon System Cuts under BCA Limits For individual weapon systems, DOD’'s cuts range widely in terms of quantity and percentage cuts. Some programs, including the Army’'s Apache helicopter remanufacture, the Marine Corps’ ' CH-53K helicopter, the Navy’'s DDG-51, and the Air Force’'s MQ-9 armed drone are cut by 25% or more. Other programs, like the Marine Corps’' amphibious combat vehicle, the Navy’'s TAO oiler, and the Air Force’'s combat rescue helicopter, would be delayed. A few would be cancelled—one brigade set of Stryker armored vehicles for the Army, the adaptive engine for the Air Force, and an additional ground-based sensor for missile defense (Table 10). ). Table 10. DOD's Cuts to Individual Weapon Systems under BCA Caps: FY2015FY2019 FY2015-FY2019 (in billions of dollars and % cut) SERVICE

SERVICE

FY15-FY19 BCA Plan: Quantity and % Cut FY15-FY19 BCA Plan: Billions of $ and % Cut Total Qty Quantity Cut % Cut Total $ $ Cut in Billions % Cut Blackhawk helicopter 410 -61 -15% $7.2 -$1.2 -17% Apache remanufacture 259 -67 -26% $5.6 -$1.2 -22% $1.3 -$0.8 -60% ARMY Stryker armored vehicles Light utility helicopter Not provided One brigade set Not provided 1,005 -45 -4% $0.8 -$0.4 -48% 13 -7 -54% $4.4 -$1.0 -23% MARINE CORPS CH-53K helicopter Amphibious combat vehicle Beginning development Beginning development Limited to scoping $1.1 -$0.5 -48% V-22 Underfunded No quantity cut Underfunded $5.3 -$0.3 -6% H-1 helicopter 133 -11 -8% $4.6 -$0.3 -7% [44] [-8] [-18%] [$69.1] [-$8.2] [-12%] DDG-51 10 -3 -30% $16.0 -$3.2 -20% VA class submarine 10 -1 -10% $27.9 -$1.2 -4% NAVY/MARINE CORPS All Ships Including Congressional Research Service 42 Defense Spending and the Budget Control Act Limits SERVICE FY15-FY19 BCA Plan: Quantity and % Cut Total Qty Carrier replacement program (CVN) P-8A aircraft 0 56 TAO fleet oiler 0 FY15-FY19 BCA Plan: Billions of $ and % Cut Quantity Cut % Cut Total $ Delays delivery of CVN 79; $2B in cost after FY2019 0% $11.2 -$1.0 -9% -11% $12.2 -$1.0 -8% 0% $1.9 -$1.8 -97% -7% $14.8 -$1.1 -8% 0 $1.1 -$1.0 -88% -6 Delays construction to FY2016 $ Cut in Billions % Cut AIR FORCE KC-45 tanker 69 Combat rescue helicopter 0 -5 Delay start MQ-9 armed drone 83 -36 -43% $2.1 -$0.9 -44% MC-130J aircraft 35 -10 -29% $3.8 -$1.2 -31% Global Positioning System III 11 -1 -9% $3.9 -$0.4 -10% 0 Cancelled 100% $1.5 -$1.3 -91% 3,038 -531 -17% $3.0 -$1.0 -34% F-35A (AF) fighter aircraft 238 -15 -6% $27.9 -$1.5 -5% F-35B (MC) fighter aircraft 69 0 0% $11.0 $0.0 0% F-35C (N) fighter aircraft 36 -2 -6% $6.4 -$0.2 -4% $4.4 -$0.6 -13% Adaptive engine Adv. med. range air-to-air missile (AIM120D) JOINT PROGRAMS Jt. Light tactical veh. (MC and Army) Jt. Direct attack munition (JDAM) Slows Humvee replacement -1,000 Not provided 41,358 -17,095 -41% $1.2 -$0.3 -27% Interceptor follow-on 0 Cancelled -100% $4.4 -$0.6 -15% Add'l ground-based sensor 0 Cancelled -100% $2.1 -$0.6 -27% MISSILE DEFENSE TOTAL Weapon System Cuts Not applicable Not applicable Not applicable $187.0 -$24.8 -13% Total Modernization Decreases Not applicable Not applicable Not applicable $886.7 -$66.2 -7% Sources:

 

Total Qty

Quantity Cut

% Cut

Total $

$ Cut in Billions

% Cut

ARMY

 

 

 

 

 

 

Blackhawk helicopter

410

-61

-15%

$7

.2

-$1

.2

-17%

Apache remanufacture

259

-67

-26%

$5

.6

-$1

.2

-22%

Stryker armored vehicles

Not provided

One brigade set

Not provided

$1

.3

-$0

.8

-60%

Light utility helicopter

1,005

-45

-4%

$0

.8

-$0

.4

-48%

MARINE CORPS

 

 

 

CH-53K helicopter

13

-7

-54%

$4

.4

-$1

.0

-23%

Amphibious combat vehicle

Beginning development

Beginning development

Limited to scoping

$1

.1

-$0

.5

-48%

V-22

Underfunded

No quantity cut

Underfunded

$5

.3

-$0

.3

-6%

H-1 helicopter

133

-11

-8%

$4

.6

-$0

.3

-7%

NAVY/MARINE CORPS

All Ships Including

[44]

[-8]

[-18%]

[$69

.1]

[-$8

.2]

[-12%]

DDG-51

10

-3

-30%

$16

.0

-$3

.2

-20%

VA class submarine

10

-1

-10%

$27

.9

-$1

.2

-4%

Carrier replacement program (CVN)

0

Delays delivery of CVN 79; $2B in cost after FY2019

0%

$11

.2

-$1

.0

-9%

P-8A aircraft

56

-6

-11%

$12

.2

-$1

.0

-8%

TAO fleet oiler

0

Delays construction to FY2016

0%

$1

.9

-$1

.8

-97%

AIR FORCE

KC-45 tanker

69

-5

-7%

$14

.8

-$1

.1

-8%

Combat rescue helicopter

0

Delay start

0

$1

.1

-$1

.0

-88%

MQ-9 armed drone

83

-36

-43%

$2

.1

-$0

.9

-44%

MC-130J aircraft

35

-10

-29%

$3

.8

-$1

.2

-31%

Global Positioning System III

11

-1

-9%

$3

.9

-$0

.4

-10%

Adaptive engine

0

Cancelled

100%

$1

.5

-$1

.3

-91%

Adv. med. range air-to-air missile (AIM120D)

3,038

-531

-17%

$3

.0

-$1

.0

-34%

JOINT PROGRAMS

F-35A (AF) fighter aircraft

238

-15

-6%

$27

.9

-$1

.5

-5%

F-35B (MC) fighter aircraft

69

0

0%

$11

.0

$0

.0

0%

F-35C (N) fighter aircraft

36

-2

-6%

$6

.4

-$0

.2

-4%

Jt. Light tactical veh. (MC and Army)

Slows Humvee replacement

-1,000

Not provided

$4

.4

-$0

.6

-13%

Jt. Direct attack munition (JDAM)

41,358

-17,095

-41%

$1

.2

-$0

.3

-27%

MISSILE DEFENSE

Interceptor follow-on

0

Cancelled

-100%

$4

.4

-$0

.6

-15%

Add'l ground-based sensor

0

Cancelled

-100%

$2

.1

-$0

.6

-27%

TOTAL Weapon System Cuts

Not applicable

Not applicable

Not applicable

$187

.0

-$24

.8

-13%

Total Modernization Decreases

Not applicable

Not applicable

Not applicable

$886

.7

-$66

.2

-7%

Sources: CRS analysis based on data in Figures 5-1 through 5-31 in Department of Defense, Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request, April 2014; http://www.defense.gov/pubs/2014_Estimated_Impacts_of_Sequestration-Level_Funding_April.pdf. . Notes: DOD assumes no cuts to its FY2015 request. DOD’ DOD's report describes the individual cuts and potential impacts but does not explain why some programs are cut more heavily than others, why particular programs are selected, or whether some programs are experiencing technical or scheduling difficulties. Congressional Research Service 43 Defense Spending and the Budget Control Act Limits Operations and Maintenance: Readiness vs. Other Support Of the $1.1 trillion Operations and Maintenance (O&M) spending for FY2015-FY2020, DOD categorizes • categorizes22% for service readiness activities, including unit training and depot maintenance; • 5% for upgrades of facilities on bases; • 10% for the running of installations; and • 62% for “"Other Defense O&M,”" including training and recruiting, schoolhouse training, pre-positioning of war stocks, communications, transportation, environmental restoration, and administration (Table 11). ). In testimony on the FY2016 budget request, each of the Service Chiefs emphasized their concerns about how BCA caps would affect readiness. Army Chief of Staff, Raymond Odierno said that “ "sustainable readiness will remain out of reach with our individual and unit readiness rapidly deteriorating between 2016 and 2020.112 113 Navy Chief of Naval Operations, Admiral Jonathan Greenert said that a return to BCA limits in FY2016 would “"further reduce readiness of contingency response forces—the ones that are only at one-third level.”113"¹¹⁴ Air Force Chief of Staff General Mark A. Welsh III stated that recent recoveries in the readiness of units to 50% would be reversed and “"squadrons would be grounded, readiness rates would plummet, red and green flag training exercises would have to be canceled.”114 "¹¹⁵ Despite these concerns, DOD’'s proposed plan to comply with BCA limits would cut service readiness activities more than other O&M activities. While overall O&M would be cut by $40.1 billion or 4%, service readiness activities would be cut by 7%, shouldering 40% of the cut, almost double their 22% share of total O&M (Table 11). ). Service readiness activities include unit training and depot maintenance of weapon systems. After the past 13 years of war when the services focused training on units scheduled to deploy and emphasized training for small-scale operations for counterinsurgency operations, the services are very gradually increasing “"full-spectrum”" training that would prepare units for larger conflicts. Sequester cuts, they argue, would delay plans to transition to this training in several years. While cuts to depot maintenance, another high-profile part of O&M, could be delayed when equipment is refurbished and returned to units, this would be unlikely to affect the ability of units to train because the size of the equipment inventory takes the time for repair into account. In addition, the inventory is likely to be sufficient in light of the buildup of equipment for the wars and recent decreases in military personnel levels. Often tapped in tight times, facilities, sustainment, restoration, and modernization funds that are used to upgrade base facilities would be cut by 14% cuts, more than three times its share of total 112 Ibid, pp. 5-6. Ibid, p. 8. 114 Ibid, p. 10. 113 Congressional Research Service 44 Defense Spending and the Budget Control Act Limits O&M. Base installations support (e.g., paying electricity and water bills on bases), on the other hand, often considered to be “"fixed costs,”" would be cut by 4%. Table 11. DOD's Plan for Achieving BCA Operation & Maintenance Savings, FY2015FY2019FY2015-FY2019 by Category (in billions of dollars and %) Operation and Maintenance % Cut Total Caps Cuts From DOD Plan DOD Plan Total Category Service readiness Facilities, sustainment, restoration, and modernization Installation services Nondefense and other defense Billions of $: FY2015FY2019 O&Ma TOTAL Shares of FY15FY19 Total BCA Cuts $239.9 -$16.0 -7% 22% 40% $49.4 -$7.0 -14% 5% 17% $111.6 -$4.8 -4% 10% 12% $667.6 -$12.3 -2% 62% 31% $1,068.5 -$40.1 -4% 100% 100% Source: Figures 5-1 through 5-15 in Department of Defense, “Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request,” April 2014 in Notes: CRS analysis of DOD report above. DOD assumes no cuts to its FY2015 request. a. Includes training and recruiting, schoolhouse training, prepositioning of war stocks, communications, transportation, environmental restoration, and administration. The reason for the small 2% cut to “other” O&M activities, which makes up 60% of O&M, is unclear. Composed of training and recruiting, schoolhouse training, pre-positioning of war stocks, communications, transportation, environmental restoration, and administrative activities, taking reductions would require evaluating these “back office” activities that are often targeted for

(in billions of dollars and %)

Operation and Maintenance

Billions of $: FY2015-FY2019

% Cut

Shares of

Category

DOD Plan Total

Total Caps Cuts

From DOD Plan

FY15-FY19 Total

BCA Cuts

Service readiness

$239

.9

-$16.0

-7%

22%

40%

Facilities, sustainment, restoration, and modernization

$49

.4

-$7.0

-14%

5%

17%

Installation services

$111

.6

-$4.8

-4%

10%

12%

Nondefense and other defense O&M^a

$667

.6

-$12.3

-2%

62%

31%

TOTAL

$1,068

.5

-$40.1

-4%

100%

100%

Source: Figures 5-1 through 5-15 in Department of Defense, "Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request," April 2014 in

Notes: CRS analysis of DOD report above. DOD assumes no cuts to its FY2015 request.

a. Includes training and recruiting, schoolhouse training, prepositioning of war stocks, communications, transportation, environmental restoration, and administration. The reason for the small 2% cut to "other" O&M activities, which makes up 60% of O&M, is unclear. Composed of training and recruiting, schoolhouse training, pre-positioning of war stocks, communications, transportation, environmental restoration, and administrative activities, taking reductions would require evaluating these "back office" activities that are often targeted for savings by outside groups (see Appendix D). ). Uncertainties Facing DOD At first glance, it may be difficult to understand why DOD’'s concern about the BCA caps has grown just when those limits are about to rise each year by enough to cover inflation. However, in addition to BCA spending constraints, DOD is also aware of the uncertainties in its future budget projections. In addition to the persistent tendency for cost growth in weapon systems, military personnel compensation has grown rapidly in the past decade. O&M costs and support activities also show unexplained but long-term tendencies to grow faster than inflation. DOD is also worried about congressional reluctance to accept its proposals for health care and other compensation reforms because savings from these changes are already embedded in budget projections. Congressional Research Service 45 Defense Spending and the Budget Control Act Limits CBO Projections of the Cost of DOD’'s Plan For many years, the Congressional Budget Office has projected the cost of DOD’'s Future Years Defense Program (FYDP), as well as for longer periods, in order to assess whether DOD has budgeted sufficient funds to carry out its program. CBO uses DOD programmatic data about weapon system acquisition, various pay and economic factors, and historical experience to project future costs. It also excludes savings from changes proposed by DOD, such as health care reforms that require Congressional approval. For the 2014 evaluation, CBO compares its own projection with both DOD’'s FYDP plan and BCA spending limits.115 116 Under these assumptions and starting from DOD’'s FY2015 request, CBO projects that the cost of carrying out DOD’'s plan for FY2015-FY2021 would exceed DOD estimates by $215 billion or about 5.5%. Compared to BCA caps, CBO projects a larger savings gap of $332 billion or 8.5%, well above the 5.1% gap from DOD planning figures. At the same time, CBO’'s latest projection is half as large as projected for the FY2014 President’'s budget request.116 CBO’117 CBO's projections are higher than DOD for several reasons including • higher annual increases in military pay and civilian pay than incorporated in DOD’ DOD's plans (ECI rather than 1%), • exclusion of savings from DOD’'s cost-sharing proposals that Congress has previously rejected, • greater growth in health costs, • more O&M growth after FY2019, • higher projected cost growth for acquisition programs—roughly double that incorporated by DOD—based on historical experience, and • potential “"bow waves”" because DOD has not adjusted its plans in response to budget constraints.117 118Rising Cost per Troop In addition to CBO’'s higher projections of the cost of DOD plans, DOD is aware of the risks posed by long-term increases in per-troop costs. Since FY1980, the cost per troop—for all expenses ranging from pay to procurement—has almostmore than doubled in real terms from $200175,000 per troop in FY1980 to $390410,000 per troop in FY2016 request (Figure 9). This growth reflects • increases in the early 1980s during the peacetime buildup during former President Reagan’'s tenure, • further growth in the 1990s as DOD had difficulty adjusting its overhead and infrastructure costs to the one-third decrease in the number of military personnel in response to the end of the Cold War in 1990, 115 CBO, Long-Term Implications of the 2015 Future Years Defense Program, p. 1-p. 6, November 2014; http://www.cbo.gov/sites/default/files/cbofiles/attachments/49483-FDYP.pdf. 116 Ibid., p. 3. 117 Ibid., p. 9, p. 28, Figure 1-1, p. 29, and Figure 3-2. Congressional Research Service 46 Defense Spending and the Budget Control Act Limits • in response to the end of the Cold War in 1990, continued increases in per-troop costs despite five rounds of base closures, • higher compensation benefits and costs for military personnel after FY2000 particularly for health care, and • sharp increases in procurement and RDT&E in the past decade (Figure 9 and Figure 10).

). Figure 9. Cost Per Troop, FY1980-FY2016 Request (in thousands of FY2016 dollars excluding war costs) Sources: Calculated by CRS using OMB, Table 5.1 and Table 10.1 in FY2016 Historical Tables; OMB, FY2016 FY2016 Historical Tables; ; https://www.whitehouse.gov/omb/budget/HistoricalsHistoricals; totals adjusted to exclude emergency and Overseas contingency Operations as shown in Table 2-1 and Table 7-5 in Department of Defense, Office of the Under Secretary of Defense (Comptroller), National Defense Budget Estimates for FY 2016, March 2015; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY16_Green_Book.pdf. . Notes: In this figure, the total for DOD’'s base budget is divided by estimated average strength for active-duty forces; this calculation treats costs for reservists as part of overall costs for active-duty because of their support role. Budget Authority is deflated by the chained GDP price index for Defense in OMB, Table 10.1, FY2016 Historical TablesFY2016 historical Tables, converted by CRS from FY2009 to FY2016 dollars. Since FY2000, the cost per troop has increased sharply for most of DOD’'s major types of expenses—military personnel, Operation & Maintenance, Procurement, RDT&E—with the exception of Military Construction/Family Housing (Figure 10). This growth reflects some of the same factors cited by CBO including: • annual increases for both military and civilian personnel above the rate of inflation and above the Economic Cost Index for labor costs, • a richer benefits package for military personnel, particularly in military health care with out-of-pocket costs for active-duty and retired military at one-fifth the average for civilians (e.g., low co-pays and a free Medigap policy in Tricare for Life), • largely unexplained increases in other O&M support costs, and Congressional Research Service 47 Defense Spending and the Budget Control Act Limits • large increases in the cost of major weapons systems due to ever more sophisticated technology, lower quantity buys, less competition, and fewer military personnel as support roles shift to contractors.118 119

Figure 10. Trends in Average Per Troop Cost by Type of Spending (in thousands of FY2016 dollars, excluding war costs) Sources: Calculated by CRS using OMB, Table 5.1 and Table 10.1 in FY2016 Historical Tables; OMB, FY2016 FY2016 Historical Tables; ; https://www.whitehouse.gov/omb/budget/HistoricalsHistoricals; totals adjusted to exclude emergency and Overseas contingency Operations as shown in Table 2-1 and Table 7-5 in Department of Defense, Office of the Under Secretary of Defense (Comptroller), National Defense Budget Estimates for FY 2016, March 2015; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY16_Green_Book.pdf. . Notes: In this figure, the total for DOD’'s base budget is divided by estimated average strength for active-duty forces; this calculation treats costs for reservists as part of overall costs for active-duty because of their support role. Budget Authority is deflated by chained GDP price index as shown in “Defense deflator” shown in OMB, Table 10.1, FY2016 historicalHistorical Tables, converted by CRS from FY2009 to FY2016 dollars. Figure 10 shows a flattening of this long-term trend in recent years; this may reflect congressional endorsement of DOD’'s requests to restrain military and civilians pay raises, reductions in procurement, and efficiency packages, all adopted in response to BCA caps. Congress is currently considering whether to adopt recommendations by the Military Compensation and Retirement Modernization Commission in its January 2015 report. The commission proposed major changes to DOD’'s current retirement system and health care plan as well as other quality-of-life programs.119 118 CBO, “Growth in DOD’s Budget from 2000 to 2014,” November 2014; http://www.cbo.gov/sites/default/files/ cbofiles/attachments/49764-MilitarySpending.pdf. 119 Military Compensation and Retirement Modernization Commission, Final Report, January 29, 2015; http://www.mcrmc.gov/public/docs/report/MCRMC-FinalReport-29JAN15-HI.pdf. Military Compensation and Retirement Modernization Commission, “Recommendations Overview;” http://www.mcrmc.gov/public/docs/report/ MCRMC-Recommendations-Overview-Public-Final.pdf. Congressional Research Service 48 Defense Spending and the Budget Control Act Limits well as other quality-of-life programs.¹²⁰ Other uncertainties include the effectiveness of DOD’'s planned efficiencies and whether DOD is willing to adjust its long-term weapons acquisition objectives to meet BCA caps, assuming those stay intact. Congressional Research Service 49 Defense Spending and the Budget Control Act Limits Appendix A. stay intact. How BCA Defense Spending Limits Are Set The original BCA (P.L. 112-25) set limits that would reduce discretionary defense spending by about $860 billion between FY2012 and FY2021 from CBO’'s current services baseline (reflecting steady-state spending with increases to offset inflation) in effect at that time.120 121 Compared to the Administration’'s FY2012 request, savings would be about $1.0 trillion, somewhat larger because the request included some real growth in defense spending beyond covering the effects of inflation. These savings would be achieved in two steps. First, about half of the savings were reflected in defense spending caps set in the law. The second $500 billion in defense savings was to be determined by a plan to be proposed by a bipartisan Joint Committee on Deficit Reduction (popularly known as the Super Committee) and voted on by Congress. If that committee failed to develop a plan within its deadline—as turned out to be the case—the BCA required that the initial defense caps in the law be revised and lowered by an additional $53.9 billion annually. The act established separate revised spending caps for defense and nondefense (known as a firewall or division between overall discretionary spending limits). This means that Congress must meet separate defense and nondefense annual cap each year to avoid sequestration. The American Taxpayer Relief Act (P.L. 112-240) lowered the amount to be taken from the initial statutory caps to $42.5 billion in FY2012 and FY2013. In FY2013, the BCA required that the sequester reduction be applied to the enacted level. Initially, the BCA caps set limits for “"security,”" a broad definition including not only National Defense activities but also International Affairs and the Department of Homeland Security and “ "non-security”" (other activities). Beginning in FY2013, BCA spending limits were redefined to apply to National Defense (budget function 050), consisting primarily of the Department of Defense, and “nondefense”"nondefense" (all other). The Bipartisan Budget Act (P.L. 113-67) amendments to the BCA specifically listed the annual revised caps or spending limits for FY2014-FY2021 that must be complied with to avoid a sequester (see Box A).¹²² ).121 If Congress breaches or exceeds either revised cap, the President is required to levy a sequester that consists of largely across-the-board cuts. In the case of defense spending, these pro rata cuts apply at either the account level or the individual program level. CBO refers to these spending caps as an “"automatic enforcement mechanism”" because current statute requires a sequester in any year that Congress breaches or exceeds the Act’s caps.122 120 CBO, The Budget and Economic Outlook: An Update, August 24, 2011; http://www.cbo.gov/ftpdocs/123xx/ doc12316/08-24-BudgetEconUpdate.pdf. 121 §101 in P.L. 113-67. The original BCA specified the amount to be taken from initial caps. 122 CBO, “Estimated Impact of Automatic Budget Enforcement Procedures Specified in the Budget Control Act,” September 12, 2011; http://www.cbo.gov/ftpdocs/124xx/doc12414/09-12-BudgetControlAct.pdf. Congressional Research Service 50 Defense Spending and the Budget Control Act Limits 's caps.¹²³ Box A. Excerpt from OMB FY2014 Sequestration Report on “"revised caps”123 "¹²⁴ Section 302 of the BCA provided for revisions to the caps if legislation proposed by the Joint Select Committee on Deficit Reduction to reduce the deficit by more than $1.2 trillion was not enacted by January 15, 2012. Because such legislation was not enacted by this date, the Section 302 revisions to the caps were triggered and reflected in the OMB Final Sequestration Report for FY 2012, issued on January 18, 2012. As required by law, the security category was redefined to include only the discretionary programs in the defense budget function (050) (the “defense”"defense" category), which mainly consists of the Department of Defense and significant portions of agency budgets for the Department of Energy (including the National Nuclear Security Administration) and the Federal Bureau of Investigation. The non-security category was redefined to consist of all discretionary programs not in the security category—essentially all nondefense (non-050) budget functions (the “nondefense” "nondefense" category). The defense and nondefense categories were put in place for 2013 through 2021, replacing the overall discretionary category for those years. While the separate caps were adjusted to reflect the redefinitions, the total amount of discretionary funding remained unchanged. 123 OMB, Sequester Preview Report to the President and Congress for Fiscal Year 2014 and OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2014, April 10, 2013, Corrected version, May 20, 2013, p. 3 and p. 5; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/ fy14_preview_and_joint_committee_reductions_reports_05202013.pdf. OMB sequestration reports only include the reductions required for the second set of savings for the budget currently considered by Congress, arguing that reductions in future years will be necessary unless Congress changes the law (see p. 5). Congressional Research Service 51 Defense Spending and the Budget Control Act Limits Appendix B. amount of discretionary funding remained unchanged. Raising BCA Caps in FY2013-FY2015 Congress Modifies BCA Defense Spending Limits Both the American Taxpayer Relief Act (ATRA, P.L. 112-240) and Bipartisan Budget Act (BBA, P.L. 113-67) eased the path of meeting defense spending limits in the near-term. Together, these acts provided defense with an additional $54 billion for FY2012-FY2015, reducing ten-year savings required from the FY2012 President’'s Budget plan by 1%. Instead of a ten-year defense total of $5.40 trillion in the original BCA, the BBA sets a limit of $5.45 trillion.124 125 In FY2012, Congress reduced DOD’'s request by 4.2% or $23 billion to meet the new BCA spending limits. The effect on DOD was softened because BCA spending reductions for FY2012 were applied to a broadly defined “security”"security" category which included not only DOD but also the Department of Homeland Security, International Affairs, the Department of Veterans Affairs, and other small agencies.125 126 American Taxpayer Relief Act Several months after the FY2013 President’'s budget plan was submitted, Congress modified the BCA spending limits. Facing the “"fiscal cliff”"—the combined contractionary effects of ending the tax cuts enacted during then-President Bush’'s tenure, and slated BCA spending reductions in FY2013—Congress passed P.L. 112-240//H.R. 8, the American Taxpayer Relief Act (ATRA) on January 2, 2013, 17 months after enactment of the original BCA (P.L. 112-75).¹²⁷).126 Although ATRA did not change the requirement for a sequester in FY2013, it reduced the amount of that sequester from $54 billion for defense to $42.5 billion. At the same time, ATRA softened the scheduled $62 billion cut between FY2012 and FY2013, splitting the reduction over two years rather than one. Instead, ATRA mandated decreases of $36 billion in FY2013 and $20 billion the following year. Congress left later years intact (Table B-1). To "). To “pay for”" or offset the reduction in savings, ATRA changed the treatment of Roth IRA retirement accounts.127 128 Under the adjusted ATRA caps, Congress cut defense spending from $555 billion enacted in FY2012 to $518 billion in FY2013 rather than the $492 billion originally required.128 In the case 124 See Table 1 above and for latest revised lowered caps, see Table 2 in OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015; http://www.whitehouse.gov/sites/default/files/omb/ assets/legislative_reports/sequestration/2016_sequestration_preview_report_president.pdf. 125 See Table 3 and p. 9 in OMB, Final Sequestration Report to the President and Congress for Fiscal Year 2012, January 18, 2012, 1-18-12; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/ sequestration_final_jan2012.pdf. International Affairs took more than its share of the BCA cut; see Stimson Center, “The Coming Cut: Continuing Resolution,” by Russell Rumbaugh; Budgeting for Foreign Affairs and Defense, Budget Analysis Brief, October 25, 2013; http://www.stimson.org/images/uploads/bfadb003_the_coming_cut.pdf. 126 CRS Report R42700, The “Fiscal Cliff”: Macroeconomic Consequences of Tax Increases and Spending Cuts, by Jane G. Gravelle. 127 CRS Report R42884, The “Fiscal Cliff” and the American Taxpayer Relief Act of 2012, coordinated by Mindy R. Levit. 128 CRS Report R42949, The American Taxpayer Relief Act of 2012: Modifications to the Budget Enforcement Procedures in the Budget Control Act, by Bill Heniff Jr. Congressional Research Service 52 Defense Spending and the Budget Control Act Limits In the case of DOD (which constitutes about 95% of the National Defense total), Congress appropriated $527.4 billion, $2 billion above the request. After various adjustments, OMB’'s sequester order reduced the appropriated amount to $495 billion (see Table B-1).¹²⁹ ).129 The Bipartisan Budget Act In the fall of 2013, faced with an impasse between the House and Senate about discretionary spending levels that led to a temporary government shutdown, Congressman Paul Ryan and Senator Pat Murray, Chairs of their respective budget committees, negotiated the Bipartisan Budget Act of 2014 (BBA; H.J.Res. 59//P.L. 113-67). This made further adjustments in BCA revised caps for FY2014 and FY2015 (Table B-1). ). Table B-1. Adjustments in BCA Spending Caps (in billions of dollars of budget authority) Caps Actuals Defense Spending Caps

Caps

Actuals

Defense Spending Caps

Budget Control Act of 2011 (BCA): S. 365/P.L. 112-75 Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total: 12-21 National Defense (050) 552 552 555 492a 502a 512 523 536 549 562 576 590 5,397a DOD (051) (estimated) 528 528 530 470a 480a 489 500 512 525 537 551 564 5,158a The American Taxpayer Relief Act of 2012 (ATRA): H.R. 8/P.L. 112-240 National Defense: 050 552 552 555 518a 498a 512 523 536 549 562 576 590 5,420a DOD: 051 (est.) 528 528 530 495a 476a 489 500 512 525 537 551 564 5,180a Change from BCA: 050 — — 0 26 -4 0 0 0 0 0 0 0 22 Change from BCA: 051 — — 0 25 -4 0 0 0 0 0 0 0 21 Bipartisan Budget Act of 2013 (BBA): H.J.Res. 569/P.L. 113-67 National Defense (050) 552 552 555 518 520a 521a 523 536 549 562 576 590 5,451a DOD (051) (est.) 528 528 530 495 497a 498a 500 512 525 537 551 564 5,210a Change from ATRA: 050 — — 0 0 22 9 0 0 0 0 0 0 31 Change from ATRA: 051 — — 0 0 21 9 0 0 0 0 0 0 30 Total Cap Change from Original BCA to BBA National Defense (050) — — 0 26 18 9 0 0 0 0 0 0 54 DOD (051) (est.) — — 0 25 18 9 0 0 0 0 0 0 51 Sources: CRS calculations based on P.L. 112-25, P.L. 112-240, P.L. 113-67, and OMB Table 32-1, 31-1, and 28-1 in OMB's annual Analytical Perspectives; also OMB, Final Sequestration Report. FY2014 and FY2015; OMB, “Final Sequestration Report to the President and Congress for Fiscal Year 2014,” February 7, 2014; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/ sequestration_final_feb2014.pdf; OMB, “Final Sequestration Report to the President and Congress for Fiscal 129 Table provided to CRS by DOD. Congressional Research Service 53 Defense Spending and the Budget Control Act Limits Year 2015,” January 15, 2015; https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/ sequestration/sequestration_final_january_2015_president.pdf. Notes: Sections highlighted show years adjusted. a. Shows years adjusted. CRS used 95.4% for DOD’s share of the revised caps based on the DOD (051) share of National Defense (050) in FY2013 for all years. Signed by the President on December 26, 2013, the BBA raised the ATRA cap for FY2014 from $498 billion to $520 billion, a $22 billion increase. For the following year, the BBA raised the earlier ATRA limit from $512 billion to $521 billion, a $9 billion increase. BCA caps remained the same for FY2016 through FY2021. With these changes, National Defense spending was set at the FY2013 post-sequester level $521 billion in FY2014 and FY2015, with a small increase to $523 billion in FY2016. This held defense spending to a nominal freeze for essentially four years without increases to cover the low levels of inflation in those years. After FY2016, defense spending under the caps would grow by about $11 billion each year, providing slightly more than needed to offset projected inflation. By FY2021, National Defense spending would be $590.0 billion, providing 2% real growth above the FY2016 level (Table B-1) In F2014, the Administration requested $552 billion for National Defense and $527 billion for the Department of Defense (DOD). Congress appropriated $520 billion for National Defense and /P.L. 112-75

Fiscal Year

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Total: 12-21

National Defense (050)

552

552

555

492^a

502^a

512

523

536

549

562

576

590

5,397^a

DOD (051) (estimated)

528

528

530

470^a

480^a

489

500

512

525

537

551

564

5,158^a    

 

 

 

 

 

 

 

 

 

 

 

 

The American Taxpayer Relief Act of 2012 (ATRA): H

.R. 8/P.L. 112-240

National Defense: 050

552

552

555

518^a

498^a

512

523

536

549

562

576

590

5,420^a

DOD: 051 (est.)

528

528

530

495^a

476^a

489

500

512

525

537

551

564

5,180^a

Change from BCA: 050

—

—

0

26

-4

0

0

0

0

0

0

0

22

Change from BCA: 051

—

—

0

25

-4

0

0

0

0

0

0

0

21

   

 

 

 

 

 

 

 

 

 

 

 

 

Bipartisan Budget Act of 2013 (BBA): H

.J.Res. 569/P.L. 113-67

National Defense (050)

552

552

555

518

520^a

521^a

523

536

549

562

576

590

5,451^a

DOD (051) (est.)

528

528

530

495

497^a

498^a

500

512

525

537

551

564

5,210^a

Change from ATRA: 050

—

—

0

0

22

9

0

0

0

0

0

0

31

Change from ATRA: 051

—

—

0

0

21

9

0

0

0

0

0

0

30

Total Cap Change from Original BCA to BBA

National Defense (050)

—

—

0

26

18

9

0

0

0

0

0

0

54

DOD (051) (est.)

—

—

0

25

18

9

0

0

0

0

0

0

51

Sources: CRS calculations based on P.L. 112-25, P.L. 112-240, P.L. 113-67, and OMB Table 32-1, 31-1, and 28-1 in OMB's annual Analytical Perspectives; also OMB, Final Sequestration Report. FY2014 and FY2015; OMB, "Final Sequestration Report to the President and Congress for Fiscal Year 2014," February 7, 2014; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/sequestration_final_feb2014.pdf; OMB, "Final Sequestration Report to the President and Congress for Fiscal Year 2015," January 15, 2015; https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/sequestration_final_january_2015_president.pdf.

Notes: Sections highlighted show years adjusted.

a. Shows years adjusted. CRS used 95.4% for DOD's share of the revised caps based on the DOD (051) share of National Defense (050) in FY2013 for all years.

Signed by the President on December 26, 2013, the BBA raised the ATRA cap for FY2014 from $498 billion to $520 billion, a $22 billion increase. For the following year, the BBA raised the earlier ATRA limit from $512 billion to $521 billion, a $9 billion increase. BCA caps remained the same for FY2016 through FY2021.

With these changes, National Defense spending was set at the FY2013 post-sequester level $521 billion in FY2014 and FY2015, with a small increase to $523 billion in FY2016. This held defense spending to a nominal freeze for essentially four years without increases to cover the low levels of inflation in those years. After FY2016, defense spending under the caps would grow by about $11 billion each year, providing slightly more than needed to offset projected inflation. By FY2021, National Defense spending would be $590.0 billion, providing 2% real growth above the FY2016 level (Table B-1) In F2014, the Administration requested $552 billion for National Defense and $527 billion for the Department of Defense (DOD). Congress appropriated $520 billion for National Defense and $496 billion for DOD, complying with the BCA caps and avoiding a sequester (Table B-1). ). For FY2015, the Administration requested $549 billion for National Defense and $522 billion for DOD including $26.4 billion in a separate Opportunity, Growth and Security Initiative (OGSI) that was intended to “"accelerate modernization of key weapons systems, make faster progress toward restoring readiness lost under sequestration [in FY2013] and improve its facilities.”130 "¹³⁰ Congress appropriated $521 billion for National Defense and $496 billion for DOD, complying with BCA revised caps and continuing a three-year nominal freeze in DOD spending that began with the FY2013 sequester. 130 The Administration requested $27.7 billion for National Defense (including $$26 billion for DOD), and an equal amount for nondefense programs. OMB, Fiscal Year 2015 Budget of the U.S. Government, March 4, 2014; Department of Defense chapter; http://www.gpo.gov/fdsys/pkg/BUDGET-2015-BUD/pdf/BUDGET-2015-BUD-6.pdf. Congressional Research Service 54 Defense Spending and the Budget Control Act Limits Appendix C. with the FY2013 sequester. Defense Plans Partly Adapt to BCA Spending Limits Some observers would suggest that changes to defense spending to comply with BCA limits should be compared to the Administration’'s original plan for defense spending before BCA enactment. Others would argue that BCA limits should be compared to the FY2011 CBO steadystatesteady-state baseline which extrapolates defense spending at the enacted level with increases only for inflation, often referred to as a “"real freeze.”" Another approach compares BCA limits to successive Administration plans from FY2013-FY2016 to see how plans were adjusted in reaction to the caps. Compared to CBO’'s steady-state baseline, a “"current services”" baseline commonly used by Congress and across the government, BCA caps to the CBO baseline at the time, BCA caps required a reduction of $860 billion or about 14%. Before passage of the BCA, the gap between the FY2012 Administration plan for National Defense (budget function 050) and the BCA spending limits was close to $1.0 trillion for the decade (050). Defense spending was projected to total $6.41 trillion for FY2012-FY2021, assuming 4% real growth over the decade.131131 Under BCA limits, defense spending would total $5.4 trillion, or $1.0 trillion lower (Table C-1). ). Table C-1. CBO Baseline, Administration Defense Plans and BCA Defense Limits (in billions of dollars and % difference) Fiscal Year/ Baseline 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-21 FY2012 CBO Steady State Baselinea 554 552 562 574 586 599 614 630 646 664 682 700 6,257 na na 555 492 502 512 523 536 549 562 576 590 5,397 Savings gap na na -7 -82 -84 -87 -91 -94 -97 -102 -106 -110 -860 In percent na na -1.3% -14.3% -14.3% -14.5% -14.8% -14.9% -15.0% -15.3% -15.5% -15.7% -13.7% 554 552 578 596 612 625 638 649 661 673 685 698 6,414 na na 555 492 502 512 523 536 549 562 576 590 5,397 Savings gap na na -24 -104 -110 -112 -115 -113 -112 -111 -109 -108 -1,017 In percent na na -4.1% -17.4% -18.0% -18.0% -18.0% -17.4% -16.9% -16.5% -15.9% -15.4% -15.9% Original BCA limits FY2012 Pres. Budgetb Original BCA limits Sources: OMB,

Fiscal Year/ Baseline

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2012-21

FY2012 CBO Steady State Baseline^a

554

552

562

574

586

599

614

630

646

664

682

700

6,257

Original BCA limits

na

na

555

492

502

512

523

536

549

562

576

590

5,397

Savings gap

na

na

-7

-82

-84

-87

-91

-94

-97

-102

-106

-110

-860

In percent

na

na

-1.3%

-14.3%

-14.3%

-14.5%

-14.8%

-14.9%

-15.0%

-15.3%

-15.5%

-15.7%

-13.7%

                            FY2012 Pres. Budget^b

554

552

578

596

612

625

638

649

661

673

685

698

6,414

Original BCA limits

na

na

555

492

502

512

523

536

549

562

576

590

5,397

Savings gap

na

na

-24

-104

-110

-112

-115

-113

-112

-111

-109

-108

-1,017

In percent

na

na

-4.1%

-17.4%

-18.0%

-18.0%

-18.0%

-17.4%

-16.9%

-16.5%

-15.9%

-15.4%

-15.9%

Sources: OMB, Fiscal Year 2012 Analytical Perspectives, Table 32-1; http://www.whitehouse.gov/sites/default/files/ omb/budget/fy2012/assets/32_1.pdf.; and CBO, The Budget and Economic Outlook: An Update, August 24, 2011; http://www.cbo.gov/ftpdocs/123xx/doc12316/08-24-BudgetEconUpdate.pdf. Notes: a. CBO’.

Notes:

a. CBO's baseline reflects the latest enacted level with adjustments for inflation in later years. b. b. The Administration FY2012 plan projected 4% real growth over the decade. 131 The FY2012 Administration plan exceeded the CBO baseline by $157 billion; that baseline projects defense spending at the latest enacted level with adjustments only for inflation. Congressional Research Service 55 Defense Spending and the Budget Control Act Limits DOD’ DOD's Reaction to BCA Caps Changes over Time BCA caps on defense spending primarily affect the Department of Defense (DOD). Since enactment of the BCA, DOD budgets have been lowered in several steps, and DOD’s 's characterization of the effects of BCA spending limits has shifted with each new budget. FY2013 Plan Achieves Half of BCA Savings DOD’ DOD's FY2013 budget plan included a reduction of $487 billion reduction in the FY2013 budget plan compared to the prior year, achieving half of the savings needed to comply with BCA caps measured against DOD’'s pre-BCA plan. In “"Defense Budget Priorities and Choices,”" a January 2012 strategy report, DOD suggested that Achieving these savings [of $487 billion for DOD] is hard, but manageable. It is hard because we have to accept many changes and reductions in areas that previously were sacrosanct. Collectively, the changes align our investments to strategic priorities and budgetary goals, but individually, each one requires a difficult adjustment. It is manageable because the resulting joint force, while smaller and leaner, will remain agile, flexible, ready, innovative, and technologically advanced.132 132 The strategy paper stated that DOD could continue to plan and size forces to be able to defeat a major adversary in one theater while denying aggression elsewhere or imposing unacceptable costs; [but] No longer size active forces to conduct large and protracted stability operations, and structure major adjustments in a way that best allows 133 for . . . regeneration of capabilities. 133 FY2014 Plan Adds Savings With the additional $93 billion savings incorporated in the FY2014 DOD plan, the savings gap between the plan and BCA amended caps for the next eight years shrank to $331 billion. In its FY2014 report, “"Defense Budget: Priorities and Choices,”" DOD’'s tone shifted from the year before when the reductions were “"manageable,”" now warning that The DoD is experiencing declining budgets that have already led to significant ongoing and planned reductions in military modernization, force structure, personnel costs, and overhead expenditures . . . [concluding overall that the] choices made in the FY 2014 submission reflects the Department’'s intent to deepen the budget and program alignment with the President’ President's strategic guidance, seek additional taxpayer savings where possible and prudent, and do so at minimum risk to the readiness or quality of the All-Volunteer Force.134 132 Department of Defense, “Defense Budget Priorities and Choices,” p. 1, January 2012; http://www.defense.gov/ news/Defense_Budget_Priorities.pdf. 133 Ibid., passim. 134 DOD, Defense Budget Priorities and Choices, Fiscal Year 2014, p. 1, and p. 10, April 2013; http://www.defense.gov/pubs/DefenseBudgetPrioritiesChoicesFiscalYear2014.pdf. Congressional Research Service 56 Defense Spending and the Budget Control Act Limits 134 FY2015 Plan Trims Spending The FY2015 DOD plan trimmed another $186 billion reducing the savings gap to about $175 billion.135135 In its FY2015 Budget Overview, DOD concluded that The FY 2015 funding levels will allow the military to protect and advance U.S. interests and execute the updated defense strategy – but with somewhat increased levels of risk for some missions . . . [due to] gaps in training and maintenance over the near term and will have a reduced margin of error in dealing with risks of uncertainty in a dynamic and shifting 136 security environment over the long term. 136 DOD argued that it could comply with the amended BCA revised caps in the BBA for FY2015 but not in later years and meet the strategy in the 2014 Quadrennial Defense Review (QDR). Then Then-Secretary of Defense Chuck Hagel warned that while We can manage these anticipated risks under the president's budget plan, but they would grow significantly if sequester-level cuts return in fiscal year 2016, if our reforms are not accepted, or if uncertainty on budget levels continues. As I've made clear, the scale and timeline of continued sequestration-level cuts would require greater reductions in the military's size, reach, and margin of technological superiority. Under sequestration spending levels, we would be gambling that our military will not be required to respond to multiple major contingencies at the same time.137 137 FY2016 Plan Rejects BCA Limits In FY2016, BCA caps are slated to increase to $499 billion, $3 billion above the previous year, and then to rise by about $11 billion annually from FY2017-FY2021, reaching $563 billion in FY2021. DOD’'s request of $534 billion exceeds the FY2016 cap by $36 billion. In its latest plan, DOD made no attempt to incorporate additional savings. In its FY2016 Budget Overview, DOD argues that recent geopolitical developments, including the Islamic State offensive, the Ebola virus outbreak, and Russian actions in the Ukraine have only reinforced the need to resource the Department of Defense (DoD) at the President’ President's budget level rather than the current law. . . [and that the higher level] will allow the military to protect and advance U.S. interests and execute the updated defense strategy - but with somewhat increased levels of risk for some missions. . . [concluding that the] QDR [Quadrennial Defense Review] strategy cannot be executed at sequester-levels of funding.138 135 This figure includes the $26 billion requested for DOD in the Opportunity, Growth and Security Initiative fund. Department of Defense, Fiscal Year 2015 Budget Request: Overview, Figure 1-1 and p.7-7, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf. 137 Department of Defense, Press Conference, “Remarks by Secretary Hagel and Gen. Dempsey on the fiscal year 2015 budget preview in the Pentagon Briefing Room, Presenters: Secretary of Defense Chuck Hagel and Joint Chiefs of Staff Chairman Gen. Martin E. Dempsey, ”February 24, 2014;” http://www.defense.gov/Transcripts/Transcript.aspx? TranscriptID=5377. This position is consistent with the 2014 Quadrennial Defense Review as discussed in Department of Defense, Fiscal Year 2015 Budget Request: Overview, Figure 1-1, 2-1, 2-3, and p.7-7, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf. 138 DOD, Department of Defense Fiscal Year 2016 Request Overview, p.1-1, February 2015; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/ FY2016_Budget_Request_Overview_Book.pdf. 136 Congressional Research Service 57 Defense Spending and the Budget Control Act Limits [Quadrennial Defense Review] strategy cannot be executed at sequester-levels of funding.¹³⁸ For the Army, the chief concern is their conviction that its force structure would have to be cut from 450,000 to 420,000 active-duty personnel, with associated cuts in reserve forces.139According139According to Chief of Staff, General Raymond Odierno those force levels would mean “ "jeopardizing the Army’'s ability to execute even one prolonged multiphase contingency operation. . . 140 140 For the Navy, “"Required cuts will force us to further delay critical warfighting capabilities, reduce readiness of forces needed for contingency response, forego or stretch procurement of ships and submarines and further downsize weapons capacity.”141 "¹⁴¹ General Joseph Dunford, commandant of the Marine Corps, testified that BCA funding levels will result in a Marine Corps with fewer available active-duty battalions and squadrons than we required for a single major contingency [and] result in fewer Marines and Sailors being forward-deployed in a position to immediately respond to a crisis involving our diplomatic posts, American citizens or US interest.142 142 For Air Force Chief of Staff, Mark A. Welsh III, under ”"sequestration level funding,”" the Air Force would face a choice between being “’ “"' "ready and capable now’”'" and “"ready and capable in the future.”" . . . [resulting in] an Air Force that, at sequestered levels of funding, cannot successfully execute all Defense Strategic Guidance requirements.143 139 Assistant Secretary of the Army (Financial Management and Comptroller), FY 2016 President’s Budget Highlights, p. 33, February 2015; http://asafm.army.mil/Documents/OfficeDocuments/Budget/budgetmaterials/fy16//pbhl.pdf. 140 Statement by General Raymond T. Odierno, Chief of Staff United States Army before the Senate Armed Services Committee, “The Impacts of Sequestration on National Defense,” January 28, 2015; http://www.armedservices.senate.gov/imo/media/doc/Odierno_01-28-15.pdf. 141 Senate Armed Services Committee, Statement of Admiral Jonathan Greenert,” Chief of Naval Operations, “The Impacts of Sequestration on National Defense,” January 28, 2015; http://www.armed-services.senate.gov/imo/media/ doc/Greenert_01-28-15.pdf. 142 Senate Appropriations Subcommittee on Defense, Transcript, “Hearing on President Obama's Fiscal 2016 Budget Request for U.S. Navy and Marine Corps, “ March 4, 2015. 143 Senate Armed Services Committee, Statement of General Mark A. Welsh III, Chief of Staff U.S. Air Force, ”The Impacts of Sequestration on National Defense,” January 28, 2015;” http://www.armed-services.senate.gov/imo/media/ doc/Welch_01-28-15.pdf. Congressional Research Service 58 Defense Spending and the Budget Control Act Limits Appendix D. successfully execute all Defense Strategic Guidance requirements.¹⁴³ Selected Bibliography of Ways to Reduce Defense Spending Below is a selected bibliography of recent reports on and studies of ways to reduce defense spending. The list includes primarily reports that address the problem of reaching a particular level by using various types of savings. It does not include the many reports on reducing the costs of individual weapon systems. Table 12. Selected Bibliography of Reports and Studies on Reducing Defense Spending Organization Author Title Publicatio n Date URL American Enterprise Institute Mackenzie Eaglen Shrinking Bureaucracy, Overhead, and Infrastructure March 2013 Spending

Organization

Author

Title

Publication Date

URL

American Enterprise Institute

Mackenzie Eaglen

Shrinking Bureaucracy, Overhead, and Infrastructure

March 2013

http://www.aei.org/wp-content/ uploads/2013/03/-shrinking-bureaucracy-overhead-and-infrastructure-why-this-defense-drawdown-must-be-different-for-the-pentagon_083503530347.pdf

Brookings Institution

Roughead, Gary, Adm. (USN Ret, and Kori Schake

National Defense in a Time of Change, Policy Brief 2012 Discussion Paper 2013-01

February 2013

03/-shrinkingbureaucracy-overhead-andinfrastructure-why-this-defensedrawdown-must-be-different-forthe-pentagon_083503530347.pdf Brookings Institution Roughead, Gary, Adm. (USN Ret, and Kori Schake National Defense in a Time of Change, Policy Brief 2012 Discussion Paper 2013-01 February 2013 http://www.brookings.edu/~/~/ media/research/files/papers/2013/ 02/ us%20national%20defense%20cha nges/thp_rougheaddiscpaper.pdf O'Hanlon, Michael A Moderate Plan for Additional Defense Budget Cuts February 2013 20changes/thp_rougheaddiscpaper.pdf  

O'Hanlon, Michael

A Moderate Plan for Additional Defense Budget Cuts

February 2013

http://www.brookings.edu/~/~/ media/research/files/papers/2013/ 1/1/defense-budget-cuts-ohanlon/ defense-budget-cuts-ohanlon.pdf Williams, Cindy Making Defense Affordable February 2013  

Williams, Cindy

Making Defense Affordable

February 2013

http://www.brookings.edu/~/~/ media/research/files/papers/2013/ 02/ make%20defense%20affordable/ thp_williams_brief.pdf Williams, Cindy Making Defense Affordable: Discussion Paper 2013-02 February 2013  

Williams, Cindy

Making Defense Affordable: Discussion Paper 2013-02

February 2013

http://www.brookings.edu/~/~/ media/research/files/papers/2013/ 02/ make%20defense%20affordable/ thp_williamsdiscpaper.pdf Roughead, Gary, Adm. (USN Ret, and Kori Schake National Defense in a Time of Change, Discussion Paper 2013-01 February 2013  

Roughead, Gary, Adm. (USN Ret, and Kori Schake

National Defense in a Time of Change, Discussion Paper 2013-01

February 2013

http://www.brookings.edu/~/~/ media/research/files/papers/2013/ 02/ us%20national%20defense%20cha nges/thp_roughead_brief.pdf Barno, David W., Lt. Gen. ret. and Nora Bensahel, Matthew Irvine,Travis Sharp Hard Choices: Responsible Defense in an Age of Austerity October 2011 20changes/thp_roughead_brief.pdf

Center for a New American Security

Barno, David W., Lt. Gen. ret. and Nora Bensahel, Matthew Irvine,Travis Sharp

Hard Choices: Responsible Defense in an Age of Austerity

October 2011

http://www.cnas.org/files/ documents/publications/CNAS_HardChoices_BarnoBensahelSharp_0.pdf  

Danzig, Richard

publications/ CNAS_HardChoices_BarnoBens ahelSharp_0.pdf Danzig, Richard Driving in the Dark: Ten Propositions about Prediction and October 2011 National Security

October 2011

http://www.cnas.org/files/ documents/publications/CNAS_Prediction_Danzig.pdf  

Barno, David W., Lt. Gen. ret. and Nora Bensahel, Matthew Irvine, Travis Sharp

Sustainable Pre-eminence: Reforming the U.S. Military at a Time of Strategic Choice

May 2012

publications/ Center for a New American Security Congressional Research Service 59 Defense Spending and the Budget Control Act Limits Organization Author Title Publicatio n Date National Security URL CNAS_Prediction_Danzig.pdf Barno, David W., Lt. Gen. ret. and Nora Bensahel, Matthew Irvine, Travis Sharp Sustainable Preeminence: Reforming the U.S. Military at a Time of Strategic Choice May 2012 http://www.cnas.org/files/ documents/publications/CNAS_SustainablePreeminence_BarnoBensahelIrvineSharp_1.pdf  

Barno, David W., Lt. Gen. ret. and Bensahel, Nora, Stokes, Jacob, Smith, Joel, Kidder, Katherine

The Seven Deadly Sins of Defense Spending

June 2013

publications/ CNAS_SustainablePreeminence_ BarnoBensahelIrvineSharp_1.pdf Barno, David W., Lt. Gen. ret. and Bensahel, Nora, Stokes, Jacob, Smith, Joel, Kidder, Katherine The Seven Deadly Sins of Defense Spending June 2013 http://www.cnas.org/files/ documents/publications/ CNAS_SevenDeadlySIns.pdf Korb, Lawrence J., and Alex Rothman Defense in an Age of Austerity Korb, Lawrence J., Alex Rothman, and Max Hoffman $100 Billion in Politically Feasible Defense Cuts for a Budget Deal Center for Center for Strategic and International Security Leed, Maren and Brittany Gregerson Keeping the Faith: Creating a Sustainable Path for Military Compensation Center for Strategic and Budgetary Assessments Harrison, Todd and Mark Gunzinger Center for American Progress Center for Strategic and International Security January 2012 http://www.americanprogress.org /wp-content/uploads/issues/2012/ 01/pdf/defense_austerity.pdf December 2012 http://www.americanprogress.org /wp-content/uploads/2012/12/ KorbDefenseCuts.pdf October 2011

Center for American Progress

Korb, Lawrence J., and Alex Rothman

Defense in an Age of Austerity

January 2012

http://www.americanprogress.org/wp-content/uploads/issues/2012/01/pdf/defense_austerity.pdf  

Korb, Lawrence J., Alex Rothman, and Max Hoffman

$100 Billion in Politically Feasible Defense Cuts for a Budget Deal

December 2012

http://www.americanprogress.org/wp-content/uploads/2012/12/KorbDefenseCuts.pdf

Center for Center for Strategic and International Security

Leed, Maren and Brittany Gregerson

Keeping the Faith: Creating a Sustainable Path for Military Compensation

October 2011

http://csis.org/files/publication/111118_Leed_KeepingFaith_WebS.pdf

Center for Strategic and Budgetary Assessments

Harrison, Todd and Mark Gunzinger

publication/ 111118_Leed_KeepingFaith_We bS.pdf Strategic Choices: Navigating Austerity November 2012

November 2012

http://csbaonline.org/publications/ 2012/11/strategic-choices-navigating-austerity/  

Harrison, Todd

strategic-choicesnavigating-austerity/ Harrison, Todd Strategic Choices Exercise Out brief May 2013

May 2013

http://www.csbaonline.org/ publications/2013/05/strategic-choices05/strategicchoices-exercise-outbrief/ Harrison, Todd Chaos and Uncertainty: The FY2014 Defense Budget and Beyond October 2013  

Harrison, Todd

Chaos and Uncertainty: The FY2014 Defense Budget and Beyond

October 2013

http://csbaonline.org/publications/ 2013/10/chaos-and-uncertaintytheuncertainty-the-fy-14-defense-budget-andbeyond/ Natalya Anfilofyeva Joint Think Tank Event: Alternatives to the QDR and FY15 Defense Budget January 2014 and-beyond/  

Natalya Anfilofyeva

Joint Think Tank Event: Alternatives to the QDR and FY15 Defense Budget

January 2014

http://csbaonline.org/2014/01/28/ joint-think-tank-eventalternativesevent-alternatives-to-the-qdr-and-fy15defense-budget/ Harrison, Todd Strategy and Force Structure choices February 2015 fy15-defense-budget/  

Harrison, Todd

Strategy and Force Structure choices

February 2015

http://csbaonline.org/publications/ 2015/02/joint-think-tankstrategictank-strategic-choices-exercise/ Murdock, Clark A. et.al Planning for a Deep Defense Drawdown, Part I, A Proposed Methodological Approach May 2012

Center for Strategic and International Security

Murdock, Clark A. et.al

Planning for a Deep Defense Drawdown, Part I, A Proposed Methodological Approach

May 2012

http://csis.org/files/publication/ 120522_DD_Interim_Report.pdf Murdock, Clark, Ryan Crotty, and Building the Affordable 2021Military June 2014  

Murdock, Clark, Ryan Crotty, and Angela Weaver

Building the Affordable 2021Military

June 2014

http://csis.org/files/publication/140625_Murdock_Building2021Military_Web.pdf

Congressional Budget Office

Various

Reducing the Deficit: Spending and Revenue Options

March 2011

publication/ 140625_Murdock_Building2021M Congressional Research Service 60 Defense Spending and the Budget Control Act Limits Organization Author Title Publicatio n Date Angela Weaver Congressional Budget Office URL ilitary_Web.pdf Various Reducing the Deficit: Spending and Revenue Options March 2011 http://www.cbo.gov/ftpdocs/ 120xx/doc12085/03-10-ReducingTheDeficit.pdf   03-10ReducingTheDeficit.pdf Goldberg, Matthew W. W. Costs of Military Pay and Benefits in the Defense Budget November 2012

November 2012

http://www.cbo.gov/sites/default/ files/cbofiles/attachments/11-14-1211-1412-MilitaryComp_0.pdf Approaches for Scaling Back the Defense Department’s Budget Plans March 2013    

Approaches for Scaling Back the Defense Department's Budget Plans

March 2013

http://www.cbo.gov/sites/default/ files/cbofiles/attachments/ 43997_Defense_Budget.pdf Arthur, David Options for Reducing Defense Budgets to Meet Funding Limits Under the Budget Control Act December 2013  

Arthur, David

Options for Reducing Defense Budgets to Meet Funding Limits Under the Budget Control Act

December 2013

http://www.cbo.gov/publication/ 44950?utm_source=feedblitz& utm_medium=FeedBlitzEmail& utm_content=812526& utm_campaign=0 Angres, Leigh Choices for Deficit Reduction: An Update December 2013 0  

Angres, Leigh

Choices for Deficit Reduction: An Update

December 2013

http://www.cbo.gov/sites/default/ files/44967-DeficitReduction.pdf Various Health Related Options for Reducing the Deficit 2014-2023 December 2013  

Various

Health Related Options for Reducing the Deficit 2014-2023

December 2013

http://www.cbo.gov/sites/default/ files/44906-HealthOptions.pdf Tighe, Carla Approaches to Reducing Spending on Military Pay and Benefits, Presentation to the Western Economic Association June 2014  

Tighe, Carla

Approaches to Reducing Spending on Military Pay and Benefits, Presentation to the Western Economic Association

June 2014

http://www.cbo.gov/sites/default/ files/cbofiles/attachments/45443-WEA_Presentation.pdf  

Various

attachments/45443WEA_Presentation.pdf Various Options for Reducing the Deficit November 2014

November 2014

http://www.cbo.gov/sites/default/ files/cbofiles/attachments/49638-BudgetOptions.pdf

Defense Reform Caucus

Various

An Open letter to Secretary Carter, Chairman McCain, Ranking Member Reed, Chairman Thornberry, Ranking Member Smith, Chairman Cochran, Ranking Member Durbin,Chairman Frelinghuysen, Ranking Member Visclosky

April 2015

attachments/49638BudgetOptions.pdf Defense Reform Caucus Various An Open letter to Secretary Carter, Chairman McCain, Ranking Member Reed, Chairman Thornberry, Ranking Member Smith, Chairman Cochran, Ranking Member Durbin,Chairman Frelinghuysen, Ranking Member Visclosky April 2015 https://www.aei.org/wp-content/ uploads/2015/04/ Defense_letter_april29Politico.pd f Department of Defense Secretary of Defense Leon Panetta Sustaining U.S. Global Leadership: Priorities for 21st Century Defense January 2012 pdf

Department of Defense

Secretary of Defense Leon Panetta

Sustaining U.S. Global Leadership: Priorities for 21st Century Defense

January 2012

http://www.defense.gov/news/ Defense_Strategic_Guidance.pdf Not specified Defense Budget Priorities and Choices April 2013  

Not specified

Defense Budget Priorities and Choices

April 2013

http://www.defense.gov/pubs/DefenseBudgetPrioritiesChoicesFiscalYear2014.pdf  

Secretary of Defense Ashton Carter

Twenty percent headquarters reduction

July 2013

http://news.usni.org/2013/08/02/document-carter-memo-on-headquarters-reduction

Federal News Radio

Adams, Gordon

Gordon Adams interviewed in Federal News Radio on the defense budget

March 2015

http://www.federalnewsradio.com/146/3821674/Gordon-Adams-Distinguished-Fellow-Stimson-Center

Foreign Affairs

Leffler, Melvyn

Defense on a Diet: How Budget Crises Have Improved U.S. Strategy

November/December 2013

https://www.foreignaffairs.com/articles/americas/2013-10-04/defense-diet  

Williams, Cindy

Accepting Austerity: The Right Way to Cut Defense

November/December 2013

pubs/ DefenseBudgetPrioritiesChoicesF iscalYear2014.pdf Congressional Research Service 61 Defense Spending and the Budget Control Act Limits Organization Author Title Publicatio n Date Secretary of Defense Ashton Carter Twenty percent headquarters reduction Federal News Radio Adams, Gordon Gordon Adams interviewed in Federal News Radio on the defense budget March 2015 http://www.federalnewsradio.com /146/3821674/Gordon-AdamsDistinguished-Fellow-StimsonCenter Foreign Affairs Leffler, Melvyn Defense on a Diet: How Budget Crises Have Improved U.S. Strategy November/ December 2013 https://www.foreignaffairs.com/ articles/americas/2013-10-04/ defense-diet Williams, Cindy Accepting Austerity: The Right Way to Cut Defense November/ December 2013 http://www.cfr.org/united-states/ accepting-austerity/p31891 General Accountabilit y Office GAO-13-470 Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD's Total Workforce May 2013 p31891

General Accountability Office

GAO-13-470

Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD's Total Workforce

May 2013

http://www.gao.gov/products/ GAO-13-470 Military Compensatio n and Retirement Modernizatio n Commission Chair, Alphonso Maldon Jr. Final Report January 2015 GAO-13-470

Military Compensation and Retirement Modernization Commission

Chair, Alphonso Maldon Jr.

Final Report

January 2015

http://www.mcrmc.gov/public/ docs/report/MCRMC-FinalReport-29JAN15-HI.pdf

National Commission on Fiscal Responsibility and Reform

Commission staff

Draft Co-Chairs Proposal

November 2010

report/MCRMCFinalReport-29JAN15-HI.pdf National Commission on Fiscal Responsibility and Reform Commission staff Draft Co-Chairs Proposal November 2010 http://www.fiscalcommission.gov/ sites/fiscalcommission.gov/files/ documents/CoChair_Draft.pdf Commission staff $200 Billion in Illustrative Savings November 2010 http://www.fiscalcommission.gov/ sites/  

Commission staff

$200 Billion in Illustrative Savings

November 2010

http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/ documents/ Illustrative_List_11.10.2010.pdf National Defense University Kugler, Richard L. and Linton Wells II Strategic Shift: Appraising Recent Changes in U.S. Defense Plans and Priorities April 2013

National Defense University

Kugler, Richard L. and Linton Wells II

Strategic Shift: Appraising Recent Changes in U.S. Defense Plans and Priorities

April 2013

http://ctnsp.dodlive.mil/files/2013/ 10/Strategic-Shift.pdf Project on Defense Alternatives PDA Briefing Memo #56 A Reasonable Alternative to Sequester of DoD Funding, August 2012 Conetta, Carl A Reasonable Defense: A Sustainable Approach to Securing the Nation Congressional Research Service July 2013 URL November 2012 http://news.usni.org/2013/08/02/ document-carter-memo-onheadquarters-reduction http://www.comw.org/pda/ fulltext/140812bm56-DefenseSequester.pdf

Project on Defense Alternatives

PDA Briefing Memo #56

A Reasonable Alternative to Sequester of DoD Funding,

August 2012

http://www.comw.org/pda/fulltext/140812bm56-Defense-Sequester.pdf  

Conetta, Carl

A Reasonable Defense: A Sustainable Approach to Securing the Nation

November 2012

http://www.comw.org/pda/ fulltext/121114-Reasonable-Defense.pdf

Project on Defense Alternatives and Cato Institute

Conetta, Carl, Charles Knight, and Ethan Rosenkranz

Defense Sense: Options for National Defense savings, Fiscal Year 2013

May 2012

http://comw.org/pda/fulltext/120515DefSense.pdf

RAND

Johnson, Stuart E., Irv Blickstein, David C. Gompert, Charles Nemfakos, Harry J. Thie, Michael J. McNerney, Duncan Long, Brian McInnis, Amy Potter

A Strategy-Based Framework for Accommodating Reductions in the Defense Budget by 2021

2012

http://www.rand.org/content/dam/rand/pubs/occasional_papers/2012/RAND_OP379.pdf  

Hosek, James, Beth J. Asch, Michael G. Mattock

Should the Increase in Military Pay Be Slowed?

June 2012

http://www.rand.org/content/dam/rand/pubs/technical_reports/2012/RAND_TR1185.pdf  

Johnson, Stuart E., Irv Blickstein

U.S. Defense Department Needs to Set Priorities, Weigh Risks: Defense in an Age of Austerity

Winter 2012

http://www.rand.org/pubs/periodicals/rand-review/issues/2012/winter/us-defense-department-needs-to-set-priorities.html

Stimson Center

Defense Advisory Committee, Blechman, Barry et al.

A New U.S. Defense Strategy for a New Era

November 2012

121114-ReasonableDefense.pdf 62 Defense Spending and the Budget Control Act Limits Organization Author Title Publicatio n Date URL Project on Defense Alternatives and Cato Institute Conetta, Carl, Charles Knight, and Ethan Rosenkranz Defense Sense: Options for National Defense savings, Fiscal Year 2013 RAND Johnson, Stuart E., Irv Blickstein, David C. Gompert, Charles Nemfakos, Harry J. Thie, Michael J. McNerney, Duncan Long, Brian McInnis, Amy Potter A Strategy-Based Framework for Accommodating Reductions in the Defense Budget by 2021 Hosek, James, Beth J. Asch, Michael G. Mattock Should the Increase in Military Pay Be Slowed? June 2012 Johnson, Stuart E., Irv Blickstein U.S. Defense Department Needs to Set Priorities, Weigh Risks: Defense in an Age of Austerity Winter 2012 Defense Advisory Committee, Blechman, Barry et al. A New U.S. Defense Strategy for a New Era November 2012 http://www.stimson.org/images/ uploads/research-pdfs/A_New_US_Defense_Strategy_for_a_New_Era.pdf  

Leatherman, Matthew, Barry Blechman, and Russell Rumbaugh

Managing the Military More Efficiently: Potential Savings Separate from Strategy

May 2013

research-pdfs/ A_New_US_Defense_Strategy_ for_a_New_Era.pdf Leatherman, Matthew, Barry Blechman, and Russell Rumbaugh Managing the Military More Efficiently: Potential Savings Separate from Strategy May 2013 http://www.stimson.org/images/ uploads/research-pdfs/Managing_the_Military_More_Efficiently.pdf  

Defense Advisory Committee, Blechman, Barry et al.

Strategic Agility: Strong National Defense for Today's Global and Fiscal Realities

September 2013

research-pdfs/ Managing_the_Military_More_Effi ciently.pdf Defense Advisory Committee, Blechman, Barry et al. Strategic Agility: Strong National Defense for Today’s Global and Fiscal Realities September 2013 http://www.stimson.org/images/ uploads/ Strategic_Agility_Report.pdf Stimson Center May 2012 http://comw.org/pda/fulltext/ 120515DefSense.pdf 2012 http://www.rand.org/content/ dam/rand/pubs/ occasional_papers/2012/ RAND_OP379.pdf http://www.rand.org/content/ dam/rand/pubs/technical_reports/ 2012/RAND_TR1185.pdf http://www.rand.org/pubs/ periodicals/rand-review/issues/ 2012/winter/us-defensedepartment-needs-to-setpriorities.html Author Contact Information Amy Belasco Specialist in U.S. Defense Policy and Budget abelasco@crs.loc.gov, 7-7627 Congressional Research Service 63 Defense Spending and the Budget Control Act Limits Acknowledgments The following CRS colleagues in the Foreign Affairs, Defense, and Trade Division provided useful comments on this report: Nathan Lucas, Valerie Grasso, Daniel Else, Jeremiah Gertler, and Marian Lawson in a very timely fashion. The CRS Graphics staff, including Sandra Edwards, provided enormous help with tables and figures. Congressional Research Service 64 Strategic_Agility_Report.pdf

Author Contact Information

[author name scrubbed], Specialist in U.S. Defense Policy and Budget ([email address scrubbed], [phone number scrubbed])

Acknowledgments

The following CRS colleagues in the Foreign Affairs, Defense, and Trade Division provided useful comments on this report: Nathan Lucas, Valerie Grasso, Daniel Else, [author name scrubbed], and Marian Lawson in a very timely fashion. The CRS Graphics staff, including Sandra Edwards, provided enormous help with tables and figures.

Footnotes

1.

The caps are raised to accommodate this spending; see §251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 (hereinafter BBEDCA). Caps are set in terms of Budget Authority (BA). All figures are BA unless listed otherwise.

2.

BNA, Daily Report for Executives, "U.S. Budget CBO Projects Deficit to Shrink Again But Warns Slow Economy Likely to Persist," 8-25-12.

3.

OMB, Sequester Preview Report to the President and Congress for Fiscal Year 2014 and OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2014, p. 3, April 10, 2013, May 20, 2013.

4.

OMB, Final Sequestration Report to the President and Congress for Fiscal Year 2012, January 2012, p. 3; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/sequestration_final_jan2012.pdf.

5.

§251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985.

6.

OMB, Statement of Administration Policy, " S. 1376 – National Defense Authorization Act for FY 2016, June 2, 2015; https://www.whitehouse.gov/sites/default/files/omb/legislative/sap/114/saps1376s_20150602.pdf; see also,

OMB, Statement of Administration Policy, "H.R. 1735 – National Defense Authorization Act for FY 2016;" "https://www.whitehouse.gov/sites/default/files/omb/legislative/sap/114/saphr1735r_20150512.pdf.

7.

In its report, the Office of Management and Budget, responsible for reporting BCA spending limits, refers to the initial caps as the "original limits," and to adjustments to those limits as "Joint Select Committee on Deficit Reduction Enforcement," and the lowered or revised caps as "Revised Limits;" see OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015, p.4; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_sequestration_preview_report_president.pdf.

8.

Defense-related programs in the Department of Energy for nuclear weapons and the Department of Justice for counter-terrorism make up most of the remainder.

9.

CBO, Letter from Douglas Elmendorf, Director to Speaker of the House, John Boehner and Majority Leader of the Senate, Harry Reid, "CBO Estimate of the Impact on the Deficit of the Budget Control Act of 2011," August 1, 2011; http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/123xx/doc12357/budgetcontrolactaug1.pdf. The defense share is half of the total reduction of $2.1 trillion over the decade. BCA limits are set at the budget function level, or National Defense (budget function 050); the Department of Defense (DOD) makes up about 95% of that total.

10.

When the BCA caps were enacted, CBO uses those statutory limits as its "baseline" estimate.

11.

CRS calculation based on OMB, FY2012 Analytical Perspectives, Table 32-1; http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/32_1.pdf.

12.

See OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015, p.4; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_sequestration_preview_report_president.pdf.

13.

See OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015, p.4; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_sequestration_preview_report_president.pdf.

14.

CRS calculations based on OMB and DOD data, and CRS estimate of DOD's share of BCA limits; includes the $26 billion separate request for DOD in the Administration's Opportunity, Growth and Security Initiative (OGSI) fund.

15.

See "In addition to cancelling the 2016 mandatory sequestration order and replacing the automatic mandatory reductions required in future years, the 2016 Budget adjusts upward the 2016 through 2021 defense and non-defense caps from where they otherwise would be under Joint Committee reductions . . . [substituting] by a balanced package of spending cuts, tax loophole closers, and program integrity measures included in the Budget;" on p. 8 of OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_sequestration_preview_report_president.pdf. For previous proposals, see "The President stands by the compromise offer he made to Speaker Boehner in December 2012. This Budget includes all of the proposals in that offer. These proposals would achieve nearly $1.8 trillion in additional deficit reduction over the next 10 years, bringing total deficit reduction to $4.3 trillion. This represents more than enough deficit reduction to replace the damaging cuts required by the Joint Committee sequestration" in Office of Management and Budget, FY2014 Budget," Reducing the Deficit in a Smart and Balanced Way," pp. 35-36; http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=BUDGET&browsePath=Fiscal+Year+2014&searchPath=Fiscal+Year+2014&leafLevelBrowse=false&isCollapsed=false&isOpen=true&packageid=BUDGET-2014-BUD&ycord=0.

16.

Calculation by CRS based on congressional action on the DOD Appropriations bill in those years.

17.

See Title IX section in H.Rept. 114-139 and S.Rept. 114-63.

18.

CRS Report R41965, The Budget Control Act of 2011 and CRS Report RL34424, The Budget Control Act and Trends in Discretionary Spending, by [author name scrubbed].

19.

Department of Defense, "Defense Budget Priorities and Choices," p. 1, January 2012; http://www.defense.gov/news/Defense_Budget_Priorities.pdf.

20.

DOD, Defense Budget Priorities and Choices, Fiscal Year 2014, p. 1, and p. 10, April 2013; http://www.defense.gov/pubs/DefenseBudgetPrioritiesChoicesFiscalYear2014.pdf.

21.

This figure includes the $26 billion requested for DOD in the Opportunity, Growth and Security Initiative fund.

22.

Department of Defense, Fiscal Year 2015 Budget Request: Overview, Figure 1-1 and p.7-7, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf.

23.

DOD, "United States Department of Defense Fiscal Year 2016 Request Overview," p.1-1, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf.

24.

Testimony by Secretary of Defense Ashton Carter before Senate Appropriations Committee, Subcommittee on Defense, transcript, "President Obama's Fiscal 2016 Budget Request for Defense, " May 6, 2013.

25.

For a full discussion of DOD concerns about BCA caps and meeting the national military strategy, see DOD, 2014 Quadrennial Defense Review, March 4, 2014; http://www.defense.gov/pubs/2014_Quadrennial_Defense_Review.pdf; see also statements by the Service Chiefs of Staff, Senate Armed Services Committee, Hearing, "Impact of the Budget Control Act of 2011 and Sequestration on National Security;" http://www.armed-services.senate.gov/hearings/15-01-28-mpact-of-the-budget-control-act-of-2011-and-sequestration-on-national-security.

26.

DOD, Overview: Fiscal Year 2016 Budget Request, p. 2-1ff, p. 6-5ff, passim, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf.

27.

Senate Armed Services Committee, Statements and transcript,"Hearing on the Budget Control Act and Sequestration," January 28, 2015; Department of Defense, Quadrennial Defense Review, 2014; 3-4-14; http://www.defense.gov/pubs/2014_Quadrennial_Defense_Review.pdf.

28.

See Table 3 and Table 4 in S.Rept. 114-14, and Table 1 in H.Rept. 114-47; see also §104, Functional Categories for National Defense (050) and Overseas Contingency Operations (970) in the conference version of S.Con.Res. 11.

29.

Under budget law, OMB raises budget caps to accommodate funding designated as OCO. The $57 billion and $96 billion in OCO-designated funds include $50 billion for defense and $7 billion for the State Department in the request, and the $96 billion includes $89 billion for defense and $7 billion for the State Department in the House and Senate budget resolutions.

30.

Conference agreement on S. Con., Res. 11 as printed in Congressional Record, April 29, 2015, Table 4, p. H2545.

31.

The 302(b) allocation split amounts for DOD between the DOD and Military Construction/Veterans Affairs subcommittees. See House Appropriations Committee, H. Rept. 114-, "Revised Suballocation of Budget Allocations for Fiscal Year 2016," May _, 2015, http://appropriations.house.gov/uploadedfiles/fy2016-revised302b.pdf. CQ/Roll Call, "Senate Appropriators Launch Initial Work on Spending Bills," by Tamar Hallerman, May 12, 2015; http://www.cq.com/doc/4680825?0. The 302(b) allocation divides amounts for DOD between the DOD Appropriations subcommittee and the other subcommittees.

32.

Inside Defense, " Comptroller: $90B OCO Account Proposed in House Budget Blueprint 'Not the Solution," 3-24-15; http://insidedefense.com/defensealert/comptroller-90b-oco-account-proposed-house-budget-blueprint-not-solution-updated; and Defense News, Ash Carter: House Budget Undermines Long-Term Planning, by Paul McLeary 4:33 p.m. EDT March 26, 2015; http://www.defensenews.com/story/defense/2015/03/26/defense-budget-congress-carter/70487034/.

33.

OMB, Shaun Donovan, Director "Congressional Republican Budget Conference Agreement Cuts Programs that Support the Middle Class, Working Families, and National Security," April 30, 2015; https://www.whitehouse.gov/blog/2015/04/30/congressional-republican-budget-conference-agreement-cuts-programs-support-middle-cl.

34.

§251 (b)(2)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) includes this designation procedure. See also discussion in CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by [author name scrubbed].

35.

See, for example, Table 1 and pp.3-5 in OMB, "Final Sequestration Report to the President and Congress for Fiscal Year 2015," January 15, 2015; https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/sequestration_final_january_2015_president.pdf.

36.

See Table 5 and sections "War Funding and Budget Controls" in CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by [author name scrubbed]. DOD's monthly Cost of War reports have included a table listing all war-designated funding not tracked since FY2008. Presumably, DOD excludes this funding in order to use actual experience to estimate future spending without including these funds.

37.

Ibid.

38.

Politico, "War budget might be permanent 'slush fund' "by Jeremy Herb and Bryan Bender, 3/24/15; http://www.politico.com/story/2015/03/war-budget-might-be-permanent-slush-fund-116367.html; see also CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by [author name scrubbed].

39.

§409 in S.Con.Res. 11 as passed by the Senate gave the Chair of the Senate Budget Committee the prerogative to decide whether a particular provision is subject to this point of order. Unless 60 Senators agree to waive the point of order, the OCO-designated funds in a particular account would be struck, and the process could continue until funds did not exceed the §409 limit. Senate Budget Committee, Draft Concurrent Resolution of the Budget for Fiscal Year 2016; http://www.budget.senate.gov/republican/public/index.cfm?a=Files.Serve&File_id=c7aa8422-0e77-45db-964e-7676b22cdef0; and Concurrent Resolution on the Budget for Fiscal Year 23016, 114-111; http://www.budget.senate.gov/republican/public/index.cfm?a=Files.Serve&File_id=5389a308-6d7b-45fc-b8e7-e6db453eaf9a. For pre-conference, see CQ Roll Call, "GOP Hawks May Get Final Word on War Spending in Budget," by Paul M. Krawzak, 4-16-15.

40.

See H.Rept. 114-47, p. 150 and §513 in the House-reported version of H.Con.Res. 27; see also Function 970 in §102 of the House-passed version for the increase in OCO funds from $94 billion to $96 billion. According to press reports, Senator McCain considered but decided against proposing an amendment to delete this point of order; Politico," A procedural requirement will make it hard for the Pentagon to ever get the extra money," by Jeremy Herb and Seung Min Kim, 3/23/15.

41.

§4302 in conference version of S.Con.Res. 11 and §302 in S.Con.Res. 11 as passed by the Senate.

42.

CRS calculations based on Conference version of S.Con.Res. 11 and Table 28 in OMB, FY2016 Analytical Perspectives; https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/28_1.pdf.

43.

The White House,"U.S.-Afghanistan Joint Statement," March 24, 2015; https://www.whitehouse.gov/the-press-office/2015/03/24/us-afghanistan-joint-statement.

44.

CRS Memo, "Funding for military contingency operations in the regular defense appropriations bills in the 1990s," by [author name scrubbed], April 6, 2005.

45.

See CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by [author name scrubbed].

46.

DOD, United States Department of Defense Fiscal Year 2016 Request Overview, p. 7-1, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf.

47.

Stimson Center, Russell Rumbaugh, What We Bought: Defense Procurement from FY01 to FY10, October 28, 2011; http://www.stimson.org/books-reports/what-we-bought-defense-procurement-from-fy01-to-fy10/.

48.

See Table 3-6 in CBO, Budget and Economic Outlook: Fiscal Years: 2014-2024, 2-4-14; http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf.

49.

See Table 5 and p. 51 in GAO, Report to the Chairman, Committee on the Budget, House of Representatives, 2013 Sequestration: Agencies Reduced Some Services and Investments, While Taking Certain Actions to Mitigate Effects, March 2014; http://www.gao.gov/assets/670/661444.pdf.

50.

GAO, Sequestration: Observations on the Department of Defense's Approach in Fiscal Year 2013, GAO-14-177R, Nov. 7, 2013; http://www.gao.gov/assets/660/658913.pdf.

51.

DOD, United States Department of Defense Fiscal Year 2016 Request Overview, p. 7-2, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf; Inside the Pentagon, "July deadline missed, DOD Planning To Release OCO Budget 'Migration Guidance' This Fall," August 13, 2014; http://insidedefense.com/Inside-the-Pentagon/Inside-the-Pentagon-08/14/2014/dod-planning-to-release-oco-budget-migration-guidance-this-fall/menu-id-148.html.

52.

The White House, "U.S.-Afghanistan Joint Statement," March 24, 2015; https://www.whitehouse.gov/the-press-office/2015/03/24/us-afghanistan-joint-statement.

53.

Defense News, "Ash Carter: House Budget Undermines Long-Term Planning," by Paul McLeary, March 26, 2015; http://www.defensenews.com/story/defense/2015/03/26/defense-budget-congress-carter/70487034/; Inside Defense," Comptroller: $90B OCO Account Proposed In House Budget Blueprint 'Not The Solution,' " March 24, 2015; http://insidedefense.com/defensealert/comptroller-90b-oco-account-proposed-house-budget-blueprint-not-solution-updated; Inside Defense, "COCOM Chiefs: Increasing OCO Funds Not Efficient Solution To Budget Problem," March 19, 2015; Tuesday, March 24, 2015; http://insidedefense.com/node/168215; DOD, FY2016 Overview, pp. 7-9.

54.

See Figure 6-3 in DOD, "Overview: Fiscal Year 2016 Budget Request," February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf. Although Section 1009 (c) of Title 37 provides an automatic annual increase in basic pay, indexed to the ECI, the President can specify an alternate amount as he did in FY2014 and FY2015; see pp. 8-9 in CRS Report RL33446, Military Pay: Key Questions and Answers, by [author name scrubbed] and [author name scrubbed]

55.

See Figure 6-3 in DOD, "United States Department of Defense Fiscal Year 2016 Request Overview," February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf.

56.

See discussion on p. 11-p.14 in CRS Report RL33446, Military Pay: Key Questions and Answers, by [author name scrubbed] and [author name scrubbed]; CBO, "Growth in DOD's Budget from 2000 to 2014," November 2014; http://www.cbo.gov/sites/default/files/cbofiles/attachments/49764-MilitarySpending.pdf.

57.

Military Compensation Retirement Modernization Commission, Final report, p. 2, January 2015; http://www.mcrmc.gov/public/docs/report/MCRMC-FinalReport-29JAN15-HI.pdf.

58.

These estimates are net savings, taking into account upfront costs. See Ibid. p. 255.

59.

Department of Defense, "Defense Budget Priorities and Choices," p. 1, January 2012; http://www.defense.gov/news/Defense_Budget_Priorities.pdf.

60.

Department of the Army, Fiscal Year (FY) 2016 Budget Estimates, Volume I, Operation and Maintenance, Army, Justification of Estimates, p. 1-p. 200, passim, February 2015; http://asafm.army.mil/Documents/OfficeDocuments/Budget/budgetmaterials/fy16/opmaint//oma-v1.pdf. Department of the Army, Fiscal Year (FY) 2016 Budget Estimates, Volume I, Military Personnel, Army; http://asafm.army.mil/Documents/OfficeDocuments/Budget/budgetmaterials/fy16/milpers//mpa.pdf.

61.

See Figure 2-1 in CBO, Approaches for Scaling Back the Defense Department's Budget Plans, p. 18, March 18, 2013; CBO defines "direct" costs as compensation and operational costs; indirect costs as those attributable to units such as transportation and maintenance, and overhead costs, as those attributable to the services such as recruiting and administrative support; http://www.cbo.gov/sites/default/files/cbofiles/attachments/43997_Defense_Budget.pdf. This figure includes direct, indirect, and overhead costs.

62.

Department of Defense, Fiscal Year 2015 Budget Request: Overview, p. 1-2, 4-2, 7-12, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf.

63.

See, for example, Inside Defense, "Kendall: Current Strategic Forces Modernization Plans Unaffordable without Topline Relief," April 14, 2015; http://insidedefense.com/defensealert/kendall-current-strategic-forces-modernization-plans-unaffordable-without-topline.

64.

See p. 83 in GAO-15-342SP, Defense Acquisitions: Assessments of Selected Weapon Programs, reissued on April 9, 2015; http://www.gao.gov/assets/670/668986.pdf; and p. 6 and p. 19 in CRS Report RL30563, F-35 Joint Strike Fighter (JSF) Program, by [author name scrubbed]. `

65.

GAO-15-342SP opcit, p. 54.

66.

Ibid. p. 84. Ibid. and CRS Report RL30563, F-35 Joint Strike Fighter (JSF) Program, by [author name scrubbed]; see also GAO-15-364, GAO, F-35 Joint Strike Fighter: Assessment Needed to Address Affordability Challenges, "Highlights," April 2015; http://www.gao.gov/assets/670/669619.pdf.

67.

Table 3 does not include aircraft bought in previous years.

68.

DOD, The Report of the Department of Defense on Base Realignment and Closure, Required by Section 2824 of the National Defense Authorization Act for Fiscal Year 1998, P.L. 105-85, April 1998 (hereinafter, DOD, Base Closure Review, 1998); http://www.defense.gov/pubs/brac040298.pdf.

69.

DOD, Fiscal Year 2015 Budget Request: Overview, p. 2-4 to p.2-5, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf.

70.

DOD, Base Realignment and Closure Fiscal Year (FY) 2015 Budget Estimates, March 2014, p. 8; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/budget_justification/pdfs/05_BRAC/FINAL_FY15_BRAC_Summary_Book.pdf.

71.

DOD, Base Realignment and Closure Fiscal Year (FY) 2016 Budget Estimates, February 2015; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/budget_justification/pdfs/05_BRAC/FINAL_Book_BRAC_Exec_Sum_FY2016.pdf.

72.

Section 2824 of the 1998 National Defense Authorization Act (P.L. 105-85).

73.

DOD, Base Closure Review, p. iv, p. 6, p. 8, p. 48, 1998; U.S. General Accounting Office. Military Bases: Review of DOD's 1998 Report on Base Realignment and Closure, p. 3, November 1998; http://www.gao.gov/assets/230/226562.pdf. For example, DOD did not include long-term environmental remediation costs or offsetting savings from land sales or leases, which proved to be lower than anticipated.

74.

GAO/NSIAD-96-67, Military Bases: Closures and Realignment Savings Are Significant but not Easily Quantifiable, p. 2, April 1996; http://www.gao.gov/assets/230/222465.pdf.

75.

U.S. General Accounting Office. Military Bases: Review of DOD's 1998 Report on Base Realignment and Closure, p.27, and p. 28-p. 30; see also GAO/NSIAD-97-67.

76.

CBO, "Review of the Report of the Department of Defense on Base Realignment and Closure," July 1998; http://www.cbo.gov/sites/default/files/brac98.pdf.

77.

CBO, "Review of the Report of the Department of Defense on Base Realignment and Closure," p. 3, July 1998.

78.

Ibid, p. 5.

79.

Stimson, "Managing the Military More Efficiently: Potential Savings Separate from Strategy," passim, 5-13-13; http://www.stimson.org/images/uploads/research-pdfs/Managing_the_Military_More_Efficiently.pdf.

80.

Department of Defense, Fiscal Year 2015 Budget Request: Overview, passim, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf in DOD, United States Department of Defense Fiscal Year 2016 Request Overview, passim, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf.

81.

CBO Approaches for Scaling Back the Defense Department's Budget Plans, p. 28, March 18, 2013; http://www.cbo.gov/sites/default/files/cbofiles/attachments/43997_Defense_Budget.pdf.

82.

See p. 4-1 in Department of Defense, Fiscal Year 2015 Budget Request: Overview, passim, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf; and for lack of additional savings in FY2016, see DOD, United States Department of Defense Fiscal Year 2016 Request Overview, passim, February 2015. http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf. See also, Opcit, CBO, Approaches, p. 28, 2013.

83.

Office Of the Under Secretary of Defense (Comptroller), Department of Defense, Department of Defense Efficiency Initiatives, Fiscal Year 2012 Budget Estimates; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2012/FY2012_Efficiency_Justification_Book.pdf.

84.

Department of Defense, Fiscal Year 2015 Budget Request: Overview, p.1-2, and p.1-3, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf; and p. 1-3 in DOD, United States Department of Defense Fiscal Year 2016 Request Overview, passim, February 2015.

85.

CSBA, Promoting Efficiency in the Department of Defense: Keep Trying, But Be Realistic, by Robert Hale, January 2002; http://www.csbaonline.org/wp-content/uploads/2011/03/2002.01.25-DoD-Efficiency.pdf.

86.

Secretary of Defense, Donald Rumsfeld, "Statement to House and Senate Armed Services Committees," June 28. 2001; http://www.defense.gov/Speeches/Speech.aspx?SpeechID=384.

87. Politico Pro, "The sequestration monster myth," By Jeremy Herb, 4/12/15; http://politico.pro/1ynD964. 88.

These are generally included in general provisions.

89.

The caps are raised to accommodate funds designated as emergency or for Overseas Contingency Operations (OCO); see Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), §251, §254 (a) and (f).

90.

§255 (f), §258B, and 255 (f) of the BBEDCA.

91.

See §253(d), §255 (f) §258B, and §256 (k) in the BBEDCA.

92.

Deputy Secretary of Defense, Ashton Carter, "Handling Budgetary Uncertainty in Fiscal Year 2013," January 10, 2013.

93.

§901(b) and (c) in P.L. 112-240.

94.

Army News, "Panetta: Severe cuts in ops if sequester occurs," by Marcus Weisgerber, 1-10-13; http://www.armytimes.com/news/2013/01/dn-panetta-says-severe-cuts-ops-sequester-011013/; Air Force, "Sequestration Implementation Plan," Briefing to Congress, 2-16-13; Yahoo.com, "Air Force Says Spending Cuts Hit Combat Aircraft," May 7, 2013. Yahoo.com, "Army Warns Of Steeper Reductions in Troop Numbers." by Richard Lardner, April 23, 2013; American Forces Press Service, "Hale: Sequestration Devastates U.S. Military Readiness," by Cheryl Pellerin, May 10, 2013.

95.

GAO, Report to the Chairman, Committee on the Budget, House of Representatives, 2013 Sequestration: Agencies Reduced Some Services and Investments, While Taking Certain Actions to Mitigate Effects, p. 78-p. 81, March 2014; http://www.gao.gov/assets/670/661444.pdf.

96.

GAO-14-177R, Sequestration: Observations on the Department of Defense's Approach in Fiscal Year 2013, p. 3, Nov. 7, 2013); http://www.gao.gov/assets/660/658913.pdf.

97.

For original estimate, OMB, Report Pursuant to the Sequestration Transparency Act of 2012 (P.L. 112-25), p. 7, September 14, 2012; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/stareport.pdf; see §253(f) in the BBEDCA; amount provided by OMB. OMB was required under ATRA to calculate the sequester on March 1, 2013 based on an annualized level of the Continuing Resolution in effect at the time. Sec. 253(f) of the Deficit Control Act of 1985 provides that if the final enacted level is below the post-sequester amount in the order, then the agency receives a "credit" for savings in excess of sequester savings. For example, if the final appropriation was $90, and the post-sequester amount as calculated was $100, then DOD received a "credit" of $10 applied to the sequester total. OMB data identify $3.7 billion in DOD credits that reduced the sequester to $37.2 billion. Amount of credit provided by OMB. See also, Department of Defense, Office of the Under Secretary of Defense (Comptroller), Department of Defense Report on the Joint Committee Sequestration for Fiscal Year 2013, June 2013; http://comptroller.defense.gov/execution/Sequestration/Unclassified_Published_Sequestration_Final.pdf.

98.

Table 1 in GAO-14-177R.

99.

Amounts from DOD table provided to CRS. For exemption of military personnel, see Acting Director of OMB, Jeffrey D. Zients to Speaker of the House, John H. Boehner, "Notification letter to exempt military personnel from a sequester, July 31, 2012." Figures from table provided to CRS by DOD. Unobligated BA is available from DOD procurement, Research, Development, Testing & Evaluation (RDT&E), and Military Construction funds are available to be obligated for two, three, and five years respectively; in other words, contracts can be written for goods or services over that period of years, often called the "life" of the funds.

100.

See CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, by [author name scrubbed].

101.

Department of Defense, Defense Budget Priorities and Choices, passim, January 2012; http://www.defense.gov/news/Defense_Budget_Priorities.pdf.

102.

This period covers DOD's Future Years Defense Program (FYDP) as of the FY2015 budget request.

103.

Department of Defense, "Estimated Impacts of Sequestration-Level Funding: U.S. Department of Defense Fiscal Year 2015 Budget Request," p. 1-2, April 2014; hereinafter, DOD, Estimated Impacts; http://www.defense.gov/pubs/2014_Estimated_Impacts_of_Sequestration-Level_Funding_April.pdf; hereinafter, DOD, Estimated Impacts, April 2014.

104.

This does not include additional funds requested for DOD separately in the Opportunity, Growth, and Security Initiative account.

105.

Ibid. p. 2-1; the FY2015 request complies with BCA caps if the additional $26 billion requested for DOD in a separate Opportunity, Growth, and Security Initiative (OGSI) is excluded: Congress did not address the OGSI request.

106.

DOD, Estimated Impacts.

107.

CBO Approaches for Scaling Back the Defense Department's Budget Plans, Summary Figure 2 and p. 3-p.6, March 18, 2013; http://www.cbo.gov/sites/default/files/cbofiles/attachments/43997_Defense_Budget.pdf.

108.

See DOD, Estimated Impacts, p. 3-1, April 2014. The report states "Army force structure is shown in Figure 3-1. There would be no changes from PB15, as submitted, to BBA/BCA [under sequester cap limits]."

109.

This is a rough estimate relying on CBO factors.

110.

See Figure 3-1 in Department of Defense, "Estimated Impacts," p. 1-2, April 2014. For Army position, see Army Briefing, "Army Force Mix: Least Risk, Best Value," January 6, 2014, p. 5 as quoted in CRS Report R42493, Army Drawdown and Restructuring: Background and Issues for Congress, by [author name scrubbed].

111.

Senate Armed Services Committee, Transcript "The Impacts of Sequestration on National Defense," January 28, 2015.

112.

DOD Estimated Impacts, p. 4-2, April 2014.

113.

Ibid, pp. 5-6.

114.

Ibid, p. 8.

115.

Ibid, p. 10.

116.

CBO, Long-Term Implications of the 2015 Future Years Defense Program, p. 1-p. 6, November 2014; http://www.cbo.gov/sites/default/files/cbofiles/attachments/49483-FDYP.pdf.

117.

Ibid., p. 3.

118.

Ibid., p. 9, p. 28, Figure 1-1, p. 29, and Figure 3-2.

119.

CBO, "Growth in DOD's Budget from 2000 to 2014," November 2014; http://www.cbo.gov/sites/default/files/cbofiles/attachments/49764-MilitarySpending.pdf.

120.

Military Compensation and Retirement Modernization Commission, Final Report, January 29, 2015; http://www.mcrmc.gov/public/docs/report/MCRMC-FinalReport-29JAN15-HI.pdf. Military Compensation and Retirement Modernization Commission, "Recommendations Overview;" http://www.mcrmc.gov/public/docs/report/MCRMC-Recommendations-Overview-Public-Final.pdf.

121.

CBO, The Budget and Economic Outlook: An Update, August 24, 2011; http://www.cbo.gov/ftpdocs/123xx/doc12316/08-24-BudgetEconUpdate.pdf.

122.

§101 in P.L. 113-67. The original BCA specified the amount to be taken from initial caps.

123.

CBO, "Estimated Impact of Automatic Budget Enforcement Procedures Specified in the Budget Control Act," September 12, 2011; http://www.cbo.gov/ftpdocs/124xx/doc12414/09-12-BudgetControlAct.pdf.

124.

OMB, Sequester Preview Report to the President and Congress for Fiscal Year 2014 and OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2014, April 10, 2013, Corrected version, May 20, 2013, p. 3 and p. 5; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/fy14_preview_and_joint_committee_reductions_reports_05202013.pdf. OMB sequestration reports only include the reductions required for the second set of savings for the budget currently considered by Congress, arguing that reductions in future years will be necessary unless Congress changes the law (see p. 5).

125.

See Table 1 above and for latest revised lowered caps, see Table 2 in OMB, Sequestration Preview Report to the President and Congress for Fiscal Year 2016, February 2, 2015; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_sequestration_preview_report_president.pdf.

126.

See Table 3 and p. 9 in OMB, Final Sequestration Report to the President and Congress for Fiscal Year 2012, January 18, 2012, 1-18-12; http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/sequestration_final_jan2012.pdf. International Affairs took more than its share of the BCA cut; see Stimson Center, "The Coming Cut: Continuing Resolution," by Russell Rumbaugh; Budgeting for Foreign Affairs and Defense, Budget Analysis Brief, October 25, 2013; http://www.stimson.org/images/uploads/bfadb003_the_coming_cut.pdf.

127.

CRS Report R42700, The "Fiscal Cliff": Macroeconomic Consequences of Tax Increases and Spending Cuts, by [author name scrubbed] .

128.

CRS Report R42884, The "Fiscal Cliff" and the American Taxpayer Relief Act of 2012, coordinated by [author name scrubbed] .

129.

Table provided to CRS by DOD.

130.

The Administration requested $27.7 billion for National Defense (including $$26 billion for DOD), and an equal amount for nondefense programs. OMB, Fiscal Year 2015 Budget of the U.S. Government, March 4, 2014; Department of Defense chapter; http://www.gpo.gov/fdsys/pkg/BUDGET-2015-BUD/pdf/BUDGET-2015-BUD-6.pdf.

131.

The FY2012 Administration plan exceeded the CBO baseline by $157 billion; that baseline projects defense spending at the latest enacted level with adjustments only for inflation.

132.

Department of Defense, "Defense Budget Priorities and Choices," p. 1, January 2012; http://www.defense.gov/news/Defense_Budget_Priorities.pdf.

133.

Ibid., passim.

134.

DOD, Defense Budget Priorities and Choices, Fiscal Year 2014, p. 1, and p. 10, April 2013; http://www.defense.gov/pubs/DefenseBudgetPrioritiesChoicesFiscalYear2014.pdf.

135.

This figure includes the $26 billion requested for DOD in the Opportunity, Growth and Security Initiative fund.

136.

Department of Defense, Fiscal Year 2015 Budget Request: Overview, Figure 1-1 and p.7-7, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf.

137.

Department of Defense, Press Conference, "Remarks by Secretary Hagel and Gen. Dempsey on the fiscal year 2015 budget preview in the Pentagon Briefing Room, Presenters: Secretary of Defense Chuck Hagel and Joint Chiefs of Staff Chairman Gen. Martin E. Dempsey, "February 24, 2014;" http://www.defense.gov/Transcripts/Transcript.aspx?TranscriptID=5377. This position is consistent with the 2014 Quadrennial Defense Review as discussed in Department of Defense, Fiscal Year 2015 Budget Request: Overview, Figure 1-1, 2-1, 2-3, and p.7-7, March 2014; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pdf.

138.

DOD, Department of Defense Fiscal Year 2016 Request Overview, p.1-1, February 2015; http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2016/FY2016_Budget_Request_Overview_Book.pdf.

139.

Assistant Secretary of the Army (Financial Management and Comptroller), FY 2016 President's Budget Highlights, p. 33, February 2015; http://asafm.army.mil/Documents/OfficeDocuments/Budget/budgetmaterials/fy16//pbhl.pdf.

140.

Statement by General Raymond T. Odierno, Chief of Staff United States Army before the Senate Armed Services Committee, "The Impacts of Sequestration on National Defense," January 28, 2015; http://www.armed-services.senate.gov/imo/media/doc/Odierno_01-28-15.pdf.

141.

Senate Armed Services Committee, Statement of Admiral Jonathan Greenert," Chief of Naval Operations, "The Impacts of Sequestration on National Defense," January 28, 2015; http://www.armed-services.senate.gov/imo/media/doc/Greenert_01-28-15.pdf.

142.

Senate Appropriations Subcommittee on Defense, Transcript, "Hearing on President Obama's Fiscal 2016 Budget Request for U.S. Navy and Marine Corps, " March 4, 2015.

143.

Senate Armed Services Committee, Statement of General Mark A. Welsh III, Chief of Staff U.S. Air Force, "The Impacts of Sequestration on National Defense," January 28, 2015;" http://www.armed-services.senate.gov/imo/media/doc/Welch_01-28-15.pdf.