FY2022 NDAA: Budgetary Context

FY2022 NDAA: Budgetary Context

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INSIGHTi

FY2022 NDAA: Budgetary Context
Updated January 7, 2022
Congressional consideration of the National Defense Authorization Act for Fiscal Year 2022 (NDAA;
H.R. 4350; S. 2792; S. 1605; P.L. 117-81) occurred as federal spending was projected to continue to
exceed revenues. This trend raised questions about whether pressure to reduce the federal deficit would
affect defense budget plans.
In July 2021, the Congressional Budget Office (CBO) projected a federal deficit of $3.0 trillion for
FY2021, or 13.4% of Gross Domestic Product (GDP). That percentage was the second-highest since
1945. CBO attributed the size of the projected deficit in part to “the economic disruption caused by the
2020-2021 coronavirus pandemic and the legislation enacted in response.” CBO projected spending
would continue to exceed revenues over the next decade (Figure 1). From FY2022 to FY2031, CBO
projected discretionary defense outlays would increase 23% and nondefense discretionary outlays 6%;
while mandatory outlays would increase 40% and net interest payments on the national debt 198%.
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Figure 1. Outlays by Budget Enforcement Category and Revenues,
FY2001-FY2031 (Projected)
(in trillions of nominal dollars)

Source: CRS analysis of Office of Management and Budget (OMB), Historical Tables, Table 1.4 and Table 8.1; and CBO,
Budget and Economic Data, 10-Year Budget Projections, July 2021, Table 1-1 and Table 1-4.
Notes: 2001 through 2020 reflect OMB amounts (actual); 2021 through 2031 reflect CBO projections.
In recent decades, during periods of widening gaps between revenues and outlays, Congress has
sometimes enacted legislation intended to reduce the deficit in part by limiting defense spending.
After the deficit reached nearly 6% of GDP in 1983, Congress enacted the Balanced Budget and
Emergency Deficit Control Act of 1985 (P.L. 99-177). This legislation created annual deficit limits and
stated that breaching them would trigger automatic funding reductions equally divided between defense
and non-defense spending. In 1990, Congress passed the Budget Enforcement Act of 1990 (Title XIII of
P.L. 101-508), which included statutory limits on discretionary spending. These limits were in effect
through 2002 and, in certain years, included a specific limit on defense spending.
After the deficit reached nearly 10% of GDP in 2009, Congress enacted the Budget Control Act of 2011
(BCA; P.L. 112-25). The legislation reinstated statutory limits on discretionary spending for fiscal years
2012-2021 and resulted in separate annual limits for defense spending. The defense spending caps under
BCA as amended applied to discretionary base budget authority for the national defense budget function
(050). The legislation effectively exempted certain other types of funding from the caps, including
funding designated for Overseas Contingency Operations (OCO). Under the BCA, discretionary spending
limits were enforced through a mechanism called sequestration, which automatically cancels previously
enacted appropriations by an amount necessary to reach pre-specified levels. Over the past decade,
Congress enacted appropriations within BCA discretionary spending limits except in FY2013, when then-
President Barack Obama ordered the sequestration of budgetary resources across nonexempt federal
government accounts. BCA discretionary spending limits expired in FY2021; there were no discretionary
spending limits for FY2022. As part of the FY2022 budget request, the Biden Administration proposed
discontinuing funding for OCO and, instead, requested funding for contingency operations in the base
budget.

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Some observers have argued statutory spending limits disproportionately affect defense programs and
inadequately address projected growth in mandatory programs; others have argued they are necessary in
light of recurring deficits and increasing federal debt. In 2020, CBO identified options for reducing the
federal budget deficit through budgetary savings in both mandatory and discretionary programs. Twelve
options involved reducing funding for discretionary defense programs (e.g., operation and maintenance,
naval ship construction, aircraft). In 2021, CBO published a report describing three options for carrying
out national defense activities under a smaller defense budget based on differing military strategies.
Figure 2 shows defense spending over time in both nominal and constant FY2022 dollars, based on CRS
analysis of Office of Management and Budget (OMB) figures. The inflation-adjusted line shows the
cyclical nature of defense spending during wartime. The level of defense outlays requested for national
defense in FY2022, when adjusted for inflation, was higher than during the Cold War-era military buildup
of the 1980s and lower than during the height of post-9/11 operations in Iraq and Afghanistan. OMB
projected defense outlays to remain relatively flat through FY2026.
Figure 2. National Defense Outlays, FY1940-FY2026 (projected)
(in billions of nominal and constant FY2022 dollars)

Source: CRS analysis of OMB, Historical Tables, Table 3.1 and Table 10.1.
Notes: FY2021 through FY2026 reflect projections. Figures adjusted to constant FY2022 dol ars using GDP (chained)
price index in Table 10.1.
Figure 3 shows defense spending over time as a share of both federal outlays and GDP, based on OMB
figures. Defense outlays steadily decreased from peaks of nearly 90% of federal outlays and more than a
third of GDP in the 1940s during World War II—to a projected 12.8% of federal outlays and 3.3% of GDP
in FY2022.

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Figure 3. National Defense Outlays as Share of Total Federal Outlays and GDP, FY1940-
FY2026 (projected)
(in percentages)

Source: CRS analysis of OMB, Historical Tables, Table 3.1.
Notes: FY2021 through FY2026 reflect projections.
For FY2022, Congress debated competing proposals regarding the overall size of the defense budget. In
August 2021, the Senate and House adopted an FY2022 budget resolution (S.Con.Res. 14), which
recommended $765.7 billion in new budget authority for FY2022 national defense programs and assumed
“discretionary levels as proposed in the President’s budget request.” In December 2021, Congress passed
the FY2022 NDAA, with a total budget authority implication of $790.6 billion. As of the date of this
publication, Congress has not enacted regular FY2022 appropriations acts. Congress passed continuing
resolutions (P.L. 117-43 and P.L. 117-70) to fund most defense programs and activities at FY2021 levels,
with certain exceptions (or anomalies), through February 18, 2022.

Author Information

Brendan W. McGarry
Megan S. Lynch
Analyst in U.S. Defense Budget
Specialist on Congress and the Legislative Process

Disclaimer

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IN11797 · VERSION 5 · UPDATED