OMB's pass-back memo has been leaked. That memo includes the topline numbers that will make up the President's defense request this coming February. It has two interesting implications:
- If you assume DoD keeps the same proportion of the 050 budget function, the toplines fit under the BCA's revised security caps (which is budget function 050, national defense) that go into effect this January now that the supercommittee has failed. And means the administration isn't budgeting for sequester.
- Staying under those caps also means the budget will erode in real terms. The average nominal growth is about 2%, which after FY14 is slightly under inflation projections. So the budget is actually shrinking, as expected.* Although as we've said after 10 years that is still only a 7% reduction in real terms, far below historical builddowns.
Kudos to CBO as well, who way back in January had projected an $83B OCO number for FY13--what the admin is proposing now--when they offered their policy alternative for a drawdown to 45K troops by 2015. And a hopeful sign that there won't be a lot of base to OCO shenanigans, especially with the administration telling DoD to begin moving all enduring war costs to the base. Reclaiming war costs would bring us closer to historical builddown percentages, although the base budget still probably has some way to go to.
* the original draft included an assumption for FY18-21, which did not match the guidance provided.