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“Modest reforms to pay and compensation will improve readiness and modernization. It will help keep our all-volunteer force sustainable and strong. Keeping faith also means investing sufficient resources so that we can uphold our sacred obligations to defend the nation and to send our sons and daughters to war with only the best training, leadership and equipment. We can’t shrink from our obligations to one another. The stakes are too high.”

Gen. Martin E. Dempsey

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DOD’s $64B Question: “Where is that $64B?”


CBO has long said that DoD underestimates program costs including, most recently, its report on the Long-Term Implications of the 2012 Future Years Defense Program. That study concluded that “the difference between the CBO projection and DOD’s estimates for the FYDP is about 2%, or about $64 billion, over the five-year period.”

Months of grinding budget negotiations have given us all a clear sense of how unwelcome $64 billion in surprise costs will be.  It’s hard to visualize that surprise, though, and CBO provided only a table.  So here’s the corresponding figure.  The space between the green and blue lines is the additional defense cost CBO projects but the Pentagon has not yet acknowledged.

So how will this gap eventually be acknowledged?  Pressing ahead with the Pentagon’s FY12 program would generate spending not only above today’s level, but also beyond its purported plan. When it arrived, that’d feel like imposed deficits and debt.  Though very different in process, this outcome is similar in budgetary terms to the debt hidden in our war budgets.

Other experiences with this problem suggest that Congress and the administration will revise the program, though, rather than embracing these costs.  Deadlines slip, costs fall off the horizon, and today’s projection looks more prescient.  The sense of hidden debt is converted into outright hidden inefficiency. 

So, when you read The Will and the Wallet in 2016, don’t look for a budget trend that matches today’s CBO line – look for a pattern of delays in the programs that underpin that trend.  That makes it all better… right?


Reader Comments (1)

It is clear to see this effect by looking backward. An examination of the last decade of Navy shipbuilding budgets, for example, shows the navy spent every cent appropriated, but built only 78% of the number of ships promised. You'll find a similar number when you look at aircraft procurement and I would venture to guess that the Army's and Air Force's track records show similar excessive optimism. All budgets are aspirational; very few are accurate.

July 26, 2011 | Unregistered CommenterPhil C.

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