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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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Wednesday
Aug312011

Modest Cuts Sustained Over Time

Cutting the defense budget requires endurance.  Our last builddown, lasting from 1986 through 1998, illustrates this well.  But a slog can yield results.  Mild cuts applied to such a large budget and sustained over a long term still add up to very sizeable savings.  By FY98, for instance, the defense budget had decreased by 36% – $200B less than its FY85 peak after adjusting for inflation, a savings of $1.6T compared to its baseline going in. 

That decline occurred through modest annual adjustments over time.   The median change from FY86 to FY98 was only -2.5%.  Most of the cuts came from forgoing inflation adjustments.  Looking in current dollars, for instance, the topline actually increased in 7 of the 13 years.

Still there are some outliers, as the chart shows.  In FY91, the base defense budget dropped by 9% in real terms.  Funding for the Gulf War – $43B in current-year supplemental funding, or 14% of the base budget – appeared and would be outlaid over the coming years, but it was offset in lump sum by more than $40B in reimbursements by our allies.  The total amount that flowed through the Pentagon was significantly more than the year before, even though the base budget shows a significant decrease. 

Small annual adjustments mean we have the ability to manage the transition to a smaller defense budget in a sensible way.  As our own Gordon Adams told the House Budget Committee this summer “the slope of this [ongoing] build down will be gradual, implemented over a number of years, and it should be linked to a coherent set of strategic, mission, and program choices.” 

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