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.”