Projecting Defense Spending

In a recent report, CBO estimated the base defense budget from 2012 out through 2030 using the Defense Department's Future Years Defense Program (FYDP) -- DoD's five-year plan for defense spending submitted to Congress in April 2011 -- to project future spending.

While the FYDP only provides for spending through 2016, CBO has extrapolated what defense spending would be if the budget were to be maintained through 2030, projecting the budgetary effects of decisions included in the near-term five-year window. For the 2012-2016 period, CBO estimates that the FYDP would grow defense spending by 1.8 percent annually after adjusting for inflation. Beyond 2016, the budget would have 0.5 percent real growth.

CBO expects that increases in operation and support costs will be the big driver of the increases in defense spending over the next few decades under this budget plan. This category basically breaks down into spending on military personnel -- compensation and health care -- and operation and maintenance. Both categories are expected to be on the rise through the next decade in the FYDP, taking up a larger share of the overall defense budget. We've broken down spending by category (in 2012 dollars) in the table below.

Defense Spending by Category (Billions of 2012 Dollars)

2012 2016 2021 2030
Operation and Maintenance $207 $226 $248 $284
Military Personnel $143 $144 $155 $175
Procurement $113 $140 $140 $110
Research and Development $76 $69 $69 $58
Military Construction $13 $12 $13 $13
Family Housing $2 $2 $2 $2
Total, Base Budget $554 $594 $625 $642

Compared to last year, the path is similar for the first decade, but growth rates diverge in the second decade. Based on the average growth rates, defense spending by 2030 in this year's FYDP is about $50 billion lower than last year's FYDP. In particular, the acquisitions portion of the budget is more restrained compared to last year's plan.

Of course, making projections for discretionary spending can be very difficult, given that lawmakers must appropriate funding each year and the unpredictability of future security needs. However, it is still useful to see what the Pentagon is looking to spend on defense over the long-term as we comb through the defense budget for savings. With this in mind, defense spending -- like all areas of the budget -- should be part of any fiscal plan to put our fiscal house in order.