A CBO PAPER: The Long-Term Implications of Current Defense Plans: Summary Update for Fiscal Year 2004

Decisions about national defense that are made today can have long-lasting effects on the composition of U.S. armed forces and on the budgetary resources needed to support them. For example, programs to develop weapon systems often last a decade or more before the systems are fielded, and policy decisions about such matters as military pay and benefits can have long-term implications. In January 2003, the Congressional Budget Office (CBO) published a study called The Long-Term Implications of Current Defense Plans in which it projected the resources that might be needed each year through 2020 to carry out the defense plans contained in the Bush Administration's 2003 Future Years Defense Program (FYDP). Since then, the Department of Defense (DoD) has prepared a new FYDP reflecting changes that have been made to the department's programs and priorities in the past year. This paper updates CBO's January 2003 long-term projections to be consistent with the plans contained in the 2004 FYDP. Overall, CBO's current and previous projections tell a similar story: carrying out today's plans for defense would require annual funding to stay at higher levels over the long term than defense spending has reached at any time since 1980, even when the effects of inflation are removed (see Figure 1). That continuing demand for high levels of defense resources comes from three sources: (1) Plans to rapidly increase purchases of new military equipment in the near term, following the decline in such purchases that occurred during the 1990s after the Cold War ended; (2) plans to develop and eventually produce systems that will provide new capabilities, as part of the push for 'military transformation'; and (3) the increasing cost of providing pay and benefits to DoD's military and civilian personnel.