Fiscal Year 2002 Budget Request

by Christopher Hellman, Senior Analyst

The Defense Monitor, Center for Defense Information, August 2001

As THE WORLD'S LONE SUPERPOWER, it is not surprising that the United States spends more on its military than any other nation. What is surprising is just how large the U.S. share of world military spending actually is, and the fact that while defense budgets of most countries are shrinking, U.S. military spending continues to grow.

Consider the following:

* Russia, which has the second largest military budget in the world, will spend less than one-sixth what the United States will, assuming its economy can afford it. China, which has the third largest military budget, recently announced that it would increase its military spending by almost 18 percent. (The largest part of the increase reportedly is for personnel costs.) Yet the United States still spends more than eight times what China spends.

* The U.S. military budget is 23 times as large as the combined spending of the seven countries traditionally identified by the Pentagon as our most likely adversaries-Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria-which together spend just over $14 billion annually.

* The United States and its close allies-the NATO nations, South Korea, and Japan-spend more than the rest of the world combined, accounting for roughly two-thirds of all military spending. Together they spend more than 38 times that of the seven rogue states.

* The seven rogue nations, along with Russia and China, together spend $116 billion, roughly one-third the U.S. military budget.

* The United States alone spends more than the combined spending of the next 15 nations.

***

THE BUSH ADMINISTRATION is requesting $343.2 billion for the Pentagon in Fiscal Year 2002. This is $32.6 billion above current levels, and includes the $14.2 billion increase requested for the military in the March budget release (see below). This total also includes $14.3 billion for the defense functions of the Department of Energy.

Background

On February 28, the Bush administration released the first official information on its proposed Fiscal Year 2002 budget request. The document, "A Blueprint for New Beginnings: A

Responsible Budget for America's Priorities," was a preliminary document outlining broad spending priorities for the federal government.

As part of its initial request, the Bush administration sought $310.5 billion for the Defense Department in FY'02, plus an additional $14.3 billion for the defense functions of the Department of Energy. In all, the Pentagon's initial request was $324.8 billion. This was the FY'02 spending level projected last year by the Clinton administration. It was $14.2 billion more than FY'01, a 4.6 percent increase above current levels. At the time, White House and Pentagon officials made clear that this was a "placeholder budget," and that further significant increases would be requested.

Highlights of the Full Request The military budget includes $82.3 billion for personnel ($6.9 billion above current levels) to fund a 4.6 percent pay raise, increased health benefits and higher housing allowances. The Operations and Maintenance budget (which is most closely associated with force readiness) grows by $17.8 billion to $125.7 billion, while the research and development budget, at $47.4 billion, represents a $6.4 billion funding boost.

Only the procurement budget, which goes mainly towards the purchase of weapons, did not increase, dropping from $62.1 billion to $61.6 billion. While this represents a reduction of only $500 million (0.8 percent), it seems improbable that Congress will accept such levels, and will likely increase the procurement accounts by substantial amounts.

The Bush administration has stated repeatedly its intention to fund weapons modernization and develop "leap ahead" technologies in part through the termination of some current programs. But as many analysts expected, most major weapons systems received funding at or above current levels. [For specific programs, see the box "Funding for Selected Weapons Systems" on page 1.] Defense Secretary Donald Rumsfeld said that the tough decisions on specific weapons will not occur until the FY'03 budget cycle, after a number of reviews currently under way at the Pentagon have been completed.

Missile Defense

One area which received significant additional funding was missile defense. In all, the Pentagon plans to spend $8.3 billion on missile defense, an increase of $3 billion (57 percent) over current levels. [See Box "Fiscal Year 2002 Ballistic Missile Funding Request"] In addition, the Ballistic Missile Defense Office (BMDO) has been restructured. Funds are now allocated in general categories, rather than to specific programs. The three major categories will focus on developing technologies related to Boost Phase, Midcourse and Terminal segments of an incoming missile's flight. Effectively, budgetary line items within BMDO have been eliminated. Without such details it will be extremely difficult, if not entirely impossible, for independent assessments of how much money is being spent on programs.

Discretionary Spending

In all, the federal government will spend approximately $1.9 trillion in Fiscal Year 2002. Of this, discretionary spending-those funds that the administration must request and Congress must act on each year-accounts for roughly one-third. The other category of federal spending is mandatory spending, which the federal government spends automatically unless the President and Congress change the laws that govern it. Mandatory spending includes entitlements, those benefits like Social Security, Medicare, food stamps and federal pensions. It also includes interest payments on the national debt. With the new funds, Pentagon spending now accounts for over half (50.5 percent) of all discretionary spending. [See chart]

What Next?

Congress is just now beginning its work on the annual Pentagon spending bills. The debate in Washington this year is over whether to increase military spending a lot, or increase it a whole lot. Ultimately, whether Congress can fully fund the Pentagon's request-or even add more money to the defense budget, as has been the case in recent years-will be decided by economic factors, rather than ideology. The Congressional Budget Office's (CBO) revised budget projections, which will update figures for the federal budget surplus, are due out in late August. The new figures will likely have a significant impact on how large the Pentagon spending increase will be.

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