The Fiscal Year 2001 Military Budget

The Center for Defense Information website

The Clinton Administration's Fiscal Year 2001 budget request for the military includes $305.4 billion for the Pentagon and the defense functions of the Department of Energy. It is $12 billion higher than the current (FY'00) budget, and represents more than 1% real growth in military spending. And while last year the Administration proposed adding $112 billion to the Pentagon's multi-year spending plan, the new request goes last year's plan one better, adding another $15 billion to the original increase. In all, the Administration's request calls for over $1.6 trillion in military spending for Fiscal Years 2001-2005.

... military spending will continue to increase annually over the next five years. By FY2004, U.S. military spending will have reached the Cold War average even though the Soviet Union is gone and the U.S. military itself is a third smaller than it was a decade ago.

Military Spending Still Getting Lion's Share of Budget

As it has in past years, military spending dwarfs that of all other discretionary programs. For the first time in recent history, however, it will account for less 50% of the total discretionary budget.

Or will it? Based on the figures included in the President's budget request, education and housing assistance programs are slated to receive major funding increases from this year's levels. For education, the projected increase represents a 36% growth in federal funding, while the planned increase for housing calls for a 59% jump. Simply put, there is no way that the GOP-led Congress will accept these increases.

Once these unrealistic funding increases are removed from the FY'01 request, the Pentagon continues to account for over 50% of the discretionary budget.

Spending Priorities: Weapons, not People

As was the case last year, concerns about troop readiness, spare parts, and attracting and retaining quality people into the military are being used to fuel support for Pentagon spending increases. But as was also the case last year, the allocation of resources within the military budget request paints a different picture.

The request increases funding for personnel by almost 3% and for operations and maintenance ­ the so-called "readiness" account ­ by more than 4%. But it also increases funding for procurement ­ the purchase of new weapons -- by more than 11%. By FY 2005 spending for personnel will have increased by 16% and for readiness by 9%, but funding for the purchase of new weapons will rise by nearly 31%. .. the Pentagon continues to invest billions on Cold War weapons systems.

How Much Will Congress Add?

The ink was not yet dry on the President's budget before Congressional "hawks" were voicing their dissatisfaction with the Pentagon funding levels, which they considered inadequate. For example, Representative John Kasich (R-OH), chairman of the House Budget Committee, said: "We are going to have to put more money in the military­there is no question." This sentiment was echoed by the heads of the four military services. Asked by Congress to provide information on unfunded programs which they consider to be high priorities, the Chiefs submitted "wish lists" that totaled over $15 billion in FY'01 alone.

Despite clear support in Congress for raising military spending, it appears that the ability of members to give the Pentagon a significant increase in FY'01 is limited. The Balanced Budget Act (BBA) of 1997 sets specific spending limits for defense and all other federal discretionary programs ­ those on which Congress and the Administration must act to fund each year. However, the prospect of perceived significant budget surpluses have led some members of Congress to consider using these funds to pay for high priority federal programs, including defense. But do these surpluses really exist? And if so, just how large are they?

According to government accounting methods, when the amount that the government takes in each year, known as revenues, exceeds the amount spent, the difference is the budget surplus. The problem is that much of what the government takes in each year represents workers' contributions to the Social Security system intended for future benefit payments. Currently the Social Security system is bringing in more than it is paying out in benefits, and the difference is being counted towards the overall federal balance of payments. This has the effect of making the surplus appear much larger than it actually is, and permits the government to spend funds that in future years will be needed to pay Social Security benefits when the system's income no longer is sufficient to cover benefit payments.

In recent weeks leading congressional Democrats and Republicans, along with the Clinton Administration, have decided, at least for the time being, that surplus Social Security revenues will NOT be counted towards the general budget surplus nor used to fund other federal programs. The portion of the surplus not related to Social Security revenues is known as the "on-budget" surplus. The Congressional Budget Office estimates that the total budget surplus for FY'01 will be $166 billion, while the on-budget surplus will be roughly $21 billion.

In addition to those supporting increases in Pentagon spending, other members of Congress are trying to fund their priorities out of the on-budget surplus. Such items as a tax cut and Medicare coverage of prescription drugs are very popular, particularly in an election year. Supporters of critical domestic programs such as education and crime prevention are also are interested in securing additional funding. Thus the demands on this relatively small surplus add up quickly. Democratic staffers at the House Budget Committee estimate that no more than $5 billion will be available for the military in FY'01, with the likely increase in Pentagon spending to be in the range of $2-3 billion.

Budgetary "Sleight-of-Hand"

Congress' ability to raise military spending in FY'01 is restricted only if members continue to take a "hands-off" approach towards the Social Security surplus and if they are disciplined enough to avoid the budgetary gimmicks that have become commonplace in the last few years. For example, last year Congressional appropriators declared $7.2 billion in Pentagon funding to be "emergency spending" and thus not subject to the spending caps set by the BBA. They also agreed to defer $1.2 billion in FY'00 spending until FY'01 by deferring payments to defense contractors, and by delaying the last payday for military personnel in FY'00 by one working day so that it would fall in FY'01. Similar "magic" occurred elsewhere in last year's budget. Three billion dollars for veterans' health care and $4.5 billion for the year 2000 census were declared to be spending emergencies even though the VA health care program is an annual expenditure and funding for the census has been included in the normal federal budget for 200 years.

While it is unlikely that Congress will raid the Social Security accounts in an election year, it is far less certain that members will be able to restrain themselves from finding other ways around the BBA's spending limits.

For more details and analysis of the Administration's FY'01 military budget request, contact CDI, or visit our military budget site.

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