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What to Expect in the FY 2018 Defense Budget By Todd Harrison

On Tuesday, the Trump administration plans to release its first budget request to Congress, which will include a detailed budget proposal for defense. This will be the first chance to see the specific priorities of the new administration and gauge whether campaign rhetoric about growing the military will become administration policy. Below are five critical questions asked and answered about what to expect in the FY 2018 budget request.

Q1: How does the Trump defense budget compare to the Obama defense budget?

A1: The Trump administration previewed its FY 2018 budget request in March, announcing the topline level of funding for defense. Based on analysis of a leaked copy of an Office of Management and Budget (OMB) budget table obtained and posted on line by Third Way, it appears that the administration modified this topline slightly after that announcement. To understand how the Trump budget compares to President Obama’s defense plans, the most relevant comparison is to the projection for FY 2018 in the last budget submitted by the Obama administration. The table below compares the Trump budget request for defense to the Obama budget projection for the same year. While the Trump budget request is $54 billion above the Budget Control Act (BCA) caps in effect for FY 2018, the Obama administration was already planning for $35 billion more than the budget caps allow. Thus, the Trump budget is a net increase of $19 billion above what was already planned in the Obama budget ($18.4 billion of which is for the Department of Defense [DoD]).

Q2: How will the proposed increase be spent?

A2: The announcement in March only included the topline levels shown above and no detail on how the money would be allocated. However, the budget table obtained by Third Way provides a more detailed look at the proposed budget. The tables below break out the DoD base discretionary budget by Service and budget title. The proposed Overseas Contingency Operations (OCO) budget is listed separately because the Obama administration did not release an OCO budget projection for FY 2018, and thus there is no equivalent comparison to be made.

Of the $18.4 billion proposed increase in the base DoD budget relative to the Obama budget level, $8.6 billion is consumed by higher military personnel costs and operation and maintenance (O&M) costs. Much of this is due to decisions on force levels made in the FY 2017 defense budget enacted by Congress in April, which increased force levels above what was requested for 2017. For example, in the FY 2017 National Defense Authorization Act Congress set the Army active end-strength for FY 2017 at 476,000 (compared to 460,000 in the Obama request). The Obama projection for FY 2018 assumed Army end-strength would fall to 450,000, but in the Trump budget Army active end-strength is almost certain to be 476,000 or higher. These additional forces also require training and support for routine peacetime activities, which increases demands on O&M funding in the base budget.

Personnel costs are also higher in FY 2018 due to the higher pay raise Congress enacted for FY 2017, which was 2.1 percent rather than the 1.6 percent raise requested by the Obama administration. This change in FY 2017 means that service members are starting out at a higher pay level than anticipated for FY 2018. Moreover, the Obama budget assumed a raise of 1.6 percent for FY 2018, but the Trump administration may instead propose a pay raise equal to the Employment Cost Index, which would be 2.4 percent.

Funding for Research, Development, Test, and Evaluation (RDT&E) receives the largest percentage increase, growing by $7.6 billion or 10 percent above the level projected for FY 2018 in last year’s budget request, but procurement is down slightly with a cut of $0.3 billion. Overall, the budget increase appears to be spread fairly evenly across the Services, with each receiving an increase of 3.8 to 4.0 percent compared to last year’s projected budget levels. Defense-wide funding (i.e., funding that does not belong to any of the Services) receives a modest increase. Within defense-wide funding, the Defense Health Program (TRICARE) receives a cut of $0.7 billion, indicating that the budget may include some military health care reform initiatives.

Q3: Does this budget indicate a significant shift from the Obama administration?

A3: Based on the topline budget figures released in March and the details leaked this week, this budget does not appear to be a significant departure from the Obama defense budget. It is only 3 percent higher than previously projected for FY 2018, and much of that increase is consumed by the costs of the higher pay raise and end-strength levels enacted by Congress in FY 2017. That leaves little room in the budget for the Trump administration to make significant changes. The fact that this budget is not a significant change should not come as a surprise. The first budget request of a new administration often does not change much from the last request of an outgoing administration. It is not until the second budget request that a significant change is usually evident. This is because the first budget of a new administration is started months in advance by the previous administration, and the new administration has just a few months at the end to make adjustments before submitting it to Congress.

Q4: Is this one of the largest defense increases in history?

A4: If enacted, this would be the eighth-largest year-over-year increase in the base budget (adjusting for inflation) in the past 40 years, as shown in the figure below. In terms of the percentage increase, it is only the ninth largest in the past 40 years. These figures only include the base budget and therefore exclude increases due to war-related funding after 9/11. But if war-related funding is included, it is still only the ninth-largest increase in the past four decades. It is also worth noting that in 20 of the past 40 years the budget declined in real terms.
Comparison of Year-Over-Year Changes in the Base National Defense Budget
This request would return the base defense budget to a level almost equal (when adjusted for inflation) to the peak year of the Reagan defense buildup. However, as shown in the figure below, this is still slightly below the peak of the post-9/11 buildup in the base defense budget in FY 2009.

Q5: What are the chances the proposed defense budget is enacted by Congress?

A5: The chances of the budget being enacted at the level proposed by President Trump appears to be low. The budget request requires an increase in the BCA budget cap for defense of $54 billion, and it proposes paying for this defense increase by cutting the nondefense discretionary budget by an equal amount. These cuts would be targeted at the State Department and Environmental Protection Agency, among others. Because modifying the BCA budget caps requires 60 votes in the Senate for cloture, Republicans will need some Democratic votes to enact any change.

Three previous budget deals have modified the BCA budget caps, and each followed a similar pattern: every increase in the defense side of the budget caps was matched by an equal increase in the nondefense side of the budget caps. This “parity” even extended to OCO funding. It is unlikely that enough Democrats in the Senate would agree to such a significant increase in the defense budget caps without some increase in the nondefense side—much less a cut in nondefense. For this reason, it seems more likely that a compromise will be forged that includes a smaller increase for defense and no cuts to nondefense, similar to the deal negotiated for the FY 2017 omnibus appropriations bill.

Todd Harrison is a senior fellow and director of defense budget analysis with the International Security Program at the Center for Strategic and International Studies in Washington, D.C.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2017 by the Center for Strategic and International Studies. All rights reserved.

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The Center for Strategic and International Studies (CSIS) is a bipartisan, nonprofit organization founded in 1962 and headquartered in Washington, D.C. It seeks to advance global security and prosperity by providing strategic insights and policy solutions to decisionmakers.

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