Budgeting for Defense: Maintaining Today's Forces Section 5 of 5
September 2000

Chapter Three

Alternative Defense Forces and Budgets

The gap between current defense budgets and the Congressional Budget Office's estimate of the funding needed to sustain today's military offers a challenge to future policymakers. In broad terms, they have two options for eliminating that gap: they could either bring the amount of the sustaining budget down to today's level of funding--by cutting specific programs or forces or by paring down their missions--or they could increase funding for defense.

This chapter discusses both of those approaches. For example, it includes selected examples of possible reductions directed at each of the major determinants of the defense budget discussed in Chapter 1. But defense officials could also change the nation's strategic goals and its respective priorities, which might lead to decisions to reduce forces or cut investments in modernization related to lower-priority missions. CBO illustrates that option for closing the gap by developing two alternative force structures that each emphasize one or the other of the Department of Defense's major strategic goals--preparing for regional conflicts (specifically, major theater wars) and pursuing peace operations. An across-the-board cut to DoD's forces and programs is a further option available to policymakers, as is increasing the defense budget to the level of funding that CBO estimates is needed to sustain today's military.

CBO's alternatives are only broad renderings of different approaches to eliminating a funding gap. To make the detailed changes associated with a major restructuring of U.S. strategic priorities would require policymakers to thoroughly review possible threats to the nation's security (both now and in the future), the appropriate strategy to counter them, and the budgetary implications of decisions about those matters. Such a review could lead to changes in forces, levels of readiness, and plans for modernization. Without that review, estimates of the cost of alternative strategies are merely illustrative, and actual requirements for national defense cannot be calculated.

Reducing Budget Requirements

To close the gap between current defense funding and CBO's estimate of a sustaining budget, future policymakers may seek to change the requirements that generate the defense budget request. They could do that by cutting specific programs, changing strategic priorities, or instituting an across-the-board cut in all defense programs.

Reducing Specific Budget Categories

Cuts to one or more of the major categories of DoD spending--forces, investment, or infrastructure-- would be one way to significantly reduce the resources needed to sustain the U.S. military. CBO evaluated a number of such options in its March 2000 report Budget Options for National Defense, calculating potential savings over the 2001-2010 period. The examples that follow are selected from that volume; here, however, savings from the options are expressed in 2000 dollars rather than the current dollars used in the defense options report.(1)

Forces. In preparing that volume, CBO examined the costs and implications of cutting several types of major combat forces--for example, reducing the numbers of Army National Guard divisions, Navy attack submarines and aircraft carriers, and tactical fighter wings in the Air Force. Average annual savings from implementing those options would range from about $0.5 billion (for eliminating two Army National Guard combat divisions) to $2.2 billion (for cutting two carriers and their air wings). Savings from trimming National Guard divisions and tactical fighter wings reflect only operating costs; however, CBO's option for cutting the number of carriers also includes savings from reducing procurement. Declines in operating costs alone from eliminating two carriers and their air wings would average $1.4 billion annually. Operating savings from cutting two Air Force tactical fighter wings would average about $0.6 billion.

Investment. Although the Defense Department is not buying sustaining quantities of most types of military equipment, it is developing or buying a number of new weapon systems. They include the Army's Comanche helicopter and Crusader artillery system, aircraft carriers and attack submarines for the Navy, and the Air Force's F-22 fighter and C-17 airlift aircraft. Canceling or cutting back any of those programs would reduce the funding required for procurement or development, or both. Average annual savings over the 2001-2010 period could range from about $0.5 billion (for canceling the Comanche) to $3.8 billion (for canceling the F-22).

Infrastructure. Making its support activities more efficient is another way that DoD could save money and reduce the resources needed to maintain its forces in the future. A large share--more than half--of DoD's funding is found in categories related to infrastructure, according to the Defense Department. Cutting the costs of those activities may be an option that future Administrations and Congresses would choose to pursue regardless of other cuts (to forces and investment, for instance) that they decided to make.

Maintaining national security at the lowest price to taxpayers is, of course, a widely shared objective. CBO evaluated several approaches to reducing the military's support costs in Budget Options for National Defense; the options included revamping the military medical system, closing more bases, restructuring some benefits that active-duty personnel now receive, and consolidating DoD's retail facilities. CBO's estimates of average annual long-term savings from such options reached as much as $1.6 billion (for downsizing the military medical care system).

Yet despite their potential for savings, efforts to make support operations more efficient are unlikely to resolve all of DoD's budget problems. Most of the savings from individual options in this category would amount to less than $0.5 billion annually; in some cases, the savings would be much less. Also, whether such changes could be instituted at all is questionable. Many efficiency measures of this kind--including some of the options CBO evaluated, such as base closures--have proved to be quite difficult to implement.

Changing Strategic Priorities

Many of the options discussed above would substantially reduce the funding that CBO estimates DoD would need to sustain its forces. But a number of those changes would have to be undertaken together to bring CBO's estimate of a sustaining budget down to the level of DoD's funding for 2000. A systematic approach to such reductions would reassess the national security strategy, rank the military's missions in the light of that reassessment, and reduce spending on forces and modernization programs associated with missions of lower priority. The following alternatives illustrate two ways in which that spending could be cut.

Alternative I: Emphasize Peace Operations. Increasing the priority of military missions that CBO has labeled peace operations would probably mean a shift in the distribution of forces that the military maintains. Some military units--in particular, some noncombat units--would need to be increased or at least retained at their current level.(2) Units that are heavily involved in peace missions include the Navy's carrier battle groups, amphibious ready groups in the Marine Corps, certain support and administrative elements of the Army's divisions and corps, and surveillance and reconnaissance aircraft in the Air Force. This alternative would retain those units at current levels (see Table 5). At the same time, it would cut some traditional combat forces, including five Army divisions (two active and three reserve) and almost six tactical fighter wings (including two and a half from the reserves) in the Air Force.

Table 5.
Selected U.S. Military Forces Under Current and Alternative Strategic Priorities

  Forces Under Alternative
Strategic Priorities
  Forces Under Current
Strategic Prioritiesa
Emphasize Peace
Emphasize Major
Theater Wars

Army Divisions  
  Active 10   8   10  
  Reserve 8   5   5  
Navy Carrier Battle Groupsb 12   12   12  
Marine Corps  
  Amphibious ready groupsc 12   12   12  
  Expeditionary forcesd  
    Active 3   3   3  
    Reserve 1   0.7   1  
Air Force Tactical Fighter Wings  
  Active 12.6   9.3   12.6  
  Reserve 7.6   5.1   7.6  
Sustaining-Budget Estimate
(Billions of 2000 dollars of
budget authority)
340   320   325  

SOURCE: Congressional Budget Office.
a. Today's strategic priorities encompass what CBO has termed peace operations (such as humanitarian assistance, peacekeeping, and peace enforcement) and major theater wars.
b. A carrier battle group includes an aircraft carrier and its air wing, along with surface combat ships, attack submarines, and logistics ships.
c. An amphibious ready group comprises several amphibious ships (including one that can carry attack aircraft and a variety of helicopters) that transport Marines and their equipment.
d. A Marine expeditionary force includes a division, an air wing, and supporting forces for those combat elements.

In developing this alternative, CBO assumed that its estimate of steady-state quantities for procurement would decline in proportion to the reductions in forces. Thus, Alternative I would pare back the level of purchases under a sustaining budget for ground combat equipment, including tanks, attack helicopters, and artillery systems. It would also reduce sustaining purchases of fighter, ground attack, and multirole aircraft. In contrast, the alternative would maintain purchases of a variety of systems that have been heavily used in recent peace operations including utility helicopters and trucks for the Army and airlift aircraft, tankers, and reconnaissance aircraft in the Air Force. Because CBO did not assume that any programs would be eliminated, it also assumed that RDT&E funding would not be cut.

As a result of lower costs for operations and modernization, the sustaining budget for Alternative I is smaller than the sustaining budget associated with today's forces. CBO estimates that the total sustaining budget for this alternative is about $320 billion--approximately $30 billion more than the budget for 2000 but $20 billion less than the amount CBO estimates is required to sustain and modernize today's forces.

Alternative II: Emphasize Major Theater Wars. Some defense experts believe that the services' most important mission is to be ready to go to war, not to perform peace operations. If DoD decided to emphasize the conventional capabilities necessary to fight two regional wars, it might choose to preserve most types of combat forces--specifically, units with a great deal of firepower, such as tank battalions, conventional attack wings, and strategic bomber squadrons--at today's levels (see Table 5). However, this option would cut three divisions of the Army National Guard because those units are not included in DoD's current plans for fighting two major theater wars.

Basically, this alternative would preserve the military's current force structure, but it would rely much more than do current plans on using today's weapons to equip those forces. The relatively unsophisticated warfighting capabilities of potential regional foes are one justification for such a move. Another would be the possibility of avoiding the problems of aging equipment by buying newly built current-generation weapons and curtailing purchases of new, more-sophisticated weapons.(3) For example, this alternative would purchase F-15s and F-16s for the Air Force's tactical fighter forces instead of more-advanced F-22s and Joint Strike Fighters. It would also purchase the cheaper OH-58D helicopter instead of the light-attack Comanche helicopter that is part of the Army's current purchasing plan.

A sustaining budget for this alternative totals about $325 billion a year, CBO estimates. That sum is about $15 billion less than the sustaining-budget estimate associated with today's planned forces and about $35 billion more than the appropriation for 2000. Compared with the first alternative, this option would keep far more forces at a modestly higher cost. However, the fact that changes of the extent described under both alternatives still would not bring the total for a sustaining budget down to today's level of funding illustrates the complexity of the problem that decisionmakers face.

Reducing DoD's Forces, Programs, and Activities Across the Board

Spreading cuts across all parts of the defense establishment is another alternative for closing the gap between today's defense funding and CBO's estimate of sustaining funding. Although reducing budgets in that way might seem an unlikely approach for DoD, the department has frequently spread cuts broadly in the past, perhaps finding it easier to impose reductions everywhere rather than direct cuts toward specific areas. By dispersing cuts, DoD may also preserve more kinds of capabilities than it would if it targeted reductions.

But across-the-board cuts have disadvantages as well. Overall, they probably cut forces and purchases more deeply than would cuts that result from reducing specific programs. That is because the savings from canceling complete systems can be greater than the savings from reducing the quantities purchased by a number of programs. In addition, some portion of DoD's costs probably does not vary with reductions in its forces. (For example, if a unit such as a squadron or part of a brigade was cut, operating costs for the base at which the unit was located might not decline by much.) Making across-the-board cuts to forces without proportional cuts in DoD's infrastructure can also mean that the operating cost per unit will increase. One of CBO's earlier analyses suggests, for example, that the Air Force could operate more fighters without increasing its budget if it did so from fewer bases.(4)

CBO estimates that DoD would need to cut roughly 25 percent of today's forces to reduce its total sustaining budget to $290 billion (the defense appropriation for 2000, excluding supplemental funding). That kind of reduction would mean cutting more than two divisions in the active Army, three carrier battle groups in the Navy, and the equivalent of more than three active fighter wings in the Air Force. Such cuts are smaller than the reductions in forces that occurred during the 1990s. Nevertheless, they would have a substantial effect on the capability of U.S. forces because the cuts would be taken from today's smaller military. As a result, some defense leaders believe that cuts of the magnitude described above would leave DoD's forces smaller than the forces necessary to fight two major theater wars.

Across-the-board reductions would also lessen the military's investment in modernizing its forces. Funding for research and development would fall to about $34 billion under this approach, making it likely that DoD would pursue fewer programs to develop new technologies than it would have otherwise. And despite the budgetary benefits of across-the-board cuts in programs for weapon modernization, that approach would do little to resolve the department's problem of ever-older fleets of equipment and weapon systems.

Increasing the Defense Budget to Equal CBO's Estimate of a Sustaining Level for Today's Forces

The gap between DoD's current budget and the funding that CBO estimates would sustain today's military could also be closed if the defense budget grew. If the Congress and the President boosted funding for national defense to $340 billion (CBO's overall estimate of a sustaining budget), that funding would be about $50 billion a year higher than the appropriations for 2000. Most of the increase--about $30 billion--would go toward procurement. Nearly all of the remaining $20 billion would be split evenly between the categories of military personnel and operation and maintenance. (As noted in Chapter 2, the latter amount reflects a boost in real compensation over the 2001-2015 period to keep increases in military and civilian pay comparable with pay increases in the private sector. Consequently, CBO's estimate may overstate the near-term increase required for a sustaining budget but understate the funding required over the longer term.)

Many advocates of increased spending for defense argue that not just more money but additional forces and weapon programs are needed. CBO, however, did not analyze the effects of those kinds of changes to current forces.

To consider increasing the defense budget may seem plausible with the federal budget in surplus. CBO's most recent baseline projections of cumulative on-budget surpluses over the next 10 years range from $2.2 trillion, when discretionary appropriations are adjusted for expected inflation, to $3.3 trillion, when discretionary appropriations are frozen at today's level.(5)

But those projected surpluses are far from assured. Relatively small changes in the economy could shift the budget's balances up or down.(6) And even if large surpluses materialized, they would not guarantee big additional sums for defense because the military would be competing with many other claimants for those funds. CBO's Budget Options volume discusses several possible uses of the surplus, which include cutting taxes, improving benefits for Medicare recipients, and providing more support for education programs.(7) Increased spending on nondefense programs or reductions in revenues through tax cuts could make increases in defense spending less likely.

1. Current dollars reflect future inflation. Those effects must be removed--that is, the savings must be converted to 2000 dollars--before the amounts in the options can be compared with the figures in this study.

2. See General Accounting Office, Impact of Operations Other Than War on the Services Varies, NSIAD-99-69 (May 1999), for a discussion of the variation in the effects of peacekeeping operations on units' readiness.

3. Such an approach would still provide considerable modernization. The aircraft, ship, or tank built today is often much improved from the original model of one or two decades before, even though today's system carries the same designation (for example, F-16 or M1).

4. Statement of Robert F. Hale, Assistant Director for National Security, Congressional Budget Office, before the Subcommittees on Conventional Forces and Alliance Defense, on Manpower and Personnel, and on Readiness, Sustainability, and Support of the Senate Committee on Armed Services, May 16, 1989.

5. Congressional Budget Office, The Budget and Economic Outlook: An Update (July 2000), p. 2. Those amounts are in current dollars rather than the constant dollars used for the other budget estimates in this study.

6. For example, CBO estimated the effects of making more pessimistic or more optimistic assumptions in its January 2000 report The Budget and Economic Outlook: Fiscal Years 2001-2010.

7. See Congressional Budget Office, Budget Options (March 2000). Chapter 1 of that volume discusses a number of expansions to the scope of federal activities that policymakers have proposed, many of which could add significantly to spending in parts of the federal budget other than defense. Such proposals cover revisions to Social Security and Medicare, ways to increase the number of people covered by health insurance, increases in long-term care for the elderly, and improvements in education. Chapter 2 discusses a variety of changes to the U.S. tax code. Most of those changes would decrease taxes and therefore federal revenues, at least in the near term, although some changes could improve economic performance over the long run.

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