Outlook for Defense spending is grim

Rising unemployment and the worsening economic situation mean the Defense Department budget likely will hold steady at least through 2010, despite calls to reduce military spending and redirect funds to other national needs, budget experts said this week.

The Obama administration is not expected to submit a detailed 2010 Defense budget request to Congress until April, although it is expected to announce its overall funding request for the department by the end of February. Generally, the White House submits its annual budget to Congress in late January or early February.

"This isn't unusual with a new administration," said Andrew Krepinevich, president of the nonpartisan Center for Strategic and Budgetary Assessments. "What's unusual is we're in the worst financial crisis since the Great Depression."

The Pentagon's total spending for fiscal 2009 is expected to be about $648.3 billion, including $135.6 billion in supplemental funding for the wars in Iraq and Afghanistan that Congress has not yet approved.

Krepinevich predicted the Obama administration will ask for $535 billion to $540 billion for Defense in fiscal 2010, not including any supplemental funding. Assuming the administration is shifting some war funding to the Pentagon's base budget, as Defense Secretary Robert Gates has proposed, those levels would not represent a major shift relative to the Bush administration, Krepinevich said.

"In the near term, it looks as if Defense spending will be protected," he said. "But as you look further out, things really do look grim."

Stan Collender, a budget specialist who served on the House and Senate Budget committees and now is a managing director for Qorvis Communications, agreed.

"I don't believe the Defense budget is going to go up under this administration as it might have in the previous one," Collender said. "But I can't believe there will be real reductions from current spending right now either."

Once the economy is stabilized, the administration and Congress will be forced to deal with the ballooning deficit, Krepinevich and Collender said during a meeting with reporters on Thursday. Defense has the largest budget of any federal agency, and is a target for future cuts, they noted.

The central problem for the Defense Department is the military services cannot execute their modernization plans under the comparatively rosy scenarios the Bush administration projected before the depth of the financial crisis became clear, Krepinevich said.

The Air Force is anticipating a $20 billion shortfall, while the Army is expecting a $30 billion to $40 billion shortfall in paying for key weapons programs in future years. The Navy hasn't publicized its estimated shortfall, "but everyone knows their shipbuilding program is in tatters right now," Krepinevich said.

What's more, Gates told Congress in January that he believes the increase in Defense spending spurred by the Sept. 11, 2001, terrorist attacks is coming to an end. "When you have Secretary Gates saying the spigot is turning off, I think you can take that to the bank," Krepinevich said.

On Wednesday, Gene Dodaro, acting comptroller general, told the House Appropriations Subcommittee on Defense that the Pentagon's 2007 portfolio of major weapons programs had grown by 26 percent over initial estimates.

"DoD's major weapons systems continue to take longer to develop, cost more, and deliver fewer quantities and capabilities than originally planned," Dodaro said in written testimony.

The mismatch between funding and departmental plans, and the expectation that budgets will be squeezed further once the economic crisis subsides, is driving what Krepinevich called a "hollow buildup" of military forces.

"We're not talking about a buildup like you had during the Reagan administration, where you could coast on that capital stock we built," he said. "We still have a significant number of costly programs waiting to go into full production."

Krepinevich added: "When I talk to major defense firms they're scratching their heads."