The Congressional Budget Resolution (CBR) recently passed by the full House and Senate includes an $8.3 billion increase in budget authority for national defense in fiscal year (FY) 2000, and a total of $25.5 billion more in budget authority in FY 2000-05. However, the CBR provides only $2.5 billion more in outlays in FY 2000 and actually provides $9.5 billion less in outlays over the FY 2000-05 period than the Clinton administration’s proposal.

Moreover, even in terms of budget authority, the CBR provides $4.2 billion less for defense than the administration’s plan in FY 2005. In addition, under the CBR, budget authority for defense would eventually begin to fall in real (inflation-adjusted) terms; indeed, by FY 2006 funding would be slightly lower than today (FY 1999) and by FY 2009 it would be some 7 percent lower. Altogether, the CBR would provide $103 billion less in defense budget authority over the coming decade than the administration’s plan. These cuts would be used to help offset the $800 billion tax cut also included in the CBR.<

Outlay Problem
The lower defense outlay levels included in the CBR would help Congress stay within the 1997 balanced budget agreement’s tight discretionary spending caps. However, those outlay levels are inconsistent with the budget authority increase included in the CBR. In reality, those budget authority levels are likely to result in outlays that are substantially higher than assumed in the CBR. In fact, to fit within the balanced budget agreement’s outlay cap, it might be necessary to cut defense budget authority by some $18 billion below the level included in the CBR for FY 2000, or resort to budgetary gimmicks. The administration’s own proposal suffers from a similar, but less severe, problem.See Table

Pressure caused by this outlay problem could also be relieved in part by the FY 1999 supplemental appropriation for operations in Kosovo, if—as proposed by Rep. Bill Young, House Appropriations Committee chair—this emergency supplemental is used to pay for some initiatives that are otherwise proposed for inclusion in the FY 2000 defense budget.

Near-Term Increase, Long-Term Cut
Even assuming the proposed CBR’s outlay problems can be resolved, it would provide less than would be needed to fully fund the administration’s defense plan over the long run, let alone the expanded plans advocated by many members of Congress. The CBR could help alleviate the near-term plans/funding mismatch faced by the Defense Department, but the reduction in defense budget authority projected in the CBR after FY 2004 would greatly exacerbate the Defense Department’s much more serious long-term mismatch.

Fortunately, the risks to U.S. national security could probably be better minimized by revising the strategy that drives the allocation of defense resources than by simply spending more on defense. In other words, it is more important to spend smarter than to spend more.

Deep Cuts in Non-Defense Programs
The 1997 balanced budget agreement includes tight caps on both discretionary budget authority and outlays for FY 2000-02. In contrast to earlier years of the budget agreement, defense and most non-defense programs are now covered under a single budget authority and a single outlay cap. To stay under those tight overall caps, while at the same time providing a boost for defense, the CBR would make deep cuts in non-defense discretionary programs. The CBR would cut budget authority for non-defense discretionary programs by roughly 10 percent in real terms in FY 2000, and 25 percent through FY 2009. Outlays for non-defense discretionary programs would be cut by roughly 20 percent through FY 2009. These cuts would also be used to help offset the 10-year, $800 billion tax cut included in the CBR.

More On the Outlay Problem
According to an estimate by the Congressional Budget Office (CBO), the administration’s FY 2000 budget request substantially understates its level of outlays in FY 2000 and beyond. CBO estimates that the outlays stemming from the administration’s request for budget authority are $9.2 billion more than assumed by the administration in FY 2000, and a total of $13.7 billion more through FY 2002 (the last year covered by the 1997 balanced budget agreement). This discrepancy is important. It means that if the administration’s request is to remain under the budget agreement’s cap on outlays, defense budget authority might have to be cut by some $14 billion in FY 2000 and by a total of perhaps $15 billion through FY 2002. Budget authority must be cut disproportionately more to achieve a given reduction in outlays because generally only about two-thirds of the Defense Department’s budget authority is actually spent (i.e., converted to outlays) in the year it is appropriated, with the rest being spent over the following several years.

The CBR’s outlay problems are even worse. It understates the outlays stemming from their proposed budget authority level by some $12 billion in FY 2000, and a total of some $23 billion in FY 2000-02. This suggests that to live within the budget agreement’s outlay cap, it might be necessary to cut defense budget authority by some $18 billion below the level included in the CBR for FY 2000 and a total of perhaps $27 billion through FY 2002.

Alternatively, the CBR will have to rely on gimmicks (e.g., simply “scoring” outlays at the CBR’s lower levels rather than the more accurate, higher levels likely to be realized in practice) to a greater degree than the administration’s request. To be sure, the administration and Congress have faced similar problems over the past few years, but the problems have been considerably smaller.

Possible Impact of Kosovo Supplemental
As noted earlier, the outlay problem could also be alleviated somewhat if the FY 1999 supplemental is used to pay for some activities and initiatives that are otherwise proposed for inclusion in the FY 2000 defense budget. On April 19, 1999, the administration requested a $6 billion supplemental appropriation to cover the cost of military and humanitarian operations in Kosovo through the end of the fiscal year (September 30). The supplemental proposed by Rep. Young would attach an additional $6.9 billion in unrequested funding to the supplemental. Among these add-ons would be about $1.8 billion to pay for a higher pay raise and more generous retirement benefits in FY 2000. Assuming it is designated emergency spending, the outlays from this boost in pay and retirement would not count against the FY 2000 outlay cap.

In addition, most of the other add-ons proposed by Rep. Young are for operations and maintenance (O&M) programs and activities (such as spare parts and depot maintenance). Adding this emergency funding in FY 1999 may reduce the need to add funding to these accounts in FY 2000. This would help with the FY 2000 outlay problem—especially since O&M accounts are relatively “fast-spending” accounts. It would, however, do little to address the outlay problem in FY 2001-02. Moreover, it is questionable whether the funding in the supplemental should be increased beyond the level needed to cover costs directly related to operations in the Balkans.

For more information, contact Steven Kosiak or Elizabeth Heeter at 202-331-7990

CSBA is an independent policy research institute established to promote innovative thinking about defense planning and investment strategies for the 21st century.

© 1999 Center for Strategic & Budgetary Assessments. All Rights Reserved.