The Congressional Budget Office (CBO) projects that budget deficits could total over $7 trillion over the next 10 years if current policies are not changed. Urging action to address the current fiscal crisis in a report released this month, CBO also highlighted the growing public debt level that reached $9 trillion at the end of 2010, or 62 percent of GDP. In its report, “Reducing the Deficit: Spending and Revenue Options,” CBO identifies 105 options to reduce the deficit including spending cuts to mandatory and discretionary programs, as well as tax increases. CBO does not exempt defense from consideration. The report includes 13 options affecting the defense budget ranging from a broad limitation on growth in the defense budget, caps on pay raises, and cost controls and limitations on military health care, to specific program cuts and cancelations.
The CBO option to reduce overall growth in DoD appropriations includes three alternatives that produce significant cuts to DoD for 2012 to 2021: 1) limit appropriations growth to an average of 1.4 percent beginning in 2012 (-$286 billion), 2) freeze appropriations at the FY2011 continuing resolution level (-$611 billion), and 3) cut defense appropriations each year by one percent from the 2011 level (-$862 billion). CBO acknowledges that these reductions could limit DoD’s ability to counter increasing threats, make it difficult to redress problems of an aging inventory of weapons and facilities, and increase the stress on an already overburdened military force.
Regarding military compensation, a CBO option would cap increases in military basic pay at .5 percent below the increase in the Employment Cost Index (ECI), saving $17 billion from 2012 to 2021. Current law requires military pay increases to be set at the projected full increase in the ECI, unless adjusted by the president or the Congress. CBO recognizes that such a cap could have an adverse affect on retention, but speculates that this affect would be relatively small and could be alleviated by increases bonuses.
A CBO option would also cap federal civilian pay raises. Current law sets annual civilian pay raises at .5 percent below the increase in the ECI, unless adjusted by the president or the Congress. The CBO option would reduce the pay raise called for under law by .5 percent from 2013 to 2021, saving $50 billion for the entire government. Pay raises for 2011 and 2012 would not be affected because they are currently frozen for that period.
CBO options affecting military health care programs include both cost controls and benefit limitations. One option would increase enrollment fees, copayments, and deductibles for military retirees under 65 who want to use TRICARE, saving $28 billion. Another option would limit the TRICARE benefit for military retirees and their families by not allowing them to enroll in TRICARE Prime (the lowest out-of-pocket cost). Rather, they could enroll in TRICARE Standard or Extra with an enrollment fee that would be adjusted annually. This option would save over $110 billion from 2012 to 2121. The third CBO health care-related option would increase drug copayments under TRICARE for all but active duty personnel, producing savings of $13 billion.
Another CBO option affecting active military personnel would consolidate the commissary and exchange systems within five years and require them to operate without appropriated funds. About one-third of the savings would be used to provide a tax-free grocery allowance to active duty personnel. The grocery allowance would offset the price increases (estimated at 7 percent) due to the loss of appropriated funds support.
Two CBO program specific options affect the F-35 (Joint Strike Fighter) program. One option would cancel the F-35 (Joint Strike Fighter) program and replace the requirement with the most advanced current versions of F-16 and F/A-18, saving $36 billion from 2012 to 2021. Another would retain the Air Force F-35 program, but cancel the Navy and Marine Corps F-35 and replace it with more F/A-18E/F aircraft, saving about $15 billion over the period. Other program specific options would cut the carrier force to 10 aircraft carriers and nine air wings (-$2 billion), cancel the Marine Corps’ Expeditionary Fighting Vehicle (-$2.5 billion), delay fielding the Army Ground Combat Vehicle (-$6 billion), and terminate the Medium Extended Air Defense System (MEADS) and the Precision Tracking Space System (PTSS), saving $4 billion and $2 billion respectively.