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+ - LONG-TERM SUSTAINABILITY OF CURRENT DEFENSE PLANS
+
+[House Hearing, 111 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+ LONG-TERM SUSTAINABILITY OF CURRENT DEFENSE PLANS
+
+=======================================================================
+
+ HEARING
+
+ before the
+
+ COMMITTEE ON THE BUDGET
+ HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED ELEVENTH CONGRESS
+
+ FIRST SESSION
+
+ __________
+
+ HEARING HELD IN WASHINGTON, DC, FEBRUARY 4, 2009
+
+ __________
+
+ Serial No. 111-2
+
+ __________
+
+ Printed for the use of the Committee on the Budget
+
+
+ Available on the Internet:
+ http://www.gpoaccess.gov/congress/house/budget/index.html
+
+ ----------
+ U.S. GOVERNMENT PRINTING OFFICE
+
+47-035 PDF WASHINGTON : 2009
+
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
+DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
+Washington, DC 20402-0001
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+ COMMITTEE ON THE BUDGET
+
+ JOHN M. SPRATT, Jr., South Carolina, Chairman
+ALLYSON Y. SCHWARTZ, Pennsylvania PAUL RYAN, Wisconsin,
+MARCY KAPTUR, Ohio Ranking Minority Member
+XAVIER BECERRA, California JEB HENSARLING, Texas
+LLOYD DOGGETT, Texas SCOTT GARRETT, New Jersey
+EARL BLUMENAUER, Oregon MARIO DIAZ-BALART, Florida
+MARION BERRY, Arkansas MICHAEL K. SIMPSON, Idaho
+ALLEN BOYD, Florida PATRICK T. McHENRY, North Carolina
+JAMES P. McGOVERN, Massachusetts CONNIE MACK, Florida
+NIKI TSONGAS, Massachusetts K. MICHAEL CONAWAY, Texas
+BOB ETHERIDGE, North Carolina JOHN CAMPBELL, California
+BETTY McCOLLUM, Minnesota JIM JORDAN, Ohio
+CHARLIE MELANCON, Louisiana CYNTHIA M. LUMMIS, Wyoming
+JOHN A. YARMUTH, Kentucky STEVE AUSTRIA, Ohio
+ROBERT E. ANDREWS, New Jersey ROBERT B. ADERHOLT, Alabama
+ROSA L. DeLAURO, Connecticut, DEVIN NUNES, California
+CHET EDWARDS, Texas GREGG HARPER, Mississippi
+ROBERT C. ``BOBBY'' SCOTT, Virginia
+JAMES R. LANGEVIN, Rhode Island
+RICK LARSEN, Washington
+TIMOTHY H. BISHOP, New York
+GWEN MOORE, Wisconsin
+GERALD E. CONNOLLY, Virginia
+KURT SCHRADER, Oregon
+
+ Professional Staff
+
+ Thomas S. Kahn, Staff Director and Chief Counsel
+ Austin Smythe, Minority Staff Director
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+ C O N T E N T S
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+ Page
+Hearing held in Washington, DC, February 4, 2009................. 1
+
+Statement of:
+ Hon. John M. Spratt, Jr., Chairman, House Committee on the
+ Budget..................................................... 1
+ Questions for the record................................. 72
+ Hon. Paul Ryan, ranking minority member, House Committee on
+ the Budget................................................. 2
+ Hon. Rick Larsen, a Representative in Congress from the State
+ of Washington, prepared statement of....................... 3
+ Stephen Daggett, specialist in defense policy and budgets,
+ Congressional Research Service............................. 3
+ Prepared statement of.................................... 9
+ Responses to questions for the record.................... 57
+ J. Michael Gilmore, Assistant Director, Congressional Budget
+ Office..................................................... 20
+ Prepared statement of.................................... 26
+ Responses to questions for the record.................... 72
+ Hon. Steve Austria, a Representative in Congress from the
+ State of Ohio, questions for the record.................... 56
+ Hon. Rosa L. DeLauro, a Representative in Congress from the
+ State of Connecticut, questions for the record............. 56
+ Hon. James R. Langevin, a Representative in Congress from the
+ State of Rhode Island, questions for the record............ 73
+
+
+ LONG-TERM SUSTAINABILITY OF
+ CURRENT DEFENSE PLANS
+
+ ----------
+
+
+ WEDNESDAY, FEBRUARY 4, 2009
+
+ House of Representatives,
+ Committee on the Budget,
+ Washington, DC.
+ The committee met, pursuant to call, at 10:05 a.m. in room
+210, Cannon House Office Building, Hon. John Spratt [chairman
+of the committee] presiding.
+ Present: Representatives Spratt, Schwartz, Becerra,
+Blumenauer, McGovern, McCollum, Melancon, Scott, Larsen,
+Doggett, Berry, Yarmuth, Connolly, Kaptur, Tsongas, Etheridge,
+Langevin, Ryan, Hensarling, Simpson, Nunes, Harper and Lummis.
+ Chairman Spratt. Call the meeting to order.
+ I first would thank our witnesses and, for that matter,
+everyone else for coming to the hearing this morning on the
+long-term sustainability of our current defense plans.
+ Our object in this hearing is a better understanding of
+defense spending increases over the last 8 years and some
+notion, at least we hope to come out with, of the
+sustainability of concurrent defense plans for 2010 and beyond.
+ Over the past 8 years, the defense funding level has
+enjoyed a--defense spending has enjoyed a rather permissive
+environment; and it has increased at a rapid rate. The so-
+called base, or our non-war budget, increased between 7 and 8
+percent; and the cost of our deployments in Iraq and
+Afghanistan increased steadily each year, surpassing $185
+billion in the year 2008. As a result, total defense spending,
+Function 050, more than doubled over this period, rising from
+$335 billion in 2001 to $691 billion in 2008.
+ Defense spending in real terms is now at its highest level
+since World War II. So it is reasonable to ask, can this trend
+continue? Given our fiscal condition, the receding economy,
+surging deficits, annual increases in defense on par with what
+we have seen over the last 8 years are not going to be easy to
+accommodate in the budget.
+ Secretary Gates implied as much himself. In his testimony
+recently before the House and Senate Armed Services Committees,
+he told the committee, and I quote, the spigot of defense
+spending opened by 9/11 is closing. He also said that the
+Defense Department is going to have to differentiate between,
+quote, those things that are desirable as opposed to those
+things that are truly needed.
+ Now, let there be no mistake about it. I have been on the
+Armed Services Committee for all of the 26 years I have been
+here, and I have been a stalwart supporter of national defense.
+We will spend whatever we need to see that our national
+security needs are met. Only now more than ever, given the
+budget we have got, we must ensure that we do so in a fiscally
+sound manner.
+ For the government to make fiscally sound, responsible
+decisions it must first have a full accounting of its policies,
+including both DOD's base defense plans and its prospective war
+plans. Over the past 8 years, such an accounting has been
+lacking.
+ The government must also assess options, identify cost
+pressures, explore tradeoffs and assess opportunity costs; and
+this is what we want to begin exploring today. We have two
+excellent witnesses for this purpose. Michael Gilmore is the
+Assistant Director for National Security at the Congressional
+Budget Office; and Steve Daggett, an expert in defense policy,
+and budgeting in particular, at the Congressional Research
+Service.
+ I welcome you both, and I thank you for your willingness to
+come before the committee and for your excellent testimony,
+which I have read. I think you will be two good witnesses to
+help us understand past trends in defense spending and any
+implications for the future, long-term cost implications of the
+defense plans that we have in place now.
+ But before turning to either one of you, I want to turn to
+Mr. Ryan, the ranking member from Wisconsin, and ask him for
+any opening statement he cares to make.
+ Mr. Ryan. Thank you, Mr. Chairman.
+ Our conference is just winding down, so I expect our
+members to start coming soon.
+ Clearly, the bulk of Congress' attention has been focused
+on and remains to be focused on addressing the current crisis
+in our economy. But dealing with the economic crisis does not
+excuse or even diminish Congress' responsibility to the primary
+role of the Federal Government, and that is our national
+defense. So even as the economy has replaced the global war on
+terrorism on the front page, it does not replace our commitment
+to those on the front lines. Our job, as it has always been, is
+to ensure that American soldiers have the best available to
+them.
+ But as this hearing will point out, DOD's plan far exceeds
+what has been budgeted. Just as in the civilian sector, DOD's
+health care spending is increasing at an unsustainable rate;
+and, just as in the rest of the budget, these costs are
+beginning to eat into their discretionary budget. So I have a
+particular interest in hearing from both witnesses about what
+DOD is doing or at least planning to do to address this
+particular problem.
+ Finally, as everyone on the committee is well aware, DOD
+did not receive a clean audit last year. It has, in fact, been
+on GAO's high-risk list for as long as I can personally
+remember; and, regrettably, I have not heard any indication
+that these problems will be resolved in the near future.
+ My point here is that, while we must ensure our troops are
+fully funded, we cannot simply throw money at the Pentagon
+without proper oversight and accountability. I look forward to
+exploring our witnesses and the drivers behind DOD's growing
+budgets and how, together with Congress, it might be more
+efficiently transparently met in this important mission.
+ Thank you.
+ Chairman Spratt. Thank you, Mr. Ryan.
+ One further housekeeping detail, I ask unanimous consent
+that all members be allowed at this point to submit an opening
+statement for the record.
+ Hearing no objection, so ordered.
+ [The prepared statement of Mr. Larsen follows:]
+
+ Prepared Statement of Hon. Rick Larsen, a Representative in Congress
+ From the State of Washington
+
+ Chairman Spratt, thank you for holding today's hearing on the Long-
+Term Sustainability of Current Defense Plans. I appreciate your
+dedication to thoroughly examining all aspects of our nation's fiscal
+future.
+ The previous Administration has left us with defense spending plans
+that are both unsustainable and unrealistic. The Pentagon's base budget
+has already reached its highest levels since World War II, and
+executing current defense plans will result in the dramatic defense
+spending increases for the foreseeable future. Plans to increase the
+size of the military, maintain aging facilities and equipment, procure
+new weapons, and develop more sophisticated technology all contribute
+to unsustainable growth in defense spending.
+ Unbudgeted costs for wars in Iraq and Afghanistan will further
+strain our defense budget in the coming years. The Congressional Budget
+Office estimates that funding for these operations will cost nearly
+$900 billion over the next ten years in addition to the Pentagon's base
+budget.
+ Earlier this month, media outlets reported that officials within
+the Department of Defense were preparing a request for $587 billion in
+defense spending in fiscal year 2010, a dramatic increase over the $513
+billion provided by Congress in fiscal year 2009. The Bush
+Administration projected that a defense budget of $527 billion in
+fiscal year 2010 would be sufficient, and other media reports have
+indicated that the Office of Management and Budget plans to adhere to
+this budget cap. To be clear, an internal Defense Department document
+requesting $587 billion is not a budget, it is a Christmas wish-list
+from the military services. Congress will write and enact the defense
+budget based on thorough discussions with military leaders, the
+civilian leadership of the Defense Department, and the White House.
+ In the coming year, the Department of Defense and Congress must
+make tough choices regarding future defense spending. As Secretary of
+Defense Gates has said, we cannot buy everything and do everything. Our
+nation faces enormous fiscal deficits, and our current recession will
+only make budget shortfalls worse. Facing this budgetary reality, we
+will need to scrutinize each major weapons program to reduce costs
+while ensuring that our military personnel have the tools they need to
+meet the threats we face.
+ I look forward to working with you, Chairman Spratt, both here on
+the Budget Committee and on the Armed Services Committee, to ensure
+that our future defense spending plans are both sustainable and
+consistent with our national security objectives.
+
+ Chairman Spratt. In addition, for the record, let me note,
+if there is no objection, we will have the full written
+statement of Mr. Daggett and Mr. Gilmore entered in the record,
+so that you can summarize it as you see fit.
+ But, today, we have one panel, two witnesses and some
+excellent testimony, so I encourage you to take your time to
+give us a thorough review of what you have said.
+ And, Mr. Daggett, let us begin with you, sir. Or Mr.
+Gilmore. I will let the two of you settle it out.
+ Mr. Gilmore. It is your preference, Mr. Chairman.
+
+STATEMENT OF STEPHEN DAGGETT, SPECIALIST IN DEFENSE POLICY AND
+ BUDGETS, CONGRESSIONAL RESEARCH SERVICE
+
+ Mr. Daggett. I am glad to start out.
+ Mr. Chairman, thanks very much for the invitation to
+testify.
+ Mr. Spratt, you and I go back I think 25 years or so now,
+so it is really a pleasure to see you. But I have to say I
+particularly appreciate you asking me to be on a panel with
+Mike today. I know that, whatever question you ask, one of us
+at least will be able to answer it. Mike has done--Mike's work
+at CBO really has been the definitive work on the cost of long-
+term defense plans that all of us in town really use for
+further analysis.
+ Chairman Spratt. Let me interrupt you here at this point,
+Stephen.
+ Recall when we launched the second Persian Gulf War against
+Iraq, CBO was the first to say, if this going to be a long
+undertaking, you have got manpower and rotational problems that
+the DOD did not acknowledge to us. CBO was on the front lines
+of that. You have done some excellent work also in projecting
+defense budgets. So we have got two good, disinterested experts
+here; and we are glad to have both of you.
+ Mr. Daggett. Thanks.
+ Mr. Chairman, if you look at what the leaders of the
+military services have said, what defense industry analysts
+have said, what analysts in think tanks have said, you come
+away with a strong sense that there is a real gap in the
+defense budget, a real mismatch between the cost of planned
+programs and what most are projecting will be the likely trend
+in the defense budget.
+ The Chairman of the Joint Chiefs has said that defense
+spending ought to be kept to a floor of 4 percent of GDP, which
+by my calculations would mean adding about $100 billion in 2010
+to the defense budget to accommodate. Each of the military
+services has said similar things.
+ The Chiefs of Staff and the Secretary of the Air Force for
+the past couple of years have been saying that the Air Force
+needs about $20 billion more per year in acquisition accounts
+to accommodate its planned program. To put that into context,
+the overall Air Force acquisition budget, which is weapons
+procurement plus R&D, was scheduled to go from about $63
+billion in 2009 up to about $70 billion by 2013. So, in effect,
+they are saying they are about 30 percent short in the amount
+of money available for the program that they want.
+ The Army has said similar things. They are projecting about
+130 or $140 billion base budget, and they are saying that their
+annual requirements are on the order of 170 to $180 billion. A
+big piece of that is for war costs that they are concerned
+might not be funded if the war is financed out of the base
+budget without an accommodating increase in it.
+ The Navy has just increased estimates of the cost of its
+30-year shipbuilding plan quite substantially and says now that
+there is a shortfall over the next few years in fighter
+aircraft procurement. So, by all accounts, there appears to be
+a gap between projected budgets and the cost of the program.
+ If you look, on the other hand, at the overall level of
+defense spending, you have to ask why that is true. If I look
+at defense in a historical context, as you noted, the 2008
+budget is high by any historical standard. It is actually about
+20 percent bigger after adjusting for inflation than the budget
+in 1985, which was the peak in the post Cold War period, except
+for one year in Korea.
+ The overall defense budget, just the base defense budget,
+excluding supplemental appropriations, has increased by 43
+percent above inflation since 1998, which is about as large as
+the buildup in the first Reagan administration. By the middle
+of the Reagan administration the Defense Department felt that
+programs were pretty well-funded, and we really did
+recapitalize the force with budgets in the 1980s.
+ A comparison that I like to do--and if we have slides up it
+would be one of the first slides--this is a slide that just
+shows the trend, the historical trend in the base defense
+budget, not including war-related funding going back to the end
+of the Korean War. And what it shows is that, on average, the
+defense budget has increased by about 2.1 percent per year
+above inflation year after year. In some years, the trend has
+been above the average; in some years, it has been below. In
+2009, which is a measure I use, the budget is actually about 8
+percent above the historical trend.
+ So, again, by historical standards, the budget appears
+relatively high. So the question I pose is, why the disconnect?
+Why on the one hand do the budgets appear relatively robust and
+on the other hand we hear from the military services that
+budgets are very tight and getting tighter?
+ I have six answers to that question, and I will just
+briefly go over each of them, and then I will leave that as a
+basis for discussion.
+ The first factor is just the increasing cost of military
+personnel, and if you look at the next slide that tracks it.
+This is a slide that shows the cost of a military service
+member, active duty military service member, index to inflation
+and then index to 1972, which is the inception of the all-
+volunteer force.
+ If you look at the trend, it tracks with what you would
+think. The cost of a service member declined in the 1970s
+because pay raises didn't keep up with inflation.
+ There were big catch-up pay raises in 1980 under the Carter
+administration; in 1981, under Reagan, 11.7 percent and then
+14.3 percent. So about a 25 percent pay raise over a 2-year
+period.
+ The trend in the 1980s and 1990s was a very modest
+increase, if any increase at all, but then it shot up like a
+rocket after about 1999. By my numbers, a military service
+member in 2009 is 45 percent more expensive above inflation, in
+addition to inflation, than in 1998. And there are a lot of
+factors that went into that.
+ There were pay raises of the employment cost index plus
+one-half percent in 7 of the last 8 years. There were three
+rounds of pay cable reform in which people in the middle grades
+got larger pay raises to improve retention. There were very big
+increases in the basic allowance for housing to eliminate on-
+base versus off-base discrepancies in housing costs. That is on
+the take-home-pay side of the equation.
+ There were also very big increases in deferred benefits,
+particularly in retirement benefits, the biggest one being
+TRICARE for Life in which 65 and over military retirees may now
+use TRICARE as a second care to Medicare for military medical
+care; and that is a pretty expensive benefit. DOD pays into the
+military retirement fund about $10 billion a year for the cost
+of TRICARE for Life, which is 10 percent of the entire military
+pay and benefits package. So a hugely expensive benefit.
+ The second factor driving up costs is reflected in the next
+slide, and that is the ongoing trend in operation and
+maintenance costs. Operation and maintenance is one of the
+titles of the Defense Appropriations Act.
+ If you go back again to the end of the Korean War, take out
+recent war costs, index it for inflation and look at what the
+trend is relative to the size of the force per active duty
+troop, it increases over time at a pace of about 2-\1/2\
+percent per year above base inflation. The question is, is that
+a problem? And my answer is I think you can make a strong case
+that it is.
+ That rate of growth above inflation is not as high as in
+some sectors of the economy, like health care, but we are all
+concerned that health care costs are eating into Federal
+budgets and undermining efficiency in lots of areas of the
+economy. And while the trend in defense operation and
+maintenance isn't as high it is still significant, and it is at
+odds with trends in the overall economy in which the trend has
+generally been in the opposite direction, the direction of
+improved efficiency, rather than less efficiency.
+ There are a lot of factors that explain that. Part of it is
+that a large part of the O&M budget is comprised of pay of
+civilian personnel, and pay of civilian personnel has increased
+over time in real terms above inflation, as it should. But in
+return for that you would also look for increased deficiency;
+fewer people doing more work. We don't seem to have achieved
+that across the board.
+ Another factor is increasing medical costs, which are a big
+part of the operation and maintenance account. DOD is terribly
+concerned about that.
+ Another factor is the cost of weapons operation and
+maintenance. The Air Force has complained for many years that,
+as its aircraft have aged, the cost of operating and
+maintaining them has climbed. It also appears to be the case
+that newer generations of weapon systems are more expensive
+rather than less expensive to operate and maintain, which again
+is at odds with the trend in the civilian sector.
+ What appears to be happening is that, although DOD is to
+some degree pursuing improvements in reliability and
+maintainability, when the final decision is made on what to
+procure they are really going after performance. And
+performance comes at a price, including difficulties in
+operational and maintenance accounts.
+ The fourth factor--a third factor, excuse me, driving up
+the cost of defense which is reflected in a table that I showed
+you is increasing intergenerational costs in major weapons
+programs. Again, that is the next slide.
+ This is a slide that compares the number of various--number
+of weapon systems in various categories procured in fiscal year
+1985 and in fiscal year 2008. Those years are quite comparable
+in that the total acquisition budget in both years--that is,
+again, the amount of procurement plus R&D--is pretty close. It
+was about $240 billion in 2008 and, if you adjust for
+inflation, about $220 billion in fiscal year 1985. So pretty
+comparable amounts of money. But, in 2008, the budget is buying
+many, many fewer units of many different categories of weapon
+systems--aircraft, ships, missiles--pretty much across the
+board. That is a very simple measure of intergenerational cost
+growth in major weapons programs.
+ If you consider, for example, the F-35 fighter aircraft,
+which is going to be the mainstay both for the Air Force and
+for the Navy and Marine Corps in the future, the unit flyaway
+cost of the F-35 is now projected to be $83 million a copy. In
+1985, the low-cost fighter for the Air Force, which is the kind
+of equivalent of the F-35, was the F-16. In today's prices, in
+1985 the F-16 cost about $30 million apiece. So an increase
+from 30 million to 80 or $85 million a copy. That is not
+atypical of trends in weapons costs.
+ There certainly is a rationale for spending more on weapons
+over time because you get more capability in return. The issue
+is, has the tradeoff between the number of systems you can buy
+and the capability gotten to a point of diminishing returns?
+Secretary Gates is arguing really that it has and that we need
+to take, therefore, a very close look at the investment cost of
+weapons and the capabilities we are trying to build into new
+generations of weapons.
+ A fourth and very closely related factor that I look at
+independently from intergenerational cost growth in major
+weapons programs is systematic underestimation of costs on the
+part of DOD. The General Accounting Office has for the last 6
+years taken a careful look at the status of major weapons
+programs in DOD, and this is a table that GAO provided, which
+shows what is going on in cost estimation, and it is not moving
+in the right direction.
+ One way to look at this slide is in what they did was
+compare the portfolio of what we call major defense acquisition
+programs. That is the major weapons programs above certain
+thresholds in cost in the system in 2000, 2005 and then in
+2007. And if you compare cost estimation in 2000 with the
+accuracy of cost estimation in 2007, it has gotten worse over
+time. On average, in 2000, DOD underestimated the R&D cost of
+weapons programs by about 27 percent, which in itself is not
+very good. But, in 2007, they underestimated R&D costs by an
+average of 44 percent. If you look at it from the point of view
+of the impact on the overall budget, cost growth in the 2007
+inventory of major weapons is projected now to total about $300
+billion, which is more than a year's worth of weapons
+acquisition, and it is about 18 percent cost growth over
+initial projections. So, in effect, we are losing almost one-
+fifth--we are losing our ability to acquire almost one-fifth of
+the weapons we plan to buy because we underestimate cost.
+ The fifth factor driving costs up has been the
+reorganization in the Army. The Army was criticized in the
+1990s for not reorganizing itself very rapidly to be a more
+deployable force. Throughout the 1990s, it still had pretty
+much a kind of Cold War-oriented force which was designed to be
+mobilized for one big war, rather than to be able to be
+deployed on a rotational basis or expeditionary basis, as we
+say, abroad. Just as the war in Iraq was beginning, they were
+beginning to reorganize into a more modular force; and then the
+war in Iraq also had some lessons with it.
+ All of that has conspired to really drive up the cost of
+the Army, much of it as I think a one-time cost but some of it
+ongoing cost as well. Modularization in the Army is projected
+to cost in all about $50 billion. Much of that has been paid
+for already, mainly in supplemental appropriations, but there
+remains some costs to be accommodated for finishing the
+modularization of the Army.
+ There has also been an increase of 92,000 troops in the
+Army and the Marine Corps, 65,000 in the Army and 27,000 in the
+Marine Corps. Once that is fully in place, that will add to
+military personnel and directly related operation and
+maintenance costs about $13 billion a year. So that is built
+into long-term budgets as a long-term increase.
+ And then, in addition to that, the lesson of the war has
+been that the Army has taken away as one of the lessons of the
+war that it systematically underfunded what we used to call
+minor procurement for things like force protection equipment,
+communications and transportation. So that to outfit the Army
+in the future on an ongoing basis requires a substantially
+larger ongoing capital investment.
+ Add to that the need to provide equipment for Army National
+Guard combat units at a much higher level than we used to do in
+the past. Then you further increase costs. In the past,
+National Guard units were regarded as likely to be mobilized
+only very rarely in the event of a major war, and they were
+equipped largely with material cascaded from the active duty
+forces. Well, now they are part of the rotation base, so they
+need to be equipped at a level much closer to that of active
+duty forces. So all that is driving the cost of the Army
+substantially higher.
+ And then a final factor which is much harder to quantify is
+an expanded range of, as DOD puts it, challenges for which they
+think we need to prepare. And that is the next chart. This is
+what DOD calls the quad chart or the four challenges chart.
+ And what it does is--it is an interesting beginning point
+for discussion, I think. What it does is break down the kinds
+of challenges DOD thinks we will face in the future into
+various categories, and it organizes them according to
+vulnerability and the likelihood that they may materialize.
+ So DOD's official assessment is that the likelihood of what
+they call traditional state-on-state, force-on-force conflict
+is relatively low; and we are relatively not vulnerable to that
+because we are so militarily capable in those areas.
+ Irregular warfare has a high likelihood, 100 percent
+likelihood. We are engaged in it now. But they also argue our
+vulnerability to it being damaging to the U.S. per se is
+relatively low because we can manage it.
+ Catastrophic dangers, terrorists armed with weapons of mass
+destruction are, they say, a high likelihood and also high
+vulnerability. So that obviously would be a focus of additional
+investment in the future.
+ And then a new category that is interesting for discussion
+they refer to as disruptive challenges. Others, including near
+peer competitors in the future, trying to identify areas of
+U.S. weakness and exploit those militarily. So things like
+anti-satellite weapons or cyber warfare or other efforts to
+exploit the vulnerabilities of our communications networks and
+energy dependence and so on.
+ The investment implications of this, part of it is clear
+and part of it is not. Presumably, what this suggests is we
+should invest less money over time in traditional capabilities,
+because the likelihood of that kind of conflict is low and we
+are pretty strong in that area. That is hard to do. That
+involves taking a very hard look at the kinds of weapon systems
+we are currently building and making some choices among them.
+Whether we will actually be able to do that to what extent
+therefore to me is very unclear.
+ For the rest, most of these additional challenges appear to
+me to be primarily additive to the base budget we already have;
+and the cost of some of them could in the future be fairly
+high.
+ There is an ongoing discussion of what disruptive
+challenges we might face in the future. With China, it would be
+likely to challenge us directly in a force-on-force way or more
+likely to challenge us, if they do, with disruptive threats.
+And there is a lot of thinking that suggests they are more
+likely to challenge us in areas of our vulnerability.
+ With that, Mr. Chairman, those are what I see at least as
+the main things driving the cost of defense higher over the
+long term; and we can discuss further what we might want to do
+about it in some questions.
+ Chairman Spratt. Thank you for an excellent presentation.
+ [The prepared statement of Stephen Daggett follows:]
+
+Prepared Statement of Stephen Daggett, Specialist in Defense Policy and
+ Budgets, Congressional Research Service
+
+ Mr. Chairman, Members of the Committee, thank you very much for
+inviting me to testify this morning on the sustainability of current
+defense plans. This is an issue that appears to be rising very rapidly
+toward the top of the defense policy agenda, even at a time when the
+agenda is very crowded. Certainly, when you listen to the senior
+leaders of the military services, you are hearing a great deal of
+concern about the potential for a more or less severe mismatch,
+beginning now and extending as far ahead as you care to look, between,
+on the one hand, the cost of currently planned defense programs and, on
+the other hand, what most see as the likely trend in the defense
+budget.
+ Admiral Mullen, the Chairman of the Joint Chiefs, has urged
+repeatedly that the defense budget should stay at a floor of about 4%
+of GDP, which, is about the current level of defense spending with war-
+related supplementals included.\1\ Department of Defense outlays in
+FY2008, including war costs, were $595 billion, which was 4.2% of GDP.
+Outlays for the overall national defense budget function were about
+4.4% of GDP. If you apply the 4% target just to the Department of
+Defense base budget, not including war costs, which is what Admiral
+Mullen appeared to endorse in earlier statements, it would entail an
+increase of about $100 billion in FY2010 compared to last year's
+projection, and of even larger amounts in future years.
+ For their part, each of the military services has echoed Admiral
+Mullen's plea for more money. The former Secretary and Chief of Staff
+of the Air Force, for example, argued for the past couple of budget
+cycles that the Air Force alone needed $20 billion more per year for
+weapons acquisition.\2\ To put that into perspective, in last year's
+six-year defense plan, acquisition funding--that is, procurement plus
+R&D--in the Air Force base budget was scheduled to grow from $63
+billion in FY2009 to $70 billion in FY2013. So the senior leaders of
+the Air Force appeared to be saying, in effect, that their budget was
+30% short of the amount they thought necessary for equipment.
+ The Army reportedly is now projecting ongoing budget requirements
+of $170 to $180 billion a year, which is $30 to $40 billion per year
+higher than currently projected base funding.\3\ The Navy has not been
+so explicit, but last year increased substantially its estimates of the
+cost of its 30 year shipbuilding plan, and it has warned of a
+substantial shortfall in fighter aircraft inventories as well.
+ If you look at defense industry projections you'll get the same
+message, as you will if you survey the spectrum of views among the
+various Washington defense think tanks--most of them using CBO's
+numbers, by the way--though prescriptions for what to do about it vary.
+ Part of the widespread concern about a budget shortfall has to do
+with expectations about the trend in the overall defense budget--or
+what defense budget planners refer to as the defense top line. Analysts
+generally assume, first, that as the war in Iraq winds down, war-
+related supplemental appropriations will decline and ongoing war costs
+will be absorbed into the regular, annual defense budget, and, second,
+that the regular budget itself will be constrained because of budget
+deficits and competing spending demands. Secretary of Defense Gates
+said just last week before the Senate Armed Services Committee that
+`the spigot of defense spending that opened on 9/11 is closing.'
+ For our part, CRS would rather not speculate about the top line
+trend. We can all do the budget arithmetic--and the arithmetic
+certainly leads you anticipate baseline budget deficits that exceed
+what, in the past, led to limits on defense spending. But, how much to
+spend for defense is, in the final analysis, a political decision for
+Congress to make and there's no value added in our guessing about that.
+ Instead I want to focus on the other side of the equation, which is
+the cost side--why things cost as much as they do, and what the
+implications are for addressing the budget mismatch now and in the
+future.
+ why does the defense budget seem tight?
+ If you look just at the total amount of money available for defense
+in recent years--and projected for the next several years--it is not at
+all apparent why there should be a budget shortfall of the magnitude
+the military services are warning about. The overall, enacted
+Department of Defense budget for FY2008 amounts to $656 billion,
+including a base budget of $484 billion and supplemental appropriations
+of $171 billion. We don't know the final FY2009 amount yet, because we
+still have a supplemental funding request to consider.
+ After adjusting for inflation, the FY2008 total is about 20% higher
+than the DOD budget in FY1985. FY1985 was the peak year of the buildup
+of the 1980s and also the second highest DOD budget in the Cold War era
+(the highest was in FY1952, during the Korean War). And the FY2008
+amount is for an active duty force which was about 1/3 smaller than the
+force in the 1980s. For weapons acquisition, that is, for procurement
+plus research and development, the total in FY2008, when you include
+supplemental funding, was about $240 billion. That is about the same as
+the peak in FY1985, which was $220 billion in FY2008 prices--and the
+FY2008 amount is, again, for a force about 1/3 smaller. So the FY2008
+budget appears comparable to earlier peaks in defense spending.
+ Other measures suggest the same thing. One approach is to compare
+current spending to the average trend in defense over time. If you
+track the total DOD budget per active duty troop, excluding war costs,
+funding has grown by a bit more than 2% per year above inflation on
+average since the end of the Korean War (see Figure 1). In some years,
+actual budgets were above the trend line, in other years, below it. In
+FY2009, the overall DOD base budget, not including war costs, is about
+8% above this historic trend line.
+
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+ Another reference point is simply the growth of the defense budget
+over the past few years. Considering just the base defense budget,
+without including war-related funding, there has been a very large
+increase in defense spending over the past ten years. In all, the DOD
+base budget has grown by 43% above inflation since it reached its
+lowest post-Cold War level in FY1998. That buildup is about the same as
+the increase at the end of the Carter and beginning of the Reagan
+Administrations--which was about 40% above inflation from FY1980-
+FY1985.
+ If you take all of this together, you come away with the impression
+that today's defense budget appears, by most historical standards, to
+be quite robust. But listening to the military services, to defense
+industry, to defense budget analysts in the think tanks you get a very
+different impression--that even now the budget is tight, and that if
+spending does not continue to climb, planners will face tougher and
+tougher choices. So why the disconnect? CRS's analysis, quite bluntly,
+is that the budget seems tight because the cost of almost everything we
+been doing in defense has been accelerating upward too fast even for
+growing budgets to keep up.
+ And what is driving the cost of defense higher? In what follows, I
+will propose six answers to that question, and I will mention each of
+them at least very briefly. Following that, I will very briefly discuss
+a couple of themes that emerge from this analysis of defense cost
+trends.
+ the growing cost of uniformed personnel
+ The first factor driving up the price of defense is, simply, the
+growing cost of uniformed military personnel. If you take the amount
+provided for active duty military personnel in annual defense
+appropriations bills, exclude supplemental appropriations, adjust for
+inflation using the Consumer Price Index (CPI), and divide by the
+number of active duty troops, again excluding war-related increments,
+you will find that an average military service member is about 45% more
+expensive, after adjusting for inflation, in FY2009 than in FY1998.
+This does not include the cost of medical care for service members,
+dependents, and recent retirees, which is financed in the operation and
+maintenance accounts, and which also has grown substantially. Nor does
+it include benefits that are not part of the national defense budget,
+and which are not, therefore, among the cost tradeoffs that planners
+directly face. These include tax advantages for service personnel and
+veterans benefits, including VA medical and educational benefits.
+ A long term perspective on the price of military personnel is
+reflected in Figure 2, which shows the cost of an individual active
+duty service member indexed to the inception of the all volunteer force
+in 1972. In brief, pay and benefits of military personnel declined in
+the 1970s because annual pay raises didn't keep up with inflation;
+jumped up in FY1980 and FY1981 with catch up pay raises of 11.7% and
+then of 14.3%--that is, more than 25% over a two-year period; climbed
+very modestly in the remainder of the 1980s and '90s; and then rocketed
+up dramatically beginning in about FY1999.
+ The main increases over the past ten years include:
+ Congressionally mandated annual pay raises equal to the
+Employment Cost Index (ECI) plus \1/2\ percent in seven of the last
+eight years. The ECI is a measure of the average cost of pay and
+benefits in the civilian economy. Since FY1982, pay raises had fallen
+behind the growth of the ECI and the `ECI plus \1/2\' formula was
+designed to catch up over a period of several years.
+ Three rounds of `pay table reform,' requested by the
+Defense Department, which provided additional pay raises, sometimes of
+as much as 10%, to middle grades in order to improve retention of
+experienced personnel.
+ Substantial increases over several years, requested by the
+Clinton Administration, in the non-taxable Basic Allowance for Housing
+(BAH), intended to eliminate differences in out-of-pocket on-base and
+off-base housing costs.
+
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+ Those increases, along with changes in subsistence pay for
+officers, bonuses and special pays, and some other things, are
+reflected in higher take home paychecks of military personnel. In
+addition, there have been very large increases in retirement benefits,
+including
+ Tricare-for-Life, enacted by Congress as part of the
+FY2001 national defense authorization act, and implemented in FY2003,
+which makes the military Tricare medical insurance system into a second
+payer for Medicare for 65-and-older military retirees. DOD pays $10 to
+$11 billion a year into the military retirement fund to cover future
+costs of this new benefit for current uniformed personnel, which is
+about 10% of the entire military pay and benefits package.
+ Concurrent receipt of military retired pay and veterans
+disability payments for those with disabilities of 50% or more. Another
+congressional initiative, this is paid for out of the national defense
+budget function as a mandatory amount of about $5 billion a year.
+ Repeal of the `Redux' retirement plan, which had provided
+somewhat lower retirement benefits to military personnel who enlisted
+after 1986 than to earlier enlistees.
+ The elimination of social security offsets in pensions of
+62 and older survivors of military retirees who chose dependent
+benefits as part of their retirement.
+ Figure 3 shows the relative growth per troop in the major elements
+of both take-home pay and deferred compensation in the military
+personnel accounts, adjusted for inflation, between FY1998 and FY2009.
+As noted earlier, with everything included, these elements of
+compensation grew by 45% above inflation. Even if you leave out the
+cost of Tricare-for-Life and concurrent receipt, military pay and
+benefits would still have grown by 30% above inflation.
+
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+ Before I go on with this discussion let me emphasize one point. The
+purpose of doing this analysis is not to address whether military pay
+and benefits are adequate or more than adequate or less than adequate.
+A discussion of that question is certainly important, but it goes way
+beyond the point I am making. The only purpose of this analysis is to
+address the issue of budget tradeoffs. If only a given amount of money
+is available for defense, the growing cost of personnel necessarily
+comes at the expense of something else. Moreover, others have addressed
+the issues of pay comparability, the value of deferred compensation,
+promises of medical care in retirement, and other matters at great
+length. Last year's Quadrennial Review of Military Compensation, for
+example, can give you chapter and verse on all of the key measures of
+compensation comparability.
+ That said, a couple of other points may also be worth noting. One
+has to do with analyses which show that there has been a military `pay
+gap'--i.e., that military pay has lagged behind average increases in
+compensation in the civilian economy. Usually, the pay gap is measured
+by comparing cumulative raises in military basic pay with a trend line
+that starts with pay in FY1982, after the catch up raises of FY1980 and
+FY1981, and adjusts upward annually by the amount of the Employment
+Cost Index. Using this measure, there was a significant pay gap by the
+end of the 1990s, which ECI plus + raises have been intended to
+correct.
+ In measuring military pay, however, it is important to note that
+the amount service members take home every month includes both basic
+pay and the basic allowance for housing--and you might also want to
+include amounts for subsistence, which is provided both as pay and as a
+direct service. While increases in basic pay may still fall somewhat
+short of growth in the Employment Cost Index, when very large increases
+in the basic allowance for housing are included, the pay gap, measured
+as the FY1982 level adjusted for cumulative growth in the ECI, has been
+made up in recent years.
+ One other issue may be a matter for some further discussion. A
+frequently asked long-term budget question is whether it might be
+cheaper to rely more on reserve than on active duty forces. In the
+past, when Army National Guard (ARNG) combat units were, for the most
+part, regarded as a strategic reserve that would be called up only in
+the event of a major war, it was reasonable to calculate that Guard
+units were cheaper than active duty forces. Personnel and operating
+costs were typically 25-35% of those of active duty units, and
+investment costs were less, as well, because Guard units were often
+equipped with older material cascaded from active duty forces. Now,
+however, ARNG units are no longer regarded as a strategic reserve, but
+as an operational reserve available for regular deployment abroad. In
+that role, Guard units no longer appear much cheaper per day of
+availability--and might even be more expensive--than active duty
+forces, since they are available for deployment for only a fraction of
+the time of active units, and equipment levels must come closer to
+matching those of active forces.
+ continued growth in operation and maintenance costs
+ A second cost driver is the continued, steady growth of operation
+and maintenance budgets. If you put together a spread sheet that shows
+defense funding back to end of the Korean war, exclude recent war
+costs, divide annual O&M budgets by the number of active duty troops,
+and adjust for inflation, you will come up with a trend line that grows
+by somewhere between 2.5% and 3.0% above inflation every year--year
+after year after year (see Figure 4).
+
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+ It is a bit difficult to analyze why O&M grows at such a
+relentless, steady pace, because the O&M budget covers all kinds of
+very different activities--advertising and recruiting; basic and
+advanced individual and unit training; professional military education;
+fuel costs; transportation; medical care for service members, their
+dependents, and some retirees; utility bills; facility maintenance and
+repair; warehouse and supply operations; purchases of spare and repair
+parts; day-to-day operation of weapons and equipment; overhauls,
+including sometimes extensive upgrades, of weapons and equipment;
+defense think tank studies of strategy and of trends in O&M; pay and
+financial management; and management of much of the Defense Department.
+ There are, however, a few pieces of the picture that collectively
+explain in very large part why O&M costs keep climbing.
+ One is that a very large share of the O&M budget goes to pay
+civilian Department of Defense personnel. In the FY2009 base budget,
+civilian pay in the O&M accounts was projected to total $53 billion,
+about 30% of total O&M funding. While federal civilian pay and benefits
+have not grown as rapidly as those of uniformed personnel, they have
+outpaced the growth of inflation--as in most skilled occupations,
+compensation of federal civilian workers has grown in real terms over
+time.
+ Second, the O&M budget includes costs of operating and maintaining
+major weapon systems. Those costs also appear to have increased faster
+than base inflation, though the reasons are complicated. Military
+service officials, particularly in the Air Force, have long argued that
+aging equipment becomes progressively more and more expensive to
+operate and maintain. CBO found some time ago that this was not a major
+factor in O&M. On the other hand, though it may not add up in itself to
+a huge amount of money, it may be one of a large number of individually
+minor factors that should be considered in concert to explain the
+larger trend.
+ Most observers also agree that new weapons are typically more
+expensive to operate and maintain than earlier generations of similar
+systems. Why this should be the case is very hard to explain. It is
+certainly at odds with trends in the civilian sector, in which
+reliability and maintainability of all kinds of goods have improved
+dramatically--consider automobiles, household appliances, and,
+especially, consumer electronics (leaving aside battery replacement).
+It appears, however, that while military developers promise lower
+operating costs, in the end they choose to pursue advances in
+performance instead.
+ Third, the O&M budget includes most of the annual funding for
+providing medical care to service members, their dependents, and many
+retirees (it does not include $5-6 billion a year in military personnel
+accounts for pay and benefits of unformed health care providers). DOD
+officials see growing medical costs, which have climbed much faster
+than overall inflation, as a critical long-term budget issue.
+ Fourth, and finally, the O&M budget finances operation and repair
+of military facilities. As the quality of life in the civilian sector
+improves, defense facilities also, in general, are expected to keep up,
+which, in turn, also may drive up costs in real terms.
+ This list is by no means exhaustive, but may help to understand
+some of the principal factors behind the continued growth of O&M costs.
+The corollary question, then, is whether this is a problem. Some may
+say no--that this is the cost of doing business and as long as growth
+isn't excessive, it is simply a fact of life for which budgets need to
+be adjusted. On the other hand, continued steady growth in the day-to-
+day cost of doing business appears to be at odds with experience in
+many parts of the private sector, in which improved productivity is the
+norm. The trend in defense O&M prices appears to be more similar to the
+trend in health care costs--which is universally seen to be a problem--
+than to the trend in other economic activities.
+ Most importantly, within limited budgets, higher O&M costs will
+crowd out other things. The effect of growing O&M costs on trade-offs
+within the defense budget in the 1990s illustrates the issue. Defense
+advocates often complain about the dramatic decline of weapons
+procurement funding in the 1990s. Then-Secretary of Defense William
+Perry, at the time, agreed, saying that the `procurement holiday' of
+the early '90s had gone on long enough and needed to be reversed. The
+Defense Department's target for many years was to get the procurement
+budget up from the $45 billion range to at least $60 billion. While $60
+billion for procurement appears quite constrained by today's standards,
+achieving even that target proved elusive. The reason was the
+continuing growth of overall O&M costs. Successive long-term defense
+plans generally assumed that O&M costs would level off in future years.
+When they did not, within limited budgets, the Defense Department
+shifted funds from procurement to cover must pay O&M bills. Year after
+year, therefore, planned increases in procurement funding were deferred
+due to the growth in O&M accounts.
+ As a side note, the problem should not be attributed only to the
+Clinton Administration. Underestimation of O&M costs, rather, was
+something the Clinton defense team inherited from the outgoing Bush
+Administration's defense plan and then was unable to correct. After
+adjusting for lower than expected trends in inflation, over the FY1994
+to FY1999 period, for which we can compare Bush and Clinton defense
+plans in detail, the total amount the Clinton Administration spent on
+defense was, in terms of real purchasing power, not much lower than the
+previous Administration projected in its final six year defense
+program.\4\ O&M spending, however, was much higher, and procurement
+much lower.
+ CRS' conclusion is that steadily growing O&M costs devoured the
+budget for weapons modernization through most of the 1990s. The danger,
+of course, is that we will face the same tradeoffs again if budgets in
+the next decade are as tight as in the '90s.
+ intergenerational cost growth in major weapons programs
+ A third cost factor, and one that is a matter of extensive
+discussion today, is the apparently accelerating pace of
+intergenerational cost growth in major weapons programs. The issue of
+intergenerational cost growth in weapons programs often considered in
+conjunction with discussions of the growth in costs of programs
+compared to initial development estimates--but the two factors are
+really quite distinct. The systematic underestimation of weapons
+acquisition costs is an independent factor, which I'll mention next.
+ Examples of very large intergenerational leaps in weapons costs are
+all around. The F-35 fighter, which is the new `low-end' fighter for
+the Air Force, is now projected to have a unit flyaway cost of $83
+million each and a total unit acquisition cost of over $100 million.\5\
+In FY1985, the Defense Department procured 150 F-16s fighters, the
+previous low-end fighter, at a then-year price of $16 million apiece,
+which is about $30 million in FY2009 prices. In later years, F-16
+prices climbed as new models incorporated more and more advanced
+technology. Still, the leap in costs is dramatic.
+ It is not, however, by any means atypical. Below is a quite
+illustrative table, prepared by Cecil Black of the Boeing Corporation,
+which compares numbers of major weapons in selected categories procured
+in FY1985 with numbers bought in FY2008 (with funding both in the base
+DOD budget and in war-related appropriations). As I noted earlier, in
+FY1985, acquisition funding (again, procurement plus R&D) totaled about
+$220 billion in FY2008 prices. In FY2008, acquisition funding totaled
+about $240 billion.
+
+ TABLE 1.--RECAPITALIZATION RATES: FY1985 VS FY2008
+ [Quantities of weapons procured]
+------------------------------------------------------------------------
+ 1985 2008 Difference
+------------------------------------------------------------------------
+Tactical Fighters..................... 338 56 -282
+Bombers............................... 34 0 -34
+Other Fixed Wing...................... 211 153 -58
+Rotary Wing........................... 354 373 +19
+Missiles.............................. 87,113 13,471 -73,642
+Tracked Combat Vehicles............... 2,414 1,258 -1,156
+Tactical Vehicles..................... 56,551 32,276 -24,275
+Satellites (Unclassified)............. 10 1 -9
+Ships................................. 23 7 -16
+------------------------------------------------------------------------
+Source: Cecil Black, Boeing Corporation.
+
+ The growing price of weapons does much to explain why the expense
+of maintaining even a smaller force structure than in the past has
+climbed so high. At current prices of major weapon systems, the `steady
+state' cost of replacing platforms as they reach the end of their
+planned service lives has become very difficult to afford, even with
+budgets that exceed previous peaks.
+ Why this is the case--and what to do about--is a matter that is far
+beyond the scope of this brief survey. In some cases, at least, cost
+has been driven up by an attempt to build systems to perform multiple
+missions with maximum capabilities in every dimension. The DDG-1000,
+which I cite only because it has been a focus of debate for the past
+year, and may well be terminated, may be a informative example.
+ In brief the DDG-1000 (formerly DDX) destroyer is a 15,000 ton
+ship. This is about the size of a World War II cruiser, and it is half
+again as large as the earlier generation DDG-51 destroyer it is
+intended, in part, to replace. Why is it so large? It incorporates the
+most advanced Aegis air defense radar and anti-air missile systems; the
+anti-submarine warfare capabilities of a dedicated ASW frigate; the
+ability to provide long-range fire support to forces ashore from two
+guns and from vertically launched missiles; a full flag officer
+communications capability; the ability to deploy two helicopters or one
+helicopter and two UAVs for multiple missions, such as mine-sweeping
+and ASW; and the ability to carry aboard and deploy ashore either a
+marine unit or a special forces detachment. It also includes an
+advanced drive and multiple systems intended to reduce the required
+number of sailors. In short, it is all things to all requirements
+writers. The result is a ship that is now projected to cost between
+$3.5 and $4.0 billion each, and that cannot, therefore, be afforded in
+substantial numbers.
+ The rationale for developing a ship like the DDG-1000 is apparent.
+A large multi-mission ship has considerable advantages, including an
+ability to absorb future growth in capabilities. With a smaller force
+in prospect, it is understandable that the Navy would want some of its
+newer ships to be as flexible as possible. Still, the resulting cost of
+the ship has led the Navy to an internal debate about terminating the
+program and resuming DDG-51 procurement in its place. And, in any case,
+the DDG-1000 is too expensive to be produced in large numbers.
+ How typical is this of recent development efforts? Secretary Gates,
+at least, thinks it has become the norm. In his article on defense
+policy in the January/February issue of Foreign Affairs he wrote:
+ When it comes to procurement, for the better part of five decades,
+the trend has gone toward lower numbers as technology gains have made
+each system more capable. In recent years, these platforms have grown
+ever more baroque, have become ever more costly, are taking longer to
+build, and are being fielded in ever-dwindling quantities. Given that
+resources are not unlimited, the dynamic of exchanging numbers for
+capability is perhaps reaching a point of diminishing returns. A given
+ship or aircraft, no matter how capable or well equipped, can be in
+only one place at one time.\6\
+ underestimation of program costs
+ Systematic underestimation of weapons costs has become such a
+significant element of defense costs that it can easily be seen as an
+independent factor driving up the overall price of defense. For the
+past six years, GAO has done annual overviews of cost trends in major
+defense acquisition programs based on a review of Department of Defense
+Selected Acquisition Reports. In the review it reported last March, GAO
+provided a very clear summary of what has been happening--and it is,
+frankly, not going in the right direction. Table 2 is a summary of
+GAO's findings.
+
+ TABLE 2.--GAO ANALYSIS OF MAJOR DEFENSE ACQUISITION PROGRAM COST GROWTH
+ [Amounts in constant FY2008 $]
+------------------------------------------------------------------------
+ 2000 2005 2007
+ portfolio portfolio portfolio
+------------------------------------------------------------------------
+Number of programs............... 75 91 95
+Total planned commitments........ $790 $1.5 $1.6
+ Billion Trillion Trillion
+Commitments outstanding.......... $380 $887 $858
+ Billion Billion Billion
+Portfolio performance (change to 27 percent 33 percent 40 percent
+ total RDT&E costs from first
+ estimate).......................
+Change in total acquisition cost 6 percent 18 percent 26 percent
+ from first estimate.............
+Estimated total acquisition cost $42 Billion $202 $295
+ growth.......................... Billion Billion
+Share of programs with 25 percent 37 percent 44 percent 44 percent
+ or more increase in program
+ acquisition unit cost...........
+Average schedule delay in 16 months 17 months 21 months
+ delivering initial capabilities.
+------------------------------------------------------------------------
+Source: Government Accountability Office, Defense Acquisitions:
+ Assessment of Selected Weapon Programs, GAO-08-467SP, March 31, 2008.
+
+ To summarize the results: GAO compared the average acquisition
+performance of all the Major Defense Acquisition Programs (MDAPs) on
+which DOD reported in 2000, 2005, and 2007. There were 75 MDAPs in
+2000, 91 in 2005, and 95 in 2007. On average, DOD underestimated R&D
+costs of MDAP programs in the 2000 program by 27 percent and in 2007 by
+40%. It underestimated total acquisition costs of MDAPs in the 2000
+program by an average of 6 percent, and it underestimated total
+acquisition costs of MDAPs in the 2007 plan by an average of 26
+percent. In the 2007 program, 44 percent of the programs had cost
+growth of more than 25%, a thresholds established by the Nunn-McCurdy
+amendment, which triggers requirements for a thorough program review.
+ Most significantly, total cost growth in the 2007 programs is now
+expected to total $295 billion, which is 18% of the overall $1.6
+trillion value of the major weapons programs in the acquisition plan.
+Such substantial unplanned cost growth undermines efficiency, further
+increases costs, and creates a need to restructure acquisition programs
+across the all the services. Some programs may have to be cancelled and
+many stretched out to adjust the overall budget to accommodate the
+resulting gap on funding.
+ new requirements for ground forces
+ A fifth factor driving up defense costs is the apparent need to
+restructure the Army, in particular, and the Marine Corps to some
+degree, to be able to respond to new missions that have been adopted in
+response to the attacks of 9/11. The decision to engage first in
+Afghanistan and then in Iraq led the Army to accelerate plans to
+restructure its basic organization. Instead of a force designed for
+wholesale mobilization for a major war, the Army has become a modular
+force organized around fully manned and readily deployable Brigade
+Combat Teams (BCTs) designed for rotational deployment abroad. The
+Defense Department, with broad support in Congress, has also decided to
+increase the size of the Army by 65,000 active duty troops, mainly to
+add six additional brigades, and of the Marine Corps by 27,000. When
+fully phased in, the addition of 92,000 active duty troops will cost
+more than $13 billion a year in increased personnel and operating
+expenses of the Army and Marine Corps.
+ The modularization of the Army in itself will cost more than $50
+billion, mainly to fill out equipment requirements for the force.\7\
+The conflicts in Iraq and Afghanistan have also led the Army to
+redefine its requirements for equipment in all its units. To fight the
+wars in Iraq and Afghanistan the Army has, in effect, established new
+standards that it sees necessary for force protection equipment,
+transportation equipment, and communications equipment for almost every
+unit in the force. And these requirements now extend not only to active
+duty units but also to National Guard combat units that have become
+part of the regular rotation base for deployment abroad, and therefore
+require largely the same equipment as active duty forces.
+ The cost of reorganizing ground forces to be more flexible and
+deployable is a significant factor that has driven the overall cost of
+defense somewhat higher. The Army's case for reorganizing and for
+adding to the size of the force is based on anticipated requirements
+for rotating forces abroad. Following the 2004 Quadrennial Defense
+Review, the goal to be able to deploy 18 or 19 brigade combat teams
+abroad on a recurring basis. Later, the force generation goal was
+increased to as many as 23 forward deployed brigades.
+ If active duty units are available for deployment one year out of
+every three, then 48 active brigades, as is now planned, would provide
+16 deployable brigades a year. Additional brigades would be generated
+from the Army National Guard, which requires Guard units to be trained
+and equipped for regular deployments.
+ a broader array of global security challenges
+ A final, and much less easily quantifiable factor that may affect
+the defense budget has to do with entirely new security challenges that
+planners have only begun to characterize. A good starting point in
+thinking about the range of new challenges is what has come to be
+called the `Quad Chart' in the Pentagon. I have attached one version of
+the Quad Chart at the end of this statement.
+ In brief, the Quad Chart divides security challenges into four
+categories: Traditional military conflicts between states with
+conventional military forces; irregular conflict such as insurgencies
+in Iraq, Afghanistan and elsewhere, catastrophic challenges posed by,
+for example, state-sponsored or not-state terrorist groups with access
+to weapons of mass destruction; and, a the newest category, disruptive
+threats from a range of competitors, including peer or near-peer
+regional or global actors, who would not attempt to compete with
+traditional U.S. military forces directly, but would instead try to
+identify and attack U.S. vulnerabilities. The quad chart divides these
+challenges according to likelihood and vulnerability. The premise is
+that traditional military threats are unlikely and the United States
+has such overwhelming capabilities that it is not vulnerable to them.
+Catastrophic challenges are seen as likely to appear, and vulnerability
+as high. Irregular threats are likely, but vulnerability low.
+Disruptive threats are regarded as unlikely, but vulnerability high.
+ The quad chart has important implications for the allocation of
+resources. If traditional challenges are unlikely, and U.S.
+vulnerability is low, the implication is that resources might be
+shifted away from investments in such capabilities in favor of other,
+higher, priorities. Much of what Secretary Gates has said in recent
+articles and speeches reflects this perspective. An effort to reduce
+investments in traditional military capabilities, however, implies a
+willingness to accept greater risks to U.S. security in some potential
+areas of conflict. While direct state-on-state conflict may appear less
+likely than in the past, assessments of the international security
+environment nonetheless point up the potential for future conflicts
+over many issues, including access to resources, economic and social
+dislocations caused by climate change, and remaining unresolved
+regional disputes. So traditional challenges could reappear in the
+future, and planners must decide in the present how much to invest as a
+means of hedging against them.
+ The apparent need to prepare for a broader array of new challenges
+than planners had assumed at the end of the Cold War may prove to have
+a very big effect on budgets--or it may not. It is not clear to what
+extent the new challenges may shape spending in the future. Some more
+spending to counter anti-satellite weapons and cyberwarfare may prove
+necessary--but it is very difficult to anticipate how much money will
+be required to counter other `disruptive' challenges that remain to be
+defined.
+ So far, the main effect of identifying new challenges seems to have
+been to push budget requirements marginally higher, though there may
+later be offsetting trade-offs.
+ themes and implications
+ A few themes--with some implications for policy--emerge from this
+review of the things that are driving up defense costs. One important
+theme is that the price of defense is driven in very large part by the
+cost of people--including both uniformed and civilian personnel in the
+Defense Department. This, in itself, does not imply that we should trim
+the defense budget by reducing pay and benefits or by abandoning
+increases in the number of troops in the Army and Marine Corps. It may,
+however, serve to point up the importance of considering other means of
+reining in personnel costs. This could mean reducing the size of the
+other services, or pursuing more vigorously than in the past reductions
+in the number of uniformed personnel performing support functions.
+ In general, when defense budgets are tight, the variable part of
+the budget, which bears the brunt of most cut drills, is investment,
+both in weapons and in facilities. You can certainly trim the budget by
+reducing investment without dire consequences for a few years. But
+ultimately, simply slowing the pace of weapons modernization will lead
+to an aging and less capable force, and skimping on facilities can
+leave you with a backlog of problems.
+ This may suggest that if defense budget shortfalls continue, we
+will, later if not now, have to consider reductions in the number of
+personnel. And from a budgeting perspective, if you are going to
+eliminate something in the long run, the sooner policy-makers decide to
+do so, the better, because it saves money in the interim for other
+important things.
+ A second theme is that the military services have, to varying
+degrees, been caught in a budget bind that is by no means entirely of
+their own making. Rather, it is a result, in part of growing personnel
+costs and, in part, of changing guidance on priorities from senior
+decision-makers, including Congress. In the first few years after the
+end of the Cold War--and in the wake of the first Persian Gulf War--the
+guidance, implicitly if not explicitly, was that our technology would
+save us--particularly information technology that would give U.S.
+forces a critical advantage in seeing an arena of conflict. Now, faced
+with irregular warfare in Iraq and Afghanistan, the emphasis is on
+larger numbers of highly trained and flexible foot soldiers--the
+`strategic corporal' as a former Marine Commandant put it. High tech
+forces for `traditional' state on state, force on force conflicts are
+becoming a lesser priority.
+ The implications of that theme are varied. The Air Force, lately,
+has been subject to some criticism--to put it mildly--on a number of
+grounds. One complaint is about the growing cost of many of the
+programs the Air Force manages--including a large share of space and
+other programs that are fundamentally joint in nature, that are
+essential to all of the services. In its defense, however, the Air
+Force was, for many years, only doing what its leaders thought was the
+key task, which was to exploit U.S. technological advantages as much as
+possible in order to maintain military strength even if, as was
+commonly expected, the size of the overall force would continue to
+decline.
+ Another implication has to do with funding for the Army. As
+discussed earlier, one factor that has driven up the cost of defense in
+recent years is the urgent restructuring of the Army. At the end of the
+1990s, the Army was being criticized because it had not adjusted, as
+the other services had, to the post-Cold War era. It was still
+organized, not for expeditionary, rotational operations abroad, but to
+fight one big war. As it became engaged in Iraq and Afghanistan,
+however, the Army embraced the need to reorganize itself into a very
+different, modular force with fully manned, more readily deployable
+units.
+ For the most part, the costs of modularization and the initial
+costs of adding to the size of the force have been financed with
+supplemental appropriations. A question now on the agenda is whether
+large supplementals should continue. To the extent there remain some
+additional Army restructuring costs, as there may well be, particularly
+to better equip National Guard units, Congress may want to consider
+whether to continue using supplemental funding for at least a limited
+additional period to cover one-time expenses associated with continued
+Army reorganization.
+ For the Budget Committee, this may present something of a dilemma.
+On the one hand, these requirements have long since gone past the point
+of being uncertain, unpredictable, and unplanned costs that should be
+financed through emergency appropriations exempt from caps on
+discretionary spending. On the other hand, to the extent that these
+investments are seen as one-time expenses, then it may make more sense
+to continue to pay for them with presumably temporary war-related
+appropriations, rather than build them into the base budget.
+ I'll be happy to address any questions you may have.
+ endnotes
+ \1\ Most recently Admiral Mullen reiterated his views in a Pentagon
+press briefing on November 17, 2008--see Department of Defense News
+Transcript, `Department of Defense News Briefing with Admiral Michael
+Mullen at The Pentagon, Arlington, Va.,' November 17, 2008.
+ \2\ Author's notes on a presentation by then-Secretary of the Air
+Force, Michael Wynne, at an Aviation Week Defense Technology and
+Requirements Conference, February 13, 2008.
+ \3\ John T. Bennett, $40B Price Tag for Larger Army: U.S. Service
+Predicts Cost of 1.1 Million-Soldier Force, Defense News, December 15,
+2008, p. 1.
+ \4\ The bulk of the reduction can be traced to two things--a cut of
+about 150,000 in active duty troops and reductions in missile defense
+funding. This discussion is based on CRS Report 95-20, `A Comparison of
+Clinton Administration and Bush Administration Long-Term Defense Budget
+Plans for FY1994-99,' Dec. 20, 1994, by Stephen Daggett, and on
+subsequent unpublished update information. Both are available to
+congressional offices from the author on request.
+ \5\ Data from F-35 Selected Acquisition Report, June 2008.
+ \6\ Robert M. Gates, `A Balanced Strategy: Reprogramming the
+Pentagon for a New Age,' Foreign Affairs, January/February 2009.
+ \7\ See CRS Report RL32476, U.S. Army's Modular Redesign: Issues
+for Congress, by Andrew Feickert, updated January 24, 2007.
+
+ Chairman Spratt. Mr. Gilmore.
+
+ STATEMENT OF J. MICHAEL GILMORE, ASSISTANT DIRECTOR,
+ CONGRESSIONAL BUDGET OFFICE
+
+ Mr. Gilmore. Mr. Chairman, Congressman Ryan, members of the
+Committee, I appreciate the opportunity to discuss the
+sustainability of the defense plan this morning.
+ My remarks are going to be based on the report that CBO
+released early last month on the long-term implications of the
+2009 future years defense program. So if I could have the first
+chart, please.
+ In these charts that I am going to show you this morning,
+funding is going to just be displayed in constant 2009 dollars.
+So the effects of inflation are removed and you can compare the
+buying power of past budgets, which is on the left of the
+chart, to projected future budgets, which is on the right of
+the chart.
+ In CBO's projection, DOD funding averages about $549
+billion annually in the period from 2014 to 2026, which is the
+projection period we considered. And that is more than the peak
+of the 1980's buildup, which is shown on the left of the chart,
+about $485 billion. So a $549 billion annual average in the
+future versus $485 billion during the peak of the Reagan
+buildup, and that is to pay for a force one-half to two-thirds
+the size of the force we had during the mid-1980s.
+ Now, including what we label on this chart as potential
+unbudgeted costs, that could push that average in the future to
+$652 billion a year, 35 percent more than the 1980's peak. And
+what we include in that unbudgeted cost category are, first of
+all, funding for continued operations overseas in the near term
+and the long-term. And in the long-term we made a somewhat
+arbitrary assumption of 75,000 troops deployed somewhere in the
+world 2013 and thereafter, and that would cost about $60
+billion a year. So that is $60 billion worth of the unbudgeted
+cost.
+ And then the remainder of the unbudgeted cost is associated
+with historical experience in cost growth in major weapon
+systems, and that is about $43 billion. So we project that in
+order to buy the current program without cutting back on the
+number of aircraft or ships or other major weapon systems
+bought, which, by the way, is typically the way the Department
+has handled the problem with cost growth, if you wanted to pay
+for the programs as they are currently laid out that would cost
+another $43 billion a year, on average.
+ The sustained relatively high level of funding in our
+projection is due to, as Steve Daggett has already alluded to,
+growing costs of pay and benefits for military personnel and
+plans to increase of size of U.S. ground forces, as well as
+plans to purchase new systems, including systems with the
+advance capabilities the Department associates with military
+transformation that are turning out to be much more expensive
+than the systems that they are going to replace.
+ Let me say a little bit more about each of the areas, the
+two areas of funding that are indicated on the chart,
+investment and operations and support. And let me turn first to
+operations and support, which currently is about 60 percent of
+the budget and which under our projections will grow to almost
+67 percent of the budget over time in real growth. So let me
+turn first to operations----
+ Excuse me, next chart.
+ Let me show you another way of looking at defense
+expenditures. This showed you spending or funding. This looks
+at past and projected defense spending as a share of the
+economy. Defense spending averaged about 5.6 percent of gross
+domestic product in the 1980s. It declined to 3.8 percent of
+GDP in the 1990s; and it is currently about 4.5 percent of GDP,
+including the costs of the wars in Iraq and Afghanistan.
+ Now, in our projection, which shows relatively flat
+constant funding, defense spending would decline to 2.5 percent
+to 3 percent of GDP by 2026, excluding and including unbudgeted
+costs. And that assumes the GDP continues to grow. Right now,
+it is not.
+ Next chart.
+ Now let me turn to operations and support in more detail,
+currently about 60 percent of the budget. About 40 percent of
+this funding is for military pay; and the remaining 60 percent
+is for operations and maintenance, which is running units,
+maintaining equipment, and providing other benefits, including
+medical care, to military personnel.
+ In our projection, operations and support funding rises
+steadily in real terms, from $307 billion in 2009 to $380
+billion in 2026, excluding that unbudgeted cost category, and
+$443 billion, including those unbudgeted costs, which in this
+projection are associated mostly with continued operations
+overseas, because most of the costs of operations overseas are
+in the operations and support category. Not all of them, and I
+will say more about that in a minute.
+ Now, what is driving this growth is continued real pay
+increases and real increases in the cost of benefits,
+particularly medical benefits, and I will say more about that
+in a minute.
+ However, another source of growth is the increasing cost to
+operate both new equipment, which turns out to be more complex
+and more expensive to operate overall than the equipment it
+replaces, as well as aging equipment. The cost of aging
+equipment--maintaining and operating aging equipment are
+growing as well.
+ Let me have the next chart.
+ This is to bore in a little bit on the medical care cost
+dilemma that the Department is facing that, as already has been
+mentioned, is similar to the medical cost dilemma that the
+economy as a whole is facing. DOD's budget for health care,
+including accrual payments for care that will be provided to
+future retirees, so-called TRICARE for Life, is now about
+double the amounts budgeted in the 1990s, as shown on this
+chart. And CBO and DOD's own actuaries project that the
+Department's health care costs will increase steadily, $5
+billion in real growth from 2009 to 2013 and $32 billion in
+real growth, or 79 percent, through 2026.
+ Unfortunately, the situation could be worse than that 79
+percent growth if faster than projected medical inflation--and
+certainly history tells us we frequently underestimate the
+growth in medical costs--if faster than projected medical
+inflation occurs, that could cause a real increase in these
+accounts of 126 percent; and that is depicted by the dash line
+labeled unbudgeted costs.
+ The accrual payment growth is 6.25 percent on an annual
+basis nominal growth. Per capita pharmaceutical cost growth is
+9 percent, and per capita direct care and purchase care growth
+is about 6 percent nominal growth. So all of those areas
+contributing to substantial growth in the Department's medical
+care costs.
+ Let me have the next chart.
+ This is a reprise of a chart that Steve showed. This is a
+somewhat truncated version showing per capita, meaning per
+active duty service member growth, in operations and
+maintenance funding. Measured on a per-service-member basis,
+DOD's O&M funding has grown steadily during the past 20 years,
+averaging $2,100, 2009 dollars, per active duty member per
+year--that is shown here on this chart--which does not remove
+the current war costs which causes that large increase there
+over the last 5 years.
+ Then, in the future, we project that the 20-year trend will
+continue. And the fact that in the period there labeled FYDP,
+or future years defense program, that that black line above the
+dash line indicates that in DOD's plans, at least in the 2009
+future years defense program, there isn't an indication there
+in its base program DOD was underfunding its readiness
+accounts. If it were doing that, then you would expect that
+black line to be below the dash line. So there is no evidence
+when you look at this metric that DOD was actually paying for
+peacetime readiness in the supplemental appropriations as
+opposed to its base program. And we currently project the per
+capita O&M funding will increase by another 20 percent through
+2026 relative to today's level.
+ Next chart.
+ Let me turn to the investment accounts. I have given you an
+overview of operations and support, which was 60 percent of the
+budget. Let me turn to the other 35 percent of the budget. This
+shows past and projected funding for investment.
+ In our projection investment, which is funding to develop
+and purchase new weapons, would average about $187 billion
+during 2014 to 2026; and that is about 10 percent below the 1-
+year peak in investment that occurred during the 1980's buildup
+of about $207 billion.
+ Accommodating historical trends in cost growth would
+increase funding demands in our projection by about $30 billion
+annually, or about a 15 percent increase overall, to pay for
+the program if we continued to try and buy it but historical
+trends and cost growth were realized. And the cost of
+purchasing new equipment to support continued contingency
+operations--remember, our projection assumes that we continue
+to be engaged overseas--could cause funding to advance and
+increase by another $22 billion annually, on average, based on
+experience in Iraq and Afghanistan.
+ Next chart.
+ Chairman Spratt. You got--if I could interrupt you there--
+two items: total unbudgeted costs, as opposed to contingency
+unbudgeted costs. What is the difference between them?
+ Mr. Gilmore. Contingency unbudgeted costs are associated
+with paying for refurbishing equipment and buying new equipment
+to replace worn-out equipment and damaged equipment if we
+continue to be involved in operations overseas. So our
+projection included an assumption that over the long run we
+would have 75,000 troops involved somewhere overseas, not
+necessarily Iraq and Afghanistan, although it could be there.
+So if you continued to have 75,000 troops involved overseas
+with the kind of operational tempo that we have been
+experiencing over the last couple of years, then that would, in
+our projection, imply an additional $22 billion in investment,
+mostly procurement, annually to continue to replace and repair
+equipment associated with maintaining those operations. And
+then historical cost growth is the remainder of the unbudgeted
+cost.
+ So there is contingency unbudgeted cost, which is the first
+dash line, and then there is with total unbudgeted cost, which
+is the second dash line. And the difference between the two is
+just historical trends in cost growth.
+ If we take today's investment program and we experience
+what we have seen in the past with regard to growth in the cost
+of major weapon systems that are preproduction, then that would
+add another $30 billion annually to the cost of the program on
+our projection. That assumes that you don't cut back on the
+amount of weapons that we are currently planning to purchase so
+that you don't further reduce joint strike fighter purchases in
+the Air Force below any aircraft year. You try to buy those
+aircraft, but costs go up as they have in the past and you just
+pay for those increased costs.
+ Have I made that at all clear?
+ Next chart.
+ Those two dash lines will be on every one of these
+investment charts, and it is most noticeable in the case of the
+Army because the Army would bear the brunt of these continued
+operations overseas. So you see that there is a large amount of
+unbudgeted costs--a relatively large amount of unbudgeted costs
+associated with contingency operations in this chart. That is
+because the Army would bear the brunt of those operations if
+they occurred.
+ One of the--this is Army investment, so I just showed you
+investment overall for the Department of Defense past and
+projected. Now I am going to show you past and projected
+investment for each one of the services, beginning with the
+Army.
+ One of the most noticeable features on this chart is that
+recently, due to funding provided in supplemental
+appropriations to replace and repair equipment associated with
+operations in Iraq and Afghanistan, the Army has received as
+much investment, mostly procurement funding, in supplementals
+as it has requested in the base budget. And that is shown by
+that spike there, which, by the way, is well above the peak in
+investment that occurred during the Reagan buildup in the
+1980s.
+ Now, in the future, CBO's projection of Army investment
+averages about $36 billion annually, so that is towards the
+right hand part of the chart, excluding unbudgeted costs and
+$58 billion including them. Historical trends in cost growth
+for Army systems, particularly for combat vehicles such as
+those being developed under the future combat systems program,
+account for about 40 percent of those unbudgeted costs. And the
+remaining 60 percent is associated with paying for the costs of
+equipment used in continued operations overseas if that were to
+occur.
+ Now, saying a little bit more about the future combat
+systems program, which as you can see there takes up a good
+deal of the funding in our projection, FCS funding exceeds $100
+billion through 2026, about 6 to $8 billion annually in the
+projection. That would buy 13 brigade sets of equipment through
+2026, with another two planned to be purchased beyond 2026. But
+that is about one-half of what may be needed for the Army,
+because the Army will have 19 active heavy brigades, seven
+heavy brigades in the Army National Guard according to current
+plans, and three to five prepositioning sets of heavy equipment
+that may have to be replaced with FCS.
+ The plan now is to eventually replace all of the equipment
+in the heavy brigades with FCS. So something will have to--if
+that doesn't occur and if they stick with the plan to buy 15
+brigade sets, as opposed to more than twice that amount,
+something will have to be done to maintain the existing
+equipment, the Bradley fighting vehicles and the Abrams tanks
+that they will have in several thousands of numbers. So CBO's
+projection includes more than $3 billion annually to replace an
+upgrade to combat vehicles that will not be replaced by the
+future combat system.
+ Let me show you the next chart, which illustrates one of
+the challenges the Department faces overall but in particular
+the Army faces with its combat vehicle fleet.
+ The top part of this panel shows on the left the weapon
+systems that were purchased during the 1980s and the 1990s, and
+in the 1980s a lot of Abrams tanks and Bradley fighting
+vehicles were bought. And then on the right hand part of the
+chart, on the top, it shows the number of vehicles that will be
+procured under the future combat systems program current plans,
+one brigade set a year.
+ Then, on the bottom, the chart shows funding to buy those
+weapon systems, the funding that was necessary during the 1980s
+to buy the number of tanks shown on the chart and then the
+funding that under current Army estimates will be required to
+buy future combat systems at a rate of one brigade set a year.
+And under current Army plans, which we hear, by the way, may
+change, development in some of the FCS combat vehicles
+contained in this projection may in fact be ended. They may end
+up developing a fewer number of those vehicles.
+ The Army will spend at levels comparable to those in the
+1980s to purchase about one-quarter the number of new vehicles.
+Those purchases alone would not be sufficient to sustain its
+force, as I mentioned; and absent that $3 billion a year in
+annual funding that we include in our projection to upgrade and
+replace older systems, the FCS purchases displayed in the chart
+wouldn't be sufficient to sustain the force, as I said; and the
+aged Army combat vehicles would double over the long term from
+about 10 years currently to 20 years by 2026, which is about
+double the desired fleet wide age. So the additional $3 billion
+a year or something in that neighborhood will probably have to
+be spent if more FCS vehicles are not bought, and which is the
+current plan.
+ Next chart.
+ Let me turn to the Navy. This shows past and projected
+funding for investment in Navy systems.
+ CBO's projection indicates that funding for investment in
+Navy and Marine Corps weapon systems will average about $58
+billion annually during 2014 to 2026, which is slightly less
+than the average funding of $61 billion during the period of
+the 2009 FYDP, 2009 to 2013. And through 2018, in this
+projection anyway, funding will be comparable to that of the
+mid-1980s, and that is to support a fleet of about half the
+size of the ship fleet that we had during the 1980s.
+ Funding for shipbuilding, excluding historical cost growth,
+so there is that ships' portion of the funding at the top of
+the chart, will average about $21 billion through 2026. That is
+about 40 percent greater than it is in 2009.
+ Funding to develop new weapon systems, the bottom part of
+the chart, shows the development funding for new systems. And
+you can see that funding to develop new weapon systems would
+decline from $19 billion in 2009 to $11 billion in 2013 and
+eventually in our projection to about $7 billion by 2026. And,
+as seen in the chart, such a steady, substantial decline in
+RDT&E funding would be inconsistent with experience during the
+past 20 years. But, nonetheless, that is the implication of
+current plans. They will buy out the joint strike fighter
+program and F-18 EF and multi-mission maritime aircraft, and
+they will not begin to develop the replacements for those
+systems even though towards the end of this projection the F-18
+EFs that have been bought over the last several years will be
+nearing the end of their service lives.
+ Next chart.
+ Finally, let me show you our projection for Air Force
+investment that is shown on this chart. CBO projects that Air
+Force investment will average about $70 billion annually during
+2014 to 2026, versus about $64 billion annually during the 2009
+to 2013 period of the 2009 future years defense program.
+Accommodating historical cost growth would increase funding
+demands by about $6 billion annually. And note that a
+substantial portion of the other funding depicted in this chart
+is associated with intelligence activities that experienced
+substantially increased funding since 2001.
+ Next chart.
+ Let me just bore in here for a second on one of the
+particular challenges facing the Air Force, and that is the
+modernization of its tactical aircraft fleet. So this is the
+Air Force analog of that chart that I showed you a few moments
+ago for combat vehicles in the Army. On the left, we have the
+numbers of aircraft that were purchased in the past. So there
+were large purchases of F-16s, particularly F-16s and F-15s,
+during the 1980s. Then there was not much aircraft procurement
+during much of the 1990s. Then we began to buy the F-22, which
+are the pink bars on the chart. And then, in the future, we
+will buy in increasing numbers the joint strike fighter for the
+Air Force rising in this projection to 80 aircraft a year,
+although we have heard that part of the increase in funding in
+the fiscal year 2010 future years defense program that the
+Department has developed would be to buy an additional 30 joint
+strike fighters a year for the Air Force. That would raise that
+number to 110 a year if that were correct.
+ Then on the bottom part of the chart you can see the
+funding, and you can see that recently and in the future we
+will be spending at levels roughly comparable to the levels
+that we spent during the 1980s but to buy substantially fewer
+aircraft. Those aircraft have gotten a lot more expensive.
+ Let me just give you a bit more detail on that. During 1981
+to 1988, 1,877 aircraft were purchased, for a total of $54
+billion. That is an average unit cost of about $30 million.
+Most of those were F-16s. During 1993 to 2001, 105 aircraft
+were purchased for $9 billion, an average unit cost of $80
+million per plane. And during 2001 to 2008, 156 aircraft were
+purchased. Almost all of those were F-22s, although that is the
+beginning of joint strike fighter purchases as well, so about
+\1/10\th--less than \1/10\th the number of aircraft that were
+produced during 1981 to 1988. And those were purchased for $32
+billion and an average unit cost of $210 million.
+ So during 2001 to 2008 we purchased about 60 percent of the
+aircraft that we did during the 1980s--excuse me, we spent
+about 60 percent buying aircraft in 2001 to 2008 that we spent
+during the 1980s, and we bought 10 percent of the aircraft. So
+60 percent of the funding, 10 percent of the aircraft.
+ And then in the future the joint strike fighter which will
+replace those--well, not entirely replace those F-16s, those
+dark blue bars there that were purchased in the 1980s, we will
+be buying those at $80 million a plane, versus $30 million a
+plane during the 1980s.
+ That concludes my remarks, and I am happy to take your
+questions.
+ [The statement of Mr. Gilmore may be accessed at the
+following Internet address:]
+
+ http://www.cbo.gov/ftpdocs/99xx/doc9972/02-04-Long-Term--Defense--
+ Testimony.pdf
+
+ Chairman Spratt. Well, thank you both. We asked for
+numbers, and we got them back in spades.
+ But, interestingly enough, the one thing you didn't mention
+was the one thing that 4 years ago or longer Senator Kerry and
+President Bush when they debated were put to the question, what
+do you think is the greatest threat facing the United States
+today? Kerry answered, a terrorist equipped with some kind of
+nuclear device; and President Bush readily concurred. It is the
+one thing they commonly agreed upon. You haven't touched upon
+that at all.
+ By my calculation, if you scrub this budget down, go to DOE
+and scrub its budget down for CTR and for Nunn-Lugar and all
+the different components of nonproliferation, you come up with
+about $2 billion. Is my approximation pretty close to what you
+would approximate is what we are really spending on this
+particular threat, nonproliferation? Steve? Mike?
+ Mr. Daggett. Well, there are two major categories in the
+defense account. One is cooperative threat reduction, which is
+in the DOD budget; and that has been running about $400 million
+a year. And then Department of Energy has a substantially
+larger nonproliferation program, counterproliferation program,
+largely to buy nuclear material and so on. I think you are
+right. I think it has been running about a billion and a half a
+year.
+ There are other initiatives in the State Department as
+well. I mean, the whole counterproliferation, international
+counterproliferation efforts. But those don't involve lots of
+money. The money for it is really in Department of Energy. And
+so I think your total is about right.
+ Chairman Spratt. And it has been pretty steady at that
+particular level for several years at least.
+ Mr. Daggett. Yes.
+ Chairman Spratt. How do you account for that? Do you think
+there is an underallocation here simply because it gets
+squeezed out by other programs, or this is all the Pentagon and
+the Department of Energy think can be sensibly applied?
+ Mr. Daggett. Well, I know there is an ongoing program. The
+big budget driver, as I understand it, is purchasing nuclear
+material; and there are agreements, international agreements on
+how much we are going to purchase each year. You might be able
+to increase that to some extent, but I think that is what
+drives really the cost of it.
+ You asked me are there other things we should be doing that
+we are not doing? I don't know. That is a bit beyond what I
+have looked at in detail. I can certainly get back to you.
+ And Amy Wolf, who works with us, has worked very closely on
+counterproliferation programs. The Harvard Belfer Center does a
+study every year of the status of nonproliferation efforts, and
+they make a number of recommendations. They have made a number
+of recommendations for changes in policy.
+ I have looked at it pretty closely a couple of years ago
+and didn't see many that required a lot more money. It was more
+international diplomatic initiatives and things of that sort
+that they were looking at. But I would be glad to look more at
+that and talk with you and with Scott about it.
+ You can certainly identify, I think, some additional areas
+of possible investment. I am not sure it would be a huge amount
+of money.
+ Chairman Spratt. Mr. Gilmore, if we cut through all of your
+charts and information here to the basics, to the bottom line,
+what are we spending today on the base defense budget for
+national defense and what are we spending typically in terms of
+supplementals for emergency purposes, primarily Iraq and
+Afghanistan?
+ Mr. Gilmore. Let us see. In 2009, I think the Department
+requested $517 billion and the Congress appropriated about $515
+billion in the base budget; and there was about another $180
+billion or so in supplemental funding for operations in Iraq
+and Afghanistan and other purposes.
+ Chairman Spratt. So that comes to nearly $700 billion?
+ Mr. Gilmore. Pretty close.
+ Chairman Spratt. And in real terms how does that compare to
+the post-war expenditure levels in the post-war period?
+ Mr. Gilmore. It is a peak. I mean, if you look at a chart
+that is on our Web site that displays defense funding over the
+past 60 years, I think we are at a peak in inflation-adjusted
+spending.
+ Chairman Spratt. Compared to Korea?
+ Mr. Gilmore. It has been a pretty steady increase, so I
+think it is an overall peak.
+ Chairman Spratt. Now, we have received from DOD from time
+to time bills for reset--renovation, repair, reconstitution and
+repurchase, really--of equipment that is either badly damaged
+or worn out due to the operating environment and the OPSTEMPO
+in the two war zones we find ourselves now, Afghanistan and
+Iraq. Have either of you paid any particular attention, spent
+any effort to try to unpack what is in those substantial
+requests that started at about 15, $16 billion?
+ The Chiefs told us that if we stopped the war in Iraq
+tomorrow we would still have these costs for at least 2, 3,
+maybe 4 years at a substantial level. But the level has risen
+considerably from about 15 or $16 billion several years ago to
+around $50 billion today, just under $50 billion today.
+ Mr. Gilmore. I think a year and a half or 2 years ago,
+Grant Lussier in our division produced a report on the Army
+reset program trying to, as you put it, unpack some of the
+details, which turns out to be a challenge to do, given the
+information that is available from the Department.
+Nonetheless----
+ Chairman Spratt. Give me some examples under the
+acquisition of new equipment.
+ Mr. Gilmore. Yes. A lot of the increase is associated with
+buying new equipment for the Army. Substantial numbers of up-
+armored, high-mobility, multi-purpose wheeled vehicles, Humvees
+that were not in the force at the beginning of the conflict, as
+everyone knows.
+ A substantial amount of money, about $20 billion, I think--
+I could be wrong--for purchases of mine-resistant, ambush-
+protected vehicles. Substantial amounts of money to purchase
+the most modern versions of Army trucks, the trucks built as
+part of the so-called Family of Medium Tactical Vehicles
+Program. A lot of those trucks were bought for National Guard
+units that lacked the most modern trucks. And, in fact, a large
+number of those trucks are just kept in the theater, and the
+units that come in haul in on those trucks.
+ So a substantial portion of that growth has been associated
+with buying that kind of new equipment that was not in the
+force prior to the operation.
+ Mr. Daggett. And I have one point. It really is unclear to
+me to what extent the Army has filled out its evolving
+requirements and plans for that kind of minor equipment. One of
+the tasks for the next administration, it seems to me, is to
+really unpack where the Army is going and what bills remain
+unfunded and try to distinguish what is to replace war
+equipment and what is to fill out modularization of the force
+and what additional kinds of equipment needs they might
+identify because of lessons of the war to equip the Army
+National Guard.
+ They spent a lot of money on it already. I am just not sure
+how far along they are in meeting all of those additional
+requirements. It could require a substantial amount additional
+if you do everything the Army wanted. It could be almost all of
+it has already been spent. I just don't know the answer to
+that. And I don't know that anybody really----
+ Mr. Gilmore. Well, I think the Army has indicated that, in
+fact, there are substantial additional bills that will come
+due. I read, anyway--I can't verify the accuracy of the
+reports--that the Army has claimed that they are about $40
+billion a year short in their investment accounts of where they
+would want to be if they could fully modernize and fully equip
+their force the way they want to. I have just read that; I
+haven't had a chance to get any information that would actually
+verify that figure.
+ Chairman Spratt. These requests come not in the base
+budget, but in, primarily, largely in the supplemental.
+ Mr. Gilmore. Well, it is a combination of the two. For
+example, some of the increases that occurred early on in the
+procurement requests in the supplementals were buying equipment
+associated with modular conversions, the conversion of the
+Army's combat brigades from division-centered to brigade-
+centered, modular brigades that were more capable of
+independent operations. Although, now the Department claims
+that almost all those costs, if not all those costs, are being
+requested in the base budget. But, initially, there were
+amounts requested in the supplementals.
+ So it is a combination of the two. But, as I pointed out on
+that chart, in Army procurement, the Army has gotten as much
+recently in procurement in the supplemental as it is requesting
+in its base budget.
+ Chairman Spratt. Typically, when advocates or opponents
+speak of the percentage of defense expenditures as a percent of
+GDP, they talk basically about the defense budget and, to some
+extent, Function 050, which would include the DOE nuclear
+program as well. But they generally do not include some direct
+collateral costs, such as veterans. The veterans bill today is
+running about, for both mandatory and discretionary, about $95
+billion a year. They rarely mention homeland security, an
+account that didn't even exist in the budgets several years ago
+and today is at $35 billion to $40 billion, maybe half of which
+is really classified money, but there is at least a $20 billion
+to $25 billion increase there. And they rarely mention military
+aid under the 150 account for foreign purposes. And you could
+go down the list.
+ Do you think, as we try to arrive at that measure, what
+percentage of our GDP are we allocating to national security,
+that these accounts should be included?
+ Mr. Daggett?
+ Mr. Daggett. Yes, it is really a policy issue for Congress.
+ I will say, when I look at it--I have spent a lot of time
+talking about personnel costs. And when you are tracking
+personnel costs, if you just look at the defense budget, even
+the 050 account, as a whole--in whichconcurrent receipt, is
+part of 050, not 051--you don't get a whole picture of it,
+largely because of VA costs.
+ So it may affect allocation decisions in this sense, that
+you are not capturing the full cost of personnel when you just
+talk about what the budget cost in DOD is, that the full cost
+of hiring somebody in the military is actually substantially
+higher than just the DOD cost because of future veterans'
+benefits and so on.
+ So it is useful, in general, to keep that in mind. But
+whether you have an overall budget account for national
+security or whatever as a way of doing it, you know, I don't
+have an axe to grind on that. But I do think visibility of all
+those kinds of costs is certainly useful from a planning point
+of view.
+ Chairman Spratt. I think the message that both of you bring
+us in great detail in your testimony today is that, typically
+when we think about cost growth in the defense business, we
+think about the investment accounts, R&D and procurement,
+because the percentage increases over and above baseline tend
+to be substantial over time.
+ But now we have a defense budget where the personnel
+accounts are swelling just as much as the--or substantially, if
+not as much as the investment accounts. O&M, of course, is
+growing substantially because we have troops deployed in two
+theaters and still troops stationed at places throughout the
+world.
+ It is hard to contain a budget which has got every account
+in it demanding substantial funding because of its level of
+engagement right now. Would you agree with that?
+ Mr. Daggett. My discussion is that personnel costs really
+drive a large part of the defense budget and have really driven
+costs up across the board. The implication I draw, by the way,
+is, to the extent that there is a decision to cope with that by
+reducing spending in some way, if you just look at the
+investment accounts, you are really focusing on a relatively
+narrow part of the budget disproportionately.
+ So you really do need to consider the cost of personnel,
+both uniformed personnel and civilian personnel, in this budget
+environment. If you think the budget is going to be tight for
+the foreseeable future, eventually you are going to have to
+look at the size of the force. And, from my point of view, just
+from a planning perspective, if you are going to draw down the
+size of the force in the future, the sooner you decide to do
+it, in a way, the better, because then you save resources in
+the interim for other investments.
+ So, absolutely, I think it really is important to keep in
+mind that a big, big part of the budget is driven by the cost
+of people.
+ Chairman Spratt. Mr. Gilmore, one final question. Some time
+ago we asked, after not getting the information from DOD, we
+turned to CBO and said, would you give us your best estimate of
+what our engagement in Iraq and Afghanistan has cost to date
+and what it is likely to cost over the future?
+ Could I just put those two charts up to see if those
+estimates are still applicable in the eyes of CBO?
+ This shows that, if you take funding all the way back to
+2001, primarily, solely almost, for the first couple of years
+for Iraq, and then for Iraq and Afghanistan together, from 2001
+through 2009, the total amount of war funding to date, the
+supplementals has been $864 billion. That is primarily a matter
+of record, and it is just a matter of which costs were
+allocated to that theater and which costs went elsewhere.
+ Is that still----
+ Mr. Gilmore. That seems correct to me.
+ Chairman Spratt. Now, second chart. Picking up from there,
+we agreed that CBO would estimate a drawdown in troops over a
+5-year period of time to about 75,000 troops in both theaters
+in that zone of the world. And once the force level reached
+75,000, that would be the steady state, it would continue at
+that level for the next 5 years.
+ The total then came to 867. Of course, that is a
+projection, not a record number. Is that still roughly what CBO
+would project for the costs under that scenario?
+ Mr. Gilmore. That looks consistent to me with what was
+included in the recent outlook.
+ Chairman Spratt. This is driving a large part of that O&M
+account that we saw swelling as you showed us the numbers
+earlier, then, and the reset and reconstitution account as
+well.
+ Mr. Gilmore. Yes, although there are underlying reasons
+separate from operations in Iraq and Afghanistan that the
+operations and support costs have been growing, as both Steve
+and I have mentioned. But the recent rapid increase is
+obviously due to the need to fund those operations.
+ Chairman Spratt. Thank you very much, both of you, for your
+fine testimony.
+ Mr. Ryan?
+ Mr. Ryan. Thank you, Chairman.
+ This is a very interesting hearing. And for those of us who
+aren't on Armed Services or Approps, this is very helpful to
+us.
+ Okay. A number of questions.
+ Mr. Daggett, I want to go to your cost overrun chart. I
+think it is chart 6 of your testimony. The change in total
+acquisition cost from the first estimate, 6 percent increase in
+fiscal year 2000, 18 percent overrun in fiscal year 2005, and
+26 percent in fiscal year 2007. Is that right?
+ Mr. Daggett. Right.
+ Mr. Ryan. That is a staggering increase. Can you drill down
+into that number and give us a sense of why, how, and what
+direction are we headed now?
+ Mr. Daggett. The question is, why is it getting worse? It
+seems to be getting worse, not better----
+ Mr. Ryan. Right.
+ Mr. Daggett [continuing]. In spite of really pretty serious
+efforts on the part of DOD to get a better handle on it. There
+is a cost-analysis improvement group at the Pentagon that
+really does go over cost projections very carefully.
+ Mr. Ryan. So what is happening?
+ Mr. Daggett. I think a couple of things. And this is drawn
+mostly from reading GAO's testimony on it. GAO really has
+looked very carefully at this, and this is from GAO's latest
+analysis.
+ Part of it might just be cyclical. Typically, weapons cost
+growth is greatest as systems and full-scale engineering
+development begin to enter the production phase, because we are
+finally getting down to what it is going to take to produce it.
+So you get larger cost growth at the end of the development
+cycle. And it could be just that part of the inventory of
+weapons is in that part of the cycle. I have had some
+discussions with people at OMB who think that that is part of--
+--
+ Mr. Ryan. Is it the higher-tech nature of the equipment
+and, therefore, the less predictability?
+ Mr. Daggett. Yes. The other issue that GAO, in particular,
+points to is a willingness to accept very high levels of
+technical risk in the development process. And DOD and GAO do
+measures of that. They call them TRLs, technical risk levels.
+And for each major development program, there are various
+elements of technology in the development effort, and they
+assign various TRL levels to it. And there does seem, just by
+that measure, to have been a greater willingness to accept
+higher levels of risk in the development process, which then
+leads to schedule delays and cost increases.
+ Let me say, part of that is driven, by the way, by just the
+length of time it takes to develop a weapon. If you are going
+to develop something that is not going to be fielded for 10 or
+20 years, and you look at what is going on, say, in electronic
+developments in the civilian sector, it is proceeding so
+rapidly that what you say is, well, I can't afford to leave
+that behind; that new technology is going to be very helpful to
+the weapons system. So we have to assume its availability in
+the development process. So we will look ahead to what we think
+is technically reasonable and assume we can build it. But then,
+when you actually try to develop it or do it, it becomes more
+difficult than you think--the schedule slips, cost increases,
+and so on.
+ But if you really look at what GAO is saying--and, again,
+they are looking at this very closely--that is one of the
+drivers of it, just a general across-the-board willingness--
+again, not for bad reasons, not with an unreasonable view
+toward what is going on--to get into a program on the
+assumption that we will make it work later.
+ Mr. Ryan. A 20 percentage point increase in 7 years, that
+is just staggering.
+ A lot of people on our side of the aisle like this idea of
+a 4 percent GDP floor on spending. As a budgeteer, I don't like
+the idea of any floor on any program; caps, yes, but floors,
+no.
+ But looking at the CBO's--your chart--you don't have your
+charts numbered here, and you had about 75, so looking at the
+one which is percentage of GDP----
+ Mr. Gilmore. I think it was my second chart.
+ Mr. Ryan. Yeah. I have them all detached here.
+ So give me a sense for where we are headed, percentage GDP,
+if your health care projections go off. And then I want to ask
+you about that.
+ Your TRICARE projection kicks in in, what, 2002, where it
+really starts taking off, your accrual projection? And that is
+probably chart 5 or 6.
+ Mr. Gilmore. The program was initiated--I mean, prior to
+2001 or 2002, it was pay-as-you-go, and they just paid for
+expenses not on an accrual basis. Then TRICARE for Life was
+instituted, and it was decided to fund it on an accrual basis.
+So the funding every year is based on a projection of what you
+need to invest today in order to pay for future retirees, and
+that is when the costs began to increase.
+ Mr. Ryan. We concur with accrual principles.
+ I want to get at this. So, looking at the accrual rate of
+TRICARE and all of the other health care issues, what goes into
+your projection? How much of it is health inflation? What
+health inflation rate do you use? Do you use the same health
+inflation rate the trustees at Medicare use? And how much of it
+is demographics?
+ So breaking that projection down, how much do you ascribe
+to demographics, how much do you ascribe to health inflation?
+And how do you arrive at your health inflation rate?
+ Mr. Gilmore. I can't give you a breakdown on demographics;
+I would have to get back to you on that. But the demographics
+of the DOD retiree population, we will have to look at how much
+that is changing over time. You don't have exactly the same
+problem there that you do in the economy as a whole. I can't
+give you more detail on that off the top of my head, but I can
+get back to you on that.
+ But, in any event, in terms of the growth rates that are
+assumed in these projections, the growth rate for the accrual
+costs and the TRICARE for Life accounts that we use is the same
+as the one that the DOD actuaries use. We have looked at it,
+and it seems reasonable to us, and that is 6.25 percent nominal
+growth.
+ Mr. Ryan. Do they use the same rate that the Medicare
+trustees use?
+ Mr. Gilmore. It is comparable.
+ And then there are other things that are budgeted for in
+those health accounts, as was displayed in my fourth chart, I
+guess, including pharmaceutical costs. And per capita
+pharmaceutical nominal growth is 9 percent in 2014, which we
+assume slows to 6 percent by 2026. And that is consistent with
+the kinds of growth rates that CBO and others use when they
+project pharmaceutical costs for civilian----
+ Mr. Ryan. And even with all that, your percent-of-GDP
+projection stays under 4 percent in the out-years?
+ Mr. Gilmore. Yes, it does. On that second chart, ``Defense
+Resources as a Percentage of Gross Domestic Product,'' there is
+the dotted line, administration plan with unbudgeted costs.
+That includes all of the unbudgeted costs that I showed you on
+all those charts. You insert the upper end of the range in
+every case for all those dotted lines. And that includes the
+dotted line for total unbudgeted costs in the Military Medical
+System chart, which incorporated even faster growth than 6.25
+percent for accrual and 9 percent per capita pharmaceutical
+growth, cost growth, and 6 percent per capita for direct and
+purchase care cost growth.
+ Mr. Ryan. What is the measurement of the crowd-out within
+the DOD budget in nominal terms with new health care costs
+versus all other military spending?
+ Mr. Gilmore. Well, medical spending, I mean, that is one
+way to look at it----
+ Mr. Ryan. You know how we do this all the time on mandatory
+versus discretionary with the entire budget, and how we show
+that the crowd-out is occurring so rapidly over the years. Give
+me an apples-to-apples comparison with the DOD budget.
+ Mr. Gilmore. Well, about the best I can do off the top of
+my head is just return to chart 4, which shows funding for the
+military medical system of about $40 billion currently. And
+that could grow to as much as $90 billion by 2026, so more than
+a doubling over 17 years. So that is more than 100 percent cost
+growth over that period versus about a 7 percent growth overall
+in operations and support costs.
+ So our projection for needed funding for the military
+medical system is growing seven, eight times more rapidly than
+O&S costs as a whole.
+ Mr. Ryan. We have had these complaints in the last number
+of budgets about the administration trying to sneak, you know,
+what we would consider base spending into the supplemental
+bills. And they did a lot of this 3, 4 years ago. We kept
+criticizing them; they did a little less of it.
+ Are you now saying that, from your estimation, they are not
+sneaking base spending into supplemental bills and that the
+supplemental bills themselves are pretty much truly
+supplementals?
+ Mr. Gilmore. We really haven't taken a position----
+ Mr. Ryan. Mr. Daggett, please feel free. I mean, either one
+of you can answer the question.
+ Mr. Gilmore. We haven't taken a position on whether a
+certain kind of funding is appropriate in supplementals or the
+base budget. There are arguments on both sides of that.
+ But in terms of--what many people have argued in the past,
+for example, that the costs for converting combat brigades from
+division-centered to a modular design should be part of the
+base budget, that was originally in the supplementals and it
+now seems to be part of the base budget.
+ Other people have argued that the upgrades that are made to
+the Bradleys and Abrams when they return from the theater--
+because the Army determined that they have to be torn apart
+completely, and since they were torn apart and we have to put
+them back together, we might as well upgrade them to the most
+modern configuration; not an unreasonable argument--but some
+people have argued that those costs ought to be borne in the
+base budgets since those kinds of upgrades had long been part
+of the Army's desired base program but not funded because of
+other constraints. Those kinds of upgrades still are in the
+supplementals, although there are fewer of them now because
+there are fewer tanks, for example, in the theater.
+ So I think what you will find is what you stated, that over
+time the amount of money that is included in the supplementals
+that a number of people would argue should be, in other
+circumstances, funded in the base budget has been reduced, but
+I don't think it has been entirely eliminated.
+ Mr. Ryan. And, last question, our airplanes, our fighters,
+what is the cost of a Joint Strike Fighter and an F-22?
+ Mr. Gilmore. The Joint Strike Fighter, the current
+projection for the Air Force version is that it will cost about
+$80 million apiece. And the F-22 is on the order of $180
+million or $190 million apiece.
+ Mr. Ryan. And the F-16--which, in my mind, I should think
+of Joint Strike Fighter as the new version of an F-16, right?
+F-16s were $30 million?
+ Mr. Gilmore. They were $30 million when we bought them in
+the 1980s, although the more recent versions of the F-16s,
+which are more capable, which have been sold to some foreign--
+--
+ Mr. Ryan. These are in real dollars, right?
+ Mr. Gilmore. Yes, these are in 2009 dollars. All the
+numbers I have given you are in 2009 constant dollars.
+ The more recent versions of that plane that have been
+purchased, I think, by the United Arab Emirates, which are more
+capable--they have, for example, much better radar--have been
+more on the order of $40 million to $50 million.
+ Chairman Spratt. You are talking flyaway costs as opposed
+to program unit cost, are you not?
+ Mr. Gilmore. I am talking procurement unit costs.
+Procurement unit costs are a little bit more than flyaway.
+ Chairman Spratt. Of course they are. They have the R&D in
+them.
+ Mr. Gilmore. Well, no, Mr. Chairman, I am just talking
+about procurement. I am not including the R&D costs. The
+flyaway costs don't include things like initial spares and that
+sort of thing.
+ So procurement unit costs are a little more than flyaway
+unit costs, which are both less than acquisition unit costs,
+which include the R&D.
+ Mr. Ryan. Thank you.
+ Chairman Spratt. Ms. Schwartz.
+ Ms. Schwartz. Thank you, Mr. Chairman.
+ And thank you for your testimony and information.
+ I think all of us understand, and I think would agree, that
+protecting and defending our Nation and getting the size of our
+military and our costs in DOD right is one of our most
+significant responsibilities as Congress, and I certainly do.
+Certainly we are facing a budget that is the largest since
+World War II, at $527 billion. So we want to get this right,
+and appreciate your information.
+ And I think, as both the chairman and the ranking member
+pointed out, that having information that is accurate from DOD
+is extremely important, and that has not been so easy, given
+the previous administration sometimes not sharing all of this
+information that we would like.
+ Really, just one comment and one question. I did want to
+thank the chairman for his asking questions about the reset
+costs. I do recall, in a previous budget hearing, asking DOD
+whether all the reset costs for replacement of equipment and
+repair of equipment from the war zone in Iraq and Afghanistan
+have been accounted for, and his answer was yes, absolutely,
+100 percent. It was rather stunning. I am happy to get that
+testimony.
+ But if, in fact, that is not correct, which is what you are
+suggesting, that is pretty important for this new
+administration to understand what the cost for replacement of
+equipment and repairing of equipment is going forward. And, of
+course, the war continues in Iraq and Afghanistan, as you
+project.
+ My question really has to do with also some problems that I
+realize came out of the supplemental discussions more than DOD,
+but wondered if it related to DOD and whether you could speak
+to them. And that is, certainly there have been concerns about
+inefficiencies and overspending in contracting. And, again, the
+stories have come out, by and large, around the wars in Iraq
+and Afghanistan, particularly with private contractors.
+ Could you speak to whether you have looked at--again, we
+are in tough economic times. We are looking for the greatest
+efficiency going forward, and that includes within DOD. And we
+have a new administration that is very keen on greater
+transparency and accountability for use of Federal dollars.
+ So could you speak to whether there, in fact, have been
+problems in terms of contracting and costs that we might be
+able to rein in?
+ And yet, again, I am coming at this from a point that we do
+want to and need to make sure that we are the right sized
+Department of Defense and that we are protecting both our
+troops in the field, of course, but then also, going forward,
+are prepared for the challenges and threats ahead.
+ But given that, could you speak to any of the specifics you
+might on efficiencies and what greater transparency and
+accountability might lead to within DOD so that we might apply
+those costs where we need to?
+ Mr. Gilmore. We have not--and it is not our function at CBO
+to do audits of these contracts. The Special Inspector General
+for Iraq has done that and published quite a bit of material
+about his findings. That is not something that we have done.
+ What we have done and published last August is a report
+that summarized what we thought was the total amount of funding
+that had been spent in the Iraq theater on contractors that
+support military operations in Iraq and neighboring countries,
+such as Kuwait. And we concluded that, through late 2007, about
+$85 billion had been spent for those purposes, and that, if the
+current rate of spending continued, which was probably likely
+given that force levels weren't going to change that much--they
+were going to decline somewhat, but not dramatically, at least
+not at that time, not yet--that probably, by the end of 2008,
+about $100 billion would have been spent on contractor support
+of our operations.
+ The other thing that we took a look at was whether it would
+have been cheaper for the military to perform those functions,
+those support functions itself. And what we concluded was it
+wouldn't have been, not unless we thought we were going to be
+continually involved in an occupation of Iraq of the size that
+we have had continually, meaning virtually always, in which
+case, then, yes, it would be cheaper for the military to do
+that itself, but----
+ Ms. Schwartz. Is there a point at which, 10 years, 20
+years----
+ Mr. Gilmore. Yeah, if you don't think you are going to be
+involved in it continually, then it is actually cheaper to hire
+contractors and then shed them when you are no longer engaged
+in those activities and only hire them when you are.
+ Ms. Schwartz. That makes sense, although it has now been 8,
+9 years, and you projected out for another 10. So it is much
+longer than temporary. We hope it is temporary, too, of course.
+ Mr. Gilmore. I won't dispute that.
+ But with regard to your specific question about
+efficiencies, we have not looked at that, but the Iraq
+Inspector General has and I think GAO has. They have reached
+the conclusions that they have.
+ Ms. Schwartz. Well, you get a sense of $100 billion out
+of--it is not the $527 billion. It is out of the supplemental;
+it is out of the $800 billion.
+ Mr. Gilmore. At that time, it probably would have been on
+the order of $100 billion out of $600 billion or $700 billion
+was spent on contractors.
+ Ms. Schwartz. Maybe it is something for us to continue to
+consider going forward.
+ Mr. Gilmore. Yes, but I would point out that probably about
+two-thirds of the defense budget is spent on contractors, one
+way or another. Contractors develop the weapons systems. There
+are a lot of contractors that perform other functions. And so
+if you look at that $515 billion, there is a third of it that
+is spent on military personnel, but----
+ Ms. Schwartz. Well, I am not suggesting that we not use
+private contracting. I am just suggesting that--and I believe
+there is quite a bit of oversight. In some situations where I
+visited, certainly, Defense contractors said there is someone
+from DOD there auditing what they do all the time.
+ So I am just saying that, under the previous
+administration, there were some real issues with this, again,
+to those audits, and that we ought to make sure that we are
+spending precious public dollars as efficiently and effectively
+as we might. So, maybe a question for another day and for
+someone else.
+ Thank you.
+ Chairman Spratt. Mr. Simpson.
+ Mr. Simpson. Thank you, Mr. Chairman.
+ I would just note that there has been a question of
+contract management under every administration, not just the
+previous administration. And, in fact, you don't go into
+whether contract management has been appropriate or not. I sit
+on the Energy and Water Subcommittee, and we have looked at a
+lot of the contracts that have been done with the Department of
+Energy and some of the programs. The waste treatment plant at
+Hanford that started off at $4 billion and went to $14 billion
+causes us a great deal of concern.
+ I wonder about the relationship between the contractors who
+work for DOD, who have a close relationship with them. How much
+contract management oversight is there? And you don't go into
+that, do you?
+ Mr. Gilmore. No, we don't.
+ Mr. Simpson. Let me ask a couple of other questions. In
+your budget, when you are looking at your numbers here, do you
+take into account defense operations that are outside of the
+DOD? Department of Energy, for example, the weapons complex,
+the nonproliferation funds that the chairman was talking about,
+those types of things? Because those are certainly as much a
+part of defense as anything else we do.
+ Mr. Gilmore. In the projections that I showed you, we
+focused just on budget function 051, which is the Department of
+Defense. Considering 050 would add another $18 billion to $20
+billion. And then there would be amounts in addition to that
+that Chairman Spratt mentioned, substantial amounts, associated
+with veterans affairs and other activities, homeland security,
+homeland defense. But my projections focused just on Department
+of Defense.
+ Mr. Simpson. There is a proposal that this administration
+is currently looking at, is taking the weapons complex out of
+civilian management and putting it under DOD. Have you looked
+at that proposal at all?
+ Mr. Gilmore. We have not.
+ Mr. Simpson. Let me ask you about one of the costs that you
+mentioned, health care costs, as driving the O&M budget. How
+does that compare with private-sector health care increases
+that we are seeing in the private sector?
+ Mr. Gilmore. In the projections that I showed you, the
+growth rates for the cost of DOD medical care and
+pharmaceuticals and so forth are all comparable to those that
+CBO uses in its projections for the costs in civilian health
+care.
+ Mr. Simpson. That is surprising, seeing as how I thought
+government control of that was going to keep the cost down, and
+that is why we were going to go to universal health care, but
+that is another question.
+ What about the long-term increase in inefficiency that you
+would expect when you have new technologies and so forth? We
+don't see that within--I think, Mr. Daggett, you said we don't
+see that within the Department of Defense as we do in the
+private sector. As an example, the first cell phone I bought
+cost $960. Today they will give you a cell phone.
+ Why don't we see that type of thing within the Department
+of Defense?
+ Mr. Daggett. There is a huge literature that discusses
+that, and the bottom line on it is seeking performance rather
+than reliability, availability, and maintainability, as they
+say.
+ For its part, the DOD has been looking pretty hard at that
+in the last couple of years. There is a new team that is
+working at DOD to actually get involved in the operational
+testing or development testing of major systems, with a view
+toward identifying possible improvements in long-term
+maintainability of the system. But that is a new initiative. I
+mean, we will have to see how that plays out.
+ DOD itself is very concerned about the fact that the cost
+of operating and maintaining weapons systems really hasn't come
+down as costs have come down in the civilian sector. And you
+look at any part of the civilian sector, not just electronics,
+but automobiles or aircraft operation and maintenance, the
+trends are not as good in DOD, and sometimes they are going the
+opposite direction in DOD from what is going on in the civilian
+sector.
+ So, you know, it is certainly an area that DOD recognizes
+and that they are trying to work at. That said, if you go back
+to the 1980s, that was an issue back then, as well.
+ But, again, what drives it here is, when you are developing
+a weapons system, what are you looking for? You are looking for
+performance, and you are trying to push the envelope, in a lot
+of cases. In electronics, you are trying to get a complete
+picture of the battlefield. And that involves--to the extent
+that you could use off-the-shelf consumer technology to do
+that, then it would get cheaper over time. But a lot of these
+are unique kinds of things that DOD alone does that there is
+not a parallel requirement for in the civilian sector, so they
+are left to do it themselves. And it becomes a very costly kind
+of thing to try to do it.
+ Another aspect of the problem is, again, given that it
+takes so long to develop a weapons system, some of the old
+software and even the computer systems that you are using are
+getting pretty out of date. So when they do break, you have to
+go back to the manufacturers and get old systems or you have to
+replicate it in a way. So it is more expensive to replace it
+than it typically is in the civilian sector.
+ So there are a lot of factors that drive this.
+ Mr. Simpson. That is the one thing we found within the
+Department of Energy, is that they do unique things that are
+sometimes hard to do estimate the cost of because they have
+never been done before.
+ I appreciate your testimony. As the chairman said, it is
+interesting to get the background on this, but an awful lot of
+this discussion depends on the policy decisions that we
+ultimately have to make.
+ Chairman Spratt. Thank you, Mr. Simpson.
+ Ms. McCollum.
+ Ms. McCollum. Thank you, Mr. Chair.
+ Gentlemen, we sit here today, and Congress and the new
+administration, as has been pointed out in other questions,
+must begin making smart decisions for best overall security
+strategy for the United States.
+ As the DOD working paper states, capabilities based on
+planning should be apportionate to the risks that are across
+the challenges. Now, it seems our current defense strategy
+focuses on spending on the least likely scenarios, according to
+the quad chart that was put up. Clearly, an example of this was
+the money that was spent on missile defense. And I am afraid
+that we are not focused enough on high-risk, high-vulnerable
+scenarios.
+ As we look to make the Pentagon more cost-efficient, one of
+the tools that we have in our national security strategy box is
+supporting the 3-D strategy: National security is defense,
+diplomacy, and development. And one of the things that I
+noticed that is missing on this quad chart is any discussion
+about how climate change--and we know that the Department of
+Defense is spending a lot of money with climate change
+scenarios out here.
+ So what are some of the potential cost savings to our
+national security spending by increasing funding for
+development and diplomacy? What kind of savings could we see,
+doing that?
+ Thank you, Mr. Chair.
+ Mr. Daggett. I put the quad chart up, so I guess I am on
+for that.
+ It is a hard question. As I said, Secretary Gates really
+has done a series of speeches recently in which he has raised a
+lot of precisely the kinds of questions that you have. Those of
+us who work in Washington, on defense policy in particular,
+discuss quite often very fundamentally different alternative
+approaches to national security; I mean, are there things you
+can do in prevention by building relations with allies that
+could then lead to reduced requirements over the long term for
+forces and so on. I mean, we talk academically about that all
+the time. They are now on the political agenda, and they are
+there because Secretary Gates has really put them on the
+political agenda. He is talking about a whole-of-government
+approach now to national security that involves all of the
+elements that you talked about. So, you know, it is a very
+lively discussion.
+ I think in the short term, his priority, as he has
+articulated it, has been to reduce the emphasis on what he
+calls traditional systems and increase the emphasis, as he puts
+it, on the wars we are fighting now, by which he means
+irregular conflicts. So he is more focused on the fairly short
+term, not on the kind of longer-term issue so much immediately
+that you talked about, but on the shorter term. And that does
+involve some potential shifts in priorities. And I look for DOD
+to be discussing them even in the 2010 budget, and particularly
+in future budgets.
+ But that, to me, is likely to mean tradeoffs in major
+weapons programs--are we going to continue to produce DDG-1000
+Destroyer or not--transformational communications satellites,
+things of that sort, all of which support capabilities for
+traditional conflicts.
+ And in favor of what? He has been very focused on trying to
+find more resources for the immediate fight. Some of them are
+not necessarily low-tech. Some of those things are, certainly,
+UAVs and so on. But his argument has precisely been that we
+have not put sufficient resources into those areas.
+ So I think there is going to be a big debate about the
+allocation of resources, or there is likely to be a big debate
+about the allocation of resources. And I am not sure how it
+will play out.
+ I mean, you raised a much longer-term question. And I think
+there also certainly is a discussion in the government about
+allocation of resources between defense and nondefense. That
+gets way beyond what Mike and I work on, but it is a big part
+of the discussion.
+ DOD has been involved now--there have been some increases
+in what DOD is doing in typical areas of foreign affairs. If
+you leave aside military assistance, security assistance, and
+even economic assistance in foreign countries, if you leave
+aside, though, what DOD is doing in Iraq and Afghanistan, that
+is not, by DOD standards, a huge amount of money. Global train
+and equip has become a big focus of attention. DOD, last year,
+asked for authority for $800 million, I think, for that. From
+the State Department's point of view, that is a lot of money.
+From the Department of Defense point of view, it isn't
+particularly.
+ The appropriators then have taken some issue with that.
+They think that that should be handled primarily by the State
+Department rather than by DOD. And I think that, again, is an
+issue for, in a sense, this committee to address, and Congress.
+ Ms. McCollum. Mr. Chair, I hope we have a chance to talk
+about those tradeoffs and balances later in the committee,
+especially as the reauthorization for State Department starts
+moving forward.
+ Chairman Spratt. We will. Thank you very much.
+ Mrs. Lummis, from Wyoming.
+ Mrs. Lummis. Well, good morning. I appreciate very much
+your attendance today.
+ I would like to start with a very basic question about the
+Department of Defense and its inability to produce a clean
+audit. I am curious why that is, what obstacles you think
+prevent that from happening?
+ I support peace through strength. I support a robust,
+capable military. But I do find it interesting that earlier in
+this discussion we were talking about how military auditors are
+auditing contracts, but why can't they, in turn, produce a
+clean audit of the Department of Defense? Any thoughts in that
+regard?
+ Mr. Gilmore. That is not an issue that CBO really looks at.
+You know, auditing is the forte of the Government
+Accountability Office.
+ I guess the only thing I would observe--and this is by no
+means to try and make an excuse for the problems in DOD
+bookkeeping--but I think we have seen that many large
+organizations have problems keeping their books and accounting
+for every dollar that is spent, no matter how hard they try to
+do that. And DOD is another large organization, so it is not
+surprising that they have those problems, which is not to say
+that they shouldn't continue very hard to try and eliminate all
+of them.
+ But that is not something that we have looked at
+specifically.
+ Mrs. Lummis. Thank you, Mr. Chairman.
+ My next question is perhaps more on point. One of the
+biggest tensions, I understand, that occurs in the budget
+process for DOD is the constant battle between funding current
+operations and long-term planning and acquisition.
+ So my question is this: Based on your analysis, do the
+budget numbers give us an indication of where DOD is focusing?
+Is it more focused towards replenishing what we have or
+spending money on what we think we might need in the future?
+ Mr. Gilmore. Well, I think that the base budget contains
+funding for both kinds of activities, although predominantly
+for systems in the future.
+ So if you look at the investment program, it is dominated
+by things like the Joint Strike Fighter program, the Littoral
+Combatant Ship program, the DDG-1000, other systems like that
+that are going to come online in the future.
+ But there are also requests in the base budget for billions
+of dollars' worth of procurement for what Steve and we at CBO
+refer to as minor equipment in the Army--ammunition, radios,
+other things like that--that are very important to current
+operations. And then, of course, there are also substantial
+amounts in the supplementals for those kinds of things.
+ So the short answer is, it is a mixture of both. The base
+budget is primarily focused on the future, not surprisingly,
+and the supplementals are primarily focused on funding current
+operations.
+ Mr. Daggett. Could I just make one point?
+ Secretary Gates, again, has raised precisely that issue in
+those terms. He made a speech a few months ago in which he
+argued that we need to focus less on the war we are not
+fighting and more on the war we are fighting now. And I think
+that is partly where concern about that kind of issue comes
+from.
+ You know, his argument is that a large part of investment
+has been in the direction of the systems for conflicts 20 or 30
+years down the road at a time when we are having a problem, in
+his view, finding sufficient resources for some of the things
+he wanted to do in Iraq and Afghanistan. And that drove it.
+ It is not necessarily a big budget driver. The kinds of
+items he was talking about for Iraq and Afghanistan aren't
+necessarily going to drive the budget, in itself, much higher.
+But it is a matter of allocation. It is an issue in DOD.
+ Mrs. Lummis. Thank you.
+ And one more question, Mr. Chairman--and thank you very
+much for working so hard to pronounce my name right. I am
+struggling in both my own conference and with others to get it.
+And you got it right, so I deeply appreciate that.
+ My last question is about the Army National Guard or
+National Guardsmen and -women deployed in both Iraq and
+Afghanistan. And this is a subject that is very close to home
+with me because, in April, over 940 Guardsmen and -women from
+Wyoming will be deploying to Iraq in what will be the largest
+mobilization in history of Wyoming's Army National Guard.
+ So my question is, in terms of both manpower and machinery,
+in your opinion, have the DOD's budget numbers aligned with the
+increased burden on our National Guard around the country?
+ Mr. Gilmore. They are beginning to. There have been
+substantial amounts of funding requested in the supplementals
+and increased amounts in the base budget associated with
+equipping the National Guard units, for the reasons that Steve
+mentioned: The National Guard is now being used as an
+operational force, and, before Iraq, for the prior 20 or 30
+years, it was not regarded that way. It was regarded as a
+strategic reserve, and equipment fill and personnel fill levels
+for the Guard were well short of those maintained for the
+active force--you know, 80 percent equipment fill versus 90 or
+95 percent for the active force, for example. And the budgets
+in those years prior to operations in Iraq and Afghanistan
+reflected that difference, that difference in priorities.
+ But that has been changing. But I don't think the
+Department or the Army, in particular, would claim that they
+have filled all the shortfalls. And so there are still tens of
+billions of dollars' worth of shortfall that I am sure the Army
+would claim needs to be spent to fill those shortfalls.
+ Mr. Daggett. Could I add just one point? There is another
+policy issue here, and that is, it is clear that what the Army
+wants is for all forward-deployed units to have the most modern
+equipment. They want units that are training to deploy to train
+on the same kind of equipment. Then the question becomes, what
+about the next in line after them? Do they have to be equipped
+with everything the next-to-deploy unit has? And the answer is,
+well, no, but we need to think through what the mix is.
+ And then, for the fourth-to-deploy unit that is resetting,
+what kind of equipment levels do you need? And, you know, not
+every unit in the force is going to have all the most modern
+equipment all the time. The real policy issue for the Army that
+I think is still unresolved is, what are overall equipment
+requirements relative to our rotational policy?
+ And, again, that is why I think there is still a need for a
+look at what Army investment requirements are and what have
+been met and what needs to be met as yet. And that applies, as
+well, in particular to our Army National Guard.
+ Chairman Spratt. Mr. Blumenauer.
+ Mr. Blumenauer. Thank you, Mr. Chairman.
+ I would like to shift just a little bit, thinking about
+some of the long-term obligations that the Department of
+Defense has, where there is some potential significant savings,
+and if we don't do it right, it is going to cost us a lot of
+money.
+ The Department of Defense is the largest manager of
+infrastructure in the world, the largest consumer of energy. We
+have, what, 10 million to 40 million acres potentially
+contaminated from past military operations, training. Yet it
+seems that, year after year after year--and I fault the
+Congress more than the Department of Defense--that we are sort
+of missing in action, that we don't really put significant
+resources to helping the military clean up after itself.
+ I mean, ultimately, those munitions break down, the
+military chemicals get into the water supply. We spent I don't
+know how much in Massachusetts to protect the groundwater for
+Martha's Vineyard. Or something explodes, literally and
+figuratively. And so we throw a lot of money at Hawaii, but we
+find in front pages, just in the course of the last couple of
+weeks, that there is huge local resistance to expanding
+training facilities because we are not a very good steward, we
+are not a very good neighbor, people get stuck with stuff. I
+think in Sacramento it is going to be 2077 before the base that
+was closed in the first round of base closure is cleaned up and
+returned.
+ Now, it would seem to me that this has significance in
+terms of just military readiness, that we are kind of stupid in
+terms of how we use energy. We make it hard to have energy
+savings contracts that would pay for themselves. We are not
+developing the technology that would help the military
+determine whether it is a hubcap or a 105 shell. That doesn't
+just mean that it is hard to clean up in Colorado or
+Pennsylvania or Wyoming. Every State in the Union has
+unexploded ordnance problems. But it has implications for those
+people in Wyoming that are going to be shipped overseas because
+we haven't developed it.
+ Can you give me any sense of where you see indications with
+the development of future budgets going forward, that there is
+any indication that we are going to help the military save
+money by cleaning up after itself, help local communities avoid
+pollution and, frankly, explosions? Because three times since I
+have been in Congress we have had to pull firefighters out of
+national forests because the heat was exploding shells from
+prior training.
+ Do you have a sense of where we might be going in this, in
+terms of budget categorization and strategy?
+ Mr. Daggett. Just a couple of things.
+ I can't, by any means, give you an overall picture of where
+DOD is going on environmental issues. They spend a substantial
+amount of money each year on environmental clean-up and
+compliance. And there are budget figures, and I can provide you
+with the data on the trend.
+ I actually coauthored a report some years ago on trends in
+DOD environmental clean-up and compliance activities. DOD is
+subject to the same kinds of environmental compliance
+requirements as private industry is, really the Federal
+Government is.
+ Mr. Blumenauer. Theoretically. Not in practice.
+ Mr. Daggett. Let me speak to that point. And there have
+been a lot of debates about whether the investments that they
+are making in clean-up are sufficient.
+ On the compliance end, and especially on things like energy
+efficiency, DOD has done some looking at that lately, and they
+are not satisfied with what they have invested in energy
+efficiency.
+ It has a security component to it, actually. There was a
+Defense Science Board report done last year which discussed
+potential vulnerability of military facilities to loss of power
+from the public grid. And it affected potentially even mission-
+critical activities. So it is a really natural area, when you
+think about it, for DOD to look at.
+ So what is the solution to that? Well, part of the solution
+that the DSB discussed and that is being discussed much more
+extensively now inside the Defense Department as a whole is
+build green power production facilities for the base itself.
+Use wind power, use geothermal power if you have those kinds of
+things on the base.
+ And it is not just a matter of being green for the sake of
+being green. It is being green for the sake of security
+interests.
+ Mr. Blumenauer. Yeah. Well, I see my time has expired, but
+I would very much appreciate the report, the research that you
+are talking about.
+ Mr. Chairman, I think Mr. Daggett's last words are very
+important. This is not just being green for the sake of being
+green. It has operational implications for security of our
+bases in terms of energy, in terms of the safety of our
+personnel, to protect them from military toxins and unexploded
+ordnance, building the technology and saving money.
+ And because, Mr. Chairman, you wear two hats, both with
+Armed Services and with Budget, this is something that I would
+love to be able to pursue with you to make sure that we have
+the budget headroom but also we get the policies aligned.
+ Chairman Spratt. Three hats. I represent a couple of
+bombing ranges, too.
+ Mr. Scott of Virginia.
+ Mr. Scott. Thank you, Mr. Chairman.
+ And I would like to follow through on that, because it has
+a specific interest in Virginia on BRAC closings.
+ Have the BRAC closing costs, including clean-up--I think
+you used the words ``systematic underestimate of costs''--have
+the real costs of closing these bases, including clean-up, been
+appropriately projected?
+ Mr. Daggett. I can't speak to that. I just haven't looked
+at it closely enough. If you want, I will be glad to get back
+with you. We have looked at it some.
+ Mr. Scott. Okay. Let me just say that the Fort Monroe
+closing and the clean-up may be off in the hundreds of millions
+of dollars. And if the systematic underestimate is system-wide,
+you are talking about many billions of dollars.
+ Shipbuilding--under shipbuilding, I noticed you had
+significant acquisition costs there. What is our ship strength
+that we are projecting?
+ Mr. Gilmore. Well, currently, in 2009, the information we
+have is that we have a 288-ship fleet. And by 2013, that would
+grow to 295 ships. And by 2026, that would grow to 319 ships;
+55 littoral combatant ships at that time. That would be the
+total buy that is currently planned, although there has been
+difficulty with that program, and it is being restructured.
+That included seven DDG-1000s. This projection was based on the
+2009 Future Years Defense Program that was put forward prior to
+the restructuring of the DDG-1000 program. That may reduce it
+to two or three ships.
+ Fifteen CG(X)s, seven CG-47s, 62 DDG-51s, 62 submarines,
+including 12 ballistic missile submarines, 44 amphibs, and 54
+support ships, for a total of about 319 ships in 2026.
+ Mr. Scott. Did you say aircraft carriers?
+ Mr. Gilmore. Aircraft carriers are in there. I didn't
+mention them. But it was 11----
+ Mr. Scott. Well, I am from Newport News, if you want to
+mention those.
+ Mr. Gilmore. Eleven aircraft carriers. Sorry, that was an
+oversight.
+ Mr. Scott. Ship repair--is there a backlog on maintenance
+of ships?
+ Mr. Gilmore. We have not looked at that, so I can't say.
+ Mr. Scott. Because you may have another systematic
+``misunderestimate'' on----
+ Mr. Gilmore. I don't know what current DOD budgeting
+programming practice is, but many years ago when I worked there
+the practice was to program in future years any year beyond the
+budget year for 80 percent of ship depot maintenance
+requirements versus funding at what the Navy thought the real
+requirement was in the budget year, which meant that, when
+those future years became budget years, you had to find an
+additional substantial amount of money to pay for what was
+really going to happen. But whether the Navy still programs in
+that manner, I don't know.
+ Mr. Scott. You mentioned the fact that the Defense budget
+kind of includes--you kind of have to think about the cost of
+veterans. You talk about veterans health care. Have we talked
+about the social services and other health care, like mental
+health, homelessness, unemployment, that we have systematically
+not addressed? Are we including those? Are we including
+business as usual on mental health, homelessness, and problems
+like that?
+ Mr. Daggett. We have both focused really just on the
+Department of Defense budget, not on the VA budget. You know,
+my view is, in order to cover the complete cost of personnel in
+particular, you do need to take a look at the VA budget.
+ Mr. Scott. On contractors, one of the problems of hiring
+contractors is you don't even know what law they are under,
+what chain of command they are under. I mean, you have problems
+like use of deadly force, and who makes those decisions. There
+are also financial complications, like they are actually
+competing for employees with the military. We train the guys on
+our dime, and if they hire them at a slightly higher pay grade,
+then we have to train and everything else.
+ In addition to the complications on policy, have you looked
+at the financial implications of the unprecedented level of
+contractors we are using now in the Defense budget?
+ Mr. Daggett. I have not.
+ Mr. Gilmore. We have just done the analysis that I
+discussed previously of what the contract costs have been in
+Iraq, and that would total $85 billion to $100 billion.
+ By the way, in the process of doing that work, we did
+interact with the Department and asked them whether the problem
+that you mentioned of people, for example, highly trained
+special operations personnel retiring and then being hired as
+contractors, what----
+ Mr. Scott. Well, deciding not to re-up because they can
+get----
+ Mr. Gilmore. Correct--whether that was, in their view, a
+problem, whether that was creating a problem for them. And they
+indicated it was not. And we have no independent way of
+checking to determine whether that is accurate, but they
+indicated it was not.
+ Mr. Scott. Thank you. Thank you, Mr. Chairman.
+ Chairman Spratt. Mr. Scott. Mr. Larsen.
+ Mr. Larsen. Thank you, Mr. Chairman. The Defense News
+February 2nd headline, ``New Destroyer Emerges in U.S. Plans
+Options, Mulled as DDG-1000 Hits $6 Billion.'' I think your
+analysis still had it at merely $4 billion. And so another
+headline in this is, ``Presidential Helo Cost Growth Cracks
+Nunn-McCurdy ceiling.'' That is for Marine One replacement. It
+cracks the Nunn-McCurdy ceiling. And then, of, course Gates
+Foresees U.S. Cuts. Now, that is based on his testimony in the
+Senate Armed Services and the House Armed Services Committee.
+It just seems very difficult for me to understand that as much
+supplemental dollars we have provided to the Department of
+Defense, and I am a member of the House Armed Services
+Committee, so I have seen it all happen over the last 8 years,
+both given to them in supplemental and in base budgets that
+they are yet coming for even--asking for even more beyond what
+one projected increase is. And so I guess I would expect in
+Armed Services for us to be fairly tough over there.
+ But something that Secretary Gates testified to last week,
+and I wonder if you have thought through these in looking at
+your numbers, he listed seven or eight separate steps, general
+steps that he planned to take to squeeze down on acquisition
+costs, purchasing systems at 75 percent solution rather than 99
+percent solution. We apparently are on--some programs are
+hitting stable rates for acquisition, freezing requirements on
+programs, and a few other things. Mr. Daggett and Mr. Gilmore,
+do either of you have some views on Secretary Gates' thoughts
+on how to keep costs--ameliorate increases? I won't say keep
+costs down. That seems impossible in the Department of Defense.
+Let us say ameliorate the cost increases. Mr. Daggett.
+ Mr. Daggett. Let me begin by saying CRS really doesn't make
+recommendations on policy per se. We can assess the impact of
+alternatives though.
+ Mr. Larsen. Assess away.
+ Mr. Daggett. When I look at what is driving the cost of
+major weapons programs, I look, first of all, at just the
+requirements process. And I use in the testimony, written
+testimony I use DDG-1000 as an example. If you look at it, it
+is designed to be a multi-mission system with pretty much
+maximum capabilityin most areas. The air defense radar is not
+quite missile defense radar, but short of that, it is as
+capable as any system you will have across the board, but just
+has so many missions. Well, what drove that? Well, it was
+driven by the internal requirements writing process in the
+Navy. And when you--and now, you know, I mention it not because
+I have a view on whether you should buy it or not, but it is in
+trouble because it costs so much because it is such a big ship
+and so much has been added to it.
+ So it, to me, is precisely the kind of example of a system
+that is a 95 percent solution or a 99 percent solution to a
+host of issues. And what Secretary Gates is saying is accept a
+75 percent solution in areas where that will work. Well, first
+of all, you need some oversight in the acquisition in the
+requirements process to ensure that. I am not sure where that
+is at this point. But it is a matter for organization and
+senior leadership to use the requirements development process
+really as a way of doing these cost tradeoffs. What is the role
+of the joint requirements oversight council and so on. I would
+look very hard at that.
+ Another area you need to look at is are there some areas
+where you want maximum capability, others where you don't. For
+an air-to-air fighter, I can make an argument for having a very
+highly capable system with a view toward being in the service
+long down the road. For an airlift aircraft, I am not sure I
+need that, so why do you need the kind of acceleration
+requirements that you have in various systems. I think that is
+a matter for oversight.
+ Mr. Larsen. As my time runs out, could I ask Mr. Gilmore to
+respond to that question.
+ Mr. Gilmore. Well, we don't make policy recommendations
+either, but I would simply observe what common sense tells you
+that the actions the Secretary is proposing to take should all
+help reduce cost. But I think the most important thing for the
+Department to do is to be realistic in its initial estimates
+for the costs of these systems, whatever it thinks the
+requirements for the systems ought to be. And when it comes to,
+for example, the DDG-1000, we still think on the basis of past
+experience that that ship will cost between 4 and $5 billion.
+The $6 billion number, I think, includes some of the
+development cost, but I don't know for sure. I have read the
+article, but I haven't seen the details behind it. And the
+comparable number from the Navy previously was 3 to $4 billion,
+more like 3\1/2\.
+ Originally, when it was the surface combatant of the 21st
+century, the SC 21 program, the fourth ship in the class was
+supposed to cost in today's dollars, $1.5 billion. Now, if you
+looked at the cost of that ship on a cost per ton of light ship
+displacement, you know the ship without any fuel or crew or
+anything else, that would have made it the cheapest surface
+combatant ever built, substantially cheaper than the DDG-51.
+ So there were a lot of people in the building, I was in the
+building at the time, who knew that that initial estimate was
+unrealistic. So I would say that when you have initial cost
+estimates for systems like that, no program manager in the
+world is going to be able to manage the program in such a way
+that the costs will not grow. And it is not really so much cost
+growth as cost realism setting in. When you actually have to
+design the system and build it, it always ends up costing more
+than these initial very optimistic estimates where people sit
+down and think, well, if we did this differently and this
+differently and this differently, it will save substantial
+costs. Unfortunately history tells us that the problems that
+were experienced in the past may not occur, but different
+problems will occur and the optimism isn't warranted.
+ And so a lot of what I think people characterize, and, in
+fact, I characterized in the charts I showed you as cost
+growth, really isn't cost growth so much as it is cost realism.
+It is reality setting in. And if you want to avoid having that
+problem, you need to have realistic initial estimates of the
+costs which the Department doesn't have in many instances.
+ Mr. Larsen. Thank you.
+ Chairman Spratt. Mr. Yarmuth.
+ Mr. Yarmuth. Thank you, Mr. Chairman. Thanks to both of you
+for your testimony. On the question of the percentage of the
+GDP, that Defense Department budget constitutes, what kind of
+growth rate are you projecting in GDP over this term at the
+same time.
+ Mr. Gilmore. It was a little over a couple of percent real
+growth long-term.
+ Mr. Yarmuth. Some people might take solace from the
+standpoint that even with these projected increases in absolute
+cost that the percentage of growth--percentage of GDP does not
+grow, in fact, declines. But would you be familiar with what
+other costs, governmental costs would be rising out of the same
+time, because Defense is competing with obviously every other
+portion of the budget. So if say Medicare, Social Security, all
+the other cost sectors are increasing at a much higher rate,
+and I assume they would be.
+ Mr. Gilmore. They are. CBO has done a number of projections
+of the long-term cost of those entitlement programs and over
+the long-run Social Security as a share of GDP will rise
+several percentage points. And the cost of paying for Medicare
+and Medicaid and other programs like that will rise by tens of
+percentage points. That is really the bigger problem areas; the
+future health care costs associated with those programs. But I
+would observe that you could set the defense budget at zero
+dollars and it would not materially affect the problem that the
+overall Federal budget faces in paying for Social Security and
+Medicaid, which is not to say that anyone who is reasonable
+doesn't think that because defense currently composes over half
+of domestic discretionary spending, that it isn't going to be
+under pressure. It obviously will be. And if you look at the
+long-term trend for overall Federal spending as a share of GDP
+and its components, what you see is that defense basically has
+been the bill payer. Its share of GDP has declined as the share
+of GDP associated with these entitlement programs has grown.
+ Mr. Yarmuth. On that question, what would be comparable
+numbers of other industrialized nations in the world? What is
+the range that you would say it would spend of GDP.
+ Mr. Gilmore. We are at 4\1/2\ percent of GDP. The Japanese
+are 2 percent or less.
+ Mr. Daggett. Under 1.
+ Mr. Gilmore. All the other countries in the world are much,
+much less, much less.
+ Mr. Yarmuth. Mr. Simpson raised the issue of the health
+care costs and the growth rate that is projected and tried to
+make a connection between that and some kind of argument for or
+against universal health care. I suspect that one of the
+reasons that the growth rate in medical in Defense Department
+health care relates to factors that aren't present in the
+general population. Is that true? The nature of the injuries,
+the length of care that is going to be required because of many
+of the injuries concerned, you don't think those are factors,
+or would they be?
+ Mr. Gilmore. Actually, those factors would apply more to
+the Department of Veterans Affairs health care costs because of
+the veterans who suffer those kinds of injuries and require
+long-term care. And there are obviously horrible injuries that
+occur, although thankfully, a relatively small number of people
+deployed who have suffered those injuries. But nonetheless
+those are costs that end up being borne by the Department of
+Veterans Affairs. Our projections for medical care costs from
+the Department of Defense are based upon the practices that the
+Department of Defense currently uses. And we did not speculate
+in the future in doing our projection about how the Defense
+Department might change its practices; you know, employing more
+health information technology and so forth and so on.
+ So our current projections don't incorporate any savings
+from those kinds of practices because those are not, literally
+speaking, part of the current plan, which is not to say they
+may not be realized, but this is a projection of current policy
+not how it might change in the future.
+ Mr. Yarmuth. One quick question before my time expires. So
+we are dealing primarily with TRICARE here. TRICARE employs a
+number of private insurers to administer the program, so in
+fact, it is really not fair to say that the TRICARE system is a
+single payer system as is often talked about with regard to the
+Federal Government.
+ Mr. Gilmore. That is correct.
+ Mr. Yarmuth. Thank you very much. Thank you, Mr. Chairman.
+ Chairman Spratt. Ms. Kaptur.
+ Ms. Kaptur. Thank you, Mr. Chairman, very much. Gentlemen,
+you have had a long morning and we thank you very much for your
+work. I wanted to go to Mr. Daggett and say that in your
+testimony on page 4, you touch on a subject I am very
+interested in. And that is the rising cost per average military
+service member. You state about it is 45 percent more expensive
+today than it would be 10 years ago. And that does not include
+the cost of medical costs. And nor retirees. Nor does it
+include benefits that are not part of the national defense
+budget. I am interested in your discussing that a little bit
+more. Does this have anything to do with the rising costs of
+recruitment bonuses and retention, and could you discuss that a
+little bit please? And the nature of that cost versus when we
+had a conscripted force as opposed to a volunteer force?
+ Mr. Daggett. In these figures I just tracked cash income of
+personnel and deferred benefits, retirement benefits. I did not
+track noncash compensation, which is in the operation and
+maintenance accounts. And that includes medical care, family
+services, dependent education, commissaries, nor did I track
+family housing. So it is really just focused on the military
+personnel accounts. That is the kind of a technical answer. So
+it is only part of the compensation package, although it is the
+biggest share of the compensation package. I also did not track
+Veterans Administration benefits, either disability pensions or
+health care or any other aspect of VA educational benefits,
+again just because it is outside the Department of Defense. So
+what this tracks really is what has been happening in the DOD
+military personnel accounts in pay and benefits of military
+personnel. It does include retirement benefits in the sense
+that the accrual costs of military retirement are covered here.
+ The DOD pays into the military retirement fund an
+actuarially determined amount for future retirement benefits
+for current personnel. And that is included here. That is part
+of the cost. And that has been increasing dramatically. But it
+has increased dramatically because of two programs; TRICARE For
+Life and concurrent receipt of military retired pay and VA
+disability benefits. Otherwise, it is increased just with basic
+pay. So what is driving it up? Lots of different things;
+increases in basic pay, increases in basic allowance for
+housing, bonuses. Retention bonuses are part of it, but that is
+not a big part of the overall account. Those have increased
+substantially in percentage terms, but they are not a big part,
+a huge part of the overall budget.
+ Ms. Kaptur. So what is in that? Because when you look at
+the number of personnel, obviously your disbursements for
+personnel are your largest expenditure.
+ Mr. Daggett. Look at page 3, which is on the next page.
+Page 6 actually. And that is just a bar graph that shows the
+major elements of the part of the compensation package I am
+looking at. So it includes basic pay subsistence and separation
+pay. The bulk of that is just day-to-day paychecks. The basic
+allowance for housing, people often miss how large a share of
+military compensation that is, and that is actually a part of
+take-home pay. And that has increased dramatically over time.
+ Ms. Kaptur. Does this reflect a rental of the housing off
+base or the on base contracted-out housing situation? Why is
+that number going up?
+ Mr. Daggett. Well, basic allowance for housing is given to
+personnel in their paychecks to pay for housing themselves.
+This does not track the part of military compensation that is
+for family housing for on base facilities. That is a different
+account. What I am tracking here is really the trend in cash
+income of military personnel.
+ Ms. Kaptur. If I were to ask you the question since we had
+the draft versus today, and you look at this cross cut, can one
+make any judgments about how the current system is different or
+more expensive than when we had the draft?
+ Mr. Daggett. I haven't specifically done those numbers. But
+suffice it to say, personnel are much more expensive on average
+now than draftees were. But then typically the draftees were in
+for a limited period of time. They were not part of the
+professional military. And the draftees were a larger part of
+the military, a very large part of the military force. The
+uniform force was actually the smaller part of it. They were
+paid at higher rates more comparable to this. But again, the
+bulk of the force being drafted, they were paid at much lower
+rates and were in for a shorter period of time. I don't know if
+that is responsive. But I can give you the numbers on it.
+ Ms. Kaptur. I would like two pieces of information for the
+record, Mr. Chairman, if I might. My time is expired. Mr.
+Daggett, if you could provide the figure on, though you said it
+was small, the actual amount of reenlistment bonuses, bonus
+payments to retain and attract individuals to go into the
+military now versus 10 years ago. That would be very--it is
+billions of dollars. I would just like to see that. And then
+Mr. Gilmore, I would be very interested if you could provide
+for the record of the Federal deficit, the accumulated deficit
+in the last 10 years where we have had to borrow to cover that,
+how would one look at defense spending, and the war in
+particular, as a segment of that.
+ Mr. Gilmore. That is something that the organization
+doesn't do, which is ascribe a particular part of defense
+spending to the deficit. We typically don't do that.
+ Ms. Kaptur. You don't do that. Does the CBO do that? Excuse
+me, CRS do that?
+ Mr. Daggett. No.
+ Ms. Kaptur. You don't do that either? That is interesting.
+Who does do that?
+ Mr. Gilmore. Well, we don't do it because we think there
+are good reasons not to do it, that you can't identify a
+particular dollar spent and say that is a deficit dollar versus
+another dollar that is not a deficit dollar.
+ Ms. Kaptur. Well, there is over $850 billion that has been
+spent; $864 billion on the war funding has all been borrowed,
+so it can't be that hard a calculation. I thought there would
+be a chart on it or something.
+ Mr. Gilmore. You can make a distinction like that, but it
+is not something the organization argues is a correct thing to
+do.
+ Ms. Kaptur. All right. Thank you very much.
+ Mr. Daggett. If you ask, we will be glad to take a cut at
+it. I mean, we respond to any of those.
+ Ms. Kaptur. I would be very grateful for how you might
+arrange that mathematically. Thank you.
+ Chairman Spratt. Mr. Etheridge.
+ Mr. Etheridge. Thank you, Mr. Chairman. Thank you for
+holding this meeting. Thank you gentlemen for staying, and I
+appreciate your presentation. Let me ask a question a little
+different way because I represent Fort Bragg in North Carolina,
+and also have the privilege of having the headquarters of the
+30th heavy brigade that has been pulled up as an Old Hickory
+Unit pulled to Iraq and now getting ready to come back again.
+So thousands of brave men and women who are stationed in those
+areas and many who served multiple tours in Afghanistan and
+Iraq.
+ But my question is a little different in that the new
+administration is now considering plans to substantially
+increase troop levels in Afghanistan. My question is, does
+future war cost projections that we saw, and you talked about
+them in some detail, do the charts and graphs and numbers give
+us any help in looking at future projections by the CBO as you
+put these numbers out? Do they take any kind of probable
+increase in the accounts or adjustments given this
+administrative change?
+ Mr. Gilmore. The projections I showed you, which over the
+next few years, assume that troop levels decline from, in the
+total Iraq theater from 180 or 190,000 troops in Iraq and then
+another 30,000 or so in Afghan, that the total number deployed
+declined to 75,000.
+ Mr. Etheridge. So you were using the 75,000 figure as the
+number?
+ Mr. Gilmore. Yeah. That rampdown does not--we had to make
+an assumption so we just assumed. We had a beginning point
+which is the current size of the deployments in Iraq, the Iraq
+theater and Afghanistan, and then we had a somewhat arbitrarily
+chosen end point, 75,000, and we just linearly ramped it down
+over 3 or 4 years. That obviously does not account for how the
+detailed deployments might evolve over the next year or two. It
+certainly could end up being consistent with what happens. If
+there is a draw down in Iraq that proceeds at a more rapid
+pace, or is more substantial, larger than the increase in
+forces in Afghanistan, that somewhat arbitrary assumption could
+turn out to be roughly consistent with what happens, but that
+is not the way it was designed.
+ Mr. Etheridge. Let me follow that because I hear from our
+men and women quite frequently, and you touched on it earlier
+on the reset cost. And we talk about a reset cost, but also you
+got that training piece if you don't have the equipment to
+train with, and we have been through this a number of times. Is
+that in the projections as well of getting equipment up to
+speed, because when we come home, we are assuming that it will
+wind up in Afghanistan? You got a little different environment
+in Afghanistan than you do in Iraq in the sands. It is still a
+tough environment. Is that included in these projections?
+ Mr. Gilmore. The short answer is yes. We include in our
+projection an estimate of what it will cost to ``reset the
+equipment based on what our experience has been over the last
+year or so.'' So to the extent that that experience is a good
+predictor of the future we have accounted for it well. But
+there are many details of those costs that, notwithstanding our
+report of a year and a half ago, we still don't understand.
+ So I am not going to sit here and say that I think that
+that projection is a real prediction of the future, but it is
+based on our experience in reset costs over the last year or
+so.
+ Mr. Etheridge. One other point, and then I will yield back,
+Mr. Chairman. Because you touched on it and I had a note here
+on the health care costs that you responded earlier to two
+questions. Having had the opportunity to spend some time in the
+military, the days when the draft was active with a lot of my
+friends and neighbors. The health care issue that was raised in
+the current environment we find ourselves in with an all-
+volunteer army, we really have a much younger force if you look
+from top to bottom than you would have in the general public at
+large, even with TRICARE, because you have got a selected force
+by and large that is fairly active, accustomed to staying
+physically fit by and large more so than the public at large.
+ Mr. Daggett. But under 65 retirees do get access to the
+military.
+ Mr. Etheridge. No, I understand that. But by and large,
+they normally would be a more physically fit group of people I
+would think.
+ Mr. Gilmore. You are obviously correct that the enlisted
+force which composes the bulk of the force is going to be
+younger than the population as a whole, yes. Although as I
+mentioned before, we haven't really looked at the effect that
+the somewhat different demographics may have.
+ Mr. Etheridge. That would be interesting to know as we go
+through this, not to call attention to either one, but show
+what happens if a person stays physically fit, what happens in
+life. I think we know the answer, but it sure would be good to
+quantify. Thank you, Mr. Chairman. I yield back.
+ Chairman Spratt. Thank you, Mr. Etheridge. Just quickly one
+question before we turn to Mr. Langevin. Do you have a rule of
+thumb at CRS or CBO for what it costs to move a division or a
+brigade with full equipment sent back to the States from Iraq?
+ Mr. Gilmore. No, I can't give you a number off the top of
+my head. But I can say that my recollection is in the past we
+have tried to estimate those transportation costs. And I am not
+going to claim that they are small in absolute terms, but as a
+percentage of the operations and maintenance bill, the total
+operations and maintenance bill that accrues every year which
+is probably 80 percent of that $180 billion or so, it is a
+small fraction of that.
+ Mr. Daggett. We have tried to defer to CBO on cost
+estimates on forces abroad, on deployments abroad.
+ Chairman Spratt. Could you submit, for the record, your
+growth estimation that--your rule of thumb for, division set,
+brigade set, whatever the proper unit is?
+ Mr. Gilmore. I would say brigade set would probably be it.
+ Chairman Spratt. You are able to caveat it for. Mr.
+Langevin.
+ Mr. Langevin. Thank you, Mr. Chairman. And gentlemen, I
+want to thank you for your patience and your testimony here
+today and for what you do to make sure that we stay informed
+with good information. I sit on not only the Budget Committee,
+but also the House Armed Services Committee. And following the
+debate on the issue of the DDG-1000 versus the 51 that is going
+on right now, and just for my own knowledge and clarification
+for the record, when you talk about the range of potential
+costs, whether it is 4 or 5 to $6 billion for the DDG-1000, I
+would assume that you are talking about the first ship, which
+obviously is the most expensive and then costs moderate over
+time as you achieve economies of scale. Can you clarify that
+for the record?
+ And also talk about your analysis on start-up costs if we
+were to start the DDG-51 line. And you estimate real costs of
+what that would be, what that ship would be per copy now with
+the add on technologies. And also the tradeoffs versus going
+with the DDG-1000 and the fact that these aren't supposed to be
+incorporating follow-on or transformational technologies that
+would, at a later point, be used on the cruiser or other
+platforms. So that it is kind of you can't just talk about the
+51 in a vacuum, you know, they have other follow-on
+technologies that would be applied to other platforms and would
+be of course useful as the cruisers is developed. So if you
+could just kind of talk about those for a few minutes.
+ Mr. Gilmore. Well, the cost numbers that I quoted of 4 to
+$5 billion were, for the first ship, exclusive of the--so it
+excluded the development costs, the design costs for the ship,
+the cost of building the first ship. And then, yes, we do
+assume in our estimate that subsequent costs, subsequent ships
+costs less. That there is a learning effect that occurs.
+ Mr. Langevin. So can you estimate what the following costs
+would be?
+ Mr. Gilmore. I don't know off the top of my head, but I can
+certainly provide them to you.
+ Mr. Langevin. That would be helpful.
+ Mr. Gilmore. And as far as the start-up costs and the new
+ship costs for new versions of the DDG-51 are concerned, that
+is not something at which we have looked. And I would have to
+take a look at what the Department is claiming before I could
+actually decide whether we have enough information to do a cost
+estimate at this point. I don't know if there is sufficient
+information available from the Department of what it would
+actually put in new DDG-51s to do a definitive estimate.
+ Mr. Langevin. They are making what they claim to be
+definitive estimates. So I think it would be helpful if you
+would look at that and get back to us for the record.
+ Mr. Gilmore. All right.
+ Mr. Langevin. And then have you looked at--this is the last
+part of my question--the value of the fact that the kind of
+technologies that the 51 would be incorporated--the DDG-1000
+would be incorporated and would be used on other platforms, and
+particularly for the cruiser.
+ Mr. Gilmore. I don't mean to sound obtuse, and I probably
+will. I really don't know how to measure that value
+quantitatively. I certainly would admit that it exists. What
+analysis I could do that would generate numbers that would
+measure that value I fall short trying to think of. So I am not
+certain--in fact, I am fairly certain that I couldn't give you
+a--provide you with an analysis and a quantitative result that
+would measure that value. I think that that is a matter of
+judgment on the part of people in the Congress and people in
+the Department of Defense as to whether they think whatever
+costs will accrue to implement those new technologies is worth
+it.
+ Mr. Langevin. Let me go back. Mr. Daggett, do you have a
+comment to that?
+ Mr. Daggett. No.
+ Mr. Langevin. Let me go back to a line of questioning that
+my colleague, Ms. McCollum, was asking. Obviously the country
+is facing an economic and fiscal crisis right now. And with the
+Department of Defense spending, we obviously need to do the job
+of keeping the country safe, but spend our dollars more wisely.
+Just as the QDR helps inform the FYDP, isn't it more important
+than ever right now that we look at security from a more global
+perspective. There are those who would argue that we need to do
+a better job at using our soft par assets, incorporating that
+in an overall national security strategy as opposed to just
+looking at it myopically from the point of view of the Defense
+Department.
+ And so that something that I have thought about and have
+introduced legislation to that effect of calling for a
+Quadrennial National Security Review that would be done that
+would, I believe, better inform the QDR which would better
+inform the FYDP and overall defense policy and strategy, and
+would obviously make sure that we are spending our dollars in
+the best way most effective way possible. Can you talk about
+that?
+ Mr. Daggett. A couple of points. A lot of organizations
+lately have been looking at improved interagency cooperation in
+National Security Affairs. There has been discussion of doing
+an overall national security strategy statement with guide
+budgeting for DOD as well as for other agencies for security
+purposes. We will see if this administration will propose that.
+It could be part of consideration of legislative measures as
+well if there are proposals to strengthen the inner agency. At
+the center of some of the proposals are--by the way, you will
+find some of the strongest advocates of this in DOD. Not just
+Secretary Gates, but other military commanders who have been
+involved in Iraq and elsewhere who argue that the whole
+interagency system needs to be bolstered across the board for
+prevention, but also for stability operations once they are
+involved overseas.
+ A big focus of attention is on how do you build teams to
+work on national security issues like proliferation which cuts
+across agencies. It is a State Department issue, it is a DOD
+issue, it is a Department of Energy issue, it could be a
+Treasury issue to track funding flows. We are not very good or
+as good as we could be probably at building--we do build teams
+at the Assistant Secretary level to discuss policy issues, but
+at the implementation level, we don't do that on a regular
+basis. Or it doesn't work as well as it could because DOD is
+such a big agency it comes in and everybody defers to them. How
+do you build those kinds of structures across the board. That
+is a very big matter of discussion. And we have been looking at
+that a little bit. There is a whole commission that did a
+recent study on it that has a number of direct recommendations
+for team building. So absolutely a huge issue on the agenda.
+ Mr. Gilmore. I think that the arguments in favor of a
+Quadrennial National Strategy Review, those arguments in
+principle are sound and they certainly make sense. I
+participated in the 1997 Quadrennial Defense Review and in the
+2001 Quadrennial Defense Review, when I worked at the Pentagon.
+And I observed the last Quadrennial Defense Review from my
+position as CBO. And I would observe the following. If you look
+at the reviews which went from lasting 3 or 4 months in 1997 to
+over a year in the most recent version, and if you look at then
+what changes were actually made in the program, defense program
+subsequent to the reviews, you find that virtually nothing
+changed.
+ So in principle, I understand all the arguments in favor of
+these reviews. In practice, what I have seen happen is the
+reviews extend in length, expand in scope and have lesser
+impact or--it probably wouldn't be fair to say lesser, but not
+what I would characterize as significant effect on the actual
+defense program measured by what changed, what did I actually
+change in the program as a result of the review. And I would
+say probably not much in almost every instance. So going
+forward, if we can find a different way to do these reviews,
+perhaps it can be more successful in taking strategy and
+connecting them to the Future Years Defense Program and to
+spending in other departments.
+ But when I look at the record, I haven't really seen that
+happen. And I measure that according to what are the
+differences between the program that existed before the review
+and after the review.
+ Now, in principle, there could be good reasons why not much
+of anything changed. But all the arguments I have heard in
+favor of things like the Quadrennial National Strategy Review
+are, there are all these problems that we have left
+unaddressed, and the only way to address them is to have a
+broader scope more encompassing review. And when you look at
+what has happened in the past, not much has changed. And if not
+much has changed, then it would indicate to me that all these
+problems that people have identified haven't been addressed.
+ Mr. Langevin. Like to go on, but I see my time has expired.
+Thank you for your input. If you have ways to suggest that we
+could change that to make those reviews more effective, I know
+I would be open to hear those thoughts. Thank you.
+ Chairman Spratt. That concludes the hearing. I want to
+thank you once again for your excellent testimony. I think it
+speaks volumes about defense, but also about the value of
+analysis that we have valuable in CBO and CRS. Thank you very
+much indeed for coming in. Thank you for the effort you put in
+to make this hearing a useful venture. I also ask unanimous
+consent that members who did not have the opportunity to ask
+questions be given 7 days to submit questions for the record.
+Once again thank you for coming.
+ [Questions for the record and their responses follow:]
+
+ Questions for the Record Submitted by Hon. Steve Austria, a
+ Representative in Congress From the State of Ohio
+
+ 1. The successful completion of the most recent round of BRAC and
+military R&D are both very important to central Ohio. Can you tell me
+by service, whether BRAC is currently projected to achieve the savings
+that were envisioned? If the savings aren't realized, has DOD indicated
+how they will respond?
+ 2. I would like to discuss two Air Force programs--the F-22 and the
+Joint Strike Fighter (JSF). What is the status of these two systems?
+How can we get DOD to do realistic budgeting?
+
+ Questions for the Record Submitted by Hon. Rosa L. DeLauro, a
+ Representative in Congress From the State of Connecticut
+
+ 1. As you are likely aware, the Navy recently declared a so-called
+Nunn-McCurdy violation for the VH-71 presidential helicopter
+replacement program. Last year, the Defense Department announced that
+the total acquisition costs for the program were projected to increase
+from $6.5 billion to $11.2 billion. Now, merely two years after
+submitting initial baseline estimates, the Navy is confirming that the
+cost per helicopter will be at least 50 percent higher than the
+original estimate.
+ In recent testimony, Secretary Gates identified acquisitions as a
+chief challenge facing the Defense Department and specifically
+mentioned the VH-71 as a ``big ticket'' item experiencing contract or
+program performance problems, suggesting that ``the FY 2010 budget must
+make hard choices.'' As we examine cost growth in Defense programs, how
+do you think we should approach big contract issues such as this one?
+What policies are needed to control such egregious cost over-runs? On
+the VH-71 program in particular, with the modifications and the new
+requirements being as extensive as they are, and the fact that had
+these changes been clear from the outset competing firms would likely
+have submitted different proposals, do you think a re-competition of
+Increment II of the program is worthwhile to identify whether this
+helicopter can be made at a better value to the taxpayer?
+ 2. As with the controversial original award for the Air Force KC-X
+aerial refueling tanker contract, the Marine One contract was awarded
+to a consortium that involved a substantial amount of work being
+outsourced overseas. I believe such outsourcing of defense contracts
+runs against both U.S. national security and economic interests,
+eroding our defense industrial base, costing jobs and stunting economic
+growth. Do you believe, particularly in these very difficult economic
+times, that the Defense Department should consider adjusting its
+methodology to account for potential job creation and economic growth
+when considering proposals for major projects such as the KC-X and VH-
+71?
+
+ Mr. Daggett's Responses to Questions for the Record
+
+subject: trends in dod reenlistment bonuses and other special pays and
+ allowances
+ This is in response to your request, in a question at a House
+Budget Committee hearing on February 4, for information on amounts the
+Defense Department has spent for enlistment and reenlistment bonuses.
+CRS testimony for the hearing shows that compensation of an average
+active duty service member increased by 45% above inflation between
+FY1998 and FY2009. Your question is how much of that increase can be
+attributed to bonuses intended to aid in recruiting and retaining
+personnel at a time when the military services were concerned about
+potential shortfalls in meeting personnel goals.
+ A graph prepared for the testimony shows funding per active duty
+service member in FY1998 and FY2009 in constant, inflation-adjusted
+dollars, broken down into various categories within DOD's Military
+Personnel budget accounts.\1\ One of the categories is ``Incentive
+Pays, Special Pays, and Allowances.'' Funding for enlistment and
+reenlistment bonuses are included in subaccounts for ``Special Pays.''
+As Figure 1 shows, overall funding for ``Incentive Pays, Special Pays,
+and Allowances'' per active duty service member grew from $3,387 per
+troop in FY1998 to $4,976 per troop in FY2009. This is an increase of
+47% above inflation, which about in line with the growth in overall
+personnel funding.
+---------------------------------------------------------------------------
+ \1\ The data reflect amounts provided in the DOD base budget for
+each year, not including war-related funding provided in ``bridge
+funds'' or in supplemental appropriations. The data are in constant
+FY2009 dollars--the FY1998 amounts are adjusted to reflect inflation.
+---------------------------------------------------------------------------
+ Table 1 shows funding for enlistment and reenlistment bonuses
+within the ``Special Pays'' subaccounts of each of the military
+services. It provides the amounts in current year dollars and in
+constant FY2009 dollars and then shows the total in constant FY2009
+dollars per active duty service member for comparison to the amounts
+shown in Figure 1. In all, after adjusting for inflation, funding for
+reenlistment bonuses grew from $229 per service member in FY1998 to
+$796 in FY2009, an increase of 248%, and for enlistment bonuses from
+$207 per service member in FY1998 to $371 in FY2009, an increase of
+79%. While these are large increases proportionally, enlistment and
+reenlistment bonuses represent less than 1.5% of cash compensation in
+FY2009. As a result, the increases are not a major factor explaining
+the overall growth of personnel costs.
+
+ TABLE 1.--FUNDING FOR ENLISTMENT AND REENLISTMENT BONUSES, FY1998 AND FY2009
+ [Current year and constant FY2009 dollars]
+----------------------------------------------------------------------------------------------------------------
+ FY1998 FY2009
+ ---------------------------------------------------------------
+ Officer Enlisted Total Officer Enlisted Total
+----------------------------------------------------------------------------------------------------------------
+Current Year Dollars (000s):
+ Army:
+ Reenlistment Bonus...................... 0 50,650 50,650 0 339,030 339,030
+ Enlistment Bonus........................ 0 58,223 58,223 0 314,861 314,861
+ Navy:
+ Reenlistment Bonus...................... 0 140,359 140,359 0 359,600 359,600
+ Enlistment Bonus........................ 0 144,761 144,761 0 108,797 108,797
+ Marine Corps:
+ Reenlistment Bonus...................... 0 18,850 18,850 0 213,685 213,685
+ Enlistment Bonus........................ 0 2,750 2,750 0 70,803 70,803
+ Air Force:
+ Reenlistment Bonus...................... 0 36,431 36,431 0 176,333 176,333
+ Enlistment Bonus........................ 0 16,966 16,966 0 12,986 12,986
+ Total:
+ Reenlistment Bonus...................... 0 246,290 246,290 0 1,088,648 1,088,648
+ Enlistment Bonus........................ 0 222,700 222,700 0 507,447 507,447
+Constant FY2009 Dollars (000s):
+ Army:
+ Reenlistment Bonus...................... 0 66,124 66,124 0 339,030 339,030
+ Enlistment Bonus........................ 0 76,011 76,011 0 314,861 314,861
+ Navy:
+ Reenlistment Bonus...................... 0 183,240 183,240 0 359,600 359,600
+ Enlistment Bonus........................ 0 188,987 188,987 0 108,797 108,797
+ Marine Corps:
+ Reenlistment Bonus...................... 0 24,609 24,609 0 213,685 213,685
+ Enlistment Bonus........................ 0 3,590 3,590 0 70,803 70,803
+ Air Force:
+ Reenlistment Bonus...................... 0 47,561 47,561 0 176,333 176,333
+ Enlistment Bonus........................ 0 22,149 22,149 0 12,986 12,986
+ Total:
+ Reenlistment Bonus...................... 0 321,534 321,534 0 1,088,648 1,088,648
+ Enlistment Bonus........................ 0 290,737 290,737 0 507,447 507,447
+Constant FY2009 Dollars per Active Duty Service
+ Member:
+ Total:
+ Reenlistment Bonus...................... 0 229 229 0 796 796
+ Enlistment Bonus........................ 0 207 207 0 371 371
+----------------------------------------------------------------------------------------------------------------
+Source: CRS based on data in military service Military Personnel budget justification books--FY1998 amounts are
+ actual amounts reported in FY2000 justification books, FY2009 amounts reflect the original base budget
+ request.
+
+ subject: share of cumulative federal budget deficits due to defense
+ spending
+ This is in response to your request, in a question at a House
+Budget Committee hearing on February 4, for an estimate of the share of
+cumulative federal budget deficits attributable to defense spending.
+For a number of reasons, any answer to the question is problematic and
+may well raise objections on several grounds. This response, therefore,
+should not be taken as a definitive answer to your question, but,
+rather, as one illustrative approach to the issue.
+ The conceptual difficulty of the question lies in the fact that
+deficits are, by definition, a result of an imbalance between spending
+on the one hand and revenues on the other, and it is very difficult to
+assign responsibility to one or the other. Deficits may grow from year
+to year either because spending increases, compared to some baseline,
+or because revenues decline, again relative to some baseline. But it is
+not clear what baseline to use in either case. It is certainly possible
+to calculate changes in spending or in revenues from year to year due
+to changes to standing law--i.e., to apply something like the baseline
+estimates calculated by the Congressional Budget Office (CBO) and the
+Office of Management and Budget (OMB). But then the problem is how many
+years ahead to continue attributing deficits either to changes in
+spending or to changes in revenues at one point in time. The issue is
+further complicated by the fact that both revenues and spending are
+affected by the state of the economy. Should, then, an economic
+downturn be held more responsible for deficits than changes in policy?
+ Rather than try to unpack these issues, this memo approaches the
+question, not by calculating what changes in spending and revenues
+cause deficits, but, rather, by determining what proportion of deficits
+have financed defense compared to non-defense spending. Specifically,
+it calculates the national defense percentage of annual federal budget
+outlays and then attributes an equal percentage of annual deficits to
+defense. The defense share of cumulative deficits, then, equals the sum
+of defense-attributable annual deficits compared to total deficits
+(less surpluses) over the chosen period of time.
+ Table 1 at the end of this memo, follows this approach for each
+year from FY1947 through FY2007. FY1947 was chosen as a starting point
+since it marked the first year of post-World War II outlays. Outlays in
+FY1946 still included a very large amount of money appropriated for the
+war, including funding carried over from prior years They also included
+funding to return forces home and to close down weapons production
+lines. FY2007 was chosen as an end-point because it is the latest year
+for which actual data on Budget Function 050 outlays are currently
+available.
+ Please note that the table calculates the defense share of
+cumulative deficits over the FY1947-FY2007 period rather than the
+defense share of the national debt owed to the public. For purposes of
+comparison, the table also shows the debt owed to the public at the end
+of each year in the final column. Annual changes in debt owed to the
+public correlate only quite roughly with annual deficits or surpluses,
+since off-budget borrowing is also reflected in the amount of the debt.
+ While this approach avoids some of the conceptual difficulties
+discussed earlier, it does not resolve them, and it raises some
+additional ones. One issue is whether it is appropriate to equate the
+share of deficits used to finance defense spending with the annual
+defense share of total federal outlays or whether, instead, annual
+increases in spending should be seen as financed by deficits. This
+issue is particularly acute with regard to supplemental appropriations.
+In years when supplemental appropriations were used to finance military
+operations, for example, without offsetting cuts in other spending or
+increases in revenues, one could very reasonably argue that the whole
+amount of war-related supplemental funding should be seen as an
+addition to the budget and therefore as responsible for an equal amount
+of the deficit (or for all of the deficit if the deficit is less than
+total war-related funding). If so, the cumulative share of deficits
+attributable to defense might appear significantly higher.
+ Another issue is whether it would be better to assume that the debt
+owed to the public is amortized over a period of time--over 30 years,
+or so, for example--so that the burden of earlier deficits are
+progressively erased from the books. If that approach were taken, the
+current defense-related share of cumulative deficits would appear
+smaller in recent years because defense has declined as a share of
+federal outlays.
+ Another alternative would involve assigning federal outlays for net
+interest on the debt differently. Table 1, in effect, treats interest
+on the debt as an element of total outlays, rather than allocating it
+in proportion to the defense or non-defense shares of cumulative
+deficits. If a share of net interest were attributed to defense, the
+defense share of cumulative deficits might appear somewhat larger.
+ Table 1 follows. In brief, it shows that defense outlays in the
+post-World War II era declined as a share of Federal spending from a
+peak of almost 70% of the budget during the Korean War to a low of 16%
+in FY1999 and increased after that to about 20% in FY2007. Accordingly,
+the share of cumulative deficits that can be said to have financed
+defense spending has also declined. Between FY1947 and FY1959, the
+cumulative budgets showed a surplus. The cumulative share of defense
+spending that might be said to be financed with deficits has declined
+from 53% in FY1959, the first year of net cumulative deficits in post-
+World War II budgets; to 23% in FY2007.
+ If CRS can be of any further assistance, please contact Stephen
+Daggett at the phone number shown above.
+
+ TABLE 1.--SHARE OF CUMULATIVE DEFICITS FROM FY1947-FY2007 USED TO FINANCE DEFENSE OUTLAYS AS SHARE OF TOTAL FEDERAL OUTLAYS
+ [Amounts in millions of current year dollars]
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+ Defense- Defense-
+ National Related Share Defense- Related
+ National Total Federal Defense Annual Surplus/ of Annual Cumulative Related Share Percentage of Note: Debt
+ Fiscal year Defense Outlays Percentage of Deficit Surplus/ Surpluses/ of Cumulative Cumulative Owed to the
+ Outlays Total Outlays Deficit Deficits Deficits Deficits (7)/ Public
+ (2)/(3) (3)X(4) (6)
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+ 1947 12,808 34,496 37.10% 4,018 1,492 4,018 .............. ............. 202,467
+ 1948 9,105 29,764 30.60% 11,796 3,608 15,814 .............. ............. 194,904
+ 1949 13,150 38,835 33.90% 580 196 16,394 .............. ............. 194,979
+ 1950 13,724 42,562 32.20% -3,119 -1,006 13,275 .............. ............. 200,692
+ 1951 23,566 45,514 51.80% 6,102 3,159 19,377 .............. ............. 191,344
+ 1952 46,089 67,686 68.10% -1,519 -1,034 17,858 .............. ............. 191,852
+ 1953 52,802 76,101 69.40% -6,493 -4,505 11,365 .............. ............. 193,637
+ 1954 49,266 70,855 69.50% -1,154 -802 10,211 .............. ............. 199,462
+ 1955 42,729 68,444 62.40% -2,993 -1,869 7,218 .............. ............. 203,009
+ 1956 42,523 70,640 60.20% 3,947 2,376 11,165 .............. ............. 198,398
+ 1957 45,430 76,578 59.30% 3,412 2,024 14,577 .............. ............. 196,285
+ 1958 46,815 82,405 56.80% -2,769 -1,573 11,808 .............. ............. 200,898
+ 1959 49,015 92,098 53.20% -12,849 -6,838 -1,041 -554 53.20% 208,657
+ 1960 48,130 92,191 52.20% 301 157 -740 -397 53.60% 210,317
+ 1961 49,601 97,723 50.80% -3,335 -1,693 -4,075 -2,090 51.30% 211,104
+ 1962 52,345 106,821 49.00% -7,146 -3,502 -11,221 -5,591 49.80% 218,347
+ 1963 53,400 111,316 48.00% -4,756 -2,282 -15,977 -7,873 49.30% 221,951
+ 1964 54,757 118,528 46.20% -5,915 -2,733 -21,892 -10,605 48.40% 222,055
+ 1965 50,620 118,228 42.80% -1,411 -604 -23,303 -11,210 48.10% 221,678
+ 1966 58,111 134,532 43.20% -3,698 -1,597 -27,001 -12,807 47.40% 221,545
+ 1967 71,417 157,464 45.40% -8,643 -3,920 -35,644 -16,727 46.90% 219,907
+ 1968 81,926 178,134 46.00% -25,161 -11,572 -60,805 -28,299 46.50% 237,315
+ 1969 82,497 183,640 44.90% 3,242 1,456 -57,563 -26,842 46.60% 224,013
+ 1970 81,692 195,649 41.80% -2,842 -1,187 -60,405 -28,029 46.40% 225,484
+ 1971 78,872 210,172 37.50% -23,033 -8,644 -83,438 -36,673 44.00% 237,519
+ 1972 79,174 230,681 34.30% -23,373 -8,022 -106,811 -44,695 41.80% 250,951
+ 1973 76,681 245,707 31.20% -14,908 -4,653 -121,719 -49,347 40.50% 265,729
+ 1974 79,347 269,359 29.50% -6,135 -1,807 -127,854 -51,155 40.00% 263,051
+ 1975 86,509 332,332 26.00% -53,242 -13,859 -181,096 -65,014 35.90% 309,707
+ 1976 89,619 371,792 24.10% -73,732 -17,773 -254,828 -82,787 32.50% 382,690
+ TQ 22,269 95,975 23.20% -14,744 -3,421 -269,572 -86,208 32.00% 398,807
+ 1977 97,241 409,218 23.80% -53,659 -12,751 -323,231 -98,959 30.60% 444,100
+ 1978 104,495 458,746 22.80% -59,185 -13,481 -382,416 -112,440 29.40% 491,646
+ 1979 116,342 504,028 23.10% -40,726 -9,401 -423,142 -121,840 28.80% 524,712
+ 1980 133,995 590,941 22.70% -73,830 -16,741 -496,972 -138,581 27.90% 591,077
+ 1981 157,513 678,241 23.20% -78,968 -18,339 -575,940 -156,921 27.20% 664,944
+ 1982 185,309 745,743 24.80% -127,977 -31,801 -703,917 -188,722 26.80% 790,078
+ 1983 209,903 808,364 26.00% -207,802 -53,959 -911,719 -242,680 26.60% 981,741
+ 1984 227,413 851,853 26.70% -185,367 -49,486 -1,097,086 -292,166 26.60% 1,151,853
+ 1985 252,748 946,396 26.70% -212,308 -56,700 -1,309,394 -348,866 26.60% 1,337,454
+ 1986 273,375 990,441 27.60% -221,227 -61,062 -1,530,621 -409,928 26.80% 1,549,767
+ 1987 281,999 1,004,083 28.10% -149,730 -42,052 -1,680,351 -451,980 26.90% 1,677,713
+ 1988 290,361 1,064,481 27.30% -155,178 -42,328 -1,835,529 -494,308 26.90% 1,822,398
+ 1989 303,559 1,143,829 26.50% -152,639 -40,509 -1,988,168 -534,817 26.90% 1,970,628
+ 1990 299,331 1,253,130 23.90% -221,036 -52,798 -2,209,204 -587,615 26.60% 2,177,147
+ 1991 273,292 1,324,331 20.60% -269,238 -55,561 -2,478,442 -643,175 26.00% 2,430,408
+ 1992 298,350 1,381,649 21.60% -290,321 -62,691 -2,768,763 -705,867 25.50% 2,703,341
+ 1993 291,086 1,409,522 20.70% -255,051 -52,672 -3,023,814 -758,538 25.10% 2,922,744
+ 1994 281,642 1,461,907 19.30% -203,186 -39,145 -3,227,000 -797,683 24.70% 3,077,915
+ 1995 272,066 1,515,884 17.90% -163,952 -29,426 -3,390,952 -827,108 24.40% 3,230,264
+ 1996 265,753 1,560,608 17.00% -107,431 -18,294 -3,498,383 -845,402 24.20% 3,343,149
+ 1997 270,505 1,601,307 16.90% -21,884 -3,697 -3,520,267 -849,099 24.10% 3,347,826
+ 1998 268,207 1,652,685 16.20% 69,270 11,242 -3,450,997 -837,858 24.30% 3,262,917
+ 1999 274,785 1,702,035 16.10% 125,610 20,279 -3,325,387 -817,579 24.60% 3,135,719
+ 2000 294,394 1,789,216 16.50% 236,241 38,871 -3,089,146 -778,708 25.20% 2,898,391
+ 2001 304,759 1,863,190 16.40% 128,236 20,975 -2,960,910 -757,733 25.60% 2,785,480
+ 2002 348,482 2,011,153 17.30% -157,758 -27,335 -3,118,668 -785,068 25.20% 2,936,235
+ 2003 404,778 2,160,117 18.70% -377,585 -70,755 -3,496,253 -855,823 24.50% 3,257,327
+ 2004 455,847 2,293,006 19.90% -412,727 -82,050 -3,908,980 -937,872 24.00% 3,595,203
+ 2005 495,326 2,472,205 20.00% -318,346 -63,783 -4,227,326 -1,001,656 23.70% 3,855,852
+ 2006 521,840 2,655,435 19.70% -248,181 -48,772 -4,475,507 -1,050,428 23.50% 4,060,048
+ 2007 552,568 2,730,241 20.20% -162,002 -32,787 -4,637,509 -1,083,215 23.40% 4,255,497
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+Source: CRS calculations based on data from Office of Management and Budget, Historical Tables: Budget of the United States Government, FY2009, February
+ 2008
+
+ subject: cost of military personnel before and after the inception of
+ the all volunteer force
+ This is in response to your request, in a question at a House
+Budget Committee hearing on February 4, for information on the relative
+cost of military personnel under the draft compared to their cost since
+the inception of the All Volunteer Force (AVF) in 1972. During the
+hearing, I noted that personnel have become considerably more expensive
+since beginning of the AVF, but I did not have detailed information
+immediately at hand.
+ This memo provides three tables and one figure in response to your
+request. Table 1 and Figure 1 show all compensation provided to active
+duty military personnel in military personnel budget accounts per
+service member from FY1955, following the Korean War, through FY2009,
+excluding war costs in FY1990-FY1992 and from FY2003 on. The amounts
+are shown both in current year prices and in inflation adjusted
+constant FY2009 prices, with figures adjusted for inflation using the
+consumer price index. These data are consistent with information I
+provided on the cost of personnel since FY1972 in written testimony on
+February 4. The amounts appropriated in the military personnel accounts
+provide cash compensation and deferred retirement benefits for
+uniformed personnel, but do not include either tax benefits that are
+not part of the Department of Defense budget nor benefits such as
+medical care and child care services, that are financed in DOD
+operation and maintenance accounts.
+ Table 1 provides a reasonably complete picture of the relative cost
+of personnel under a draft compared to the cost of personnel since the
+inception of the All Volunteer force. The amounts in the table reflect
+all major elements of cash compensation of military personnel plus the
+value of retirement benefits. The final column of Table 1 shows that
+compensation per service member in constant FY2009 prices grew from
+about $36,000 in FY1955 to $49,000 in FY1970, just before the AVF was
+implemented, to $57,000 in FY1973, after the AVF was in place.
+Subsequently, compensation declined in the 1970s, as annual pay raises
+fell behind inflation, but grew to $61,000, again in FY2009 prices, in
+FY1983, following ``catch-up'' pay raises of 11% in FY1980 and of 14%
+in FY1981. Average compensation remained at about that level through
+the 1990s and then began to increase substantially, growing to about
+$80,000 per service member by FY2009--again, all in constant, inflation
+adjusted dollars, using the CPI as a measure of inflation. These
+elements of compensation grew by more than 40% above inflation between
+FY1998 and FY2009. Figure 1 illustrates the long-term trend.
+ figure 1. military personnel funding per active duty service member,
+ fy1955-fy2009
+
+ [Constant FY2009 $ Adjusted Using CPI-U]
+
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+ Source: CRS based on Department of Defense data for budget amounts
+and end-strength and Bureau of Labor Statistics for CPI-U inflation
+index.
+
+ Notes: Funding amounts include all military pay and benefits
+financed in the military personnel accounts of annual appropriations
+bills, excluding pay and benefits of reserve personnel. These include
+basic pay, basic allowance for housing, subsistence, retired pay and
+medical benefits accrual contributions to the military retirement fund,
+bonuses and other special pays and allowances, permanent change of
+station travel allowances, and other cash allowances. The amounts do
+not reflect medical benefits or in-kind benefits funded in operation
+and maintenance accounts. Amounts are for the base defense budget only,
+not including war-related funding in FY1990-FY1992 and from FY2003
+through FY2009. End-strength levels also exclude reserves mobilized for
+military operations in those years.
+
+
+ TABLE 1.--MILITARY PERSONNEL FUNDING PER ACTIVE DUTY SERVICE MEMBER,
+ FY1955-FY2009
+[Budget authority in current year dollars and in constant FY2009 dollars
+ using CPI-U]
+------------------------------------------------------------------------
+ Active Active Funding Funding
+ Duty Duty per per
+ Military Military Active Active Active
+ Personnel Personnel Duty End- Duty Duty
+ Fiscal year Funding Funding Strength Service Service
+ (Current (FY2009 $ (000s) Member Member
+ Year $ in in (Current (FY2009
+ Millions) Millions) Year $) $)
+------------------------------------------------------------------------
+FY1955........... 11,060 89,707 2,935 3,768 30,565
+FY1956........... 11,096 88,597 2,807 3,953 31,563
+FY1957........... 11,008 85,229 2,795 3,938 30,494
+FY1958........... 10,378 77,985 2,599 3,993 30,006
+FY1959........... 11,313 84,391 2,504 4,518 33,703
+FY1960........... 10,878 79,982 2,476 4,393 32,303
+FY1961........... 11,439 83,505 2,483 4,607 33,631
+FY1962........... 12,028 86,571 2,808 4,284 30,830
+FY1963........... 12,400 88,006 2,700 4,593 32,595
+FY1964........... 13,111 92,408 2,687 4,879 34,391
+FY1965........... 13,827 95,480 2,656 5,206 35,949
+FY1966........... 16,170 108,725 3,093 5,228 35,152
+FY1967........... 19,170 124,787 3,375 5,680 36,974
+FY1968........... 21,098 132,286 3,547 5,948 37,295
+FY1969........... 22,837 135,696 3,460 6,600 39,218
+FY1970........... 24,564 137,937 3,066 8,012 44,989
+FY1971........... 24,595 132,294 2,714 9,062 48,745
+FY1972........... 25,164 131,211 2,324 10,828 56,459
+FY1973........... 26,300 129,223 2,253 11,673 57,356
+FY1974........... 27,254 120,579 2,163 12,600 55,746
+FY1975........... 28,976 117,512 2,129 13,610 55,196
+FY1976........... 30,401 116,368 2,081 14,609 55,919
+FY1977........... 31,870 114,687 2,075 15,359 55,271
+FY1978........... 33,706 112,572 2,062 16,346 54,594
+FY1979........... 36,080 108,135 2,031 17,765 53,242
+FY1980........... 39,561 104,472 2,063 19,176 50,641
+FY1981........... 46,418 111,098 2,101 22,093 52,879
+FY1982........... 56,603 127,701 2,130 26,574 59,954
+FY1983........... 60,349 132,069 2,163 27,900 61,058
+FY1984........... 57,746 120,935 2,184 26,440 55,373
+FY1985........... 60,002 121,430 2,207 27,187 55,020
+FY1986........... 59,570 118,445 2,233 26,677 53,043
+FY1987........... 65,620 125,823 2,244 29,242 56,071
+FY1988........... 67,723 124,708 2,209 30,658 56,454
+FY1989........... 69,351 121,781 2,203 31,480 55,280
+FY1990........... 69,759 116,303 2,144 32,537 54,246
+FY1991........... 75,007 119,964 2,077 36,113 57,758
+FY1992........... 71,477 111,017 1,880 38,020 59,052
+FY1993........... 66,499 100,239 1,775 37,464 56,473
+FY1994........... 61,775 90,840 1,678 36,815 54,136
+FY1995........... 62,090 88,750 1,583 39,223 56,064
+FY1996........... 60,421 83,900 1,538 39,285 54,551
+FY1997........... 60,924 82,688 1,504 40,508 54,979
+FY1998........... 59,535 79,535 1,406 42,343 56,569
+FY1999........... 61,347 80,175 1,386 44,262 57,846
+FY2000........... 63,853 80,765 1,384 46,137 58,356
+FY2001........... 66,568 81,868 1,386 48,029 59,068
+FY2002........... 71,096 86,091 1,386 51,296 62,114
+FY2003........... 80,506 95,339 1,386 58,085 68,787
+FY2004........... 84,414 97,371 1,386 60,905 70,253
+FY2005........... 91,396 101,973 1,386 65,942 73,573
+FY2006........... 95,766 103,459 1,357 70,595 76,267
+FY2007........... 96,247 101,094 1,328 72,451 76,100
+FY2008........... 100,761 102,978 1,326 76,009 77,681
+FY2009........... 109,469 109,469 1,368 80,004 80,004
+------------------------------------------------------------------------
+Sources: CRS using data from the Department of Defense and adjusted for
+ inflation using the Consumer Price Index for Urban Wage Earners (CPI-
+ U) from the Bureau of Labor StatisticsNotes: Amounts include all funding provided in military personnel
+ accounts for active duty personnel. Amounts do not reflect medical
+ care and in-kind benefits such as child care services, commissary and
+ exchange privileges, and recreational facilities, financed in
+ operation and maintenance accounts
+
+ As a complement to the data in Table 1, Tables 2 and 3 show monthly
+basic pay of representative enlisted personnel and officers, at the
+most common grade levels, for selected years (the data go back to 1905
+for enlisted personnel and to 1922 for officers). These data are taken
+directly from tables in background papers prepared by the Library of
+Congress Federal Research Division for the Office of the Secretary of
+Defense in preparation for the Ninth Quadrennial Review of Military
+Compensation.\1\ The data are derived from annual pay tables, which
+show, within each grade, pay levels for personnel with increasing
+numbers of years of service. The Table 2 shows monthly basic pay of an
+``E-4'' enlisted service member, and Table 3 shows monthly basic pay of
+an ``O-3'' grade officer. These grades were chosen because they
+represent the most common ranks in today's force. The most common grade
+level of an enlisted service member in 2008 was ``E-4,'' which
+corresponds to a rank of corporal or specialist in the Army, corporal
+in the Marine Corps, senior airman in the Air Force, and Petty Officer
+Third Class in the Navy. The most common grade level of an officer in
+2008 was O-3, which corresponds to a rank of Captain in the Army, Air
+Force, and Marine Corps, and to Lieutenant in the Navy. Amounts are
+shown in current year dollars and in constant FY2009 prices, again
+adjusted for inflation using the CPI.
+---------------------------------------------------------------------------
+ \1\ Dr. Glenn Curtis, Military Compensation Background Papers:
+Sixth Edition, Federal Research Division, Library of Congress,
+Washington, DC, May 2005, http://www.loc.gov/rr/frd/pdf-files/
+Military--Comp.pdf. The gaps in the table, which skip over most years
+until 1940, are as shown in the background tables--CRS did not alter
+the information in current year prices in any way. It would require
+additional research to fill in the figures for intervening years.
+---------------------------------------------------------------------------
+ It is important to note that basic pay is only a part of cash and
+deferred compensation. In FY2008, funding for basic pay was 49% of the
+total provided in military personnel budget accounts Other elements of
+cash compensation included housing and subsistence allowances, clothing
+allowances, special pays and bonuses, permanent change of station
+moving allowances, and a number of other smaller categories of
+compensation. In all, these parts of compensation totaled 23% of
+funding. Financing of future retirement benefits comprised the
+remaining 28%. Though they do not reflect a complete picture of
+military compensation, these tables of monthly basic pay are provided
+in order to present a more concrete comparison of military pay when the
+draft was in effect with pay of members of the current professional
+military force.
+ If CRS can be of any further assistance, please contact Stephen
+Daggett by direct phone at 202 707-7642 or by e-mail at
+[email protected].
+
+ TABLE 2.--MONTHLY BASIC PAY SCHEDULE FOR E-4 ENLISTED PERSONNEL, SELECTED YEARS FROM 1905-2004
+ [Monthly pay at rank with years of service]
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+ Under Over Over Over Over Over Over Over Over Over Over
+ 2 Over 2 Over 3 Over 4 Over 6 Over 8 10 12 14 16 18 20 22 24 26 30
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+ CURRENT YEAR DOLLARSJul-1905................ 54 54 54 57 57 59 59 62 62 65 65 65 65 65 65 65
+Oct-40.................. 60 60 60 66 66 69 69 72 72 75 75 75 75 75 75 75
+Aug-41.................. 70 70 70 76 76 79 79 82 82 85 85 85 85 85 85 85
+Jun-42.................. 78 78 82 82 86 86 90 94 94 98 101 105 109 109 113 117
+Jul-46.................. 100 100 105 105 110 110 115 120 120 125 130 135 140 140 145 150
+Oct-49.................. 118 125 125 132 140 147 154 162 169 176 191 191 191 191 191 191
+May-52.................. 122 130 130 138 145 153 161 168 176 183 199 199 199 199 199 199
+Apr-55.................. 122 140 140 160 168 179 187 190 203 211 218 218 218 218 218 218
+Jun-58.................. 122 150 160 170 180 190 190 190 190 190 190 190 190 190 190 190
+Oct-63.................. 122 180 190 205 215 215 215 215 215 215 215 215 215 215 215 215
+Sep-64.................. 122 185 195 210 221 221 221 221 221 221 221 221 221 221 221 221
+Sep-65.................. 166 205 216 233 245 245 245 245 245 245 245 245 245 245 245 245
+Jul-66.................. 169 212 223 241 253 253 253 253 253 253 253 253 253 253 253 253
+Oct-67.................. 178 223 236 254 267 267 267 267 267 267 267 267 267 267 267 267
+Jul-68.................. 190 239 252 272 285 285 285 285 285 285 285 285 285 285 285 285
+Jul-69.................. 214 269 284 306 321 321 321 321 321 321 321 321 321 321 321 321
+Jan-70.................. 232 290 307 331 347 347 347 347 347 347 347 347 347 347 347 347
+Jan-71.................. 250 313 331 357 374 374 374 374 374 374 374 374 374 374 374 374
+Nov-71.................. 323 341 361 389 405 405 405 405 405 405 405 405 405 405 405 405
+Jan-72.................. 347 366 387 418 434 434 434 434 434 434 434 434 434 434 434 434
+Oct-72.................. 370 391 413 446 463 463 463 463 463 463 463 463 463 463 463 463
+Oct-73.................. 393 415 439 473 492 492 492 492 492 492 492 492 492 492 492 492
+Oct-74.................. 414 437 463 499 519 519 519 519 519 519 519 519 519 519 519 519
+Oct-75.................. 435 459 486 524 545 545 545 545 545 545 545 545 545 545 545 545
+Oct-76.................. 451 476 504 543 564 564 564 564 564 564 564 564 564 564 564 564
+Oct-77.................. 479 505 535 577 599 599 599 599 599 599 599 599 599 599 599 599
+Oct-78.................. 505 533 564 608 632 632 632 632 632 632 632 632 632 632 632 632
+Oct-79.................. 540 571 604 651 677 677 677 677 677 677 677 677 677 677 677 677
+Oct-80.................. 604 638 675 727 756 756 756 756 756 756 756 756 756 756 756 756
+Oct-81.................. 682 720 762 822 854 854 854 854 854 854 854 854 854 854 854 854
+Oct-82.................. 710 749 793 855 889 889 889 889 889 889 889 889 889 889 889 889
+Jan-84.................. 738 779 825 889 924 924 924 924 924 924 924 924 924 924 924 924
+Jan-85.................. 767 810 858 925 961 961 961 961 961 961 961 961 961 961 961 961
+Oct-85.................. 791 835 884 952 990 990 990 990 990 990 990 990 990 990 989 990
+Jan-87.................. 814 860 910 981 1,019 1,019 1,019 1,019 1,019 1,019 1,019 1,019 1,019 1,019 1,019 1,019
+Jan-88.................. 830 877 928 1,000 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040
+Jan-89.................. 864 913 966 1,041 1,082 1,082 1,082 1,082 1,082 1,082 1,082 1,082 1,082 1,082 1,082 1,082
+Jan-90.................. 896 946 1,001 1,079 1,121 1,121 1,121 1,121 1,121 1,121 1,121 1,121 1,121 1,121 1,121 1,121
+Jan-91.................. 932 984 1,042 1,123 1,167 1,167 1,167 1,167 1,167 1,167 1,167 1,167 1,167 1,167 1,167 1,167
+Jan-92.................. 971 1,026 1,086 1,170 1,216 1,216 1,216 1,216 1,216 1,216 1,216 1,216 1,216 1,216 1,216 1,216
+Jan-93.................. 1,007 1,064 1,126 1,213 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261
+Jan-94.................. 1,029 1,087 1,151 1,240 1,289 1,289 1,289 1,289 1,289 1,289 1,289 1,289 1,289 1,289 1,289 1,289
+Jan-95.................. 1,056 1,115 1,181 1,272 1,322 1,322 1,322 1,322 1,322 1,322 1,322 1,322 1,322 1,322 1,322 1,322
+Jan-96.................. 1,081 1,142 1,209 1,303 1,354 1,354 1,354 1,354 1,354 1,354 1,354 1,354 1,354 1,354 1,354 1,354
+Jan-97.................. 1,114 1,176 1,246 1,342 1,395 1,395 1,395 1,395 1,395 1,395 1,395 1,395 1,395 1,395 1,395 1,395
+Jan-98.................. 1,145 1,209 1,280 1,379 1,434 1,434 1,434 1,434 1,434 1,434 1,434 1,434 1,434 1,434 1,434 1,434
+Jan-99.................. 1,186 1,253 1,327 1,429 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485
+Jan-00.................. 1,243 1,313 1,390 1,497 1,557 1,557 1,557 1,557 1,557 1,557 1,557 1,557 1,557 1,557 1,557 1,557
+Jul-00.................. 1,243 1,373 1,447 1,520 1,594 1,594 1,594 1,594 1,594 1,594 1,594 1,594 1,594 1,594 1,594 1,594
+Jan-01.................. 1,289 1,424 1,501 1,576 1,653 1,653 1,653 1,653 1,653 1,653 1,653 1,653 1,653 1,653 1,653 1,653
+Jan-02.................. 1,444 1,518 1,600 1,680 1,752 1,752 1,752 1,752 1,752 1,752 1,752 1,752 1,752 1,752 1,752 1,752
+Jan-03.................. 1,503 1,580 1,665 1,749 1,824 1,824 1,824 1,824 1,824 1,824 1,824 1,824 1,824 1,824 1,824 1,824
+Jan-04.................. 1,558 1,638 1,727 1,814 1,892 1,892 1,892 1,892 1,892 1,892 1,892 1,892 1,892 1,892 1,892 1,892 CONSTANT 2009 $ ADJUSTED USING CPI-UJul-1904................ 1,346 1,346 1,346 1,413 1,413 1,481 1,481 1,548 1,548 1,615 1,615 1,615 1,615 1,615 1,615 1,615
+Oct-40.................. 929 929 929 1,022 1,022 1,068 1,068 1,115 1,115 1,161 1,161 1,161 1,161 1,161 1,161 1,161
+Aug-41.................. 1,037 1,037 1,037 1,126 1,126 1,170 1,170 1,215 1,215 1,259 1,259 1,259 1,259 1,259 1,259 1,259
+Jun-42.................. 1,049 1,049 1,101 1,101 1,154 1,154 1,206 1,259 1,259 1,311 1,364 1,416 1,468 1,468 1,521 1,573
+Jul-46.................. 1,111 1,111 1,166 1,166 1,222 1,222 1,278 1,333 1,333 1,389 1,444 1,500 1,555 1,555 1,611 1,666
+Oct-49.................. 1,073 1,140 1,140 1,207 1,274 1,341 1,408 1,476 1,543 1,610 1,744 1,744 1,744 1,744 1,744 1,744
+May-52.................. 1,008 1,071 1,071 1,134 1,197 1,260 1,323 1,386 1,449 1,512 1,638 1,638 1,638 1,638 1,638 1,638
+Apr-55.................. 992 1,139 1,139 1,297 1,360 1,455 1,518 1,541 1,645 1,708 1,771 1,771 1,771 1,771 1,771 1,771
+Jun-58.................. 919 1,127 1,202 1,278 1,353 1,428 1,428 1,428 1,428 1,428 1,428 1,428 1,428 1,428 1,428 1,428
+Oct-63.................. 868 1,278 1,348 1,455 1,526 1,526 1,526 1,526 1,526 1,526 1,526 1,526 1,526 1,526 1,526 1,526
+Sep-64.................. 862 1,300 1,372 1,480 1,554 1,554 1,554 1,554 1,554 1,554 1,554 1,554 1,554 1,554 1,554 1,554
+Sep-65.................. 1,143 1,415 1,492 1,610 1,690 1,690 1,690 1,690 1,690 1,690 1,690 1,690 1,690 1,690 1,690 1,690
+Jul-66.................. 1,134 1,422 1,499 1,618 1,698 1,698 1,698 1,698 1,698 1,698 1,698 1,698 1,698 1,698 1,698 1,698
+Oct-67.................. 1,158 1,453 1,533 1,654 1,736 1,736 1,736 1,736 1,736 1,736 1,736 1,736 1,736 1,736 1,736 1,736
+Jul-68.................. 1,193 1,495 1,578 1,702 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787
+Jul-69.................. 1,273 1,595 1,685 1,816 1,907 1,907 1,907 1,907 1,907 1,907 1,907 1,907 1,907 1,907 1,907 1,907
+Jan-70.................. 1,301 1,629 1,722 1,856 1,949 1,949 1,949 1,949 1,949 1,949 1,949 1,949 1,949 1,949 1,949 1,949
+Jan-71.................. 1,344 1,683 1,780 1,919 2,014 2,014 2,014 2,014 2,014 2,014 2,014 2,014 2,014 2,014 2,014 2,014
+Nov-71.................. 1,686 1,780 1,883 2,030 2,112 2,112 2,112 2,112 2,112 2,112 2,112 2,112 2,112 2,112 2,112 2,112
+Jan-72.................. 1,808 1,908 2,019 2,177 2,264 2,264 2,264 2,264 2,264 2,264 2,264 2,264 2,264 2,264 2,264 2,264
+Oct-72.................. 1,817 1,919 2,030 2,189 2,276 2,276 2,276 2,276 2,276 2,276 2,276 2,276 2,276 2,276 2,276 2,276
+Oct-73.................. 1,737 1,834 1,940 2,093 2,175 2,175 2,175 2,175 2,175 2,175 2,175 2,175 2,175 2,175 2,175 2,175
+Oct-74.................. 1,680 1,774 1,877 2,025 2,104 2,104 2,104 2,104 2,104 2,104 2,104 2,104 2,104 2,104 2,104 2,104
+Oct-75.................. 1,665 1,758 1,860 2,006 2,084 2,084 2,084 2,084 2,084 2,084 2,084 2,084 2,084 2,084 2,084 2,084
+Oct-76.................. 1,622 1,712 1,813 1,954 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031
+Oct-77.................. 1,598 1,687 1,786 1,926 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002
+Oct-78.................. 1,513 1,598 1,691 1,823 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895
+Oct-79.................. 1,427 1,507 1,595 1,719 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787 1,787
+Oct-80.................. 1,445 1,526 1,615 1,741 1,809 1,809 1,809 1,809 1,809 1,809 1,809 1,809 1,809 1,809 1,809 1,809
+Oct-81.................. 1,539 1,625 1,720 1,854 1,928 1,928 1,928 1,928 1,928 1,928 1,928 1,928 1,928 1,928 1,928 1,928
+Oct-82.................. 1,553 1,639 1,735 1,870 1,945 1,945 1,945 1,945 1,945 1,945 1,945 1,945 1,945 1,945 1,945 1,945
+Jan-84.................. 1,546 1,632 1,727 1,862 1,935 1,935 1,935 1,935 1,935 1,935 1,935 1,935 1,935 1,935 1,935 1,935
+Jan-85.................. 1,553 1,640 1,736 1,871 1,945 1,945 1,944 1,945 1,945 1,945 1,945 1,945 1,945 1,945 1,945 1,945
+Oct-85.................. 1,572 1,659 1,757 1,893 1,968 1,968 1,968 1,968 1,968 1,968 1,968 1,968 1,968 1,968 1,966 1,968
+Jan-87.................. 1,561 1,648 1,745 1,880 1,955 1,955 1,955 1,955 1,955 1,955 1,955 1,955 1,955 1,955 1,955 1,955
+Jan-88.................. 1,529 1,614 1,709 1,842 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915
+Jan-89.................. 1,518 1,603 1,697 1,829 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901
+Jan-90.................. 1,493 1,577 1,669 1,799 1,870 1,870 1,870 1,870 1,870 1,870 1,870 1,870 1,870 1,870 1,870 1,870
+Jan-91.................. 1,491 1,574 1,667 1,796 1,867 1,867 1,867 1,867 1,867 1,867 1,867 1,867 1,867 1,867 1,867 1,867
+Jan-92.................. 1,508 1,593 1,687 1,817 1,889 1,889 1,889 1,889 1,889 1,889 1,889 1,889 1,889 1,889 1,889 1,889
+Jan-93.................. 1,518 1,604 1,698 1,829 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901 1,901
+Jan-94.................. 1,514 1,599 1,693 1,823 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895 1,895
+Jan-95.................. 1,509 1,594 1,688 1,818 1,890 1,890 1,890 1,890 1,890 1,890 1,890 1,890 1,890 1,890 1,890 1,890
+Jan-96.................. 1,501 1,586 1,679 1,809 1,880 1,880 1,880 1,880 1,880 1,880 1,880 1,880 1,880 1,880 1,880 1,880
+Jan-97.................. 1,511 1,597 1,691 1,821 1,893 1,893 1,893 1,893 1,893 1,893 1,893 1,893 1,893 1,893 1,893 1,893
+Jan-98.................. 1,529 1,616 1,711 1,842 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915 1,915
+Jan-99.................. 1,550 1,637 1,734 1,867 1,941 1,941 1,941 1,941 1,941 1,941 1,941 1,941 1,941 1,941 1,941 1,941
+Jan-00.................. 1,572 1,660 1,758 1,894 1,969 1,969 1,969 1,969 1,969 1,969 1,969 1,969 1,969 1,969 1,969 1,969
+Jul-00.................. 1,572 1,737 1,830 1,923 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016
+Jan-01.................. 1,585 1,751 1,846 1,938 2,033 2,033 2,033 2,033 2,033 2,033 2,033 2,033 2,033 2,033 2,033 2,033
+Jan-02.................. 1,748 1,838 1,937 2,035 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122
+Jan-3................... 1,780 1,871 1,972 2,072 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160
+Jan-04.................. 1,797 1,890 1,992 2,093 2,182 2,182 2,182 2,182 2,182 2,182 2,182 2,182 2,182 2,182 2,182 2,182
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+Source: All data in current year dollars from Library of Congress, Federal Research Division, Military Compensation Background Papers, Volume 1, May
+ 2005. Data in constant FY2009 dollars calculated by CRS using CPI deflators from the Department of Commerce, Bureau of Labor Statistics for all years
+ from 1913 on and, for years prior to 1913, from Professor Robert Sahr, Oregon State University, Inflation Conversion Factors for Dollars 1774 to
+ Estimated 2018, available on line at: http://oregonstate.edu/cla/polisci/faculty-research/sahr/sahr.htm
+
+
+ TABLE 3.--MONTHLY BASIC PAY SCHEDULE FOR O-3 OFFICERS, SELECTED YEARS FROM 1922-2004
+ [Monthly pay at rank with years of service]
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+ Under Over Over Over Over Over Over Over Over Over Over
+ 2 Over 2 Over 3 Over 4 Over 6 Over 8 10 12 14 16 18 20 22 24 26 30
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+ CURRENT YEAR DOLLARSJul-22.................. 200 200 210 210 220 220 230 240 240 250 325 338 350 350 363 375
+Jun-42.................. 200 200 210 210 220 230 230 240 240 313 325 338 350 350 363 375
+Jul-46.................. 230 230 242 242 253 265 265 276 276 344 358 371 385 385 399 413
+Oct-49.................. 314 314 314 328 342 356 371 385 399 413 428 428 442 442 442 442
+May-52.................. 326 326 326 341 356 371 385 400 415 430 445 445 459 459 459 459
+Apr-55.................. 326 326 351 374 406 421 437 452 468 484 499 499 515 515 515 515
+Jun-58.................. 326 346 372 415 440 460 480 510 525 525 525 525 525 525 525 525
+Oct-63.................. 326 440 470 520 545 565 595 625 640 640 640 640 640 640 640 640
+Sep-64.................. 354 451 482 533 559 579 610 641 656 656 656 656 656 656 656 656
+Sep-65.................. 428 478 511 565 592 614 647 679 695 695 695 695 695 695 695 695
+Jul-66.................. 442 493 527 583 611 633 667 701 718 718 718 718 718 718 718 718
+Oct-67.................. 466 521 556 616 645 669 705 740 758 758 758 758 758 758 758 758
+Jul-68.................. 498 557 595 659 690 715 753 791 810 810 810 810 810 810 810 810
+Jul-69.................. 561 627 670 742 777 805 848 890 912 912 912 912 912 912 912 912
+Jan-70.................. 606 678 724 802 840 870 917 962 986 986 986 986 986 986 986 986
+Jan-71.................. 654 731 781 865 906 939 989 1,038 1,064 1,064 1,064 1,064 1,064 1,064 1,064 1,064
+Nov-71.................. 654 731 781 865 906 939 989 1,038 1,064 1,064 1,064 1,064 1,064 1,064 1,064 1,064
+Jan-72.................. 701 784 838 927 971 1,007 1,061 1,113 1,141 1,141 1,141 1,141 1,141 1,141 1,141 1,141
+Oct-72.................. 748 836 894 989 1,037 1,074 1,131 1,188 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217
+Oct-73.................. 794 888 949 1,050 1,100 1,140 1,201 1,261 1,292 1,292 1,292 1,292 1,292 1,292 1,292 1,292
+Oct-74.................. 838 937 1,001 1,108 1,161 1,203 1,268 1,331 1,363 1,363 1,363 1,363 1,363 1,363 1,363 1,363
+Oct-75.................. 880 984 1,052 1,164 1,219 1,263 1,331 1,397 1,431 1,431 1,431 1,431 1,431 1,431 1,431 1,431
+Oct-76.................. 912 1,019 1,090 1,206 1,263 1,309 1,379 1,448 1,483 1,483 1,483 1,483 1,483 1,483 1,483 1,483
+Oct-77.................. 968 1,083 1,157 1,280 1,342 1,390 1,465 1,538 1,575 1,575 1,575 1,575 1,575 1,575 1,575 1,575
+Oct-78.................. 1,022 1,142 1,221 1,351 1,415 1,467 1,545 1,622 1,662 1,662 1,662 1,662 1,662 1,662 1,662 1,662
+Oct-79.................. 1,094 1,222 1,307 1,446 1,515 1,570 1,654 1,736 1,779 1,779 1,779 1,779 1,779 1,779 1,779 1,779
+Oct-80.................. 1,221 1,365 1,460 1,615 1,692 1,753 1,847 1,939 1,987 1,987 1,987 1,987 1,987 1,987 1,987 1,987
+Oct-81.................. 1,396 1,561 1,668 1,846 1,934 2,004 2,112 2,216 2,271 2,271 2,271 2,271 2,271 2,271 2,271 2,271
+Oct-82.................. 1,452 1,623 1,735 1,920 2,012 2,084 2,196 2,305 2,362 2,362 2,362 2,362 2,362 2,362 2,362 2,362
+Jan-84.................. 1,510 1,688 1,804 1,997 2,092 2,168 2,284 2,397 2,456 2,456 2,456 2,456 2,456 2,456 2,456 2,456
+Jan-85.................. 1,570 1,755 1,877 2,076 2,176 2,254 2,376 2,493 2,555 2,555 2,555 2,555 2,555 2,555 2,555 2,555
+Oct-85.................. 1,617 1,808 1,933 2,139 2,241 2,322 2,447 2,568 2,631 2,631 2,631 2,631 2,631 2,631 2,631 2,631
+Jan-87.................. 1,666 1,862 1,991 2,203 2,308 2,391 2,521 2,645 2,710 2,710 2,710 2,710 2,710 2,710 2,710 2,710
+Jan-88.................. 1,699 1,900 2,031 2,247 2,354 2,439 2,571 2,698 2,765 2,765 2,765 2,765 2,765 2,765 2,765 2,765
+Jan-89.................. 1,769 1,978 2,114 2,339 2,451 2,539 2,676 2,809 2,878 2,878 2,878 2,878 2,878 2,878 2,878 2,878
+Jan-90.................. 1,832 2,049 2,190 2,423 2,539 2,630 2,773 2,910 2,981 2,981 2,981 2,981 2,981 2,981 2,981 2,981
+Jan-91.................. 1,907 2,133 2,280 2,523 2,643 2,738 2,886 3,029 3,104 3,104 3,104 3,104 3,104 3,104 3,104 3,104
+Jan-92.................. 1,988 2,222 2,376 2,629 2,754 2,853 3,008 3,156 3,234 3,234 3,234 3,234 3,234 3,234 3,234 3,234
+Jan-93.................. 2,061 2,305 2,464 2,726 2,856 2,959 3,119 3,273 3,353 3,353 3,353 3,353 3,353 3,353 3,353 3,353
+Jan-94.................. 2,106 2,355 2,518 2,786 2,919 3,024 3,188 3,345 3,427 3,427 3,427 3,427 3,427 3,427 3,427 3,427
+Jan-95.................. 2,161 2,417 2,583 2,858 2,995 3,102 3,270 3,432 3,516 3,516 3,516 3,516 3,516 3,516 3,516 3,516
+Jan-96.................. 2,213 2,474 2,645 2,927 3,067 3,177 3,349 3,515 3,601 3,601 3,601 3,601 3,601 3,601 3,601 3,601
+Jan-97.................. 2,279 2,549 2,725 3,015 3,159 3,272 3,449 3,620 3,709 3,709 3,709 3,709 3,709 3,709 3,709 3,709
+Jan-98.................. 2,343 2,620 2,801 3,099 3,248 3,364 3,546 3,721 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812
+Jan-99.................. 2,428 2,714 2,902 3,211 3,365 3,485 3,674 3,855 3,950 3,950 3,950 3,950 3,950 3,950 3,950 3,950
+Jan-00.................. 2,544 2,844 3,041 3,365 3,526 3,652 3,850 4,040 4,139 4,139 4,139 4,139 4,139 4,139 4,139 4,139
+Jul-00.................. 2,544 2,884 3,113 3,365 3,526 3,703 3,850 4,040 4,139 4,139 4,139 4,139 4,139 4,139 4,139 4,139
+Jan-01.................. 2,638 2,991 3,228 3,489 3,656 3,840 3,993 4,190 4,292 4,292 4,292 4,292 4,292 4,292 4,292 4,292
+Jan-02.................. 2,797 3,170 3,422 3,699 3,876 4,070 4,232 4,441 4,550 4,550 4,550 4,550 4,550 4,550 4,550 4,550
+Jan-03.................. 2,911 3,300 3,562 3,884 4,070 4,274 4,406 4,623 4,736 4,736 4,736 4,736 4,736 4,736 4,736 4,736
+Jan-04.................. 3,019 3,422 3,694 4,027 4,220 4,432 4,569 4,794 4,911 4,911 4,911 4,911 4,911 4,911 4,911 4,911 CONSTANT 2009 DOLLARS USING CPI-UJul-22.................. 200 200 210 210 220 220 230 240 240 250 325 338 350 350 363 375
+Jun-42.................. 200 200 210 210 220 230 230 240 240 313 325 338 350 350 363 375
+Jul-46.................. 230 230 242 242 253 265 265 276 276 344 358 371 385 385 399 413
+Oct-49.................. 314 314 314 328 342 356 371 385 399 413 428 428 442 442 442 442
+May-52.................. 326 326 326 341 356 371 385 400 415 430 445 445 459 459 459 459
+Apr-55.................. 326 326 351 374 406 421 437 452 468 484 499 499 515 515 515 515
+Jun-58.................. 326 346 372 415 440 460 480 510 525 525 525 525 525 525 525 525
+Oct-63.................. 326 440 470 520 545 565 595 625 640 640 640 640 640 640 640 640
+Sep-64.................. 354 451 482 533 559 579 610 641 656 656 656 656 656 656 656 656
+Sep-65.................. 428 478 511 565 592 614 647 679 695 695 695 695 695 695 695 695
+Jul-66.................. 442 493 527 583 611 633 667 701 718 718 718 718 718 718 718 718
+Oct-67.................. 466 521 556 616 645 669 705 740 758 758 758 758 758 758 758 758
+Jul-68.................. 498 557 595 659 690 715 753 791 810 810 810 810 810 810 810 810
+Jul-69.................. 561 627 670 742 777 805 848 890 912 912 912 912 912 912 912 912
+Jan-70.................. 606 678 724 802 840 870 917 962 986 986 986 986 986 986 986 986
+Jan-71.................. 654 731 781 865 906 939 989 1,038 1,064 1,064 1,064 1,064 1,064 1,064 1,064 1,064
+Nov-71.................. 654 731 781 865 906 939 989 1,038 1,064 1,064 1,064 1,064 1,064 1,064 1,064 1,064
+Jan-72.................. 701 784 838 927 971 1,007 1,061 1,113 1,141 1,141 1,141 1,141 1,141 1,141 1,141 1,141
+Oct-72.................. 748 836 894 989 1,037 1,074 1,131 1,188 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217
+Oct-73.................. 794 888 949 1,050 1,100 1,140 1,201 1,261 1,292 1,292 1,292 1,292 1,292 1,292 1,292 1,292
+Oct-74.................. 838 937 1,001 1,108 1,161 1,203 1,268 1,331 1,363 1,363 1,363 1,363 1,363 1,363 1,363 1,363
+Oct-75.................. 880 984 1,052 1,164 1,219 1,263 1,331 1,397 1,431 1,431 1,431 1,431 1,431 1,431 1,431 1,431
+Oct-76.................. 912 1,019 1,090 1,206 1,263 1,309 1,379 1,448 1,483 1,483 1,483 1,483 1,483 1,483 1,483 1,483
+Oct-77.................. 968 1,083 1,157 1,280 1,342 1,390 1,465 1,538 1,575 1,575 1,575 1,575 1,575 1,575 1,575 1,575
+Oct-78.................. 1,022 1,142 1,221 1,351 1,415 1,467 1,545 1,622 1,662 1,662 1,662 1,662 1,662 1,662 1,662 1,662
+Oct-79.................. 1,094 1,222 1,307 1,446 1,515 1,570 1,654 1,736 1,779 1,779 1,779 1,779 1,779 1,779 1,779 1,779
+Oct-80.................. 1,221 1,365 1,460 1,615 1,692 1,753 1,847 1,939 1,987 1,987 1,987 1,987 1,987 1,987 1,987 1,987
+Oct-81.................. 1,396 1,561 1,668 1,846 1,934 2,004 2,112 2,216 2,271 2,271 2,271 2,271 2,271 2,271 2,271 2,271
+Oct-82.................. 1,452 1,623 1,735 1,920 2,012 2,084 2,196 2,305 2,362 2,362 2,362 2,362 2,362 2,362 2,362 2,362
+Jan-84.................. 1,510 1,688 1,804 1,997 2,092 2,168 2,284 2,397 2,456 2,456 2,456 2,456 2,456 2,456 2,456 2,456
+Jan-85.................. 1,570 1,755 1,877 2,076 2,176 2,254 2,376 2,493 2,555 2,555 2,555 2,555 2,555 2,555 2,555 2,555
+Oct-85.................. 1,617 1,808 1,933 2,139 2,241 2,322 2,447 2,568 2,631 2,631 2,631 2,631 2,631 2,631 2,631 2,631
+Jan-87.................. 1,666 1,862 1,991 2,203 2,308 2,391 2,521 2,645 2,710 2,710 2,710 2,710 2,710 2,710 2,710 2,710
+Jan-88.................. 1,699 1,900 2,031 2,247 2,354 2,439 2,571 2,698 2,765 2,765 2,765 2,765 2,765 2,765 2,765 2,765
+Jan-89.................. 1,769 1,978 2,114 2,339 2,451 2,539 2,676 2,809 2,878 2,878 2,878 2,878 2,878 2,878 2,878 2,878
+Jan-90.................. 1,832 2,049 2,190 2,423 2,539 2,630 2,773 2,910 2,981 2,981 2,981 2,981 2,981 2,981 2,981 2,981
+Jan-91.................. 1,907 2,133 2,280 2,523 2,643 2,738 2,886 3,029 3,104 3,104 3,104 3,104 3,104 3,104 3,104 3,104
+Jan-92.................. 1,988 2,222 2,376 2,629 2,754 2,853 3,008 3,156 3,234 3,234 3,234 3,234 3,234 3,234 3,234 3,234
+Jan-93.................. 2,061 2,305 2,464 2,726 2,856 2,959 3,119 3,273 3,353 3,353 3,353 3,353 3,353 3,353 3,353 3,353
+Jan-94.................. 2,106 2,355 2,518 2,786 2,919 3,024 3,188 3,345 3,427 3,427 3,427 3,427 3,427 3,427 3,427 3,427
+Jan-95.................. 2,161 2,417 2,583 2,858 2,995 3,102 3,270 3,432 3,516 3,516 3,516 3,516 3,516 3,516 3,516 3,516
+Jan-96.................. 2,213 2,474 2,645 2,927 3,067 3,177 3,349 3,515 3,601 3,601 3,601 3,601 3,601 3,601 3,601 3,601
+Jan-97.................. 2,279 2,549 2,725 3,015 3,159 3,272 3,449 3,620 3,709 3,709 3,709 3,709 3,709 3,709 3,709 3,709
+Jan-98.................. 2,343 2,620 2,801 3,099 3,248 3,364 3,546 3,721 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812
+Jan-99.................. 2,428 2,714 2,902 3,211 3,365 3,485 3,674 3,855 3,950 3,950 3,950 3,950 3,950 3,950 3,950 3,950
+Jan-00.................. 2,544 2,844 3,041 3,365 3,526 3,652 3,850 4,040 4,139 4,139 4,139 4,139 4,139 4,139 4,139 4,139
+Jul-00.................. 2,544 2,884 3,113 3,365 3,526 3,703 3,850 4,040 4,139 4,139 4,139 4,139 4,139 4,139 4,139 4,139
+Jan-01.................. 2,638 2,991 3,228 3,489 3,656 3,840 3,993 4,190 4,292 4,292 4,292 4,292 4,292 4,292 4,292 4,292
+Jan-02.................. 2,797 3,170 3,422 3,699 3,876 4,070 4,232 4,441 4,550 4,550 4,550 4,550 4,550 4,550 4,550 4,550
+Jan-03.................. 2,911 3,300 3,562 3,884 4,070 4,274 4,406 4,623 4,736 4,736 4,736 4,736 4,736 4,736 4,736 4,736
+Jan-04.................. 3,019 3,422 3,694 4,027 4,220 4,432 4,569 4,794 4,911 4,911 4,911 4,911 4,911 4,911 4,911 4,911
+--------------------------------------------------------------------------------------------------------------------------------------------------------
+Source: Same as Table 2, above.
+
+ Mr. Gilmore's Responses to Questions for the Record
+
+ question from chairman spratt
+ Do you have a rule of thumb at CRS or CBO for what it costs to move
+a division or a brigade with full equipment sent back to the States
+from Iraq? Could you submit, for the record, your growth estimation
+that--your rule of thumb for, division set, brigade set, whatever the
+proper unit is?
+
+ Answer: The Congressional Budget Office (CBO) estimates that it
+would cost approximately $50 million (in 2009 dollars) to transport a
+fully manned and equipped Army heavy brigade combat team (HBCT) from
+Iraq to the United States.
+ CBO's estimate reflects several assumptions. First, since Kuwait is
+the primary entry and exit point for units deploying to and redeploying
+from the Iraqi theater of operations, CBO assumes that the brigade's
+equipment and personnel would leave the Iraqi theater of operations
+through Kuwait. In addition, CBO assumes that the brigade's equipment
+would be sealifted from Kuwait to the United States, and that personnel
+would be airlifted from Kuwait to the United States. Once the equipment
+reaches the United States, CBO assumes that the brigade's equipment
+would be moved by rail from the port of arrival to the brigade's final
+destination.
+ Based on historical Department of Defense (DoD) cost factors for
+transporting equipment and personnel, CBO estimates that the sealift
+costs, including costs associated with handling the brigade's equipment
+at the departing and arriving ports, would be $33 million and would be
+the single largest cost associated with the transportation of an HBCT
+from Iraq to the United States. In addition, CBO estimates that the
+transportation of personnel from Iraq to the United States via Kuwait
+would cost $8 million. The remainder of the cost estimated by CBO is
+associated with the movement of equipment from Iraq to Kuwait and from
+the arriving port in the United States to its final destination.
+ The cost to transport Army combat brigades from Iraq to the United
+States would not account for all of the transportation costs of
+withdrawing U.S. forces from Iraq. The U.S. military has many units in
+Iraq that are not Army combat brigades, and it has supplies and
+equipment not associated with any specific unit. In particular, the
+Army has a substantial number of forces in the Iraqi theater of
+operations that provide support to its combat brigades. Those support
+units contain more total personnel than do the Army's combat brigades.
+Moreover, the Navy, Air Force, and Marine Corps all have units in the
+Iraqi theater of operations that would need to be redeployed.
+ DoD also maintains a substantial stock of additional equipment
+(primarily its so-called Theater-Provided Equipment pool) not directly
+associated with any single unit that would need to be redeployed,
+although DoD may have plans to leave some of that equipment pool behind
+in Iraq. Finally, DoD has a substantial stock of supplies and
+ammunition that would also be redeployed. The need to transport the
+personnel and equipment not associated with Army combat brigades means
+that the total transportation costs of withdrawing U.S. forces from
+Iraq will be greater than the costs of withdrawing the Army's combat
+brigades.
+ Thus, the cost to re-deploy personnel and equipment not associated
+directly with HBCTs is likely to be significant.
+ questions from representative delauro
+ 1. As you are likely aware, the Navy recently declared a so-called
+Nunn-McCurdy violation for the VH-71 presidential helicopter
+replacement program. Last year, the Defense Department announced that
+the total acquisition costs for the program were projected to increase
+from $6.5 billion to $11.2 billion. Now, merely two years after
+submitting initial baseline estimates, the Navy is confirming that the
+cost per helicopter will be at least 50 percent higher than the
+original estimate.
+ In recent testimony, Secretary Gates identified acquisitions as a
+chief challenge facing the Defense Department and specifically
+mentioned the VH-71 as a ``big ticket'' item experiencing contract or
+program performance problems, suggesting that ``the FY 2010 budget must
+make hard choices.'' As we examine cost growth in Defense programs, how
+do you think we should approach big contract issues such as this one?
+What policies are needed to control such egregious cost over-runs? On
+the VH-71 program in particular, with the modifications and the new
+requirements being as extensive as they are, and the fact that had
+these changes been clear from the outset competing firms would likely
+have submitted different proposals, do you think a re-competition of
+Increment II of the program is worthwhile to identify whether this
+helicopter can be made at a better value to the taxpayer?
+
+ Answer: As I stated in my testimony, realistic cost estimates
+developed as early as possible in the life of a program are key to
+developing realistic budgets and to avoiding subsequent cost increases.
+A realistic estimate would use parametric analysis of past costs for
+programs with technical content analogous to the proposed program's
+content. A realistic estimate would also account not just for the
+requirements stated at a program's inception but for changes in
+requirements that might reasonably be expected.
+ Whether it would be worthwhile to re-compete Increment II of the
+presidential helicopter program because of the changes in requirements
+that have occurred is a policy decision that must be made by the
+Congress and DoD. CBO does not make recommendations for how to decide
+such policy issues.
+
+ 2. As with the controversial original award for the Air Force KC-X
+aerial refueling tanker contract, the Marine One contract was awarded
+to a consortium that involved a substantial amount of work being
+outsourced overseas. I believe such outsourcing of defense contracts
+runs against both U.S. national security and economic interests,
+eroding our defense industrial base, costing jobs and stunting economic
+growth. Do you believe, particularly in these very difficult economic
+times, that the Defense Department should consider adjusting its
+methodology to account for potential job creation and economic growth
+when considering proposals for major projects such as the KC-X and VH-
+71?
+
+ Answer: Whether it would be worthwhile to account for potential job
+creation and economic growth when considering proposals for major
+projects such as the KC-X and VH-71 is a policy decision that must be
+made by the Congress and DoD. CBO does not make recommendations for how
+to decide such policy issues.
+
+ question from representative langevin
+ I sit on not only the Budget Committee, but also the House Armed
+Services Committee. And following the debate on the issue of the DDG-
+1000 versus the 51 that is going on right now, and just for my own
+knowledge and clarification for the record, when you talk about the
+range of potential costs, whether it is 4 or 5 to $6 billion for the
+DDG-1000, I would assume that you are talking about the first ship,
+which obviously is the most expensive and then costs moderate over time
+as you achieve economies of scale. Can you clarify that for the record?
+ And also talk about your analysis on start-up costs if we were to
+start the DDG-51 line. And you estimate real costs of what that would
+be, what that ship would be per copy now with the add on technologies.
+And also the tradeoffs versus going with the DDG-1000 and the fact that
+these aren't supposed to be incorporating follow-on or transformational
+technologies that would, at a later point, be used on the cruiser or
+other platforms. So that it is kind of you can't just talk about the 51
+in a vacuum, you know, they have other modern technologies that would
+be applied to other platforms and would be of course useful as the
+cruisers develop. So if you could just kind of talk about those for a
+few minutes.
+ Mr. Gilmore. Well, the cost numbers that I quoted of $4 billion to
+$5 billion were, for the first ship, exclusive of the development
+costs; so, they excluded the development costs, the design costs for
+the ship, the cost of building the first ship. And then, yes, we do
+assume in our estimate that subsequent costs, subsequent ships' costs,
+are less; that there is a learning effect that occurs.
+ Mr. Langevin. So can you estimate what the following costs would
+be?
+
+ Answer: The table displayed below, taken from CBO testimony before
+the Seapower Subcommittee of the House Armed Services Committee on July
+31, 2008, displays estimates of the costs of follow-on DDG-1000 ships
+and of buying one or two DDG-51s per year. The DDG-51s are assumed for
+this analysis to have the same design as the DDG-112, the last ship
+purchased in 2005.
+
+ PROJECTED COSTS OF CONSTRUCTING DDG-1000 AND DDG-51 DESTROYERS, 2009 TO 2013
+ [Billions of 2009 Dollars]
+----------------------------------------------------------------------------------------------------------------
+ 2009 2010 2011 2012 2013 Total
+----------------------------------------------------------------------------------------------------------------
+DDG-1000 Zumwalt Class (One per year, 3rd through 3.7 3.8 3.6 3.7 3.6 18.5
+ 7th ships).........................................
+DDG-51 Arleigh Burke Class:
+ One per year starting in 2010................... 0.4 2.2 2.3 2.3 2.4 9.6
+ Two per year starting in 2010................... 0.4 3.7 3.8 3.9 3.9 15.7
+DDG-1000 (Navy's Estimate).......................... 2.5 2.5 2.2 2.3 2.0 11.4
+----------------------------------------------------------------------------------------------------------------
+Source: Congressional Budget Office.Notes: All estimates include outfitting and postdelivery costs of $50 million to $60 million per ship. The DDG-
+ 1000 cost estimate assumes a single ship would be ordered every year from one of two alternating shipyards.
+
+ In its testimony from July 2008, CBO assumed the cost to restart
+DDG-51 production--which is separate from purchasing the ships
+themselves--would be about $400 million. Recently, a memorandum leaked
+to the trade press from John Young, Undersecretary of Defense for
+Acquisition, Technology, and Logistics, implied that the cost to
+restart the DDG-51 line would be $348 million.
+ CBO cannot estimate the cost of future surface combatants that
+include new technologies at this time. The Navy has not determined
+which technologies, and at what pace, it will incorporate in future
+ships or how many of those types of ships it will buy. In addition, the
+Navy has not yet determined, officially, whether the future surface
+combatant would be based on a DDG-51 hull or a DDG-1000 hull.
+Determining which hull the Navy would use for a future surface
+combatant will have a substantial effect on the cost of those ships.
+ For your reference, I am also providing the table below, which
+displays growth in the projected cost of the DDG-1000 program that has
+occurred since its inception as the DD-21 program in 1997.
+
+ GROWTH IN THE ESTIMATED COSTS OF THE FIFTH SHIP OF THE DD-21/DD(X)/DDG-
+ 1000 DESTROYER PROGRAM, SELECTED YEARS
+------------------------------------------------------------------------
+ Billions of
+ 2009 dollars
+------------------------------------------------------------------------
+1997 Navy Cost Goals (DD-21):
+ Objective Goal..................................... 1.2
+ Threshold Goal..................................... 1.4
+2004 Future Years Defense Program...................... 1.6
+2009 Navy Estimate..................................... 2.1
+2009 CBO Estimate...................................... 3.6
+------------------------------------------------------------------------
+Sources: Department of the Navy, Fiscal Year 2009 Budget Estimates,
+ Shipbuilding and Conversion (February 2008); Department of Defense,
+ Future Years Defense Program for Fiscal Year 2004; and Department of
+ the Navy, DD-21 Program Office, DD-21 Program Brief (October 19,
+ 1998).Notes: All years are federal fiscal years. For the historical
+ comparison, the numbers exclude outfitting and postdelivery costs of
+ about $60 million per ship.
+
+ questions from representative austria
+ 1. The successful completion of the most recent round of BRAC and
+military R&D are both very important to central Ohio. Can you tell me
+by service, whether BRAC is currently projected to achieve the savings
+that were envisioned? If the savings aren't realized, has DOD indicated
+how they will respond?
+
+ Answer: Estimates of the savings generated by implementing the 2005
+base realignment and closure (BRAC) recommendations (the most recent
+round) have declined relative to initial projections. In 2005, the BRAC
+Commission estimated that annual recurring savings due to the 2005 BRAC
+round would be about $4.2 billion for fiscal year 2012 and beyond.
+DoD's 2009 budget submission indicates that net annual savings due to
+BRAC would be about $4 billion.
+ Estimates of the costs to implement the 2005 BRAC round have
+increased relative to initial projections. The BRAC Commission
+originally estimated that the costs to implement the 2005 BRAC round
+would total about $21 billion. DoD's 2009 budget submission indicates
+that total costs to implement the 2005 BRAC round are now about of $32
+billion.
+ Because of higher costs and smaller expected savings, estimates of
+the net savings attributable to BRAC over the 20-year period ending in
+2025 have declined. The BRAC Commission estimated in 2005 that total
+savings over that period would be about $36 billion (in constant 2005
+dollars). In 2009, the Government Accountability Office (GAO)
+calculated that total savings over that period would equal about $14
+billion (in constant 2005 dollars, see the GAO report, Military Base
+Realignments and Closures: DOD Faces Challenges in Implementing
+Recommendations on Time and Is Not Consistently Updating Savings
+Estimates, GAO-09-217, January 2009).
+ Estimates of savings by service arising from BRAC are not available
+to CBO. Both DoD and GAO, which has published multiple reports on BRAC,
+should be able provide those data.
+ CBO is not aware of a position taken by DoD on how the department
+would respond to realizing lesser BRAC savings. In testimony before the
+Subcommittee on Readiness of the House Armed Services Committee on
+December 12, 2007, the Deputy Undersecretary of Defense (Installations
+and Environment) acknowledged the difficulty of estimating savings due
+to BRAC. He stated, however, that ``the fact that BRAC has generated
+substantial savings has not been credibly questioned.''
+
+ 2. I would like to discuss two Air Force programs--the F-22 and the
+Joint Strike Fighter (JSF). What is the status of these two systems?
+How can we get DoD to do realistic budgeting?
+
+ The F-22 Raptor is the newest Air Force fighter in service. Like
+the F-15C Eagle that it is replacing, the F-22 was designed primarily
+as an air-to-air fighter. However, the Air Force plans to make the F-22
+capable of launching some types of air-to-ground weapons. Since the
+retirement of the F-117 in 2007, the F-22 is the only stealthy fighter
+(able to elude detection by radar) currently in the Air Force
+inventory. The latest plans released by DoD call for fielding 183 F-
+22s. The last of those aircraft were funded in the 2009 budget at a
+cost of about $150 million per aircraft. As of February 2009, 135 F-22s
+had been delivered to the Air Force. DoD also has indicated that it
+plans to spend approximately $8 billion to upgrade the F-22's
+capabilities.
+ The Air Force has stated the need for no fewer than 381 F-22s,
+although recent remarks by the Chairman of the Joint Chiefs of Staff
+have indicated that requirement may be revised downward to around 240
+aircraft, about 60 more than in DoD's current plans. In the Department
+of Defense Appropriations Act, 2009 (Division C of Public Law 110-329),
+the Congress included $523 million for advanced procurement of 20 more
+F-22s (in addition to the 183 that are planned), pending a decision by
+the new Administration on whether to continue production. That decision
+is expected to be announced when DoD releases its detailed 2010 budget
+request in April 2009.
+ The F-35 is currently under development for use by the Air Force,
+Navy, and Marine Corps. The F-35 has been designed as a stealthy
+multirole fighter with an emphasis on ground attack capabilities but
+incorporating substantial air-to-air capabilities as well. Three
+versions of the F-35 are being developed: the land-based F-35A, the
+short takeoff/vertical landing (STOVL) F-35B, and the aircraft carrier-
+based F-35C. Under the latest plans released by DoD, the Air Force
+would purchase 1,763 F-35As by 2034 (at a maximum rate of 80 aircraft
+per year from 2015 to 2033), and the Navy and Marine Corps would
+purchase an unspecified mix of F-35Bs and F-35Cs totaling 680 aircraft
+by 2025 (at a maximum rate of 50 aircraft per year from 2014 through
+2022).
+ Funding for production versions of the F-35 JSF began in fiscal
+year 2007. Through fiscal year 2009, funds had been appropriated for 14
+Air Force aircraft and 12 Navy Department aircraft. Current schedules
+call for the first F-35 squadrons to be operational in the Marine
+Corps, Air Force, and Navy by 2012, 2013, and 2015, respectively. As of
+December 2007, DoD estimated that slightly more than $200 billion in
+constant 2009 dollars would be needed from 2010 through 2034 to
+complete development and planned procurement of the F-35. Many
+observers remain concerned, however, that costs for the JSF will be
+higher than reported. (See, for example, the GAO report, Joint Strike
+Fighter: Recent Decisions by DOD Add to Program Risks, GAO-08-388,
+March 2008.)
+ Two recent Congressional Research Service reports provide more
+detailed overviews of the F-22 and F-35 programs. See F-22A Raptor,
+Congressional Research Service, RL31673, December 19, 2008; and F-35A
+Lightning II Joint Strike Fighter (JSF) Program: Background, Status,
+and Issues, Congressional Research Service, RL30563, February 17, 2009.
+ As I stated in my testimony, realistic cost estimates developed as
+early as possible in the life of a program are key to developing
+realistic budgets and to avoiding subsequent cost increases. A
+realistic estimate would use parametric analysis of past costs for
+programs with technical content analogous to the proposed program's
+content. A realistic estimate also would account not just for the
+requirements stated at a program's inception but for changes in
+requirements that might reasonably be expected.
+
+ [Whereupon, at 12:40 p.m., the committee was adjourned.]
+
+
+
+