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Defense Spending Cuts: Take Your Pick

In the wake of the sequester, there's been a lot of talk in Washington about the effect that automatic spending caps could have on the Department of Defense's budget. Specifically, some legislators and government officials are unsure of how to cut costs without undermining national security interests.

The Congressional Budget Office (CBO) released a report on Monday that may provide some answers. In "Approaches for Scaling Back the Defense Department's Budget Plans," CBO analyzed the projected future costs of the DoD's current plans relative to the sequestration requirements.

As the graph above illustrates, the costs of DoD's future plans are still well above what's actually permitted under the Budget Control Act -- the Department would have to reduce its annual budget by about $74 billion per year to meet the requirements. CBO's cost estimates are higher than DoD's own, primarily because CBO is less certain of the Department’s ability to contain costs associated with veterans' health benefits, military and civilian compensation, and weapons acquisition.

CBO looked at four broad policy measures that the Department could implement in order to lower its costs and meet the new budgetary requirements.

• Option 1: Preserve Force Structure; Cut Acquisition and Operations. In this scenario, the size of the U.S. military force would remain the same, but funding for weapons acquisition and operations would be cut, starting at 13% in 2013.
• Option 2: Cut Acquisitions and Operations; Phase in Reductions in Force Structure. This option would achieve half its savings by cutting acquisition and operation costs. The other half of the cuts would occur after 2017, by gradually reducing the size of U.S. military forces and shifting active units to reserves.
• Option 3: Achieve Savings Primarily by Cutting Force Structure. As suggested by its title, option 3 would cut the size of some military forces by twice as much as option 2.
• Option 4: Reduce Force Structure Under a Modified Set of Budget Caps. This option would adjust the timing and amount of automatic spending cuts so that they are phased in more slowly. It would require about the same total reduction of U.S. military forces as under option 3, but the bulk of the cuts would occur in later years.

Important to note is that the study is not meant to draw any conclusions on military strategy; the paper simply focuses on fiscal issues associated with the DoD's future plans. In CBO's own words:

"The effect of such reductions on national security is beyond the scope of this paper. Although these options would represent a significant scaling back of DoD's plans, U.S. military forces have substantial technological and operational advantages over those of other nations today. Therefore, policymakers may find it acceptable for the United States to reduce the size of its military as a decade of overseas conflicts draws to a close. … Even at their deepest in 2014, the cuts from the BCA will return DoD’s budget to where it stood in real terms in 2006, still 25 percent above the department’s funding in 2000."

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