President Obama's War Budget: Analyzing the Numbers

President Obama's 2009 supplemental spending request to fund the wars
in Iraq and Afghanistan is currently before Congress. The House
Appropriations Committee will "mark up" (finalize its version) of a war
funding bill at a committee hearing on May 7th. The full House will
likely vote on the bill the following week. The objective is to have
the bill finalized and to Obama for signature by Memorial Day.

President Obama is seeking an additional $75.8 billion in war funds
for this fiscal year. It is possible that Congress will add to this
amount before final passage. If Congress enacts Obama's request, total
war spending will come to $144.6 billion for Fiscal Year 2009 (which
ends on September 30, with Fiscal Year 2010 beginning on October 1).
This compares to the $186 billion war spending in 2008. Obama's
proposed war budget for 2010 is $130 billion.

At first glance, it is easy to conclude that the proposed 22 percent
reduction in war spending from 2008 to 2009 represents a significant
shift in war strategy and is indicative of a drawing down of the twin
wars in Iraq and Afghanistan. Sadly, such a conclusion would be wrong.

What follows is a discussion of the three main components of the war
budget: Personnel costs; Operation & Maintenance costs; and
Procurement costs. This discussion is based upon data and material
produced by the Department of Defense Comptroller; the Congressional
Research Service; the budget justification materials of the branches of
the military; and the Fiscal Year 2009 Bridge Fund appropriations
passed by Congress last June. (Please see the end of this article for
the source material used in preparing this analysis).

This discussion includes total war funding for 2009, including both
that amount appropriated by the Democrat-controlled Congress last June
and the amount being requested by Obama in the currently pending
supplemental spending request. It should be noted that the war funds
approved by Congress last year were contained in the bill crafted by
the Democratic Party leadership.

It should also be noted that while funding levels are reduced from
2008 to 2009, in each of the three categories, President Obama is in
fact seeking new funding to the tune of $75.8 billion. That said,
Personnel costs are reduced by $1.7 billion in 2009. Operation &
Maintenance costs are reduced by $1.9 billion. Procurement costs are
reduced by $37 billion. Even so, a closer look at the numbers behind
the numbers reveals that the reductions are not as significant as they
may appear to be at first glance.

PERSONNEL COSTS:

Personnel costs will decline by $1.8 billion in 2009. The Army, Air
Force, and Marine Corps will all reduce personnel costs. A portion of
these cost reductions will be offset by small increases in Personnel
costs for the Navy as well as for the Marine Corps Reserve and for the
Reserve and National Guard components of the Army and Air Force.

The Army's personnel costs will drop by $2 billion, declining from
$13 billion in 2008 to $11 billion in 2009. While this is a 15 percent
decline, it also illustrates that all is not as it seems when reviewing
top line budget numbers.

Two significant factors account for nearly all the reduction in the
Army's personnel costs, neither of which is related to the Iraq and
Afghanistan war effort. "Active Overstrength" costs are reduced by $1.4
billion and "Recruiting and Retention" costs are reduced by $0.8
billion.

"Active Overstrength" refers to the number of soldiers in the Army
over-and-above the number provided for by Congress in the regular
baseline Department of Defense budget. In 2008, Active Overstrength
consisted of 43,632 soldiers. This declines to 15,658 soldiers in 2009.
All this means-and all the $1.4 billion reduction in associated costs
means-is that the soldiers' pay of 27,974 soldiers is now included in
the baseline budget of the Army rather than being included in the
supplemental spending bills.

Meanwhile, personnel costs for the Army Reserve and Army National
Guard increase by $1.1 billion in 2009, reflecting the increased number
of Reserve and Guard units being deployed to one of the two wars.

The Army's reduction in "Recruitment and Retention" costs is perhaps
best explained by the current economic depression and the lack of other
job opportunities.

OPERATION & MAINTENANCE

Operation & Maintenance funds decline by $1.9 billion in 2009
(down to $91.6 billion compared to $93.5 billion in 2008). This
category contains funds for U.S. military operations. It also contains
funds for the training and development of the military and police
forces in Iraq and Afghanistan. As fate should have it, it's a decline
in funding for Iraq's military and police forces that results in the
cost reduction in 2009.

Of the U.S. military services, only the Air Force receives a slight
increase in Operation & Maintenance funding this year, increasing
by $0.5 billion. The Army's O&M budget is reduced by $1 billion;
the Army National Guard by $0.5 billion; the Navy by $0.8 billion; and
the Marine Corps by $0.1 billion. The Air Force Reserve and Air
National Guard together will receive $0.4 billion less in O & M
funds (thus offsetting the slight increase in the Air Force budget).

Notably, funding for "Operation and Maintenance - Defense Wide"
increases by $2.5 billion in 2009 (up to $8.3 billion from the $5.8
billion n 2008). Funding for the US Special Operations Command (SOCOM)
is included in this category, as is funding for the Defense Security
Cooperation Agency (DSCA). If Obama's supplemental spending request is
approved by Congress, total funding for SOCOM will be $2.4 billion in
2009 and for the DSCA, $1.7 billion.

Overall, the Operation & Maintenance funding for U.S. military
forces comes out essentially the same this year-$84.2 billion in 2009
compared to $84 billion in 2008.

The cost savings in the overall Operation & Maintenance budget
is to be found in those funds designated for the development and
training of Iraq's military and police forces. President Obama seeks no
additional funds for the Iraq Security Forces Fund and only an
additional $415 million for the Iraq Freedom Fund. In 2009, funding for
the Iraq Security Forces Fund is cut by $2 billion and for the Iraq
Freedom Fund by $3.4 billion-for a total cut in funding of $5.4 billion.

Resources are shifted to the Afghanistan Security Forces Fund, which
will be increased by $2.9 billion (to a total of $5.6 billion in 2009).
An entirely new Pakistan Counterinsurgency Capability Fund is created
with Obama's supplemental and will initially be funded with $400
million for this fiscal year (which notably ends on September 30).
Spending on the Afghanistan Security Forces Fund and the Pakistan
Counterinsurgency Capability Fund account for a $3.3 billion increase
in war funds.

So what is left after all of the cost shifts discussed above? The
U.S. will spend $84.2 billion on the Operation & Maintenance budget
of its own military in 2009-essentially the same as the $84 billion
spent in 2008. This compares to the $75 billion spent in 2007; the $60
billion spent in 2006; and the $48 billion spent in 2005. The Operation
and Maintenance numbers in Obama's war budget do not provide
significant evidence of a significant shift in the overall strategy for
the wars in Iraq and Afghanistan.

PROCUREMENT

Procurement funding drops by $36.9 billion in 2009-from $64.9
billion in 2008 to $28 billion in 2009. Yet it would be inaccurate to
conclude that this 57 percent reduction in procurement funding
represents a truly significant shift in funding for the Iraq and
Afghanistan wars. The $28 billion funding level still remains well
above the $22.9 billion appropriated in 2006 and the $18 billion
appropriated in 2005. Indeed, of the $28 billion in total 2009 funding,
$21.9 billion is contained within the supplemental spending request
submitted by Obama-in and of itself still above funding levels in 2005
and on a par with 2006.

Significantly, the year 2006 provides one explanation for the
reduction in procurement funds in 2009 when compared to 2008 and 2007.
In October 2006, Deputy Secretary of Defense Gordon England greatly
expanded the parameters on the type of procurement spending that could
be included in emergency supplemental spending requests. Prior to
October 2006, the DOD financial regulations aimed to limit requests for
supplemental spending requests to only cover the incremental costs of
the two wars. In simple form, this meant that if a Stryker fighting
vehicle is destroyed in Iraq then the Army could request a new Stryker
as a replacement. The Air Force could replace Joint Direct Attack
Munitions expended in the Iraq and Afghanistan wars. Used ammunition
could be replenished. Yet even with this limitation in place, the
Congressional Research Service and others questioned whether many of
the items acquired by the military through the supplemental process
were indeed incremental costs of war to replace lost equipment - or
whether at least some portion of the procurement monies was being used
to upgrade existing equipment previously scheduled for upgrade, to
acquire new equipment for the new modular structure of the Army, and to
buy next generation weapons systems (each of which should have been
funded through the regular baseline Department of Defense budget).

In October 2006, England directed the military to submit spending
requests to not only cover the incremental costs of the wars in Iraq
and Afghanistan, but also to include any new costs attributed to the
so-called "long war on terror".

Procurement appropriations exploded, jumping from $22.9 billion in
2006 (the fiscal year immediately prior to England's directive) to
$45.4 billion in 2007 (the first fiscal year under the new directive),
and then to $64.9 billion in 2008.

Thus, it is likely that the reduction in Procurement monies to be
appropriated in 2009 simply reflects a reversal of England's directive,
with a shift back to a more normative budgetary process which seeks to
limit new "emergency" procurement requests to those incremental costs
directly related to the wars in Iraq and Afghanistan, rather than being
reflective of significant shifts in the direction of the overall war
strategy.

It is also possible that the reduction in procurement monies in 2009
reflects that previously appropriated procurement funds still remain
available to be spent. Normally when Congress appropriates funds, those
funds must be spent in that fiscal year or be lost. However,
procurement monies remain available to be spent for up to three years
after being appropriated by Congress. This often results in procurement
funds being carried over from one fiscal year to the next. According to
the Congressional Research Service, as of October 1, 2007, the
Department of Defense carried over $45 billion in war justified
procurement appropriations into the new fiscal year.

The sharp reduction in procurement funds in 2009 may also be a
result of the prior front-loading of procurement requests by the
military. That is to say, in 2007 and 2008 the Department of Defense
may well have requested surplus procurement funds as a buffer against
future reductions in procurement funds. The Congressional Research
Service notes that: "The FY 2007 and FY 2008 war requests both appear
to include an extra year of Army and Marine Corps reset requirements.
According to statements by Army Chief of Staff, General Peter J.
Shoomaker and other military spokesman, Army reset is estimated to be
$12 billion to $13 billion a year as long as the conflict lasts at the
current level and 'for a minimum of two to three years beyond'".

With the passage of Obama's war supplemental, the Army will be
slated to receive a total of $13.5 billion in procurement funds in
2009-essentially what General Shoomaker projected. So again, the
question arises: does President Obama's war budget for 2009 reflect a
potentially significant shift in war strategy or does it merely reflect
a return to a more normative budget pattern?

Last, as regards procurement, it ought to be noted that fully
one-third of the reduction in 2009 Procurement funds will be the result
of a $12.4 billion reduction in funding for the Mine Resistant Ambush
Protected (MRAP) vehicles. In 2008, Congress appropriated $16.8 billion
to rapidly acquire and deploy MRAPs for use in Iraq. In 2009, the $4.4
billion is included in total spending for a new version of MRAPs to be
designed and produced for use in the different terrain and environment
of Afghanistan.

THE AFGHANISTAN - PAKISTAN WAR

Obama's 2009 war budget sheds light on the expansion of the war in
Afghanistan and Pakistan. While overly broad conclusions perhaps should
not be drawn from the available data, the trends are indeed troubling.

In its summary "Fiscal Year 2009 Supplemental Request" the
Department of Defense states that funding for the Afghanistan war will
increase to $46.9 billion in 2009, a 31 percent increase over the $35.9
billion in 2008 and the $32.6 billion in 2007.

This $11.3 billion increase includes an additional $2.8 billion for
the Afghanistan Security Forces Fund; $400 million for the Pakistan
Counterinsurgency Capability Fund; and $4.4 billion for MRAPs designed
for use in Afghanistan. Increased troop levels will also account for a
portion of the increase.

Military construction projects in Afghanistan are expanded under
Obama's war budget. In the 2009 supplemental now before Congress, Obama
seeks an additional $620 million to fund Army construction projects and
$240 million to fund Air Force construction projects. The Army projects
include construction and upgrade of air facilities at various bases to
accommodate the CH-47 Chinook helicopters and to construct additional
troop housing to accommodate the increased troop levels.

The supplemental spending request also points towards the increased
use of the MQ - 1 Predator and the MQ-9 Reaper drones in the war. Obama
seeks $57.4 million to acquire 742 Predator Hellfire missiles and $196
million for ten new MQ-9 Reapers.

Funding is included to upgrade the MQ-1 and MQ-9 systems in order
that a second remote split operations site can be established to
control the drones. This second site is necessary since the current
site is reaching its operational capacity for the control of the
increasing drone flights. As noted in the justification materials
submitted by the Air Force: "Both Predator and MQ-9 Reaper conduct
their missions through 'Remote Split Operations' whereby a minimum
number of operators and maintenance personnel are deployed forward for
launch and recovery of the aircraft. After launch, the aircraft is
'handed-off' to CONUS-based mission crews for actual mission
prosecution. For this mode of operations, the command and control and
full motion video (FMV) is currently relayed through a single forward
communications site. This site is nearing capacity with the current
increase in Predator operational tempo...This project procures satellite
terminals and video dissemination equipment to establish a second
remote split operations relay site."

WHAT THE FUTURE MAY HOLD

President Obama is seeking $130 billion to fund the Iraq and
Afghanistan wars in his budget request for 2010. This is a mere $14
billion less than overall funding in 2009. It won't be possible to
determine the direction Obama seeks to take war funding until the
Department of Defense releases its justification materials to lay out
how this $130 billion will be spent.

Yet the reality that Obama's Fiscal Year 2010 request is only $14
billion less than the 2009 war budget is not at all encouraging. Quite
likely some minor reductions will take place in the Personnel costs of
the budget, as the remaining Army Overstrength numbers are absorbed
into the baseline military budget and as, perhaps, fewer National Guard
and Reserve units are deployed to Iraq and Afghanistan. Perhaps some
small reductions will take place within the Operation & Maintenance
budget as brigade combat teams are withdrawn from Iraq, though savings
may well be eaten up by increases in the O & M costs in Afghanistan
as a troop buildup continues and military operations potentially
intensify. Procurement costs may be slightly reduced, though that may
simply indicate a shift of procurement funds into the baseline military
budget of the Department of Defense.

All of which is to say that our work to end the wars in Iraq and
Afghanistan is really only just beginning anew. We should not allow
ourselves to be deceived into believing that a shift in war strategy
and policy is underway simply because of a reduction in appropriations
for the war. The top dollar line is itself deceiving.