Trump’s Defense Budget: Place Your Bet!

The survey has been closed due to the impending release of the administration’s “skinny budget.” CSIS will announce the winning prediction and provide its analysis of the survey soon.

The challenge
Predict how much the Trump administration will request for defense, what will happen with the war funding (“Overseas Contingency Operations”), and when the five-year budget projection will be announced.  For comparison, we are also asking how much you think the Trump administration should request.  Finally, think of a new name for the war funding, since the Trump administration—like the Obama administration when it took office—may change it to reflect a new policy.

Those with the most accurate predictions (and most clever names—PG-rated please!—for the war funding) get a free lunch with the CSIS experts!  

After submitting a response, see what the CSIS experts predict.

To allow the Trump administration a long enough time horizon to fully implement its program, we are asking for a prediction of the last year of what DOD calls the Future Year Defense Program.  For the Trump administration the “FYDP” will cover FY 2018-2022.  Amounts are for the DOD base budget, discretionary, then-year dollars, and excluding any transfer from OCO.

After completing your survey, you can go to a site where the CSIS experts give their predictions. Given the high degree of uncertainty, your prediction is probably as good as ours.

Policy Implication of Budget Levels
There are inumberable ways that the Trump administration could build to the budget levels in our options. Nevertheless, it is useful to give a sense of what the budget levels imply for forces and programs.  The descriptions below illustrate what the Trump administration’s budget strategy might be for each of the budget options. 

1. Very large increase (more than $90 billion/year). This level would allow full implementation of the program that then-candidate Trump laid out in his September 2016 speech

  • Regular Army of 540,000 soldiers
  • Navy of 350 ships
  • Air Force of 1,200 fighter attack aircraft
  • Marine Corps of 36 active-duty infantry battalions
  • Increased missile defense and cyber capabilities
  • Modernized nuclear capabilities
  • Increased readiness

CSIS, using its Force Cost Calculator, estimated that this program, when fully implemented, would cost about $90 billion (in FY 2022 dollars, $80 billion in FY 2017 dollars) more than what the Obama administration had proposed. Trump has since made many statements about rebuilding the military, increasing its size, and improving its readiness that would seem to support this approach. Defense hawks like Sen. John McCain and Rep. Mack Thornberry have signaled their support for a large increase. Senator McCain's white paper, Restoring American Power, proposes an increases of $117 billion in FY 2022. This option is also consistent with the views of the military services, which believe that they need substantial additional resources to execute the current strategy and meet Trump’s targets. (The Trump administration’s strategy is unclear at this point.)

On the one hand this represents a large budget increase.  On the other hand, it would increase the defense budget to only about 3.5 percent of GDP, below the level of the 2000s and far below the average of the Cold War.

Like all of the options, except for the reduction option, this requires either a major modification to the budget caps or their elimination.  Although Trump pledged to eliminate the defense cap, the politics are difficult, as the budget history of the last few years has shown.  Democrats will demand domestic increases as the price of their support.  Deficit hawks may require some caps to remain and some politically difficult budget cuts as offsets.

2. Large increase (between $50 billion and $90 billion/year).  This level would allow a substantial increase in spending on forces, readiness, and modernization but not the full expansion of the September speech.  The Trump administration has many competing budget initiatives, particularly for tax cuts and infrastructure spending, that will compete with defense. The Trump administration will also face opposition from deficit hawks, led by its nominated director of the Office of Management and Budget, Rep. Mick Mulvaney. Deficit hawks like Mulvaney want to cut all spending, including defense, in the interest of making government smaller, less intrusive, and fiscally sustainable. This pressure affects not just this option but the subsequent three options. 

Trump’s Pentagon could meet the targets of the September speech in ways  different from what is expected. For example, Trump called for building a Navy of 350 ships, but he did not specify the timeline or the kind of ships. The Trump administration could build 350 ships on a longer timeline and buy less expensive ships. However, this approach would likely encounter resistance from defense hawks and in the Pentagon because it’s not what the services and agencies are expecting. 

3.    Limited increase (from $20 billion to $50 billion/year)

4.     Obama funding level (plus or minus $20 billion/year)

5.    Reduced  (reduction of $20 billion or more)

Options 3, 4, and 5 pick up on many of Trump statements about waste in the Pentagon and the ability to offset new spending by finding efficiencies.  For example, during the campaign he said: “I’m going to build a military that is so strong nobody’s going to mess with us.  But you know what? We can do it for a lot less.”   After the election, he tweeted about reductions to the F-35 program, cost reductions to the presidential aircraft replacement, and an internal Pentagon study allegedly identifying $125 billion in savings from “back office” activities.  All these imply that at least some of the defense buildup might be funded internally. (Whether this level of savings is achievable does not concern us here, but for an assessment, see CSIS’s paper on this subject.) This approach would contradict the expectations of defense hawks, and walk back from many goals in the September speech, but governing is different from campaigning and requires tough trade-offs.  This approach would also pick up support from deficit hawks, as indicated earlier.

The first option here would give the Pentagon a little additional money to pay existing bills like the outyear costs of the readiness and personnel increases in the FY 2017 Defense Authorization Act. It would also avoid criticism that Trump’s program was no different from the Obama program. This increase is roughly comparable to what the Bush administration had initially proposed in 2001 before the attacks of September 11. At that time the Bush administration had planned to focus on domestic issues and intended only a relatively small increase in defense.

A more aggressive version of this approach would keep spending at the Obama level. Politically this might not be viable, but skeptics about defense spending and some deficit hawks would find it attractive.

The extreme version of this approach would cut back to the Budget Control Act level.  This would not be politically viable for the Trump administration, given its statements about strengthening defense. No matter how many efficiencies DOD found, forces would still get smaller and less ready.  The option is included to give survey participants a full range of possibilities when choosing what they think the Trump administration should do.

Overseas Contingency Operations (OCO) options
OCO was originally designed to fund the additional costs of wars in Iraq and Afghanistan, but it became controversial because the caps of the Budget Control Act (incorrectly, but generally called “sequestration”) did not restrict OCO.  As a result, both the Congress and the president have used it as a relief valve for the base budget. CSIS experts have written extensively about this phenomenon (here, here). There is a strong “good government” argument for restricting OCO to the incremental costs of Middle East conflicts. Limiting OCO will be hard, however, because of interactions with other elements of the budget and the tradeoffs that would be required.  

OCO is now about $60 billion a year, although the amount bounces around depending on what the president and Congress decide to include.

Here’s an explanation of the options:

  1. Criteria expanded—more activities included and the amount increases significantly. DOD, and many defense hawks, would like to expand the definition of OCO to include all global conflicts, not just those in the Middle East. They would also like to include certain U.S.-based activities that support overseas operations.
  2. No significant change from existing criteria and recent practice. Although there may be some changes at the margin, this option foresees OCO continuing pretty much as it is currently configured, including some amount shifted from the base budget. This acknowledges the difficulty in making changes and the power of inertia.
  3. Enduring costs folded into the base budget, with equivalent funds added to the base. This would be a purely accounting change where enduring costs, that is, costs for activities that will continue for the long term even after US forces cease combat operations, would be moved into the base budget with an equivalent increase in the base budget. DOD has said that the amount of these enduring costs is about $30 billion per year. Some examples of enduring activities are U.S. bases in the Persian Gulf region, the European Reassurance Initiative, and support to the Iraqi and Afghani forces.
  4. Enduring costs folded into the base budget but without full offset. This would move the cost of enduring activities into the base, similar to option three, but would not provide a dollar-for-dollar increase in the base budget to compensate. In effect, this would reduce the defense budget or require that some enduring activities be scaled back.

Timing of announcement
Timing is important because it reflects the date when the Trump administration will have set its overall budget strategy for the federal government (defense, domestic, entitlements, revenue) and, likely, its defense strategy as well.  There’s a lot of uncertainty about the timing, however. Specifically, the Trump administration might:

  • Put something out early, within a month or two of taking office, to make a quick statement of policy and give the agencies a target to plan to;
  • Publish about the time the existing continuing resolution for FY 2017 runs out (April 28) and Congress, presumably, passes the FY 2017 appropriations;
  • Announce just the FY 2018 levels in the spring, when it submits its FY 2018 budget, and wait to announce the long term defense budget until it completes its defense strategic review later in the year;
  • Complete the strategic review any time. The FY 2017 National Defense Authorization Act changed the due date from submission of the next budget to “as soon as possible”.  (For a full discussion, see the CSIS paper “National Security Reform: What Happened in Congress?”.) Historically, May is the earliest such a review was completed (1997), but change of administration reviews generally take longer;
  • Wait all the way until submission of the FY 2019 budget in February 2018. 

Naming the war funding
The George W. Bush administration called the war funding “the Global War on Terror,” or GWOT, aligning it with their policy of pursuing the terrorists behind the 9/11 attacks.  This term was criticized for being inaccurate, terrorism being a tactic, and for being too broad, since not all global terrorists were a U.S. target.  The Obama administration changed the name to the more neutral, "Overseas Contingency Operations," or OCO, along with other changes such as publishing criteria about what should go into the war funding.  The Trump administration might change the name again to reflect a new policy or just a new start.
Photo credit: DON EMMERT/AFP/Getty Images