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The first detailed Clinton defense plan was presented to the Congress in the fiscal year 1995 budget submission. Congressional debate this year revolves around the issues of whether the forces in the plan will be sufficient to fight potential threats and whether they are folly funded in the plan.

This memorandum addresses these issues. It analyzes the capability of the forces the Clinton Administration expects to have by the late 1990s and their affordability in both the near and longer term. The memorandum also evaluates alternatives, but in keeping with the Congressional Budget Office's (CBO's) mandate to provide objective analysis, it makes no recommendations. It is provided as background for testimony by Robert D. Reischauer, Director of CBO, before the House Committee on Armed Services.

Lane Pierrot of CBO's National Security Division prepared the analysis, drawing on the work of a number of other CBO analysts. Neil M. Singer, R. William Thomas, and Michael A. Miller provided direction during the analysis. Geoff Cohen developed the analysis of capability for two regional wars and assisted with the overall project Karen Ann Watkins also provided extensive assistance during the analysis. The discussion of the costs of operating weapons builds on analysis done by William P. Myers and Lisa Siegel. William P. Myers also estimated detailed weapons costs. Frances Lussier, Ivan Eland, and Lane Pierrot provided analysis of long-term funding for the services, while David Mosher and Raymond J. Hall, Wayne Glass, Rachel Schmidt, and Ellen Breslin Davidson and Amy Plapp did the same for ballistic missile defense, environmental cleanup, defense conversion, and DoD health costs, respectively. Rachel Schmidt compiled that analysis. Debbie Clay-Mendez and Amy Belasco contributed freely from their analysis on issues relating to operations and maintenance, military personnel, and readiness. David Mosher, Michael O'Hanlon, and James Homey made useful suggestions during review. Ellen Breslin Davidson reviewed the memorandum for accuracy. Paul L. Houts edited it, with assistance from Christian Spoor, and Cynthia Cleveland prepared it for publication.

Questions about the analysis may be addressed to Lane Pierrot.
 
 

SUMMARY AND INTRODUCTION

DEFENSE IN CONTEXT

• The Deficit
• Discretionary Caps
• Defense's Share of Gross Domestic Product

DOES THE BUDGET PROVIDE ENOUGH FUNDING FOR THE ADMINISTRATION'S PLAN FOR DEFENSE DURING THE 1995-1999 PERIOD?

• Force Reductions and the Operating Accounts
• Readiness Indicators
• Cuts to Procurement

FACTORS THAT COULD ALTER THE ADMINISTRATION'S PLANS FOR DEFENSE SPENDING

• Added Costs in the Administration's Plan
• Cuts to Infrastructure
• Added Costs for Environmental Cleanup
• Growth in Weapons Costs

PROSPECTS FOR DECREASES IN DEFENSE SPENDING

LONG-TERM PROSPECTS FOR DEFENSE AFFORDABILITY

• Long-Term Trends Assuming No Cost Growth
• Long-Term Trends Assuming Costs Grow
• DoD's Budget Could Receive Real Increases Beyond 1999

THREATS TO U.S. INTERESTS: REQUIREMENTS FOR TWO REGIONAL CONTINGENCIES

• Smaller Threats
• The Administration's Planned Forces and Two Regional Conflicts
• The Adequacy of Airlift and Sealift
• Results

ILLUSTRATIVE ALTERNATIVES

• Increased Forces
• Alternatives That Save Money
• Reduce Acquisition Programs

APPENDIXES

A - Tables Presenting Analytic Assumptions for CBO's Long-Term Funding Analyses
B - MIRKWOOD Assumptions and Methodology
 

TABLES
1.	Discretionary Caps and the Administration's Plans
2.	Trends in National Defense Budget by Title
3.	Forces in the Administration's Plan Compared with 1990 and 1995 Levels
4.	Department of Defense Personnel
5.	Examples of Possible Increases and Decreases in Department of Defense Budgets
6.	Alternatives to the Administration's Plan: Effects on Cost and Capability
A-1.	CBO Assumptions Behind Projections of Long-Term Costs, 2000 to 2010
A-2.	Procurement of Selected Major Weapons Under the Administration's Plan, as Estimated by CBO
A-3.	Average Unit Procurement Costs Assumed by CBO
FIGURES
1.	National Defense Outlays as a Share of Gross Domestic Product
2.	Historical Procurement Data, Numbers of Weapon Systems
3.	Budget Implications of the Administration's Plan
4.	Comparative Scores of Selected Regional Powers, 1995
5.	Comparison of Scores for United States and Indigenous Forces in Theater

SUMMARY AND INTRODUCTION

The fiscal year 1995 budget request is the first budget to contain the Clinton Administration's detailed plans for defense. The plans are based on analysis done over the past year as part of the Administration's bottom-up review (BUR). The review proposes cuts in conventional forces in all services to meet the Administration's targets for defense spending. As a result of the planned cuts in dollars and force structure, two major questions have surfaced that lie at the heart of this year's defense debate:

• Are the dollars the Administration plans to devote to defense spending sufficient to support the forces that it expects to have?
  
  
• Are the forces in the Administration's plans sufficient for its defense strategy, defined by this Administration as well as its predecessor as the ability to engage in two nearly simultaneous regional conflicts?

Clinton defense targets provide about $104 billion less funding for defense during the 1995-1999 period than the Bush Administration would have provided.¹ But the BUR analysis suggests a number of forces could be cut while still maintaining the capability to fight two regional wars. The analysis also recommended canceling or scaling back a number of programs. As a result of these reductions, the $1.2 trillion the Administration expects to spend on defense during the 1995-1999 period should be roughly sufficient to meet requirements.

The Clinton plan cuts operating funding less than it cuts forces. Operating funding would decline by 27 percent from 1990 levels, while major types of forces would be cut from about one-third (Army divisions and Navy ships) to almost one-half (Air Force wings). Thus, the planned operating funding should be sufficient to support the programmed forces. Procurement should also be roughly sufficient, although the Administration expects to buy considerably fewer ships, planes, and tanks than were bought in 1990. CBO's estimates suggest that Department of Defense (DoD) stocks of most major weapons should suffice at least through the 1990s.

The Administration's plan is subject to several risks, though they are small as a percentage of the plan's total funding. They raise concerns nonetheless because the budget fits snugly under the discretionary caps set out in the Omnibus Budget Reconciliation Act of 1993 (OBRA-93), and because the risks could arise after defense has experienced a number of years of declining budgets and thus the flexibility to address them might be lessened. The risks include the shortages the Administration has identified in its plan; additional costs if savings from infrastructure reductions are delayed; and the possibility that costs will increase because of factors such as growth in weapons costs or requirements for environmental cleanup. Conversely, the Clinton Administration might make several further spending reductions if funding shortages arise.

The question of the affordability of the Administration's forces is more problematic in the long term. Over the 2000-2010 period, DoD would need an average of $12 billion to $25 billion more per year than the funding it would have if its budget only grew enough to offset inflation beyond 1999. (The range in these estimates relates to whether the Congressional Budget Office (CBO) assumes that the costs of future weapons grow.) The necessity for additional funding arises because future administrations would have to buy more major weapons on average during this period than are needed in the near term. Modest annual real growth in defense spending--about 1.5 percent annually from 2000 to 2010--would provide enough money even for the higher of these two budget paths. Should additional funding for defense not be forthcoming, further force cuts could be necessary to balance operations and acquisition funding.

However, further cuts to forces might be acceptable. The threats facing the United States are lower than they were during the Cold War. Instead of planning to fight a major conventional power such as the former Soviet Union, defense guidance calls for the capability to fight two smaller regional powers, though at the same time. CBO's analysis suggests that the forces the BUR provides would bring substantial capability to bear in two regional wars. (For purposes of analysis, CBO assumed one war in Southwest Asia against Iraq and one on the Korean peninsula.) Ratios of the capability of friendly to hostile forces in Southwest Asia would grow from about 0.6:1 at the beginning of conflict to about 2.8:1 after about three months of deliveries of U.S. troops and equipment. A nearly simultaneous conflict in Korea would start out with a ratio of about 1:1 and grow to about 2.6:1 after about two months of deliveries. These force ratios would provide sufficient capability to mount offensive operations in part of each theater while retaining enough forces to prevent further gains by the opposition.

These results suggest that DoD may be able to withstand further force reductions and still be able to bring significant forces to bear in two regional wars. CBO's analysis considers an alternative that would operate fewer forces. The Congress might wish to consider such a step if DoD encounters funding problems in the future. Alternatively, the Congress may wish to consider cutting acquisition programs or making changes in the ways DoD operates its forces.

CBO's analysis also includes an alternative that keeps forces at 1994 levels, rather that cutting them to the levels in the BUR. According to CBO's analysis of the forces the United States might field in two regional wars, this alternative provides additional capability, but the increased capability would require about $70 billion more for DoD than the Administration plans to provide during the 1995*1999 period. Although concerns about a more uncertain world might lead to desires for additional defense spending, this spending might not be readily available in the face of overall budget constraints.

This document is available in its entirety in PDF.

1. Department of Defense, Report on the Bottom Up Review (October 1993), p. 107. The difference reflects a Clinton Administration estimate of the Bush Administration baseline.