Congressional Budget Office
Director’s Blog

The Department of Defense’s (DoD’s) proposed budget for fiscal year 2010 includes a number of significant changes in planned military programs. Many of the issues addressed in the budget have been apparent for some time to analysts in CBO’s National Security Division. (J. Michael Gilmore led this division from 2001 until earlier this year; Matthew S. Goldberg is CBO’s Acting Assistant Director for National Security.) Indeed, many of the programmatic changes just proposed have been examined by CBO in recent publications, including:

• Budget Options, Volume II (August 2009)
• Options for Combining the Navy’s and the Coast Guard’s Small Combatant Programs (July 2009)
• The Effects of Proposals to Increase Cost Sharing in TRICARE (June 2009)
• An Analysis of the Army’s Transformation Programs and Possible Alternatives (June 2009)
• Alternatives for Modernizing U.S. Fighter Forces (May 2009)
• Options for Deploying Missile Defenses in Europe (February 2009)
• The Army’s Wireless Communications Programs (February 2009)
• Long-Term Implications of the Fiscal Year 2009 Future Years Defense Program (January 2009)
• Resource Implications for the Navy’s Fiscal Year 2009 Shipbuilding Program (June 2008)

Here are some examples of relevant CBO analysis:

• Based on the five-year plan that accompanied last year’s budget request, DoD was planning to expand the active Army from 42 combat brigades to 48 combat brigades by 2011. In a budget option that has long been under formulation (Option #050-1, page 6), CBO noted that the Army would probably be unable to identify 23,000 additional soldiers (beyond those already identified) to fully populate six new brigades under the current cap on total Army personnel. One option analyzed by CBO would explicitly relax the cap and add 23,000 soldiers to the force, at a total cost of about $16 billion over the next five years.
• The Army has been developing its Future Combat System (FCS) program which would encompass eight new models of manned combat vehicles as well as new unmanned aerial and ground vehicles, sensors, and munitions. All of these components would be linked by advanced communications networks into an integrated combat system. Starting with a report released in August 2006, CBO has evaluated several alternatives to the FCS program that would forgo the development of new combat vehicles and instead “spin out” FCS improvements in communications and other systems to upgrades of existing tanks and fighting vehicles. Most recently, CBO estimated in a budget option that these changes to the FCS program could save the Army roughly $5 billion in outlays over the next ten years (Option #050-4, page 10).
• CBO evaluated DoD’s practice of hiring contractors to provide decision-makers with analyses and various other support activities—so-called contract advisory and assistance services. CBO analyzed an alternative that, in conjunction with “spinning out” the FCS program and curtailing or cancelling selected other weapon-system procurements, would reduce the volume of advisory and assistance services by 20 percent. Along somewhat similar lines, Secretary Gates announced a plan to reduce the number of support service contractors from the current 39 percent of DoD’s total workforce to the pre-2001 level of 26 percent and replace them with full-time government employees.

CBO released a study today that examines alternatives to current Navy and Coast Guard long-term procurement strategies for their small surface ships known as small combatants. As articulated in their respective long-term shipbuilding plans, the Navy and the Coast Guard intend to purchase a total of 83 small combatants. CBO estimates these purchases would cost more than $47 billion over the next 20 years.

The Navy is building two versions of its new combat ship designed for operations near coastlines (the littoral zone). Also, the Coast Guard is building replacements for its existing classes of high-endurance cutters and medium-endurance cutters. As the designation “small combatant” implies, the Navy’s two versions of littoral combat ships (LCSs) and the Coast Guard’s national security cutters (NSCs) and offshore patrol cutters (OPCs) are designed to be significantly shorter in length, lighter in weight, and shallower in draft than most Navy surface warships (carriers, amphibious ships, cruisers, and destroyers).

Although all four types of ship are about the same size, they are designed to perform different missions. In general, The Navy’s LCSs are designed to have less range than Coast Guard cutters but to operate at much greater speeds and close to shore during wartime as part of a naval battle network. The Coast Guard ships are meant to operate independently at sea for long periods of time and at some distance from the shore and not to engage in major combat operations.

In the early stages of implementing the ship programs, however, the Navy and the Coast Guard have encountered various challenges—including cost overruns and construction problems. As a result of those delays and cost overruns, some members of the Congress and independent analysts have questioned whether the Navy and the Coast Guard need to buy four different types of small combatant and whether—in spite of the services’ well-documented reservations about using similar hull designs—the same type of hull could be employed for certain missions.

To explore that possibility, CBO examined three alternatives to the Navy’s and the Coast Guard’s current plans for these four ships.

• Option 1 explores the feasibility of having the Coast Guard buy a variant of the Navy’s LCS—to use as its offshore patrol cutter.
• Option 2 examines the effects of reducing the number of LCSs the Navy would buy and substituting instead a naval version of the Coast Guard’s national security cutter.
• Option 3 examines the advantages and disadvantages of having the Coast Guard buy more national security cutters rather than incur the costs of designing and building a new ship to perform the missions of an offshore patrol cutter.

According to CBO’s estimates, all three alternatives and the services’ plans would have similar costs, regardless of whether they are calculated in terms of acquisition costs or total life-cycle costs. CBO’s analysis also indicates that the three alternative plans would not necessarily be more cost-effective or provide more capability than the services’ existing plans. Specifically, even if the options addressed individual problems that the Navy and Coast Guard might confront with their small combatants, the options would also create new challenges.

Eric J. Labs of CBO’s National Security Division wrote this report. Eric has been at CBO for 14 years and holds a Ph.D. from MIT. With three children, two dogs, and two cats, Eric’s hobby is sleeping.

The TRICARE program provides health care for members of the uninformed services, for military retirees, and for their families—the more than 9 million people eligible to use its integrated system of military health care facilities and providers and regional networks of contracted civilian providers. User fees for TRICARE beneficiaries have remained the same (or even been reduced) since the mid-1990s, when the current program was first set up. At the same time, taxpayers’ costs for the program have risen dramatically. The Department of Defense (DoD) has not requested any TRICARE fee increases for the upcoming fiscal year 2010. In light of previous proposals, however, a CBO report released today looks at the impact of possible cost-sharing changes in TRICARE on the federal budget.

In 2008, DoD’s spending on health care was $42 billion, or about 6 percent of DoD’s total funding; under current policy, CBO projects that the share of defense spending devoted to health care will rise sharply further in coming years. In its budget submissions for 2007, 2008, and 2009, DoD proposed that enrollment fees, deductibles, and copayments of some TRICARE beneficiaries (generally retirees between the ages of 38 and 65) be increased to encourage more-efficient use of the system and reduce medical spending.

In its analysis, CBO compared the proposed increase in fees for military retirees with the growth seen in several measures of nonmilitary health care spending. It found that the proposed enrollment fees accurately adjusted for trends in spending growth observed in the civilian sector since 1995. For example, if the Prime plan’s enrollment fee of $460 for family coverage had grown at the same pace as the average premium in civilian health plans, the amount today would be close to the new fees proposed in DoD’s 2009 budget submission. Nevertheless, the level of DoD’s proposed fees would still be below premiums commonly seen in civilian plans. The average annual health insurance premium for family coverage in a health maintenance organization in 2008, for example, was about $13,100, of which the average worker’s contribution was about $3,400. Under the proposal, most DoD retirees who were not yet eligible for Medicare would have paid $1,100 per year to enroll their family in TRICARE Prime in 2011.

CBO also determined, on the basis of currently available research, that DoD used reasonable assumptions about TRICARE beneficiaries’ responses to some of the changes in the 2009 proposal and that the actual reductions in spending could be larger than DoD has foreseen. CBO also found, however, that DoD did not include in its estimates the effects that increased cost sharing for TRICARE might have on other federal programs—such as Medicaid and the Federal Employees Health Benefits (FEHB) program—and on revenues. Those effects would decrease, though to a relatively small degree, the reductions in spending that might be realized from increasing TRICARE beneficiaries’ costs.

This paper was written by Carla Tighe Murray of CBO’s National Security Division. Carla has been at CBO for seven years and holds a Ph.D. from the University of Illinois (Urbana-Champaign).  She enjoys yoga and gourmet cooking.

The near- and long-term implications of the Modularity Initiative and the Future Combat Systems (FCS) programs, which would change how the Army is organized and equipped, are examined in a CBO study released today. Also explored in the study are three alternatives for modernizing the Army’s combat forces using modified versions of the FCS program.

Before changes were announced in April by Secretary of Defense Robert Gates, the FCS program would have, among other things, replaced the Army’s heavy tracked armored vehicles developed in the 1960s and 1970s with lighter and more mobile combat vehicles that would be equally as survivable. The Modularity Initiative would reorganize the Army’s warfighting forces from divisions containing 12,000 to 17,000 or more soldiers to a larger number of smaller, interchangeable, and independent teams of 3,000 to 4,000 soldiers. Army leaders have contended that the FCS program and Modularity Initiative would yield an Army that could respond to crises around the world more quickly and that would be more mobile and technically sophisticated—and, hence, more effective—once it arrived.

CBO’s analysis of the Modularity Initiative shows that the program has cost more and yielded fewer benefits than were originally estimated:

• The Army has had to add personnel to support the additional units;
• The planned increases in personnel are unlikely to be sufficient to fully support the force structure of 76 brigade combat teams (BCTs) that was planned at the end of 2008;
• Although modular BCTs might require less time to prepare to respond to an overseas crisis than their premodular predecessors, they require roughly the same amount of time to transport their equipment overseas; and
• The costs to carry out the initiative have grown beyond the initial estimate of $21 billion and may total more than $140 billion through 2013.

CBO’s analysis also reaches the following conclusions concerning the Army’s FCS program included in the previous Administration’s 2009 plan and associated modernization programs:

• The FCS program would have fielded a full set of equipment to less than 20 percent of the Army’s BCTs and would not have been completed until 2030.
• Although one of the main goals of the FCS program was to speed the movement of Army combat units overseas, replacing the current armored vehicles with FCS manned vehicles would not have significantly reduced transportation times.
• According to the Army’s estimates, the annual costs of the FCS program and its associated Spin-Out program could have approached $10 billion at their peak, an expenditure that could have been difficult to afford given other demands on the Army’s budget.
• Alternative approaches to introducing FCS technologies into the Army’s combat units—approaches that would eliminate all or part of the program’s ground vehicles while retaining its communications network and, in some cases, its components with sensors to detect enemy troops and their movement—would yield annual savings of $3 billion to $8 billion in the cost of FCS-related programs included in the previous Administration’s 2009 plan.
• Because FCS manned vehicles would not have replaced the armored combat vehicles in all of the Army’s BCTs, additional annual funding of $2 billion to $4 billion could have been required over the next 20 years to modernize vehicles that the Army will retain indefinitely.

In April, Secretary of Defense Robert Gates recommended changes to these programs, including:

• Reducing the active Army’s goal for combat units by 2013 from 48 BCTs to 45 brigade combat teams, and
• Canceling the manned vehicle portion of the FCS program and accelerating the spin-out of FCS technologies to all of the Army’s brigade combat teams, rather than just infantry brigades.
  Although the administration’s 2010 request was submitted shortly before CBO published this report, that request did not contain sufficient programmatic details to allow CBO to conduct a complete reassessment of either the revised Modularity Initiative or the FCS program.

Frances M. Lussier of CBO’s National Security Division prepared the paper.  When not performing her CBO duties, Fran is an accomplished choral singer and amateur ornithologist.

The United States Air Force, Navy, and Marine Corps are in the process of replacing most of today’s fighter aircraft with new F/A-18E/F, F-22, and F-35 Joint Strike Fighter (JSF) aircraft. Although procurement plans call for purchasing about 2,500 aircraft over the next 25 years, the services are projecting that those purchases will be unable to keep pace with the need to retire today’s aircraft as they reach the limit of their service life.

Today CBO released a study of U.S. fighter forces that compares the size and capability of today’s forces with the forces that would be fielded under the Department of Defense’s (DoD’s) modernization plans and several alternative plans that would offer varying levels of capability and require varying levels of budgetary commitment. CBO’s analysis of DoD’s plans and the alternatives included comparisons of the number of aircraft in each force, the types and technological sophistication of those aircraft, and their aggregate capacity to carry air-to-ground and air-to-air weapons. Using those criteria, CBO found the following:

• Under DoD’s procurement plans, fighter inventories are likely to fall below the services’ stated goals in the coming years. Nevertheless, many military capabilities would remain equal to or improve relative to today’s capabilities because of the enhanced performance that is expected to result from the technological advances that have been incorporated into the latest generation of fighters. Some of those improvements might be offset by the increased capabilities of potential adversaries, however.
• Alternative approaches to modernization that included purchasing less advanced but less costly fighter aircraft could avoid inventory shortfalls, achieve long-term cost savings, or both. They would not offer the same capability improvements (especially in terms of the ability to evade an adversary’s air defenses) that would be realized by purchasing JSFs, although they could maintain or improve upon today’s level of capability.
• Force structures in which some fighters are replaced with smaller numbers of attack aircraft possessing longer ranges, larger weapons loads, or both, could be fielded at costs similar to current plans. Compared to forces equipped with fighters alone, forces equipped with a mix of fighters and such attack aircraft would offer improvements such as increased basing flexibility and persistence over the battlefield but would have decreased air-to-air combat capabilities.

The study was written by Dave Arthur and Kevin Eveker.

As part of ongoing efforts to protect the United States and its allies from attack by ballistic missiles, the U.S. Missile Defense Agency (MDA) is working to deploy a missile defense system in Europe to “defend allies and deployed forces in Europe from limited Iranian long-range threats and expand protection of [the] U.S. homeland.” As proposed, the system would be in the field by 2013 and would include interceptor missiles in silos to be built in Poland, a tracking radar in the Czech Republic, and another radar at an unspecified location near Iran.

CBO’s study of this system, released today, compares the potential cost and performance of MDA’s proposed European system with the cost and performance of three other options for deploying missile defenses in Europe:

• Standard missile interceptors located on U.S. Navy Aegis ballistic missile defense ships operating at three locations around Europe, supported by two transportable radars;
• Ground-based standard missile interceptors operating from mobile launchers located at two existing U.S. bases, supported by two transportable radars; and
• Ground-based kinetic energy interceptors (a new high-acceleration interceptor under development at MDA), also operating from mobile launchers located at two existing U.S. bases and supported by two transportable radars.

CBO developed these alternatives using components that are already being planned rather than entirely new systems. Like MDA’s proposal, the alternatives are all midcourse-phase defense systems (they would intercept an enemy missile after its rocket booster had burned out and the missile was “coasting” on a ballistic trajectory above the atmosphere). (Note for the uninitiated: the report has an introduction to ballistic missiles– you can find it in Appendix A.)  

CBO compared MDA’s proposed deployment and the alternatives for the defense that they provide to Europe, the additional defense they would provide to the U.S. relative to existing system, their costs, and when the alternatives could be available. Using those four criteria, CBO found the following:

• Defense of Europe. All of the alternatives CBO considered would provide defense of most of Europe roughly equivalent to the defense provided by MDA’s proposal against most types of ballistic missiles that Iran is thought to have developed or could develop in the future. Because the alternatives CBO considered would locate interceptors closer to Iran than MDA’s planned system, they would generally provide more extensive defense of southeastern Europe than would MDA’s proposal. Moreover, because they would be composed of mobile or transportable components, deploying the alternative systems would not require building permanent facilities—including missile silos—at European sites.
• Extended defense of the United States. A second goal of MDA’s proposed European system is to give the United States an extra layer of defense against potential Iranian intercontinental ballistic missiles. CBO’s analysis indicates that by 2012 systems already in place at two bases in the United States would protect more than 99 percent of the U.S. population from this threat. MDA’s proposed European system would extend defensive coverage to the other 1 percent of the U.S. population. It would also provide redundant defense from a third interceptor site for all of the continental United States, giving system operators more flexibility by creating an opportunity to launch a second interceptor from the United States, if necessary. None of the alternatives considered by CBO provide as much additional defense of the United States.
• Costs. For roughly the same cost as MDA’s European system—a total of about $9 billion to $14 billion over 20 years—the United States could deploy either of the ground-based alternatives. The ship-based alternative would cost almost twice as much as MDA’s proposal—a total of about $18 billion to $26 billion over 20 years—largely because CBO assumed that the Navy would need to buy additional ships to operate it.
• Availability. The alternatives that CBO examined might not be available as early as MDA’s proposed European system.

Kudos to Michael Bennett of the National Security Division for the development of this report, and to Maureen Costantino, who prepared the many interesting and informative maps and figures. 

Decisions made today about national defense– whether they involve weapon systems, military compensation, or numbers of personnel– can have long-lasting effects on the composition of the nation’s armed forces and the budgetary resources needed to support them. CBO has published a series of reports over the past six years about its projections of the resources that might be needed over the long term to carry out the Administration’s plans as expressed in the Future Years Defense Program (FYDP). Yesterday CBO released a paper providing projections of the amount of budgetary resources might be needed in the long term to carry out current defense plans (as they are described in the 2009 FYDP).

As in recent similar CBO reports, today’s report projects that carrying out the plans proposed in the 2009 FYDP would require sustaining higher inflation-adjusted levels of spending than those that occurred at the peak of the defense buildup in the mid-1980s. Four key factors account for the projected high level of spending:

• Plans to purchase more new military equipment over the next several years and then to sustain that rate of procurement over the longer term;
• Plans to develop and produce weapons systems with new capabilities and rising estimated costs;
• Plans to increase the size of military forces, coupled with the increasing cost of pay and benefits for military and civilian personnel; and
• Plans to meet rising operations and maintenance costs for both aging equipment and newer, more complex equipment.

In CBO’s projection of DoD’s current FYDP, defense resources average about $549 billion annually (in 2009 dollars) from 2014 to 2026, or about 6 percent more than the $515 billion in total obligational authority (TOA) provided by the Congress for 2009. (The 2009 FYDP and CBO’s projections of its long-term implications exclude potential future supplemental or emergency appropriations; CBO’s projections include additional appropriations that have already been enacted).

Possible unbudgeted costs have the potential effect of increasing the projection of long-term demand for defense funding to an annual average of about $652 billion through 2026, or 26 percent more than the funding provided for 2009. CBO’s analysis includes several possible sources of unbudgeted costs: that the costs of weapon systems now under development would exceed early estimates; that medical costs might rise more rapidly than DoD has assumed; and that DoD would continue to conduct military operations overseas as part of the war on terrorism, albeit at reduced levels relative to current operations in Iraq and Afghanistan.

Costs for operations in Iraq, Afghanistan, and for other purposes related to the war on terrorism have been rising. In 2007, appropriations for those activities totaled $170 billion in 2007 dollars, or 28 percent of total funding for the Department of Defense. In 2008, the appropriations rose to $187 billion in 2008 dollars, or 28 percent of defense funding that year. (In both years, some of the supplemental and emergency funding was for purposes unrelated to military operations overseas: in 2007, $5 billion; in 2008, $7 billion.)

Under DoD’s current plans and CBO’s projections of them, defense resources would steadily decline in relation to the size of the economy. The share of the U.S. gross domestic product (GDP) allocated to defense spending declined from an annual average of 5.6 percent in the 1980s to 3.8 percent in the 1990s. If DoD’s current plans were carried out, defense spending would drop to 3.1 percent of GDP by 2013 and to 2.5 percent of GDP by 2026, excluding unbudgeted costs.

CBO’s report includes two alternatives to its projections for DoD’s plans: an “evolutionary” scenario (in which DoD would forgo or scale back acquisition of the new, advanced capabilities that the department associates with military transformation and instead pursue evolutionary upgrades to its current capabilities) and a “transformational” scenario (in which DoD would increase its emphasis on acquiring the advanced capabilities it associates with military transformation). Under those two scenarios, CBO projects that the long-term  demand for defense resources would be reduced by 7 percent and 4 percent, respectively, relative to its projection of the implications of the 2009 FYDP.

Contractors play a substantial role in supporting the United States’ current military, reconstruction, and diplomatic operations in Iraq, accounting for a significant portion of the manpower and spending for those activities.

CBO released a study today, conducted at the request of the Senate Committee on the Budget, on the use of contractors in the Iraq theater to support U.S. activities in Iraq. The webcast of the press briefing is available here.

CBO found:

• From 2003 through 2007, and converting the funding into 2008 dollars, U.S. agencies awarded $85 billion in contracts for work to be principally performed in the Iraq theater, accounting for almost 20 percent of funding for operations in Iraq. Including funding for 2008 itself, the U.S. has likely awarded $100 billion or more for contractors in the Iraq theater.

• More than 70 percent of those obligations were for contracts performed in Iraq itself. The Department of Defense awarded contracts totaling $76 billion, and the U.S. Agency for International Development and the Department of State obligated roughly $5 billion and $4 billion, respectively, over the same period.

• Contractors provide a wide range of products and services in theater. Most contract obligations were for logistics support, construction, petroleum products, or food.

• Although personnel counts are rough approximations, CBO estimates that at least 190,000 contractor personnel, including subcontractors, work on U.S.-funded contracts in the Iraq theater. About 20 percent are U.S. citizens.

• The United States has used contractors during previous military operations, although not to the current extent. According to rough historical data, the ratio of about one contractor employee for every member of the U.S. armed forces in the Iraq theater is at least 2.5 times higher than the ratio during any other major U.S. conflict, although it is roughly comparable with the ratio during operations in the Balkans in the 1990s.

Private security contractors have been a particular focus of attention. Our analysis shows:

• Total spending by the U.S. government and other contractors for security provided by contractors in Iraq from 2003 through 2007 was between $6 billion and $10 billion.

• About 10,000 employees of private security contractors work directly for the U.S. government. Another 15,000 to 20,000 work for the Iraqi government, other contractors, and other customers, bringing the total to approximately 25,000 to 30,000 employees of private security contractors operating in Iraq.

• The costs of a private security contract are similar to those of a U.S. military unit performing similar functions. During peacetime, however, the private security contract would not have to be renewed, whereas the military unit would remain in the force structure.

Regarding the legal issues associated with contractor personnel, CBO finds that military commanders have less direct authority over the actions of contractor personnel than over their military or civilian government subordinates. In addition, the legal status of contractor personnel in Iraq is uncertain, particularly for those who are armed.

CBO’s report was prepared by Daniel Frisk and R. Derek Trunkey of our National Security Division.

Every year in response to a Congressional directive, the Department of the Navy issues reports that describe its plans for ship construction over a 30-year period. In the report released in February 2006, the Navy presented its fiscal year 2007 plan, which called for expanding its fleet from 285 battle force ships in 2006 to 313 by 2020 and beyond. In May 2006, the Congressional Budget Office (CBO) issued a study analyzing that plan and estimating its potential costs. Today CBO released an analysis of the resource implications of the Navy’s fiscal year 2009 shipbuilding plan.

Since May 2006, the Navy has provided two updates to its 313-ship plan, one for fiscal year 2008 and one for fiscal year 2009. The plans differ in several ways. For instance, although the 2007 and 2008 plans both assumed annual costs of $16.1 billion for new construction, the 2008 plan increased the total number of ships scheduled for purchase over the 30-year period to 293, compared with 280 under the 2007 plan. The 2009 plan envisions purchasing three more ships than indicated in the 2008 plan—296—and increases the Navy’s estimate of the costs to implement the plan by about 30 percent. Although the overall number of ships slated for purchase under the 2008 and 2009 plans differs only slightly, the Navy made significant changes in the types of ships it would purchase under the two plans. CBO’s analysis found the following:

• Executing the Navy’s most recent 30-year shipbuilding plan would cost an average of about $27 billion per year (in 2009 dollars), or more than double the $12.6 billion a year that the Navy has spent, on average, since 2003.
• The Navy’s 2009 budget request appears to depart from all of the budgetary assumptions used to develop the service’s 2007 and 2008 shipbuilding plans.
• CBO’s estimates of the Navy’s shipbuilding program through the period covered by the 2009-2013 Future Years Defense Program are about 30 percent higher than the Navy’s estimates.
• For the 2009-2020 “near term” period, CBO estimates that the new-ship construction alone would cost about 13% more than the Navy estimates
• For the “far term” period beyond 2020, CBO estimates that costs would be about 8% greater than the Navy projects.

These estimates are based on a number of assumptions that CBO made about the size and characteristics of various types of ships that the Navy would buy and about the timing of those purchases. Different assumptions could produce different estimates. The analysis was performed by Eric J. Labs of our National Security Division and Raymond Hall of our Budget Analysis Division.

Today CBO released a new study analyzing the increases in funding for military activities in Iraq, Afghanistan, and elsewhere in the war on terrorism over the past several years.

• The United States began combat operations in Afghanistan in fiscal year 2002 and in Iraq in fiscal year 2003. To finance those operations (and others related to the war on terrorism), the Congress provided $18 billion and $76 billion in emergency appropriations in those years, respectively.
• With the exception of a slight decrease in 2004, to $74 billion, funding has increased steadily each year, to a total of $165 billion for 2007.
• If the Administration’s request for 2008 is funded in full, appropriations for military operations in Iraq and Afghanistan, and for activities elsewhere in the war on terrorism will rise to $188 billion this year and to a cumulative total of $752 billion since 2001.
• Most of the spending is concentrated in two categories — operation and maintenance (O&M), which has roughly doubled from 2004 to 2008, and procurement, which has increased tenfold over that period.
• Prior to 2005, funding for military operations was largely limited to the incremental amounts needed to mobilize and deploy troops, transport equipment and supplies, and purchase additional quantities of consumables such as fuel, repair parts, and munitions. War funding also paid for an increase in the number of service members on active duty. About 60 percent of appropriations provided during this period went to O&M accounts and 20 percent went to military personnel accounts.
• Beginning in 2005, as part of its request for war funding, DoD asked for appropriations to “reset” equipment, that is, to repair or replace worn or damaged equipment. Those efforts include major overhauls that restore the item to “like new” condition. At the same time, DoD often added major upgrades to repaired items, returning equipment to the field with significantly enhanced abilities; these upgrades involved much higher costs than simply repairing equipment. Most such efforts are funded through the O&M and procurement accounts. During this phase, O&M funding continued to account for roughly 60 percent of total funding.
• In 2006, DoD began widening its focus from resetting equipment to “reconstituting” the force, an effort that involved purchasing new equipment as well as repairing and replacing damaged systems. Whereas the reset program had required more O&M funding, the shift to reconstitution increased the need for procurement funds.
• In 2007, DoD expanded the list of expenses that could be included in the request for war-time appropriations. In addition to seeking funds to pay for the direct incremental costs of operations in Iraq and Afghanistan, the services were permitted to include costs related to the broader war on terrorism. DoD requested funds to replace damaged equipment with newer models, accelerate planned purchases of new systems, address emerging needs, and enhance the military’s capability not only to continue current operations but also to be better prepared for the longer war on terrorism. Achieving the goals of that expanded reconstitution program required significantly more procurement spending.
• Thus, in 2007 and 2008, procurement funding soared, averaging about 35 percent of total war funding in those years. While O&M funding continued to increase and funds for military personnel held steady, those accounts fell to an average of 52 percent and 10 percent of total war funding, respectively.
• If the Congress provides the remaining $101 billion that DoD has requested for the war in 2008, annual funding levels will have increased by 155 percent since 2004. Increases in procurement and in operation and maintenance account for almost all of that growth. Appropriations for military personnel have changed little, and other DoD appropriations contribute relatively small amounts to the total.

David Newman and Jason Wheelock of the defense unit in our Budget Analysis Division put the analysis together.