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Life after Bush - the US defence budget
Jane's Information Group
By Matthew Smith
April 18, 2008

The administration of US President George W Bush has overseen the largest defence spending increase in real terms for 30 years.

In 2004 expenditure in real terms surpassed that at the height of the Cold War and the budget has since continued to grow rapidly thanks to the costs of wars in Iraq and Afghanistan. By 2008 the budget reached USD689 billion - nearly 25 per cent higher in real terms than it was at the previous spending peak in 1985 and equalling the levels of spending seen during the Second World War.

The total defence budget (including emergency funding for Iraq and Afghanistan) is expected to rise to around USD700 billion in 2008 and 2009, marking what Jane's expects to be the peak of US defence expenditure in the near term as the additional funding required for fighting the 'global war on terror' reaches its maximum level.

However, despite the enormous size of the budget and the political impact of a new administration's priorities, a series of factors is combining to make the prospect of cuts to the main Department of Defense (DoD) budget a distant one - regardless of who wins the election in November. Although total expenditure is set to decline in real terms from 2009/10, the reductions will be seen in the operational budgets for Iraq and Afghanistan, not in the core DoD personnel and equipment programme.

Four key factors underlie this assessment: the cost of the military is rising; the political will to reduce spending is non-existent; the security environment remains challenging; and, despite current economic concerns, Jane's believes that the US can afford it.

Of the four factors, the easiest to quantify is the rising cost of the military because the DoD provides detailed projections of future spending through a set of rolling five-year estimates. These estimates indicate that the Pentagon is anticipating that the core defence budget will carry on increasing until at least 2013, rising from USD513 billion to USD548.5 billion.

Military costs have been expanding on two fronts: the core DoD budget is subject to cost pressures mainly arising from rising personnel numbers; and a requirement for advanced technology is making it increasingly expensive to develop, procure, operate and maintain new weapon systems.

The Congressional Budget Office (CBO) report, 'Long-term implications of current defence plans: summary update for Fiscal Year 2008', identifies a planned increase in the number of US Army (65,000) and Marine Corps (28,000) recruits as one of the key drivers of rising personnel costs. As well as increasing pay levels, this will impact on the requirement for medical funding, which the CBO estimates will grow by USD6.7 billion in real terms by 2013.

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