Congressional Budget Office

Testimony

CONGRESSIONAL BUDGET OFFICE

SECOND AND D STREETS, S.W.

WASHINGTON, D.C. 20515

Statement of 

Matthew S. Goldberg

Acting Assistant Director

Long-Term Implications of the

Department of Defense’s 

Fiscal Year 2010 Budget Submission

before the 

Committee on the Budget

U.S. House of Representatives

October 14, 2009

This document is embargoed until it is delivered at 

10:00 a.m. (EDT) on Wednesday, October 14, 2009. 

The contents may not be published, transmitted, or 

otherwise communicated by any print, broadcast, or 

electronic media before that time.

CBO

Mr. Chairman, Congressman Ryan, and Members of the Committee, I appreciate the 

opportunity to appear before you today to discuss the long-term implications of the fiscal year 2010 budget submission for the Department of Defense (DoD). Decisions 

about national defense made today—whether they involve numbers of personnel, military compensation, or weapon systems—can have long-lasting effects on the composition of the nation’s armed forces and the budgetary resources needed to support them. 

Over the past seven years, the Congressional Budget Office (CBO) has published a 

series of reports about its projections of the resources that could be required over the 

long term (typically two decades) to carry out the nation’s defense plans.1 Those projections differ from CBO’s baseline, under which discretionary defense spending 

grows at the rate of inflation without reference to DoD’s plans.2

This testimony is the latest installment in CBO’s analyses of DoD’s budget requests. It 

concerns CBO’s preliminary projections for fiscal years 2011 through 2028. Those 

projections are based in part on the President’s 2010 budget request and budget justification materials the Administration provided to the Congress with that request.3

Among the other sources CBO consulted to supplement its analysis were DoD press 

releases and briefing materials and the Secretary of Defense’s announcement in April 

2009 of changes to the nation’s defense plans.4 For its analyses of past budget requests, 

CBO has drawn from information in DoD’s Future Years Defense Program (FYDP), 

which typically is submitted to the Congress with the President’s annual budget 

request.5 This year, however, the Administration did not submit a FYDP, which 

would have covered the years 2011 through 2015.

CBO projects that carrying out the plans proposed in the President’s 2010 budget 

request excluding overseas contingency operations (in general, overseas military operations against hostile forces—currently consisting of the wars in Iraq and Afghanistan 

and military actions elsewhere to combat terrorism) would require defense resources 

averaging $567 billion annually (in constant 2010 dollars) from 2011 to 2028 (see 

Figure 1 on page 15 and Table 1 on page 19).6 That amount is about 6 percent more 

1. The first of those Congressional Budget Office reports, The Long-Term Implications of Current 

Defense Plans, appeared in January 2003. Each year since then, CBO has published summary and 

detailed updates (the latter in annotated briefing format); all are available online: www.cbo.gov.

2. Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2009 to 2019

(January 2009).

3. Department of Defense, “DoD [2010 Budget] Request,” www.defenselink.mil/comptroller/

Budget2010.html.

4. Department of Defense, “Defense Budget Recommendation Statement” (as prepared for delivery 

by Secretary of Defense Robert M. Gates, April 6, 2009), www.defenselink.mil/speeches/

speech.aspx?speechid=1341.

5. The FYDP is a database that comprises a historical record of defense forces and funding as well as 

DoD’s plans for future programs. The historical portion shows costs, forces, and personnel levels 

since 1962. The plan portion presents DoD’s program budgets (estimates of funding needed for the 

next five or six years, based on the department’s current plans for all of its programs).

6. CBO measures inflation by the implicit price deflator for gross domestic product. That index 

measures overall prices among final goods and services in the U.S. economy.
2

CBO

than the $534 billion in total obligational authority (TOA) requested by the Administration in its regular 2010 budget, again excluding overseas contingency operations.7

Four main factors account for the higher resources required in the long term:

B The likelihood of continued real growth in pay and benefits for DoD’s military and 

civilian personnel;

B The projected increases in the costs of operation and maintenance (O&M) for 

aging equipment as well as for newer, more complex equipment;

B DoD’s plans to develop and field advanced weapon systems to replace many of 

today’s military systems that are nearing the end of their service lives; and

B Investments in new capabilities, such as advanced intelligence, surveillance, and 

reconnaissance systems, to meet emerging security threats.

Supplemental and emergency appropriations to fund overseas contingency operations 

totaled $171 billion in 2007 ($180 billion in constant 2010 dollars), or 39 percent as 

much as regular funding for DoD that year. In 2008, those appropriations peaked at 

$187 billion ($192 billion in constant 2010 dollars), again 39 percent as large as the 

regular defense budget that year. In 2009, those appropriations dropped to $154 billion 

($155 billion in constant 2010 dollars), or 35 percent the size of the regular defense 

budget, reflecting a reduction in the number of U.S. military personnel in Iraq.

This year, for the first time since overseas contingency operations began in fiscal year 

2002, the Administration has requested a full year of anticipated appropriations for 

those operations along with its regular defense budget request. In March 2009, the 

U.S. military had deployed about 175,000 service members to the Iraq theater and 

about 40,000 to the Afghanistan theater. The Administration’s request of $130 billion 

for 2010 would support a smaller total number: 100,000 service members in Iraq and 

68,000 in Afghanistan.8 CBO does not have access to DoD’s estimates of costs for 

overseas contingency operations in 2011 or later that would have been contained in 

the 2010 FYDP.9

7. All funding in CBO’s projection is calculated as TOA, the bulk of which is for annual 

appropriations sought by the department. Budget authority differs from TOA in that it includes 

the effects of certain receipts, permanent spending in certain trust funds and other accounts, and 

certain payments to the military retirement fund. In recent years, the difference between TOA and 

budget authority in subfunction 051 of the federal budget (which funds the Department of 

Defense) has been $2 billion or less.

8. Department of Defense, Fiscal Year 2010 Budget Request: Summary Justification (May 2009), 

www.defenselink.mil/comptroller/defbudget/fy2010/fy2010_SSJ.pdf. 

9. The Administration submitted a “placeholder estimate,” however, in the President’s 2010 budget 

request of $50 billion per year from 2011 to 2014. See Office of Management and Budget, Updated 

Summary Tables: Budget of the U.S. Government, Fiscal Year 2010 (May 2009), Table S-12, 

www.whitehouse.gov/omb/budget/fy2010/assets/summary.pdf.
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CBO

The long-term demand for defense resources could be larger than CBO’s base projections. CBO has developed a scenario under which, consistent with the Status of 

Forces Agreement signed by the governments of Iraq and the United States in November 2008, all U.S. troops would be withdrawn from Iraq by December 31, 2011. The 

total number of U.S. military personnel deployed worldwide would decline to 30,000 

starting in fiscal year 2013, although those troops would be in unspecified locations 

and not necessarily in Iraq or Afghanistan.10 CBO estimates that supporting that 

number of deployed service members would require recurring annual appropriations 

of about $20 billion in 2010 dollars. CBO refers to those costs as “contingency 

unbudgeted costs.”

Other factors also could increase defense resources above CBO’s base projections. 

There could be higher costs for developing and purchasing new weapon systems; 

CBO’s analysis of unbudgeted costs assumes the same percentage cost growth, on 

average, that has been observed in the past.11 In addition, as has been true historically, 

medical costs could rise more rapidly than DoD has assumed; CBO assumes that 

DoD’s medical costs per capita beyond fiscal year 2015 will increase 30 percent faster 

than the rate projected for the rest of the nation.12 Accounting for those and other 

factors, as well as contingency costs, CBO has projected the “total unbudgeted costs” 

of current defense plans. The inclusion of total unbudgeted costs increases the projection to an annual average of $624 billion through 2028, or 17 percent more than the 

regular funding requested for 2010 (see Figure 1). Some 38 percent of the total 

unbudgeted costs between 2013 and 2028 are associated with overseas contingency 

operations.

Under DoD’s current plans and CBO’s projections, defense resources would steadily 

decline as a share of U.S. gross domestic product (GDP).13 That share declined from 

10. Congressional Budget Office, The Budget and Economic Outlook: An Update (August 2009), 

pp. 21–26

11. See Mark V. Arena and others, Historical Cost Growth of Completed Weapon System Programs, 

TR-343-AF (prepared by RAND Corporation for the United States Air Force, 2006), 

www.rand.org/pubs/technical_reports/2006/RAND_TR343.pdf; and Obaid Younossi and others, 

Is Weapon System Cost Growth Increasing? A Quantitative Assessment of Completed and Ongoing 

Programs, MG-588-AF (prepared by RAND Corporation for the United States Air Force, 2007), 

www.rand.org/pubs/monographs/2007/RAND_MG588.pdf.

12. DoD anticipates that medical costs will escalate more rapidly than general inflation. In its 

programming guidance for fiscal year 2010, the DoD comptroller promulgated annual inflation 

rates for fiscal years 2013 through 2015 of 1.8 percent for operation and maintenance, excluding 

fuel and the Defense Health Program (DHP), 7 percent for private-sector medical care purchased by 

the DHP, 10.1 percent for pharmacy outlays, and 6.4 percent for other DHP outlays (mostly for care 

provided at military treatment facilities). See Department of Defense, “Inflation Guidance—Fiscal 

Year (FY) 2010 President’s Budget” (memorandum from the Under Secretary of [Comptroller], 

February 13, 2009), www.ncca.navy.mil/services/PB2010_Inflation_Guidance_Feb_13_2009.pdf.

For the justification of the 30 percent acceleration in costs beyond 2015, see Congressional Budget 

Office, Growth in Medical Spending by the Department of Defense (September 2003), p. 14.

13. CBO’s estimate of future GDP growth is based on continuing the series presented in The Budget 

and Economic Outlook: An Update.
4

CBO

an annual average of 5.6 percent in the 1980s to 3.8 percent in the 1990s and rose 

again above 4 percent after 2005 with supplemental and emergency funding 

included.14 If DoD’s current plans were carried out, defense spending would decline 

to 3.2 percent of GDP by 2015 and to 2.6 percent of GDP by 2028. Defense spending would be higher when unbudgeted costs are included, but it would still decline to 

3.8 percent of GDP by 2015 and to 3.1 percent of GDP by 2028 (see Figure 2 on 

page 16). 

The remainder of this testimony describes in more detail CBO’s projections of funding for operation and support (O&S) accounts and for investment accounts. O&S 

accounts include the appropriation titles for military personnel, O&M, and various 

revolving funds.15 I highlight causes of increases in those accounts over the past 

decade, some of which CBO projects will continue to grow for the next decade or 

two. Investment accounts are for developing, testing, and purchasing weapon systems 

and other equipment. I discuss possible budgetary effects of recent announcements by 

the Secretary of Defense concerning the restructuring or termination of several major 

defense acquisition programs.

Projections of Funding for Operation and Support

	


	

		

includes $188 billion, or 35 percent of the total, for O&M and $136 billion, or 

25 percent of the total budget, for military personnel (see Table 1).

Between 1980 and 2001, O&M costs per active-duty service member increased 

steadily by about $2,200 per year (in constant 2010 dollars). O&M has deviated 

above that trend since 2002 because the wars in Iraq and Afghanistan have required 

large amounts of O&M funding but more modest increases in active end strength 

(the number of active military personnel as of the last day of the fiscal year.)16 Those 

funds supported U.S. military forces in the Iraq and Afghanistan theaters, providing 

food, housing, and contracted security; fuel, spare parts, and maintenance for military 

equipment; transportation of personnel and equipment to and from the theater; and 

other services. The regular defense budget for 2010 requests O&M funding that 

exceeds the prewar trend line by between $12,000 and $15,000 per service member; 

an additional $9,000 per service member would be required if funding for overseas 

contingency operations is included.

14. Defense spending here is measured by the actual disbursements (outlays) from the Treasury that 

arise from funding for defense programs.

15. For its analysis, CBO treats the revolving funds as part of the O&M appropriation. The revolving 

funds generate receipts from fees charged to the military services and defense agencies; they also 

receive direct appropriations. Those funds include the National Defense Sealift Fund, the Defense 

Commissary Agency, Defense Coalition Support, and each military department’s fund for working 

capital.

16. The Army’s active-duty end strength increased by 13 percent, from 480,000 in 2001 to 544,000 in 

2008. The supplemental and emergency appropriations for Army O&M in 2007 totaled twice the 

amount in the regular budget for that year.
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CBO

Important Influences on the Costs of Operation and Support 

For its projections, CBO divided O&S funding into functional categories used by 

DoD’s program analysts:17

B Operating forces—military and support units assigned to combatant commands;

B Medical—medical personnel, military medical treatment facilities (MTFs), 

purchased care, pharmaceuticals, and medical accrual charges;18

B Bases, installations, and infrastructure—installations for military forces, 

communications and information infrastructure, central benefit programs for 

DoD personnel, and miscellaneous activities;

B Command and intelligence—operational headquarters, command-and-control 

systems, and intelligence collection;

B Central training—training at central locations away from service members’ duty 

stations;

B Central logistics—depot-level maintenance, supplies, and transportation of 

materiel; and

B Headquarters and administration—acquisition infrastructure, science and technology programs, central personnel administration, and departmental management.

CBO assumes that all costs other than those for military and civilian pay and the two 

categories labeled “operating forces” and “medical” grow at the rate of general inflation (see Figure 3 on page 17 and Table 2 on page 20). Projected funding for operating forces exhibits real growth because as weapon systems age, their O&M costs 

increase as well. Moreover, new generations of weapon systems are likely to be more 

complex and more expensive to operate and maintain than the systems they replace.19

Medical costs also have grown faster than other O&M-funded activities in the past, 

and the DoD comptroller’s programming guidance anticipates continuing inflation in 

those costs.20

17. The definitions that follow are adapted from Ronald E. Porten, Daniel L. Cuda, and Arthur 

C. Yengling, DoD Force and Infrastructure Categories: A FYDP-Based Conceptual Model of 

Department of Defense Programs and Resources (Alexandria, Va.: Institute for Defense Analyses, 

September 2002).

18. Medical accrual charges are distributed among all of the O&S functional categories in the defense 

budget. To provide a comprehensive estimate of DoD’s medical costs, CBO consolidated all such 

charges in the medical category.

19. Congressional Budget Office, The Effects of Aging on the Costs of Operating and Maintaining 

Military Equipment (August 2001).

20. See Department of Defense, “Inflation Guidance—Fiscal Year (FY) 2010 President’s Budget.”
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CBO

CBO projects continued real growth in military and civilian pay. In November 2003, 

Congress passed a permanent law that indexed the annual increase in basic military 

pay to the percentage increase in the Bureau of Labor Statistics’ employment cost 

index (ECI) for wages and salaries in private industry.21 The ECI grew more rapidly 

than the GDP deflator in all years but two from 1981 to 2009; 	



pattern will continue between 2010 and 2028 and that growth of the ECI will exceed 

growth of the GDP deflator by an average of 1.4 percentage points per year. Furthermore, in 20 of the past 28 years the annual pay raise for federal civilians has been set 

equal to (and, in one year, above) the percentage increase in basic military pay.22

Assuming that pay raises for federal civilians continue to keep pace with those for military personnel, CBO projects continued real growth in pay for both groups. 

CBO’s projections reflect several developments over the past decade that provided 

new or enhanced military benefits:

B Changes to the REDUX retirement system. 
			

personnel who retire after 20 years of active service increased from 40 percent to 

50 percent of a service member’s “high-three” basic pay, and the system now 

provides full (rather than partial) cost-of-living adjustments each year.23

B Establishment of TRICARE for Life. Expanded health care coverage is now available 

for Medicare-eligible military retirees and their families, paying most of what 

would have been the retiree’s out-of-pocket cost shares under Medicare as well as 

funding space-available care for retirees at MTFs.24

B Elimination of the Social Security Offset for the Survivor’s Benefit Plan. The retirement annuity for surviving spouses who participate in the plan and attain age 

62 increased from 35 percent to 55 percent of the deceased service member’s 

retirement pay.25

21. Section 602 of the NDAA for fiscal year 2004 (P.L. 108-136, 117 Stat. 1498, amending 37 U.S.C. 

1009). See Department of Labor, Bureau of Labor Statistics, “Employment Cost Trends: Data 

Usage,” www.bls.gov/ncs/usage.htm; and Charles A. Henning, Military Pay and Benefits: Key 

Questions and Answers, CRS RL33446 (Congressional Research Service, updated October 31, 

2008), www.policyarchive.org/bitstream/handle/10207/20192/

RL33446_20081031.pdf?sequence=3.

22. In two other years, 2000 and 2001, the pay raise for civilian employees was set equal to the acrossthe-board increase in basic military pay, but the Congress enacted additional military pay raises tied 

to seniority. Thus, the average military pay raise exceeded the civilian pay raise in those two years.

23. The basic pay that determines an active-duty service member’s retirement annuity is computed as 

the average of the 36 highest months of basic pay in the service member’s career. The retirement 

changes were enacted in the National Defense Authorization Act for Fiscal Year 2000 (NDAA, 

Public Law 106-65, 113 Stat. 512) and affected service members who retired beginning in 2006.

24. TRICARE for Life was enacted in the NDAA for fiscal year 2000. The program is funded on an 

accrual basis, with payments into the Medicare-Eligible Retiree Health Care Fund charged against 

the military personnel accounts.

25. That change was enacted in the NDAA for fiscal year 2005 (P.L. 108-375, section 644, 118 Stat. 

1960, 10 U.S.C. 1451).
7

CBO

B Changes in the Rules Regarding Concurrent Receipt. Several classes of retired military 

personnel are now permitted to receive military retirement pay without any offset 

for compensation for a service-connected disability they receive from the Department of Veterans Affairs.26

B Provision of Early Receipt of Retirement Pay by Some Reservists. The age at which 

retired members of the reserve components can receive retirement pay was lowered 

to less than age 60 in some cases and is based on the accumulation of periods of 

active duty during the member’s military career.27

In addition to those new benefits, the Congress has enacted real increases in basic military pay that affect the pay of active service members and their future retirement 

annuities. DoD funds military retirement on an accrual basis, with payments into the 

Military Retirement Fund charged against the military personnel accounts. Higher 

basic pay today leads to higher projections of future retirement annuities, in turn 

requiring larger contributions today from the military personnel accounts into the 

retirement fund.28

Military Compensation

In early 1980s, several relatively large increases in military pay were enacted that purportedly equalized the pay scales for military personnel and the civilian workforce. 

However, many observers assert that since 1982 a gap has developed between basic 

military pay and civilian wages and salaries. The Congress has passed several measures 

in an effort to close that gap.

Pay Comparability. Up to 2003, the annual increase in basic military pay had been 

linked to the percentage increase in the General Schedule pay scale under the Federal 

Employees Pay Comparability Act of 1990. In November 2003, the Congress enacted 

a permanent law requiring that annual increases in basic pay from 2007 forward be 

indexed to the ECI. That law also stipulated that the pay increases for 2004, 2005, 

and 2006 exceed the increase in the ECI by one-half of 1 percentage point.29 With 

the 2008 and 2009 pay increases, which also exceeded the percentage increase in the 

ECI, the pay gap, which in 1998 and 1999 reached 13.5 percent, was reduced to 

26. The rules for concurrent receipt have been relaxed successively in the Bob Stump NDAA for fiscal 

year 2003 (P.L. 107-314, section 636, 116 Stat. 2574, 10 U.S.C. 1413a, as amended by section 

642 of the NDAA for fiscal year 2004, P.L. 108-136, 117 Stat. 1566) and in the NDAA for fiscal 

year 2008 (P.L. 110-181, section 641, 122 Stat. 156).

27. That change was enacted in the NDAA for fiscal year 2008 (P.L. 110-181, section 647, 122 Stat. 

160, 10 U.S.C. 12731).

28. Those calculations are revisited each year by DoD’s Office of the Actuary, most recently in 

“Valuation of the Military Retirement System: September 30, 2007” (December 2008), 

www.defenselink.mil/actuary/valbook2007.pdf.

29. Section 602 of the NDAA for fiscal year 2004 (P.L. 108-136, 117 Stat. 1498, amending 37 U.S.C. 

1009).
8

CBO

2.9 percent (the percentage by which the cumulative increase in military basic pay 

since 1982 fell short of the cumulative increase in the ECI for wages and salaries in 

private industry; see Figure 4 on page 18).

The pay gap as conventionally measured might not provide the best information on 

the adequacy of military compensation. First, the broad sample of civilian workers 

included in the survey used to produce the ECI consists of people who are, on average, older than military personnel and more likely to have college degrees. Since 1980, 

the pay of college-educated workers has risen faster than that of high school graduates 

in the civilian sector. Also, the pay of older civilian workers generally has grown faster 

than that of younger workers. 

Basic pay for enlisted personnel closely matches the 50th percentile (median) earnings 

for civilian counterparts of comparable age and education. With cash allowances 

added to the equation, pay for the average enlisted member in 2006 matched the 

75th percentile of civilian earnings, exceeding DoD’s stated goal of paying at the 

70th percentile.30

The pay gap calculation focuses on one part of military compensation—basic pay—

and ignores changes in other components. Regular military compensation (RMC) is 

a broader measure that, in addition to basic pay, includes housing and food allowances, which are not subject to the federal income tax. In addition to raising basic pay 

in 2000, DoD requested and lawmakers authorized a restructuring of housing 

allowances that eliminated out-of-pocket expenses typically paid by service members 

(those payments had averaged about 20 percent of housing costs).31 Other changes 

were made as well: Allowance rates were more closely linked to increases in local 

housing prices, and service members were given “rate protection” from any declines in 

those prices. 

With RMC substituted for basic pay in the comparison, annual increases in military 

compensation outpaced the corresponding increases in the ECI for 8 of the 10 years 

between 2000 and 2009. The pay gap recomputed using RMC reveals a pay surplus 

after 2002, standing at 10.3 percent as of January 1, 2009 (the percentage by which 

the cumulative increase in RMC since 1982 exceeded the cumulative increase in the 

ECI for wages and salaries in private industry; see Figure 4). Ultimately, the best 

barometer of the effectiveness of DoD’s compensation system is how well the military 

attracts and retains high-quality, skilled personnel. Overall, in recent years DoD has 

met its goals in recruiting and retaining active-duty members (perhaps because 

30. The percentile comparisons were reported in Congressional Budget Office, Evaluating Military 

Compensation (June 2007). DoD’s goal of paying at the 70th percentile was first stated in 

Department of Defense, Report of the Ninth Quadrennial Review of Military Compensation (2002), 

www.defenselink.mil/prhome/qrmc/.

31. Those changes were enacted in the NDAA for fiscal year 2001 (P.L. 106-398, section 605, 114 Stat. 

1654A-147, 37 U.S.C. 403).
9

CBO

military compensation compares favorably with civilian options), notwithstanding the 

prospect of deployment to Iraq or Afghanistan.32

Many of the same considerations apply to DoD’s civilian personnel. DoD’s 2010 budget calls for employing 745,000 full-time-equivalent civilians who would earn 

$69 billion in compensation in that year. Of that sum, $57 billion would be paid 

from the O&M appropriation.33 The same pressures that real increases (above general 

inflation) in military compensation exert on the military personnel appropriation are 

reinforced by real increases in civilian compensation in the O&M (and other) appropriations, both contributing to the real increases in funding required for operation 

and support.

Unbudgeted Pay Increases. CBO’s base projection assumes that military and civilian 

pay raises from 2011 forward will be set equal to the percentage increase in the ECI.34

Among other factors, CBO’s analysis of unbudgeted costs attempts to quantify the 

impact on future defense budgets if military and civilian pay raises above the ECI 

continue to be enacted. In particular, CBO’s analysis assumes that military personnel 

and federal civilians will receive pay raises in 2011 through 2015 that equal its projection of the percentage increase in the ECI plus a premium of 0.5 percentage points. 

Funding those five years of larger pay raises would require an additional $2.8 billion 

in the military personnel appropriation and $2.3 billion in the O&M appropriation 

(to fund higher civilian salaries) by 2015. Although pay raises are assumed to revert to 

the ECI after 2015, the funding necessary to sustain the larger pay raises assumed 

from 2011 through 2015 would continue to compound in future years, requiring 

$3.6 billion in the military personnel appropriation and $2.8 billion in the O&M 

appropriation by 2028.

32. Congressional Budget Office, Recruiting, Retention, and Future Levels of Military Personnel 

(October 2006).

33. See the “Green Book,” namely, Department of Defense, National Defense Budget Estimates for FY 

2010 (June 2009), Tables 61, 62, and 75, www.defenselink.mil/comptroller/defbudget/fy2010/

Green_Book_Final.pdf. (The remaining civilians would be paid from other appropriation titles: 

For instance, civilians in military laboratories might be paid from the appropriation for research, 

development, test, and evaluation; civilians in acquisition programs offices might be paid from the 

procurement appropriation.)

34. The pay raises that are expected to take effect on January 1, 2010, have not yet been enacted. DoD’s 

2010 budget requested a military raise of 2.9 percent and assumed a 2.0 percent raise for civilian 

employees (see Department of Defense, Fiscal Year 2010 Budget Request: Summary Justification). 

The House and Senate versions of the 2010 NDAA (H.R. 3170 and S. 1390) would provide a larger 

military raise of 3.4 percent. The House version of the Financial Services and General Government 

Appropriations Act for 2010 (H.R. 3170) would provide a raise of 2.0 percent for federal civilian 

employees, as requested by the Administration, whereas the Senate version (S. 1432) would provide 

a raise of 2.9 percent. CBO’s base projection assumes raises of 2.9 percent for military personnel and 

2.0 percent for civilians, as in DoD’s budget request; CBO’s estimate of unbudgeted costs assumes 

larger raises of 3.4 percent in 2010 for military personnel and civilians.
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CBO

Projections of Funding for Investment

The 2010 regular budget request for investment (excluding overseas contingency 

operations) includes $109 billion, or 20 percent of the total defense budget, for 

procurement; it also includes $79 billion, or 15 percent of the total, for research, 

development, test, and evaluation (RDT&E, see Table 1). CBO’s projection of 

$126 billion in procurement funding for 2020 is below CBO’s earlier 

projection that was based on the 2009 FYDP; CBO’s projection of $187 billion 

in total investment funding for 2020 is $7 billion below its earlier projection.35

The new, smaller projections incorporate recently announced changes to DoD’s 

investment plans.

Basis of Projections

The Secretary of Defense announced several major changes to DoD’s investment 

plans before the formal release of the 2010 budget.36 Although additional details were 

provided in the budget request and in subsequent press releases and briefing materials, 

the Administration did not submit a FYDP (which would have contained projected 

funding and other program information through 2015) with its 2010 budget request. 

Nor did it submit year-end (December 2008) Selected Acquisition Reports (SARs), 

which would have provided cost, schedule, and funding data (including the estimated 

out-year funding requirements) to reflect the program of record for each major 

defense acquisition program.

In the absence of information typically available in a FYDP, CBO relied on the President’s 2010 budget request, with its accompanying budget justification materials, and 

other sources (including the previous year’s FYDP and SARs, to the extent they are 

still applicable) to project investment resources through what would have been the 

FYDP years (2011 through 2015) and further out, to 2028 (see Table 3 on page 21). 

Important Influences on Projections of the Costs of Investment

This section provides four examples of changes in DoD’s investment plans that CBO 

was largely able to anticipate and thus build into its projection of the 2010 defense 

budget. Those four changes affect the number of brigade combat teams (BCTs) in the 

active Army, the Future Combat Systems (FCS) program, the Airborne Laser (ABL) 

program, and sea- and land-based missile defense in Europe.

DoD’s Plans to Lower the Target Number of BCTs in the Active Army from 48 to 45. 

According to the 2009 FYDP, DoD planned to expand the active Army from 42 to 

48 combat brigades by 2013 (as well as 28 BCTs in the Army National Guard). In its 

2009 edition of 	

 CBO noted that the active Army would probably be 

unable to identify 23,000 additional soldiers (beyond those already identified) to fully 

populate 6 new brigades under the current cap on total Army personnel.37In April 

35. See Congressional Budget Office, Long-Term Implications of the Fiscal Year 2009 Future Years 

Defense Program (January 2009).

36. Department of Defense, “Defense Budget Recommendation Statement.”

37. Congressional Budget Office, Budget Options, Volume 2 (August 2009), Option 050-1, p. 6.
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CBO

2009, the Secretary of Defense proposed curtailing the number of BCTs at 45 (versus 

48) as a means to ensure that deployed units are fully staffed and to end the routine 

use of “stop loss” (the practice of involuntarily retaining deployed soldiers past the end 

of their enlistment or reenlistment contracts, until after their units return to the 

United States). The Secretary also proposed maintaining the active Army’s planned 

end strength at 547,000. CBO estimates that by holding that end strength, DoD can 

avoid requesting as much as $16 billion over the next five years in budget authority 

that would be required for the expansion.38

DoD’s Plans to Cancel the Manned-Vehicles Portion of the Army’s FCS Program. The 

FCS program had been planned to encompass eight new models of manned combat 

vehicles as well as new unmanned aerial and ground vehicles, sensors, and munitions. 

All of those components would be linked by advanced communications networks 

into an integrated combat system. In January 2009, CBO projected (on the basis of 

the 2009 FYDP) that the Army’s FCS program would cost $60 billion over the next 

10 years; “spinning out” technology enhancements to all of the Army’s infantry 

BCTs would cost $10 billion; the upgrades and purchase of combat vehicles would 

cost $28 billion. The combined 10-year cost of those related programs would have 

been $98 billion.

The Secretary announced in April 2009 that DoD would cancel the manned-vehicle 

portion of the FCS program. The department would then reevaluate that component 

and restart it at some unspecified time in the future. Further details concerning the 

revised FCS program, including funding estimates and delivery schedules for the various components, will most likely not be available until DoD submits its 2011 budget 

(and associated FYDP) in February 2010. As a substitute for the FCS plan that would 

have procured about 300 new vehicles per year, CBO analyzed a plan under which the 

Army would upgrade its existing Abrams tanks, Bradley fighting vehicles, and M109 

self-propelled howitzers and also purchase new Stryker wheeled vehicles. CBO estimates those upgrades and new purchases of an average of 770 vehicles per year would 

cost a total of $43 billion between 2010 and 2019. In addition, CBO estimated a cost 

of $37 billion over the same 10-year period to spin out improved communications 

and other systems for all 73 of the Army’s active and National Guard BCTs.39 All 

together, the program assumed in CBO’s projections would cost an estimated $18 billion less over the next 10 years than the plan in the 2009 FYDP. (The Secretary’s 

38. The Secretary of Defense also announced a temporary increase in active Army end strength from 

547,000 to 569,000 through fiscal year 2012. The Secretary indicated that the increase in end 

strength for fiscal years 2009 and 2010 could be achieved without requesting any additional budget 

authority (see Department of Defense, “DoD News Briefing with Secretary Gates and Chairman, 

Joint Chiefs of Staff Adm. Michael Mullen” [news transcript, July 20, 2009], www.defenselink.mil/

transcripts/transcript.aspx?transcriptid=4447). The source for funding in 2011 and 2012 remains 

to be determined.

39. Congressional Budget Office, Budget Options, Volume 2 (August 2009), Option 050-4, p. 10; An 

Analysis of the Army’s Transformation Programs and Possible Alternatives (June 2009); and The Army’s 

Future Combat Systems Program and Alternatives (August 2006).
12

CBO

announcement concerning FCS left open the possibility of restarting the Army’s 

program to develop new types of manned combat vehicles; CBO’s estimates did not 

include any development or procurement costs for that program.)

DoD’s Plans to Cancel the Second ABL Aircraft and Restructure the Program as a 

Research and Development Effort. The ABL program, managed by the Missile 

Defense Agency, has been working to develop a system to destroy enemy ballistic missiles during their boost phase—the few minutes after launch before a missile’s rocket 

motors burn out—by means of a high-energy chemical laser carried on modified 

Boeing 747 aircraft. Under previous plans, a successful test of the first ABL against a 

missile in flight would have been followed by development of a second prototype and, 

eventually, by the fielding of seven aircraft for operational use. Citing problems with 

technology and cost as well as doubts about the operational roles envisioned for the 

ABL, DoD announced that plans for the second aircraft would be shelved and that 

the program would be shifted to a research and development effort.

CBO is currently examining the operational effectiveness and potential costs of purchasing and operating of a fleet of ABL aircraft. The analysis will explore such factors 

as how well the ABL’s lasers and optics will perform in combat, the number of aircraft 

needed to keep a single ABL on station around the clock, the vulnerability of the ABL 

to enemy action, and the potential need for additional support such as fighter protection and aerial refueling.

CBO’s projection assumed that the shoot-down test for the first ABL aircraft, which 

was originally scheduled for 2009, would be completed in 2010 but that none of the 

seven subsequent ABL aircraft would be built. CBO also assumed that the Missile 

Defense Agency would maintain an ongoing research and development effort costing 

$300 million per year in 2010 dollars. CBO estimates that those changes to the ABL 

program would yield net savings in budget authority of $2.4 billion over the next five 

years (2010–2014) and $8.6 billion between 2010 and 2019 (in 2010 dollars). The 

Secretary’s announcement left open the possibility that a second or later ABL aircraft 

could be procured, depending on the outcome of the shoot-down test and subsequent 

research and development efforts; CBO’s estimate does not include any funding for 

those aircraft.

DoD’s Plans to Change Ground-Based Missile Defense Systems. In April 2009 the 

Secretary of Defense announced plans to freeze the current number of ground-based 

interceptors in Alaska as part of the ground-based midcourse missile defense system 

that is intended to defend the United States against limited ballistic missile attacks 

from North Korea or Iran. The plan would continue funding for research and development to improve the nation’s ability to defend against long-range ballistic missiles. 

DoD also announced plans to upgrade six Navy Aegis warships to perform the ballistic missile defense mission at a total cost of $200 million. Moreover, on September 

17, 2009, President Obama announced his cancellation of the previous Administration’s plans to field a high-resolution tracking radar in the Czech Republic and to
13

CBO

deploy 10 ground-based interceptor missiles in permanent silos in Poland.40 In its 

place, the President proposed a four-phase plan. Phase One would rely on Block IA of 

the SM-3 missile, which would be deployed on existing Aegis warships.41 Phase One 

also would base an AN/TPY-2 radar in Europe to provide early detection and tracking 

of ballistic missiles if launched toward the United States. Phase Two would entail both 

sea- and land-based deployment of a more capable Block IB version of the SM-3 missile; Phases Three and Four would involve Block IIA and Block IIB missiles that are 

still under development. (Each block represents a major upgrade in capability from its 

predecessor.) 

In a report published in February 2009, CBO discussed three alternatives to the previous Administration’s plans for ballistic-missile defense in Europe. Two of the three are 

similar to the current Administration’s revised plans.42 One alternative would use 

SM-3 missiles deployed on Aegis warships operating at three locations around 

Europe, supported by two forward-based tracking radar stations; another alternative 

would rely on land-based SM-3 missiles operating from mobile launchers located at 

two U.S. bases in Europe (Ramstein Air Base in Germany and Incirlik Air Base in 

Turkey), supported by two transportable radar units. The Administration’s new plan 

blends elements of these two options and encompasses both sea- and land-based 

deployment of SM-3 missiles.

For a sea-based concept, maintaining continuous coverage in three locations would 

require a total of nine ships (for each ship deployed, another would be undergoing 

maintenance and a third would be in use for training). CBO viewed the fiscal year 

2010 request for $200 million to convert six warships as a first installment in pursuing an approach of upgrading existing warships (or proposed warships that would 

have been built to perform other missions) to provide missile defense. That approach 

would reduce costs relative to procuring new ships but would forgo the possibility of 

deploying those ships to other locations in the world where they could perform other 

missions. Alternatively, if new ships are needed, an option would be to adapt littoral 

combat ships for the missile defense mission with a specially developed Aegis module 

consisting of a version of the AN/SPY-1 radar and vertical launch system cells; CBO 

has estimated those ships would cost $650 million each. 

40. The White House, “Fact Sheet on U.S. Missile Defense Policy: A ‘Phased, Adaptive Approach’ for 

Missile Defense in Europe” (press release prepared by the Office of the Press Secretary, September 

17, 2009), www.whitehouse.gov/the_press_office/FACT-SHEET-US-Missile-Defense-Policy-APhased-Adaptive-Approach-for-Missile-Defense-in-Europe/.

41. On February 21, 2008, a modified SM-3 Block IA missile fired from the Aegis cruiser U.S.S. Lake 

Erie (CG-70) destroyed a military satellite that was in a deteriorating orbit and carrying the toxic 

chemical hydrazine. See Jim Garamone, “Lake Erie Satellite Shot” (Pearl Harbor, Hawaii: American 

Forces Press Service) www.lake-erie.navy.mil/Site%20Pages/Events_Satilite%20shot.aspx.

42. Congressional Budget Office, Options for Deploying Missile Defense in Europe (February 2009).
14

CBO

In January 2009 (on the basis of the 2009 FYDP), CBO projected that total investment costs for missile defense would be at least $10 billion per year, peaking at 

$17 billion in 2018; unbudgeted costs could add another $4 billion annually.43 The 

Secretary announced in April 2009 that the ABL program would be limited to a single 

aircraft, that no additional ground-based interceptors would be deployed in Alaska, 

and that the Multiple Kill Vehicle program would be terminated. With those and 

other changes, the 2010 request for the Missile Defense Agency would be $1.4 billion 

smaller than the amount provided in 2009.44 Incorporating those changes, CBO now 

projects that total investment costs for missile defense would average about $8 billion 

annually through 2028, peaking at about $10 billion in 2014. The total savings, 

averaging $2 billion per year, include the specific savings from restructuring the 

ABL program as described above.

43. Congressional Budget Office, Long-Term Implications of the Fiscal Year 2009 Future Years Defense 

Program.

44. Department of Defense, “Defense Budget Recommendation Statement.”
15

CBO

Figure 1.

Past and Projected Resources for Defense

(Billions of 2010 dollars)

Source: Congressional Budget Office.

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

100

200

300

400

500

600

700

800

Military Personnel

Operation and Maintenance

Procurement

Research, Development, Test, and Evaluation

Family Housing Military Construction

With

Contingency

Unbudgeted

Costs

With Total

Unbudgeted Costs

Actu FYD CBO Projection

January 2009 Projection

2009 Supplemental

Appropriations

2010 Supplemental

Request

Actual CBO Projection
16

CBO

Figure 2.

Defense Resources as a Percentage of Gross Domestic Product

(Percent)

Source: Congressional Budget Office.

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

1

2

3

4

5

6

7

Administration's Plan

With Unbudgeted Costs

Actual CBO Projection

Administration's

Plan
17

CBO

Figure 3.

Past and Projected Resources for Operation and Support 

(Billions of 2010 dollars)

Source: Congressional Budget Office.

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

50

100

150

200

250

300

350

400

450

500

Headquarters and Administration

Central Logistics

Central Training

Bases, Installations, and

Infrastructure

Medical

Operating Forces

Command and Intelligence

With Total

Unbudgeted Costs

January 2009 Projection

2009 Supplemental

Appropriations

2010 Supplemental

Request

With Contingency

Unbudgeted Costs

Actual CBO Projection
18

CBO

Figure 4.

Differences Between Military and Private-Sector Pay Raises Since 1982

(Percent)

Source: Congressional Budget Office based on data from the Department of Defense and the Department of Labor.

Note: RMC = regular military compensation (basic pay, allowances for housing and subsistence, and the federal tax advantage 

that occurs because those allowances are not taxed); ECI = employment cost index for wages and salaries in private 

industry.

1984 1987 1990 1993 1996 1999 2002 2005 2008

-20

-15

-10

-5

0

5

10

15

Cumulative Difference Between

Changes in RMC and the Civilian ECI

Cumulative Difference Between Changes in

Military Basic Pay and the Civilian ECI
19

CBO

Table 1.

Past and Projected Resources for Defense in Selected Years

(Billions of 2010 dollars)

Source: Congressional Budget Office.

Note: n.a. = not applicable.

a. This figure excludes $74 billion in other supplemental and emergency funding allocated among the appropriation titles 

listed above.

b. This figure includes $17 billion that the Administration has not requested but that CBO projects could be needed.

2013 2020 2028

113 109 120 126 116 117 127

81 79 57 61 54 66 59 ____ ____ ____ ____ ____ ____ ____

194 187 177 187 169 183 186

245 188 194 214 240 191 217

127 136 142 157 178 139 160 ____ ____ ____ ____ ____ ____ ____

373 324 336 371 417 330 377

28 23 11 11 13 14 12 ____ ____ ____ ____ ____ ____ ____

595 534 525 568 598 528 574

81 a 130 n.a. n.a. n.a. n.a. n.a. ____ ____ ____ ____ ____ ____ ____

676 664 525 570 599 527 575

n.a. 681 b 568 627 659 612 631

Projected

Military Personnel

2010 2010–2013 2014–2028

Average

Research, Development, Test, and

Evaluation

Subtotal, Investment

Total Including Additional Funding

Total Including Unbudgeted Costs

Funding

2009

Other

Additional Supplemental and Emergency 

Subtotal, Operation and Support

Total, Regular Defense Budget

Operation and Maintenance

Procurement


CBO



	

				

(Billions of 2010 dollars)

 Congressional Budget Office.

Note: n.a. = not applicable.

a. This figure excludes $64 billion in other supplemental and emergency funding allocated among the categories listed above.

b. This figure includes $1 billion that the Administration has not requested but that CBO projects could be needed.

2013 2020 2028

161 124 128 139 152 126 140

44 46 50 65 85 48 68

Infrastructure 52 47 48 51 54 48 51

22 22 23 24 25 23 24

33 32 33 35 37 32 35

21 16 17 19 21 17 19

39 36 37 39 43 36 40 ____ ____ _____ ____ ____ ____ ____

Defense Budget 373 323 336 371 417 330 377

Funding 52 a 105 n.a. n.a. n.a. n.a. n.a. ____ ____ ____ ____ ____ ____ ____

424 429 336 371 417 330 377

n.a. 430 b 358 398 453 385 406

Additional Supplemental and Emergency 

Total, Including Additional Funding

Total Including Unbudgeted Costs

2009

Total Operation and Support, Regular

Command and Intelligence

Projected

Headquarters and Administration

2010 2010–2013 2014–2028

Medical

Bases, Installations, and 

Central Training

Central Logistics

Average

Operating Forces
21

CBO



Past and Projected Resources for Defense Investment in Selected Years

(Billions of 2010 dollars)

Source: Congressional Budget Office.

Note: n.a. = not applicable; C4ISR = command, control, communications, computers, intelligence, surveillance, and 

reconnaissance. 

a. This figure excludes $6 billion in other supplemental and emergency funding allocated among the categories listed above.

b. This figure includes $17 billion that the Administration has not requested but that CBO projects could be needed.

2013 2020 2028

10 7 7 13 5 7 10

15 17 21 25 24 19 25

29 26 31 20 24 29 24

4 4 523 4 3

1 1 242 1 3

5 9 963 9 7

48 46 45 56 55 48 56

Evaluation 81 77 57 61 54 66 59 ____ ____ ____ ____ ____ ____ ____

Total Investment, Regular Defense

Budget 194 187 177 187 169 183 186

Funding 28 a 23 n.a. n.a. n.a. n.a. n.a. ____ ____ ____ ___ ____ ____ ____

222 210 177 187 169 183 186

n.a. 227 b 199 217 193 213 214

Additional Supplemental and Emergency 

Total, Including Additional Funding

Total Including Unbudgeted Costs

Average

2009 2010 2010-2013 2014-2028

Aircraft

Missiles and Munitions

Missile Defense

C4ISR

Other Procurement

Research, Development, Test, and 

Projected

Ground Combat

Ships