Government Contracting Accounting and Compliance Developments Conference June 7&8, 2012 8:00 AM

In an effort to reduce spending the White House has proposed a ceiling on military spending which would span nearly two decades. The Wall Street Journal reports that proposed the proposed cuts are drawing criticism, particularly provisions that target military pay and benefits for U.S. troops.

"The Obama administration is proposing a cap on war outlays through fiscal 2021, the first time spending for military combat in Afghanistan and Iraq would be limited since the attacks of Sept. 11, 2001.

The plan is part of a Pentagon budget that also reins in military health and retirement benefits, adjusts pay scales and trims equipment programs, a series of moves designed to impose financial discipline.

For the fiscal year that begins Oct. 1, President Barack Obama is seeking $525.4 billion for the basic operations of the Defense Department, plus $88.4 billion to support troops in Afghanistan.

The proposal is $6 billion lower than the 2012 base budget of $531 billion, approved by Congress, which was a cut of $22 billion from the administration's proposal for the current year. In 2012, Congress appropriated $115.1 billion for the Afghanistan war.

A main feature of the fiscal 2013 request is the proposal to limit "overseas contingency operations" appropriations—the amount spent that is beyond the regular Pentagon budget—to a total of $450 billion from fiscal 2013 through 2021.

The proposal to limit emergency war spending quickly drew fire from Republicans.

"The president's budget is a clear articulation of Mr. Obama's priorities: reduce resources for our struggling armed forces, and redirect them to exploding domestic bureaucracies," said Rep. Howard McKeon (R., Calif.), chairman of the House Armed Services Committee. "This budget reflects a true reduction, in real terms, of military spending while we have troops in combat."

The administration is casting its proposal as a "multiyear" cap that would allow for flexibility from year to year and that could be adjusted in the event of an emergency.

Lawmakers exempted war costs from spending limits imposed under last year's budget control deal between the White House and Congress, creating what some called a "loophole" for the Pentagon to avert reductions.

Todd Harrison, a defense-spending expert at the Center for Strategic and Budgetary Assessments, a think tank with close ties to the Pentagon, said the president's proposal would close the loophole and "make it harder to circumvent the budget caps."

The new budget also cuts money for the Afghan security forces from $11.2 billion to $5.7 billion. Defense officials said that cut reflect the fact that the U.S. has met the equipment needs of the Afghan security forces, and can spend less on new weapons or vehicles.

The $88.4 billion war funding request for 2013 assumes that the U.S. troop level in Afghanistan will remain at 68,000, the current target level for September 2012.

"That doesn't mean there won't be later changes in Afghan troop levels, it does mean we don't bind the hands of the president," said Robert Hale, the Pentagon comptroller. "We want to let him hear the recommendations of his field commanders."

Obama administration officials have said that they want troop levels to continue to decline in 2013, but commanders in Afghanistan want to hold troops at 68,000 until the following year.

Last month, Defense Secretary Leon Panetta outlined the defense-spending plan, which calls for a reduced global U.S. military footprint while shifting more investment to U.S. special-operations forces and high-tech weaponry.

Defense officials are pursuing a goal of a 30% increase in unmanned aircraft flights, but are slowing an aggressive drone acquisition plan so they can invest in training for new operators needed to fly them.

Instead of purchasing 48 new Reaper drones in 2013, Defense officials will purchase 24, and plan to buy the rest later.

During the height of the Afghanistan and Iraq wars, increases in active-duty pay and benefits approved by Congress drove up personnel costs.

Health-care costs alone have more than doubled since 2001, rising to $49 billion from $19 billion. Both health and retirement benefits, military officials said, have to be brought into closer alignment with the private sector.

The Pentagon proposed a 1.7% pay increase for 2013, in line with private-sector increases. But the department said that, "in an effort to control costs," it is proposing lower raises for 2014 and beyond.

Also planned are increases in health enrollment fees and pharmaceutical co-pays."

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