Since the war on terrorism began in earnest after September 11, 2001, defense budgets have risen sharply. It would be reassuring to believe that the resources to fight this war will continue to be made available, regardless of its cost or duration, and that Congress and the President will at the same time maintain the broader military capabilities needed to protect the nation's security interests. Fiscal realities, however, have often compromised military capabilities in the past and may do so again in the future. The short-term threat to defense is tied to deficit control. Reducing the very large deficits projected for the next several years will require cutbacks in discretionary spending. As a result, defense will be competing with domestic programs for a shrinking share of the budget, and the politics of this competition could prove highly unfavorable for defense.

Chapters include: why defense budgets are unstable; post-cold war Transition I: the base force, and Transition II: the Clinton program; the shrinking discretionary spending margin; and risk, reversibility, and defense planning. 50 tables and charts. Index.

Since the war on terrorism began in earnest after September 11, 2001, defense budgets have risen sharply. It would be reassuring to believe that the resources to fight this war will continue to be made available, regardless of its cost or duration, and that Congress and the President will at the same time maintain the broader military capabilities needed to protect the nation's security interests. Fiscal realities, however, have often compromised military capabilities in the past and may do so again in the future. The short-term threat to defense is tied to deficit control. Reducing the very large deficits projected for the next several years will require cutbacks in discretionary spending. As a result, defense will be competing with domestic programs for a shrinking share of the budget, and the politics of this competition could prove highly unfavorable for defense. Over the longer term, the budget policy outlook is clearly negative. Like other advanced democracies, the United States must find a way to reform its social welfare system in response to an aging population. Unless retirement and healthcare entitlements for the elderly are retrenched significantly, these programs will generate enormous spending pressures, making it more and more difficult to support defense as well as other national needs. And since the defense commitments of the United States are unique, the fiscal challenge associated with welfare state modernization is especially pressing. The purpose of this monograph, then, is to present a fiscal policy framework that is likely to shape current and future defense funding levels. This framework is not immutable, but it does mean that defense planners need to take into account the ways in which domestic policy commitments, budget policy trends, and budgetary politics affect defense. In particular, current defense plans contain optimistic, and arguably unrealistic, assumptions about long-term funding for the core defense budget. Recent Future Years Defense Programs have projected real (inflation-adjusted) spending levels well above Cold War peaks and assumed that these levels, unlike the Cold War peaks, can be sustained indefinitely. However, with unusually severe budgetary constraints in place for the foreseeable future, defense spending levels will likely be lower and more volatile than current planning envisions. The challenge for strategic planners, then, is to impose clear priorities on a defense budget that cannot accommodate all they deem desirable. These priorities must also be prudent, which in a wartime context means protecting funding for the urgent and the necessary, readiness and traditional modernization, against the highly uncertain potential benefits of transformational modernization.

The U.S. Department of Defense accounts for over half of federal government discretionary spending and over 3% of GDP. Half of all federal employees work for the Department. The annual budget for the military not only provides for those salaries, it covers the baseline and wartime operating expenses of the force, and hundreds of billions of dollars of investment in new capabilities and technologies. Given the materiality of the defense function and amount of resources it consumes, the processes for budgeting for defense and managing the funds is important to understand. This text provides a fully integrated view of defense budgeting. It takes the position that defense budgeting is a specific instance of public budgeting, and public budgeting is a specific instance of public policy. In order to fully understand how the nation budgets for defense, it first lays a theoretical and conceptual foundation for public policy and public budgeting. That is followed by an assessment of the political and policy context for defense, including the overarching federal budget process and role of Congress in setting defense policy. Only then does the text explore the specifics of defense budgeting: how, by whom, and why the budget is crafted. Beyond the topic of budgeting – formulating, requesting, and legitimating the request for funds – the book tackles financial management topics. Included are discussions of federal appropriations law, funds management, accounting requirements, intragovernmental business transactions, and contemporary topics of defense policy such as funding overseas contingency operations in an era of deficit control legislation. This book is an appropriate reference for both students and practitioners of defense budgeting and financial management. It would also be appropriate in a general public budgeting course. Most public budgeting texts focus on state and municipal governments and there are few that address the federal system. This book fills that gap and provides a specific example of federal budgeting.

When the first edition of Why Budgets Matter was published in 2003, the federal budget had fallen back into deficit. At the time, fairly modest changes in taxes and spending would have ensured that deficits and debt would remain at tolerable levels. Instead, the disconnect between taxes and spending that had plagued the United States since the 1960s grew even greater. A near-catastrophic economic collapse beginning in December 2007 then magnified the fiscal consequences of irresponsible policy choices. This new edition examines how and why the balanced-budget equilibrium of the 1990s was destabilized in the 2000s. It also places this latest partisan battle over the size of government in historical perspective by exploring its connection to earlier budget policy eras.