Weapons Budget Grows Amid Obama Cuts

Tony Capaccio

U.S. spending on weapons through 2016 likely will grow faster than the overall defense budget, which will have annual increases of only about 1 percent above inflation, according to Pentagon Comptroller Robert Hale. 

“Our goal would be to get forces and modernization to grow by 2 or 3 percent,” Hale said in an interview, while saying that “it’s not a given.” 

An increase in weapons spending will include greater purchases of Bethesda, Maryland-based Lockheed Martin Corp.’s F- 35 fighter, new ground vehicles, ship construction, satellite systems and unmanned drones, according to the Pentagon’s long- range plan. Northrop Grumman Corp., of Los Angeles, and Chicago- based Boeing Co. also stand to benefit. 

Some money may be shifted into equipment and personnel accounts from an effort to cut $100 billion of overhead costs over five years, announced by Defense Secretary Robert Gates on June 28, Hale said. 

“Procurement and research are in the ‘gaining’ portion of the budget,” Hale said. “The goal would be to move money from support-type activities — operations and maintenance, military construction — into acquisition.” 

Hale’s remarks are good news for defense contractors, said Todd Harrison, a defense analyst with the Washington-based Center for Strategic and Budgetary Assessments. 

“It sounds like they are trying to do everything they can now to avoid major program cuts in the next few years,” Harrison said. Yet, if the Pentagon goal of cutting overhead and support costs isn’t achieved, “they will have no choice but to cut” programs, he said. 

Gates has announced plans to revamp Pentagon spending, saying in a May 8 speech that future budgets will see little real growth because a defense-spending “gusher” that opened after the Sept. 11 attacks “has been turned off and will stay off for a good period of time.”

In April 2009, Gates proposed to cut and truncate programs worth as much as $330 billion over their service lives. 

The Pentagon’s $549 billion base budget request for fiscal 2011 represents an increase of about 1.8 percent over fiscal 2010, when defense spending rose 2.1 percent. Those budgets follow eight years of 4 percent average annual growth. 

Hale said there still may be more cuts in store for some weapons programs after a Pentagon review later this year for the fiscal 2012 budget.

Congress approved $104.8 billion for weapons buying this year and is considering proposed procurement spending of $111.2 billion for fiscal 2011, which begins Oct. 1. The Pentagon may request $120 billion in 2012, rising to $137 billion in 2015, according to comptroller’s office projections that Hale said are, at this time, only for planning purposes.

Estimates about how much money may become available from the cost-cutting efforts are “going to get squishier” as projections move further into the future, Hale said. “That’s just inevitable.”

The Pentagon plan calls for $7 billion in savings in 2012, increasing to $11 billion in 2013 and $18.9 billion in 2014, according to a Pentagon fact sheet. The largest savings are projected at $37 billion in 2016. 

While it will be a “significant challenge” to achieve those goals, Hale said that Gates wants “to push the process a little bit. Let’s see how far we can get.” 

To contact the reporter on this story: Tony Capaccio at acapaccio@bloomberg.net