Centrists.Org: The Administration's Bogus War Budget

The Administration's Bogus War Budget
Jeff Lemieux
August 5, 2004

In its new mid-session budget, the Bush Administration understates the likely cost of military deployments in Iraq and Afghanistan by as much as $200 billion over the next 5 years. In an era of bogus budgeting, this may be the most egregious gimmick of all.

Charts and Tables:
Figure 1. Supplemental Budget Requests So Far
Figure 2. Troops Deployed in Iraq and Afghanistan
Figure 3. Projected Military Costs Through 2009
Figure 4. Bush Budget Falls Short of Likely War Spending
Table 1. CBO Scenarios vs. Bush Budget

Most budgetary gimmicks are technical and complicated. President Clinton used a convoluted accounting scheme to imply that Social Security could be "saved" by running budget surpluses. (The surpluses helped, but they weren't really a solution.)

More recently, President Bush and Congressional Republicans have used misleading "sunset provisions" in the tax code to trick the public. The sunset provisions make tax cuts look much less expensive than they really are. The worst offender is the Alternative Minimum Tax (AMT). It could cost as much a $1 trillion over the next ten years to extend sunset provisions related to the AMT.

Budgetary gimmicks are now routine and widespread. The news media have a hard time sorting them out and explaining what's really going on.

However, President Bush's failure to budget for continued military expenses in Iraq and Afghanistan is very straightforward. It is also very perplexing. This may be the worst budgetary gimmick yet.

The President’s Mid-Session Budget Review, which was released quietly last Friday afternoon, says the budget deficit will be $445 billion in 2004. That’s about right -- Centrists.Org and other mainstream analysts have pegged the deficit at about $440 billion for some time now.

However, Bush’s budget for the next several years is understated by tens of billions of dollars -- and possibly as much as $200 billion or more -- because it does not include funding for continued military operations in Iraq and Afghanistan.

Figure 1 shows the supplemental budget requests for the global war on terror. These requests included military spending in Afghanistan and Iraq, as well as U.S. and overseas reconstruction and other war-related costs.

Figure 1.

Most analysts expect another supplemental request early next year, beyond the $25 billion requested so far for 2005. However, the Administration's budget does not include any additional requests.

By way of explanation, the Administration “expects to request additional funding from the Congress early in 2005, when the overall requirement can be estimated more reliably.”

That’s nonsense. All budgets involve estimates, years in advance. That is the purpose of budgets: to plan for expenditures that are likely. We don’t know exactly how much money we will need for Medicare or homeland security either, but we make projections anyway.

Omitting defense funding distorts the entire budget process. It’s just phony budgeting to make specific claims about deficit reduction -- the Administration says it will "cut the deficit in half" -- when large, known expenditures are not included in the figures.

To be fair, it may not make sense in a time of war to publicly state expected future troop levels or costs of overseas operations.

However, the budget could still display a range of alternatives, or underscore that its figures do not include all needed military costs.

We cannot predict future military needs, but it seems very unlikely that overseas military costs in Iraq and Afghanistan will dissipate suddenly. In June, the Congressional Budget Office (CBO) illustrated three plausible scenarios for U.S. troop strength in Iraq and Afghanistan (see Figure 2, below).

Scenario 1 would raise troop strength from 180,000 in 2004 to just over 210,000 in 2005 and 2006, with a steady reduction thereafter. By 2009, no troops would remain in Iraq, although 15,000 or so would remain in Afghanistan.

Scenario 2 holds the number of troops deployed steady at 180,000 through 2005, with slow reduction thereafter.

Scenario 3 reduces the number of troops from 180,000 in 2004 to 100,000 in 2005, with a steady reduction through 2009, when all troops would be out of Iraq.

Figure 2.

Second, CBO estimated the budget authority necessary to support these deployment levels (see Figure 3, below).

Under Scenario 1, spending would remain steady at about $64 billion through 2006, with a sharp reduction beginning in 2007 and 2008. Scenario 2 would cost about $56 billion in 2005 and 2006, with a slow reduction after that. Under Scenario 3, the cost would drop sharply to less than $40 billion in 2005, with continuing reductions through 2009. (In addition to the costs of war in Iraq and Afghanistan, these estimates include the cost of certain anti-terror patrols in the U.S.)

Figure 3.

Figure 4 shows how the Administration's budget stacks up against these three scenarios. Based on budget authority from the 2003 and 2004 supplemental appropriations, Bush's budget only funds outlays of $44 billion in 2005, dropping to $7 billion in 2006. After that, there is virtually no budget for war spending in Iraq and Afghanistan.

Figure 4.

All told, the Administration's mid-session budget includes a total of $53 billion in outlays dedicated directly to the war effort between 2005 and 2009 (see Table 1).

However, the least expensive CBO scenario would require $130 billion in spending within the 5-year budget period. Scenario 2, which envisions steady troop strength for 2 more years and only slow reductions thereafter, would cost $245 billion, almost $200 billion more than the Bush Administration has budgeted.

Table 1.

CBO Scenarios vs. Bush Budget: Projected Military Costs of War on Terrorism
(billions of dollars)

			2005-2009

CBO/Conrad Scenario 1 \a			218

CBO/Conrad Scenario 2 \b			245

CBO/Conrad Scenario 3 \c			131

Bush Budget			53

Sources: Congressional Budget Office, Office of Management and Budget, Centrists.Org
Notes: Included Iraq, Afghanistan, and Domestic Anti-Terror Patrols. Scenarios based on Congressional Budget Office letter to Senator Kent Conrad Estimated Costs of Continuing Operations in Iraq and Other Operations of the Global War on Terrorism (June 25, 2004)

\a 30,000 additional troops in Iraq in 2005, but no troops remaining in Iraq by 2009
\b no addition to troop strength in 2005; slow drawdown thereafter
\c rapid reduction of troops in Iraq beginning in 2005; no troops remaining by 2009

In the realm of budget shenanigans, a $100 billion or $200 billion shortfall might not seem like much. Sunset provisions can understate the cost of tax cuts by trillions of dollars.

But it seems especially irresponsible in a time of war and terrorism alerts to systematically understate likely military expenditures within the U.S. budget. President Bush has characterized himself as a "war president."  He should hold himself and his Administration to higher standards of war budgeting.

Links:
Congressional Budget Office Letter to Sen. Kent Conrad Estimated Costs of Continuing Operations in Iraq and Other Operations of the Global War on Terrorism (June 25, 2004)

Office of Management and Budget Mid-Session Budget Review (July 30, 2004)

Detailed "Computer Run" Tables of President's Mid-Session Budget (note this is a large .PDF file)

Centrists.Org Where Will the Deficit Go From Here? New Long-Term Budget Projections (June 3, 2004)  Under realistic assumptions, the annual federal deficit is poised to hover around $400 billion through 2007, between 3 and 4 percent of GDP. After that, the deficits will grow as the first waves of baby boomers leave the workforce and join the entitlement rolls.

Centrists.Org It's The Sunsets, Stupid! CBO and JCT Should Show the Extended Cost of Expiring Provisions (May 3, 2004)  The use of sunset provisions has distorted the budget process and can make a mockery of budget rules. The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) should show the full, 10-year cost of expiring tax cuts or spending bills in the footnotes to their official estimates.