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The Hill's Congress Blog is running a new piece on a new study about how the Defense Department is extracting additional billions of dollars (hundreds of billions, actually) over time for inflation that does not exist according to the most common federal government measure of inflation. Read my summary of the new study below and at http://thehill.com/blogs/
Pentagon inflation indices cost unjustified billions
By Winslow T. Wheeler - 06/06/11 04:16 PM ET
The Department of Defense (DOD) uses a specially tailored measure of inflation that masks past budget growth and induces Congress to appropriate excess funding for inflation -- inflation that is very unlikely to occur.
The Pentagon budget analysts’ bible, the so-called Green Book, reveals several special, DOD-only, measures of inflation, along with the widely accepted GDP inflation index. While flawed, the GDP measure is used throughout government and the private sector. A comparative analysis of these inflation data in DOD's Green Book reveals many startling things.
First, from 2000 to 2012 the Pentagon received an additional $164 billion in “real” growth that the GDP deflator does not justify. It was requested for inflation; it was spent on actual programs.
Second, the Pentagon has reaped substantially more “real” budget increases than most public DOD budget analysts would recognize. For example, the official Pentagon budget numbers for inflation-adjusted ("constant") dollars assert that for fiscal year 2012 DOD will spend $124 billion more than we spent on average during the Cold War. The GDP index reveals that we will actually spend from $224 billion to $342 billion more in 2012 than during the average Cold War year. The money has not been spent for growth in our forces; it has been spent for cost growth. After such huge amounts of additional annual spending, we now have a military force structure that is smaller and older than during any point during the Cold War – even smaller and older than after the build-down after the Cold War.
Third, the Pentagon’s self-serving inflation index does not just distort budget history, it induces Congress to appropriate money to the Pentagon for inflation that will not occur, according to the widely accepted GDP index. In the years 2013 to 2016, DOD seeks a minimum of $23 billion more for inflation that the GDP measure for inflation says will not occur.
Fourth, the over-estimation of inflation grows much larger when considering long term deficit reduction. Over the next 12 years, President Obama proposes to “save” $400 billion in “security” spending, including DOD. An extrapolation of data available from DOD and OMB shows that $167 billion of the “savings,” or 62 percent of DOD’s share of the $400 billion, is for phantom -- non-existent -- inflation.
Finally, before any discussion starts on the amounts to be saved in Pentagon spending for deficit reduction, the $167 billion in over-estimated inflation should be removed from the current 12 year projection of the defense budget. That $167 billion reduction will, in fact, permit the defense budget to grow at the rate DOD says it is requesting, and it will not reduce any funding for inflation predicted by the GDP index.
Finally, all Pentagon budget data needs to be audited by an independent, objective party to remove misleading data and bogus requests in future years for phantom inflation.
Winslow T. Wheeler is the Director of the Straus Military Reform Project of the Center for Defense Information in Washington. He spent 31 years working on Capitol Hill for senators from both political parties and the US Government Accountability Office. The study he summarizes above can be found at the CDI website at http://www.cdi.org/pdfs/
The Pentagon budget analysts’ bible, the so-called Green Book, reveals several special, DOD-only, measures of inflation, along with the widely accepted GDP inflation index. While flawed, the GDP measure is used throughout government and the private sector. A comparative analysis of these inflation data in DOD's Green Book reveals many startling things.
First, from 2000 to 2012 the Pentagon received an additional $164 billion in “real” growth that the GDP deflator does not justify. It was requested for inflation; it was spent on actual programs.
Second, the Pentagon has reaped substantially more “real” budget increases than most public DOD budget analysts would recognize. For example, the official Pentagon budget numbers for inflation-adjusted ("constant") dollars assert that for fiscal year 2012 DOD will spend $124 billion more than we spent on average during the Cold War. The GDP index reveals that we will actually spend from $224 billion to $342 billion more in 2012 than during the average Cold War year. The money has not been spent for growth in our forces; it has been spent for cost growth. After such huge amounts of additional annual spending, we now have a military force structure that is smaller and older than during any point during the Cold War – even smaller and older than after the build-down after the Cold War.
Third, the Pentagon’s self-serving inflation index does not just distort budget history, it induces Congress to appropriate money to the Pentagon for inflation that will not occur, according to the widely accepted GDP index. In the years 2013 to 2016, DOD seeks a minimum of $23 billion more for inflation that the GDP measure for inflation says will not occur.
Fourth, the over-estimation of inflation grows much larger when considering long term deficit reduction. Over the next 12 years, President Obama proposes to “save” $400 billion in “security” spending, including DOD. An extrapolation of data available from DOD and OMB shows that $167 billion of the “savings,” or 62 percent of DOD’s share of the $400 billion, is for phantom -- non-existent -- inflation.
Finally, before any discussion starts on the amounts to be saved in Pentagon spending for deficit reduction, the $167 billion in over-estimated inflation should be removed from the current 12 year projection of the defense budget. That $167 billion reduction will, in fact, permit the defense budget to grow at the rate DOD says it is requesting, and it will not reduce any funding for inflation predicted by the GDP index.
Finally, all Pentagon budget data needs to be audited by an independent, objective party to remove misleading data and bogus requests in future years for phantom inflation.
Winslow T. Wheeler is the Director of the Straus Military Reform Project of the Center for Defense Information in Washington. He spent 31 years working on Capitol Hill for senators from both political parties and the US Government Accountability Office. The study he summarizes above can be found at the CDI website at http://www.cdi.org/pdfs/
Winslow T. Wheeler
Director
Straus Military Reform Project
Center for Defense Information
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