President Obama's claim "that we've already cut" $400 billion in defense spending is misleading. The president was referring to a Defense Department report that identified $178 billion in "efficiencies" over five years — which the administration says will save $400 billion over 10 years. But only $78 billion of the $178 billion represents actual cuts; the rest of the identified efficiencies will be reinvested in other Pentagon programs.
Obama, July 15: It also requires cuts in defense spending, and I’ve said that in addition to the $400 billion that we’ve already cut from defense spending, we’re willing to look for hundreds of billions more.
Where did Obama get the figure of $400 billion in "cuts"? Kenneth Baer, a spokesman for the White House Office of Management and Budget, told us the $400 billion cited by the president comes from a 2011 Department of Defense Efficiency Initiatives report that details $178 billion in savings over the next five years. Baer said those savings amount to $400 billion over 10 years — although the Pentagon report does not project that far out.
But here's the problem with that thinking: Only $78 billion of the $178 billion represents actual reductions in the defense budget. OMB Director Jack Lew acknowledged this in a Feb. 14 blog entry on the president's fiscal year 2012 budget proposal. Lew wrote: "The Budget cuts $78 billion from the Pentagon’s spending plan over the next five years." Defense Secretary Robert Gates explained in a Jan. 6 statement at the Pentagon that $100 billion of the $178 billion was reinvested in the military.
Gates, Jan. 6: In all, this budget proposal anticipates a total reduction of roughly $78 billion to the Five Year Defense Plan submitted last year. Even with this top-line reduction, we were able to adhere to the original intent of the reform initiative and permit the military services to keep and reinvest the roughly $100 billion they identified for savings.
In an e-mail, Baer told us the White House considers the entire $178 billion as "savings," even though much of the money was reinvested in the military and OMB scores it as $78 billion in budget cuts.
Baer, July 19: Although the $100 billion is reinvested into other DOD high priority programs, we still consider these as “savings” but we do not score these savings – due to budget scoring rules — as a reduction to the deficit.
The reason the entire $178 billion cannot be counted as savings is obvious. By this logic, any time money moves from a low-priority project to a high-priority project, it could be counted as "savings" (as Baer said) or "cuts" (as Obama said). If you spend $2 on carrots instead of $2 on candy, did you save $2?
Also, it may not be possible to project these defense savings beyond five years. For example, the $178 billion in efficiencies includes the savings realized from delaying the next generation Ground Combat Vehicle, which is estimated to save $800 million over five years (page 7). But if the Pentagon follows the advice of the president's debt commission, the GCV program will be delayed only until 2015, and the costs for the program will eventually come due.
This is not to say that the GCV program will not yield additional savings in the last five years, from 2017-2021. But while Obama says he "already cut" $400 billion, many of the cuts are planned but have not yet happened. Actual savings are subject to future budgets.
So how much money has been cut from defense budgets? Michael O'Hanlon, senior fellow at the Brookings Institution and a former national security analyst at the Congressional Budget Office, told us in an e-mail that "actual budget cutting was less than half the $400 billion, 10-year total often cited."
— Scott Blackburn