Pentagon feeling the pressure on budget.

• Author: Farrell, Lawrence P., Jr.
• Position: President's Perspective

There is good and bad news in the defense spending legislation that President Bush signed in August.

The good news is that the $416 billion approved for fiscal year 2005 covers "must-pay" bills, including a pay increase for U.S. troops and a $25 billion supplemental appropriation to address next year's essential expenses for operations in Iraq and Afghanistan.

One piece of bad news is that there are several issues that have potentially huge implications for future spending that Congress has yet to debate. Another piece of bad news is that the appropriation shows a downturn compared to a year ago. And although we will see more supplemental appropriations in 2005, one wonders if defense budgets are leveling off and headed for declines.

One reason to worry is the projected U.S. federal budget deficits over the next several years, and how these deficits might constrain defense spending. U.S. Comptroller David M. Walker articulated the problem very clearly in an article just published in National Defense. "A crunch is coming, and eventually all of government will feel its impact. Although national defense and homeland security have received generous funding in recent year's, this cannot continue indefinitely. Defense budgets of the future almost certainly will be tighter," Walker wrote.

Not only will Social Security and Medicare become huge financial burdens in the years ahead, as the baby boom generation enters retirement, but the nation also is saddled by mounting war expenses. At a recent conference, Congressman John Murtha, a Pennsylvania Democrat who strongly supports defense spending, said that the defense budget, of necessity, must come down. The pressure no doubt will grow.

Although the Pentagon did receive a $25 supplemental for the war, the expectation is that more money will be needed before fiscal year 2005 ends next October. The United States is spending on average nearly $5 billion a month in Iraq, according to Pentagon estimates, likely bringing total defense spending above the $450 billion level for 2005. The Government Accountability Office also noted in a July report that fiscal year 2004 costs for the global war on terrorism will exceed previous supplemental appropriations, requiring the Defense Department to shift funds from other accounts.

The obvious prediction is a squeeze on Defense Department procurement, research and development budgets, with adverse consequences for the defense industrial base. Although procurement...