Press Releases

Biden's FY23 budget request fails to fully tackle inflation

By Mackenzie Eaglen

March 28, 2022

Defense News

Congress is busy taking in the president's budget request, released March 28, to fund the government for fiscal 2023. As members sift through the reams of documents and data, they should know that the higher defense budget is helpful but simply not enough.

This is not a case of blindly calling for "more, more, more!" Rather it is a plea for meeting needs and persistently high inflation.

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The military needs a budget at inflation levels every year just to tread water. President Joe Biden's 4% bump for the military is a useful down payment on tackling inflation and price increases across the board; however, there are few items or outcomes Americans and the Defense Department are buying right now that are seeing cost growth as low as just 4 points.

While the American people have felt the tangible effects of high inflation this past year, "on average, defense inflation was 20 basis points above [the consumer price index]." This means that the 2023 budget, which tackles some inflation and nothing more, results in even harsher declines of defense purchasing power for the training, facilities, weapons and talent that keep us safe.

The implications of these trends are highly consequential — especially on top of the deeply unhealthy ratios of building new equipment to researching next-generation technology. The Defense Department has again requested record funding for research, development, test and evaluation in 2023. But without the procurement dollars to take R&D efforts from the laboratories into the hands of warfighters, these are roads to nowhere.

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In estimating future spending, the Pentagon, the White House and the Congressional Budget Office have, for years, assumed a 2% inflation rate for budget growth. This year, the CBO updated its 2021 inflation forecast to 5.4%. A recent McKinsey & Company report estimated the Defense Department "could have $692 billion in buying power in 2026 [at FY23 spending levels]." Moreover, should 7% inflation continue, the purchasing power of $732 billion sinks to $578 billion.

The result of diminished buying power for another year means that the force will continue to get smaller and older while waiting on the promise of future technologies to materialize at scale. Building just nine new ships while retiring 24 in a single year and buying fewer aircraft than the 150 the Air Force is proposing to retire in 2023 is too risky.

If the money does not materialize to meet real growth for the U.S. military, oxymoronically, the research projects the administration is funding today will not even be able to be fielded to defend against the threats of the future. This will only deepen the trenches of the "valley of death," the phenomenon where billions of research dollars go wasted when capabilities are never actually bought because there are not enough procurement dollars to go around.

Insufficient funding is not limited to this administration, but its continuation certainly is. There is a difference between recognition and response.

As has been made clear by Biden's Pentagon, defense officials recognize that China increased its defense spending by at least 8% per year for a decade (and projects another 7 point growth next year to our 4% nominal growth). Meanwhile, China has the "world's largest standing army, navy, coast guard, maritime militia, and sub-strategic missile force." Nor are China's advantages only quantitative.

The FY23 defense budget request is a failed response. The military should not have to skimp on its many priorities because of a falling budget, even as demand is high around the globe. Congress will surely recognize the clear need to meet inflation for the defense budget and spend more to buy back combat power capacity that cannot be recouped once equipment is permanently retired.

Russia's invasion of Ukraine and the risk of action against Taiwan by China in this decade demand a better balance in the defense budget between buying the future and funding the present. Congress will reject a budget stuck on cruise control with overly optimistic assumptions about risk today. Size matters, not just technology. A continuing overemphasis on R&D is no longer a sufficient framework to address the threats facing the United States.

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