Department of DefenseBudget Update to the

Virginia Ship Repair Association

RDML (ret) Joe Carnevale

Senior Defense Advisor

20 September 2011

DoD Budget Update

• Budget Control Act of 2011

• The Peace Dividend

• Fiscal Year 2012 Budget

Budget Control Act of 2011What Does It Do?

• Increases the debt limit by $400B immediately.• Cuts $917B over 10 years with $21B in FY12.• President can request additional increase of $500B this year.

– Congress may disapprove.– President may veto Congressional disapproval.– Congress may override veto with two-thirds majority.

• President may request an additional $1.2-1.5T next year.– If matched by budget cuts generated by the “super committee” and enacted by Congress,– Or a Balanced Budget Amendment is passed by Congress and sent to the states.– Subject to the disapproval/veto/override provisions above.

• Cuts generated by the Joint Select Committee on Deficit Reduction.– Goal of $1.5T over 10 years.– Propose by 23 Nov 11 and enact by 23 Dec 11.– Up or down vote, no amendments, no filibuster.

• Balanced Budget Amendment– Congress must vote on it before 31 Dec 11.– Not required to pass to support debt limit increase.

• Sequestration if cuts are less the $1.2T– Equal, across the board cuts to Security and Non-Security programs to get to $1.2T.– Cuts apply to Medicare but not Social Security.

Budget Control Act of 2011

• Security includes: DoD, DHS, VA, National Nuclear Security Administration, and Budget Function 150 International Affairs

• Security Spending Caps– FY12 $684B– FY13 $686B

• FY12 equals FY11 - $5B or a 0.7% cut from FY11 levels.• DoD budget for FY12 would be $525B if proportional cut.• President’s Budget (PB) has DoD = $553B vs that $525B• President’s Budget (PB) has DoD = $539B without MILCON

Status: Proposed vs PB vs $525B Cap• HASC $539B $0B +$28B• SASC $533B -$6B +$22B• HAC $530B -$9B +$19B• SAC $513B -$26B +$0B

Note: Give or take a billion or two.

The Peace Dividend

The Peace Dividend

• Occurred in the early 90’s.

• Last major cut in Defense spending.

• Result of the collapse of the Soviet Union.

• What was cut?

• What can we learn from it?

The Peace DividendDoD Budget Authority 1980-2010

(Billions of Dollars)

0

100

200

300

400

500

600

700

800

Bil

lio

ns o

f D

oll

ars

1989:

Soviet troops withdraw from Afghanistan,

Poland & Hungary become independent,

Berlin Wall falls,

Governments fall in Czechoslovakia, Bulgaria, and Rumania;

Soviet empire ends

1990: Germany reunited

1991:

Warsaw Pact ends,

The Soviet Union dissolves,

The Cold War Ends

Total Federal and Department of Defense Budget Authority 1980-2010

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

years

Billio

ns

of

do

lla

rs

DoD Budget Authority Total Federal Budget Authority

Total Federal and Department of Defense Budget Authority 1980-2010

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

years

Bill

ion

s o

f d

olla

rs

DoD Budget Authority Total Federal Budget Authority Total Receipts $Billions

Total Federal Budget Authority and Receipts 1980-2010

Total Federal and Department of Defense Budget Authority 1980-2010

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

years

Bill

ion

s o

f d

olla

rs

DoD Budget Authority Total Federal Budget Authority Total Receipts $Billions

Total Federal Budget Authority and Receipts 1980-2010

Bush Tax Cuts

Economic Growth and Tax Relief Reconciliation Act of 2001

Jobs and Growth Tax Relief Reconciliation Act of 2003

DoD Budget Authority 1988-1996

240

250

260

270

280

290

300

Billio

ns

of

do

lla

rs

DoD cut by $42B

Military Personnel 1988-1996 (in thousands)

1,000

1,500

2,000

2,500

1988 1989 1990 1991 1992 1993 1994 1995 1996

458,000 people leave the service

from 1990 to 1994

Navy Active Ship 1988-1996

300

400

500

600

700

1988 1989 1990 1991 1992 1993 1994 1995 1996

166 fewer shipsin the Navy

from 1990 to 1994

$0

$5

$10

$15

$20

$25

$30

1988 1989 1990 1991 1992 1993 1994 1995 1996

Years

Bill

ions

of D

olla

rs

Operation & Maintenance, Navy Shipbuilding & Conversion, Navy

O&MN and SCN 1988-1996

O&MN cut by $4.0B

SCN cut by $7.4B

Dramatic Change in SCN

1989 1990 1991 1992 Before 1993 1994 1995 1996 AfterTrident 1SSN-688 2 1SSN-21 1 1 1

Submarines 3 1 2 6 1 1

CV SLEP 1Carrier Replacement Program 1

DDG-51 3 5 4 5 17 4 3 3 2 12

LHD-1 Amphibious Assault Ship 1 1 1LSD-41 Cargo Varient 1 1 1LPD-17 Amphibious Assault Ship 1

Amphibious 1 1 2 4 1 2 3

MCM Mine Countermeasures Ship 3MHC Coastal Mine Hunter 2 1 2 3 2Mine Warfare C2 Ship 1

Mine 2 4 2 3 11 2 1 3

TAO Fleet Oiler 4BA-5 Auxiliaries, Craft + PY Prog Costs 1AO (Jumbo) 2 1Tagos Surtass Ships 3 1 1AOE 1 3 1 1Oceanographic Research Ship 1 2 2

Auxiliary 10 6 2 4 22 2 2

Total 19 18 12 12 61 7 6 4 5 22

FY 2012 Shipbuilding Plan

Budget Climb from 1998 to 2008

Budget Authority 1998 2008 Delta % IncreaseTotal DoD (OMB Tables) 255 675 420 165%Total DoD (DoD Books) 255 568 313 123%

Defense Wide 35.4 105.8 70.4 199%Army 60.5 175.4 114.9 190%Navy 81.3 147.7 66.4 82%

Air Force 76.6 139.2 62.6 82%

WPN 1.1 3.1 2.0 182%RDT&E 7.9 17.8 9.9 125%

APN 6.3 12.4 6.1 97%OPN 3.0 5.4 2.4 80%

O&MN 21.6 36.4 14.8 69%SCN 8.1 13.4 5.3 65%MPN 16.7 23.4 6.7 40%

MPMC 6.1 10.3 4.2 69%O&MMC 2.3 8.7 6.4 278%

Note: Navy & Marine Corps 2008 includes Baseline, supplementals &GWOTNote: 1998 from 1999 Highlights BooksNote: 2008 from 2009 Highlights Books

Fiscal Year 2012 Budget

FY 2012 Ship Procurement

SCN   FY10   FY11   FY12   HAC   SAC

            PRESBUDG   Passed   Proposed

CVN   $ 736,989   $ 1,731,256            

CVN AP   $ 482,938   $ 908,313   $ 554,798        

SSN 1 $ 1,958,118 2 $ 3,441,452 2 $ 3,232,215 2 $ 3,221,314    

                $ (10,901)    

SSN AP   $ 1,953,680   $ 1,691,236   $ 1,524,761   $ 1,461,361    

                $ (63,400)    

CVN RCOH   $ 1,558,779   $ 1,255,799            

CVN RCOH AP           $ 529,652        

DDG 1000   $ 309,636   $ 186,312   $ 453,727        

DDG 51 1 $ 1,906,368 2 $ 2,922,190 1 $ 1,980,709 1 $ 1,978,314    

                $ (2,395)    

DDG 51 AP   $ 577,210   $ 47,984   $ 100,723        

LCS 2 $ 1,076,669 2 $ 1,230,984 4 $ 1,802,093 4 $ 1,755,093    

                $ (47,000)    

LPD 17         1 $ 1,847,444 1 $ 1,833,444    

                $ (14,000)    

LHA (R)     1 $ 949,897            

LHA (R) AP   $ 169,476       $ 2,018,691   $ 1,999,191    

                $ (19,500)    

FY 2012 Ship Procurement(Continued)

SCN   FY10   FY11   FY12   HAC   SAC

            PRESBUDG   Passed    

Oceanographic Ship     1 $ 88,561 1 $ 89,000        

Moored TS AP           $ 155,200        

Service Craft   $ 7,870   $ 13,770   $ 3,863        

JHSV (OPA) 1 $ 202,475 1 $ 202,764 1 $ 223,845     0 0

                  -1 $ (223,845)

JHSV (SCN) 1 $ 177,407 1 $ 180,703 1 $ 185,106     2 $ 370,206

                  +1 $ 185,100

MLP (NDSF)   $ 119,702 1 $ 677,979 1 $ 425,865     0 0

                  -1 $ (425,865)

SSC (R&D)   $ 91,771   $ 153,686   $ 161,099   $ 121,099   $ 98,099

                $ (40,000)   $ (63,000)

FY 2012 Maintenance & Modernization

  FY10 FY11 FY12 HAC SAC

O&MN Base & OCO Base & OCO PRESBUDG Passed Proposed

Ship Depot Maint $ 6,265,286 $ 6,028,226 $ 5,970,781 $ 6,335,781  

SDMaint Base $ 4,761,670 $ 4,972,609 $ 5,337,609  

        $ 365,000  

SDMaint OCO   $ 1,266,556 $ 998,172    

SDMaint Reserve $ 59,442 $ 91,054 $ 53,916    

           

     

OPN          

DDG Mod $ 159,296 $ 296,691 $ 119,522    

CG Mod $ 316,711 $ 356,958 $ 590,349 $ 566,942 $ 585,349

        $ (23,407) $ (5,000)

Small Boats $ 58,821 $ 58,431 $ 39,793 $ 33,653  

        $ (6,140)  

Std Boats OCO $ -   $ 13,729    

Conclusions

• Significant actions taken in the early 90s to cut budgets can’t be repeated.

• The dramatic increase in Defense Budget over a decade was not proportionate.

• A proportionate allocation of future cuts will be disastrous to the Navy and the Nation.