White House Cuts $25 Billion More From Defense to Fund VA

By Tony Capaccio - Oct 1, 2011 4:33 AM GMT+0700

The White House has directed the Pentagon to reduce its 10-year spending plan by another $25 billion, on top of the roughly $450 billion it’s already planning to cut, according to three government officials.

The Office of Management and Budget directed the action because the White House decided to protect Veterans Administration medical funding from cuts, said one the officials. All three spoke on condition of anonymity because the change hasn’t been announced.

The reduction might mean a $1 billion cut in the pending $513 billion defense bill for fiscal 2012, said the official, who was familiar with the OMB action. The bill’s already been reduced $26 billion from the Pentagon’s original budget request, meaning about no increase from current year spending.

The OMB guidance came in early September, said one of the three sources.

A $27 billion reduction remains within the range laid out in the Budget Control Act signed into law Aug. 2. For the fiscal years beginning in 2013, the new cut would average an additional $2.5 billion a year, the official said.

The Budget Control Act has an overall cap for fiscal 2012 and 2013 that includes the Defense Department, State Department, Veterans Administration and Department of Homeland Security, so to protect this veterans funding means that all other accounts in the security budget will have to be cut that much more, said Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments, a non-partisan budget analysis group in Washington.

VA Health Costs

The President’s fiscal 2012 budget request included $52.6 billion for veteran’s health care. The VA’s discretionary budget and veteran’s health care budget is projected to reach $60 billion by fiscal 2016, Harrison said.

The Pentagon may get hit with another $500 billion over 10 years in automatic cuts if the supercommittee in Congress fails to find $1.5 trillion in overall federal savings, according to the Congressional Budget Office.

Joint Chiefs of Staff Chairman Admiral Mike Mullen told a business group last week the cumulative cuts might be as high as $1.1 trillion. That would represent between 15 and 18 percent of an estimated $6.14 trillion 10-year spending projection, according to administration figures.

War Costs

Separately, the White House in its deficit reduction discussions has made clear that the cost of the Iraq and Afghanistan wars remains a driving force in the budget.

The Pentagon’s latest figures through July 30 indicate the military’s spent $1.054 trillion since Sept. 11, 2001, with $704.6 billion obligated for Iraq and $323.2 billion for Afghanistan.

The spending total includes war-related operations, transportation, special combat pay and benefits, food, medical services, maintenance, replacement of lost combat equipment and building the Iraq and Afghanistan security forces.

The average monthly cost for both wars this fiscal year through July 30 -- the latest figures available -- is $11.6 billion. That’s up from $9.7 billion as of April 30, according to Pentagon Comptroller figures.

As of July 30, monthly Afghanistan spending has increased to $7.8 billion from $6.2 billion April 30; Iraq spending has increased slightly to $3.8 billion from $3.5 billion, according to the figures. The U.S. has 46,000 troops in Iraq and 98,000 in Afghanistan.

The Afghanistan increase has been driven primarily by more expensive base and facilities support, greater command, control and intelligence equipment, and maintenance and base support of fortified MRAP vehicles, according to Pentagon briefing charts.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net