2012 Budget Due Today to Congress

by: Matthew Potter
February 14, 2011

Category: Business Line, Companies, Congress, Department of Defense, development program, Events, Federal Budget Process, General Dynamics, IT, logistics, Military Aviation, production program, Restructuring, S&T, Services | RSS 2.0

Even though the Congress failed to pass a 2011 budget the Obama Administration will submit its 2012 spending plan today. Even that is late as it is supposed to be sent up to the Hill the first Tuesday in February. The President’s plan reportedly includes some budget cuts with a goal of reducing the total deficit by up to $1.1 trillion over ten years. Of course for the first three years of this Administration the annual deficit has been over $1 trillion so this plan barely puts a dent in spending.

Congress generally adopts the President’s plan overall but because the House really is in control of Federal spending it normally makes changes that track more to its priorities then necessarily the executive branch. This year will be Obama’s first with a hostile House and there may be significant changes to his proposed spending. It is expected that the new Republican leadership will cut much more from total annual spending then the President is proposing.

The Defense Budget will actually be larger then last year but the rate of growth will almost be flat. This reflects the winding down of operations in Iraq as well as the new budget realities the U.S. must face. Secretary of Defense Robert Gates had already announced $100 billion in reinvestment opportunities as well as cuts of up to $78 billion.

Part of this was generated by Defense recommending cancellation of the U.S. Marines new amphibious assault vehicle, the Expeditionary Fighting Vehicle (EFV). This program to replace the existing LVTP-7 vehicles used to move troops from ship to shore and then support their operations inland is being managed by General Dynamics (GD) and has had budget and schedule issues. Of course there has already been push back from Congress especially from those states who will lose significant jobs and business when the program ends.

This reduction of one program illustrates the problems both the Administration and Congress will have as they try to balance the Federal budget. Every program that is facing cuts will have some sort of advocate in Congress who will attempt to keep it funded. That is why the President is freezing most spending but that will not be enough to bring the budget back from multi-billion dollar deficits.

The defense budget is the largest part of the discretionary spending and as long as the U.S. is fighting overseas there will be a lot of pressure to keep its size up. At the same time money must be invested into new weapons as well as replacing and recapitalizing those damaged or lost in the last ten years of combat.

There will be no easy choices with the total budget.

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