Growth in war costs

February 11, 2008

Today CBO released a new study analyzing the increases in funding for military activities in Iraq, Afghanistan, and elsewhere in the war on terrorism over the past several years.

  • The United States began combat operations in Afghanistan in fiscal year 2002 and in Iraq in fiscal year 2003. To finance those operations (and others related to the war on terrorism), the Congress provided $18 billion and $76 billion in emergency appropriations in those years, respectively.
  • With the exception of a slight decrease in 2004, to $74 billion, funding has increased steadily each year, to a total of $165 billion for 2007.
  • If the Administrations request for 2008 is funded in full, appropriations for military operations in Iraq and Afghanistan, and for activities elsewhere in the war on terrorism will rise to $188 billion this year and to a cumulative total of $752 billion since 2001.
  • Most of the spending is concentrated in two categories -- operation and maintenance (O&M), which has roughly doubled from 2004 to 2008, and procurement, which has increased tenfold over that period.
  • Prior to 2005, funding for military operations was largely limited to the incremental amounts needed to mobilize and deploy troops, transport equipment and supplies, and purchase additional quantities of consumables such as fuel, repair parts, and munitions. War funding also paid for an increase in the number of service members on active duty. About 60 percent of appropriations provided during this period went to O&M accounts and 20 percent went to military personnel accounts.
  • Beginning in 2005, as part of its request for war funding, DoD asked for appropriations to reset equipment, that is, to repair or replace worn or damaged equipment. Those efforts include major overhauls that restore the item to like new condition. At the same time, DoD often added major upgrades to repaired items, returning equipment to the field with significantly enhanced abilities; these upgrades involved much higher costs than simply repairing equipment. Most such efforts are funded through the O&M and procurement accounts. During this phase, O&M funding continued to account for roughly 60 percent of total funding.
  • In 2006, DoD began widening its focus from resetting equipment to reconstituting the force, an effort that involved purchasing new equipment as well as repairing and replacing damaged systems. Whereas the reset program had required more O&M funding, the shift to reconstitution increased the need for procurement funds.
  • In 2007, DoD expanded the list of expenses that could be included in the request for war-time appropriations. In addition to seeking funds to pay for the direct incremental costs of operations in Iraq and Afghanistan, the services were permitted to include costs related to the broader war on terrorism. DoD requested funds to replace damaged equipment with newer models, accelerate planned purchases of new systems, address emerging needs, and enhance the militarys capability not only to continue current operations but also to be better prepared for the longer war on terrorism. Achieving the goals of that expanded reconstitution program required significantly more procurement spending.
  • Thus, in 2007 and 2008, procurement funding soared, averaging about 35 percent of total war funding in those years. While O&M funding continued to increase and funds for military personnel held steady, those accounts fell to an average of 52 percent and 10 percent of total war funding, respectively.
  • If the Congress provides the remaining $101 billion that DoD has requested for the war in 2008, annual funding levels will have increased by 155 percent since 2004. Increases in procurement and in operation and maintenance account for almost all of that growth. Appropriations for military personnel have changed little, and other DoD appropriations contribute relatively small amounts to the total.

David Newman and Jason Wheelock of the defense unit in our Budget Analysis Division put the analysis together.