Obama's Defense Budget Plan Falling Apart Before First One Passed

(MoneyWatch)  The Obama Administration's 2010 defense budget is languishing in Congress. The Authorization Act has been passed with fanfare but the key Appropriation Bill is not moving very fast. There are still arguments between the White House and Congress over funding for VH-71 helicopters and the Democrats are trying to attach unpopular legislation to the bill in hope of getting it passed.

Now comes word that one of the key reforms proposed by the new President of moving the money to carry out operations in Iraq and Afghanistan rather then using supplementals has already been bypassed. The 2010 budget contains over $130 billion for these operations. Now there is word that a supplemental of forty to fifty billion dollars will be required soon.

Part of this is due to the new strategy in Afghanistan where more troops made be required. The original plan probably was to pay for this by winding down operations in Iraq. While U.S. troops are slowly leaving that country through just stopping deployments of new ones there still remain a significant amount although they are less active in the past.

Of course any supplemental that is passed will only benefit those companies providing logistics support to the deployed forces. Much of the money will be used to pay for their services. The more troops that stay overseas the more KBR will require. This comes at a time when there is criticism of that company for not reducing their work force in Iraq. Interestingly enough KBR says they cannot meet the original plan for reducing their commitment until a clear plan for withdrawing the U.S. forces in the country.

Obama and Secretary of Defense Gates proposed some aggressive reforms and reductions in the defense budget. There has been criticism of this approach from Congress, media and industry. A more incremental one might have worked better. There is support for some programs that they wanted to cancel or re-structure. They won three big fights over F-22, missile defense and Future Combat Systems (FCS). These caused companies like Boeing and SAIC to take big hits.

The issue over the VH-71 is how to best utilize the aircraft already purchased under the program. The program under the first increment has purchased several aircraft to support testing and development. These represent an investment of almost $3 billion and could be used to provide some capability. The money in the House version of the budget is less then $500 million.

A major argument for continuing some of these programs was compared to the $787 billion spent on a "stimulus" program that has not been able to halt the rise in unemployment a few billion more in a defense budget of almost $700 billion would not be wasteful. This may be an unfair argument but there is no doubt the continuation of an F-22 and VH-71 program will keep thousands employed at least for the next few years.

The problem government always faces is that when it takes nine-to-ten months to pass a budget things change on the ground. The assumptions of the 2010 budget in February may not be supported by the situation in November. At the current rate there may not be an appropriations bill passed until after Thanksgiving. New contracts and major options on existing ones cannot be awarded until that happens. The longer this goes on the harder it may be to keep some programs on schedule as a several months delays may cause production breaks. This will then have to be bought back at greater cost.

It may be that the White House needs to cut their losses and work out a deal with Congress to get this passed soon.