Now Congressional Quarterly is reporting that Gates is planning for a budget that remains flat for the next five years. This means that there will be no real growth in the defense budget beyond inflation. Since 2001 there have been significant increases each year in defense spending driven by the pace of operations in Iraq and Afghanistan as well as investment in new equipment for those operations. There was no plan in the 2002 budget to spend several billion dollars on Mine Resistant Ambush Protected (MRAP) vehicles or armor plate for HUMVEES.
The report also says that Gates plans to invest $60 billion in new programs. This is beyond what is currently laid into the budget for R&D and procurement. Now some of it may come from the end of F-22 production or the Missile Defense Agency's (MDA) budget but the majority will have to come out of other parts of the budget.
Since the bulk of the budget is personnel costs and Operations and Maintenance (O&M) money that means the only way to free up these dollars is either to reduce the size of the military, reduce their benefits or cut out operations or readiness. In the Seventies the U.S. military went through this as well as the Vietnam War wound down and Carter had other priorities. Not only was the military not getting new equipment there was no money for training or keeping what they had running. These kind of cuts lead to a bad situation for the military.
It may be that the decline in Iraq alone could cover the $12 billion a year, or Congress could still provide more funds then the President requests. The situation may not be as dire as it could be spun. Unfortunately without seeing the full budget documents it will be hard to tell until that time what the path for the U.S. military is. Like the $2 billion saved with the end of the F-22 when the Federal Government is spending over a trillion dollars on "Stimulus" and economic rescue programs even $12 billion doesn't seem like much.
If this really is the plan for Obama the fight over defense spending may get a great deal uglier then it already is. The effect on the economy and U.S. military capability might also be highly negative. At the same time this could be overblown until more details come out about the future budget.