Update on the Budget

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Update on the Budget
By: David Berteau
@csis_isp

Each July, the Office of Management and Budget (OMB) updates its economic and federal budget forecasts in the annual Mid-Session Review. This year’s update, released late on Friday afternoon, contained important information for defense and national security budgets.

The report projects robust growth in the overall national economy, which boosts federal revenue, reduces spending, and shrinks the deficit. While this does not delay the arrival of the next fight over the federal debt ceiling (set for next March), it is a much-needed positive sign.

July is also the 40th anniversary of the Budget Reform and Impoundment Control Act of 1974, widely celebrated by budget geeks across Washington and around the world. That act created the congressional budget process, as well as the Congressional Budget Office (CBO), the legislative counterpart to OMB. CBO’s economic forecast, released just days after OMB’s, is somewhat less rosy for the near term and notes the long-term fiscal risks from growth in spending for mandatory programs like Medicare and Social Security.

OMB’s update also quietly corrected errors that accompanied the federal budget for Fiscal Year 2015 (FY15). These errors had projected steep declines in defense outlays for the current fiscal year (FY14) in the Procurement and Research, Development, Test, and Evaluation accounts. At CSIS, we track the monthly outlay reports from the U.S. Treasury Department, where the actual declines had been in a modest 4–5 percent range rather than the 15–20 percent forecast last March with the budget. This update of smaller declines is a tiny bit of good news for the Department of Defense (DoD) and industry, even if already evident from the data.

July also saw DoD deliver its request for $59 billion for the Overseas Contingency Operations accounts, called OCO (the government-wide number is $66 billion). This covers costs for Afghanistan, as well as equipment repair and recovery from the past decade of war. OCO has become in some ways the safety valve for the reductions mandated under the Budget Control Act. Congress is likely to approve the request and may even increase it slightly.

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