Defense spending as 'stimulus'?

The Defense Department has enjoyed a long budgetary heyday, but the golden times may be nearing an end as the Iraq war, which has been eating up $10 billion a month, starts winding down and recession pressures force federal budgeteers to rein in spending.

That's the conventional wisdom, at least.

But defense spending won't drop anytime soon, experts predict. Even as the nation gasped over a $1.2 trillion federal budget for this fiscal year, estimated Tuesday by the Congressional Budget Office, President-elect Obama this week signaled his resolve to spend the country out of recession. In the short term, that probably means more money for defense.

It may be impractical, for several reasons, to cut defense spending for the first year or two of the Obama administration, experts say.

One is that a de-escalating war in Iraq won't immediately curtail expenditures needed to keep troops and equipment whole. Defense Secretary Robert Gates, in a New Year's Eve request to Congress, asked for an additional $70 billion to pay for war costs. At the same time, ramped-up military operations in Afghanistan under Mr. Obama will cost the US government more.

Perhaps the biggest reason defense spending won't fall anytime soon is that it would be too hard for congressional lawmakers to justify cuts to defense during a recession, and lawmakers will instead seek to retain and renew defense contracts – and keep thousands of people in their jobs.

"I would be very doubtful that Congress will cut any major procurement programs, because the Democrats would not want to be accused of putting anyone out of work as they put together an economic stimulus package," says Dov Zakheim, who served as the Pentagon's chief financial officer until 2004. Federal spending on defense could rise as much as 2 percent over the next couple years, says Mr. Zakheim, now a consultant in Washington.

Still, Obama made a point Wednesday of saying his administration would dedicate itself to rooting out inefficiencies in government and finding ways to streamline operations. The Pentagon budget, which accounts for almost 47 percent of all federal discretionary spending, would seem to be a prime place to start. This week, the Government Accountability Office reported that every year the military stashes $7.5 billion in unneeded parts in Navy warehouses.

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