Policy Reported To Give Surplus To Pentagon --- High Inflation Projections Netted $35 Billion Extra For Defense, GAO Says
WASHINGTON -- The General Accounting Office estimates that the Pentagon netted a windfall of $35 billion in fiscal 1982 through 1985 by using excessive inflation projections in budget planning.</br></br>The surplus, which is higher than most earlier estimates, occurred because the annual inflation rates were lower than government economists projected in those years. According to a GAO study, the Pentagon redirected most of the funds to weapons programs and personnel pay raises. The study, requested by Chairman Les Aspin (D., Wis.) of the House Armed Services committee, calls for steps to ensure that the Defense Department doesn't receive excessive funds to cover inflation in the future.</br></br>The report, which the GAO is expected to release later this month after the Pentagon has submitted its comments, is likely to rekindle a debate over the defense budgeting process. Congressional staffers say some of the recommendations may lead to proposals to give lawmakers greater control over the Pentagon's inflation-accounting system. Congress is scheduled to take up the military appropriations bill for fiscal 1986, which begins Oct. 1, in the next few weeks.</br></br>The GAO report challenges a central premise underlying the Pentagon's system of budgeting for inflation: that weapons budgets should be based on separate, higher inflation assumptions than those for the rest of the federal budget. Since 1982, the Pentagon has based its requests for funds on the assumption that weapons prices would increase at a rate 30% higher than the inflation rate the government used in calculating the real gross national product, the inflation-adjusted value of the nation's output of goods and services.</br></br>However, the GAO analysis concludes that defense procurements "increased at about the same rate as prices of all goods in the U.S. economy."