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Defense spending as 'stimulus'?

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"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.

The Pentagon's baseline budget for the current fiscal year is $514 billion, but with Secretary Gates's $70 billion request, war funding will top $136 billion in additional defense costs for 2009.

Other factors are also at play.

To pay for the wars in Iraq and Afghanistan, the Pentagon has used a controversial budgetary maneuver called "supplemental funding," in which costs for war operations are counted separately from the normal baseline budget.

As equipment such as trucks, planes, and other gear failed, these supplementals have been used to bankroll new weapons systems to replace the dilapidated gear. Supplemental funding has been like candy to a child, and lawmakers and the Pentagon itself would like to see the Pentagon be weaned off it. Senior Pentagon officials say the Defense Department's fiscal year 2010 budget, to be unveiled two weeks after Obama takes office, will reflect an increase of about $57 billion in money that is "migrated" from supplemental funding to the baseline budget – which will represent an annual increase of about 13 percent.

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