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INSIGHTi
FY2022 NDAA: Budgetary Context
November 10, 2021
Congressional consideration of the National Defense Authorization Act for Fiscal Year 2022 (NDAA;
H.R. 4350 and S. 2792) occurs as federal spending is projected to continue to exceed revenues. This trend
raises questions about whether pressure to reduce the federal deficit may affect defense budget plans.
In July 2021, the Congressional Budget Office (CBO) projected a federal deficit of $3.0 trillion for
FY2021, or 13.4% of Gross Domestic Product (GDP). That percentage would be the second-highest since
1945. CBO attributed the size of the projected deficit in part to “the economic disruption caused by the
2020-2021 coronavirus pandemic and the legislation enacted in response.” CBO projects spending will
continue to exceed revenues over the next decade (Figure 1). From FY2022 to FY2031, CBO projects
discretionary defense outlays will increase 23% and nondefense discretionary outlays 6%, while
mandatory outlays will increase 40% and net interest payments on the national debt 198%.
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Figure 1. Outlays by Budget Enforcement Category and Revenues, FY2001-FY2031
(Projected)
(in trillions of nominal dollars)
Source: CRS analysis of Office of Management and Budget (OMB), Historical Tables, Table 1.4 and Table 8.1; and CBO,
Budget and Economic Data, 10-Year Budget Projections, July 2021, Table 1-1 and Table 1-4.
Notes: Outlays from 2001 through 2020 reflect OMB amounts (actual); outlays from 2021 through 2031 reflect CBO
projections.
In recent decades, during periods of widening gaps between revenues and outlays, Congress has
sometimes enacted legislation intended to reduce the deficit in part by limiting defense spending.
After the deficit reached nearly 6% of GDP in 1983, Congress enacted the Balanced Budget and
Emergency Deficit Control Act of 1985 (P.L. 99-177). This legislation created annual deficit limits and
stated that breaching them would trigger automatic funding reductions equally divided between defense
and nondefense spending. In 1990, Congress passed the Budget Enforcement Act of 1990 (Title XIII of
P.L. 101-508), which included statutory limits on discretionary spending. These limits were in effect
through 2002 and, in certain years, included a specific limit on defense spending.
After the deficit reached nearly 10% of GDP in 2009, Congress enacted the Budget Control Act of 2011
(BCA; P.L. 112-25). The legislation reinstated statutory limits on discretionary spending for FY2012-
FY2021 and resulted in separate annual limits for defense spending. The defense spending caps under
BCA as amended applied to discretionary base budget authority for the national defense budget function
(050). The legislation effectively exempted certain other types of funding from the caps, including
funding designated for Overseas Contingency Operations (OCO). Under the BCA, discretionary spending
limits were enforced through a mechanism called sequestration, which automatically cancels previously
enacted appropriations by an amount necessary to reach prespecified levels. Over the past decade,
Congress enacted appropriations within BCA discretionary spending limits except in FY2013, when then-
President Barack Obama ordered the sequestration of budgetary resources across nonexempt federal
government accounts. BCA discretionary spending limits expired in FY2021; there are no discretionary
spending limits for FY2022 or thereafter. As part of the FY2022 budget request, the Biden Administration
proposed discontinuing funding for OCO and, instead, requested funding for contingency operations in
the base budget.
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Some observers have argued statutory spending limits disproportionately affect defense programs and
inadequately address projected growth in mandatory programs; others have argued they are necessary in
light of recurring deficits and increasing federal debt. In 2020, CBO identified options for reducing the
federal budget deficit through budgetary savings in both mandatory and discretionary programs. Twelve
options involved reducing funding for discretionary defense programs (e.g., operation and maintenance,
naval ship construction, aircraft). In 2021, CBO published a report describing three options for carrying
out national defense activities under a smaller defense budget.
Figure 2 shows defense spending over time in both nominal and constant FY2022 dollars. The inflation-
adjusted line shows the cyclical nature of defense spending during wartime. The level of defense outlays
requested for national defense in FY2022, when adjusted for inflation, is higher than during the Cold War-
era military buildup of the 1980s and lower than during the height of post-9/11 operations in Iraq and
Afghanistan. Defense outlays are projected to remain relatively flat through FY2026. Figure 3 shows
defense spending over time as a share of both federal outlays and GDP. Defense outlays have steadily
decreased from peaks of nearly 90% of federal outlays and more than a third of the overall economy in
the 1940s during World War II—to less than 13% of federal outlays and 3.3% of the economy in FY2022.
Figure 2. National Defense Outlays,
Figure 3. National Defense Outlays as
FY1940-FY2026 (projected)
Share of Total Federal Outlays and GDP,
(in billions of nominal and constant FY2022 dollars)
FY1940-FY2026 (projected)
(in percentages)
Source: CRS analysis of OMB, Historical Tables, Table
3.1 and Table 10.1.
Source: CRS analysis of OMB, Historical Tables, Table
Notes: FY2021 through FY2026 reflect projections.
3.1.
Figures adjusted to constant FY2022 dol ars using GDP
(chained) price index in Table 10.1.
Notes: FY2021 through FY2026 reflect projections.
Congress is debating competing proposals regarding the overall size of the defense budget. In August
2021, the Senate and House adopted an FY2022 budget resolution (S.Con.Res. 14), which recommended
$765.7 billion in new budget authority for FY2022 national defense programs and assumed “discretionary
levels as proposed in the President’s budget request.” On September 23, the House passed its version of
the NDAA (H.R. 4350), which included a total budget authority implication of $790.5 billion for national
defense (including mandatory and discretionary budget authority beyond the scope of the legislation).
That amount is $25 billion (3%) more than the President’s budget request. The Senate has not yet acted
on its version of the bill (S. 2792), which includes a similar increase to discretionary authorizations for
national defense.
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Author Information
Brendan W. McGarry
Megan S. Lynch
Analyst in U.S. Defense Budget
Specialist on Congress and the Legislative Process
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
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Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
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