Why Does O&M Spending Keep Going Up?

The Pentagon has requested $277 billion in fiscal 2010 to fund operations and maintenance (O&M) activities in the regular military budget and overseas conflicts. That’s more than any other country spends on its entire military establishment, so you’d think pundits would be scrutinizing the account more closely. But they generally don’t, buying into the easy logic that the elevated level of outlays must reflect high optempo and the cost of maintaining an aging arsenal. Here’s a different way of looking at O&M expenditures. Maybe huge O&M outlays are an indicator of rising personnel costs. Nearly a third of the regular O&M budget covers the cost of civilian defense workers, whose pay and benefits have been rising faster than inflation. And most of the cost of the military healthcare system — which looks likely to spend a billion dollars a week in 2011 — is carried in the O&M account. So the real culprit in rising O&M outlays is people costs, which are gradually eclipsing other types of defense spending.