WASHINGTON (Reuters) - U.S. military spending may soon hit post-World War II highs in real terms, but analysts expect this to mark the end of an 11-year buildup no matter who wins the White House in November.
President George W. Bush, in his final spending plan to be released on Monday, is likely to seek about $515 billion for the Pentagon for fiscal 2009, up five percent in inflation-adjusted terms from the amount provided by Congress in the base 2008 budget, these experts say.
In addition, the administration has said it will ask Congress for $70 billion to sustain operations in Iraq, Afghanistan and elsewhere in the early months of the new budget year that begins Oct 1.
If Bush gets what he wants, the Pentagon's baseline budget is "probably roughly peaking now," said Steven Kosiak, director of budget studies at the Center for Strategic and Budgetary Assessments, a research group in Washington.
"The next eight years are not going to look like the last eight years, when it went up 30 percent in real terms," Kosiak said, citing long-term federal budget deficits.
Regardless of whether Bush's fellow Republicans keep the White House or a Democrat is elected on November 4, contractors and others bet that spending is topping out for the current cycle.
"We believe the U.S. defense budget will be fairly flat for the next few years, so international business becomes more important for us to continue growing," Joe Song, Asia-Pacific vice president of the military arm of Boeing Co, the Pentagon's No. 2 supplier by sales, told Reuters in Singapore on Thursday.
Pentagon spokesman Bryan Whitman told reporters on Friday the 2009 budget request would reflect "the realities of a long-term global struggle and the importance of irregular warfare." One priority would be paying for more U.S. ground forces, he said.
Rising costs of fuel, health care, fighter jets, warships and other big-ticket items are seen inflating Bush's 2009 military plan, boosting top contractors headed by Lockheed Martin Corp, then Boeing, Northrop Grumman Corp, General Dynamics Corp and Raytheon Co.
Loren Thompson of the private Lexington Institute, a research group with close ties to the Pentagon and industry, said military procurement in Bush's baseline budget request will surge to $111 billion in fiscal 2009 from $98 billion in 2008. The administration has already said it will seek even more procurement funding in a 2009 supplemental request, including money for four Lockheed F-22 fighter jets.
"However, this may be the top for weapons spending in the current defense spending cycle because research shows a very strong correlation between Democratic control of the federal government and declines in weapons outlays," Thompson said.
If Democrats take back the White House, "they would probably shift some money programmed for military activities into domestic programs, with weapons outlays taking the biggest hit," he added.
But even if a Republican wins, the White House budget office's existing plan calls for scant real growth in defense spending after 2009.
"A Republican administration would be less inclined to shift military funding to domestic programs, but barring some major upheaval such as 9-11, defense outlays are likely to moderate in the years ahead when compared with the very sizable increases of Bush years," Thompson said.
Robert Work, who analyzes Pentagon programs at the Center for Strategic and Budgetary Assessments, said he expected lawmakers to add to Pentagon requests in an election year rather than cut them, because arms programs represent jobs that could translate into votes.
Lawmakers would be more inclined, at least for the coming year, to keep assembly lines open that the Pentagon is seeking to close, including for Boeing's C-17 cargo jet and Lockheed's F-22, he said. Congress also appears likely to add money for shipbuilding, which also means lots of jobs, Work said.
U.S. military spending has climbed steadily since a post-Cold War low in 1998 under former president Bill Clinton.
Outside of its core budget, the Defense Department asked Congress for $189.3 billion in fiscal 2008 to support the U.S.-declared global war on terrorism sparked by the September 11, 2001, attacks.
As of last month, Congress had provided about $86.8 billion of this, including $16.8 billion for mine-resistant vehicles. The sum ultimately made available will determine if 2008, rather than 2009, in fact marks the post-World War II high water mark in spending, adjusted for inflation.
Outlays for Iraq and Afghanistan for 2009 are likely to total $150 billion, Thompson reckons, down from the $189 billion sought in 2008. The higher figure reflects costs for the U.S. troop "surge" in Iraq, which is now unwinding.
In any case, U.S. commitment to what some officials call the "long war" will require difficult trade-offs because of the nation's long-range fiscal challenges, the Government Accountability Office, Congress's audit arm, told congressional committees on Wednesday.
The Department of Homeland Security, which is another big customer of defense contractors, said Thursday it would seek $12.1 billion for border security and immigration enforcement in 2009, a 19 percent jump over last year.
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