Statement of Rudolph G. Penner, Director, Congressional Budget Office
Abstract
Mr. Chairman and members of the panel, I am pleased to appear before you today to testify on inflation adjustments in the defense budget. Since the early 1970s, much of the budget request for the Department of Defense (DoD) has included funds to cover anticipated increases in prices. In recent years, however, the Administration's inflation estimates have exceeded actual increases in prices, so that DoD has received more funds than it needed to compensate for inflation. This excess funding has prompted questions about how better to budget for defense inflation. Improved forecasting methods might be of some help. But since no method can be expected to forecast inflation precisely, the Congress might also wish to examine more systematic ways of adjusting appropriations to correct for the inevitable errors in forecasting. On the other hand, more formal adjustment procedures will impose some cost by adding to the complexity of the budget process. In order to aid the Congress in assessing the costs and benefits of reform, my testimony today will explore the advantages and disadvantages of various approaches to inflation accounting. I must stress that my testimony is limited to the effects on the defense budget of overall inflation in the economy. Other forms of cost increases -- such as weapons cost growth resulting from slips in schedules or engineering changes -- also have important effects on the defense budget, but must be dealt with on a case-by-case basis.
Document Details
- Document Type
- Technical Report
- Publication Date
- Apr 30, 1986
- Accession Number
- ADA529827
Entities
People
- Rudolph G. Penner
Organizations
- Congressional Budget Office