Department of Defense revenue sources and budgetary constraints

Government Budget Process

Over the last several years, the issue of: budgetary concerns have been increasingly brought to the forefront. Part of the reason for this, is because many bureaucrats have a difficult time in controlling spending and increasing taxes (when necessary). As a result, this has been eating away at the fiscal stability of many different governments. Where, they are having trouble coping with mounting levels of fiscal debt and the lingering effects on the services that they are providing. Evidence of this can be seen by looking no further than, than comments from the Brookings Institute with them saying, "The gap we face is just too large to close if we declare significant areas of the budget off-limits. Neither party is going to sacrifice only the areas of the budget it most cares about in the absence of corresponding concessions from the other side." (Trumball, 2010) This is important, because it highlights the overall scope of the potential crisis facing a host of different governments. In the case of the Department of Defense, they face similar challenges, as they are forced to rein in spending. To determine how and where the different revenues for this agency are derived requires conducting a careful analysis of their budget. This will be accomplished by: examining which revenues / funds are used by the various areas inside the department, possible restrictions that can be placed on these revenues, evaluating how public policy decisions affect the receipt of revenues and analyzing the conditions that affect revenue projections. Together, these different elements will provide the greatest insights as to how revenues and spending can have an impact upon this agency.

Determine which Revenues are used in which funds: Government, Proprietary and Fiduciary

In general, the federal government will generate revenues from a number of different sources to include: income taxes, excise taxes and special taxes (i.e. various fees etc.). The income tax revenues are generally used by the government to run its day-to-day operations. In the case of the Department of Defense, a part of this income would help to fund and support their different activities. ("The Numbers," 2010)

At the same time, they also have proprietary funds, these are used by the Department for supplemental activities (such as: additional funding for cost overruns in operations around the globe). The types of revenues that would fall into this category include: income tax and excise tax revenues. ("The Numbers," 2010)

The fiduciary funds are those that would be used to provide support for various programs of key personnel (i.e. social security contributions). The types of funds that would be utilized in this part of the budget would include: the Social Security Payroll tax. ("The Numbers," 2010)

Describe any Restrictions that are (or could be) Placed on those Revenues

The biggest possible restrictions are: that various programs could have certain amount of funds earmarked for consistent spending. A good example of this can be found with the Joint Strike Fighter program. Where, the Pentagon would award various contract for the plan to key districts. At the same time, there can be restrictions on how the money will be spent and in what areas. ("Bender," 2010)

Analyze the Economic Conditions that Affect Revenue Projections

The economic conditions will play a major role in determining how much spending will occur within the Department of Defense. The reason why is because, the tax revenues are dependent upon economic conditions remaining strong. As a significant portion of the federal budget, is reliant upon income taxes receipts. During times of economic contraction this can be problematic, as it will cause the underlying levels of revenues to decline. At which point, the Department of Defense will face budgetary issues, as they are forced to reduce spending or have some kind of freeze in place. A good example of this can be seen with comments from the White House. Where, they were critical of the Pentagon for not cutting spending, in many different programs that were often considered to be "sacred cows." However, the various budget issues and recession have made many of these programs vulnerable. This is significant, because it shows how economic conditions and politics could have an impact upon the way various revenues are utilized at the Department of Defense. (Dupy, 2010)

Clearly, revenues for the Department of Defense are derived from a portion of the total: income, excise and special taxes that are received from the U.S. government. As a result, the underlying revenues and how they are spent will be subject to changes in the economy. While at the same time, politics can have an impact upon various spending programs. When you put these different elements together, this shows how these the various revenues that can have an effect upon the Department of Defense. As they must be able to wrestle with these different objectives, whilst maintaining focus on addressing the national security issues facing the country.