August 16, 2017

The Road to Defense Budget Disaster



For years, defense hawks have been warning about the threat to the Department of Defense should another sequester occur. For years, sequestration has been avoided because lawmakers have rightly chosen not to appropriate funds above the spending limits mandated in the Budget Control Act of 2011 (BCA). With the Trump administration’s defense budget request $54 billion above the BCA cap for fiscal year 2018, and the National Defense Authorization Act calling for even more, is that about to change?

Before answering that question, it’s important to distinguish between two things: sequestration and budget caps. Lawmakers and analysts frequently conflate them. For example, Sen. John McCain, in an op-ed co-authored with House Armed Services Committee Chairman Mac Thornberry in 2015, railed against the “across-the-board” cuts the BCA was forcing on the U.S. military. But there were no across-the-board cuts in 2015. Or 2016. Or before that in 2014. There was an across the board cut in 2013, which was the result of the failure of the so-called “Supercommittee” to arrive at a consensus on deficit reduction by the deadline provided in the BCA. The budget caps themselves do not cut anything. They impose a limit—with some important exceptions—on what the Department of Defense can spend. The Pentagon can plan what it spends in anyway it chooses up to that limit. It is entirely reasonable to argue that the budget caps do not provide the Pentagon with sufficient funding. But while critics of the BCA routinely claim the caps create “uncertainty” for defense planners, in reality, they do the exact opposite. They are nothing if not certain.

Conflating the BCA caps with sequestration was always a rhetorical trick defense hawks used to rail against legislation they thought to be dangerous. Todd Harrison of the Center for Strategic and International Studies has previously explained why this conflation is a problem:

The misleading and deceptive use of words may be smart politics, but it does not lead to better policy outcomes. Instead of lazily trying to equate the BCA’s budget constraints with the foolish across-the-board cuts of sequestration, senior leaders should make a better case for why defense should not be forced to stay within the BCA budget caps. And I think it’s a fairly straightforward argument to make.

Sequestration, the across-the-board cuts to the defense budget, only occurs when Congress appropriates funds for the Department of Defense that exceed the caps imposed by the BCA. Until recently, the prospect of that occurring was unthinkable—rendering the defense hawks rhetoric about the threat it posed transparently alarmist. While the Obama administration did propose budgets that exceeded the BCA limits on both defense and domestic spending, and Congress responded with budget resolutions filled with “gimmicks” to avoid exceeding the caps, legislators and the administration were always able to negotiate bipartisan deals that increased the caps less than either side wanted but sufficiently to avoid a sequester.

As Joe Gould of Defense News recently reported, many in Congress think a sequester is now possible:

The House’s version of 2018 defense appropriations legislation includes added ships, jets and potentially $28.6 billion in flexible funding for emerging requirements. At $584.2 billion, with $73.9 billion overseas contingency operations, or OCO, it would exceed 2018 budget caps for defense by $63.5 billion.

 

Some lawmakers fear that with no clear path from GOP leaders to adhere to or lift the budget caps, it’s unclear whether Congress is headed toward sequestration budget cuts triggered when the caps are broken or some other scenario that would damage defense.

The overseas contingency operations (OCO) account, used ostensibly to fund ongoing operations in Iraq, Afghanistan, and elsewhere, has typically been used to provide some budgetary breathing room for the Pentagon because it is exempt from the BCA caps. But former Congressman Mick Mulvaney, now director of the Office of Management and Budget, has been a staunch opponent of the Pentagon’s OCO gimmick. Even with OCO providing a safety valve,  legislators have consistently crafted bipartisan deals—starting with the Ryan-Murray deal for the fiscal year 2014 budget—that have increased both defense and domestic spending and avoided the type of across the board cuts that sequestration would entail.

As Katherine Blakeley of the Center for Strategic and Budgetary Assessments explains in an analysis of the administration’s defense budget request, the legislative calendar that awaits lawmakers when they return from August recess provides little room to negotiate a compromise. Blakeley, and others, have noted that the most likely scenario a continuing resolution for the first months of fiscal 2018. And this is all taking place despite the president’s party holding majorities in both houses of Congress. It is also occurring as the United States continues to fight wars in Afghanistan and Iraq, ramps up counterterrorism operations elsewhere, and as the president threatens North Korea and, more recently, Venezuela.

Despite platitudes from some corners about the need to give the U.S. military budgetary carte blanche, defense spending is still a product of the political process. There is always a debate to be had about foreign policy ends, as well as the proper level of spending to provide military means to achieve them. Inherent to that debate is the likelihood that there will always be a gap between ends and means. But even if sequestration is avoided yet again, the current dysfunction in both Congress and the White House, is likely to ensure that gap widens.

Matthew Fay is the Director of Foreign and Defense Policy Studies at the Niskanen Center