FPI Bulletin: The Fraying of the Defense Budget Deal

March 9, 2016

Disagreement over last November’s budget deal, formally known as the Bipartisan Budget Act (BBA), is opening a new debate over defense spending between Congress and President Obama. In fiscal year 2017, the BBA allocated $59 billion for Overseas Contingency Operations (OCO), a category of defense spending intended to support combat and related operations. Since November, a number of Republican leaders have insisted that this sum is a minimum, while the administration, however, seems to be treating this figure as a maximum. This disagreement is salient because both sides acknowledge that some portion of the OCO spending will be used to offset shortfalls in the Pentagon’s base budget, in addition to paying for the intensifying campaign against ISIS and the expansion of efforts to deter Russian aggression.

A Dispute Emerges

When Speaker of the House John Boehner first announced the provisions of the BBA last year, he said Republicans had “negotiated a legislative floor for defense OCO that is the same in both FY16 and FY17.” This clause was necessary, said Boehner, because “We were concerned the President might play games in the second year of the deal, and this provision was put in place to proactively head it off.” The congressional report on the BBA affirmed this position, writing that $59 billion entails “minimum adjustments to the defense and non-defense caps for overseas contingency operations in fiscal years 2016 and 2017.” The text of the BBA simply states that the OCO appropriation for 2017 will be $59 billion.

In mid-January, prior to the release of the President’s FY17 budget request, House Armed Services Committee Chairman Mac Thornberry (R-TX) warned of rumors that the administration would renege on its commitment to ask for “no less than $59 billion” for the OCO account. In light of the terrorist attacks in Paris and the subsequent intensification of the U.S. military campaign against the Islamic State, Thornberry asserted that the case for additional OCO funding was clear. On February 5, in a letter to the House Budget Committee, Thornberry recommended raising the OCO figure by at least $15-$23 billion.

When the White House delivered a FY17 budget proposal that included $59 billion in OCO spending, Thornberry commented, “I am disappointed that this request does not adhere to the budget agreement made just last fall.” More colorfully, Senate Armed Services Committee Chairman John McCain (R-AZ) fulminated, “I just think the numbers are wrong…When will these people wake up? There will be more attacks on the United States of America, this is not the time to be cutting defense spending.”

Conversely, Senate Minority Leader Harry Reid (D-NV) contended that it was the Republicans who were acting in bad faith and endangering the budget deal. Reid’s deputy, Sen. Dick Durbin (D-IL), said of the $59 billion OCO figure, “I viewed it as a ceiling, not a floor.” Referring to President Obama’s insistence that every additional dollar for defense must be matched by an additional dollar for non-defense programs, Durbin added, “There is one abiding concern: fifty-fifty, defense and non-defense.” This suggested that Democratic reservations about increasing OCO were primarily political, at least in the upper chamber. Across the Hill, Rep. Adam Smith (D-WA), the ranking member of the House Armed Services Committee, remained silent about the merits of the GOP position and said he welcomed a debate about appropriate spending levels.

In the month since the budget was released, the debate over defense spending levels has focused in part on the Defense Department’s decision to reduce modernization spending and end strength across the services. These are the types of cuts that OCO could buy back in FY17, and which seem particularly important as the Pentagon’s budget falls below the level previously described as necessary to maintain “the lower ragged edge of manageable risk” to our national security.

Uncertainty at the Pentagon

The secretary of defense and other senior officials have refused to address explicitly whether the budget deal prescribed a minimum or a maximum for OCO. They have affirmed, however, that OCO is variable by nature because it is intended to address unexpected requirements.

On February 2, a journalist asked Secretary of Defense Ashton Carter to comment on Chairman Thornberry’s assertion that $59 billion for OCO was “a floor, not a ceiling.” Carter responded that “OCO is by definition a variable fund that depends upon what you do in the course of a year.” He then observed that while Congress would not want to provide more funding than the Pentagon could spend, “I would think that if we needed more they’d respect that as well.”

A week later, another journalist asked Pentagon Comptroller Mike McCord whether an increase an OCO funding might alleviate the need to cut $11 billion from the Department’s acquisition budget for 2017. Avoiding a clear answer to the question, McCord responded, “I would say the thinking in the budget was we comply with the budget deal.” Unsatisfied, the reporter pushed McCord to address directly the Republican accusation that the administration refused to ask for more OCO funding despite obvious shortfalls. Side-stepping again, McCord suggested it was actually Republicans who stood in the way of additional funding, saying, “I think we've been making the case for higher resources, and Congress as a whole hasn't agreed to give them to us.”

OCO Relief Necessary, but Insufficient

All sides in this debate take for granted that the Pentagon will employ some portion of its OCO funding to compensate for shortfalls in its regular or “base” budget. Even though the purpose of OCO is to support contingency operations, Congress has tolerated or implicitly encouraged this practice, since it is preferable to rigid enforcement of the deep cuts associated with sequestration.   

Following the passage of the budget deal, all sides became increasingly candid about the employment of OCO to meet base budget needs. In its official briefing on the FY17 budget proposal, the Pentagon identifies $5 billion of its OCO budget as “relief” for shortfalls in the base. Meanwhile, Chairman Thornberry’s letter to the House Budget Committee suggests that $23 billion is the proper amount of relief that OCO should provide for the base budget, hence the need for additional funding.

Just as the text of the BBA does not specify whether $59 billion is a floor or ceiling for OCO, it does not specify how much of OCO is intended to compensate for reductions to the base budget. All that can be said with confidence is that increasing requirements associated with actual contingencies necessarily reduces the amount of OCO available for base requirements. Thus, the intensification of the campaign against ISIS and the expansion of efforts to deter Russian aggression have, by definition, reduced by $5.1 billion the ability of OCO to compensate for shortages in the base.

In the short-term, the responsible approach to this problem is to increase funding for OCO. Yet the problem will persist for as long as the Budget Control Act and its sequestration provisions prevent Congress from employing the regular appropriations to provide the Armed Forces with the funding they need to carry out their missions.

Mission Statement

The Foreign Policy Initiative seeks to promote an active U.S. foreign policy committed to robust support for democratic allies, human rights, a strong American military equipped to meet the challenges of the 21st century, and strengthening America’s global economic competitiveness.
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