Republican Pentagon Proposal: Gimmicks Inside Gimmicks

Yesterday, House Republicans released a budget that included a massive increase in Pentagon spending to $613 billion for Fiscal Year 2016. The core of the proposal is a $39 billion plus-up to the Department of Defense by funding Overseas Contingency Operations (OCO) accounts at artificially high levels so that OCO money can be spent on what should really be base-budget functions. Because OCO is not covered by the Budget Control Act spending caps, the proposal amounts to a massive budget gimmick that would skirt the budget caps on the Department of Defense by playing a budgetary shell game with funds roughly the size of the GDP of Lebanon. In fact, the gimmick is so brazen that it has been harshly criticized by top Republicans themselves. Also featured in the House’s budget proposal – and a reported feature of the Senate’s upcoming proposal as well – are so-called “deficit-neutral” reserve funds that would give the Pentagon additional money taken from cuts to Medicare.

House Republicans are proposing a massive increase in Pentagon spending funded by budget gimmicks that abuse OCO war funding. “The House Budget Committee released its non-binding fiscal 2016 budget resolution on Tuesday, proposing Congress spend $523 billion for defense, which adheres to the spending level set for this year in the 2011 Budget Control Act (though allowing increasing spending in the coming years to the tune of $387 billion over the 10-year totals). But the House resolution also sets $94 billion for Overseas Contingency Operations funding, or OCO, a catch-all war chest that is not subject to the budget caps – essentially relying on OCO to make up the shortfall and skirt the issue completely.” The proposed $94 billion in OCO is $39 billion over the Pentagon’s request. The purpose of increasing OCO is to skirt the budget caps. Defense News reports the Pentagon and Congress would have “the additional $39 billion in war funding to spread out as they see fit” to pay for base-budget functions. [Defense One, 3/17/15. Defense News, 3/17/15]

Members of Congress, from arch-hawk Sen. John McCain to socialist Sen. Bernie Sanders, have spoken out against increasing Pentagon spending with OCO budget gimmicks.

 Sen. John McCain (R-AZ): “I think that using OCO in that fashion is basically not the best way to address it – OCO is overseas contingency, that’s the name of it…I would much rather go through the normal authorization and appropriations process and I think most members would – this is kind of a dodge.” [John McCain via Defense One, 3/17/15]

 Sen. Jack Reed (D-RI): “I think we’ve got to come to a solution that’s not a quick fix and more of a gimmick than a long term credible source of support.” [Jack Reed via Defense One, 3/17/15]

 Rep. Mick Mulvaney (R-SC): “I’m going to have some major difficulties with using the slush fund to pump up defense.” [Mick Mulvaney via The Hill, 3/17/15]

 Sen. Mike Crapo (R-ID): “It is a gimmick. To use it in that way, I oppose it.” [Mike Crapo via Politico, 3/17/15]

 Sen. Jeff Flake (R-AZ): “OCO has become a slush fund. We’re starting to put State Department funding in OCO. I mean, this is stuff that we know, we’ve budgeted for years before and we just put it to be able to raise the cap on everything else. It’s really, unfortunately, a growing gimmick.” [Jeff Flake via Politico, 3/17/15]

Sen. Bernie Sanders (I-VT): “Given the fact that we have tens of millions of Americans struggling to keep their heads above water economically, at the very least, there has to be an equal increase in non-defense, as well.” [Bernie Sanders via Defense News, 3/17/15]

 Gimmicks inside gimmicks: Republicans are looking to pay for increased Pentagon spending with other budget gimmicks called deficit-neutral reserve funds – including ones that would cut Medicare.

 Deficit-neutral funds are just another gimmick: The House budget proposal would create a “Defense Readiness and Modernization Fund” that would collect money from unspecified “deficit-neutral” sources (that would require further legislation) and channel that money to the Pentagon. But deficit-neutral funds are largely gimmicks themselves. Sarah Binder, a rules expert at George Washington University and the Brookings Institution , explains: “These deficit neutral reserve funds are popular because they carve out an area for future policy making without having to specify up front a precise mix of revenues and/or spending cuts to pay for them.” [Sarah Binder via Washington Post, 3/22/14]

Funding gimmicks with cuts to Medicare? But if Republicans can get the idea to work, it will be because they figured out how to take money away from important domestic programs. On the Senate side – which is also releasing a budget that reportedly features deficit-neutral funding streams for the Pentagon – Sen. Lindsey Graham (R-SC) wants to pay for increased funding for the Department of Defense with cuts to Medicare. Greenville Online reports: “Along with Sen. Kelly Ayotte, R-N.H., Graham said he wants to create a ‘deficit-neutral reserve account’ to use money generated by tax reform and Medicare changes to shield the defense budget from further cuts…‘Would you be willing to tell that retiree, “We’re not going to give you a subsidy of $109 month because, one, we can’t afford it, and two, we’ll take the money and rebuild the Defense Department and intelligence community that protects all of us?”’ Graham said. ‘I think most people in the country would say that is a good trade.’” [Lindsey Graham via Greenville Online, 3/13/15]

 Abuse of OCO is nothing new and has cancelled out much of the effect that the budget caps would have had. Todd Harrison of the Center for Strategic and Budgetary Assessments explains, “Since the enactment of the BCA [Budget Control Act], which does not count war-related funding against DoD’s budget cap, Congress and DoD have moved items that had been funded in the base budget to the OCO budget. In FY 2014, this practice appeared to expand. DoD transferred some $20 billion in operations and maintenance funding from the base budget to OCO in the budget request (author’s estimate), and Congress moved an additional $9.6 billion from base to OCO in the appropriations bill.” Elsewhere, Harrison noted about the FY2015 budget that “the incentive…is to reclassify anything you can as being OCO funding…How much base budget funding is DoD actually getting through the OCO appropriations? If it’s to the tune of $30 billion or so per year, as this data would suggest, then that largely offsets the reductions they’ve had.” [Todd Harrison, 3/3/14 and via Reuters, 1/30/15]