DEFENSE DEPARTMENT

$26 Billion in Additional Defense Funds Possible, But Unlikely, Analyst Says

3/3/2014

The particulars of the $496 billion defense budget will be unveiled tomorrow, but two other funding mechanisms could boost military spending and help alleviate the pain of the Budget Control Act, an analyst said.

One wild card is the Obama administration’s Opportunity, Growth, and Security Initiative that would boost defense spending by $26 billion in exchange for tax and spending reforms. The military could also continue to use its Overseas Contingency Operations funds — a wartime fund that is separate from the base budget — to soften cuts to accounts, said Todd Harrison, senior fellow of defense budget studies for the Center for Strategic and Budgetary Assessments.

But don’t bank on either to provide real relief. The former initiative is unlikely to be approved by Congress, Harrison said during a conference call with reporters. The latter fund could disappear in just a few years, and the Defense Department has yet to work out how it would fit OCO expenses back into the base budget.

The Opportunity, Growth, and Security Initiative would increase defense spending by $26 billion in exchange for tax and spending reforms. Defense Secretary Chuck Hagel indicated that most of that funding will be funneled into readiness, but some of it could be used for modernization, Harrison said.

It’s unlikely that Congress will be able to pass that initiative, he said. “They won't be able to get Republicans in the House, at least to go along with the revenue increases that are included in that.”

However, the initiative will be important to watch because it spells out a “second tier” of defense priorities for the Pentagon — the things the department currently cannot afford in its budget but would like to have, if given a little extra money.

Another factor shaking up the budget planning process is the Overseas Contingency Operations fund, which helps to pay for wartime expenses and isn’t affected by the Budget Control Act, Harrison said. Since the BCA was enacted, the Defense Department has offset cuts by transferring some budget items from the base budget to OCO.

Harrison estimates the Defense Department has moved about $20 billion to the OCO budget in 2014, and Congress transferred another $9.6 billion in its appropriations bill. Most of those items were from operations and maintenance accounts, which includes funding for depot maintenance and flying hours.

“When people talk about why aren't we seeing more impacts [from sequestration], well, that's part of the reason,” he said.

OCO funding could dry up in the next couple years, so depending on it to soften the blow of sequestration is dangerous, Harrison said.

“It's not clear that we're going to have any troops remaining in Afghanistan after 2014. It's a real possibility we could be forced to pull out all troops if we don't reach a security agreement with the Afghani government like what happened in Iraq,” he said. If that happens, the military might be able to maintain an OCO budget through fiscal year 2016, which would provide some aid to Afghanistan and pay for the cost of resetting the military’s equipment. Past that, “it’s very much possible that there just wouldn’t be much of a justification.”

“Over the next few years, DoD is going to have a big bill they have to fit back in their base budget, and that’s not something they’re planning for right now,” he added.

During the roundtable, Harrison also presented the results of an exercise where analysts from CSBA and three other think tanks were tasked with creating a list of spending priorities: one that would fall in line with the Budget Control Act including sequestration, and one in which only half of the BCA cuts are enacted.  The second scenario is about the same funding level as the fiscal year 2015 budget, he said.

The other three participants were the American Enterprise Institute, the Center for a New American Security and the Center for Strategic and International Studies.

The exercise participants agreed with the Defense Department’s decision to retire the U-2 and A-10 and start a round of base closures.

In some cases, the think tanks favored even greater cuts than the Defense Department. For example, it advocated for greater cuts to Army and Marine Corps force structure in both scenarios.

In the “half BCA” scenario, analysts called for a force structure of 406,000 soldiers and 175,000 Marines, down from the 440,000 soldiers and 182,000 Marine force outlined in the 2015 budget. They would also cut 240 joint strike fighters and two carrier strike groups in the half BCA scenario.

The think tanks were more supportive of the ground combat vehicle program, which they said should merely be delayed for five years. The analysts also called for the acceleration of the long range strike bomber program.

Topics: Defense Department, DOD Budget

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