Budget 2016: Defense Faces Stiff Political Headwinds

By Sandra I. Erwin

By Sandra I. Erwin

The White House is unveiling a funding plan for the Pentagon that kicks off another round of fiscal battles that have become a hallmark of President Obama’s administration. 

The president’s budget for fiscal year 2016 seeks a sizeable boost to defense and domestic spending. But there is little to no chance that Congress will go along. Domestic political disputes and a broken budget process almost guarantee the Pentagon will continue to live under a cloud of fiscal uncertainty for the remainder of the year.

The Obama administration is proposing a federal budget for 2016 that exceeds legally mandated limits on discretionary spending by $74 billion, including $35 billion for defense. For the Pentagon, which has pleaded for relief from the spending caps for the past three years, this ought to be a welcome reprieve. The Budget Control Act restricts defense baseline spending at $499 billion. The 2016 proposal seeks $534 billion for the defense baseline budget and $51 billion for war spending, according to officials who disclosed the figures to reporters ahead of the Feb. 2 release. The president’s budget also increases nondefense discretionary spending by $34 billion.

Whatever Congress ends up appropriating likely will be less than the president’s request but higher than the ceiling allowed by the four-year-old budget law, analysts and budget experts said. The final amount will not be known for months.

The political and fiscal environment, in theory, should be receptive to bigger military budgets. The United States is dealing with complex security crises in the Middle East, Europe and Asia. The federal budget deficit has dropped significantly. And the traditionally pro-defense Republican Party controls both houses of Congress.

But the practical reality is that defense spending decisions continue to be underpinned by Washington dysfunction and a protracted stalemate over government spending and taxes.
“I don’t think the Defense Department gets anywhere close to what they’re planning right now,” said Todd Harrison, senior defense budget analyst at the Center for Strategic and Budgetary Assessments.

The theme of the 2016 budget is “Here we go again,” Harrison said. For the Pentagon, it is shaping up to be another year of fiscal anxiety while the White House and Congress play chicken.
“I think the struggle will go on,” said Barry Blechman, distinguished fellow at the Stimson Center. “It makes Pentagon planning extremely difficult.”

The administration will make the case that the Pentagon needs the additional funding to keep the military combat ready, and nondefense agencies also have pressing priorities that require more funding. But the Budget Control Act’s stringent caps are the law of the land. If Congress passed a budget at the president's level, a sequester would be triggered and the Pentagon would have to cut $35 billion. Other than a repeal of the law, there are only fiscal sleight of hand solutions such as adding more money to the war budget that is not subject to the caps.

Getting more money for defense will require an agreement to also lift the spending caps for nondefense agencies. Such a deal might be doable in the Senate but a tough sell in the House where there is a stalwart bloc of deficit hawks that would rather cut defense than allow increases to nondefense spending.

That means it’s all headed for a veto showdown, Blechman said. “The president is not going to accept raising the defense caps without a lifting of the caps on nondefense discretionary spending.”
Pro-defense conservatives so far are not optimistic that a bridge can be built across the yawning GOP divide.

Outside the defense committees, there is no real consensus on national security, said Jerry McGinn, president of McGinn Defense Consulting. There are also several Republican senators who are positioning to run for the White House in 2016, which creates conflicting interests within the party, he said.

Bryan McGrath, a former national security adviser to GOP presidential nominee Mitt Romney, said the four defense committees that used to lead the way on military spending have lost their clout. “A lot of Republicans are happy to put serious brakes on the defense budget and cut the defense budget,” he said. Within the party, the “consensus on our place in the world has broken down.”
The ranks of the budget hawks are growing in the House, said John J. Deschauer, a partner at Squire Patton Boggs and a former Pentagon official.

Even though the federal deficit has fallen, according to Congressional Budget Office projections, debt starts to rise again in 2018, a point not lost on anti-spending Republicans. “You have a group of committed deficit hawks,” Deschauer said. “They will not support repealing sequester unless other cuts are made.” Further, the budget committee leaders are deficit hawks.” For defense, he said, “It's a real conundrum. Nobody has come up with a careful way to get out of the fix the BCA put the budget in.”

Senate and House leaders have said they intend to put the budget process back on “regular order,” something that has not happened since 2009. That would require the House and Senate to pass a concurrent resolution by April. A budget resolution does not have the force of law but lays out the congressional priorities and budget totals. It traditionally has served as a blueprint for the actual appropriation process.

The absence of regular order during the Obama presidency led to government shutdowns, multiple fiscal cliffs and continuing resolutions that kept spending at the previous year’s levels.

Whether Republican leaders can get the process back on the rails remains to be seen, said Ryan Crotty, defense budget analyst at the Center for Strategic and International Studies.

“I am somewhat pessimistic,” he said. “There is just a core disagreement between Republicans and Democrats about where that money has to come from” to pay for the defense and nondefense increases. “House Republicans are going to want to find money for defense in non-defense. And that is so clearly anathema to the president and what he sees as his priorities,” Crotty said. “Can they get another Ryan-Murray style sort of short fix that actually gets you maybe $10 billion to $20 billion this year and sort of gives you another bridge to making an agreement?”

Crotty predicts it will be difficult to have regular order if Republicans can’t reach a concurrent budget resolution by mid-April. “I think it’s going to be very hard, even with Republicans running both houses, to get something that House Republicans are going to put into a budget resolution that Senate Republicans who are largely up for re-election in 2016 are going to be willing to get behind. And it will certainly be hard to find anything that gets the votes.”

If regular order breaks down, “expect another CR [temporary funding measure],” Crotty said. If no resolution can be reached later in the year, “that’s when we find a small deal.”

The current Washington consensus is that the BCA caps will hold, and the war budget — the overseas contingency operations or OCO account — will be used as a “safety valve” to shore up the defense baseline budget, said Robert Stallard, industry analyst at RBC Capital Markets.

As to whether the budget caps can be overturned, that will require action from the very top, said Harrison, of CSBA. Both House Speaker John Boehner, R-Ohio, and Senate Majority Leader Mitch McConnell, R-Ky., are going to have to persuade their members to revise the BCA, he said, and that is a tall order. They will need the support of Budget Committee Chairmen Sen. Mike Enzi, R-Wyo., and Rep. Tom Price, R-Ga., both of whom are deficit hawks. The details of working out a deal ideally would come from budget committees, Harrison said, “but they need the backing of party leadership.” Once the GOP gets enough of its own membership onboard, it will need to compromise with Democrats on how to pay for the additional defense and nondefense spending. Democratic congressional leaders will take their cue from the White House.

Blechman, of the Stimson Center, said the Defense Department likely will end up with an appropriation with modest increases over the caps, but a deal might not happen until late in the summer or early fall.

The Pentagon is only a pawn in the political gamesmanship over the budget, he said. By presenting a budget that is 7 percent higher than what Congress set in the law, the president is just posturing. “It’s irresponsible,” Blechman said. The administration views the bigger budget request as politically beneficial even though it knows it is unlikely to happen, he said. At the same time, Republicans too are being irresponsible because they continue to shut down Pentagon cost-cutting proposals — such as personnel reforms and mothballing older weapon systems — that would help the military reduce spending and operate more efficiently, he added. “There’s enough blame to go around.”

The political theater over sequestration is damaging to the military, Blechman said. Defense advocates like Armed Services Committee leaders Sens. John McCain, R-Ariz., and Lindsey Graham, R-S.C., convened a hearing last week where the members of the Joint Chiefs of Staff were asked to lay out the consequences of the sequester. The testimony painted a detailed picture of the consequences of military budget cuts, but likely did little to ease the larger impasse over government spending.

Democrats who support increasing the Pentagon’s budget, like Sen. Jack Reed of Rhode Island, have insisted that relief for the military can’t happen unless domestic agencies get more money too.
“Compromise and difficult choices are reacquired to provide sequestration relief at the Department of Defense and for other critical national priorities, including public safety, infrastructure, health and education,” Reed said at the hearing.

Pro-defense lawmakers like McCain are banking on fiscal conservatives to support a military spending boost because many have strong political incentives to do so.

Fiscal hawk Sen. Dan Sullivan of Alaska is a case in point. He cited recent comments by retired Marine Corps Gen. James Mattis that the nation’s $18 trillion debt is a national security concern. “I think we all see that we're struggling with the issues of sequestration, with the issues of readiness, but with the broader issues of how our fiscal situation in this country actually impacts national security,” Sullivan said. From a practical standpoint, though, the “local impacts” of sequestration cannot be ignored, he said. “I think it's important that the people that we represent also hear what the potential for local impacts could be with regard to sequestration.”

Another conservative lawmaker, Sen. Thom Tillis, R-N.C., wondered whether the military could manage with less money if it were given the authority to allocate cuts, rather than having to slice programs across the board as is required by sequestration. Army Chief of Staff Gen. Ray Odierno said the BCA-level funding is simply not enough, regardless. “I want to be very clear about that up front,” Odierno told Tills at the hearing. “I just think it does not allow us to meet what we believe is our defense strategy.” Sequestration, itself, is inefficient because salami sliced cuts limit how you manage, he added. “And what it's done is it's stretched programs longer than they need to be so the cost per item is more.”

Odierno also reminded senators that the military is financially burdened by programs it does not want but Congress mandates anyway. “Yes, we are still having to procure systems we don't need,” Odierno said. “Excess tanks is an example in the Army, hundreds of millions of dollars spent on tanks that we simply don't have the structure for anymore.”

The simple truth is that everyone hates sequestration but nobody can figure out how to fix it, legislators admit.

“We don't have a plan" to reverse sequestration, Graham said. And he noted that neither does the White House.

“Have each of you talked with the president about this problem with sequestration?” Graham asked the military chiefs. “We have, senator,” said Gen. Mark Welsh, chief of staff of the Air Force.
Odierno said the higher amount requested by Obama is a “budget that we have worked with the president. So I think you would see that he believes that the Department of Defense cannot operate under a budget of sequestration.”

Graham, like other pro-defense lawmakers, resents the president’s strategy of shifting the blame to Congress. “Does he seem upset when you mention to him the consequences of what the Congress has decided to do with his signature?.... Has he submitted a plan to you that says, ‘I understand what you're telling me, this is unacceptable, as commander in chief here's how I intend to fix it?”
None of the chiefs said they were aware of such a plan.
“I don't mean to just to beat on the president,” Graham added. “I think that applies to us too. We're the ones who created this mess. The president signed the bill. … We don't have a plan.”

Topics: Defense Department, DOD Budget

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