Despite Deal, More Budget Battles Loom (UPDATED)

By Jon Harper
Democrats and Republicans recently reached a bipartisan budget agreement that lifts sequestration caps on defense expenditures and avoids a government shutdown. But more fiscal fights lie ahead.

The deal raises base defense spending to $548 billion in fiscal year 2016 and $551 billion in fiscal year 2017. It includes an additional $59 billion for overseas contingency operations (OCO) in each of those years.

Although the budget toplines have been agreed upon, congressional appropriators must still come to an agreement about line item funding for specific programs, analysts noted.

“Most of the issues are settled for [fiscal year] ‘16 at this point,” said Todd Harrison, a defense budget analyst at the Center for Strategic and International Studies. But decisions about program funding for fiscal year 2017 won’t be tackled until next year after the Defense Department releases its budget request.

In the coming years, Congress and Pentagon officials will have to figure out how to pay for expensive modernization programs, including the F-35 joint strike fighter, KC-46 tanker, long-range strike bomber and the Ohio replacement submarine, experts said.

“I think lawmakers will wrestle with … how to overcome the modernization bow wave facing DoD,” said Jacob Cohn, a defense analyst at the Center for Strategic and Budgetary Assessments. “I would not be surprised if the buys are truncated.”

Members of Congress will also be confronted with “contentious” cost-saving proposals such as changes to military pay and benefits and another round of base realignment and closure, he said in an email.

Sen. John McCain, R-Ariz., the chairman of the Senate Armed Services Committee, said lawmakers will need to consider ways to rein in personnel costs.

“We’re going to have to look at the entitlements,” he said during a recent panel discussion. “We’re going to have to look at TRICARE, we’re going to have to look at a number of those aspects of defense spending that need reform, and I don’t think that’s going to be easy.”

The recent budget deal could undermine reform efforts, Cohn said. “By relieving some amount of fiscal pressure facing DoD, I think Congress has lessened the likelihood that some of the more politically contentious cost-savings proposals will pass.”

Going forward, Harrison anticipates a new gimmick being used to facilitate budget agreements. As part of the recent pact, about $15 billion in non-defense spending was included in the Pentagon’s war budgets for fiscal years 2016 and 2017.

“Including additional non-defense funding in OCO is a new trick in the budget deal, and it is something I expect we will continue to see as part of future budget deals,” Harrison said.

“It allows Congress to increase non-defense spending without requiring offsetting deficit reduction measures. Using OCO funding to supplement the base defense and non-defense budget has become the grease that makes the gears of the budget machine turn again,” he added.

Correction: This story has been corrected to identify Jacob Cohn as a defense analyst at the Center for Strategic and Budgetary Assessments. A previous version of this story incorrectly stated that he was with the Atlantic Council.

Topics: Defense Department, DOD Budget

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