Complications Loom for Trump’s Defense Budget

Photo: Defense Dept.

The Pentagon has been adamant that Defense Secretary James Mattis will put forth a budget proposal that boosts military readiness. 

Details on how Mattis’ fiscal guidance reshapes spending priorities or results in higher top-line funding levels will surface in the coming weeks when the Pentagon submits supplemental request for fiscal years 2017 and 2018.

“His vision, his thinking and his priorities are very much in line with his goal of building military readiness,” Pentagon spokesman Capt. Jeff Davis said of Mattis’ budget plan. 

But significant political roadblocks stand in the way of funding the Pentagon’s wish list, obstacles that also would deny the military the long-term fiscal predictability it has sought for years, said former defense officials and lawmakers.

A deteriorating atmosphere on Capitol Hill is diminishing the odds that Congress will even pass a budget for the current fiscal year, possibly extending temporary funding, known as a continuing resolution, beyond the current April 28 deadline, said John McHugh, a former New York Republican congressman and secretary of the Army during the Obama administration. 

“I’m very concerned about a CR through the end of fiscal year 2017,” he said last week during a webinar hosted by Bloomberg Government. Based on recent conversations with appropriators, he said, “It’s likely we’ll get a CR.” 

Lawmakers from both parties told McHugh they would like to move forward with an appropriations bill but hopes are fading. “Both sides said they will give it a shot to get an omnibus. The bills are written. Not a lot of technical work is needed. But it’s the politics,” McHugh said. And he worries this will hurt the Defense Department because new programs cannot be started without a proper appropriations bill. 

“CRs are devastating for the military,” said McHugh. “We need a ‘regular order’ way to deal with the imbalance in defense. Every service chief and secretary, it’s what keeps us up at night, not having forces fully trained and equipped.”

Appropriators also have to decide whether the “overseas contingency operations,” or OCO supplemental funding for the Pentagon will be bundled with the 2017 spending bill.

The outlook might improve for the fiscal year 2018 budget. “I’m hoping we can break the stalemate,” said McHugh. “But the fact is that a dark cloud remains, the Budget Control Act caps. We are still going to have to find a way to balance domestic and defense to bring some Democratic votes.”

The spending caps on discretionary spending set in law until 2021 cannot be repealed with only Republican votes, and Democrats will not cooperate unless military budget hikes are matched for nondefense agencies. Congressional Republicans and the Trump administration have shown no sign of wanting to cut such a deal, and may actually move to cut nondefense programs. 

Although the House could pass legislation with just Republicans, the 60-vote threshold in the Senate “really makes it hard,” said McHugh. “I can’t imagine they’ll allow defense to go up without domestic spending,” he added. “Obama found it politically necessary to tie the two together. I see why he did it but it makes it that much harder.”

A deal to lift the caps similar to those negotiated in 2014 and 2015 confronts tough odds because they would require some compromise on nondefense spending. “Grand bargains are like Big Foot,” said McHugh. “Everyone talks about it but you never see it.” For Congress, the easier choice is to “kick the can,” which means the BCA may stay in place, he said. “This is such a fundamental problem for defense.” 

During the past four years, separate deals were made to raise the caps, and were paid for with user fees and entitlement cuts,” noted Richard Kogan, senior fellow at the Center on Budget and Policy Priorities.

There is no procedural maneuver that Republicans could use to remove the statutory restrictions with a simple majority. “In a budget resolution, you cannot override statutory caps,” he said. “It can happen if both parties want it to happen. I don’t think that situation applies now.”

A more effortless approach to raise defense would be to increase the OCO account, said Kogan. “Defense appropriations could declare the excess over the caps OCO.”

Kogan cautioned that he has no idea how the politics will play out. He observed that the BCA issue is one illustration of the limits of power in Washington. “People assume that with the GOP in control, they can push it through,” he said. “Not so quick.” The administration will encounter similar challenges securing support for tax reforms and infrastructure spending bills.

On defense, specifically, even the OCO option will encounter hurdles as the director of the Office of Management and Budget, former GOP congressman Mick Mulvaney, is a staunch deficit hawk and has criticized maneuvers like the defense supplemental as budget gimmicks. 

“With Mulvaney in charge of OMB, OCO may be entering a new era,” said McHugh.

Congressional defense hawks appear alarmed by the tougher than expected environment. House Armed Services Committee Chairman Rep. Mac Thornberry, R-Texas, told reporters last week he worried that the administration’s lagging efforts to fill Pentagon top jobs might jeopardize Mattis’ push to shore up military budgets. 

Davis, the Pentagon spokesman, dismissed the suggestion that Deputy Defense Secretary Bob Work, an Obama administration holdover, has clashed with Mattis over budget priorities. He noted that senior defense officials have been in “continuing conversations with Representative Thornberry.” 

The budget inputs “when they leave this building and go over the transom to the White House and OMB, they will go out of here in Secretary Mattis’ name, and they will reflect his vision, his thinking and his priorities,” Davis said. “That is very much in line with his goal of building military readiness.”

He insisted that Work has the “full confidence and trust of Secretary Mattis.” Work’s deep familiarity with the budget process, with how to coordinate the military services’ proposals and overall corporate knowledge is “critical to building the budget,” Davis said. “But ultimately this will be Mattis’ guidance.”

The Pentagon is working to meet a March 1 deadline to submit the 2017 amendment for supplemental funding to OMB. The fiscal year 2018 request likely will be sent over in May.

Underlying these statements are larger difficulties for the Pentagon as it tries to make the case for a bigger budget, such as enduring struggles breaking through the gridlock on Capitol Hill. 

“One issue is that the new administration does not yet have its own people in key positions to start steering the Defense Department in a new direction, and there is some frustration on the Hill over that,” said defense budget expert Todd Harrison, of the Center for Strategic and International Studies. “The other issue is that people are talking past each other about readiness,” said Harrison. “Readiness is one of the most overused and misunderstood words in defense. A lack of readiness can be used to mean shortfalls in personnel, training, and maintenance funding, which contribute to near-term readiness. Other times it is used to mean having the right technologies and capabilities to meet future threats, which contributes to long-term readiness.”

Work's advocacy for investments in next-generation technology is one way to improve long-term readiness, said Harrison. “And Thornberry's push for greater force structure and end strength is intended to improve near-term readiness.”

Capitol Hill insiders warn that the Pentagon could be in for more of the same fiscal battles that became par for the course during the Obama years. A change in administration does not remove the entrenched dynamics that have stalled federal spending bills for nearly a decade — one of them being that lawmakers no longer pay a political price at home for not passing budgets on time. 

“Earmarks are now a real discussion in the Republican Congress,” said former GOP congressman from New York, James Walsh, now a lobbyist at K&L Gates. “Since earmarks went away in 2008, bills aren’t getting done, they aren’t getting to the president,” he said.

The factions that pushed back on government spending during the Obama administration are still in power, and have been strengthened by the appointment of Mulvaney at the helm of OMB, Walsh noted. “The conservatives are together. What motivates them is the debt.”

This does not bode well for bigger defense budgets, which consume about half of the government’s discretionary funding. Mandatory spending on Medicare, Medicaid and Social Security amounted to 30 percent of the budget in 1970, whereas today it’s the exact opposite. “You can’t balance the budget on discretionary spending. … And the president doesn’t have the concern about debt and deficits that the party does,” said Walsh. “Anybody who gets discretionary funding should be very worried.”

For defense, the wild card is whether the president and congressional Republicans can gather the votes. “The House will plus up defense and send it over to the Senate. That’s when the negotiations begin,” said Walsh. And what about Mulvaney’s anti-spending views? “He’ll do what the president wants him to do.” 

A test will come later this year when the administration will need Congress to vote to raise the federal borrowing limit to avoid a U.S. default. Mulvaney in the past voted against raising the debt limit. 

Topics: Defense Department