Tag: OCO

SecDef Should Tackle Personnel Costs

Yesterday, Secretary of Defense Chuck Hagel went before the House Armed Services Committee to answer questions about President Obama’s proposed FY 2014 military budget. The request for $526.6 billion for the base DoD budget is $3.9 billion lower than the 2012 enacted level. While this reduction is a positive step, it doesn’t go far enough given the nation’s fiscal state and changing military requirements, and it exceeds the spending caps mandated by the 2011 Budget Control Act by $55 billion.

For more insight on the budget numbers and what this means politically, see my colleague Ben Friedman’s excellent post from yesterday. I want to focus on an area of the budget that cries out for reform: rising personnel costs.

During his testimony, Hagel reiterated the need to rein in such costs, echoing themes from his speech last week at the National Defense University. The president’s budget aims to reduce these costs by cutting end strength, limiting the size of pay increases (to 1 percent), and making “benefit adjustments” to TRICARE. Such adjustments are critical to the department in the long term.

A political battle over these types of reductions is all but certain; however, some members of Congress—perhaps most—will resist. This is unfortunate, especially for fiscal conservatives who understand the need to reform entitlements like Medicare, Medicaid, and Social Security, yet fail to see the need to contain skyrocketing costs in personnel and benefits at DoD. The arguments are the same: the current path is unsustainable; reforms are needed or the costs will consume the rest of the budget; and if you implement the reforms sooner, they can be more incremental and less disruptive to the troops. But then again, farsightedness isn’t Congress’s strong suit.

Personnel costs, which account for approximately 32 percent of the budget request (over 45 percent when civilian pay and benefits are included), need to be addressed. The administration has proposed cutting conventional forces—mainly from within the Army and Marine Corps—by 100,000. Hagel has mentioned reducing the civilian workforce, but he hasn’t outlined specifically how he would downsize the “world’s largest back office.”

As Ben Friedman points out, it is also important to keep in mind that the $526.6 billion base budget request does not accurately represent the total cost of national defense. For instance, Overseas Contingency Operations (OCOs)—war funding—is a separate request. Many believe that as we draw down in Afghanistan, OCO funding will come down. But Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, explained in yesterday’s hearing that those costs are likely to remain fairly steady for the next few years. Despite the fact that many budget projections count the drawdown in Afghanistan as “savings,” the United States will remain in Afghanistan for years to come.

When you factor in the budgets of other the defense-related items—nuclear weapons management under the Department of Energy, the intelligence community, the Department of Homeland Security, and Veteran Affairs—total spending on national defense soars to over $900 billion.

There is plenty of room for further cuts in this massive total, especially if we rethink what we ask our military to do. Shedding security commitments and unnecessary missions would allow for a budget that reflects our level of security. But the administration can start by addressing the costs relating to personnel. Otherwise, the future does not look bright for Pentagon budgets. 

A Modest Victory for Transparency and Accountability in the DoD Budget

Earlier this week I wrote about the Obama administration’s proposal to shift $5.6 billion dollars out of the Pentagon’s base budget into the Overseas Contingency Operations (OCO) account. Because the OCO budget was exempted from last year’s Budget Control Act (BCA), this gimmick was clearly intended to allow the Pentagon to evade the BCA limits, and had attracted the attention of House Budget chair Paul Ryan (R-WI), Republican Study Committee chair Jim Jordan (R-OH), and a handful of budget watchers. I anticipated that one or more members would call attention to it during floor debate over the defense bill.

Sure enough, on Wednesday afternoon, Rep. Mick Mulvaney (R-SC) offered an amendment to undo the shift. Unfortunately, Mulvaney’s amendment was ruled out of order, ignoring the fact that the entire defense bill exceeded the BCA spending limits and thus also should have been ruled out of order. I thought the proposal to fix the dubious OCO shift would die there.

Not so. Undaunted, Mulvaney returned with a new amendment co-sponsored with Reps. Jordan and Peter Welch (D-VT) that did not actually transfer any funds—thus conforming to House rules—but that expressed the same goals articulated in the earlier amendment. As Mulvaney, Jordan, and Welch explained in a “dear colleague” letter:

Our amendment, similar to a Sense of the House resolution, supports the policy of moving $5.6 billion in non-war costs back to the Base Budget. It fully supports the resources our troops on the battlefield will need, but it does not actually transfer any funding. It simply highlights a non-partisan issue—accountability and transparency—by demonstrating support to move these non-war costs back to the Base Budget in the FY13 CR and future budget requests. (Emphasis in original)

The gambit worked: the resolution passed 238-178, with strong bipartisan support. House Armed Services Committee chairman Howard “Buck” McKeon (R-CA) voted no, as did Appropriations chair Harold “Hal” Rogers (R-KY) and the House Appropriations Committee-Defense Subcommittee chair C.W. Bill Young (R-FL). But 154 Republicans voted for the amendment, including Budget chairman Ryan, House whip Eric Cantor (R-VA), and Rules Committee chair David Dreier (R-CA).

It was a modest, and largely symbolic, victory for transparency and accountability. The next step is to end the war in Afghanistan and eliminate the OCO account entirely. That separate pot of money for the war(s) has served to obscure the enormous growth in the Pentagon’s base budget over the past decade.

To (Ironically) Avoid Sequestration, Congress Could Declare War

The Senate is back in session this week as the battle over military spending, and the prospect of sequestration, continues to sizzle. Last Friday the Office of Management and Budget concluded  that war funding—also known as Overseas Contingency Operations (OCO)—would not be exempted from sequestration, contradicting the Pentagon’s earlier claims. Predictably, this has angered the GOP and provided fodder for those who oppose military spending cuts on any grounds.

But war funding—$88.5 billion for FY 2013—should never have been considered separate from military spending. This is a practice, gradually accepted in the past 10-15 years, that distorts the size of the defense budget, making it appear smaller. It provides the illusion that Congress and the current administration are fiscally responsible.

The irony of current flap over OMB’s ruling is that Congress could undo sequestration if it simply declared war. In today’s Cato podcast, Benjamin Friedman, research fellow for defense and homeland security studies, explains that the federal code, going back to the 1980s, holds that a declaration of war will reverse sequestration. But Congress doesn’t declare war anymore; members routinely ignore their constitutionally mandated obligation. Those who are the most vocal opponents of sequestration—Rep. Howard “Buck” McKeon (R-CA) and others—have a tool at their disposal that they will never consider.

Listen to the podcast below to hear Friedman provide a primer on the battle over war funding (OCO), sequestration, and the defense budget bills.