Oh, are we in for it this fall!
We got through the summer with a predictable outcome when it came to federal budget negotiations. Despite some vehement predictions that the government would shut down on October 1, my expectation was that the government would stay open. And it did — but only thanks to a bizarre twist: the announced departure of Speaker John Boehner. It took Boehner’s political suicide to keep it open. To tweak the old phrase: après Boehner, le deluge. And now: Katie bar the door!
The House political dam has split open in ways that make the next round of the federal budget circus about as uncertain as I’ve ever seen. And for those concerned about the resources available for foreign policy and national security, that’s going to make for a dicey end to 2015.
First, a brief review: Boehner’s gone, and Rep. Paul Ryan has only just decided to try to replace him. The GOP imploded for two weeks following Boehner’s announced departure, raising doubts over whether it can actually govern. The government is in business through December 11, operating at 2015 spending levels, courtesy of the continuing resolution passed in September.
For a while, it looked like Boehner’s final act before the end of October would be to “clean the barn up” by negotiating a slightly larger budget agreement with the White House, which would pass in the House with the help of minority leader Nancy Pelosi, since the departing speaker now owes his splintered majority nothing. (Maybe he would even get the Export-Import Bank reauthorized on his way out, among other stalemated issues).
If there were an agreement, what would it mean for foreign policy and national security funding? Recall that last February, the White House asked for $38 billion more for defense than the caps imposed in the Budget Control Act of 2011 (BCA) would provide. For the administration, this request was part of a package deal: the defense increase would be the same as a requested increase in domestic discretionary spending. Those two increases would be above the caps in the BCA, which the administration wanted to eliminate.
This posed a dilemma for congressional Republicans. Advocates for the Pentagon, like Sen. John McCain and Rep. Mac Thornberry (chairs of their respective Armed Services Committees) wanted that extra $38 billion for defense, whether or not domestic spending went up. But deficit hawks in the GOP, like Rep. Mick Mulvaney, argued that the BCA caps have held down federal spending — domestic spending in particular — and need to stay in place.
In the end, the Republicans’ budget resolution split the difference. The regular budget would adhere to the BCA caps, but defense would receive $38 billion more through the war budget, known as the Overseas Contingency Operations (OCO) budget. The OCO budget is not subject to the BCA caps, and is supposed to be used to fund our wars, which is why McCain called this move a “budget gimmick,” even though he wound up agreeing to it. The Republican majority authorizers spread that extra lolly around in the way they saw fit.
So did the defense appropriators, both in the House and the Senate. But in the Senate, the spending train ground to a halt. Turns out, the Republican majority needs 60 votes to pass its bill, and Senate Minority Leader Harry Reid made it clear that no spending bills would get Democratic votes. Nothing has moved further on the appropriations side, which is how we arrived at that late September continuing resolution.
Reid was supporting the White House view, made explicit in the President’s veto of the National Defense Authorization Act (NDAA) on Thursday, that the OCO gimmick was unacceptable, because it did not let the Department of Defense do long-term budget planning, and because there was no matching increase for domestic spending. “Shifting base budget resources into OCO risks undermining a mechanism meant to fund incremental costs of overseas conflicts and fails to provide a stable, multi-year budget on which defense planning is based,” the White House said.
In reality, the White House’s seemingly principled rejection of the OCO budget as the way to fund the additional $38 billion for defense — and thus the veto of the NDAA — is actually not an act of principle, but pure hostage-taking. White House insiders tell me that they would be happy to accept another $38 billion for defense in the OCO, or anywhere else, as long as it’s accompanied by an equivalent $38 billion of increase in non-defense discretionary spending, which funds diplomacy and foreign assistance. Very closely held talks now under way between the Hill leadership and the White House are reviewing that option, along with increases of a lesser amount.
But don’t count on it. I am told the White House wants a clean deal, free of riders for things like defunding Planned Parenthood. And the White House would like to decide on how the additional non-defense funds would be allocated. Good luck with that, amid all the disarray in the House.
Even if such a deal did emerge, John Boehner, who has agreed to stay on until he’s replaced (or Ryan, if he’s in place in time) would face the Sisyphean task of pushing it through the House. Republican unanimity to do so remains uncertain, which may force the next speaker to rely on the Democrats and the good will of Nancy Pelosi. Why? Because only the Democrats can pass what the speaker agrees to. Even Ryan is likely to have a hard time corralling this bunch, given the hardline position of the super-conservative Freedom Caucus on budget matters.
Amid all this, guess what else we’ve got coming in early November? Another fight over the debt ceiling — the federal government’s borrowing limit — which will occur well before the continuing resolution expires. Treasury Secretary Jack Lew said Treasury will run out of spending room by November 3, at the latest. So alongside those budget negotiations, whoever is leading the House Republicans has to ram through an agreement to raise the debt ceiling, too.
This budget chaos could even stretch into early December. The potential outcomes include federal default, a government shut down, a one-year or two-year agreement to increase both defense and domestic funding at levels of something less than $38 billion each, or a deal to go all the way to $38 billion each. Or it could just lead to a Pontius Pilate-type decision on December 11 to extend the continuing resolution through the whole year, and walk away with bags of popcorn to watch the Republican presidential candidates drive their clown car around the tent for the next six months.
For defense budgets, defense planning, and U.S. diplomacy, the outcome is likely to be great uncertainty. Realistically, a deal that adds $38 billion to the current defense budget cap, which currently hovers around $500 billion, seems unlikely. So my money is on either a smaller increase in the caps (as Congress did in 2013 with the Ryan-Murray deal ), or a year-long continuing resolution.
The former may be more likely than the latter, given Ryan’s likely ascension to the speakership. In principle, he’s in a position to demand the Freedom Caucus support a smaller budget settlement if they want him to be speaker. But it is far from certain the caucus will agree, making the band of uncertainty very wide.
For years, I have said and written that the Defense Department and military services need to focus on conservative fiscal planning. Instead of promising the services a large budget increase that is not certain to happen, the secretary ought to do contingency planning today at far lower budget levels, so the services realistically plan for less and maybe get lucky.
But we’re talking about Ash Carter, who, as deputy to then-Defense Secretary Leon Panetta in 2012, told the services to spend as if their budget were fully funded and a sequester would not happen. He turned out to be wrong, and tough measures were required to cut defense spending when the sequester axe fell.
Congress continues to play budgetary chicken but, sadly, the Pentagon continues to plan as if the game is over, and the skies are blue and replete with new planes and drones. Some contingency planning now is in order, because the clouds may remain in place for another two years.