Fighting the Islamic State: Assessing the Impact on the Pentagon’s Budget | National Security Network

As the United States expands the war against the Islamic State to include striking targets in Syria, the issue of funding the campaign has garnered increased interest from policymakers. Recent analyses by outside experts project that the costs of a sustained campaign could rise to $8 billion per year for airstrikes – depending upon their intensity – and $20 billion per year overall when taking into account other factors, such as arming partner ground forces. These projected costs come at a time when Congress has called to drawdown Overseas Contingency Operations (OCO) spending and Pentagon officials are indicating that in the future they will need more OCO funding to execute the campaign against the Islamic State.

However, as policymakers consider funding options, OCO remains purposed largely not for funding wars – its intended function – but for funding activities that belong in the base budget but have been reallocated to OCO to skirt spending caps. The Pentagon has the option of making overdue reforms that could save tens of billions of dollars that would make room for transferring sizable OCO funds back to the base budget where they belong and freeing OCO to pay the costs of a campaign against the Islamic State. For all of these reasons, drawing down OCO while also funding operations against the Islamic State remains possible. Finally, navigating these difficult challenges reinforces the value of increasing transparency into the Pentagon’s financial systems, highlighting the need for full auditing of the Department of Defense (DoD).

Costs of war so far in Iraq and Syria have been limited but are rising. Since the expansion of the war against the Islamic State to targets in Syria, the costs of U.S. operations have increased to $7-$10 million per day, according to Pentagon Spokesperson Rear Adm. John Kirby – although the opening U.S. strikes in Syria may have cost “at least $79 million,” according to the Daily Beast. A recent study by Todd Harrison of the Center for Strategic and Budgetary Assessments (CSBA) concluded that “the total cost to date from mid-June through September 24 is likely between $780 and $930 million.” Harrison estimates potential costs of a continued air campaign to range between $2.4 and $6.8 billion annually, depending upon intensity. Other estimates that take into account factors beyond the airstrikes are higher. Gordon Adams of the Stimson Center estimates annual costs as high as $15 to $20 billion. “The majority of the $15 to $20 billion total comes from airstrikes, which Adams estimates will cost about $8 billion a year,” reports Huffington Post. “Training and equipping Iraqi and Kurdish ground forces will cost $3 billion, and providing military support for moderate Syrian forces in Saudi Arabia will cost another $1 billion, according to Adams. The remaining costs are associated with the price of coalition building.” [John Kirby via The Hill, 9/25/14. The Daily Beast, 9/24/14. Todd Harrison et al., 9/14. Gordon Adams via Huffington Post, 9/26/14]

The Pentagon can cover higher war costs against the Islamic State while still drawing down Overseas Contingency Operations (OCO) funds to lower levels.

Much of OCO funding is not war related, leaving room to repurpose current funds to help pay for counter-Islamic State operations. Deputy Secretary of Defense Bob Work has said plainly, “There’s a lot of money in the OCO that should probably be in base [budget], and it’s not because we didn’t want it to be in the base, it’s just happened over 12 years.” This year’s OCO funding request was nearly $60 billion, though costs for U.S. operations in Afghanistan are expected to only be “in the vicinity of about $20 billion,” according to Deputy National Security Advisor Tony Blinken. That would leave a $40 billion gap between the portions of OCO needed to pay for wars (other than operations against the Islamic State) – the basic purpose of OCO – and the amount requested. This practice of using OCO to pay for non-war related costs has been prominent in past years as well. Todd Harrison of the CSBA explains, “Since the enactment of the BCA [Budget Control Act], which does not count war-related funding against DoD’s budget cap, Congress and DoD have moved items that had been funded in the base budget to the OCO budget. In FY 2014, this practice appeared to expand. DoD transferred some $20 billion in operations and maintenance funding from the base budget to OCO in the budget request (author’s estimate), and Congress moved an additional $9.6 billion from base to OCO in the appropriations bill.” [Bob Work via Defense Daily, 9/30/14. Tony Blinken via Defense News, 6/1/14. Todd Harrison, 3/3/14]

Making overdue reforms can enable moving non-war costs from OCO to the base budget where they belong – and help free up OCO funds for fighting the Islamic State. Speaking to the need to remove money in OCO that is unrelated to wars and put it back in the base budget – thereby freeing up OCO funds for war costs – Deputy Secretary of Defense Bob Work recently said, “that money either has to come into the base with an increase in our topline…Or we agree that OCO will continue in the future” at high levels. But OCO isn’t the only release valve DOD has available. For example, a detailed report by Lt. Gen. David Barno (Ret.), Nora Bensahel, Jacob Stokes, Joel Smith, and Katherine Kidder of the Center for a New American Security (CNAS) concluded that solely by reducing “redundant overhead,” the Pentagon can save “$100 billion to $200 billion over 10 years.” The authors explain, “From FY 2001 to FY 2012, the annual defense budget grew by nearly $250 billion in real terms. That growth included more than $1.2 trillion in war spending and directly fueled an explosion of headquarter and staff manpower. Service staffs in the Pentagon, joint commanders and defense agencies, including the DOD civilian and contract workforce, all ballooned during this period. In the face of force structure cuts, DOD’s overhead costs must be reduced by at least the same percentage in order to maintain combat power. The Defense Business Board argues that cuts of 5 percent to 15 percent in overheads costs can be achieved without affecting future mission readiness.” [Bob Work via Defense Daily, 9/30/14. David Barno, Nora Bensahel, Jacob Stokes, Joel Smith, and Katherine Kidder, 6/6/13]

The Pentagon’s budget under the Continuing Resolution (CR) increased OCO above what was requested, providing additional relief. Steve Bell and Alex Gold of the Bipartisan Policy Center explain, the “CR includes almost exactly the same level of OCO spending as in FY 2014 – just over $7 billion a month [at the level of $85 billion annually]. If that spending level were to continue for the whole year, that would be an increase of over $30 billion from the original DoD request for the year of $58 billion.” [Steve Bell and Alex Gold, 9/18/14]

Lawmakers from both parties have expressed concern over OCO abuse.

House Armed Services Committee Republicans: Rep. Buck McKeon’s (R-CA) Chairman’s Mark of the FY 2015 National Defense Authorization Act said, “The committee is concerned about the large portion of enduring activities, training, sustainment, and other military requirements being funded through amounts authorized to be appropriated for OCO. The committee believes the Department of Defense is accepting high levels of risk in continuing to fund non-contingency related activities through the OCO budget…” [Chairman’s Mark, Sec. 332]

Rep. Paul Ryan (R-WI): The report accompanying the Budget Committee’s 2015 budget said, “Abuse of the OCO/GWOT [Global War on Terrorism] cap adjustment is a backdoor loophole that undermines the integrity of the Budget process.” [Budget Committee Report for FY 2015 Budget]

24 members of Congress, including Reps. Keith Ellison (D-MN), Barbara Lee (D-CA), Justin Amash (R-MI), and Mike Coffman (R-CO): In a letter to the President, the members of Congress wrote, “We are deeply concerned by the migration of base budget funding into the OCO budget as well as the use of war funds to finance activities and procure items that are unrelated to the war in Afghanistan.” [Bipartisan letter, 5/22/14]

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