Playing Defense | CQ

By Megan Scully, CQ Staff

The Pentagon brings unrivaled leverage to its annual budget negotiations with Congress: Give us what we want or you might lose a war.

This year, faced with spending limits set by law four years ago, the Defense Department has blown its lid by an audacious $35 billion, handing Congress a wish list of weapons and the unenviable job of making the budget work. Military officials insist that less money equals more risk. They can’t make do with anything less than requested.

The administration’s request is just the opening bid, of course, and budget talks will stretch into autumn. But by then, there’s a good chance Congress will give the Pentagon some relief from the spending limits — perhaps $10 billion or so. To make up for the remaining overage, lawmakers can take a number of actions, including tapping unspent money from previous years, relying more on war budget accounts that are not constrained by the 2011 law and trimming hundreds of individual programs rather than axing a few.

After several years of handling Pentagon proposals that exceed spending limits, in fact, congressional appropriators approach the Defense budget with the precision and skill of surgeons. They have become expert at finding extra cash to not only cover the Pentagon’s priorities but also to pay for their own pet projects.

In the end, while most attention is still riveted on President Barack Obama’s ambitious spending and tax proposals and Republican efforts to halt both, the military might walk away with much of what it wants — and, in some cases, maybe even more than it asked for.

Todd Harrison at the nonpartisan Center for Strategic Budgetary Assessments uses a homey analogy to describe the process, equating it with shaking the couch cushions for spare change. When you’re talking about a $534 billion base budget proposal and another $51 billion for overseas contingency operations, he says, it actually isn’t all that difficult for Congress to find billions stashed in the sofa.

“From DOD’s perspective, they’ve gone through and they’ve already shaken the couch cushions and have come up with all the money they won’t be able to execute, that’s excess to need,” Harrison says. “It’s natural, though, that Congress takes an independent look, almost as an auditor in their oversight role, and they can find things that either DOD didn’t find or DOD might not agree is excess or left over.”

Those machinations don’t solve all of the department’s spending problems, but they at least ease the burden.
“Does it get you $35 billion? I don’t think so,” says Robert F. Hale, who served as the Pentagon’s comptroller for the first five years of the Obama administration. “That’s a lot of money. But it could help.”
‘Fair Warning’

It’s not yet clear whether the House and Senate, both under Republican control for the first time in eight years, will adjust the budget limits as they have in the past. Nevertheless, the Defense Department’s total budget allocation, or top line, will almost certainly be smaller than it has proposed.

“If they get less than requested, significantly less, then shame on them for not being prepared,” Harrison says. “They’ve got fair warning right now.”

For now, however, the Pentagon is sticking to its talking points and dire warnings as it attempts to sell its budget proposal on Capitol Hill. Defense officials say they need the extra $35 billion next year, and $150 billion above the limits over the next five years. Their mantra is that the budget is “strategy-driven and resource-informed,” and balances the need to cut costs with the multitude of threats the military must be prepared to respond to around the world.

Adm. James A. Winnefeld Jr., vice chairman of the Joint Chiefs of Staff, told reporters on Feb. 2 that his best military advice to Congress is to keep the budget at the requested level. Anything less, he said, will require adjustments to the nation’s defense strategy.

“It doesn’t mean the strategy completely breaks,” Winnefeld said, “but we will have to make adjustments to that strategy if we’re going to stay in balance.”
That argument resonates with Republican defense hawks who populate the House and Senate Armed Services committees. They have one primary mission this year: To raise the defense “caps” to get spending more in line with what the Pentagon says it requires.

That seems, at least on the surface, simple enough in a Republican-controlled Congress. But it’s a politically fraught task that will require these aggressive defense advocates to battle fiscal conservatives in their own party, while simultaneously fighting the White House and congressional Democrats on spending priorities.

Virginia Republican J. Randy Forbes, a senior House Armed Services Committee member, says he’s generally happy with the defense portion of the budget request. Forbes’s district lies just south and west of the Norfolk naval complex, and many of his priorities, including the pricey refueling and overhaul of the USS George Washington aircraft carrier, made the Obama budget proposal.

But Forbes would have liked to have seen the administration make other sacrifices, presumably within similarly constrained domestic programs. The total federal government request exceeds defense and nondefense discretionary spending caps by $74 billion.

“It’s somewhat like the uncle who goes in and tells his brother’s kids they can have anything they want for Christmas because he’s not going to pay for it,” Forbes says. “So when you look at this, the real cut is that the president hasn’t come in with any realistic priority decisions he’s made across the budget that makes some of these defense priorities a reality.”
Divisions Among Divisions
Forbes says he’s optimistic about the ability of the hawks to drive defense spending up to more comfortable levels. But with intraparty friction, not to mention a push from Democrats to preserve domestic spending, the final number for defense will likely still fall short of the Pentagon’s request.

There even appears to be division among the hawks on how to proceed.

Some, including Lindsey Graham of South Carolina, a vocal member of the Senate Armed Services and Appropriations committees, view any budget negotiation as having three parts: defense, non-defense and revenue.

“You can’t do defense without nondefense,” says Graham, who is one of only a handful of Republicans who are open to increasing taxes. “To implement a replacement for sequestration, you’re going to need a Simpson-Bowles-type deal, I think, to buy back sequestration on the defense and nondefense side.”

He was referring to the bipartisan recommendations for budget cuts and tax increases made by President Obama’s National Commission on Fiscal Responsibility and Reform in 2010, chaired by former Republican Sen. Alan K. Simpson of Wyoming and Democrat Erskine Bowles, who had been President Bill Clinton’s chief of staff.

But other defense hawks, including Jeff Sessions of Alabama, a member of the Senate Armed Services and Budget committees, will consider increases only for defense.

“I steadfastly oppose the idea that for every dollar spent on defense it has to be matched by a new extra dollar spent on nondefense,” Sessions says.

As budget negotiations get underway, lawmakers ultimately have three options: Raise the spending caps and appropriate to those levels, reduce the budget to the existing caps using targeted cuts, or appropriate above the spending limits and allow the indiscriminate across-the-board cuts known as sequestration go into effect.

One potential outcome would be a repeat of the 2013 deal between then-Senate Budget Committee ChairwomanPatty Murray, a Washington Democrat, and her House counterpart at the time, Wisconsin Republican Paul D. Ryan, that raised the caps on national defense spending to provide an additional $22 billion in base discretionary spending in fiscal 2014 and $9 billion more in fiscal 2015.

Even modest relief would require a delicate balance between the priorities of fiscal conservatives, defense hawks and Democrats, and it is unclear whether there is much appetite on Capitol Hill for another budget deal. But it has been done before.

“I think, at this point, only a soothsayer knows for sure,” says Hale, who was in charge of the Pentagon’s finances during the enactment of the 2011 Budget Control law, and for the revisions that followed. “History suggests there is the potential for a deal.”

In the absence of a general agreement, the more likely option is to bring the president’s budget down to the existing limits. It would be a painful budget-cutting exercise for appropriators and is not ideal for the Defense Department, but it at least allows cuts to be based on priority and strategy.

Probably the least likely option is for Congress to simply allow the mindless across-the-board sequestration cuts to go into effect. By doing so, Congress would essentially cede its power of the purse. The Defense Department, meanwhile, would be left with a budget that does not reflect its priorities.

“If they don’t reach a deal,” Hale says, “I would be very surprised if they don’t appropriate at the cap levels.”

Challenging Process

After years of virtually ignoring the budget limits, the Pentagon sent a fiscal 2015 budget request to Congress last year that matched the revised funding levels allowed under the Ryan-Murray deal.

Still, Congress took a scalpel to the request to find any potential savings and redirect that money to its own members’ priorities like the carrier refueling and buying 15 more Growler electronic attack aircraft for the Navy.

Acquisition programs are the low-hanging fruit in the Pentagon’s budget, and the fastest and easiest way to save money. But Congress is always reluctant to kill weapons programs that create jobs, and appropriators will do whatever they can to keep most of the department’s programs on track.

Rather than terminating major programs, appropriators look to find savings in hundreds of individual budget lines.

Last year, the Senate Defense Appropriations Subcommittee made cuts to 517 specific programs for a total savings of $11.7 billion.

The final omnibus spending bill, which funded most government agencies for the current fiscal year, was no less impressive, with billions of dollars in savings from — in many cases — relatively small cuts.

Indeed, appropriators used their full bag of tricks to find cash in the budget.

According to a Congressional Research Service analysis of the bill, they:

— Made $4.6 billion in cuts due to “fact-of-life” changes in programs, such as schedule delays or workload changes;
— Shifted $2.9 billion from the base defense budget to the war accounts;
— Cut $2.3 billion from program funding that appropriators deemed excessive;
— Tapped $1.8 billion in unobligated balances;
— Found $1.2 billion through rescissions of prior-year funding.

Smaller but still effective changes to the fiscal 2015 defense budget include claiming $744 million in savings because of a smaller civilian workforce and another $386.3 million through revised economic assumptions.

Add all that money up and it comes to nearly $14 billion in savings, more than enough to buy an aircraft carrier outright. And that was in a year when the Pentagon’s budget request actually matched the spending limits it was facing.

For fiscal 2016, the stakes are higher. The appropriators’ job will require even greater precision as Congress tries to get defense spending down to the statutory limits (whatever those turn out to be) while also squeezing in a few of their own must-have programs.

Harrison of the Center for Strategic Budgetary Assessments estimates that appropriators could find as much as $20 billion “without really cutting anything,” simply by using unobligated balances and shifting base-budget programs to the war budget.

That doesn’t include the cuts to individual programs, some of which even the Pentagon could endorse. After all, Congress takes a crack at the defense budget months after the Defense Department wraps up its internal negotiations. In the interim, a lot can change on various weapons programs, including delays that could push some costs off for a year.

And then appropriators will find that savings have generated fluctuating economic assumptions, including fuel prices and the rate of inflation, freeing up even more money to redirect those to other priorities.

“Time,” Hale says, “is the best budget analyst.”

It doesn’t get them $35 billion. But it gets them much closer.

Playing Defense | CQ