By Benjamin H. Friedman at CATO Institute
Thanks to the budget deal that the White House and congressional Republicans sealed November 2, the Pentagon’s brief flirtation with austerity is over.
President Barack Obama is set to sign a revised defense authorization bill allowing the Pentagon to receive $33 billion in new military spending in 2016. In truth, for all the Beltway’s wailing about defense spending austerity over the last few years, its punch barely landed. Bipartisan deals raised spending caps every year, and “war” funds allocated to non-war purposes provided further padding.
That’s too bad. True austerity could have forced Pentagon leaders to pursue overdue economies, making sensible choices among weapons and service agendas. It might even have forced our leaders to produce a real defense strategy.
Defense spending austerity has been a big Beltway topic since 2011, when Congress, in the name of deficit reduction, passed the Budget Control Act . It cut spending in two ways. First, it axed $110 billion in 2013, half from defense, via “sequestration.” That meant the cuts came proportionally from each program, except military personnel.
“Real austerity might have produced strategic choices that served U.S. interests by avoiding needless trouble and saving money.”
Second, the law capped annual defense and non-defense discretionary spending from 2012 through 2021. Spending that breached the caps would trigger a similar sequestration. War spending, known as “overseas contingency operations funding,” didn’t count toward the caps.
Had those provisions remained unchanged, non-war (base) defense spending would have fallen by about 14 percent, by Congressional Budget Office (CBO) estimates. Including war costs, which peaked in 2010, and assuming the wars ended, the defense drawdown would amount to about 30 percent. That would be slightly less than the drawdowns at the end of the Cold War (31 percent) and Vietnam War (33 percent).
And this drawdown followed a decade where Pentagon spending almost doubled, with the base portion growing by about half. The Pentagon budget, adjusted for inflation, would have remainednear Cold War highs.
Those would have been significant but quite manageable cuts, especially considering the massive advantages the U.S. military would have retained vis-à-vis all of it’s rivals. But budget deals and war protected the Pentagon from that plan.
First, the American Taxpayer Relief Act of 2012 shrunk the one-time sequester by $12 billion, allowing $518 billion in 2013 defense spending. The Bipartisan Budget Act of 2013 , or Murray-Ryan deal, raised the 2014 defense cap by $22 billion to $520 billion and the 2015 cap by $9 billion to $521 billion.
Both deals balanced defense and non-defense increases to satisfy each party. Both achieved deficit-neutral scoring from CBO by covering the increased spending with savings not fully realized for a decade and thus unlikely to occur—the legislative equivalent of selling junk bonds as AAA.
The continued flow of war funds further protected defense spending, while also reducing the size of the drawdown. After initially restricting the definition of what counted as emergency war funding, the Obama administration, as it admitted , succumbed to the temptation to evade the defense caps by stuffing overseas contingency operations bills with Pentagon requests that belong in the base.
Congress happily joined in.
It’s tough to tally how much this tactic provided the Pentagon because it is debatable what shouldcount as war spending even if everyone is being honest. A reasonable guess using CBO reporting is $15 to $25 billion annually since 2013.
This year, congressional Republicans tried to comply with the $523 billion defense cap, avoiding sequestration, while appeasing hawks and giving the president the $561 billion that he requested for the Pentagon. They did so by shamelessly designating the $38 billion in base funds needed to bridge that gap as overseas contingency operations.
The president didn’t want his requested Pentagon money without an equal increase for domestic spending. So he vetoed the National Defense Authorization Act , even though it had little to do with war funding—that’s the appropriators’ terrain. Still, the veto got the Republicans to the table and produced a deal that raised defense and domestic spending caps equally for two years and, like Murray-Ryan, paid for the boost through accounting chicanery and distant savings.
The latest deal ups defense spending caps by $25 billion in the 2016 fiscal year to $548 billion, and $15 billion in 2017 to $551 billion. It gives the Pentagon and State Department another $8 billion each in both years through funds that are for overseas contingencies in name only.
The Pentagon has not entirely dodged austerity. In the last three years, 2013 especially, spending fell short of prior years’ plans, even with the war boost. And the future defense plans attached to those requests have shrunk. They nearly match what would be spent by complying with the caps through 2021. Of course, history suggests that those future savings may disappear as new deals raise or eliminate the caps.
That limited discipline has required some Pentagon adjustment. Active-duty Army end-strength dropped from 570,000 to 475,000 troops and is supposed to hit 450,000 in 2017. The Navy and Air Force got fewer new ships and aircraft than they wanted. Base construction slowed.
The Pentagon claims to have made substantial progress in trimming back-office “overhead” costs. In the last two years, Pentagon leaders finally began to make some headway in getting Congress to control the rapid increase of military pay and health care costs.
Still, besides sacrificing procurement more than operational costs, the cuts avoid necessary hard choices. Procurement programs have been trimmed and delayed but hardly any were cancelled. No major command has been shuttered of late.
Nor has austerity caused the nation to adopt a real defense strategy. The administration still pretends that U.S. forces are the indispensible keepers of order in every corner of the earth, an expression of hubris that resists the choices strategy requires.
The much-hyped pivot to Asia did not produce real reductions in Asian or European commitments. Despite the logic of the pivot and the national aversion to ground force-centric counterinsurgency warfare, the Navy has barely gained budget share at the expense of the ground forces.
Real austerity might have produced strategic choices that served U.S. interests by avoiding needless trouble and saving money. Instead, war spending that long ago should have shifted to the base and bipartisan deals funded by phony future savings prevented the reckoning. Maybe the next debt crisis will be more productive.