26 Days Later
On March 27, the sequester will rise from the dead.
Just one more day of garment-rending, teeth-gnashing, and hair-tearing at the Pentagon, and then…well, then the Department of Defense has to get cracking before the roof really caves in on March 27.
Oh, you thought the fight was about March 1 and sequester? Not half likely, as the Brits would say. The real game has always been about March 27, when the continuing resolution, which has funded the government for the last five months, expires. That’s when the government shuts down or, if it doesn’t, when we find out how much money the Pentagon really has to spend this year.
Sequester is happening. While the White House continues its theater and the president goes on the road, realism has set in about this show — even among congressional Republicans. When House Armed Services Committee Chair Buck McKeon is ready to fold his cards after nearly two years of non-stop campaigning to "save defense," you know the fat lady has sung on the March 1 deadline: "Republicans aren’t cookie cutters, but we do agree on the basic premise of where we’re trying to go. And if we don’t get our fiscal house in order, it’s very hard to provide for the defense of the nation."
Now it’s time to get on with the business of managing the defense drawdown, starting with the walk over the next hurdle. The real deadline has always been March 27. Deputy Secretary of Defense Ash Carter effectively conceded this point on January 10, when he instructed the military services to start planning for cuts not only because of the impending sequester, but also because of the continuing resolution, which kept FY 2013 discretionary spending (including defense) at the FY 2012 level, pending passage of an actual appropriations bill.
Planning was particularly critical for what is called the operations and maintenance, or O&M, account. The O&M budget — which makes up over 40 percent of the Pentagon’s total budget — covers everything from the costs of sailing ships, to driving tanks, to flying planes, to maintaining bases, fixing equipment, training and educating the force, to, especially, the salaries of the 800,000 civilians who work for DOD. It is particularly vulnerable to sequester because other large Pentagon expenses will not be cut through sequestration. Military personnel and their benefits (including retirees) are exempt under the law, and dollars already obligated to contracts shield contractors from the near-term impact of sequester.
What’s more, DOD had actually wanted to grow the O&M account, asking for a 6 percent increase when it submitted its FY 2013 budget request. And, adding insult to injury, during the first quarter of this fiscal year, the Pentagon actually spent its operations and maintenance funding at the higher rate it had requested — not the FY 2012 level funded in the continuing resolution. "Silly us," Deputy Secretary Carter said of that mistake. That’s why March 27 represents a real reckoning point for the Pentagon.
So the questions are: Will Congress negotiate a final appropriation for FY 2013, or just extend the continuing resolution through the rest of the fiscal year, leaving the Pentagon (and other agencies) at the FY 2012 level of funding (and still subject to sequester)? Or will there be an actual appropriation for the military, setting a final level above the continuing resolution (also still subject to sequester)?
Whatever the new level for the defense budget after March 27 (it is likely to be less than what the administration asked for), it sets a new baseline for the sequester itself. Then the question is, will Congress use the occasion of passing a new CR or an appropriations bill to "fix" the sequester? Will the bill be used to give the Pentagon greater flexibility to implement the sequester or change the allocation of dollars inside the defense budget to make the implementation of the sequester "easier" in some way? Will it change the caps set out in the Budget Control Act, so the sequester is reduced, or not needed altogether?
If this sounds complicated, it is because it is complicated — very complicated. Congress cannot just appropriate more money to Defense and "fix" the sequester that way. Doing so would just set a new baseline from which sequester would take place. So to "fix" the sequester, they have to do something about the caps set in the Budget Control Act, which put the whole train wreck in motion.
And trying to fix it in an appropriations act is even more complicated. I was talking this through with Richard Kogan at the Center on Budget and Policy Priorities, one of the best informed people in Washington on this issue. It seems that if Congress tries to add money to Defense but doesn’t want those funds to create a new target for the sequester, they would have to ask, specifically, that those additional funds not be "scored" against the sequester target — a fancy way of saying, these monies just don’t count. If they try to cancel part of the sequestration, they would have to say the cancellation doesn’t count.
Either way — in fact, almost any way the Congress tries to use the appropriations act to fix sequester or make it easier, including greater flexibility — would encounter the reality that they are messing with the basic congressional budget statute and process. Meaning that the jurisdiction for these changes belongs not to the appropriators, but to the budget committees.
And if the budget committees do not sign off on the changes, they are subject to what is called a "point of order" in the House and the Senate. Meaning that the House might not be able to consider them, and one member of the Senate can stop the process. Imagine Senator Rand Paul or Tom Coburn saying, this will not stand; I prefer sequester. Then the Senate would need 60 votes for the changes in order to overcome the sequester.
I told you it was complicated. It makes it sound like a deal at the end of March is going to be almost impossible, given the current atmosphere. If sequester doesn’t kill you, the appropriations and budget process will. And if you don’t get agreement in the maze of requirements and provisions I just described, you could get a continuing resolution that goes through September, plus a sequester, or maybe even the cherry on top — a government shut-down.
It’s going to take a lot of good will to climb this mountain, something that is in noticeably short supply in Washington right now. Just take flexibility about how to enact the cuts: The administration says it doesn’t want it and it won’t help, because everything gets hit anyway, particularly operations at DOD. And if the administration has it, they have to make choices, choices that could get them in trouble with members of Congress whose oxen are gored. Congress is uneasy about it for the same reason — it gives the administration too much freedom of action. Members of Congress hate that, especially appropriators. Furthermore, flexibility will only be politically possible if every agency gets it; otherwise, a defense-only flexibility bill is unlikely to make it through the Senate.
It’s going to take some very heavy lifting to fix sequester, and even more lifting to get an appropriation. Even thinking about it gives Members of Congress (and analysts) a headache. The bottom line is that the defense bottom line is coming down, and the only question is how fast and how far.