Pentagon wins turf war with State over military aid

The Pentagon has won a major internal battle over control of foreign assistance funding, delaying the Obama administration’s pledge to demilitarize foreign policy, multiple sources tell The Cable.

DOD and State have been fighting vigorously over who would be in charge of large swaths of the foreign assistance budget, billions of dollars in total that are used to aid and work with governments all over the world. Both Defense Secretary Robert Gates and Secretary of State Hillary Clinton have emphasized the need to rebalance national security spending away from the military and toward the diplomatic core, but behind the scenes their offices have struggled to determine where the lines should be drawn.

"For too long we have focused more heavily on one of the so-called three Ds – namely defense – and less on the other two, diplomacy and development… And it has been my goal since becoming the 67^th Secretary of State to do all that I could to make sure that diplomacy and development were elevated alongside defense.," Clinton told the U.S. Global Leadership Coalition.

One big chunk of funding at issue is in foreign security assistance, known as the "1206" account, which could total about $500 million next year. This is money used to do things like military training and joint operations with countries outside of Iraq and Afghanistan, such as Indonesia and Somalia.

Since the military doesn’t have the lead in those countries, the funding should flow through State, right? Well, not in 2011. The president’s budget will keep those funds in the Pentagon’s purse in its Feb. 1 budget release, following a pitched internal battle in which the State Department eventually conceded.

"That literally is the result of vigorous arm wrestling within the administration," one source familiar with the discussions said. The battle had been waged primarily between the shops of Under Secretary of Defense for Policy Michèle Flournoy and Assistant Secretary of State for Political-Military Affairs Andrew Shapiro, but finally Deputy Secretary of State Jack Lew got involved.

"Eventually State backed off," the source said. "They’re not sure they have the capacity to actually run the 1206 programs."

The capacity issue has hampered State’s ability to take over many of the programs it professes to want to own. In a related case, top senators wanted to give State control over another fund, called the Pakistani Counterinsurgency Capabilities Fund, but couldn’t do so last year because State wasn’t prepared to take on the mission.

"My hunch is there are some real procedural problems that need to be worked out before the shift can take place," Senate Armed Services Committee chairman Carl Levin, D-MI, told The Cable. "There’s probably an effort being made to build their capacity so that they are better positioned the next time this comes around," he said, referring to the State Department.

Insiders working on the issue also suggested that State didn’t match up bureaucratically inside the fight. The Pentagon just has so many more people and resources to bring to bear, and besides, the State Department’s strategy review, the QDDR, isn’t complete.

Meanwhile, the window for Foggy Bottom to get its act together may be closing. Despite the internal wrangling, this Pentagon is more willing to give away authorities than others have been or might be.

"The State Department has an unusually strong advocate in Secretary Gates in that regard," Levin noted.

In fact, Gates floated a memo last month proposing that State and DOD share about $2 billion worth of foreign assistance money and administer the accounts jointly. But Hill staffers, who would be the ones appropriating the money, said there was no follow-through. Many saw the memo as a decoy and not really operative in any sense.

Besides the 1206 funds, there are still large accounts in the foreign assistance realm that could be adjusted when the budget request comes out in February. For example, State could be awarded the approximately $1 billion in the Iraqi Security Forces Fund, considering the U.S. Embassy in Baghdad will be taking over large parts of the training mission in Iraq soon.

In one other account focused on development, called the 1207 account, State is expected to be given that $100 million worth of budget authority, which had been housed at DOD. But since the 1207 money was already being spent by State after being channeled through the DOD accounts, that’s not really such a big change after all.

Overall, State is expected to receive a hefty increase in its top-line budget request for fiscal 2011, but much of that money will be for Iraq and Afghanistan, allowing little growth in the rest of the State-USAID accounts.

The slow pace of rebalancing national security spending and the lack of a comprehensive strategy for guiding that process is the subject of a new book by former OMB national security funding chief Gordon Adams, entitled Buying National Security: How America Plans and Pays for Its Global Role and Safety at Home.

"The tool kit is out of whack," Adams told The Cable. "There’s been a major move over the last 10 years to expand the Defense Department’s agenda, which has been creeping into the foreign-policy agenda in new and expensive ways."

Officials from the White House’s Office of Management and Budget declined to comment about the budget details ahead of the release.