Budget Hope Springs Eternal at the Pentagon

Most presidential budgets are for show, though, at the very least, they offer a glimpse into how the chief executive would arrange the world of the executive branch … if he were God. The fiscal year 2016 budget request that President Barack Obama sent up (to Congress, not Heaven) on Feb. 2, however, is one of the most mythical shows ever transmitted. Even God would have a hard time making this budget come to pass.

It’s okay to be unreal sometimes. Ronald Reagan had rosy scenarios about the deficit in his budget requests for years. George W. Bush promised that his request for big tax cuts would usher in revenue growth as far as the eye can see. (That didn’t quite pan out, plus he decided to topple Saddam Hussein, which cost more than a trillion dollars he hadn’t planned to spend.)

Unreal expectations are okay when it comes to items like tax cuts or massive government funding for community colleges — those things are unlikely, and, more to the point, people know it: the government institutions involved will not make their plans around these requests. They are not so okay when it comes to the defense budget, however — because the Pentagon actually builds such expectations into their future budgets.

This year, the administration says it has asked for an increase in the defense budget that is 4 percent higher, or about $34 billion more, than the budget the Pentagon received in fiscal year 2015. It is requesting this, despite (or perhaps because of) six straight years of declines in the amount the Department of Defense actually receives each year.

Now, 4 percent may look modest, but don’t be fooled — it’s actually a request to up the defense budget by 8 percent. The reason it looks half that size is because there’s been a predictable decline in the infamous Overseas Contingency Operations budget (OCO), intended to fund foreign military operations. (Remember: We’ve left Iraq, sort of, and are leaving Afghanistan?) That decline masks a budget request that’s actually trying to secure more dollars for basic defense needs. But put aside that budgetary sleight of hand for the moment. Here’s the bottom line: The Pentagon is not going to get that 8 percent growth — or anything even close to it.

Oh, it may sound like it. There are always loud voices on the Hill clamoring for more money for defense. Sen. John McCain (R – Ariz.), in particular, likes to sound off about his desire to do away with the Budget Control Act of 2011 (BCA) and the pesky threat of a “sequester.” The Joint Chiefs of Staff, too, have jumped into this fray, making their own plea to exempt defense spending from any trimming, pounding the rhetorical pavement with the argument that the military can no longer fulfill the requirements of the nation’s military strategy if they don’t have more money than the BCA would provide. They’re joined by the independent panel reviewing the Pentagon’s four-year strategy, the Quadrennial Defense Review. In 2014, this panel argued that defense should be exempt from deficit reduction and spending controls: “As to budgetary matters in general, we certainly understand the fiscal challenges facing the federal government but must repeat that attempting to solve those problems through defense budget cuts is not only too risky, it also will not work.”

None of these supporters, vocal though they may be, can change the politics of the budget on Capitol Hill. The reality is that even with Republicans in control of both houses of Congress, a special deal for defense is not in the offing because striking such a deal would require all parties coming together on a broader agreement on the federal budget overall. You know, the kind of deal that settles the deep disagreements between the parties on mandatory spending, revenues, and discretionary spending. Ha. Not only is there no incentive for such a deal, there is not even much pressure for it, as my colleague, budget guru Stan Collender, pointed out recently in Forbes. Not when there are pipelines to wrangle over and immigration to play politics with.

No incentive for a big deal probably means some incentive for a little deal, the kind Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) cut a couple of years ago when they bent the knee of the BCA caps a bit, both for defense and domestic discretionary spending. But plussing up defense to the tune of $10 billion is not the same as adding three times that to what the BCA would provide. Doing so would mean taking serious money from other budget priorities to balance the increase, and that is not going to happen.

So the Pentagon budget request is unrealistic. No big deal, you might say — it always is. The problem, as the great defense strategist Bernard Brodie said more than 50 years ago, is that “strategy wears a dollar sign.” The new Pentagon budget forecasts defense spending that is $150 billion above the BCA caps over the next five years. If Pentagon planners believe this mythical version of their future budgets, they are going to do what comes naturally — plug in larger troop sizes and more hardware acquisition to actually spend the mythical money. They are already doing this in the FY 2016 budget: The new budget assumes funding for buying equipment (procurement) will go up by $14 billion, or 15 percent in current dollars above what it is for this fiscal year. That said, the Army and the Marines assume that they will remain at a projected size of 450,000 and 182,000 respectively, for the next five years.

But when the reality of lower-than-projected budgets strikes, the planners are going to have to go back into those numbers and strip out such assumptions — which makes their plan, essentially, nonsense. Which brings us back to Overseas Contingency Operations.

OCO has been the safety valve for the last decade, extra defense money that everyone (the Congress, the White House, and DoD) agrees should be available. Despite its name, it is hardly treated as funding for overseas contingencies anymore; it’s just extra money. That $51 billion extra in the OCO budget gets appropriated to exactly the same budget categories as the “base” budget. And for the last three years, the availability of OCO funds, most of which are for defense operations (fuel, training, equipment repairs, etc.) has made a laughing stock of the Pentagon’s arguments that readiness hangs by a thread. The Pentagon readily survived the 2013 sequester courtesy of OCO funds, and by more than a thread.

In the new spending request, the OCO budget provides an extra bonus: $7.9 billion for what the Pentagon calls “investment/equipment reset and readiness,” DoD-speak for refilling the services’ inventories of weapons and equipment after leaving Iraq and Afghanistan. That’s exactly the kind of thing that should be funded in DoD’s base budget request — which should be about planning the military’s future, not dealing us a surprise contingency. But, as vice chair of the Joint Chiefs of Staff Adm. James A. Winnefeld Jr. said in early February, when he acknowledged that was being used to make up for the BCA caps, “we’d be the first to say that, over a decade or so … too much has crept into that [OCO] account on the investment side.”

The OCO will not last forever, though. As troops leave those large deployments in the Middle East and South Asia, the justification for it will collapse. And the base budget will not increase the way the Pentagon hopes. So we’re back to the Brodie conundrum — budgets do, and properly should, constrain strategy. It’s time for the services to stop kidding themselves, or serving up shibboleths about strengthening European allies facing Russia, fighting Ebola, and bombing the Islamic State. All of these are used to justify the requested budget increase for defense, and are actually being funded out of OCO today, not out of the base budget. It’s time for some grown-up at the Pentagon, maybe even new Secretary of Defense Ashton Carter, to get his hands on the planning machine and force it to work with real spending limits — not mythical budgets like the one President Obama just presented.

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