Report

Pentagon Seeks Massive Increase for ‘Slush Fund’ War Account

Contingency coffers could reach levels not seen since the Iraq surge.

Members of the U.S. Army 1st Brigade, 1st Cavalry Division, transport heavy combat equipment including Bradley Fighting Vehicles at the railway station near the Rukla military base in Lithuania on Oct. 4, 2014. (Petras Malukas/AFP/Getty Images)
Members of the U.S. Army 1st Brigade, 1st Cavalry Division, transport heavy combat equipment including Bradley Fighting Vehicles at the railway station near the Rukla military base in Lithuania on Oct. 4, 2014. (Petras Malukas/AFP/Getty Images)

The U.S. Defense Department is planning to ask Congress for a massive increase to a controversial war account often criticized as a “slush fund” in order to circumvent mandatory spending limits, according to multiple sources with knowledge of the discussions.

The increase would amount to a reversal for President Donald Trump’s White House budget director, former Republican Rep. Mick Mulvaney, who for years campaigned against what he saw as former President Barack Obama’s abuse of the account, calling it a “slush fund.” After he was tapped for the job, Mulvaney told Senate lawmakers that he would seek to eliminate the fund altogether.

Five sources—both U.S. government officials and outside sources close to the discussions—said the Pentagon in its fiscal year 2020 budget request is planning to ask lawmakers to more than double the size of the Overseas Contingency Operations account, as it is formally called, to a level not seen since the height of the Iraq surge in the late 2000s.

The Defense Department’s base budget for fiscal year 2020 is capped by law at $576 billion. The Trump administration is seeking roughly an additional $150 billion (possibly as much as $174 billion, which would bring the overall budget for defense to $750 billion) for the war fund, more commonly known as OCO, the sources tell Foreign Policy. Entire programs, such as the U.S. Army’s accounts for ammunition and training, will be moved to this war account, according to multiple sources.

These numbers could change, as the Pentagon’s budget request goes through many iterations before a final version is sent to Congress. The Pentagon plans to unveil a “skinny” budget request with overall figures on March 11—a delay of about a month due to the partial government shutdown. The full budget books will be released on March 18, a congressional staffer confirmed. The White House Office of Management and Budget did not respond to a request for comment.

One U.S. defense official pushed back on the notion that OCO is a “slush fund,” saying it is and has always been a “creative way around the budget caps”—both for defense and non-defense spending.

“It’s like a steam release valve,” the official said. “You’ve got these [caps] that’s pressurized everything, and OCO allows you” to relieve that pressure.

The idea behind the OCO account dates back to 1985, when Congress mandated spending caps to limit the size of the federal budget. The account was meant to act as an emergency fund the Pentagon could dip into if the United States suddenly became engaged in a full-on war, explained Todd Harrison, a defense budget expert at the Center for Strategic and International Studies.

“The reason they had that provision there is because at that time we were in the Cold War,” Harrison said, adding that the thinking was: “What if there is this huge emergency where we need to suddenly spend money on defense for an honest war?”

But subsequent administrations have exploited this loophole. Obama repeatedly used it after Congress enacted the Budget Control Act of 2011, which mandated $900 billion in across-the-board cuts to both defense and nondefense programs over a period of 10 years, in response to the debt-ceiling crisis. On top of the base budget, which is subject to the caps, Obama requested $88 billion in OCO funding for fiscal year 2013 (the Overseas Contingency Operations account is not subject to caps). Since then, the request has stayed in roughly the same range, from a low of $62 billion in 2016 to a high of $90 billion in 2018, according to the Congressional Budget Office.

Obama’s Pentagon argued that the OCO fund would be used for overseas operations such as in Iraq and Afghanistan, but critics note that every year it included billions of dollars for new equipment.

Despite Mulvaney’s pledge, Trump during his first two years in office did not make significant changes to OCO. In fiscal year 2019, the Defense Department requested $69 billion for the account.

But this year the Pentagon’s OCO request looks to be significantly higher. An administration has not asked for OCO funding at that level since the Iraq surge in the late 2000s, said Fred Bartels of the Heritage Foundation.

“What would be unprecedented would be if [the OCO request] is equivalent to the size that we had when we had more troops deployed,” Bartels said.

Indeed, the latest increase comes as the administration is seeking to reduce the U.S. military’s footprint around the world. Trump has announced plans to withdraw U.S. troops from Syria and from Africa.

Mandy Smithberger of the Project on Government Oversight called the latest OCO request “a slush fund on steroids,” adding that it is particularly concerning given the global drawdown.

“This is a bad way for the department to be doing business. They should be setting real priorities and being able to make choices,” Smithberger said. “If we are drawing down from these wars then that is clearly an opportunity for cost savings.”

An additional $174 billion to the budget cap levels would bring the Pentagon’s overall budget for fiscal year 2020 to $750 billion—the number President Donald Trump backed in December 2018.

“This is a whole new level,” Harrison said of the OCO request.

Two sources told FP that the Defense Department is moving whole programs from the base budget into OCO.

The workaround could be Mulvaney’s way to gain the increase in defense spending Trump wants without increasing nondefense spending, Harrison said.

But Harrison noted that the Democratic-controlled House will likely push back hard on the plan.

The administration is likely using the approach as “a negotiating tactic,” he said, adding that “this is their opening bid.”

This story has been updated to include additional comment from a U.S. defense official. 

Lara Seligman is a staff writer at Foreign Policy@laraseligman

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