MILITARY ISSUE BRIEF: The President’s Defense Budget
A brief analysis of the FY2014 Proposal
MAY 8, 2013
The Red Flags
DoD budget request ignores the legally mandated Budget Control Act, and is $52 billion above sequestration spending caps.
The FY2014 budget is essentially the FY2013, making another round of sequestration cuts more likely. This slow moving train wreck makes no tough decisions.
The budget request does very little to address increased personnel and benefit costs, leaving less money for weapons procurement and R&D in future budgets.
Background
The Budget Control Act of 2011 (BCA) represents the compromise reached by Congress to raise the debt ceiling. The concept was to pay for the increased costs of raising the debt ceiling through 10 years of decreased spending, which would be distributed through discretionary spending accounts. The BCA establishes hard-‐set caps for each of the following fiscal years and once those caps are hit, the sequester mechanism springs into action, applying evenly into all accounts. That being the law of the land, one would expect politicians to follow it and budget according to legal constraints. Nonetheless, the House approved budget, the Senate approved budget and President’s request are all over the spending caps set for the defense budget. These proposals all but guarantee that the FY2014 defense budget will be subjected to the sequestration procedure. During the debate on the FY13 budget, the Pentagon virtually ignored the possibility of sequestration. Publicly, Pentagon leaders were instructed to disregard the impending sequestration and did not begin planning until the waning days of negotiations. During his campaign for re-‐ election, President Obama stressed vehemently that sequestration would not take place. A delay was agreed upon to push sequestration from January 1 to March 1, during which a public relations campaign ensued from both sides. An agreement to prevent sequestration from occurring could not be reached; thus, sequestration kicked in. Sequestration is currently being implemented, even though one would not be able to tell it from the FY14 budgets that our leaders have presented. In a sense, sequestration is the slowest train wreck that no one seems to be capable of dodging. The result has been a continuous cycle of uncertainty that makes defense planning increasingly difficult. The consequences of sequester led to
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operational and maintenance budgets bearing the brunt of the automatics cuts, instead of inherent drivers of the defense budget such as personnel costs and overhead. IGNORING THE LAW The federal budgeting process is a game of smoke and mirrors, in which changes in the baseline are utilized to project either cuts or increases in government spending without actually changing the dollar amount spent. The baseline is the ruler against which we compare the new budget top-‐line to assess if there is an increase or a decrease in spending. As Baker Spring, from the Heritage Foundation, explains: When President Obama wants to assert that he is a deficit hawk, he projects a high baseline and then claims he is making large-scale cuts in the defense budget to reduce the deficit. (…) When he wants to appear as a national security hawk, he implies that his own, much lower defense budget request is the baseline and that he has imposed no reductions whatsoever on the defense program.
This year’s budget request baseline was the President’s FY13 request for the Pentagon. The proper baseline would have been the budget that was actually enacted for FY13 after the sequester took place. Ignoring the reality of sequestration and of limited available funds for the defense budget is especially damaging to the ability of the Pentagon to properly prioritize. The defense budget suffers the most from the lack of decisive budgetary authority, as continuing resolutions give DoD little strategic guidance on how to plan their resources, especially in the research and development sector. It is very telling of the usefulness of the President’s Budget Request that the chapters that discuss the different aspects of the budget comes with a note that basically invalidates all the subsequent work of the document:
It was one of the first aspects that came to the attention to the defense analyst community and it was raised during budget hearings. A concern that was met by Pentagon leaders with renewed calls to remove sequestration from the books, very similar to the arguments that were being made during the FY13 budget discussions. An additional problem that should have been in the horizon of the individuals that crafted the budgets is that a budget that does not respect the limits of the law makes it harder to be approved, since it requires previous legislative action to create the environment in which the budget becomes possible. It becomes truly an exercise in futility. As Mackenzie Eaglen from the American Enterprise Institute puts it: “Ignoring the law and the difficult decisions that come with it also allow
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policymakers to get off the hook for the consequences of their votes and choices. Unfortunately, President Obama’s 2014 defense budget is a recipe for continued uncertainty, additional budget cuts, an ultimately reduced strategy and inability to safely and smartly plan for the long-‐term.” BACK TO THE PAST The President’s Budget FY14 proposal repeats plenty of the mistakes that were part of the FY13 proposal. One table in the Comptroller’s overview of the FY14 budget request is very telling:
There are two important aspects that need to be highlighted from the table: 1) the difference between the totals and 2) the story disclaimer “not much change from PB 13 request”. The difference between the totals is critical in understanding the thinking that created the FY14 budget request. There is a 33 billion dollars difference between the request from the President’s Budget (PB) and the amount that actually enacted after sequestration. Instead of adjusting to the law, the planners decided that maintaining the course was a good idea and requested more in FY14 than they had requested in FY13. This will probably lead to more cuts through sequestration in the near future and makes defense budget a hostage of a larger budget deal. This budget proposal guarantees that the financial problems experienced by the Pentagon last year will be repeated and throw a wrench in any rational planning. By requesting the same level of funding as last year’s and welcoming the sequester, the leaders are abstaining from rational decision-‐making and leaving up to Congress to apply an across the board cuts in the budget. The
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budget makers should have taken the initiative to submit a budget that was in compliance with the law and not just copy and paste the request from last year. As David Betreau from Center for Strategic and International Studies notes, “it [President’s FY14 Budget] fails to recognize the 2013 appropriations just passed and it exceeds the budget caps in the BCA. With an erroneous baseline and disregard for the BCA caps, the President’s request not only endangers the 2014 spending levels, but set DoD on a path to plan for higher budgets over the entire Future Years Defense Program (FYDP), compromising the planning process.” DOUBLE WHAMMY The budgetary pressures experienced by the Pentagon are not only from Congressional limits set by the Budget Control Act or from the laudable impulses to reduce the size of government and governmental spending. Just as the federal budget is on course to be consumed by entitlement spending in our lifetimes, the defense budget is on the same track. According to projected internal growth, the total DoD budget will be consumed by operations and maintenance, healthcare, military personnel and military construction by the end of this decade. Lack of reform would transform the Pentagon into an institution that has no capital left for research and development as well as modernization, spending the bulk of its resources on making payroll. This is illustrated by the following graph from CSIS:
This internal budgetary pressure would reduce two of five accounts of the Pentagon to close to zero. These two accounts would be procurement and research and technology. If equipment age is already a problem now, imagine how the problem will accumulate with more a decade of wear and tear. Therefore, efforts to find sound fiscal ways to address rising personnel costs as well as attacking the inherent drivers of costs in DoD must be implemented.
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Righting the Red Flags
The purpose of this issue brief is not just to raise questions and identify problems, but also to propose straightforward, common sense, and cost-‐efficient answers. In that spirit, we have “righted” the red flags raised at the top of this issue brief: DoD budgeting needs to use numbers grounded in reality. Our elected officials cannot ignore the law just because they disagree with it. Creating budgets in a myriad of hypotheticals just makes it that much harder to come to agreements and even harder to be implemented. The President’s FY13 budget request led to a budget shortfall of an estimated $41 billion in readiness. Replicating it will only compound the results. Budgets need to adapt to new political realities, and the Pentagon refused to address these in FY14. Thus, the problem is pushed down the road. It is time for Washington to face the political and fiscal realities. The internal pressure on the defense budget received very little consideration in the budget request, and most of the proposed changes presented were dismissed during hearings. Congress needs to restructure operations and maintenance, healthcare, military personnel and military construction—as well as eliminate wasteful spending—to ensure our future battlefield readiness.
The Military Issue Brief Series
The purpose of the Concerned Veterans for America “Military Issues Brief” Series is to highlight relevant and timely issues in a simple, accessible format, in order to impact systemic and substantive policy change. Opinions contained in this brief do not constitute endorsement of any particular project or system, but instead use various topics to highlight the need for spending reform and sound fiscal policy.
About the Authors
Pete Hegseth is the Chief Executive Officer of Concerned Veterans for America, an Army National Guard infantry officer, and veteran of Afghanistan, Iraq, and Guantanamo Bay.
Tal Coley is a Research and Policy Analyst with Concerned Veterans for America and a former Air Force Signals Intelligence Analyst.
Fred Ferreira is a Research and Policy Analyst with Concerned Veterans for America.
Our Mission
The mission of Concerned Veterans for America is to advocate for policies that will preserve the freedom and liberty we and our families so proudly fought and sacrificed to defend.
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