What You Need to Know About the Next Defense Budget

The Pentagon’s priorities and upcoming battles with Congress as military spending shrinks.

Chuck Hagel, the U.S. defense secretary, addresses security and budget issues at the Center for Strategic and International Studies in Washington on Tuesday.
National Journal
Feb. 21, 2014, midnight

March 4 is the date to watch for Wash­ing­ton’s de­fense wonks.

That’s when the Pentagon plans to re­lease its budget re­quest for next year. And when the doc­u­ment drops, it will sound the start­ing gun for a slew of battles over mil­it­ary spend­ing.

The budget deal Con­gress passed in Decem­ber eased some of the Pentagon’s pain from the se­quester, which was in­ten­ded to slice $500 bil­lion from de­fense ac­counts over a dec­ade.

But don’t be fooled: The battles over next year’s de­fense budget are far from settled. They will be per­haps the most con­ten­tious yet, and for the mil­it­ary, the stakes will be high­er than ever. The De­fense De­part­ment is run­ning out of ways to cush­ion the blow from budget cuts, and this time, the ax will fall closer to the core.

Here’s what to know in ad­vance of next week’s budget re­lease.

1. The budget deal hardly rec­ti­fies se­quest­ra­tion for the De­fense De­part­ment in fisc­al 2015.

Law­makers are still bask­ing in the sense of re­lief that flooded the Cap­it­ol after the budget deal passed. They shouldn’t be.

Sen. Patty Mur­ray and Rep. Paul Ry­an’s bill was meant to pay back some $63 bil­lion in se­quester cuts over two years. That’s a siz­able chunk of change. But the ac­tu­al se­quester re­lief go­ing to de­fense for fisc­al 2015 is $9 bil­lion.

The Pentagon, which ini­tially ex­pec­ted to re­quest $541 bil­lion, has to pro­pose $43 bil­lion in re­duc­tions, or else its budget would be sub­ject to the across-the-board cuts. Un­less, of course, the law is changed again.

Is there mo­mentum in Con­gress to chip away fur­ther at se­quest­ra­tion?

“No. I really don’t [think there is],” said James In­hofe of Ok­lahoma, the top Re­pub­lic­an on the Sen­ate Armed Ser­vices Com­mit­tee. “Not now. I wish I did.”

2. A rumored $26 bil­lion wish list tees up a polit­ic­al mine­field.

To meet the lower spend­ing caps, the Pentagon is plan­ning to sub­mit a pro­pos­al for how it would spend an ex­tra $26 bil­lion on top of its budget re­quest — if Con­gress can find the cash. Law­makers will in­ev­it­ably try to cherry-pick their pri­or­it­ies and try to find ways to fund them, or swap out pro­grams in the main budget.

The concept is not totally out of left field. Start­ing in the 1990s, dur­ing the last de­fense down­turn after the Cold War, the mil­it­ary sent Con­gress a list of ini­ti­at­ives it could not squeeze in the budget. The re­quests bur­geoned dur­ing the last dec­ade of war un­til then-De­fense Sec­ret­ary Robert Gates ef­fect­ively put the kibosh on the prac­tice around 2009.

This year, though, the wish list will con­tain “ac­tu­ally val­id­ated and tra­di­tion­al re­quire­ments that can’t be met simply be­cause of the fund­ing level,” a Sen­ate aide said. “This is not, ‘If I had an ex­tra dol­lar, this is what I’d do.’ These are things already budgeted and planned for.”

For in­stance, if the budget re­duces the num­ber of F-35 Joint Strike Fight­er air­craft it plans to buy, or scales back the Lit­tor­al Com­bat Ship pro­gram, those leftover planes and ships may sur­face in the Pentagon’s wish list.

Cue open sea­son. Law­makers are already stak­ing out their po­s­i­tions. House Armed Ser­vices Seapower Sub­com­mit­tee Chair­man Randy For­bes, a Vir­gin­ia Re­pub­lic­an, is already in­sist­ing Con­gress won’t sup­port cut­ting any of the Navy’s 11 air­craft car­ri­ers. The budget is likely to in­clude re­duc­tions in pay raises for act­ive-duty ser­vice mem­bers and fees for Tri­care for Life, which will be con­tro­ver­sial.

A wish list, though, could mo­tiv­ate Con­gress to fix se­quest­ra­tion. Sen­ate Armed Ser­vices Com­mit­tee Chair­man Carl Lev­in sees the ad­dendum as a list of “im­pacts” from budget cuts. “What will be in this budget, or left out of this budget, but de­scribed by the Pentagon in a way that would put pres­sure on us to get rid of se­quest­ra­tion for the ‘16 budget?” the Michigan Demo­crat said.

3. The Pentagon’s fin­an­cial cush­ions are pretty tapped out.

So far, the Pentagon has man­aged to avoid the full force of se­quest­ra­tion. It will feel the crunch this year.

Con­gress changed the law to give the de­part­ment more flex­ib­il­ity. The Pentagon also tapped in­to its re­serves of leftover funds from pre­vi­ous years to blunt the im­pact. This year, the de­part­ment has a more mea­ger back­log to draw from.

The Pentagon also de­ferred or delayed what Dav­id Ber­teau of the Cen­ter for Stra­tegic and In­ter­na­tion­al Stud­ies es­tim­ates is up to $20 bil­lion worth of con­tracts for weapons pro­grams and mil­it­ary equip­ment. As the de­fense budget con­tin­ues to shrink, the Pentagon must aban­don hopes for a fu­ture cash wind­fall and make cru­cial de­cisions.

“Even­tu­ally it catches up to you,” Ber­teau said. “We are past the point of easy cuts.”

These de­cisions may have a price — not just in terms of na­tion­al se­cur­ity. Ac­tu­al money. Break­ing con­tracts meant to span for mul­tiple years, such as the KC-46 tanker re­place­ment or the Vir­gin­ia-class sub­mar­ine, could ul­ti­mately cost the U.S. gov­ern­ment more — in pen­al­ties and fees — than it would save.

Pro­gram delays also may raise costs over the long term as man­u­fac­tur­ers lose or­ders and lay off em­ploy­ees. The price per plane or elec­tron­ic device is of­ten based on a set quant­ity the gov­ern­ment ex­pects to buy. In the de­fense-con­tract­ing world, less volume can mean high­er prices.

4. The war­time budget may turn in­to a slush fund.

The Pentagon’s over­seas con­tin­gency op­er­a­tions ac­count, which has been tacked onto the budget for years to fund the wars in Ir­aq and Afgh­anistan, could serve as a budget gim­mick.

It’s sup­posed to be emer­gency war spend­ing. But the OCO — which is not sub­ject to the budget caps — may en­com­pass oth­er pri­or­it­ies that should, the­or­et­ic­ally, be in the Pentagon’s base budget.

This happened in fisc­al 2014, when th­­e cost per troop in Afgh­anistan skyrock­eted to over $2 mil­lion from a re­mark­ably stable $1.3 mil­lion in pre­vi­ous years, ac­cord­ing to Todd Har­ris­on at the Cen­ter for Stra­tegic and Budget­ary As­sess­ments. The Pentagon ap­par­ently ad­ded at least $20 bil­lion — and Con­gress an­oth­er $10 bil­lion — to the fisc­al 2014 OCO ac­count, for things not dir­ectly re­lated to war, like de­pot main­ten­ance for ma­jor weapons sys­tems, and pay and be­ne­fits for ser­vice mem­bers not ne­ces­sar­ily con­tin­gent on de­ploy­ments.

The fisc­al 2014 war fund­ing re­quest was $79 bil­lion, for some 38,000 troops in Afgh­anistan. “If we see the troop level drop to about 10,000 in 2015, we should see a sig­ni­fic­ant re­duc­tion in the budget — by al­most a quarter,” Har­ris­on said. If the cost per de­ployed troop is high­er — even as the size of the U.S. force is lower, and the scope of mil­it­ary op­er­a­tions smal­ler — that’s a “good in­dic­at­or we’re adding costs in there that don’t be­long there.”

5. The Pentagon could bust the budget caps next time.

The Pentagon is con­tem­plat­ing a $535 bil­lion budget in 2016, some $36 bil­lion over the se­quester cap for that year. That’s a sign the Pentagon may not be will­ing to make the really hard de­cisions this year.

If budget plan­ners ex­pec­ted to meet the caps in fu­ture years, Har­ris­on said, the Pentagon and law­makers would need to agree to make sig­ni­fic­ant re­duc­tions in force struc­ture this year — po­ten­tially even cut­ting more bri­gade com­bat teams from the Army or a Navy air­craft car­ri­er to pre­pare. That may not be in the cards. For in­stance, the Pentagon has already backed away from cut­ting the lat­ter to avoid a polit­ic­al squabble with Con­gress.

So the biggest fights over pro­grams may end up be­ing #FY16­Prob­lems.

Stacy Kaper contributed to this article.
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