October 11, 2017

CNAS Commentary: Prospects for a Defense Budget Deal

By Susanna V. Blume

Washington, October 6 – With Congress on the hook to pass a budget for the coming year and the prospect that budget instability could do real harm to U.S. national security, Center for a New American Security (CNAS) Defense Strategies and Assessments Program Fellow Susanna Blume has written a new commentary, “Prospects for a Defense Budget Deal.” In the commentary, Blume lays out potential outcomes for defense budget negotiations and which options would work best.

Please find the full commentary below:

Much ink has been spilled in recent years about the instability in the federal budgeting process and the harm it has done to national security. The Budget Control Act’s caps on discretionary spending, its sequestration mechanism, an endless parade of continuing resolutions, and threats of government shutdown constitute national self-harm on an epic scale.

What’s causing all this turmoil?

This instability is the result of the dynamic between the three relevant congressional factions: defense hawks, deficit hawks, and Democratic defenders of domestic discretionary spending. These factions are not new, though the balance between them has shifted over the course of the past decade as Republicans won first a majority in the Senate and now the White House.

To secure a long-term budget deal, two of these factions must come together to produce a spending plan that the president can support. But given the deficit hawks’ opposition to any increase in discretionary spending, and the deep partisan divides between largely Republican defense hawks and Democratic proponents of domestic spending, such a deal remains unlikely. Even if Congress were to pass a budget deal, it remains subject to presidential veto. Both the Obama and Trump administrations have threatened to veto budget deals that do not include funding for their priorities.

Congress has been preparing  budget resolutions and appropriations and authorization bills, but there is still much work to do in the conference and reconciliation processes.  Under current Senate rules, 60 senators must vote in favor of ending debate to bring a bill to a final vote, meaning that at least eight Democrats must support it. Given that the Republican majority has made significant cuts to domestic spending in all the bills presently circulating, convincing Senate Democrats to back them will be extremely challenging. 

Additionally, if Congress wishes to increase the base defense budget above the Budget Control Act’s current cap of $549 billion, as most bills in circulation currently do, they will also have to agree on some legislative solution to avoid sequestration.  Failure to legislatively lift the caps or provide some other statutory remedy for sequestration will result in the automatic cancellation of defense base budget authority in the tens of billions.  It is difficult to see deficit hawks voting for any measure that would remove these controls on discretionary spending. 

Further complicating the situation, this year’s budget negotiations are happening in concert with the administration’s attempt to reform the tax code, which, if passed in its current form, will further reduce federal revenue. As House Armed Services Committee Ranking Member Adam Smith noted recently, you cannot simultaneously cut taxes, balance the budget, and protect all the federal spending that the American people deem important, including national security.

So how do we get to a budget deal?

The least bad option, as far as the security of the nation is concerned, would be for the defense hawks and the domestic spenders to reach a long-term budget deal that permanently lifts the Budget Control Act’s caps and ends the threat of sequestration, leaving the deficit hawks out in the cold. Unfortunately, this outcome is unlikely. Budget bills originate in the House, and Speaker Paul Ryan is unlikely to bring a bill to a vote that does not have the support of a majority of Republican representatives, meaning that House deficit hawks would have to be on board.

The second least bad option would be a shorter-term budget deal that theoretically leaves in place the Budget Control Act’s caps, but increases them some, and shifts some base requirements into Overseas Contingency Operations accounts, which are not subject to the caps, to ease pressure on the defense budget. This approach is similar to the deals reached in 2014 and again in 2016, but it is far from perfect. Overseas Contingency Operations money is one-year money; pushing base requirements into these accounts increases risk in the defense program and makes it more difficult for the department to plan. But it’s better than nothing. Such a deal would make concessions to each of the three key congressional constituencies, increasing funding for national security while technically leaving existing deficit controls in place, and allowing for some concessions in the domestic space.

Two-year deals have been the norm, but Congress would be wiser to pursue a four-year deal this time around, which would take the country through the Budget Control Act’s 2021 expiration date for the discretionary spending caps and past the next presidential election in 2020. Doing so would give the department a stable planning target for the next four years, and would also reduce the likelihood of shutdowns and long continuing resolutions and their paralytic effects on vitally important defense operations, procurement, and innovation. Of course, reaching such a deal would require compromise from all quarters, a commodity that has been in short supply on Capitol Hill.

Blume is available for interviews. To arrange an interview, please contact Neal Urwitz at 202-457-9409 or nurwitz@cnas.org

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