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House Bill Would Circumvent Budget Cap for Defense

As the House considers the 2016 National Defense Authorization Act this week, it’s taking the next step to circumvent the 2011 Budget Control Act’s (BCA) cap on defense appropriations, while leaving the non-defense cap fully in place.  To do this, it authorizes the use of “overseas contingency operations” (OCO) funds — which are meant for overseas military operations and fall outside the caps — for base defense activities.

President Obama is absolutely right to threaten to veto the bill over this funding maneuver.  Policymakers should instead follow the President’s path in his 2016 budget, which says that both BCA caps — on defense and non-defense — are too low to meet national needs, particularly now that sequestration has reduced those caps below the levels initially set.  Accordingly, the President proposes raising both caps, by replacing sequestration cuts with alternate savings, building on the bipartisan 2013 budget agreement negotiated by then-House Budget Committee Chair Paul Ryan and then-Senate Budget Committee Chair Patty Murray.  As with prior sequestration relief, the President’s budget divides the cap increases evenly between defense and non-defense.

The budget resolution that House and Senate Republicans adopted last month rejects that approach, instead calling for regular appropriations to remain at the post-sequestration cap levels.  But the resolution sets funding for OCO $38 billion above the President’s proposal.  Thus defense spending would rise to the total that the President requested — since the $38 billion OCO increase wouldn’t be subject to the BCA caps — while sequestration would apply with full force to non-defense programs.

Policymakers started the OCO budget category to keep funding for the wars in Afghanistan and Iraq separate from the base defense budget.  The BCA’s defense caps were intended to cover the base defense budget, with OCO funding permitted outside them.  While many have suspected that some OCO funds spilled into the base defense budget in previous years, policymakers widely viewed the blatant use of OCO to fund base budget programs as an unacceptable gimmick — indeed, just a year ago House Republicans declared it “a backdoor loophole that undermines the integrity of the budget process.”

The defense authorization bill not only embraces this gimmick — it explicitly operationalizes it.  The bill authorizes OCO funding in two pieces.  One, the “real” OCO, equals the President’s OCO request and appears to involve mostly traditional OCO activities.  The second is a separate authorization of $38 billion unambiguously described (in section 1501(b) of the bill) as for “support of base budget requirements.”  In fact, the bill expressly prohibits the Office of Management and Budget from applying its normal criteria for OCO eligibility to those funds.

In sum, the budget resolution and the House defense authorization bill effectively eviscerate the BCA cap on defense appropriations, even as non-defense spending would remain at the post-sequestration cap without any relief.

Congress would do better to adopt the President’s approach — and the one followed in the 2013 Murray-Ryan budget agreement — of raising the caps to provide relief from sequestration on both defense and non-defense, offset with alternate savings.