How to Pay for Wars

The White House's proposal to discipline war spending is legislatively doomed and full of holes.

The Obama administration says that it wants to discipline war spending using a cap: costs above a set level would require offsetting the spending cuts. This kind of cap on war spending could theoretically force policy makers to more carefully consider the trade-offs war requires, rather than deferring them with deficits. Unfortunately, the White House’s proposal is legislatively doomed and full of holes that would prevent it from having any bite. The administration appears more interested in seeming economical than economizing. Like your common profligate, it wants to be frugal—but not yet.

A Placeholder for War?

As part of the rollout of its proposed fiscal-year 2013 budget, the White House suggests that Congress pass legislation capping spending on overseas contingency operations (OCO)—modern budget-speak for wars—at $450 billion over nine years.

An important detail is that this cap isn’t annual but rather is cumulative over nine years. Whenever annual OCO spending exceeds $450 billion, that excess spending counts toward the annual caps set through 2021 by the Budget Control Act, the deficit-reduction deal passed last summer. The act enforces caps by making spending bills that exceed them trigger sequestration, which automatically cuts spending across accounts to cover breaches. The deal also changed Congressional rules to make it harder to pass those spending bills into law.

If the United States withdraws from Afghanistan as planned and starts no major wars, it probably won’t reach the cap. But if U.S. forces stay in Afghanistan beyond 2014 and begin a protracted war with Iran, we would likely hit the cap within a few years. Under the proposed law, Congress could then fund wars by cutting an equal amount from another part of the budget or by calling the excess an “emergency,” a spending category that the administration wants to keep exempt from caps.

The White House seems to have derived the $450 billion figure from a “placeholder” budgeting device rather than from estimating the likely costs of war. The Office of Management and Budget, when estimating future spending, has lately used $50 billion as a placeholder for war costs in every year in the future beyond the next. The administration has continued this practice within their war cap, except they have reduced future years to adjust for the FY13 OCO request, which would allocate $88.5 billion for the military.

No Wars, Only Contingencies

If the administration truly wants to exit Afghanistan in the next few years, why not budget nothing for OCO in years 2015 and beyond? One answer might be that we should make an allowance for any new wars that might occur. But some contingency funding is available in the base (nonwar) military budget. Last year, for example, the Pentagon found the $2 billion needed to pay for the U.S. military role in Libya without asking Congress for supplemental funds. OCO budgets should be reserved for extraordinary emergencies. Otherwise, they become a Pentagon slush fund.

That is exactly what the administration says that its war cap avoids.

The Budget Control Act caps discretionary spending but excludes war costs. That makes war appropriations an off-book haven for defense programs trying to evade caps. As the White House notes in its budget-justification materials, that circumstance “could allow future Administrations and Congresses to use [OCO] . . . to evade the fiscal discipline that the BCA requires elsewhere.”

It’s not just future administrations that face that temptation though. The current administration acquiesced last year as the Congress shifted about $7 billion of what was nonwar Pentagon funding into the OCO account to get under the spending cap. This year, they propose moving at least $4 billion in “temporary end strength” costs into the war account. They claim this is the cost of the portion of the army and Marine Corps personnel that can be retired now that one war has ended and the other is shrinking but that remain in the force for the coming year to allow time for the drawdown.