The Cost of War: Hidden from Purview

October 4, 2006 Topic: Economics Region: Americas

The Cost of War: Hidden from Purview

Despite past protestations, the administration, with Congress’ complicity, makes another end-run around defense-spending scrutiny.

Despite past objections about multiple requests for defense funds and inadequate justification for parts of the spending request, the defense bill that Congress approved Friday is no different. Either the clamor has not been loud enough or the American public hasn't quite reckoned with the full consequences of fragmented and poorly justified defense spending not only for the fiscal health of the country, but also the vitality of the forces.

Perhaps the American public has come to perceive such an approach to defense spending as a normal practice in wartime. But a review by the Congressional Research Service shows that every time the nation went to war after World War II, including Korea and Vietnam, war costs became pretty predictable. After a year or two, spending for war became part of the regular Department of Defense budget, subject to the same discipline and accountability-and tradeoffs-as other parts of that budget.

Not so today.  The regular Department of Defense budget in the bill is $4 billion below the administration's request, and funds to operate and maintain the force have been cut by $2.7 billion. But the bill also provides $70 billion in bridge funding-or add-ons to the regular defense bill, which are treated as emergencies-for Defense Department operations in Iraq and Afghanistan and against terrorists globally, more than $10 billion above the administration's projected need.

Emergency supplementals and bridge funds do not go through the normal process in either branch of the government. They are drawn up in the Defense Department outside the usual Programming, Planning, and Budgeting system, are not offset by any other budgetary reductions inside the uniformed services, and generally move quickly from the Pentagon to the White House with minimal scrutiny.

As a result, as Comptroller General David Walker testified in July, "neither DOD nor Congress knows how much the war on terror is costing or how appropriated funds are being used."  The Defense Department has ignored two successive pieces of legislation seeking detailed reporting on how the emergency funds have actually been spent. In effect, there is only a minimal effort to scrutinize budget request in advance, or spending, after the fact, for a quarter of the Pentagon's resources.

There is a long-term cost to the nation of allowing budget discipline and accountability to erode in this way.  Budget planners lose interest in a system that does not work and are not willing-either at the Pentagon or White House Office of Management and Budget (OMB)-to take the risk of raising serious questions about the budgets being requested. Services lose discipline and decide the sky is the limit, or just sidestep the process, the way the Army has succeeded in doing this year. And Congress loses what discipline and control it has, allowing requests to sail through, loaded with a cargo of members' pet rocks. In the defense spending bill, one finds $2.1 billion for 10 C-17 aircraft the administration did not ask for, as well as a V-22 Osprey aircraft for the Marines, and a C-130J transport aircraft for the Air Force.

Looking to next year's budget, the Department of the Army announced in August that because of its yawning need for funding to cope with Iraq, it would not submit a budget to the office of the secretary of defense. Instead, Defense Secretary Donald Rumsfeld has allowed the Army to negotiate its budget appetite for $139 billion (up from $98 billion this year) directly with the OMB, quite outside the normal Defense Department and OMB budget process.

With final passage of the defense appropriations act for fiscal year 2007, taxpayers will have provided nearly $510 billion for U.S. military, diplomatic, and reconstruction activities in Iraq and Afghanistan, as well as other forces deployed to confront terrorist organizations. Of that total, 75% is for Iraq, and 91% is for the Department of Defense, according to the most recent report by the Congressional Research Service.

Moreover, another $60-70 billion is likely to be requested for these operations next February. And the Congressional Budget Office projects the possibility that the nation could spend at least another $370 billion on what the administration calls the Global War on Terrorism (GWOT) through 2016, which could be conservative.

These totals make President Bush's first economic advisor, Larry Lindsey, look like a piker when he predicted in 2002 that a war in Iraq might cost $100 billion.

Virtually all of this funding has been requested by the administration and provided by the Congress outside the normal defense budget process, either in "emergency" supplemental funding bills or bridge funds.

Since the "normal" defense budget has been $400 to $450 billion a year, an additional $110 billion a year for the "GWOT" actually constitutes somewhere between 20% and 25% of the Pentagon's total annual funding. Providing this much of the Pentagon's funding outside the regular budget has had crippling effects on the budget planning systems, both for the Pentagon and in the Congress.

While the OMB sometimes gives supplemental budget requests a "scrubbing," the practice over the past three years has been to pass them on, little changed by the OMB staff, through the president to the Congress. The process for emergency supplemental requests is also different on the Hill. The authorizing committees (House and Senate Armed Services Committees), which generally take a close look at the regular budget, do not examine the supplemental requests; they are transmitted directly to the spending committees (appropriators). There, the appropriations-committee staff does the best it can to take a close look, but over the past five years (starting with the post-9/11 emergency request) it has found the Pentagon's documentation thin and the justifications superficial. 

If the committees hold hearings at all, they call only Defense Department witnesses, who generally do not provide additional detail, but argue, instead, that the funds are urgently needed by the troops in the field and should be passed quickly before the Pentagon runs out of money.  How can Congress resist?  They will not put themselves in the position of holding needed funding back from the troops.

The result is predictable. Both the Defense Department and the Congress "game" what is left of the system. The Pentagon puts into the emergency bill things it would normally ask for in the regular budget, including tank modernization, additional aircraft and utility vehicles, and the costs of converting the Army from divisions to brigades (so-called "modularity"). These are not emergency items that could not be anticipated; they are predictable and should be scrutinized against other service priorities in the normal budget process. In other words, from the Defense Department's point of view, the regular budget and the "emergency" funds are fungible, just all part of the flow of money into the Pentagon.

For Congress, too, this broken process provided an opportunity. The practice on the Hill for the past three years, in fact, has been to trim around the edges of the regular budget, in order to keep overall spending under congressionally imposed ceilings, but add funds back through emergency supplementals to purchase, for example, those C-17s, which are not counted under those ceilings.

The American public pays the price in undisciplined and expanding spending and growing deficits. And, when "anything goes" is the budgetary tune, it is not clear the public is getting the modern, transformed, smoothly operated military it seeks and deserves. The U.S. defense budget system, once the pride of the executive branch, is broken.  And it is funding for Iraq, Afghanistan, and counter-terrorist operations that has broken it, with deep implications for future budget discipline and accountability in both the Pentagon and the Congress.

Gordon Adams is a fellow at the Woodrow Wilson International Center for Scholars in Washington, DC.  From 1993-97, he was the senior White House official for national security budgets.