How the House-Passed Budget Tightens Defense Spending Caps

In our discussion of House Budget Committee Chairman Paul Ryan's (R-WI) budget, we talked about one area where the budget actually boosts spending: defense. The budget repeals the sequester for defense spending, shifting those cuts to the non-defense side while further reducing non-defense spending. However, the committee report for the budget resolution tightens the caps by clarifying the definition of what can count as war spending.

First, some background is necessary. One concern about the defense caps is the fact that they only apply to "base" defense spending; war spending is uncapped. There are two issues with that. We have written extensively on the first problem: lawmakers can put caps on war spending and claim savings for a policy that is already in place. In addition, as long as there is no war spending cap, they can also shift money from the base budget to circumvent the defense cap. In the latter case, we previously noted how the FY 2014 omnibus bill included a reduction in the base defense budget in operations and maintenance accounts and other accounts compared to the President's request to comply with the statutory cap on defense discretionary spending and a corresponding increase in the war category (Overseas Contingency Operations), including funding for many of the same accounts that were cut in the base spending bill.

Short of putting OCO caps in place (and not counting the savings), tightening the definition of what can go into the OCO pot can help prevent this type of abuse. Ideally, Congress would codify statutory criteria for funding with OCO designation, potentially based on the criteria developed by OMB for administration requests for OCO spending. Absent formal criteria, lawmakers should subject funding with OCO designation to careful scrutiny to ensure it isn't actually base defense spending.

During the House Budget Committee mark up of the budget resolution, Ranking Minority Member Chris Van Hollen (D-MD) offered an amendment intended to prevent the use of the "Overseas Contingency Operations" designation to circumvent discretionary funding caps. Congressman Van Hollen withdrew his amendment in exchange for an agreement to include report language on this issue in the committee report. The Budget Committee report accompanying the budget resolution includes the following language about use of the OCO designation:

The Budget Control Act of 2011 allows the discretionary caps to be automatically increased for funding designated for OCO/GWOT, which has created a loophole that could be used to circumvent discretionary funding caps. For FY 2014, Congress and the President enacted an appropriations bill that provided $7.4 billion more than the Administration requested for OCO. Abuse of the OCO/GWOT cap adjustment is a backdoor loophole that undermines the integrity of the budget process. The Budget Committee will exercise its oversight responsibilities with respect to the use of the OCO/GWOT designation in the FY 2015 budget process, and it will oppose increases above the levels the Administration and our military commanders say are needed to carry out operations unless it can be clearly demonstrated that such amounts are war-related.

The report also states that non-Pentagon programs that are not directly related to the war effort should be kept in the base budget, and that OCO spending should be limited to Afghanistan, Pakistan, and Iraq instead of being expanded to include certain other conflict areas.

These steps are important in maintaining the integrity of the base defense spending caps. Shifting funds from the base budget to OCO allows appropriators to circumvent the spending caps and provide spending in excess of the caps without the threat of a sequester to bring spending back in line. Following the Pentagon's (and related agencies') requests for OCO spending and making sure that unrelated spending does not make its way into OCO would prevent lawmakers from gimmicking their way out of budgetary discipline.

Congressmen Ryan and Van Hollen are to be commended for working together to express a bipartisan commitment to bringing honesty and transparency to the use of the OCO designation. We hope they follow through on this commitment and use the oversight authority of the Budget Committee to ensure the OCO designation is not abused. They should oppose efforts to use the OCO designation for spending that is not war related, or to increase OCO spending above the levels requested by the administration and military leaders.