Defense Budget Tutorial: A preview of next week’s major DOD appropriations bill gimmick
By: Winslow Wheeler | July 13, 2006
"On Thursday, July 20, the Senate Appropriations Committee (SAC) is scheduled to “mark up” the fiscal year 2007 (FY 07) Department of Defense (DoD) appropriations bill. This “tutorial” anticipates what clearly appears to be one of the major budget gimmicks the SAC will employ. The gimmick will make it appear that a huge ($9 billion) cut is being made in the DoD bill, when in fact no such thing will be occurring.
The first hint appeared on June 22 when the Senate Appropriations Committee put out a press release on an arcane but important budget issue. The committee announced its “allocations” for FY 07. “Allocations” are nothing less than how much money each federal agency will get for the year from the Appropriations Committee—and ultimately Congress—in the form of “discretionary” spending (annual appropriations). The allocations are distributed to each of the 12 appropriations subcommittees that fund over 30 government agencies.
A few sharp reporters covered the SAC press release, noticing that the Republican-controlled committee was handing the DoD a substantial cut of over $9 billion compared to the amount President George W. Bush had requested for the fiscal year. One reporter even noted that the committee was, in effect, transferring that same amount to various non-defense agencies. (An extra $1.4 billion was distributed to the subcommittee that oversees the departments of Commerce and Justice, and NASA; the subcommittee for the departments of Transportation and Housing and Urban Development got an additional $2 billion; and the subcommittee for Labor, Health and Human Services, and Education got $5 billion more than the president requested. All of it coming out of DoD.)
It was an especially strange set of actions for the Republican-controlled committee after many of the same party members had just finished trashing the Democrats in the Senate chamber that same week for advocating that America “cut and run” from Iraq. If the Democrats had proposed a $9 billion cut in the defense budget, one can easily imagine the howls of “anti-defense budget-slashing Democrats” coming from many of the same Republicans who will almost certainly vote in favor of the measure to come out of the Appropriations Committee on July 20.
Some might also speculate that the SAC allocations will prompt a major fight between the Senate Republicans and the White House. When the House Appropriations Committee produced a DoD appropriations bill, it reduced the president’s 2007 budget for DoD by less than half the Senate amount, just $4 billion. In response, the Office of Management and Budget (OMB) and the White House sternly threatened a veto if any such bill reached the president’s desk. Surely, the Senate Republican appropriators’ design to transfer more than twice the House cut to civilian agencies —a predictable effort to appeal to domestic spending constituencies in an election year—will provoke a major political fight.
But don’t count on it. What we are really observing here is a convoluted Kabuki dance. While the performance has been played out before, it looks like a much more elaborate display this year. And, because the press has paid little, if any, attention to what has been actually going on, the actors in Congress and the White House have every reason to believe the public will remain as much in the dark now as in the past.
They key to the gimmickry is how the Congress (all of it, the Democrats have been willing, silent partners) and the White House are playing with the funds intended to pay for the wars in Iraq and Afghanistan.
A brief historical example: In June, Congress sent to the White House the ninth “supplemental” appropriations bill to pay for the wars. Like all of its predecessors, this most recent one (amounting to over $90 billion for several purposes, bringing the grand total for the wars to over $440 billion) has an important characteristic beyond being requested and funded outside the regular budget cycle. It is “emergency” spending, which has a specific and unique meaning: it is intended for spending that is “sudden, urgent, unforeseen, and not permanent;” such spending is exempted from the annual spending “caps” that Congress imposes on itself in the congressional budget process. Thus, if the Congress imposes a “cap” on defense spending with its “allocation” at some specific level, any “emergency” spending designated for paying for the wars in Iraq and Afghanistan comes in over and above that and does not count in calculating whether the cap, or allocation, is breached or not.
The “emergency” funding dodge was used in the 2006 DoD appropriations bill as well, which was signed into law last December. In that bill’s procurement accounts, Congress transferred over $700 million in peacetime DoD programs over to the emergency war account of the bill. It then filled the $700 million “hole” in the peacetime procurement account with an additional $600 million in new spending. Congress then declared itself to have saved $100 million. Of course, it had done no such thing: it had simply changed the way $700 million was paid for, added an additional $600 million, and told the taxpayers it was being frugal to the tune of $100 million.
It’s a neat trick: it permits additional spending, while also permitting the politicians to claim they are saving money. And, better yet, it all worked. The press paid little, if any, attention, and no one among the press called out any member of Congress for claiming to cut spending while actually increasing it. (The fact that peacetime spending was displaced war spending was also ignored.)
In fact, the gambit was so successful last year that this year’s Congress is upping the ante. In its new DoD appropriations bill for FY 07, H.R. 5631, the House Appropriations Committee declared it had cut DoD spending by $4 billion, but in truth it was using the transfer dodge from peacetime to war funding to move $2 billion of the $4 billion, according to OMB. Having found a total of $2.7 billion in transfers, this author is not sure OMB counted all of them, but in any case, it appears that of the $4 billion “cut” by the House Appropriations Committee, at least half of that amount was not a cut at all.
It seems that the Senate Appropriations Committee is prepared to perhaps double the House gambit. With its allocation declaring a $9 billion cut, it only remains to be seen how much of that will simply be a transfer. It might be a lot. A quiet inquiry with Republican budget and appropriations specialists on Capitol Hill—former colleagues of the author who wish to remain anonymous—indicates that a large portion of the $9 billion cut will re-emerge in the uncapped “emergency” war funding account.
There are a number of advantages to this gambit, at least to the way people on Capitol Hill think. Some amount of the money displaced from the peacetime spending bill can be replaced with Congress’ favorite form of spending (pork); other money can be added to non-defense bills (thereby appealing to the constituencies those bills serve), and all the while members can claim to be saving money.
There’s a plus side for the White House as well. It can appeal to its own political constituency by talking tough about vetoing appropriations bills with large cuts for defense. But the budgeteers in OMB will be able to identify most, if not all, of the transfers, make sure the White House knows it’s not all that it seems, and let the veto talk die away. In the end, both the president and Congress will be able to crow about their budget restraint.
On the other hand, the deficit will almost mysteriously grow larger; war spending accounts will be shortchanged, while pork is fully funded, and the press, and therefore the public, will be none the wiser. What’s the downside?