5 years on, military spending caps haven't brought the total disaster so many predicted

When Congress passed the Budget Control Act in 2011, defense leaders warned the spending caps could have disastrous consequences for military programs and planning.

Five years later, many of those fears have not materialized. But Pentagon leaders and presidential hopefuls are still condemning the law as a danger to national security, and searching for a solution to the problem known as sequestration.

“I think [this issue] is probably the biggest challenge that the next administration faces,” said Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies. “We’ve got four more years of budget caps left in effect, and you know whoever the next administration is, they are likely going to want to exceed those caps.”

The budget caps, originally proposed as a poison pill to force lawmakers into a more comprehensive fiscal plan for federal spending, place strict limits on how much defense and nondefense money can be allocated through fiscal 2021. Mandatory federal spending and some agencies like the Department of Veterans Affairs are exempt.

Despite giving lawmakers a target number for their annual appropriations work, the law has nearly paralyzed budget negotiations on Capitol Hill, giving members of Congress little room to negotiate with the White House on spending shifts and priorities.

That’s especially true for the Defense Department, with Pentagon planners delaying some major new equipment purchases for years to ensure enough money stays in place to maintain current priorities. Both Republican presidential nominee Donald Trump and Democratic nominee Hillary Clinton have made the budget caps a talking point on the campaign trail.

But Harrison noted that when the budget deal was passed in 2011, then-Defense Secretary Leon Panetta predicted crippling effects on the active-duty force that never really materialized.
Among them: the end of the controversial F-35 procurement program (military officials announced the aircraft’s initial operating capability this week), a fleet of fewer than 230 ships (the Navy still has 270 with plans to grow) and the smallest civilian workforce in department history (the 770,000 nonmilitary staff is larger now than in the early 2000s).

One area that has seen a significant impact is personnel. Under current plans, total Defense Department ground forces will drop to 632,000 in coming years, the lowest figure in roughly seven decades.

But Harrison said many of those changes — and related cuts to military pay raises and benefits — stem not solely from the Budget Control Act but also from military strategic plans from 2013 and 2014. “Those reductions did not cut as much as they would have if they were planning to get all the way to the budget cap level,” he said.

Instead of making those dire programming cuts, lawmakers have opted to find work-arounds for the budget caps. Twice Congress has passed short-term relief for the spending limits, and they have routinely used temporary war funding to add in extra money not just for military needs but also multiple nondefense programs as well.

Defense leaders “are still telling people the consequences of living at the [budget caps] level but they’re not including the fact that they’ve been getting $25 billion to $30 billion of overseas contingency funding to offset that every year,” he said.

Whether the next administration can do the same remains to be seen.

Some long-term platform purchases have been delayed, and defense planners will need to find ways to address short-term funding fixes in the next half-decade or risk some of the Pentagon’s predictions of disaster.
Harrison doesn’t see an end to the contingency funding “shell game” in the near future, but he does see plenty of financial questions for the next commander in chief.

“What’s their approach? What can they negotiate with Congress?” he asked. “What can they get Congress to appropriate?

“If they can’t get Congress to raise the budget caps and they can’t continue to get this extra [temporary war] funding year after year, then they’ve got a real problem … then you’re actually getting cut down to the budget caps, and they don’t have a plan for that yet.”

Party leaders in Congress have repeatedly said they hope a new president will bring new ideas on how to break the budget impasse.

But with Democrats insisting that defense spending be matched dollar-for-dollar with domestic programs and Republicans vowing to plus up defense first and rein in other spending, that agreement remains as elusive as five years ago.