New administration, same budget cap challenges, defense expert warns

It’s been roughly five years since Congress passed the Budget Control Act of 2011, and former Defense Secretary Leon Panetta raised alarm bells over the consequences that 10 years of “devastating” cuts would bring to the Defense Department.

Yes, DoD is on track to have 632,000 active ground troops in the next few years, the smallest force since about 1948.

But unlike what Panetta predicted, the Navy’s ship count hasn’t decreased. The F-35 program hasn’t been terminated. And with roughly 770,000 employees, DoD does not have the smallest civilian workforce since the department was created.

“There are a lot of things that they just didn’t get right,” said Todd Harrison, budget analysis program director at the Center for Strategic and International Studies, during an Aug. 2 briefing with reporters.

But the next five years under BCA do have major implications for the incoming administration and the department itself, which has used emergency Overseas Contingency Operations (OCO) funding as a workaround to avoid the most dire of cuts.

“The BCA is probably the biggest challenge that the next administration faces, not just for defense, because it’s for the non-defense side of the budget as well,” Harrison said. “We have four more years, FY18-21, of budget caps left in effect. Whoever the next administration is, they are likely going to want to exceed those caps. They’re going to be put in the same situation the Obama administration has been in. They have to strike a deal with Congress.”

For Harrison, those debates will look much like budget stalemates from the past five years. Both parties say they’d like to add more in defense spending to the budget caps, but Democrats won’t budge unless the caps include increases for both defense and civilian programs, he said.

“That’s the challenge,” Harrison said. “All these other issues … things about readiness, things about force posture, things about the modernization battle wave, those all depend on what you do with the Budget Control Act and the budget caps.”

Budget cuts, particularly after 2013, haven’t hit the all-time lows DoD predicted, mostly thanks to emergency OCO funding.

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Harrison estimated that DoD has labeled roughly $25 billion-$30 billion of base budget funding so far as “Afghanistan spending” in the OCO.

This matters, he said, because the department continues to plan for major investments that the BCA caps cannot support. Plus, several major acquisition programs, such as the F-35A and the B-21, will ramp up in 2022 or 2023.

“The next administration — Clinton or Trump — they’re going to have to figure out this problem of ‘do we increase the funding sufficient to cover all of these additional acquisition costs?'” he said. “Or do we increase acquisition funding but offset it by cuts in the size of the workforce, in personnel or [operations and maintenance]? Or do we just delay some of these programs so we don’t have a battle wave?”

The likely alternative is that DoD will continue to rely on the OCO, Harrison said.

“As long as we have the budget caps in effect, we are going to have OCO funding, regardless of what’s happening in the world,” he said. “OCO funding has become the grease, the lubricant that makes the wheels of the budget process turn.”

Lessons learned?

If many of these familiar budget debates aren’t likely to disappear within the next five years, DoD can and should learn from its previous mistakes, Harrison said.

For example, he said the department, which saw the budget caps coming, could have done more planning in advance.

“They could have cut back on spending earlier in fiscal [20]13 and that would have dampened some of the effects later,” Harrison said. “If you look at what happened in 2013 when the budget went down, they made a series of decisions to make short term cuts in spending rather than long term structural changes.”

DoD opted to furlough most of its civilian workforce for six days in 2013, rather than doing an across-the-board reduction in force.

And DoD could realize major savings from another Base Realignment and Closure (BRAC), but Congress has ignored the department’s requests for the past five years.

Unlike the department itself, companies in the defense industry did a lot of work to gradually consolidate their operations, facilities and workforce, Harrison added.

“The defense industry eventually did get it, and they responded appropriately in how they restructured their businesses,” he said. “DoD is still trying to play catch-up to this, though.”

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