Why the debt ceiling deal is not quite the defense windfall it seems to be

Nobody loved the deal Congress worked out to raise the debt ceiling. But it did avoid default and gives a spending blueprint for fiscal 2024. It’s not quite the defense bonanza it appeared to be, according to my next guest. Federal Drive with Tom Temin spoke with Elaine McCusker, who is a senior fellow at the conservative American Enterprise Institute.

Interview Transcript:

Tom Temin And we should point out you are also former acting comptroller of the Pentagon, So you know where of you speak here. But let’s begin the review of the defense budget specifics that were in that debt deal.

Elaine McCusker I think there’s both good news and bad news for defense in the budget agreement. The caps are too low and the provision on continuing resolutions is even worse. But I’ll start with a little bit of good news here. First, the agreement, I think, is good in three key ways. First, it demonstrated that compromise on complicated issues is still possible. We knew back in January when the debt limit was hit that Treasury, and Treasury started using their special measures to juggle payments and cash, that we would need action on this issue. Yet, nothing really happened to do anything about it for months. And I think we have seen a high and increasing level of acrimony and at times even a lack of professionalism on the part of our leaders. So the fact that the White House and Republican House leadership reached a deal that was then passed and enacted, I think is just good news in and of itself. It saved the country from reputational, economic and national security damage.

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Tom Temin That reputational thing is kind of important right now, because in a lot of domains we’re probably not showing our best side, you might say, this decade.

Elaine McCusker I think you can say that this whole situation was somewhat embarrassing and bordering on disgraceful that we would not be able to have our house in order to this degree. And I think we were risking a lot of economic and national security damage as we did the run up to almost defaulting on the debt limit. So reaching a deal in and of itself was a good thing. The deal removed the arbitrary, in my view, damaging and irresponsible link between defense and non-defense spending. This link could resurface and it probably will. But it was important, I think, to acknowledge getting rid of it as a good thing. Defense is the only mandatory and exclusive job of the federal government, so it should not be a priority, it should be the priority. And yet, defense is only 12% at federal budget outlays. And budgets, they should also be based on requirements. So what is needed to carry out directed missions of a department or agency and not on some sort of politically driven parody, which is what we’ve really been seeing since at least the Budget Control Act era.

Tom Temin Right. So it’s 50-50 on the so-called discretionary side, even though it’s only 12% of total outlays that the government puts there every year.

Elaine McCusker And that’s correct. And even though the Defense Department had needed increases for various really good reasons over the last decade or so, we saw forced increases to domestic spending to keep that parity, even though there weren’t valid requirements against that spending. And so I think that was sort of damaging overall. And also the parity issue actually jammed up budget agreements for years as well. So I think the fact that we gave a nod towards not doing the budget that way was a good thing in and of itself as well. And third, I mean, I think the deal at least initially seemed like it would provide some much needed budget certainty that leads to better programmatic decision making and cost savings. Now, this could certainly blow up, and it seems it has, but budget agreements, as we mentioned at the beginning, are in and of themselves are a good thing. And if you have a top line, in which to build your program from the start, you’re going to make better decisions and you’re going to have sort of more transparency in what you’re doing. That budget agreement should have paved the way for some stability. Unfortunately, that hope for momentum towards stability and potentially on time appropriations is not trending in the right direction, which kind of gets to the bad news. But I’ll stop there for a second so we can enjoy the good news.

Tom Temin We’re speaking with Elaine McCusker. She’s senior fellow at the American Enterprise Institute and former acting comptroller of the Defense Department. You are also saying that on the bad news side, then, that while certain or to some degree more certain than it was, it’s not enough.

Elaine McCusker Yeah I think what we’re seeing now is that, in addition to the budget caps being too low for defense, we now also have allocations provided on the House side to the appropriation subcommittees that are below the agreement caps in some cases. So that happy moment from the budget deal is already pretty much gone. And we’re seeing partizan appropriations bills in the House, which by the way, actually happened when the Democrats were in charge, too. But this means we could see what we’ve been seeing for more than a decade, which is ping pong between the House and Senate and sort of a stalemate come the fall, which I think increases our chances for a long term, consider ten-year-resolution. Congress has only done its job in passing on ten appropriations bills before the end of the fiscal year, three times in the last 47 years. I think that’s important to note that. And one of the reasons I thought this was positive, maybe this would be one of those years. Congress kind of recognized the damage of continuing resolutions by actually putting a provision in the budget deal that imposes the penalty if a continuing resolution goes beyond the end of the calendar year. Unfortunately, that penalty is the equivalent of shooting the hostage. Sure. Not put the penalty on those who need to take action to pass the bills, Congress. It Penalizes those who can’t do anything about it. The federal departments and actually the taxpayer.

Tom Temin Right. And in your experience, when funds do come through late, as they basically always do, even though people pretend that there’s a start of the fiscal year and it’s all fresh and clean, but the agencies are on that C.R. What is the practical effect of that in your experience inside the Pentagon, in the armed services?

Elaine McCusker Yeah, there’s a lot of immediate and long term effects. And I think it’s interesting that we’re already hearing conversations about government shutdowns. It’s mid-June. We don’t usually hear about that kind of thing until September. I see the continuing resolutions having five basic impacts on the military and our national security. First, funding is not enough. And I think even if this were a normal year, which it’s not going to be, the Department of Defense will lose about $180 million a day starting October 1st under a continuing resolution. Second, funding is not the right account. And so we’re really using last year’s priorities and strategy and programs and just extending them into the new year, which means that anything you wanted to do in procurement or detainee or even mil purge requirements, you’re going to be stuck with last year’s amounts. The third reason is you can’t do new starts or production increases. Typically, there are hundreds of these each year. This year most notable in the munitions accounts, the administration plans to spend close to $6 billion more in 24 than 23 on munitions. And that will all be sort of a consequence of a C.R. that we won’t get to do that. The fourth reason is in funding contracts, and you’re not getting the best bang for your buck, and you’re having uncertainty sort of go throughout the industrial base of supply chain. And pretty much everyone who kind of lives and works with [Department of Defense (DoD)] is going to be impacted by this. And then fifth reason, you lose time in training, production operations. Time can’t be bought back. And as a matter of fact, I think General Brown, who is the nominee to be the next chairman of the Joint Chiefs, said this best recently when he said, all the money in the world cannot buy more time. Time is irrecoverable. And when you are working to keep pace against well-resourced and focused competitors, time matters.

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