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Expert: Sequestration Spending Caps Will be Major Challenge for Next Administration

brac_pentagonThe Budget Control Act of 2011 is probably the largest challenge the next administration faces and not just in defense but spending across all the federal agencies,” one of the nation’s leading experts on defense budgets told reporters Tuesday.

Todd Harrison, the director of defense budget analysis at the Center for Strategic and International Studies, a Washington, D.C., think tank, said, the new administration be it under Donald Trump or Hillary Clinton will have to strike a deal with Congress — preferably for four years — on raising the sequestration spending caps set under the 2011 legislation.

In the three compromises worked out so far, Harrison said each side has given a little.

The shorthand for the parties’ positions are:

* Democrats say not only raise defense spending but also raise all other non-defense spending and raise taxes to pay for the increases.

* Republicans say raise defense spending and find the money for that hike by cutting other federal programs, enact no new taxes and keep the spending caps.

The real struggle “has been about non-defense spending — entitlements and taxes. Both sides took defense as a hostage” to force negotiations. When those negotiations broke down, the government was forced to shut down in early 2014.

This is the “is the same budget stalemate we have had for five years,” he said. To get around the spending caps from the 2011 act and avoid the across-the-board cuts called for in that legislation, Congress has created a number of workarounds, including dipping into an emergency spending account to pay for programs that would normally be in the base budget.

The problem with doing that, Harrison said, “It’s for one year,” and the regular defense spending plan covers five. When asked if that account could be put on a five-year model, he smiled and said yes, noting that the regular budget and the Overseas Contingency Operations request were sent simultaneously to Congress this year.

Looking at the Pentagon budget request for Fiscal Year 2017, Harrison didn’t see Congress being able to work out the differences in the two authorization bills or how to find the $18 billion over the agreed upon spending levels before Oct. 1 for the appropriations bill.

The House version would use $18 billion in the Overseas Contingency Operations account to pay for service modernization. That account is used most often to cover costs primarily associated with military operations in Afghanistan and Iraq-Syria.

The Obama administration has threatened to veto the authorization bill if it uses that account to pay for programs that should be in the base budget.

Since there likely will not be an agreement on either the authorization bill or the spending bill, Harrison means that yet again the Pentagon will enter a new fiscal year operating under a Continuing Resolution. That means the department’s spending is frozen at previous year’s levels and no new programs can begin nor old programs terminated.

Looking to the new administration and Congress taking office, “a lot of [possible change] comes down to the makeup of Congress” and “being willing to negotiate.”

Harrison said he expected the current Congress to wrap up the defense authorization and spending bills before it adjourns this year.

But will the emergency spending account go away anytime soon?

“As long as we have budget caps, we’re going to have OCO.” The Budget Control Act caps are to continue for four more years.

The caps have forced Congress to pass some serious reform measures to hold down spending in military health care, the military retirement plan and limiting pay raises for service members and department civilians. How much emerges in this authorization bill from the yearlong review of Goldwater-Nichols is up in the air, he said.

To find more savings, “the number one thing they [in Congress] could do is close excess bases. The number one thing Congress doesn’t want to do is close bases.” This is especially true in an election year. Harrison said the model for a new round of base realignment and closure should be drawn from the experiences of the 1990s, not the 2005 model. There are upfront costs in closing installations, but the “savings in perpetuity” comes from reducing the civilian work force to administer and operate the bases.

The Pentagon’s budget request for at least the last four years has called for another round of realignment and closures. The Army and Air Force say they have most excess infrastructure. Congress has not acted on that part of the request.

“We have stacked up major bills” for the future in weapons programs, Harrison said. “It looks like the Air Force will have the largest ‘bow wave.'” The service is projecting in FY 2022 and 2023 it will be spending on full-scale production of the F-35, a new long-range bomber, tanker, trainer, intercontinental ballistic missiles, nuclear-armed cruise missile, etc.

While the Obama administration doesn’t have to decide which of these long-range programs go forward, the next one will have to decide whether to cut force, delay some items and possibly terminate others to pay for them, Harrison said.

Creating a new budget line for strategic programs, such as the Ohio-class replacement program, doesn’t remove them from the spending caps, Harrison said. “You can cut other programs” such as “whatever is left in Army modernization” to pay for updating the nuclear triad.