Experts: DOD still faces cuts but dodges the worst
WASHINGTON — A panel of defense budget experts on Thursday picked apart the bipartisan budget deal reached this week on Capitol Hill, as well as spending levels set in the new, $633 billion defense bill.
The experts’ verdict: Not all is as it seems.
While praising the progress that was made to reach the overall budget deal and expedite the defense bill, the experts said in a conference call with reporters that a deeper dig into the numbers reveals that the Pentagon will still face significant spending cuts even though it appears to have dodged the worst.
For example, Russell Rumbaugh, a senior associate and director of budgeting for foreign affairs and defense programs at the nonpartisan Stimson Center, said the cuts to the Pentagon budget have been softened by being spread out over several years.
“The most important thing is that it significantly softens the drop in defense spending — the key word there is ‘softens,’ ” Rumbaugh said. “Really, the defense budget is still going down to the same low point it was previously going to go down to, it’s just now not going to do it for a couple of years.”
Under the original caps set by the 2011 Budget Control Act, the Pentagon’s budget has fallen in the current 2014 fiscal year, and also fell in the 2013 fiscal year. But the new budget and defense bill essentially keeps it from falling further, Rumbaugh said, because now the 2014 fiscal budget levels will be the same as in 2013 and the steepest funding decrease will have already happened.
Because the defense budget will be basically flat for the next four fiscal years, however, Rumbaugh said it will actually be falling because of inflation.
“Unfortunately, because of the corrosive effect of inflation, ‘flat’ really means the defense budget is coming down. So in real terms, it’s still going to end up at the same low point it was scheduled to hit in FY 14, but now it doesn’t get there until FY 16. All of which means the budget is slowly but surely eroding.”
What the Defense Department got in the new numbers, Rumbaugh said, was stability — knowledge of how much they will have to spend for the foreseeable future as they navigate new projects, programs and changes.
“The longer that cuts are spread out, the easier it is to get there,” he said. “This should allow them to do good planning and give themselves a rational plan to get to the bottom.”
Pete Sepp, executive vice president of the National Taxpayers Union, pointed out that according to the non-partisan Congressional Budget Office’s own estimates, about 75 percent of the defense spending increases in the new budget deal are in the first five years of its implementation, while 75 percent of the savings will come in the last five years.
Like the spending cuts, Sepp said that means the savings are also back-loaded in the deal.
“If you look at the 10-year time horizon for this act, it will actually increase the deficit by $26 billion over the first eight years of its life. It’s only until the last two years that the savings begin to kick in,” Sepp said. “That’s a major concern for many taxpayers’ groups who had been concerned about this ‘Spend now, worry about paying for it later’ mentality in Congress.”
The new budget deal achieves some of its savings by requiring federal employees to pay more towards their retirement funds, and it also lowers benefits for veterans who retire before age 62. Some veterans and military advocacy groups were caught off-guard by that move, and Rumbaugh said it could portend similar future shifts.
“This is a huge deal … The Defense Department is getting another $30 billion in spending, but that’s being offset with cuts to more expensive DOD personnel,” he said. “Frankly, that’s what folks have been calling for — a shift away from personnel spending towards more traditional defense spending — munitions, modernization programs. This is the first big move to do that. Whether it protects more is a probably somewhat an open-ended question.”
Rumbaugh said he anticipates that future shifts away from pay and benefits spending towards “more traditional” military spending won’t be done casually. When it does come, though, he said it will likely come through a commission that is examining how to reform military compensation. A final report from that panel won’t come for a year, he noted.
“It’s part of a really big moving package,” he said. “You’re not likely to see these things come out in piecemeal form. This was a bit of a surprise that they did these provisions, but the next step we’re looking at is the military retirement compensation reform commission. If we can indulge our grandest hopes for that, that’s going to come up with not just cuts, but reform, and will offer a whole package. We’re not likely to see such politically difficult decisions made in standard legislation.”