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Defense Spending and the Deficit Debate

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U.S. policymakers intent on restoring the nation's fiscal health are debating deficit reductions that could include substantial cuts to the defense budget and might significantly affect the Pentagon's role in global security. As part of the August debt-ceiling deal, the Budget Control Act of 2011 (BCA) placed caps on all discretionary spending through FY 2021 and specifically limited the security budget, which includes the Pentagon, for FY 2012 and 2013. The law also tasked a bipartisan group of lawmakers known as the "super committee" with identifying at least $1.2 trillion in additional reductions. If Congress fails to achieve the mandated savings, defense spending could face automatic cuts of nearly $500 billion over nine years.

Most experts believe reducing the defense budget is sensible fiscal policy, but they disagree over the extent of the cuts necessary, where they should be made, and how they should fit into a comprehensive deficit-reduction package. Some experts also say it is unclear to what degree the new budget measures will actually affect defense spending, noting that the law leaves much to Congress in the general appropriations process.

What is the super committee?

The Joint Select Committee on Deficit Reduction is a twelve-member, bipartisan working group created to "significantly improve the short-term and long-term fiscal imbalance of the federal government." Unlike standing committees (i.e., the Senate Committee on Appropriations), select committees are usually created for a particular purpose and exist for a limited time. According to the BCA, the super committee must produce and vote on recommendations for deficit reduction as well as write the requisite legislative language to carry them out. If and when the proposal is approved by a majority of the super committee, it will be fast-tracked through respective committees of jurisdiction, which have until December 9 to vote affirmatively on the bill or lose the right to do so. It will then go to the floor of both chambers. There is no allowance at any point for amendments or filibusters.

What are the deadlines?

The legislation established three deadlines: The supercommittee must propose its deficit reductions by November 23; the full Congress must vote on the relevant bill by December 23; and the bill must become law by January 15, 2012. If any of the three deadlines are not met, automatic cutbacks known as a "sequestration" are triggered. The supercommittee is scheduled to terminate on January 31.

Who are the supercommittee members?

House and Senate leaders appointed members to the supercommittee on an equal basis: three representatives per party, per chamber. The eleven men and one woman are experts in fiscal policy (CNN), many of whom are veterans of prior debt/deficit negotiations. Four appointees -- Republican Representatives Jeb Hensarling and Dave Camp and Democratic Representative Xavier Becerra and Senator Max Baucus -- were part of the Simpson-Bowles Fiscal Commission on budget reform in 2010 and voted against the proposed package.

Tax policy remains the crux of the deficit debate despite the specter of automatic cuts for defense. Most Republicans in both houses have signed a public pledge (PDF) to oppose raising taxes, and party leaders have dismissed a Democratic proposal that, although it would not affect the Pentagon, included billions in new taxes (Atlantic Wire). Democrats maintain that any cuts to entitlement programs, such as Medicare and Medicaid, must be accompanied by tax increases. House Minority Leader Nancy Pelosi rejected a $3 trillion Republican counterproposal that did not meet this requirement.

In the National Journal, James Kitfield writes that the supercommittee is weighted more toward budget hawks like Senator Pat Toomey (R-PA) than toward defense hawks like Senator Jon Kyl (R-AZ). If there is a choice between tax increases and a sequester, Republicans "might not blink" on triggering the automatic cuts at the Pentagon.

How could the Budget Control Act impact the Pentagon?

The BCA could hit defense spending in two ways. The first portion of the law limits all "security" spending for FY2012 ($684 billion) and FY2013 ($686 billion). However, spending at the Pentagon may not be affected because the mandated savings could come from other departments under the security budget umbrella, including State, Homeland Security, and Veterans Affairs. The entire "security" budget for FY 2011 was $688.5 billion, and the caps require just $7 billion in savings for these two years.

For FY2014 to FY2021, the entire discretionary budget falls under one cap where, again, defense spending may not necessarily be subject to cuts. Speaking to ForeignPolicy.com, former OMB official Gordon Adams said, "The whole deal is designed to be opaque about the things you really want to know, such as how much defense will be cut."

The White House projects the discretionary caps will produce some $350 billion in savings from the base defense budget over the next decade. However, as Benjamin Friedman writes in the National Interest, the White House makes a number of accounting assumptions that may not pan out. The projections not only assume security spending will remain at the capped level after 2013, but it attributes most of the "imaginary" savings to the Pentagon even though the money could come from other departments. CBO Director Douglas Elmendorf (The Hill) stated in his written testimony, "Defense spending could grow at the rate of inflation, and all reductions needed to meet the [discretionary spending] caps could come from non-defense programs."

The second way the BCA could impact defense spending is through a budget sequestration resulting from the supercommittee's failure to find at least $1.2 trillion in additional deficit reductions by the deadlines above. According to an analysis done by Pew (PDF), automatic cuts of $454 billion would apply directly to defense discretionary spending over the next decade (war funding would be exempt). If the committee produces a partial package of reductions, the remaining shortfall would be sequestered.

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