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Pressing Budget Issue: Repeal of Defense Sequester Caps

By Steve Bell, Blaise Misztal

Tuesday, September 15, 2015

As the next Republican presidential debate nears, serious observers should hope that the candidates face tough questions on the future of both defense and non-defense domestic spending.

Defense sequester spending “caps” in place under current law will hamstring investments to address future threats and needs. Repeal of those caps stands as one of the most pressing budget items for Congress as it nears the end of fiscal year (FY) 2015.

We agree with the consensus view that negotiations on the FY 2016 budget will be prolonged this fall. However, now more than ever, congressional negotiators need to free annual appropriations bills from the counterproductive sequester regime now in place as part of the final negotiated settlement on FY16 spending.

The contention that only a small difference in spending levels exists between what would happen under a continuing resolution (CR) and what would emerge from just appropriating at the sequester cap levels misses perhaps the most important argument against both approaches.

Under a continuing resolution, funding for programs already in place would continue at present levels. No new programs could start, even if those programs improved spending and investment. Thus, plans to modernize defense programs or to consolidate overlapping non-defense programs would never get off the ground.

Air Force Secretary Deborah James made that argument this week, warning that congressional reliance on a CR would lead to substantial harm to modernization efforts planned for the future. While funding under a sequester cap for FY16 would allow slightly higher defense spending, it would add to the approximately $1 trillion in defense spending shortfall that has accumulated over the past six years.

In the non-defense arena, health, science, transportation and education organizations and agencies have made the same argument—both a CR and keeping sequester caps in place would destroy reforms and increases critical to investing for America’s economic future.

Some contend that the use of Overseas Contingency Operation (OCO) money would give defense a way around the harm that would occur under a CR or the spending caps. However, experience shows that OCO monies rarely go to acquisition, multi-year procurement and re-capitalization. Instead those OCO funds support operations and maintenance, often to unnecessarily high levels, leading to wasteful spending.

No such OCO “slush fund” exists for annual non-defense programs, leaving absolutely no flexibility in those areas. Thus, neither a CR nor the blunt instrument of the sequester caps ensures appropriate and efficient government discretionary spending. Both short-change America’s economic future.

The answer, as we have argued for several years, is for Congress to tackle the real causes of America’s unsustainable debt projections and offer real, phased-in reforms in entitlement programs like Medicare, Medicaid, Social Security and other pensions. Sequesters merely hit the smallest and slowest growing parts of the budget, while allowing Congress to pretend to be serious about real debt stabilization.

KEYWORDS: MEDICARE, MEDICAID, SOCIAL SECURITY, DEFENSE SEQUESTER CAPS