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“Modest reforms to pay and compensation will improve readiness and modernization. It will help keep our all-volunteer force sustainable and strong. Keeping faith also means investing sufficient resources so that we can uphold our sacred obligations to defend the nation and to send our sons and daughters to war with only the best training, leadership and equipment. We can’t shrink from our obligations to one another. The stakes are too high.”

Gen. Martin E. Dempsey

« Recalibrating to Reality | Main | Sequestration and the 150 Account »
Monday
Nov282011

Playing it Straight

Neither the President nor Congress is going to budget FY13 at sequester levels, as some of our colleagues have suggested they could or should do.  

That's because come January 2, 2013, the sequester requires a cut to spending levels no matter how low an amount Congress appropriates.*  To account for already being a quarter into the fiscal year, sequester requires that FY13's share of the $1.2 trillion be subtracted from whatever the funding levels for FY13 are "at that time," according to Section 251A(7)A of Gramm-Rudman-Hollings as created by section 302 of the Budget Control Act.  That means $52 billion is coming out of the Defense Department's appropriations no matter what level its at.  

So neither the President nor the Congress has an incentive to fund at a lower level.  If they did, sequester would just cut even more.  In fact, both have an incentive to fund at the level they want and try to blame the other for why sequester gutted their perfectly fine level of funding.

Neither can the President or Congress provide a higher level of funding to make the final number come out where they want.  In not quite two months--January 15, 2012, when Congress hasn't enacted a $1.2 trillion deficit reduction package, the BCA mandates that the current security/non-security caps be replaced with revised caps.  Those revised caps are the traditional defense and non-defense, and there is a cap for every year from FY13-FY21.  That means the defense budget for FY13 has to stay under the FY13 cap, which is $546B and includes both the Defense Department and another $20B or so for the nuclear weapons budget and other defense-related activities.  Now that cap isn't enforced until 15 days after Congress adjourns for the year, so theoretically Congress could buck the cap and appropriate more.  But more likely is $52B is coming out of a Defense Department funding of something less than $546B (and to give DoD the full $546B would require not providing any funding for nukes).    

For FY14-21, the sequester mechanism just creates new, lower caps.  If Congress would appropriate funding higher than the caps, the amount above the cap would be sequestered taking us back down to the cap level.  If Congress appropriates funding less than the cap, more power to them.  

All of this of course is interpretation, and at some point OMB's lawyers decide.  But the scenario outlined above is in line with the intent of Congress when it passed the Budget Control Act.  Sequester is supposed to be an enforcement mechanism, and we're supposed to feel the bite in FY13. We're not supposed to get around it unless Congress consciously changes the law.  

In the meantime, the FY13 budget process is going to unfold just like any other year's budget process (that is, like any budget process constrained by spending caps).  Of course, DoD should start planning for lower toplines which are more than likely coming; we'd have a better defense if it did, just as we've been saying all along. 

* For now, leave aside how unlikely is the implementation of sequester.