The Debt Deal and Defense Spending

Defense spending made out pretty well in the debt deal.  Despite all of the claims, the only immediate impact of the deal on defense is the FY12 and FY13 cap on "security," which includes DoD, NNSA, function 150 international affairs, the intelligence community management account, and the Departments of Homeland Security and Veterans Affairs.  The FY12 security cap is $5B lower than the final FY11 discretionary number for security. So even if DoD ate all of that reduction it would be less than a 1% cut from FY11.  

The White House is claiming $350B in defense savings, presumably by extrapolating out from the FY12 and FY 13 caps.  But that is an assumption.  Nothing in the deal mandates those savings. 

Defense is included as part of the sequester if the second round called for in the deal, the super committee that is supposed to report additional savings by this November, doesn't come up with additional savings. If so, the caps apply not to "security" but to budget function 050, which is DoD plus Department of Energy nuclear funding and some other defense funding in DHS and the FBI.  And the deal sets out what the funding for 050 throughout the next decade would be in the absence of an agreement.  

If the sequester does kick in, 050 would be reduced by more than those caps.  The deal includes a fairly complicated formula, but basically the function 050 numbers set out by the bill would be reduced by half of the needed $1.2T savings, distributed over nine years and between discretionary and mandatory.  (Mandatory makes up about 1% of all 050 spending--so the vast bulk of the reduction would be in discretionary).  

Finally, war funding is basically exempt from the deal.  As long as Congress and the President designate funding as Overseas Contingency Operations funding, the caps are raised by that amount.  Its probably good to have a safety valve to fund our troops in the field*--but it'll be interesting to see if the Pentagon, administration, and Congress can resist hiding other defense spending in this money free from all the restrictions of this deal.

Defense was definitely on the table during this debt deal.  But it look likes most of defense was left on the table.  

* The deal also allows the President to exempt military personnel costs from sequestration, meaning no troops go unpaid.  

Obviously this is a complicated bill, and this is our best reading so far.  We'll update the post if anything we say doesn't bear out. 

Update on Friday, August 5, 2011 at 10:27AM by BFAD

We included a caveat when we originally wrote this post, but OMB Director Jack Lew now has his own post saying the same thing we said.  He says the security category in FY12 is $4B less than FY11 and we said $5B—although there’s probably some rounding either way in there.  So hope you found our post valuable, we’re proud of getting the correct analysis up early.