Debt deal leaves loophole for war costs

In the debt deal, war spending is exempt from all of the deal’s restrictions. That exemption will tempt all of the players involved in the budget process—the Pentagon, the administration, and Congress—to shift costs into the protected overseas contingency operations (OCO) account, shielding funds from the caps.

We noted that temptation in our first post on the debt deal, as did David Berteau of CSIS on This Week in Defense News. Berteau argues that the Pentagon will likely continue to take advantage of OCO “safety valve,” as they have in the past. “If you’ve got something you have to have, and you can’t fit it in the budget, you put it in the supplemental. I think that’ll still be the case,” he said.

The FY12 budget request included upfront OCO funds for international affairs for the first time, suggesting the OCO loophole might also be an option for State and USAID.  Politically vulnerable to begin with and even more so under the new caps, international affairs funds might more readily end up labeled OCO funding, now that the label has greater meaning. Gordon Adams says that shifting State/USAID funds from the base to the protected OCO account is “worth a try,” although he acknowledges the congressional authorizers and appropriators will likely not be sympathetic to this effort.  

Although war costs are to decline as troops are withdrawn from Iraq and Afghanistan, CBO projects some costs will remain for years to come.  As long as some war funding exists, the temptation will also remain.