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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

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Defense in the Newest Deal

The text of the New Year’s deal averting the fiscal cliff is up.  Almost all of it relates to taxes.  Only 1 section (section 901) of 3 pages deals with discretionary spending in the entire 153 page bill.  As reported, the deal delays sequester for two months—from January 2nd to March 1st, at the expense of $12B of discretionary cuts.1

But that $12B doesn’t happen all at once.  Only $4B comes in FY13—evenly divided between security and non-security, categories created in last year’s BCA deal.2 And the enforcement of those reduced caps won’t happen until March 27th, when the current CR expires, meaning Congress had to reach a new agreement on appropriations levels anyway. 

The other $8B is cut from FY14. In the BCA, there was just a single cap for all discretionary spending.  The new deal divides the cap between the traditional defense and non-defense, with each paying half of the $8B.  As long as Congress gets the next deal, FY13 will be divided between security and non-security, but FY14 will be between defense and non-defense.3

So defense—and all other discretionary spending—is saved for at least two months, with a penalty of only four-tenths of a percent ($4B savings out of a $1,047B topline)--provided the next deal doesn't change the toplines. 

Guess it’s a case of surviving to fight another day.


1 Another $12B in deficit savings came from increased taxes on transferring traditional IRAs to Roth IRAs. 

2 Security is DoD, NNSA, DHS, VA, international affairs, and some small intelligence funding; non-security being everything else.  If sequester goes into effect, the split reverts to defense and non-defense including the same $2B less from each side. 

update: CBO notes that though the bill reduces the non-defense discretionary cap by $2B, that category is already at $356B, under all the caps.

3 Defense is not just DoD, but all of the budget function National Defense, which includes Department of Energy funding for nuclear weapons and other defense-related funding.  Non-defense is everything else.

update 1/4/2013: the bill text referenced in the original post was revised to fix a numbering error making the relevant section 901 instead of 1001. Link and reference corrected.