Mulvaney Amendment Would Limit OCO Gimmick

May 21, 2014 | Other Spending

Strict limits on discretionary spending have made it difficult for policymakers to fund everything they want. Yet instead of making hard choices and cutting low-priority spending, policymakers have sometimes turned to gimmicks to allow them to accomodate the spending caps while not actually cutting spending. Reps. Mick Mulvaney (R-SC) and Patrick Murphy (D-FL) are offering a bipartisan amendment to the pending defense spending bill that would address one of these gimmicks: the practice of re-labeling non-war spending as "Overseas Contingency Operations," (OCO) which is uncapped.

The Budget Control Act of 2011 (as amended by the Bipartisan Budget Act) established strict limits on discretionary spending for both defense and non-defense spending, first cutting and then allowing the total amount of spending to grow slowly through 2021. The budget caps set the overall level of spending, and then Congress passes appropriations bills to determine the limits for each agency. However, the budget bills also allowed a separate category of OCO spending (intended for the wars in Iraq and Afghanistan) that was not subject to any limits.

In the past few years, policymakers have transferred regular spending to OCO in order to fund more items through the base budget, essentially circumventing the caps. Currently, anything can be labeled as OCO even if it's not remotely related to the war, as long as both houses agree, although lawmakers have so far stuck to war-related agencies. For instance, lawmakers may have used it to backfill operation and maintenance accounts in the FY 2014 defense budget by cutting the base budget amount below the Pentagon request but increasing such funding within OCO.

Recently, lawmakers of both parties have moved to limit the gimmick. For instance, the House-passed budget included language to limit OCO to the Pentagon request and to spending in Afghanistan, Pakistan, and Iraq only. The House Armed Services Committee included language along with the current defense authorization bill that "expresses some concern that the OCO budget is being used for some enduring defense requirements beyond Afghanistan (a concern shared by the Budget Committee) and mandates a report on that spending." The Committee goes on to explain that if policymakers wanted to end abuse of war spending, they could codify OMB criteria of what military spending could receive the OCO designation.

Reps. Mulvaney and Murphy have taken the Committee's advice and are now offering an amendment to the House defense bill that would do just that. This is a strong step in the right direction to ensure that only spending directly related to wars is funded outside of the discretionary spending caps, as intended. It sends a clear message to the Administration, Pentagon, and the appropriators that funding through OCO will be subject to greater scrutiny, and efforts to use OCO to circumvent caps will face resistance.

The amendment limits requests from the Pentagon that shift funding. However, the amendment would not limit Congress from funding things from the base defense budget with OCO. In a current example, Senate Appropriations Committee Chair Barbara Mikulski (D-MD) would shift $4.3 billion of the State Department base budget to OCO as a way to ease cuts to non-defense spending because of an unexpected decline in Federal Housing Administration receipts.

The Mulvaney-Murphy amendment is a good step toward ending the abuse of a common gimmick. It gives Congress and OMB stronger oversight over the OCO accounts by listing strict criteria for the types of spending that qualifies. Hopefully, the amendment discourages the President and the Pentagon from placing unrelated items in upcoming OCO requests, and lawmakers will consider taking stronger steps, like codifying the criteria for appropriations or placing caps on OCO spending.