Committee for a Responsible Federal Budget

We Need a War Spending Cap

Dec 12, 2011 | Other Spending

One of the most popular budget gimmicks in Washington right now is the war savings gimmick.

Because CBO assumes that discretionary spending grows with inflation in its baseline, it assumes that war spending (the technical term is Overseas Contingency Operations, or OCO) also grows over time, even though there is already a drawdown in place. Lawmakers can therefore set "caps" on OCO spending consistent with the drawdown that is currently occuring and use them to claim savings to the tune of about $700 billion. As we have said before, it is a gimmick to take credit for savings for a policy that is already in place. Even worse would be to use these "savings" to offset the cost of policy extensions such as patching the Alternative Minimum Tax or avoiding deep cuts to physician payments, as some are calling on Congress to do.

Still, putting in place caps for OCO spending is actually useful in another context: appropriations. POLITICO is reporting that appropriators have been shuffling off some defense and foreign aid spending to the OCO category to clear room for more security spending under the Budget Control Act spending caps. Of course, this is another terrible gimmick, and, ironically, avoiding this gimmick requires setting caps on OCO spending, the same policy that is used in the war savings gimmick. In this context, though, the OCO caps would not be counted as savings, but instead would force Congress to actually abide by the savings they agreed to in August.

When/if the trigger hits, the pressure to put some defense spending under the banner of OCO will be greater, so putting these caps in place is important. Lawmakers should also tighten the definition of OCO spending so any extra headroom that the caps may provide for war spending cannot be used for other defense or foreign aid spending.

To sum up, setting OCO caps and claiming savings for them is a budget gimmick; on the other hand, not setting the caps and using OCO to avoid security spending cuts is also a gimmick. The best case scenario for war spending would be to enact the caps without using the savings to offset other costs or to pay down the $1.2 trillion "trigger" resulting from the failed Super Committee.

Budget process can't stop politicians from playing games and adding to the deficit, but it can at least make it harder and call them out on it. The effort policymakers are exerting to identify gimmicks should instead be put to better use toward finding new ways to identify low-priority spending and make the budget and tax code more efficient. We need real deficit reduction, not gaming.