House Defense Bill Draws Potential Veto

The White House issued a statement Monday saying that the President's senior advisers would recommend vetoing H.R. 4435, the annual defense authorization bill reported by the House Armed Services Committee because it rejected meaningful reforms and ignored more than $50 billion in savings outlined by the Pentagon in its FY 2015 budget. 

Complying with the statutory spending limits on defense discretionary spending through fiscal year 2021 will require many tough choices and tradeoffs within the defense budget. Unfortunately, the defense authorization bill reported by the House Armed Services Committee punted on many of these tough choices, relying heavily on one-time savings in operations and maintenance accounts. While spending under the proposed bill would comply with the spending limit for FY 2015, the rejection of reforms with long-term savings will make it much more difficult to meet future defense needs within the budget constraints imposed by the discretionary caps.

CBO's cost estimate of H.R. 4435 puts the bill's net savings at about $29 billion between 2016 and 2019, mostly by making cuts to training, repairs, and maintenance. However, the bill rejected much greater cost savings the Pentagon proposed that would have grown over time and made it easier to control defense costs in future years. For example, the bill does not include the Pentagon's proposals to reduce costs by reforming military compensation and increasing TRICARE's out-of-pocket costs, which would save $31 billion through 2019. Instead, H.R. 4435 would put off any efforts to address military compensation until the Military Compensation and Retirement Modernization Commission issues its recommendations next year. 

The statement also raised concerns that the bill would "constrain the ability of the Department of reduce unneeded costs." The bill would reject the military's proposal to retire costly weapons systems such as the A-10 aircraft, which the Administration contends would save $4.2 billion over the next five years. The bill also prevents changes to the military's force structure, continues a C-130 cargo plane modernization program that the Pentagon had planned to replace with a less expensive alternative, and rejects a round of base closings under the BRAC Commission. Overall, the White House contends the committee rejected more than $50 billion in savings over five years that the Pentagon proposed in its FY 2015 budget. 

The White House's statement argues that ignoring these proposed savings would force the Defense Department to "retain unnecessary overhead and force structure" at the cost of capability, capacity, and readiness. The statement also makes the case that putting off meaningful reforms to military compensation would reduce funds available for other defense functions and constrain the Defense Department's ability to carry out the President's defense strategy:

To achieve a proper balance between DOD’s obligation to provide competitive pay and benefits to service members and its responsibility to provide troops the best training and equipment possible, it is imperative to slow the growth of basic pay and housing allowances, modernize military healthcare, and reform how commissaries operate. The Administration strongly encourages members of Congress to support these reforms, which would save $2 billion in FY 2015 and $31 billion through FY 2019. While the Administration looks forward to the recommendations of the Military Compensation and Retirement Modernization Commission on long-term compensation, modernization, and retirement issues, delaying DOD's holistic package of proposed initial changes will only result in increased costs and risks to the force.

We appreciate the President reiterating his support for the Pentagon's proposed cost savings by threatening to veto the defense authorization bill for rejecting them. The administration's statement on the legislation echoed many of the points made by CRFB President Maya MacGuineas on the impacts of failing to reform military compensation on our ability to maintain a strong national defense. While military compensation is a politically sensitive topic, the Joint Chiefs of Staff and several retired military leaders have made clear that changes are necessary to comply with defense spending caps if capability and readiness are to be maintained. Intelligent reforms would help the Pentagon address rising personnel costs without harming retention and recruitment.