McCain Amendment Would Undermine Appropriations Discipline
When the Senate considers this year's National Defense Authorization Act (NDAA), Senate Armed Services Committee Chairman John McCain (R-AZ) is expected to offer an amendment to increase authorized defense spending for fiscal year 2017 by $18 billion. Although the amendment would not technically break the discretionary spending limits because the funds would still need to be appropriated, adoption of the McCain amendment would set the stage for busting the caps in the defense appropriations bill.
Last year's Bipartisan Budget Act of 2015 partially reversed the effects of the sequester, which lowered the spending caps by $90 billion per year, by increasing caps on defense and non-defense discretionary spending by $50 billion in 2016 and $30 billion in 2017, equally divided between the two categories. The increased spending was ostensibly offset by mandatory savings, but in reality only half of the increased spending was paid for.
The House version of the NDAA complied with the discretionary caps on paper while providing additional funding through a shell game with the Overseas Contingency Operations (OCO) account by only authorizing funding for seven months of true war spending, an approach we criticized. The House bill artificially reduces OCO spending by $18 billion and uses this “savings” to shift $18 billion of non-war defense spending to the OCO account. The $18 billion needed to cover the remaining five months of true war costs would be made up later in the year with supplemental appropriations.
To his credit, Senator McCain is taking a more honest and transparent approach to increasing non-war defense spending instead of using the OCO designation to hide new spending and circumvent the spending limits. Nonetheless, his amendment would undermine budget discipline in a few ways.
The spending cuts under the sequester were divided evenly between defense and non-defense spending to give both parties an incentive to compromise on a deficit reduction plan. Although that incentive failed to produce an agreement by the Super Committee, it led to two bipartisan deals that replaced a portion of the savings under sequestration with mandatory savings. Effectively reversing the defense cuts would reduce the incentive for compromise and make future bipartisan agreement on deficit reduction less likely.
Increasing spending above the caps for defense also opens the door to doing the same for non-defense spending. Last year, Congress attempted to circumvent the caps on defense spending by shifting some normal defense spending to the OCO category, and ultimately, the Bipartisan Budget Act used the OCO designation to free up room for additional non-defense spending as well. Passage of the McCain amendment could lay the foundation for a similar deal this year that increases domestic spending above the caps by an equivalent amount. It is particularly ironic that the Senate is considering an amendment that would provide for discretionary spending above the limits established by the BBA when neither chamber has been unable to pass a budget that could establish different limits.
If Congress believes that the defense spending levels established by the BBA are too low, it should offset the cap increases with mandatory savings or revenue increases, and should reject efforts to bust the caps without offsets or circumvent the caps with gimmicks.