The Sequester and War Spending

An article in The Hill warns that war spending may be in jeopardy because of the sequester. Apparently, the Pentagon has reversed its position on the sequester's application to Overseas Contingency Operation (OCO) spending, now saying that it would be affected. Previously, it had said that the sequester would exempt spending for the war in Afghanistan.

First, it seems that the Budget Control Act does call for war spending to be hit by the sequester, although it is not crystal clear. The defense portion of the automatic cuts applies to function 050, budget code for much of the Department of the Defense (there is also some war spending in the non-defense portion). Although spending on the wars overseas is generally considered separately from the Pentagon's budget, it is lumped into that function; thus, that spending looks like it could be subject to the roughly ten percent cut that will hit defense spending on January 2, 2013.

Still, war spending has an advantage that other defense spending does not: it has no cap on spending. Other discretionary spending will be taken well below scheduled levels since their spending by law cannot exceed certain amounts. War spending, however, can be set at whatever level Congress desires without being out of order in the budget process. Thus, to get around the sequester, lawmakers could simply appropriate money in 2013 above and beyond what they actually want for OCO such that the sequester would bring those levels down to the "desired" amount. For example, if they wanted $80 billion for OCO, they could set a level of $89 billion and allow the level to be automatically brought down to $80 billion.

Of course, this would be a gimmicky way to deal with it, but considering the uncertainty and confusion on the issue, it's not clear how "exempting" or including OCO spending in the sequester would affect the budget.