On July 31, Congressional leaders announced they had reached an agreement which would raise the nation’s debt ceiling. The next day, ROA representatives were invited to a White House briefing to detail specifics of the deal. According to White House staff, the debt ceiling agreement will split cost reductions evenly between security and non-security discretionary spending. There will be no reduction in mandatory entitlement spending.
This means for the initial stage of $1 trillion in debt reduction, DoD will be looking at $350 billion in discretionary budget cuts over the next 10 years. This is in addition to the $100 billion that former Secretary of Defense Robert Gates reprogrammed earlier in this year. These reductions will start taking effect on Oct 1.
While this appears to be only a five percent cut per year, the accounting can be tricky. DoD’s budget is often quoted as $700 billion each year. However the House Defense Appropriates bill sets the base budget at just $530 billion for FY-2012. The balance of Defense dollars are provided for overseas contingency operations, and therefore are allocated through supplemental funding. If applied against the basic budget, the agreed upon cuts would reduce the DoD’s budget by 7.5 percent annually.
The White House staff explained that the cuts are not over. The second round in budget reduction will occur over the next three months. A super committee will be appointed with the goal to find further reductions of up to $1.5 trillion. Again, Defense is expected to carry about half of these reductions. Twelve law makers will be appointed (six from each party) over the next several weeks. These officials will be tasked with developing specific recommendations for across-the-board cuts, which will include mandatory as well as discretionary spending.
The super committee will have until the end of November to come up with an agreement. Like earlier BRAC recommendations, Congress will be presented with a recommendation that can only be approved or disapproved, as they will be unable to amend the committee’s recommendation.
Should the committee fail to come to an agreement, or Congress fail to pass the recommendation, this will “trigger” an automatic reduction of $1.2 trillion dollars, wherein Defense will face a further cut of 9 percent annually. For the committee to reach a majority on the agreement, the decision has to be bipartisan, including at least one member of the opposing party.
Hopes were voiced by participants at the White House meeting, that the savings gained by withdrawing from Iraq and Afghanistan could be an offset to mandatory cuts. According to the debt ceiling agreement, this should be the case, but the staff suggested that the super committee might decide otherwise.
A greater concern was voiced over the balanced budget amendment, which under this agreement, will also be voted upon. With each chamber requiring a 2/3rds vote to approve, the White House predicted that such legislation is very unlikely to pass one, if not both chambers.
ROA will be watching the evolution of these budget cuts, and will remain an outspoken advocate for a strong national security.