The NDAA No-Man’s Land: Blurring Battle Lines and Budget Caps

Last week, President Obama publicly vetoed the National Defense Authorization Act. A standoff over defense policy reigns between Congress and POTUS. The Senate and House Armed Services Committees have already reconciled their versions of the 2016 NDAA, however, with the president carrying through on his veto threat, an election for the new Speaker of the House on Thursday, and the debt ceiling showdown all within the week, there is more than enough misinformation and policy squabbling to fill a few volumes of the Tax Code.
 

The Basics:
The NDAA is a yearly defense bill that specifies the budgets and expenditures for the Department of Defense. From the policies of individual DOD programs, to how much funding they get, the NDAA is an ambitious bill to say the least. It is important to note that the NDAA is not a funding bill and relies on the Defense Appropriations bill for that. Relatively minor squabbles over individual programmatic funding aside, spending caps on defense and non-defense discretionary funding are enjoining a much broader debate, and are the root of the disagreements.
 
The standoff stems back to 2011, and the passage of the Budget Control Act, which imposed legally binding caps on defense and non-defense appropriations to cut about $1 trillion through 2021, and created a “supercommittee” tasked with identifying another $1.2 trillion over the 10 years. Further, it mandated across-the-board cuts, or “sequestration”, should a deal fail to be reached. As the “supercommittee” failed to find a compromise, sequestration kicked in, initiating the mandated cuts, and putting us on an even lower track for future spending growth.
 
With these deeper cuts, members on both sides of the aisle all but hailed the coming of the apocalypse, leading to the adoption of the Bipartisan Budget Act, frequently referred to as the “Ryan-Murray” deal, which dropped the required sequestration by $22 billion each for defense and non-defense spending in 2014, and by $9 billion each for 2015. The deal provided some short-term relief to the most significant spending cuts.
   
The caps have created a strange situation in which those who want more spending for the Pentagon and those who want more non-Defense discretionary are locked in an odd standoff in which neither wants to risk repealing the caps and allow spending for the other. Overall, the BCA is by no means perfect, but the peculiar stalemate between the two sides has made it one of the more successful restraints on spending in recent history.
 
The Problem:
Debate on NDAA reauthorization hit a wall built from many different kinds of brick. Many Democrats, and some Republicans, were and continue to be determined to stop NDAA reauthorization because the measure heavily relies on Overseas Contingency Operations (OCO) war funding to circumvent the BCA spending caps. One should not mistake this as a call for reduced spending – far from it – many of the same Democrats want the BCA caps removed completely but dislike the fact that the OCO account is being used to get around them while the caps remain.
 
Furthermore, it’s important to remember that the President proposed the largest Pentagon budget in history in his FY2016 budget. His veto last week underscores that the debate is not so much about increases in Defense or OCO spending at all; it’s about creating pressure to lift spending caps and a desire to spend more money. The President’s proposed Pentagon budget for FY2016, the largest in history, gives $51 billion to OCO, compared to the GOP’s proposed $81 billion. While the number is smaller, it’s hardly a responsible total.
 
One should note that both the President’s and Congressional budgets provide the same amount of spending, but the former does away with the BCA caps, paving the way for a future of unchecked spending. Neither heavy reliance on a slush fund nor repealing the caps overall show particular promise from a fiscal conservative perspective.
 
What Happens Now?
Now that the president has followed through on his veto threat, the Pentagon and other departments face a situation not too dissimilar to the budget mess of 2013, and in all likelihood, Congress will have to pass a Continuing Resolution (CR) to avoid another fiscal cliff scenario. Observers have noted that Congressional Democrats may have already laid out their demands via amendments offered during appropriations.
  
Stepping back from the NDAA debate individually, and looking at the threats the BCA caps face on many fronts, a disturbing picture begins to emerge. It’s possible that political support for maintaining the BCA may begin to further erode. It’s important to remember that both sides of the aisle have those committed to responsible spending, but the lines aren’t always clear — especially with the NDAA debate.