Truth in Budgeting and Personnel Costs in the OCO

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This week, likely on Wednesday, the full House of Representatives will take up the defense appropriations bill passed out of the Armed Services Committee in May.

Although most of the floor debate will focus on restoring or cutting funding for individual programs and weapons platforms, fiscal hawks should fix on a seemingly esoteric issue to make a point about truth in budgeting and basic transparency: the arbitrary decision by the Obama administration to shift approximately $5.6 billion dollars from the DoD’s base budget to the Overseas Contingency Operations (OCO) account. The move is ostensibly intended to pay for some of the troops fighting in Afghanistan over the next few years, but the particulars are murky, and the rationale is dubious, at best.

The OCO budget has always been a slush fund of sorts, but the potential for mischief has risen because last year’s Budget Control Act (BCA) explicitly exempted war spending from budget caps. This particular gimmick — funding supposedly temporary active-duty personnel out of the OCO account — has attracted some notice. House Budget Committee Chairman Paul Ryan called attention to it in a hearing on February 29th. POGO’s Ben Freeman wrote about it in March, pointing to a letter sent by six House Republicans, including Jim Jordan, head of the Republican Study Committee, and Arizona’s Jeff Flake, to Appropriations Chair Harold “Hal” Rogers, head of the House Appropriations Committee. Along with my co-authors Carl Conetta, Charles Knight and Ben Friedman, I mentioned it in the “Defense Sense” paper (.pdf) published in May.

Although the “Defense Sense” paper reported the amount of the shift at $4.5 billion, the Pentagon explained that the OCO request included $6.1 billion for a temporary end strength increase in the Army and Marine Corps (see page 6-7 here: .pdf). Last week, the Congressional Budget Office’s definitive report on the FY 2013 budget concluded that the active duty troops in the OCO budget would cost $5.3 billion in 2013, and $15.2 billion over five years. (See Box 2-1 on page 15, here: .pdf). My current read puts the figure for next year closer to $5.6 billion.

Regardless of the exact amount, it might not seem like much in the grand scheme of things, and it isn’t. The budget passed out of the HASC weighs in at a whopping $519 billion, $3 billion more than the Pentagon requested. Moving the OCO money would actually increase the amount of the base budget, but that should then force members to offer actual cuts to bring the budget below the targets established by last year’s BCA.

The point is not to get into the weeds; different people can disagree about how much of the base budget has been shifted into the war budget. But no amount of money should be moved from one to the other for the purpose of evading the BCA limits.

I would reiterate what we said in “Defense Sense” a few months ago. Rescinding

the planned shift of DoD personnel costs from the base budget to the Overseas Contingency Operations (OCO) account [would] preserve the integrity of the deficit reduction process. Success in this process depends on foreclosing the use of accounting measures to give the false appearance of savings or to shield any part of discretionary spending from deficit reduction.