It's time for Congress to do away with this big spending loophole
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The Trump administration’s defense budget has ushered in a new era of fiscal irresponsibility. Overseas Contingency Operations (OCO), once a designation meant to increase transparency and shield war spending from the threat of sequestration, has risen to new heights, while at the same time eroding to include billions of dollars in non-war spending. In the years since the Budget Control Act (BCA) was passed, the designation has devolved into little more than an expensive loophole in existing law.

Today, it’s threatening to take the debt and deficit down with it. It is time for Congress to eliminate the BCA caps and fund all of defense spending through the normal budgetary process so that transparency and responsibility might prevail.

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A new Stimson Center report, “Overseas Contingency Operations: The Pentagon's $80 Billion Loophole,” which I authored, finds that Congress should eliminate the Budget Control Act caps and fund all of defense spending through the normal budgetary process. Transitioning longer-term OCO expenses to the base budget may be difficult under budget caps, but is necessary to return some semblance of transparency and responsibility to the budget and to protect the nation’s taxpayers from runaway debt.

 

It’s clear that abuse of the OCO designation has increased significantly in recent years. Under President Obama, the designation criteria were left to atrophy. Current OCO guidance, which is based on an association with a specified region, has not been updated to cover the full scope of activities now designated as OCO. Today’s criteria, then, do not address a number of current OCO-funded operations, such as those in Syria and Libya, new initiatives like the European Reassurance Initiative (ERI), or base budget requirements such as readiness.

As a result, Congress’ definition of what can and cannot be considered OCO has gotten very, very loose. And once that money goes to the Pentagon, the accounting doesn’t get any better. In fact, since the Pentagon’s accounting systems don’t currently require it to differentiate between wartime accounts and routine operations, the money essentially lands in one big pot.

And the pot is growing. President Trump’s initial $30 billion supplemental request for fiscal 2017 included $5 billion in OCO-designated funds and $25 billion in additional base spending. Congress ultimately granted only $18 billion, but shifted the whole of the sum into OCO, leading to significant growth in base OCO-designated funds.

In the past, the Pentagon has acknowledged that approximately half of OCO is already used to supplement its base budget. The effect of this shift from base to OCO spending can be partially illustrated by calculating the cost of a single troop, which has grown from approximately $1 million in fiscal 2008 to $5.9 million in fiscal 2017, a 590 percent increase.

The same will happen in fiscal 2018. Trump’s budget request includes a $52 billion gulf between the BCA caps and Trump’s baseline request. Congress’ traditional maneuver, which will almost certainly be repeated again, is to ink a deal that raises the caps slightly, then throw another chunk of the delta in OCO, ultimately landing at a topline that falls somewhere in between. This move will cause OCO — along with the nation’s debt and deficit — to continue to rise even absent a war.

And while the issue has received less attention, it’s important to point out that this isn’t just a defense problem. Foreign affairs funding has also benefited from this process of abuse. As a result, in recent years, base foreign affairs funding has decreased, while OCO foreign affairs funding has increased significantly. OCO is, for better, or mostly for worse, an equal opportunity loophole.

It is time for Congress to end this charade.

Laicie Heeley is a fellow in the Budgeting for Foreign Affairs and Defense Program at the Stimson Center, a nonpartisan policy research institute working to resolve global threats to security and prosperity. She is the author of the new report Overseas Contingency Operations: The Pentagon's $80 Billion Loophole.


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