The Budget Control Act — One Year Later

On Aug. 2, the U.S. Budget Control Act of 2011 will mark its one-year anniversary, a date probably few in Washington will celebrate.

While passage of the law allowed the White House to raise the debt ceiling and avert financial catastrophe, the legislation set up the next self-made crisis, which most people expect to go unresolved until after the Nov. 6 elections.

“This is a four-act play,” said retired Marine Corps Lt. Gen. Emerson “Emo” Gardner, who serves as senior defense adviser at the Potomac Research Group. “The Budget Control Act was actually the end of the first act,” which included the heated debate over the debt ceiling and the nearly successful debt deal between House Speaker John Boehner, R-Ohio, and President Barack Obama.

Gordon Adams, who oversaw national security budgets at the Office of Management and Budget under President Bill Clinton, said theater is an excellent metaphor for what’s been going on over the last year. “It is very much like a play, because it is very much all theater,” he said.

For him, the first act was devoted to the congressional “supercommittee,” and the second act, which we’re now in, is all about the presidential election. The play will conclude in December, when the lame duck session of Congress will confront a host of financial problems that need solving, Adams said.

As the play lurches toward its final act, several defense experts said one of the main outcomes of the Budget Control Act is that long-term, strategic issues that need attention have been pushed to the side.

“The Budget Control Act has short-circuited strategic thinking,” said Byron Callan, a senior defense analyst at Capital Alpha Partners, a Washington investment firm. “There is no discussion of what happens beyond 2013.”

Plus, there is an opportunity cost associated with the endless hand-wringing over sequestration, a process by which deep, automatic spending cuts to DoD and domestic spending programs will kick in Jan. 2 if Congress doesn’t act to stop them.

For example, over the last few months, there have been multiple hearings devoted to the impact of sequestration. Washington think tanks hold frequent panel discussions on the topic, and the Senate and House of Representatives have spent precious time in session debating and passing legislation that would require the White House to provide more information on how the cuts would be implemented.

“Without question, it is both a serious distraction and has spawned a cottage industry,” said Arnold Punaro, a retired Marine major general, former Senate Armed Services Committee staffer and current member of the Pentagon’s Defense Business Board. “It has diverted attention in both the executive and legislative branches from oversight and execution to full-time efforts to ward off this doomsday event.”

Within the defense community, it has sidelined some of the strategic decisions that need to be made about how to live within tighter budget constraints, experts said.

“The debate inside the beltway has only been about the top line, and there has been little substantive debate about the components of the top line,” Gardner said.

In an interview, Rep. Adam Smith, D-Wash., ranking member of the House Armed Services Committee, said, “We have got to figure out how to have an honest discussion about cutting spending that is not in the abstract. Everyone is in favor for cutting federal spending in the abstract, but that’s not how we cut.”

This phenomenon played out this spring, when many of the Pentagon’s proposed budget reductions for 2013 — from increased health insurance fees to U.S. Air Force cuts to the Air National Guard — were rejected outright by Congress.

The Pentagon says it made difficult decisions so it could meet the initial spending caps in the Budget Control Act. Congress’ rejection of these early cuts makes it even more difficult for the Pentagon to come up with possible reductions in its next budget, Gardner said.

While most of Washington is intensely focused on how the budget battle will play out for 2013, officials inside the Pentagon are crafting its plan for 2014. The military services are expected to submit their budget proposals to DoD’s Cost Assessment and Program Evaluation Office this week for independent review.

“When you truly don’t know what will happen to your program — large or small — and you truly don’t know if you will be ‘furloughed’ and you don’t know if you will have funds to support your requirements, you erode what is one of the Pentagon’s exceptional abilities, which is their five-year planning, programming, budgeting and execution process,” Punaro said.

In keeping with the theater metaphor, the Pentagon, as a member of the audience, is being forced to respond to the play before it knows how it’s going to end. And it promises to be an explosive finale.

There is a term in theater, “upping the stakes,” and that is what we’re seeing now, Adams said. “It makes for much better theater if the stakes are made as high as possible.”

Email: kbrannen@defensenews.com.