Many have lost hope that Congress could get anything done, but the joint budget deal announced by Patty Murray and Paul Ryan last week was a true bipartisan victory.
It would yield $31 billion in sequester relief for the next two years and a real defense budget, not just a continuing resolution, of about $500 billion in 2014 and 2015. Passage would also avert another budget crisis early next year, given the US debt limit is set to max out by around Jan. 15.
The agreement also would lower cost-of-living adjustments by 1 percentage point annually for working-age military retirees — those 62 and younger.
One thing the deal did not do, however, was end sequestration. It merely suspends those mandatory cuts and budget caps until 2016, meaning another deal will be required before then, or the military will get to relive this nightmare in 21 months when fiscal 2015 ends.
Nevertheless, the Ryan-Murray plan marks an important step toward solving the nation’s debt crisis and establishing the foundation for a bipartisan dialogue about what the nation can afford and what it must sacrifice. It’s an essential prerequisite before lawmakers can start tackling reforms to entitlements, taxes and benefits.
For the Pentagon, this was as good a deal as anyone could hope for, but budget masters must still find $30 billion in savings in 2014 and some $43 billion in 2015, with no clarity about what to expect the year after.
For years, Pentagon and military leaders have talked about the need to make hard decisions. And yet, DoD has been getting by with nips and tucks in the hope of rescue. They have clung to a non-sequestration base budget that’s an optimistic wish list far larger than the continuing resolutions that more accurately mirror likely future funding.
The service chiefs and DoD’s civilian leaders went along with Army Chief of Staff Gen. Ray Odierno’s “no cuts” tone in the hope of averting cuts and preserving unity and harmony. They burned enormous political capital but got little in return and still face enormous challenges, making it unclear what they’ll have to do to get lawmakers’ support for something important in the future.
DoD’s buying power is eroding as personnel costs continue to rise at a stunning 4.2 percent a year, weapons continue to age and become more expensive, and overhead and infrastructure remain bloated. Plus, the $80 billion supplemental account that covers combat operations is slated to shrink after 2015 but carries too many non-wartime needs that will have to be covered by an ever smaller base budget.
The Pentagon budget is a bubble, notes a Wall Street veteran: “All bubbles last longer than you think they would,” he says, “And when they burst, they burst louder and harder than you ever imagined.”
A bursting defense bubble has far-reaching implications for people, programs and military capabilities vital not only to US security but also to the security of America’s many allies around the world. China, meanwhile, is positioning itself to fill voids a waning America leaves behind in the Western Pacific.
The time for budget games should be over, but the gamesmanship persists, not only in the Pentagon, but on Capitol Hill, where the recently completed National Defense Authorization Act was crafted without regard to the budget committee’s new spending caps.
Those who continue to believe that hard decisions can be postponed are wrong. This is the central mistake of every past downturn — a failure to adjust to budgetary reality that ultimately yields less capability for the money than had it planned more thoughtfully.