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Through the Fiscal Looking Glass

The latest plans for the Pentagon's budget present an alternate reality.

Gabriel García Márquez died this month and Lewis Carroll has been dead for decades, now. But the memory of magical and upside down thinking, which they captured so well, lives on in the Pentagon. The Pentagon planning machinery (and the congressional Armed Services Committee members) are working from that script, with no shame at all. They continue to walk through the looking glass, engage in magical thinking, and stand budgetary realities on their head -- all in the hopes that somehow new language and unreal numbers will lead Congress and the White House to decide that the August 2011 budget deal was just a big mistake, that all is forgiven, and that bigger defense budgets will be soon be arriving.

Once again, reality has been pushed aside in the defense budget debate. The administration transmitted a budget which, across the board, and especially when it comes to the Defense Department, departs from reality. A deal is a deal, however, so it asks the appropriate amount for defense this year -- $496 billion in FY 2015 -- in keeping with the Murray-Ryan agreement. But then the whole budget logic evaporates into magic and rhetorical excess. The administration wants another $26 billion for defense (and the military services want even more) this year, just in case anyone wants to throw the 2011 deal over the side right away. They even give this request a funny name: the "Opportunity, Growth, and Security Initiative," or OGSI.

Few members of Congress have the stomach to reopen the budget deal for FY 2014-15. Rep. Paul Ryan (R-Wis.) introduced a budget resolution in the House that also sticks to the 2015 deal. Sen. Patty Murray (D-Wash.) has no plans to introduce such a resolution; the FY 2015 deal is done. So there will be no more money for defense, not this year.

Oh, wait a minute, scratch that: the Pentagon has yet to send up its Overseas Contingency Operations (OCO) budget request for 2015. Yes, that's the same OCO budget that added $85 billion to the defense budget this year -- outside the Budget Control Act Caps. Only DoD (and, on a smaller scale, the State Department) get that kind of extra money. And the Pentagon, and even the appropriators, hope the magic of OCO will be appear again this year. Both the White House and Congress hope that magic wand will continue to wave next year. The White House has sent up a budget that projects needing $115 billion more for defense between FY 2016 and FY 2019 than that pesky Budget Control Act (BCA) would provide. Not to be one-upped, Ryan's budget resolution -- called the "Path to Prosperity" -- projects adding $350 billion to what the 2011 deal provides for defense (while it hammers domestic discretionary spending to pay for the defense increase).

It's an election year; both sides are playing politics with their budget proposals, but neither is very realistic. The Congressional Budget Office projects that, given the growing costs of mandatory programs, the deficits that are currently shrinking courtesy of the economic recovery will start to turn around in 2015, growing to over $1 trillion dollars by 2023.

But clearly the folks running for office continue to think it is better to duke it out, to go yet another round and see who wins the Senate in November, rather than face the budget reality.

Furthering the theme of upside-down reality, the Pentagon continues to argue that anything less than the additional $115 billion it is asking for would mean the end of American national security as we know it. The latest version of this looking-glass vision is the report issued by DoD this month that purports to "estimate" the impact of BCA-level budgets on the military.

The logic of this analysis defies the Pentagon's own budget planning last year. It pretends that the additional $115 billion was itself the result of planning, which must now be cut, if the BCA levels continue. That flies in the face of reality: the Pentagon, I am assured by insiders, actually created a five-year plan based on the BCA level -- a plan it could live with. Then, playing politics, the White House gifted them with another $115 billion between FY 2016 and FY 2019, money they had not planned for. Thus, seeing the winds blow a different way, they re-scripted the plan in a hurry, throwing things back in (but, oddly, not including a larger Army and Marine Corps than projected in their BCA plan).

Now, by golly, they want their $115 billion. First, the scary language. The report calls the BCA levels "sequester" levels, because the nation already finds that word scarier than the agreed upon "caps." Then comes the demand for more. Undersecretary Frank Kendall says "it is extremely unlikely that we will ask for less money than the president thinks he needs to defend the country."

So the new report treats us all to a horrendous list of things they would now have to cut -- some of them, surely, things they had been willing to forego with the original five-year plan. (They must be tearing their hair out in the comptroller's office: first it's out, then it's in, now it's less, then it's more.)

The list of draconian impacts is a classic Washington Monument proposition: if we can't have this additional money, says the Pentagon, we'll lose a squadron of F-35s, seven Navy ships, be forced to eliminate our Predator and Reaper unmanned aerial vehicle fleets, and lose readiness by leaps and bounds.

But all planning and budgeting is about making choices. The Pentagon already made those decisions, carefully, in the BCA-level plan it did before the president gave them another $115 billion to play with. Even in the report, the choices are obvious. Lose all of the Predators and Reapers? Well, what if instead of trimming the F-35 by three planes a year, we trimmed them by five a year (leaving a healthy number still being bought), and used those funds to buy the Predators and Reapers after all?

The choices hidden are even more revealing. For many years, now, it has been clear that the Pentagon "back office" is way larger than it should be. But the DoD would rather cut training, exercises, and depot repairs for equipment (as the report warns), than tackle seriously the 1.8 million people who support 1.1 million on active duty. (That's 800,000 civil servants, 700,000 services contractor personnel, and 340,000 in uniform performing civilian or commercial functions.) These folks are doing central administration, financial operations, personnel management, and other functions in the back office. It's an important responsibility, to be sure, but these funds (called "Operations and Maintenance" money in Pentagon parlance), are enormously flexible and the infrastructure is way too big. A diet for the back office is the fiscal trade space for the Pentagon -- the savings here would provide the funds for the forces and equipment they think they require. And yet the report scarcely mentions the back office. The point of the spear and the misleading confusion between "readiness" and administration are much more effective ways of scaring Congress into providing the additional funding.

The White House should never have given the Pentagon that magic money; doing so only encouraged DoD to walk through the looking glass and imagine that the defense budget might magically grow even more than it would under the BCA deal.

"Drink me" the money said. So the Pentagon once again ignored budget reality. And we have an unreal, political defense budget once again.

Alex Wong/Getty Images

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