THE FY 2014 DEFENSE BUDGET: ANOTHER LOST YEAR?
By David Berteau, Senior Vice president and Director of International Security Program, CSISRyan Crotty, Research Associate, Defense-Industrial Initiatives Group, CSIS

10 Apr 13. The President released his 2014 budget request on Wednesday April 10th and the coming weeks will be consumed by wrangling over its agency funding levels and policy changes. Republicans will rail against additional tax revenue; Democrats will fume over entitlement changes and more spending cuts. Throughout the debate, the government will still operate under a cloud of uncertainty that drags on the economic recovery, saps consumer confidence and prevents thoughtful planning or execution of government spending.

This uncertainty is particularly relevant for the Department of Defense (DoD), which relies on a long-range process that enables deliberate alignment of strategy, resources, posture, personnel, investment and production, and disruption of this process leads to inefficiency and insecurity. This uncertainty stretches back to the battle over the debt ceiling during the summer of 2011. Since the Budget Control Act (BCA) concluded that debate, the same issues—spending levels, taxes, entitlements, the debt ceiling—reappear time and time again. The government is locked in a vicious budget cycle, lurching from brink to brink and crisis to crisis, preventing any real planning. For DoD, the consequences are slow to develop but hard to fix.

For each of the last three years, DoD has begun the year without an appropriations bill. During 21 of the past 30 months, DoD has operated under some form of continuing resolution (CR), which pays many bills but prevents calculated prioritization of spending. After six months of stop-gap CR funding in FY2013, DoD got a budget for the rest of the year but that budget is being sequestered. Despite a refusal to plan for sequester and 21 months of denial, decrial, and delay from across the government, the sequestration axe still fell, lopping $41 billion off the defense budget over seven months.

2013 is a lost year for the defense budget. Political paralysis from the election, the fiscal cliff, sequestration and the debt ceiling doomed 2013 from the beginning. The FY2014 budget request is already under duress and is unlikely to fare better. Despite the two month delay in its release, it fails to recognize the 2013 appropriations just passed and it exceeds the budget caps in the BCA. With an erroneous baseline and disregard for the BCA caps, the President’s request not only endangers the 2014 spending levels, but set DoD on a path to plan for higher budgets over the entire Future Years Defense Program (FYDP), compromising the planning process. Some hope might be found in the fact that both the House and Senate passed budget resolutions for the first time since 2009 (albeit under threat of having their pay withheld if they failed). But like the President’s request, both budget resolutions exceed the statutory budget caps and once again the government has put itself in the position of needing to resolve much larger issues in order to get defense authorization and appropriations for next year. Congress needs to change the caps and then appropriate at one of the existing budget levels (House Budget Resolution, Senate Budget Resolution, or the President’s budget request) or they need to adopt a concurrent budget resolution at the cap level. If they cannot do one of these two things, there will be another CR, another sequester, and the vicious cycle will continue.

Can the government even make it to the end of the fiscal year? The debt ceiling, suspended in February, will be reinstated in May and the default deadline will likely be reached late summer, setting up another battle like the BCA two years ago. The threat of a U.S. credit default from a debt ceiling impasse could again destabilize financial markets and has the potential to cause serious damage to the uneven eco