WASHINGTON, DC – Five years ago, President Barack Obama signed into law what Todd Harrison, the director of defense budget analysis at the Center for Strategic and International Studies, says will be the biggest challenge for the incoming administration: the Budget Control Act of 2011.
“The Budget Control Act has dominated the budget debate in Washington for the past five years, and with a new administration coming into office in 2017 the Budget Control Act is likely to be on the top of their agenda,” Harrison told Business Insider.
In short, after taking the highest office in the land, Donald Trump, the 45th President of the United States will have less than 300 days to negotiate a deal with Congress or see America’s defense funds slashed.
“He has to cut a deal, and that is going to be a difficult task for a political outsider,” Harrison said.
Here’s what you need to know about the BCA and America’s arms budget:
What is the Budget Control Act?
The BCA placed budget caps on the federal government for a decade (ending in fiscal year 2021).
And while nobody spends money on defense like the U-S of A, the BCA takes roughly $1 trillion (over a period of 10 years) away from what the president had requested for the defense budget.
Why was the Budget Control Act enacted?
Oh, where to start …
In early 2011, while federal spending was sky-high and revenues were declining, America’s deficit was projected to peak at $1.5 trillion.
And while the deficit didn’t get quite that high, then-Speaker John Boehner’s Republican-controlled House of Representatives refused to increase the debt ceiling, and Democrats didn’t want to agree to dollar-for-dollar cuts in spending.
This triggered a fiscal standoff and the BCA, which basically pressured both parties to reach a broader budget deal.
A congressional supercommittee (a few members of which are in the above picture) was created and given special one-time authority to propose a deficit-reduction package.
However, in November 2011, the bipartisan joint committee was also unable to reach an agreement – and the automatic, across-the-board spending caps in the BCA went into effect.
The path for sequestration
Those automatic spending caps, which applied to outlays on domestic agencies and initiatives as well as the military, were implemented in a process called “sequestration.”
“Budget caps set the level of the budget, and sequestration is the enforcement mechanism,” Harrison wrote.
“To better understand how sequestration works, imagine if you had to cut your personal budget by a certain percentage. If given the flexibility to choose how these cuts are allocated, you would probably cut back on nonessential things, like going out to dinner or buying the latest cell phone.
“But under sequestration rules, you would be forced to cut each item in your budget by the same percentage – even things like rent payments and insurance premiums. That kind of cutting can create a lot of problems and end up costing more in the long run.”
“Sequestration has been a disaster for the military,” former Secretary of Defense Robert Gates told Business Insider.
“It is the worst kind of budget cutting because it basically cuts everything at the same percentage, so you’re cutting the most important things you do at the same rate that you’re cutting the dumbest things that you do,” Gates said.
- US Navy Photo
Since the BCA was enacted, it has been modified three times. Most notably, in November 2015, Congress passed the Bipartisan Budget Act of 2015.
This deal raised the budget cap for FY 2016 and FY 2017 and allocated $16 billion for Overseas Contingency Operations – or, in other words, “war funding.” Half of the $16 billion was designated for OCO defense and the other half was for OCO nondefense.
“The law does not, however, provide a robust definition of what constitutes OCO funding,” Harrison wrote, so when and where these funds can be used is determined by whatever Congress and the president agree on: ¯_(ツ)_/¯
In short, OCO is a sort of loophole to the budget cap and is used by the departments of Defense and State as a separate pool of money on top of their base budgets.
What’s next for the Budget Control Act and America’s 45th president?
The BCA’s restrictions last through FY 2021, which encompasses the four-year term of the 45th president.
And even though the Pentagon’s current spending power comes to a grand total of $585 billion, the incoming commander in chief will have to find a way to finance expensive projects like the F-35 Lightning II and nuclear ballistic missile equipped submarines.
What’s more, Harrison expects that the next president will most likely want to exceed the budget caps, which could trigger another fiscal standoff.
“The next administration will need to strike a long-term budget deal or else the last five years of the BCA could be a lot like the first five,” Harrison said.