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A Chance to Shut Down the Pentagon’s Slush Fund

Friday January 6th, 2017   •   Posted by Craig Eyermann at 6:52am PST   •  

52930171 - the pentagon label President-elect Donald Trump has selected South Carolina Representative Mick Mulvaney to be the next director of the White House’s Office of Management and Budget (OMB).

Mulvaney is an interesting choice for the job, which given many of the public positions that he has taken over the years with respect to wasteful spending in Washington D.C., suggests that business may not continue as usual for the federal government’s budget. Politico‘s Danny Vinik reports on one aspect of how Mulvaney’s appointment to the OMB Director position may terminate the back door method by which the Pentagon has been getting around complying with the defense spending cuts that imposed during the last four years.

Since 2001, the Department of Defense has spent more than $9 trillion on everything from new weapons systems to soldier salaries, and nearly 20 percent of that money — $1.7 trillion in total — has come from an “off-the-books” budget account called the Overseas Contingency Operations fund. It’s the best-known budget gimmick in Washington, a classic example of Democrats and Republicans finding common ground when they want to boost defense spending while technically abiding by the current budget caps….

Mulvaney has been one of the loudest critics of the fund during his time in Congress, hammering it as a “slush fund” and sponsoring legislation to eliminate it. Now, suddenly, he will find himself in a unique position to kill it off. Could he do it?

Vinik provides additional background about the Defense Department’s Overseas Contigency Operations fund and also why it has become a target for a new OMB director who may be serious about restraining wasteful spending.

On paper, the budget gimmick serves a real purpose. The Overseas Contingency Operations fund, or OCO, was established in 1997 and is typically referred to as an emergency fund; Congress appropriates money into the OCO account for the Pentagon to fund unplanned needs, like a war. During the George W. Bush administration, OCO defense spending increased dramatically as the U.S. tapped the account to pay for its wars in Afghanistan and Iraq. It peaked in fiscal 2008, at $187 billion, accounting for 28 percent of total Pentagon spending.

Since then, it has slowly declined as Obama has adopted a lighter-touch military strategy, pulling out troops in Iraq and Afghanistan. OCO defense spending in fiscal 2016 was $59 billion, 10 percent of total Pentagon spending.

Mulvaney calls this a “slush fund,” and few budget experts disagree. Its real role, they say, is to allow the Pentagon to keep spending money on overseas wars without violating the spending caps imposed by the 2011 budget deal. Todd Harrison, an expert on the defense budget at the Center for Strategic and International Studies, said that starting in 2014, the Pentagon began shifting its base defense spending into the OCO account, which — unlike the main budget — doesn’t have a limit. That gave defense hawks in Congress and the Pentagon an easy way to boost defense spending without looking like they were violating the budget cap: Simply put the money in the OCO, and pretend that the defense spending caps aren’t violated.

Both President Obama and the current OMB director, Shaun Donavan, have called for ending the OCO slush fund, but neither have been willing to back up the move toward establishing more effective fiscal discipline by actually doing so in President Obama’s annual budget requests, which confirms a lack of seriousness on their parts.

It may well be that supporting the nation’s defense requires higher spending than is currently specifically allocated for in the federal government’s budget, but that is something that needs to be established through the regular appropriations process in the U.S. Congress. Without reform, like the U.S. Department of Justice’s Judgment Fund that the Obama administration has been using as its own slush fund to achieve its political objectives without express Congressional approval, the Defense Department’s OCO fund will enable far too much spending to occur without sufficient restraint, which can only harm the nation’s interests.

Time will tell how seriously Mulvaney takes the opportunity to terminate the Pentagon’s slush fund’s role in the ongoing budgetary shell game of Washington’s bureaucrats.

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January 2017