Pentagon’s $90 Billion ‘Slush Fund’ Comes Under Attack
Policy + Politics

Pentagon’s $90 Billion ‘Slush Fund’ Comes Under Attack

iStockphoto/The Fiscal Times

An obscure Pentagon account that has powered the U.S. war effort in the Middle East since shortly after the 9-11 attacks is at the center of a growing political controversy over the use of budgetary gimmicks and the future direction of government spending.

For a decade and a half, the White House, Congress and the Department of Defense have played a deceitful game in funding the $1.7 trillion cost of the wars in Afghanistan and Iraq, keeping much of that spending “off budget” even as it still added to the national debt.

Related: 5 Gimmicks in the GOP’s ‘Gimmick-Free’ Budget

The Overseas Contingency Operations fund, as it came to be known shortly after President Obama came to power, was meant to exclusively cover the cost of personnel, weaponry, supplies and logistical support to the roughly 2.5 million troops sent to war. But gradually, OCO evolved into an all-purpose slush fund for the military, members of Congress and the Bush and Obama administrations. Policy makers found it convenient to use the account not only for fighting overseas but to fund routine costs of Department of Defense personnel and benefits or to purchase weapons system still in the production stage. 

Last September, for example, the Defense Department tried to use $2 billion of OCO funds to pay for weaponry including eight F-35 stealth fighters that are still in development and may not be available for deployment for years. Congress blew the whistle on that, but has allowed other abuses of the OCO fund over the years.

Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments, has estimated that the 2015 OCO budget includes more than $30 billion in base or routine funding that has been transferred there — in part to free up funds in the general operating budget for other pet projects. Among the extraneous expenditures in the OCO account, Harrison told Defense News, are $5 billion for a new counterterrorism fund and $1 billion as part of a European Reassurance Initiative.

Related: What Balanced Budget? GOP Pushes a 'Spend More' Blueprint   

“It’s the last refuge of scoundrels,” said Gordon Adams, a defense analyst with the Stimson Center and a professor at American University, who oversaw defense budgeting in the Clinton administration. “So everybody has been dancing to the OCO tune for the last couple of years,” taking advantage of what Adams called “magic money.”

The controversy over the misuse of OCO came to a head earlier this week when the Senate gave final approval to the Republicans’ fiscal 2016 budget. The GOP blueprint used OCO as a device to circumvent a $523 billion cap on general Pentagon spending next year imposed by the 2011 Budget Control Act.

Eager to please defense hawks including Senate Armed Services Committee Chair John McCain (R-AZ) and House Armed Services Committee chief Mac Thornberry (R-TX), Republican budget leaders added $38 billion to the OCO account — for a total of roughly $90 billion — with the understanding that those funds would go for military readiness and other activities with no direct tie to fighting in Iraq and Afghanistan.

Democrats and budget watchdogs howled at the GOP budget gimmick that provided the Pentagon with tens of billions of dollars of additional funds with no requirement for finding offsetting cuts in other portions of the budget.

Related: House GOP’s Creative Accounting Lifts Defense Budget   

Remarkably, the $90 billion in the OCO account for the fiscal year that begins Oct. 1 exceeds the budget of every federal department and agency except the Defense Department. That means, for example, that more money is coursing through OCO every year than spending by the Departments of Health and Human Services, Homeland Security, Education and Veterans Affairs, among others.

Steve Ellis, vice president of the advocacy group Taxpayers for Common Sense, denounced the move as a shameless raw power grab by House and Senate budget leaders that made OCO “slushier than ever.”

“Lawmakers decided that instead of busting the caps, they would just evade them,” Ellis contends. “As if that is a difference.”

Ellis added that the Republican-controlled Congress is refusing to own up to its obligation under the Budget Control Act to offset any spending above statutory defense and domestic spending caps through other spending cuts, entitlement reforms or revenue increases. “Congress has adjusted those caps over time ... but has always come up with offsets to at least appear that they were providing the promised deficit reduction,” he said. “Not anymore.”

Even the Pentagon, long the beneficiary of these deceptive practices, is now saying that lawmakers have gone too far in exploiting an account that was meant chiefly for the Middle East combat effort. “While this approach clearly recognizes that the budget total we’ve requested is needed, the avenue it takes is just as clearly a road to nowhere,” Carter told the Senate Appropriations Subcommittee on Defense. “The Joint Chiefs and I are concerned that if our congressional committees continue to advance this idea and don’t explore alternatives, then we’ll all be left holding the bag.”

Related: Republicans in Mad Scramble to Placate Defense Hawks   

With widespread unhappiness over the defense and domestic spending levels in the new GOP budget, Republicans and the White House appear headed for a bipartisan “mini-deal” this summer or fall. Those negotiations may also provide new ground rules to restore some fiscal integrity to the use of OCO.

Already there are signs of unrest among lawmakers with the shameless exploitation of the war funding account. Last week, the House had trouble passing the fiscal 2016 military construction-veterans affairs spending bill amid complaints from members of both parties that OCO funds were being used to finance it.

Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee, and Rep. Mick Mulvaney of South Carolina, a prominent conservative, teamed up to try to pass amendments that would have collectively eliminated $532 million in military construction funding allocated through OCO. Their efforts failed, but they made their point that it was time to reform OCO. 

Related: GOP Presidential Aspirants Clash over the Budget

Mulvaney and Van Hollen vowed to introduce additional amendments to strip the OCO of every   program not directed related to war efforts. “It’s a slush fund and gimmick,” Mulvaney told Politico, “and our own budget called it a backdoor trick last year.” 

Top Reads From The Fiscal Times: