ANALYSIS Sidestepping cuts, US likely to use ‘war credit card’ to pay for Iraq-Syria action

A U.S. Air Force B-1B Lancer flies over northern Iraq after conducting air strikes in Syria against ISIL targets on Sept. 27, 2014.

WASHINGTON — The Pentagon has been issuing dire warnings this year that the military is fast approaching a severe money crunch — a problem compounded now by the war in Iraq and Syria.

With mandatory defense cuts looming next year and new war costs mounting, Congress will almost certainly reach for an old standby accounting solution to keep money flowing — the Overseas Contingency Operations fund, a so-called war credit card.

The OCO account, separate from the base defense budget and exempt from spending reductions set to remain in place until 2021, allows the military to respond quickly to unforeseen crises. It also allows Congress to sidestep tough budget decisions such as trimming troop benefits and eliminating weapons systems the military says it no longer needs while paying for a war that the Obama administration says could last years.

Critics say relying on the fund also enables the Pentagon to avoid the rigid cost controls and spending reductions that were the goal when Congress agreed to mandatory spending caps to reduce the growing federal debt.

“There is currently no limit on OCO, so there is as much room as they need,” said Todd Harrison, a defense budget senior fellow at the Center for Strategic and Budgetary Assessments in Washington, D.C.

Spurred on by budget cuts, the military has proposed freezing troop pay raises at 1 percent, slashing commissary benefits, overhauling Tricare health care coverage, and retiring hardware such as the A-10 Thunderbolt aircraft and the USS George Washington aircraft carrier.

The CSBA recently estimated the military could soon face $300 billion in mandatory cuts.

Meanwhile, war costs are quickly mounting since bombing began in August.

The Pentagon says it is spending up to $7 million to $10 million per day on an air offensive against the Islamic State in Iraq and Syria that is likely to be long and difficult. Lawmakers also authorized the Obama administration to begin training and arming Syrian rebels into a proxy ground army, which will take years and could eventually cost over $1 billion dollars.

Analysts estimate the annual cost of the war could range between $2.4 billion and $18 billion.

Congress will almost certainly pay that bill using the OCO account, said Gordon Adams, an analyst with the Stimson Center and a professor at American University.

“It is like a drug. It is the magic feel-good for anybody’s budgetary needs,” he said.

Lawmakers must hash out a new defense spending plan by Dec. 11, when the stop-gap spending measure they passed just before leaving Washington for mid-term elections expires.

The White House has already requested $65.8 billion in OCO funds for the coming year.

“If they don’t come back sometime after the election and bump that [OCO budget] up $10-$15 billion, I will be shocked,” Adams said.

That means Congress will not have to shoehorn the cost of the war into the base budget. It has so far rejected many of the cost-cutting measures suggested by the Pentagon, which military leaders say are necessary to keep the services ready to protect the country but often mean painful hits to lawmakers’ home districts.

The Air Force put the A-10 aircraft — beloved by infantry troops — on the chopping block but it was protected in the House by Rep. Ron Barber, D-Ariz., whose district includes Davis-Monthan Air Force Base with the highest concentration of the aircraft in the world. Barber is locked in a tight mid-term race with a retired A-10 pilot.

The OCO has been criticized for years as a kind of budget credit card and a slush fund for wasteful spending. There was a move among some lawmakers and advocacy groups to have it abolished earlier this year but it gained little traction.

“I think the biggest negative long-term consequence is it completely eliminates budget discipline and planning in the Pentagon,” Adams said.

He said supplemental wartime spending over the past decade has contributed to a bloated military bureaucracy where civilian jobs outnumber uniformed positions.

While Congress is likely to sidestep difficult budget decisions, Adams said serious Pentagon reform and cost-cutting will also be derailed if OCO spending increases for the war.

“It you don’t do it [reform] now, wait to see the disaster you have when this war is over,” he said.

Jim Hasik, a defense analyst with the Atlantic Council, called the OCO fund an “accounting workaround” used to avoid the mandatory budget caps imposed by Congress and said it has potential drawbacks.

But he said overall it makes good sense to separate defense accounts that have different goals. The base Pentagon budget is aimed at long-term military preparedness and daily operations while the OCO pot can provide the spending flexibility needed to deal with sudden and unforeseen threats.

That flexibility can prove critical to the fight and protecting troops. When improvised explosives became a top threat in Iraq and Afghanistan, the U.S. spent $50 billion to field 24,000 mine-resistant vehicles that could survive the blasts and protect occupants.

With the threat receding, those mine-resistant trucks and other vehicles may be costing the government $100 million just to ship them back from Afghanistan, according to a Government Accountability Office report. Many of the trucks should simply have been destroyed or given away because upkeep is not economical, auditors said.

“There is absolutely potential for more overspending any time you use a supplemental account, sure. In a sense, that is actually part of the plan,” Hasik said. “You worry less about checking up on the waste and abuse and you just worry about getting it done fast.”

For now, the top concern is whether the Obama administration has a strategy that will ultimately win the war against the Islamic State and not whether more reliance on the OCO account with cause problems in the future, Hasik said.

“I’m not worried that the door is open [to irresponsible spending] because somebody is talking about using supplemental funding,” he said. “I’m worried that there is no logical end game.”

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