The measure will keep in place the overall spending reduction known as the sequester. Military ops might get $7B back

House Republicans are proposing this week to restore upward of $7 billion to operations and maintenance accounts for the four military services hit hard by the automatic cuts that went into effect Friday night.

That’s the bottom line driving a hybrid spending bill to be unveiled Monday and intended to replace the stopgap continuing resolution or CR due to expire March 27.


The measure will keep in place the overall spending reduction known as the sequester ordered Friday. But in the case of the Defense Department, it substitutes an updated full-year budget that shifts money to address the GOP’s great Achilles’ heel: the serious danger to military readiness if the standoff with President Barack Obama drags on for months.

( See also on POLITICO: Full coverage of sequestration)

Republicans know they can’t sustain a long fight without addressing this vulnerability, but the CR is also a political tinderbox that could blow up despite all sides now insisting that they want to avoid a government shutdown.

Obama faces pressure as well to make some adjustments to try to end the costly impasse. And there is growing anger in Democratic ranks that he and Vice President Joe Biden did not do more to resolve the sequestration issue as part of the tax negotiations at the end of the last Congress.

One option, building off comments last week by Sen. Lindsey Graham (R-S.C.), would be to rearrange the pieces of Obama’s “grand bargain” proposals to put savings first and then add revenues in tax reform.

( Also on POLITICO: House GOP rolls out spending plan)

“The bottom line is: We’re not going to do revenue to fix sequestration,” Graham told POLITICO. “I am not against taxes but we don’t need any more money to run the government. We need money to get out of debt.”

Indeed, Obama has put $900 billion in 10-year savings on the table, which roughly matches the $960 billion left to sequestration at this stage. The president has said repeatedly he is committed to this package, which includes about $200 billion in appropriations cuts but also some far-reaching changes in benefit programs that Republicans want.

By putting his savings up front, Obama might help the GOP get past the rhetoric that no revenues be part of a deal on sequestration. In turn, he would have to have a commitment locking in added revenues as part of tax reform.

In an interview aired Sunday on NBC News’s “Meet the Press,” Speaker John Boehner (R-Ohio) continued to take a tough line against new revenues beyond what the White House won New Year’s Day. And even in the pages of The Wall Street Journal, conservative economists such as Harvard professor Martin Feldstein — once a top economic adviser to Ronald Reagan — have championed a cap on tax expenditures to raise revenues. And moving ahead on corporate tax reform is one goal that the Republican business community and Obama appear to share.

For the immediate future, Washington can expect a period of turmoil, in which each side takes time to assess the real-life fallout from the impasse. But both Obama and Boehner have said they will do everything possible this month to avoid a shutdown March 27.

The House expects to take up and pass its replacement CR as early as Thursday, leaving almost three weeks to resolve the matter with the Democratic-controlled Senate.

Senate Appropriations Committee Chairwoman Barbara Mikulski will move quickly as well and is not unsympathetic to the proposed adjustments for defense. But the Maryland Democrat and Senate Majority Leader Harry Reid (D-Nev.) have warned that if the House helps defense to buy time for the GOP, some adjustments will be needed for domestic priorities as well.

Tuesday’s party luncheons in the Senate will be critical. And Mikulski is pressing her leadership to move ahead with a full-scale omnibus appropriations package that already has been the subject of months of negotiations with House Appropriations Committee Chairman Hal Rogers (R-Ky.)

Rogers is hesitant to go this far, given the pressures from the right. He told POLITICO he will add some rifle-shot adjustments sought by Democrats and the White House, which has submitted its own 35-page list. But beyond the Pentagon, the only other department that would get a full-year budget under his new CR is the Department of Veterans Affairs.

Rogers admitted Republicans could be hurt by the level of cuts now imposed on the Pentagon. The fine print of the sequestration order Friday spells out that problem in some detail.

Together, the Army, Navy, Air Force and Marines are left with a total of $145.4 billion in annual appropriations for O&M accounts or about $22 billion less than was allowed for initially in Obama’s 2013 budget. Sequestration is the biggest factor, but the services are also hurt by the rigid terms of the current CR which has kept the entire government funded since last October.

The Pentagon asked for a total of $167.2 billion for operation and maintenance for the four services; the CR now provides $157.4 billion or almost $10 billion less. That lower number greatly compounds the problem for the military when Friday’s 7.8 percent cut is added.

What the new House bill seeks to do is substitute higher O&M budgets already negotiated with the Senate as part of a compromise defense bill — once intended to be the cornerstone of a larger omnibus package. While the final details won’t be released until Monday, the updated O&M appropriations are expected to total near $165 billion.

When the 7.8 percent cut is made against this base, the military is left with roughly $152.5 billion — about $7.1 billion higher than is now allowed under sequestration.

That won’t solve all the Pentagon’s problems, but absent some relief, the pressure is immense on the services, especially the Navy and Army.

The Navy, for example, asked for nearly $47.5 billion for O&M in 2013 but under the current CR, it was capped at a rate equivalent to $44.2 billion in annual funding or $3.25 billion less.

In fact, with the White House’s permission, the Navy has been spending at a rate about 3 percentage points higher than the CR in hopes of getting some relief in a final deal. That generosity — or political miscalculation — leaves that much less money for O&M in the second half of the fiscal year.

Given the added $3.4 billion cut imposed by sequestration Friday, calculations by POLITICO indicate that the Navy will have to get through the remainder of fiscal 2013 with about 24 percent less money than it anticipated in its initial 2013 budget request. The numbers may help explain the controversial decision to keep the USS Harry Truman in Virginia rather than deploying the carrier to the Persian Gulf.

The Army also has been spending at about the CR rate. But its bigger problem is that it can’t afford to cut back on operations in war zones like Afghanistan, which means more of the burden of the O&M cuts falls on readiness and training at home.

The administration asked for $65 billion in total resources for Army O&M; the current CR provides $59.2 billion and with sequestration, that has now been reduced to about $54.7 billion, 16 percent less than the budget request.

But given the Army’s rate of spending for the first half of the fiscal year, this could translate into an estimated 27 percent cut from what it anticipated for the second half of 2013 under its initial budget request.