Sen. Warren Medicare Plan = No OCO, Lower Readiness

 

Almost all the talk about Sen. Elizabeth Warren’s Medicare for All plan — estimated to cost up to an eye-watering $20.5 trillion — has centered on the medical costs that would be cut. But one big whack would come from eliminating OCO funding, so-called emergency defense funding that is central to paying for wars in Afghanistan and Syria, as well as supporting our European allies in the face of Russian bullying. Mark Cancian, a member of the Breaking D Board of Contributors, dug into the numbers using his tools at the Center for Strategic and International Studies, and details just how Warren’;s proposed cuts would affect the Pentagon. Read on! The Editor.

Elizabeth Warren’s plan to finance “Medicare for All” would result in large cuts to the defense budget, greatly reducing support to allies and lowering military readiness.

The fact it aims at war (technically “emergency”) funding (aka Overseas Contingency Operations or OCO), which some would think would not affect the military budget as dramatically doesn’t really make  difference  because OCO funds many enduring activities beyond combat operations in Syria, Iraq, and Afghanistan.

Warren runs into the problem that all budget cutters do: if you want to spend less, you have to do less, and that requires terminating previous programs and activities that often have broad support.

Warren’s Defense Plan

In her “Medicare for All” plan, Sen. Warren lays out a variety of mechanisms to find money for the multi-trillion dollar bill. Mostly these are taxes on corporations and wealthy individuals and deep cuts to medical reimbursements to hospitals, doctors, and the pharmaceutical industry. One very important element to the defense community, however, is a $798 billion cut to the defense budget over ten years.

Here’s what she says:

OCO is a budget gimmick that masks the true impact of war spending. The emergency supplemental funding mechanism was never intended to fund the costs of long-scale, long-term operations outside of the normal appropriations process– in effect acting as a slush fund for increased Pentagon spending. And as everything from more F-35s to massive bombs never used in combat have migrated into the OCO account, the Department of Defense has been spared from having to prioritize or live within its means. It’s not just bad budgetary practice – it’s wasteful spending. 
We can start by shutting down this slush fund and balancing our overall defense priorities in the context of the actual defense budget. And as we end these wars, eliminating the Overseas Contingency Operations fund and forcing the Pentagon to fund any such priorities through its regular budgetary process will provide $798 billion over the ten-year period relative to current spending levels.

The math behind Warren’s $798 billion is unclear. The bipartisan budget agreement provides $71 billion for OCO in fiscal 2020 and $69 billion in fiscal 2021. Indeed, OCO has hovered around the $69 billion level for several years. Cutting that would save $690 billion over ten years. The administration’s 2020 budget also included $9 billion of emergency spending, mostly to backfill the defense budget for money taken in 2019 to fund the border wall. Although that was only a one-year increase, the Warren plan might have extended that to ten years.

Nevertheless, although the math might be a bit off, completely eliminating OCO would save money on the order of what Warren claims. However, it would require an abrupt termination of all activities funded by OCO. These go far beyond just combat operations and would affect activities that have received strong bipartisan support.

Misunderstanding Defense Spending

The first problem is that OCO isn’t what Warren calls it — a “shush fund.” It is budgeted and accounted for in the same way as base budget funds. What has infuriated liberals is that OCO has not been restricted by caps set by the Budget Control Act and thus has received increases over the last 10 years beyond what domestic spending has received. This happened because OCO acted as the grease for budget agreements, allowing deficit hawks, defense hawks, and domestic spending advocates to make agreements that avoided shutting down the government. Although these agreements have been “ugly,” relying on one-year adjustments and the unrestricted war funding, they have worked.

OCO finances the wars in Syria, Iraq, and Afghanistan, but it also funds a variety of “enduring activities” that would continue even if the wars end. By DoD’s calculation, about $25 billion of OCO is for combat activities, $35 billion is for enduring activities, and $7 billion is for the European Deterrence Initiative.

Included in the $25 billion of combat activities is support for the Afghan government. Eliminating OCO would not just lead to the withdrawal of all US combat forces; it would also eliminate support to the Afghan armed forces and government. There is little doubt these would quickly collapse in the face of ongoing Taliban pressure. Sen. Warren’s foreign-policy plan does not discuss how it would deal with the repercussions of such a collapse.

Among OCO’s enduring costs is funding for basing US forces in the Persian Gulf— Kuwait, Bahrain and Qatar. Eliminating the funding would, in effect, pull all US forces out of the Persian Gulf region. To achieve the savings desired, that withdrawal would need to happen quickly. Because OCO funds most of SOCOM’s global counterterrorism activities, the struggle against terrorists overseas would also cease. While some might argue for such a course of action as a way to reduce counterproductive global involvement, our allies in the region, including Israel, would regard the withdrawal as a major betrayal.

Also among these enduring costs are elements of readiness such as aircraft flying hours, ground force training, and ship maintenance that contribute to current readiness levels by increasing skills and funding long-term maintenance. Eliminating these would entail a large cut to force readiness, likely returning forces to the lower readiness levels of the 2013 sequestration period.

Finally, OCO funds the European Deterrence Initiative, which supports activities in Eastern Europe— exercises, deployments, and infrastructure improvements—designed to reassure NATO allies and deter Russian aggression. This program, initiated during the Obama administration after the Russian invasion of Crimea, has grown steadily under the Trump administration, despite Trump’s harsh rhetoric about what he says is the lackluster contribution of NATO allies. Eliminating these activities might force the Europeans to pick up the slack, but it might also fracture NATO and offer Russia an unprecedented opportunity to reclaim some of its lost empire.

Cutting That “Bloated” Defense Budget

Warren has frequently called the defense budget “bloated”, noting that it is higher than during the Reagan administration. In making cuts, Warren says: “We need to identify which programs actually benefit American security in the 21st century, and which programs merely line the pockets of defense contractors—then pull out a sharp knife and make some cuts.” The rhetoric against defense contractors is consistent with her overall populist stance. She has been particularly critical of the defense industry and the concentration of activity in five companies.

The plan does not provide many details about what it regards as wasteful. Nuclear programs and the F-35 have appeared in her position papers as likely targets but, to achieve the savings that her domestic plans require, there would have to be deep cuts to many programs.

Investment constitutes $25 billion of the 2020 OCO budget, funding hundreds of trucks, about 30 manned aircraft, and 60 unmanned aircraft. Although the losses associated with combat operations would go away under Warren’s plan, there would nevertheless be real reductions to the defense industry. Further, the military would lose a source of new equipment that, under OCO, replaces losses of older equipment, which costs more to maintain.

Misunderstanding Defense Depending

Warren states: “The Pentagon budget will cost more this year than everything else in the discretionary budget put together. That’s wrong, and it’s unsustainable.” While the first part is technically true, it is misleading. The second part is untrue.

The recent budget agreement allows $738 billion for national security in fiscal 2020 (DOD base budget and OCO, plus nuclear elements of the Department of Energy and a few other items) and $632 billion for domestic spending. Defense spending is a bit larger than domestic. However, defense is only 16 percent of the total federal budget, down steadily from 50 percent in the 1950s. Most of today’s federal budget goes to entitlement programs such as Social Security, Medicare, and Medicaid. That’s where the lack of fiscal sustainability lies.

As a burden on the economy, defense spending has declined from about 8 percent in the 1950s to 3.3 percent today. Under Warren’s plan, it would decline to about 2.1 percent in the late 2020s (assuming the base budget grows with inflation), far below the level since World War II and nearly failing to meet the NATO 2 percent goal. That does not mean that all elements of the defense budget are well spent, but current levels are “sustainable” if the nation decided that it wanted to retain its global position.

A Different Strategy?

Lower defense budgets are possible, but they will require a change in US strategy. The Trump administration’s strategy follows closely that of the late Obama administration; that is, a focus on China and Russia with additional attention toward North Korea, Iran, and global terrorism; close engagement with allies and global deployments to make this engagement tangible; expensive high-tech weapons for great power conflicts; and enough force structure to handle day-to-day deployments for allied engagement, crisis response, and humanitarian assistance. It also includes nuclear modernization, most of which began under the Obama administration, though the Trump administration added a few programs (for example, low yield nuclear weapons).

Warren’s lower defense budgets imply a different strategy, though it is not clear what that strategy might be. One could imagine a strategy of “restraint” whereby the United States pulls forces back from its global footprint and turns regional responsibilities over to allies. There is a coherence to that, but it is not consistent with Warren’s rhetoric about maintaining the international global system as it has existed since World War II. Perhaps Warren will clarify her strategy in future debates or policy statements.