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There's a Fight Brewing Over the Pentagon's 'Slush Fund'

The standoff between Obama and Congress over the defense budget centers on emergency wartime funding that allows for some creative accounting.
October 14, 2015, 10:10pm
Photo by David B. Gleason

The Pentagon's war-fighting funds were supposed to shrink, and ultimately disappear, as the military's efforts in Afghanistan and Iraq wound down — but the opposite is happening.

Congress's 2016 defense policy bill would increase the Overseas Contingency Operations (OCO) account by $38 billion, bringing its total to roughly $89 billion and prompting some experts to, once again, castigate it as a "slush fund." The National Defense Authorization Act (NDAA) for Fiscal Year 2016 would pay for the procurement of ammunition, tactical vehicles, and night-vision goggles, among other anticipated costs like research and development.

Related: Obama Has 38 Billion Reasons to Veto the Senate's Defense Spending Bill

Originally set up in 2001 under a different name, the OCO fund was created to cover "temporary and emergency requirements" for fighting in Iraq and Afghanistan. With a $38 billion increase, however, the beefed-up OCO account would make up nearly 15 percent of the Pentagon's $612 billion budget, and would pay for materials and training not tied to unanticipated increases in the cost of the two wars, which was the account's original purpose.

In part because of that fact, President Barack Obama has said he would veto the bill.

"I don't think that our troops in harm's way care which account their support comes from," Representative Mac Thornberry, a Texas Republican and the chairman of the House Armed Services Committee, told VICE News in an email. "They just want to know that they and their families will be supported."

However, adding $38 billion to the OCO account is not "ideal," Thornberry said.

Representative Barbara Lee (D-California) described the account, in an email to VICE News, as "nothing more than a Pentagon slush fund that allows the Pentagon to live beyond its means while evading the same sequestration caps that are crippling critical federal programs that support American families."

Obama asked that the increase in defense spending be met with an equal increase in non-defense spending. Congressional Democrats reportedly worry that if they allow Republicans to increase the Pentagon's budget via the OCO, they will lose the necessary leverage to compel them to lift domestic spending caps. Money in the OCO does not count against spending caps established in the 2011 Budget Control Act.

"Every dollar of that money was authorized for specific programs," Thornberry said. "It was very tightly controlled."

Watch VICE founder Shane Smith interview President Barack Obama.

This ability to control or anticipate wartime costs, however, is why the OCO fund should be ended and rolled into the baseline budget, says Justin T. Johnson, senior policy analyst for defense budgeting policy at the Heritage Foundation. The Pentagon no longer faces the same strategic uncertainty in Iraq and Afghanistan it did years ago, so it no longer needs the same spending flexibility to pay to send more troops to those countries in the middle of the year.

Congress used the account to bypass budget caps, he said, and it "can lead to sloppiness in the Pentagon budget."

Some OCO funds could be rolled into the baseline budget, according to the bill, if a full budget agreement is reached later in the year.

The House and Senate voted in favor of the NDAA 270 to 156 and 70 to 27, respectively. Fifty-seven Democrats — 37 in the House and 20 in the Senate — joined Republican-led support of the bill. Only 10 Republican representatives and two Republican senators — presidential candidates Ted Cruz and Rand Paul — opposed the measure.

If the president follows through on his veto threat, as he is expected to, the House would have to find 20 more yes votes to override his veto. Democratic leadership in the Senate warned that its chamber's current veto-proof majority is not a guarantee.

Related: Congress's October Budget Battle Could Become a US Christmas Crisis

Obama would become the fifth president to veto an NDAA since 1961, when Congress passed its inaugural annual defense authorization bill. In each of the previous cases, the commander-in-chief later signed legislation that was identical to its earlier version, minus some provisions at which his vetoes were aimed. Obama's veto would be different than his predecessors', because his objection is not based entirely on the NDAA itself.

John Isaacs, a senior fellow at the Council for a Livable World, who also referred to the account as a slush fund, said that he expects that the House and Senate won't overturn the veto. If there is a compromise, he said, the OCO account will be reduced to somewhere between the $59 billion Obama requested and the additional $38 billion Congress added to the fund.

The bill funds the war in Afghanistan, provides $715 million to Iraqi forces in their fight against the Islamic State, authorizes lethal aid to Ukraine in the country's fight against Russian-backed rebels, and keeps restrictions on transferring detainees at Guantanamo Bay, Cuba.

Additionally, more service members would have access to retirement benefits, and their pay would increase 1.3 percent.

Follow Matt Yurus on Twitter: @Matt_Yurus

Photo via Flickr