Budget Cap Conundrums

Money can’t buy happiness… right? A lot of us, theoretically, like the idea of a simple lifestyle. But at the same time, if we can afford it, we enjoy going out to eat with friends, buying nice clothes, and taking exotic vacations. It’s nice to have a higher budget, if just for those freedoms.

Many agencies are looking forward to 2016 for similar reasons. In light of President Obama’s recently released 2016 budget proposal, many government agencies will be granted higher amounts of funding – which is a relief since money has been very tight for the government in recent history. However, many Americans don’t support raising taxes on any income level, so the budget hikes are still highly debated.

One of the most discussed budget increases is that of the Department of Defense (DoD). Todd Harrison, Senior Fellow at the Center for Strategic and Budgetary Assessments, spoke with Christopher Dorobek on the show DorobekINSIDER about the DoD 2016 budget – and why maybe it’s not yet time for Defense (or other agencies) to rejoice over their newfound fiscal freedom.

Since the Budget Control Act of 2011 (BCA) became law, said Harrison, it’s now a lot more complicated to increase government spending.

The DoD cap is set at about $499 billion, but Obama’s budget proposal gives Defense $534 billion. Simple math tells us that that’s $35 billion over budget. So, will the Department of Defense’s hopes for more funding come to naught?

For this budget to actually be implemented, Congress must agree to raise the budget cap as well, which will impact all other portions of the 2016 budget. “Inherently, the BCA ties the Defense budget issue to all of the other big issues in the federal budget, including nondefense discretionary spending, and mandatory spending on things like Social Security, Medicare, Medicaid, Veterans’ benefits, and revenues,” Harrison explains. “All of those things get tied together in the BCA if you want to raise the budget caps for Defense.”

If the increase in funding doesn’t happen, how will Defense cope? One possibility is cutting back on the spending geared towards Defense employees.

“The DoD and the senior leaders in the military itself have been going to the Hill repeatedly for years saying, we need to slow the rate of growth in military compensation. If we don’t, it will either eat up a greater share of our budget, or we’ll have to cut the number of people,” Harrison explained.

The retirement plan is one place where compensation could be curtailed. After 20 years of service, instead of a pension of 50% of the former income, the retiree would receive 40%, which would lead to a significant government savings.

Another possible place to cut spending would be the health care for active duty dependents. Instead of choosing the employees’ plans, Defense would give a health insurance allowance, and allow the employee to spend it towards a plan of their choosing.

“They’re talking about switching to something called Tri Care Choice where each person would get a basic allowance for health care. For active duty dependents, it would fully cover the cost of buying a commercial insurance plan. So it would put people out into the commercial marketplace,” said Harrison.

For now, it seems like there are a lot of interesting options out there – though none without its snags and drawbacks. It’s never fun to feel like money is tight, for Defense retirees or government agencies. Maybe money can’t buy happiness, but it definitely helps!