In 1969, as President Nixon’s Domestic Policy Council sought ways to spend the forthcoming “peace dividend”—savings projected from the wind-down of the Vietnam War—council members ran into an inconvenient fact: The fiscal windfall did not exist; any post-war “savings” were already committed to a range of new spending, including some of the blossoming Great Society programs of the previous Administration. It was the first time total government spending did not decline after a war.
Today, some members of the congressional “super committee” want to go back to the future—by spending another round of non-existent post-war savings. As they lurch through the closing days before their November 23 deadline for producing a deficit-reduction deal, some want to claim up to $700 billion in illusory “savings” from the planned drawdown in Iraq and Afghanistan and then “plow it into job-creation programs” or other domestic spending. In other words, they would seize the non-existent war savings and use them as an “offset” for other new spending.
Even in the arcane world of congressional budgeting, this is an exceptionally transparent scam: It is an out-and-out spending increase that proponents try to hide by manipulating the “baseline” against which spending additions and cuts are measured. There is no way this can be considered credible.
The gimmick starts with an assumption that the government would continue its peak levels of war spending indefinitely and would also increase those amounts for inflation in the future. But no one ever intended this to happen: Even the Bush Administration had begun planning a reduction in troop levels.
Nevertheless, from President Obama’s first budget, he has used the inflated projections for overseas contingency operations (OCO) as a budget benchmark so he could claim large savings by proposing to spend less than those amounts, and he has continued the practice right up through his recent debt reduction proposal.
Senate Majority Leader Harry Reid (D–NV) made the same attempt in his debt-limit negotiations proposal only to see the bogus savings lambasted by principled Members of Congress who knew a gimmick when they saw it.
“Do you think it’s fair to take a trillion dollars of less spending on wars and claim it as your own?” said House Speaker John Boehner (R–OH) in September. “We all knew that we were going to spend less in the wars in Iraq and the wars in Afghanistan, but nobody really felt like we ought to be taking credit for what was already going to happen.” The House Republican Conference blasted the accounting as “phantom savings” and “budget deception.”
The latest proposal is even worse. It does not just claim savings that do not exist; it proposes to spend up to $700 billion of these so-called savings on new stimulus measures, unemployment insurance, or other programs. This is an out-and-out spending increase compared with any realistic projection of war spending.
In assuming this constantly rising level of OCO, proponents of the gimmick are employing similar kinds of escalating spending assumptions as they apply to entitlement programs. But the important distinction is that no one expects this OCO spending level to occur over the decade.
While it is appropriate to debate how much the federal government should spend on OCO over the next 10 years, all should also acknowledge the reductions imposed when they jettison the practice after the bogus savings are spent and return to the Administration’s shrinking defense baseline.
Unfortunately, the planned deception to use fake war savings has bipartisan appeal, according to press accounts, and may still be employed one way or another. Instead, it should be buried—promptly and deeply. Enough cynicism already surrounds the super committee; it does not need to generate more through such outrageous gimmicks that only create more spending.