Loren Thompson - How White House Budgeting Director Mick Mulvaney Sabotaged Trump's Defense Spending Increase

On Wednesday, Secretary of Defense James Mattis and Joint Chiefs Chairman Joseph Dunford testified before Congress for the first time about why the Trump administration's proposed increases in defense spending are needed. They made a persuasive case that if the military does not get a lot more money than is currently permitted by law, it will need to scale back its strategy for dealing with overseas threats.

However, the decision on which course to follow may already have been made by White House budget director Mick Mulvaney, who has effectively sabotaged chances for a big defense increase by the way he structured the administration's spending request. While reporters all over the country have been writing stories about the largesse that could be coming if Trump's proposed increases are implemented, Washington insiders know the odds of that happening are slim.

In fact, Byron Callan, one of Washington's most seasoned observers of defense budgeting, this week lowered his estimate of the likelihood the president's budget for next year would be adopted as presented from 10% to zero -- in other words, there's no chance at all. Callan, the senior defense analyst at Capital Alpha Partners, is also growing more skeptical that the White House can get a modest increase in defense for the current year. A growing chorus of Washington insiders say defense spending for the rest of this year will be stuck at last year's levels.

White House budget director Mick Mulvaney understands the politics of funding government far better than President Trump or Secretary of Defense James Mattis do, and is applying that insight in ways that will likely hurt the military.

White House budget director Mick Mulvaney understands the politics of funding government far better than President Trump or Secretary of Defense James Mattis do, and is applying that insight in ways that will likely hurt the military.

It didn't have to be this way. Trump could have gotten most of what he wanted, and he has stated repeatedly that fixing the military is more important to him than reining in the budget deficit. But that clearly is not the way his budget director sees it. Mulvaney, a charter member in the Tea Party movement that favors deficit control above all other objectives, has sought to balance defense increases with domestic program cuts in a fashion that makes the whole package unpalatable to Democrats and unpassable in Congress.

Mulvaney undoubtedly knew this when his office put the proposals together, although neither the president nor the defense secretary did. You have to be steeped in the baroque complexities of federal budgeting to grasp the political impossibility of what Mulvaney's Office of Management and Budget has proposed. Trump and Mattis, both political neophytes, didn't understand what was going on until the president's budget was public. They may not realize what Mulvaney has done even now. So let me lay it out.

In the current fiscal year, 2017, the government has been functioning under what is known as a "continuing resolution" that keeps defense and domestic discretionary spending at last year's levels (discretionary is all the stuff that isn't entitlements or debt service). The reason Congress didn't pass a real budget for 2017 even though the new fiscal year began on October 1 is that president-elect Trump sent word he would like to make adjustments in the budget before it became law. Those adjustments took several months to put together.

So here we are, halfway through the fiscal year, without the Pentagon receiving legal authority to start new programs or increase funding levels in ongoing programs. The White House made its proposed changes public earlier this month, but the way Mulvaney's shop organized the "supplemental" request as it is called was to seek funding above what is permitted by a law capping spending in the Pentagon's regular budget (also known as the base budget). The law would have to be changed to permit most of the increases.

Which is not going to happen. Congress agreed two years ago to set defense and domestic spending limits for 2016 and 2017 at specific levels that were incorporated into a two-year modification of a 2011 law capping outlays through the end of the decade. Mulvaney could have put all the proposed defense increase for this year in the overseas contingency account that funds emergency war needs, which is not limited by the budget laws. That would have sailed through Congress. Instead, he put over 80% of the proposed $30 billion increase in the part of the budget that is legally capped.

To make matters worse, he sought to balance out most of the defense increase by cutting $18 billion on the domestic side. That tradeoff made the 2017 proposal even less politically palatable than breaking the budget caps on defense already was. End result: the Pentagon isn't going to get much of the increase the administration is seeking for the current fiscal year. Congressional appropriators might be able to shift some of the requested funding from the capped accounts to the uncapped war budget, but not most of it -- they lack the votes.

In fact, the way the supplemental request is structured will probably make it harder for Congress to approve any kind of budget for the remainder of the current fiscal year. The government could end up on a continuing resolution all the way to the fiscal year's end, which the Pentagon's acting comptroller warned this week would be "extremely harmful" to military readiness (as reported by Tony Bertuca at InsideDefense.com).

You'd have to be pretty naive to think Mulvaney didn't know all this before he disclosed the proposed changes. When he was a Congressman on Capitol Hill he supported legislative efforts to "rein in" defense spending and railed against using the uncapped war account to fund routine military functions. President Trump probably didn't know that when he made Mulvaney his budget director, and probably doesn't realize even now how the former congressman is undermining his agenda for the military.

The way the budget office has arranged the defense spending request for the fiscal year beginning October 1 -- 2018 -- is even more destructive. Funding for the Department of Defense and Department of Energy nuclear-weapons programs would increase $54 billion above the congressionally-mandated budget caps, while domestic spending would fall by a corresponding amount. That may seem like sound accounting, but eliminating the budget caps requires a 60-vote "super-majority" in the Senate, and Republicans only have 52 votes in the chamber.

In other words, the White House needs eight Democrats to go along with its proposed defense increases in 2018 at the same time it is drastically reducing domestic programs the Democrats have insisted must rise in tandem with defense (they call it "parity"). Virtually no Democrats will vote in favor of that tradeoff, so it's possible there will be no spending increase for defense at all next year, except for whatever modest amount Mulvaney's office is willing to put in the so-called "overseas contingencies" (emergency war) account.

This is all so complicated that newcomers to Washington like President Trump can be excused for not immediately grasping what the budget director has done here. The bottom line, though, is that Mulvaney has put his own priorities ahead of the president's, and in the process doomed prospects for a significant defense increase. A deficit hawk from the House Freedom Caucus is calling the shots on how budgets are put together, and he doesn't seem to care what that means for the readiness or rebuilding of America's military.