As the wars in Iraq and Afghanistan have drawn down, the Overseas Contingency Operations (OCO) budget, initially intended for “emergency” war funding, has been used increasingly for purposes far afield of its original design. Despite troop withdrawals and recapitalization of the equipment used in the wars, large amounts of defense spending have continued to be assigned to OCO, rather than the base Defense Department budget. As the 2011 Budget Control Act (BCA) began to curtail the base Defense budget, OCO now includes funds to support other overseas ventures, such as the European Reassurance Initiative (ERI), intended to deter Russian threats against Eastern Europe. Indeed, it may be argued that as U.S. military operations in the Middle East shift toward the sustainment of U.S. goals, rather than a quick military victory, much of what constitutes operational OCO-designated funding has become more predictable and less emergency in nature, and therefore could be shifted into the base Defense Department budget.
We conclude in this report that the uncertainty created by current reliance on OCO, particularly to fund base budget needs, could be detrimental to national security on three levels: (a) by undermining budget controls and contributing thereby to larger deficits, (b) by generating insecurity in the Defense workforce and in Defense suppliers, and (c) by creating long-term uncertainty in defense planning. The alternative, transitioning longer-term OCO expenses to the base budget, could be achieved through a combination of increased budget caps, targeted cuts in inefficient Defense programs, and increased revenues.
Given the consequences of continued misuse of OCO, we suggest that President Obama and his successor develop and commit to a credible plan to wind down OCO funding beginning with the expiration of the Bipartisan Budget Act in FY2018.
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