Pentagon Said to Seek a 20% War-Funding Cut to $51 Billion

The Pentagon will request about $51 billion in war funding for the fiscal year starting Oct. 1, a 20 percent reduction from the $64 billion Congress approved this year and the least since the Sept. 11 terrorist attacks, officials and congressional aides said.

The Overseas Contingency Operations funding, as it’s known, will be sent to Congress in addition to basic defense spending of about $534 billion when President Barack Obama offers his proposed fiscal 2016 federal budget on Feb. 2, according to the officials and aides, who asked not to be identified before the details are made public.

While the decline in war funding largely reflects the continued withdrawal of U.S. troops from Afghanistan -- from the 10,600 now there to half that planned by year-end -- it remains enough to draw questions about why the Defense Department shouldn’t pay to fight wars as part of its basic mission.

“The continuing drawdown in Afghanistan is not having a proportionate effect on” the war budget because it’s “being used for a lot of things other than Afghanistan,” said Todd Harrison, a defense budget analyst with the nonpartisan Center for Strategic and Budgetary Assessments in Washington.

“It’s a budgetary shell game for getting around” the caps imposed by the automatic spending cuts known as sequestration, Harrison said in an e-mail.

Defense Stocks

News of the planned decrease in war spending damped today’s gains for defense stocks. After rising as much as 3.2 percent, Lockheed Martin Corp. pared its advance to 2.3 percent, at $195.15 at 2:14 p.m. in New York. Northrop Grumman Corp. climbed 2 percent to $151.63, retreating from a jump of as much as 3 percent earlier.

The shares have proved resilient in the face of Defense Department spending cutbacks. A Bloomberg Intelligence gauge of the four largest Pentagon contractors -- excluding Boeing Co., whose civilian airplanes business is larger than its military unit -- surged 30 percent in 2014, outstripping the 11 percent increase for the Standard & Poor’s 500 Index.

Exceeding Cap

Sequestration cuts are scheduled to resume again in fiscal 2016, after a two-year break, unless Congress overturns them. Obama’s base defense budget for the coming year assumes about $34 billion more than the cap would permit.

Money requested for Overseas Contingency Operations is exempt from sequestration.

The $51 billion request would be for military operations and doesn’t include money from the fund that goes to the State Department and Department of Veterans Affairs. The previous low was $17 billion in fiscal 2002, the second year of war funding.

Over the years, the Pentagon and Congress have added items less directly related to waging war, even as each chastises the other over the practice.

“The use of war funding expanded to cover issues with only tenuous links to combat operations,” Emil Maine and Diem Salmon wrote in an essay on the website of the Heritage Foundation, a Washington-based policy group. They said the fund shouldn’t be used as “a safety valve to cover defense spending shortfalls” and should be phased out.

2008 Peak

The most war spending was in fiscal 2008 when Congress approved $187 billion, largely to fund the Bush administration’s Iraq surge that swelled troops to a peak of 165,000 in November 2007. They fell to 148,000 in July 2008.

Navy Commander William Urban, a Defense Department budget spokesman, declined to comment directly on the upcoming request.

Future requests “will be based on actual contingency operations” so it’s “impossible to predict” whether the current downward trend in war spending will continue, he said.

This year’s war-spending request initially was $58.6 billion. It grew to about $64 billion with the addition of $5 billion requested in late November.

Those funds will be used to retrain and equip the Iraqi army to attack Islamic State extremists and to provide a counterterrorism fund for allies as well as the European Reassurance Initiative after Russia annexed Crimea and supported Ukrainian separatists with military forces.

The 2016 request is likely to include additional funds to pay for flying hours and munitions dropped in anti-Islamic State airstrikes.

Before it's here, it's on the Bloomberg Terminal.