In Washington D.C. this mid-July, 2022, the days are long.  The temperatures are high.  And the legislative headwinds on Capitol Hill are reaching gale force.  In this kind of charged and volatile political environment, it is critical that budget watchdogs keep their eye on the ball.  What ball?  The money! And – nowhere – do we –the American Taxpayers — spend more money than at the Pentagon.  So, hit play and join host Steve Ellis and TCS Senior Policy Analyst, Wendy Jordan, for an illuminating ride into the darkness of the congressional appropriations process.

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Episode 25 – Transcript

Intro:

Welcome to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget, spending, and tax issues facing the nation. Cut through the partisan rhetoric and talking points for the facts about what’s being talked about, [inaudible 00:00:19] about, and pushed in Washington. Brought to you by Taxpayers for Common Sense. And now a host of Budget Watchdog AF, TCS president Steve Ellis.

Steve Ellis:

Welcome to all American taxpayers seeking common sense. You’ve made it to the right place for over 25 years, TCS, that’s Taxpayers for Common Sense has served as an independent non-partisan budget watchdog group based in Washington, DC. We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are in the political spectrum, no one wants to see their tax dollars wasted. In Washington, DC this is mid-July 2022. The days are long. The temperatures are high. You can swim through the humidity. And the legislative headwinds on Capitol hill are reaching gale force.

Steve Ellis:

In this kind of charged and political environment with so many converging storm fronts, it is critical that Budget Watchdogs keep their eye on the ball. What ball? The money. And nowhere do we, the American taxpayers, spend more money than at the Pentagon. So the ball we have our eyes on today, dear podcast listeners, is the money ball itself, the National Defense Authorization Act. Joining us to illuminate the darkness and provide the facts on the NDAA all while keeping her eye on the ball is our go-to national security spending expert, TCS senior policy analyst, Wendy Jordan. Wendy, welcome back to the podcast.

Wendy Jordan:

Thanks Steve. I live for this.

Steve Ellis:

Wendy, the NDAA is in play as we tape this episode. So as the full House considers the NDAA for debate in short, what is the NDAA?

Wendy Jordan:

Well in short, which is hard for me to do when I’m talking about defense issues, the NDAA is the policy bill, not the money bill. The money bill is the Defense Appropriations Bill. So things like military service end strength is in the NDAA, how healthcare can be delivered, some foreign policy like authorizing use of military force. That is typically what you’re getting in the NDAA.

Steve Ellis:

All right. So can you help everybody get up to speed on what’s in the fiscal year 2023 Defense Policy Bill?

Wendy Jordan:

Sure. Now in the first part of this, we’re going to talk about what’s happened in the House on this bill. So the issues that are important to our listeners, for let’s just call it the NDAA or Defense Policy Bill, top line ended up being 839 billion, which is an increase of just about 37 billion. It’s 36.9 billion, but amongst friends we’ll call it 37 billion was added to the authorized top line. Again, not a spending bill. So it’s not actually spending, but it’s an authorization for how much the Pentagon may spend. Top line is less important in this bill as we just discussed. What Congress is trying to do in the Pentagon policy bill in the House this year is block certain actions that have been requested by the president’s budget request like the retirement of some ships on aircraft. They also authorize items off of the so-called unfunded priorities lists, which I think we’re going to get to later in the podcast.

Steve Ellis:

Great. So Wendy, as we tape it’s on the House floor or about to be. So there are some amendments to this big Kahuna package that we’re supporting. How about telling our podcast listeners about the one dealing with the LCS, the literal combat ship.

Wendy Jordan:

This is a story Steve. The president’s budget request asked to retire nine of the existing fleet of LCS. Now what’s interesting about this is that some of these LCSs that they are asking to retire have only been in operational status for about three years. So it seems shocking to think that the Navy would want to retire ships that are that young, but the chief of Naval operations, in testimony a few weeks ago on Capitol hill, had a very direct way of saying why he wanted to retire these ships.

Wendy Jordan:

The primary system on the nine LCSs that the chief of Naval operations has asked to retire is a battery that does anti-submarine warfare. Very important capability for the fleet to know when there’s a submarine, an enemy submarine, in the area that threatens the fleet. So the CNO had a study done, lasted about 18 months to try to figure out if they could fix the problem. And he has this great quote from his congressional testimony. “After about a year and a half study, I refused to put an additional dollar against a system that wouldn’t be able to track a high end submarine in today’s environment.”

Steve Ellis:

Of course, he may refuse to do that, but some people in Congress are having a different sort of approach to this, right, Wendy? And that’s what this amendment is about.

Wendy Jordan:

Right. Fortunately, the original version of the committee’s bill, which was authored after all by the chairman of the committee, Adam Smith of Washington, allowed the Navy to retire all nine. There was an amendment in full committee that passed, and it said you could only retire four of those nine. That five of them had to remain on active duty. So now the version of the bill is going to the floor for debate of the full House, says DNO, you can only retire four of them.

Wendy Jordan:

So the chairman of the committee, Adam Smith, is offering an amendment. We are strong supporters of that amendment to allow the Navy to retire all nine ships. You and I have discussed this, Steve, many times. It’s rare when a military service says, “We don’t need this.” Or, “This doesn’t work.” Or, “We don’t need it any longer.” And we think the fiscally responsible position that Congress should be taking is allow them to retire it. TCS was a leader on a letter of eight fiscal conservative groups saying that we support the Smith amendment. It’s actually the Smith Speier amendment to allow the Navy to retire all nine ships. And we’re very hopeful.

Steve Ellis:

And that’s representative Jackie Speier, the retiring Democrat from California that’s joining chairman Smith on this. There’s two things that kind of come to mind here real quickly. And that is day one of economics 101 is the whole concept of sunk costs. And so we spent a lot of money on these LCS. They’re not working. It’s not the whole LCS fleet. Although there are big challenges that we’re not even getting into about the whole LCS fleet and how it operates. But also they talked about, we can repurpose these and distribute them to other nations, which we often do with ships as they get older. Certainly, my background in the coast guard, lots of coast guard ships are the flagship of various small countries’ navies. And so, it’s not like it’s going to be razor blades tomorrow. It’s going to be used by another country that doesn’t actually have an anti-sub warfare need. And so it’s still a physical ship that will operate. And so it’s not like it’s going to be nothing.

Steve Ellis:

Besides the fact that as the CNO said, doesn’t want to throw good money after bad. They tried to fix this problem. They tried to address it, and it’s not working. And the Navy and the sailors who are sailing the ship deserve better than an anti-sub ship that doesn’t actually detect subs.

Wendy Jordan:

Right. Also, the Navy estimate is that in the next five fiscal years, so FY23 through FY27, retiring these ships will save more than $4 billion in operating costs. So that’s real money, and we believe that Congress should get out of the way and let Navy do it.

Steve Ellis:

Exactly, exactly. Shifting gears a little bit here, still on the NDAA, we just saw a huge inflation number, largest number in about 41 years. There are some inflation related amendments to the NDAA. What’s going on there, Wendy?

Wendy Jordan:

Yep. There are a couple of amendments that directly address the inflation issue. The House arm services committee added just under $37 billion to the top line for the Pentagon. I suppose one of the arguments is that would be an inflation increase. When the military services were making their budgetary decisions last fall, the official estimate of inflation was it was going to be 2%. Well, that was definitely wrong. And the Pentagon [inaudible 00:09:38] that and said that they’d like to have 2.2% because of healthcare costs and a couple other things. So they got a 2.2% inflation factor to their budget. Well, that’s not cutting it with today’s inflation. And so the House arm services committee, we think, is sort of overreacting and giving him an extra $37 billion. There is an amendment. It’s a group amendment headed by Ms. Lee of California. And that amendment would roll back the $37 billion adjustment to the Pentagon top line.

Wendy Jordan:

There’s another amendment, which unfortunately was not made in order under the rule, and an amendment we strongly supported, which was by Mr. Schweikert of Arizona, which would’ve rolled back just the inflation factor of that $39 billion, which was in the neighborhood of 6 billion. But it would’ve allowed an inflation factor for the Pentagon for any quality of life account. Pay, healthcare, housing, childcare, any of that sort of thing would’ve gotten the inflation adjustment, but the non quality of life accounts would not have. Unfortunately we liked Mr. Schweikert’s amendment. The rules committee did not make it in order, so it won’t be up for a vote.

Steve Ellis:

There’s a couple things here to unpack for our listeners too. And I know that our listeners are savvy folks, but when a lot of these pieces of legislation come to the floor, they’re under a so-called structured rule. So basically the members submit all of these amendments to the rules committee that picks and chooses which ones are allowed to be offered on the floor when they’re going to be offered, et cetera. And so that’s what when we’re talking about the rule and wasn’t allowed in the rule or not. The other thing that is important to note here too, is if you get to pick the amendments, you’re going to pick the ones that you and power want to see on the floor because you either want it to pass and get it voted on. Or in many cases, you want to see it fail and you want to see it fail miserably.

Steve Ellis:

And so when you look at the rules committee, for instance, it’s basically two to one majority to minority. So they don’t ever want to lose a vote in the rules committee. There’s no other committee that’s quite like that. It’s also a very small committee. So in this case you have representative Lee’s amendment, which rolls back the entire increase. They allow that because the more moderate one that might attract a little bit more support, the $6 billon one, they don’t want that to get a vote because that might win. And so therefore they want to pick something that’s not likely to win. And so you definitely see this. Sometimes it’ll be the craziest far reaching. And I’m not saying that about representative Lee’s amendment. I’m just saying just generally, they’ll allow an amendment that goes too far because they know it won’t get majority support in the House and it’ll fail. Whereas there’s ones that probably would pass. They just don’t want to see it.

Wendy Jordan:

That’s right. That’s the old legislative game. Isn’t it, Steve?

Steve Ellis:

You’re listening to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget, spending, and tax issues facing the nation. I’m your host, TCS president Steve Ellis. And we continue now with Wendy Jordan, TCS senior policy analyst. Okay, Wendy, what are some of the other fights and issues we’re looking at in the NDAA? We’ve talked about a few of the things on the spending sort of side. And I know it’s not a spending bill per se. How about oversight? I see this amendment by Representative Spanberger and Meyer. A bipartisan one nonetheless.

Wendy Jordan:

Yes. I was really pleased to see this bipartisan amendment and it has to do with oversight of spending in Ukraine. And if you think about the tens of billions of dollars that we have been rushing to Ukraine, for good reason. We were part of a letter a few weeks ago, recommending greater oversight of that spending because when you’re in a hurry and you’re trying to shovel billions of dollars out the door, a lot of waste can happen and sadly some fraud can happen. So you need oversight to make sure that’s not happening. And the Spanberger Meyer amendment wanted a report on the current structure of oversight. How is it being done? As far as I can tell from reading it, they didn’t just want to layer on their idea of what oversight should be. They wanted to know what’s current oversight so they can, in the future, build greater oversight of that spending. And we think that’s a great idea.

Steve Ellis:

Yeah. There’s certainly this whole notion of the fog of war. And if you don’t track the money, there are going to be people, bad actors, that are going to take advantage of it. And we certainly saw that in Iraq. And we certainly saw that in Afghanistan. And this is not nearly that scale, but you are shoveling a lot of money out into a country that has largely become a war zone. And you need to make sure that money’s being spent effectively and certainly taxpayers deserve that. So I’m really glad to see that both that it’s a bipartisan amendment and that it was included or at least allowed to be debated. So then looking along, there’s also this one from representatives Fox and Van Duyne, but it’s regarding OMB.

Wendy Jordan:

Yeah. This is a non-germane amendment to my reading of it. It has to do with oversight of the office of management and budget, which is not part of the Department of Defense. However, the rules committee decided to make it an order. And so there will be debate and a vote on it and we support it. The idea is to install an inspector general at OMB. We’re big supporters of the inspectors general in federal agencies. The white House is not subject to an inspector general. OMB is part of the executive office of the president, and therefore they don’t have an IG.

Wendy Jordan:

Well, OMB is responsible for a lot of funding decisions. Well, not a lot of funding decisions. Every federal funding decision goes through the Office of Management and Budget and that’s not all they do. Actually this, again, has to do with Ukraine. If you think back to what happened with Ukraine aid and the withholding of Ukraine aid in the last administration, if there had been an inspector general at OMB, we might not have gotten to the point where it ended up being a whistleblower and the whole kerfuffle that arose from that. Maybe the inspector general could not have headed off that particular crisis at the pass, but it’s important that all agencies have inspector general oversight and OMB is one of those agencies that we think should have some increased oversight.

Steve Ellis:

So we’ve been talking about the House, but the House is only half of the equation. So what’s going on with the Senate regarding the NDAA, Wendy?

Wendy Jordan:

The Senate has a more opaque process than the House does when dealing with the National Defense Authorization Act. The committee has acted. Their subcommittees considered their portions of the bill. The full committee blessed the Senate version of the NDAA. Subcommittee marks, almost all of them, are held in secret. They are considered classified events. That doesn’t happen in the House. So we have a little less insight into how decisions were made within the Senate process. They have a top line higher than the one in the House. Their top line is 847 billion. They have not gone to the Senate floor yet. House is scheduled to go to the floor this week. Last time I looked, we do not have an estimate of when the Senate will take up the NDAA on the Senate floor.

Steve Ellis:

But we know they will. That’s one of the things that both of the House Arm Services Committee and the Senate Arm Services Committee are so proud of talking about is that many decades, more than half a century, 60 plus years, that they’ve always had an NDAA. So we know it’s coming. If it’s December 31st, or if it’s September 1st, we know that something’s coming down the pike on the NDAA. So we’ve been talking policy, but then let’s look at the other side of that coin. Let’s look at spending. So what’s happening with the Defense Appropriations Bill?

Wendy Jordan:

That’s where the spending rubber meets the road. The appropriations bills are the ones that can actually cause money to be spent. So, when we talk about top line in the NDAA, it is a less finite decision on how much the Pentagon can actually spend. So the House bill is completed through committee. It has not been scheduled for floor action yet in the House. This week, they announced that there will be a six bill so-called minibus. The defense bill was not included in the so-called six bill mini bus that was announced this week. My guess is that’s because same as the NDAA passes every year, and everybody wants to be part of it, the defense bill is a great hammer to be packaged with other spending bills that are less popular because many, many, many members of Congress do not want to be seen as voting against defense spending.

Steve Ellis:

So one area where the defense authorization and the defense appropriations overlap, or have a similar affliction I would say, is the so-called unfunded priorities list. These sort of wishlists that emanate from the various services that happens to be billions of dollars that couldn’t find its way into a $750 billion plus Pentagon spending. So talk to me a little bit more about this, and what’s going on.

Wendy Jordan:

Unfunded priorities lists are the bane of our existence on the national security team at TCS. This is a practice that’s gone back for decades, but has unfortunately evolved from being sort of an informal process where the military service chiefs are asked, “Is there anything that didn’t make it into the budget that you really feel like you need?” That’s how it used to be presented to them in a hearing. And typically back in the day, the service chief would say, “Well, let me get back to you with a formal answer.” And then the four military service chiefs, and eventually the head of special operations command, would get back to the committees with relatively short lists of 10 to 20 items to their mind legitimately felt had been lost in the process between their military service, the comptroller in the Office of the Secretary of Defense, and eventually the Office of Management and Budget in the long cycle that you have to go through to get the president’s budget request.

Wendy Jordan:

And that’s the way the practice went for years and years and years. They used to be called the unfunded requirements list, URLs. And a Secretary of Defense many years ago said, “If it’s not in the budget, it’s not a requirement. So stop calling it that.” So that’s how we ended up with unfunded priorities list. And then another Secretary of Defense said, “No, service chiefs, you are not allowed to respond to that question. If it wasn’t in the budget, it’s because there’s no room for it in the budget. And you’re not allowed to do that.” Well that got the Congress’s back up. And so in 2017, they enshrined the unfunded priorities list process in statute. And they not only did that, but they said that it’s no longer just the service chiefs and SOCOM. It is every combatant commander. It’s the missile defense agency. Under an amendment that’s being offered to the NDAA, it would be the POW MIA office. It’s every possible subset you can imagine in the Pentagon is now being told to hand over these lists of unfunded priorities.

Wendy Jordan:

We think that puts untoward upward pressure on the Pentagon top line. We think that if it wasn’t in an $850 billion budget request, it’s probably not a really high priority. And so we are supporting an amendment that is being offered by Ms. Jayapal of Washington state to simply remove the statutory requirement for the unfunded priorities list. That does not mean that Congress couldn’t still ask for them, couldn’t still provide them assuming that the Secretary of Defense allows it, but it would remove the statutory requirement. And we think that’s a very common sense amendment. So we are hopeful. The same amendment was offered last year by Dr. Schrader of Oregon and failed. And we are hopeful that this year this will do better on the House floor.

Steve Ellis:

Yeah. There was a lot of misrepresentation during that debate about how it was going to stop the services from being able to submit the list, which is just poppycock and that they can still do it. And really these have just become menus for lawmakers to kind of pick through and notice their parochial spending is there and try to defend it and push for it and saying that they really want it. But for the fact that OMB denied them or the Secretary of Defense denied them.

Wendy Jordan:

It was also used last year to justify the big jump at the end of the negotiations during the omnibus. It was a 40 or a $50 billion increase at the end there in the omnibus negotiations. And part of the justification for that was bundling all the UPLs together, every single item on every single UPL, and saying, these are all necessary. Our friends at national taxpayers union totaled up this year’s UPLs and it’s $21 and half billion. So I wouldn’t be at all surprised if that same argument isn’t made at the end of the appropriations process this year.

Steve Ellis:

Yeah. It’s getting out of hand. It’s actually already well been out of hand and it’s just getting worse. Okay. So Wendy, let me get you out of here on this. So we discussed a bit about how the NDAA masquerades as spending or people talk about it that way, but how about appropriations? Do they try to dip their toe or even their whole foot into the policy side of things and how do they do that?

Wendy Jordan:

Never. Appropriators would never authorize on an appropriations bill. How dare you suggest it? Yes, of course. Every single appropriations bill has authorizing legislation in it. And don’t let anybody kid you. The most common way of doing that is something called the general provisions of the bill, which is at the back of the bill. We always say follow us for budget nerd life hacks. But one of them is always read the general provisions of an appropriations bill because that’s where the mischief is. So general provisions might be something like by American provisions, which we’ve talked about a lot. The Department of Defense can only buy ball bearings if they’re produced the United States out of U.S. steel. Anchor and mooring chain, dishware, peak coats, we’ve talked about this a lot on previous podcasts. That’s one way of authorizing on an appropriation spill.

Wendy Jordan:

It is a little inefficient. Not that they don’t do it, but it’s a little inefficient because appropriations bill only exist for the length of the fiscal year. So you have to do the same provision year after year after year after year at nauseum. They do it, but it is way less efficient than putting it in statute. Another thing you can do is you can make a policy, you can force a policy, by refusing to fund something. No, no money for X. Well, no money for X is a policy decision. Also, you can take something, what we call the zero to hero, that the Pentagon hasn’t asked for it all, and you can say, you’re going to buy it. That is also a policy decision and appropriators do that all the time.

Steve Ellis:

There’s a lot of thou shalt not spend money on this or you can’t finalize this policy. You can’t spend any money to finalize a policy, which is a backdoor way of blocking that particular policy from being enacted. And I’ll say that as far as the annual re-upping, it’s a lobby’s dream. Last thing you want is a permanent victory. So in this case you have this, hey, every year I keep getting paid to make sure the same provision’s in there.

Wendy Jordan:

That’s so true. I caught a new one. A new by American provision, actually it not in the appropriations bill, although I wouldn’t be surprised to see it in the appropriations bill, it was in the NDAA, which I prohibits the executive office of the president, the state department, and the defense department from displaying flowers, unless they’re grown domestically or in a U.S. territory. Now embassies are exempt, which is good because we’d have to be shipping flowers from the U.S. to embassies. So if you’re in Holland, you can display Dutch tulips, thank goodness, at the U.S. embassy.

Wendy Jordan:

There is an exemption, also, if it is a gift from a foreign country. So let’s say come the end of the year, the next UK prime minister arrives. And he or she has a lovely wreath made of English holly. Well, the president and the first lady don’t have to throw it out the window and maybe burn it. They’re allowed to keep it as a gift and they’re allowed to display it as a gift. But that exemption and if you have a personal display on your desk, I assume that means as a government employee, you have no idea where the flowers that you bought at the local Safeway came from, you’re not in violation of the law if you do that. So keeping American taxpayer money being spent on only domestically produced flowers.

Steve Ellis:

All right. Gardeners of the United States unite. Okay, well there you have it listeners. The fight continues to protect taxpayers from waste and bad policy. The dynamics on Capitol hill are always changing and American taxpayers always have a seat at the table with TCS on the Budget Watchdog beat. This is the frequency, market on your dial, subscribe and share, and know this Taxpayers for Common Sense has your back America. We read the bills, monitor the earmarks, and highlight those wasteful programs that poorly spend our money and shift long term risk to taxpayers. We’ll be right back with a new episode. And I hope you’ll meet us right here.