Defense hawks demand Senate GOP budget include reserve fund

Defense hawks are demanding that the Senate GOP budget include a reserve fund that would make it easier to bust spending limits set under a 2011 budget deal between the White House and Congress.

The “deficit-neutral reserve fund” could provide relief for the Pentagon and domestic programs from budget ceilings known as sequestration, even if the GOP budget blueprint released next week keeps those ceilings in place.

{mosads}Without the fund, several Senate Republicans say they won’t back their party’s budget.

“I need a commitment from the leadership that we’re going to have an ability to fix sequestration,” Sen. Lindsey Graham (R-S.C.) said this week. “This is a defining moment for the Republican Party.”

Graham and Sen. Kelly Ayotte (R-N.H.), who both sit on the Senate Budget Committee, are angling to get the fund included in the GOP budget resolution being drafted by Committee Chairman Mike Enzi (R-Wyo.).

“I am confident that he will not be a problem,” Graham said. “Either we will do it by an amendment or in the base bill.”

The fund would essentially be a placeholder in the GOP’s budget resolution that could open up negotiations later this year over changing budget limits.

The use of deficit-neutral reserve funds has increased in recent years as a way for lawmakers to allow themselves the flexibility to increase spending for their priorities.

In the case of the budget, it would be a way to win votes for a blueprint that does not turn off the sequester, which is imposing spending limits on the Pentagon that hawkish senators and Defense officials argue are painful.

“It’s basically a way to tell people that you’re doing something and to garner some support it might not otherwise get for people who insist that the caps have to be changed … without actually changing the caps,” said Stan Collender, executive vice president at Qorvis MSLGROUP.

Collender equated it to the “the magic asterisks” of President Ronald Reagan’s budgets, in which his plans claimed the deficit would be reduced but didn’t specify how.

Graham has said he and Ayotte, who is up for reelection in 2016, won’t vote for a budget that doesn’t change the spending caps and excludes the deficit-neutral reserve fund.

Some opponents of the sequester, however, say even the fund won’t be enough to win their support.

Sen. John McCain (R-Ariz.) has described the fund as a gimmick and said Thursday he won’t vote for a budget unless the spending ceilings are adjusted.

“We’ll have to increase defense spending in the budget itself. We’re looking at various options,” he said.

Sequestration was put into law as part of a 2011 deal that raised the nation’s debt ceiling. It imposed spending limits on defense and non-defense spending for the next decade.

A separate deal from December 2013 between then-House Budget Committee Chairman Paul Ryan (R-Wis.) and then-Senate Budget Committee Chairwoman Patty Murray (D-Wash.) provided two years of relief for the sequester, but that deal will not apply to the 2016 fiscal year.

Graham and his allies have said they’re willing to agree to a deal that would raise spending limits on the domestic side to get relief for the Pentagon. The White House also supports lifting the spending caps; President Obama’s budget proposed increased spending on the defense and non-defense sides by a total of $74 billion for next year. But the White House has repeatedly said it will not agree to lift the sequester just for defense spending.

Conservatives in the House and Senate are likely to oppose lifting the ceilings, particularly on domestic spending. Lifting the caps as part of a GOP budget, as a result, could make it impossible for Republicans to pass a budget.

“I’m not sure the House and Senate are going to be able to agree on a budget resolution,” said Collender, who previously worked on Capitol Hill for Democrats.

With conservatives reeling from Speaker John Boehner’s (R-Ohio) decision to surrender in the fight over immigration and funding for the Department of Homeland Security, Collender said it could make the budget debate even more divisive.

“You’ve now got those 52 militant House conservatives really angry with Boehner. So to appease them, Boehner goes to a conservative budget resolution that the Senate can’t accept. The Senate sends back a more moderate budget resolution that the militants won’t accept,” he said.  

Enzi has hinted that his budget will keep the caps in place.

He’s pointed out that the caps are set into law, and that changing them would require passage of a new bill by both the House and Senate that could be signed by Obama.

His budget resolution could set spending guidelines for Congress if it is merged with a House vehicle and approved by both chambers, but would not be sent to Obama and would not become law.

Some senators appear to be accepting the fact that they won’t change the spending ceilings through the budget blueprint. They say that change will have to come later, but before committees agree to spending bills for government agencies.

“You can do that through reconciliation or you can do it through what many people are calling a Ryan-Murray II process where you actually sit down, but you can’t really affect that through the budget,” Sen. Bob Corker (R-Tenn) said Wednesday after Senate Republicans were briefed behind closed doors on their upcoming budget plan.

According to a 2013 report by the National Review, the Ryan-Murray deal itself included dozens of deficit-neutral reserve funds.

By including the reserve funds, Ryan-Murray allowed the committee chairmen writing spending bills more leeway by giving them the flexibility to use tax hikes to pay for spending hikes. Without the funds, they would have had to offset spending hikes with spending cuts in the same area of their jurisdiction. 

A reserve fund wrapped into the budget resolution wouldn’t necessarily provide any specifics on how spending might change. But it would give the committees of jurisdiction more flexibility.

The fund would allow for tax hikes to pay for any new spending that would be permitted if sequestration caps are eased.

Graham has said he’s considering developing a “mini-Simpson Bowles” with senators from both parties. He said he would be willing to raise taxes by ending loopholes in exchange for concessions Democrats would make on entitlement spending.

Even if Republicans initiated the process through the reserve fund, defense hawks will likely face procedural obstacles. A senator, for example, could raise a budget point of order against legislation that would lift the budget caps. That would then trigger a vote to waive the point of order, and would require 60 to pass.

“The Budget Control Act is a law. You need 60 votes to change a law that set the caps in place,” Ayotte told reporters Wednesday. “We’re going to need support from Democrats to do that.”