The White House Should Show Its Cards Earlier: Reveal the Defense Budget Passback Guidance

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It is time that elected members of Congress wield at least as much power over the defense budget as the faceless bureaucrats in the White House’s budget office. The power of the bureaucrats is manifested in an annual winter dance between the Office of Management and Budget and federal agencies through a document called the “passback.” In the words of Paul O’Neill, a former deputy director, the budget office’s deep but shadowy impact on policy cannot be overstated:

One of the secrets only the initiated know is that those who labor here [at the Office of Management and Budget] for long do so because the numbers are the keys to the doors of everything. … If it matters — there are numbers that define it. And if you are responsible for advising the president about numbers, you are — de facto — in the stream of every policy decision made by the federal government.

Perhaps it is time to unlock the “keys to the doors of everything” for Congress and force the White House to unveil its “battled over” passback guidance in real time to those who cut the check and conduct oversight of these same agencies.

Same Level of Transparency Should Apply Across Legislative and Executive Branches

Congress is getting irritated. The Biden administration is on track to submit to Capitol Hill the latest federal budget submission ever since the passage of the 1921 Budget and Accounting Act. Such a delay affects the ability of service leaders to make their case to lawmakers, stymies critical debates about program funding — this year notably including shipbuilding plans, the scale of the F-35 purchase, and nuclear triad modernization — and undermines budget stability and consistency for the Department of Defense. Rep. Adam Smith, chairman of the House Armed Services Committee, insisted that the budget be submitted before May 10. Now that it is forthcoming on May 28, the chairman has pushed back markup of the annual defense policy bill until September — just a few weeks from the start of the fiscal year. Senate Armed Services Committee Chairman Sen. Jack Reed, echoing Smith’s concern, announced that his committee’s work on the annual defense authorization bill would also be delayed until midsummer, although that is likely to be pushed back again.

The current scheduling difficulties underscore how important it is for Congress to begin considering defense budget investments and tradeoffs for the upcoming fiscal year as early as possible. As this year’s delay in receiving defense budget material indicates, the less time Congress has to review the budget, the more likely that authorization and appropriation bills will not be passed before the end of the fiscal year, creating the need for continuing resolutions. These spending freezes distort budget planning by preventing new starts, progress in weapons and systems development, and planned increases in equipment production. In the words of recent acting Department of Defense Comptroller Elaine McCusker, “despite the versatility of defense managers,” the military “can’t buy back the time — and competitiveness — lost under continuing resolutions that prohibit the pursuit of new capabilities and inhibit smart buying decisions.”

Even with a delayed budget, Congress could have received earlier information on the Biden administration’s decisions if the White House’s Office of Management and Budget made its topline guidance to the Department of Defense publicly available in real time. Despite yearly complaints and concerns about its budget transparency, the Defense Department actually delivers a great deal of publicly available information regarding its spending for various programs and priorities. There is no reason why the Office of Management and Budget should not do the same.

Each November, the White House budget office provides topline budget guidance, known as the passback, to government agencies before the discretionary federal budget becomes public, usually in February. During a regular cycle, after Thanksgiving of each year, the Office of Management and Budget literally passes back commentary on draft budgets for the next fiscal year to agencies, kicking off a final series of high-stakes negotiations. The contents of a passback vary from being very general to highly detailed, depending on the department or agency in question, the president’s priorities, and the predilections and preferences of senior White House budget personnel. Should defense officials strongly disagree with elements of the passback, the issue is adjudicated at senior White House levels, or even by the president himself. Congress would benefit from the information contained in the passback being given over much earlier than is currently the case.

The Defense Department Already Submits an Avalanche of Budget Data

Given the amount of defense budget data published each year, the restrictions imposed by the Office of Management and Budget’s budget processes are difficult to justify. In association with its annual budget request, the Department of Defense releases a slew of budget exhibits, years of previous spending information, program-specific cost data, and additional spending documents and projections — consisting of thousands upon thousands of pages of reporting. While Congress is still displeased with the department’s level of transparency, the issue is not one of detail but rather timeliness and the rationale for various decisions.

The documents released by the Defense Department include high-level reports on program acquisition costs by weapon system, along with financial summary tables. The department also issues a book-length document, called the “Green Book,” which provides specifics on all spending accounts, and also includes inflation rates and historical data on national defense budget estimates for every year since 1945.

Apart from summary documents, the Department of Defense issues budget reports for major appropriation accounts, which again include expansive data tables. In addition, dollars allocated to specific activities also receive dedicated reports. For example, the Fiscal Year 2021 budget request included documentation on the European Defense Initiative, Justification for Component Contingency Operations, the Overseas Contingency Operation Transfer Fund, IT programs, the Counter-Islamic State of Iraq and Syria Train and Equip Fund, the Overseas Contingency Operation Afghanistan Security Forces Fund, and a report on Justification for Security Cooperation Program and Activity Funding. Further, these accounts are broken down into separate volumes that offer increasing levels of detail. The Defense Department also breaks out other investments publicly, such as Defense Health Program costs, alongside other specialized reports like unique documentation for the NATO Security Investment Program.

As if this were not enough, the department also shares a range of other cost data over the course of a year, outside of its annual budget request. For example, Selected Acquisition Reports project a variety of program cost data for major defense acquisition programs, such as the F-35 Joint Strike Fighter, beyond what is reflected in the annual financial data. These reports on major acquisition programs supplement and expand on the five-year program cost data that the military publishes nearly every year via the Future Year’s Defense Program as part of its budget submission to Congress.

All the military departments report granular spending data, as well. The Army, Navy, and Air Force release their investments by appropriations account, each accompanied by extensive documentation. For example, as Eric Lofgren of George Mason University has noted regarding the specificity of data delivered, the Army’s research and development budget request for 2021 “identifies 182 RDT&E program elements that are ultimately subdivided into 2,883 budgeted program account codes in the budget justification documents, detailed across 5,203 pages.”

More Sunshine Sooner Creates Better Policy Outcomes

In contrast with the Department of Defense’s budget reporting, the Office of Management and Budget’s passback is a remarkably confidential process that communicates the White House’s response to proposed budget submissions for federal departments and agencies before those budgets are sent to Capitol Hill. This year’s passback decisions were made in the absence of a Senate-confirmed director of the budget office.

While federal agencies spend the year developing their budget requests, these last-minute debates with the White House are critical, since they can change projected toplines based on the arguments made, and won or lost. Press reports indicate that the original White House guidance to the Department of Defense for 2022 was revised upward after heated negotiations ensued. The department had reportedly been advised to plan a topline in the $705 billion range but ultimately wound up at $715 billion after pushback from senior defense leaders.

Making the passback public would help defense and military leaders by avoiding nasty surprises that anger politicians while making it clear to Congress and the public where political accountability lies for tough decisions. Yes, it is important to protect the ability of the president to set policy and carry out his executive authority. But the budget request is still just a request — the final decider is Congress.

The more time defense leaders have to get meaningful congressional buy-in on their choices and tradeoffs, and the more transparent they can be about the analyses behind those budget decisions with Congress, the greater the chance that oversight becomes less adversarial and more cooperative. Recent examples of surprise changes include the decision to purchase F-15EX fighters and the judgment to retire the USS Harry S. Truman early. There have been many others.

The lack of transparency in the passback guidance often results in negative outcomes, which could have been avoided. The costs of this secrecy include worsening relations between the Hill and the Defense Department, overriding of the department’s decisions without the funds to pay for them — a double “tax” on the services — and burdensome reporting and briefing demands to get the department’s attention.

In the case of the Department of Defense, revealing passback guidance in real time would spell out to Congress where the White House disagreed with the department’s spending plans, informing how lawmakers should spend their limited deliberation and critical oversight work. For example, the passback would be particularly helpful as committees consider questions to ask of service chiefs in posture hearings, and decide which issues deserve extra attention during markup of the annual defense authorization bill.

Given that the Biden administration’s defense budget is higher than originally estimated, as referenced, but lower than expected from last year’s plans (no surprise given the change in administrations), the passback document is sure to be of heightened interest given the potential resultant changes — including the cutting of one destroyer from the shipbuilding budget and the Army’s tradeoff “between better weapons and more soldiers” in the forthcoming FY2022 request.

Separate and Unequal

Affording Congress the ability to understand the nature of the Office of Management and Budget’s recommendations for (or objections to) certain Defense Department priorities would also serve the Office of Management and Budget’s interests while building trust between the Hill and Defense Department. Controversial decisions leaking in the press before the budget drops angers lawmakers and helps fan the flames of infighting inside the Pentagon.

Time is one of Congress’ most precious commodities. Defense Department tradeoffs with political and/or job implications typically demand multiple briefings for members — often in a classified space, making them even harder to schedule and hold. Were Congress able to obtain earlier access to passback details, Capitol Hill could get a head start on its budget debates. Further, keeping the passback secret for several months ultimately does not protect the White House from thorny political questions about the merits of its executive guidance, since the passback is ultimately released along with the final defense budget request each spring.

Expanding the widow for analysis and review in the budget process can help lawmakers to fulfill their obligations as responsible stewards of taxpayer dollars. Congress should compel by law the Office of Management and Budget to join the Defense Department in providing detailed budget information by making its passback budget guidance available to the legislative branch in real time. Unelected public servants should be held accountable for their choices affecting literally “every policy decision made by the federal government.”



Mackenzie Eaglen is a resident fellow in the Marilyn Ware Center for Security Studies at the American Enterprise Institute. You can follow her on Twitter: @MEaglen.

Dov S. Zakheim is a senior adviser at the Center for Strategic and International Studies and vice chairman of the board for the Foreign Policy Research Institute. He was under secretary of defense (comptroller) and chief financial officer for the Department of Defense from 2001 to 2004 and a deputy under secretary of defense from 1985 to 1987.

Image: White House (Photo by Adam Schultz)