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Lawmakers Should Be Mindful of Fiscal Responsibility in the 2024 Defense Authorization

On Wednesday July 12, 2023, the House of Representatives is expected to consider H.R. 2670 the National Defense Authorization Act (NDAA) for fiscal year (FY) 2024.

The NDAA is taken up annually and is considered must-pass legislation as it sets the Pentagon’s spending levels and priorities. This week the House is expected to consider the $886 billion package, up $14 billion from last year. As it stands, this total is in line with the discretionary defense spending caps established in the Fiscal Responsibility Act (FRA). As lawmakers consider amendments to the NDAA, they should be mindful of fiscal discipline and adhere to the caps. 

How Does the Fiscal Responsibility Act Change Defense Spending?

Lawmakers have historically placed limits on the amount of discretionary spending that can be provided in each fiscal year. The most recent example of this was the Budget Control Act of 2011 (BCA) which established defense and non-defense spending caps through FY 2021.

The FRA is very similar with its intent to curb government spending and place limits on defense and non-defense spending. It enforces these caps by a process known as sequestration which provides for an automatic, across-the-board reduction of spending if lawmakers end up exceeding the cap.

This past May, the FRA set the cap for FY 2024 defense spending at $886 billion compared to last year’s FY 2023 approved spending, which totaled nearly $872 billion.

Every year both the House and Senate work to produce their own versions of the NDAA which then get reconciled after passage in both chambers. In FY 2022, authorized levels totaled nearly $791 billion. In FY 2023, the House approved a $73 billion increase, bringing the cost of the House NDAA to $864 billion. The Senate Armed Services Committee was more generous in their approach and approved an $871 billion NDAA, an $80 billion increase from FY 2022. However, after both the House and Senate reconciled their bills, the final NDAA funding level reached nearly $872 billion.

The House is set to begin floor consideration on the NDAA this week. The legislation would authorize nearly $886 billion, in accord with the FRA. The Senate’s version hits the same budgetary mark.

There are many amendments that will be debated and voted on that could change the final cost of the House’s NDAA. Even after passage, which is expected given that it has been approved in each of the previous 62 years, there could be pressure for additional defense spending. Over recent years, lawmakers have often found ways to evade spending limits imposed via budgetary caps. For example, the Overseas Contingency Operations (OCO) account allowed for spending for the Departments of Defense and State to exceed the BCA caps. Although the OCO account was zeroed out since FY 2022, it could still provide an outlet for cap evasion. In its analysis of the FRA, the Congressional Budget Office wrote

Some funding would be limited either according to a formula or to specified amounts, funding designated as an emergency requirement or for overseas contingency operations would not be constrained, and certain other funding would not be subject to the caps.

The caps could also be evaded through emergency supplemental funding. For example, in FY 2022 through February in FY 2023, Congress provided over $113 billion in supplemental funding for Ukraine.

The FRA has helped restore spending restraints. In the interest of adhering to them, lawmakers need to be mindful of the bottom line costs and exercise restraint and fiscal discipline in the new NDAA package, especially given the unsustainable path of the federal budget.