When the Obama Administration finally released its 2014 budget proposal on April 10 – more then two months later than required by law – DoD‘s defense budget proposal contained provisions that were, to some observers and budget analysts, unexpected.

A dozen years after 9/11, the U.S. military confronts what has been almost universally billed as a transformational era, born of several factors:

• the end of combat operations in Iraq;
• the drawdown of forces in Afghanistan;
• the strategic “pivot,” announced in January 2012, away from sustained ground operations in the Middle East and toward air and sea power aimed at East Asia; and
• a fiscal climate pushing public budgets downward.

In addition to these, the Budget Control Act of 2011, whose complex mechanisms set the current budget sequester into motion, has essentially capped the DoD’s share of the 2014 budget at $475 billion.

Perhaps the two most puzzling items in the defense budget proposal are on the top line:

• The Pentagon’s proposal for the defense “base budget” totals $526.6 billion –  about $52 billion, or ten percent, more than the Budget Control Act’s mandatory limit.
• The proposal does not include a specific number on the separate war budget, or Overseas Contingency Operations (OCO) in Afghanistan and elsewhere, but instead pencils in a “placeholder” value, equal to the $88 billion in OCO funding provided by the 2013 budget.

The explanations for these items didn’t shed much light on the thinking that went into them. As for the top line’s disregard of automatic cuts, Defense Secretary Chuck Hagel said, in his accompanying statement: “The President’s budget offers a comprehensive deficit reduction plan that would permit Congress to eliminate sequestration. That plan averts what would otherwise be another significant reduction in the defense budget, some $52 billion in fiscal year 2014 alone and $500 billion over a decade. Instead, it calls for $150 billion in additional defense savings over 10 years.”

As everyone knows, the President’s plan for eliminating sequestration involves additional “revenues” – taxes – that House Republicans have now rejected multiple times; that’s how we ended up here, with sequestration’s automatic cuts. The White House’s and Congress’s joint failure to resolve the issue is now nearly two years old – and there is no reason to expect success anytime soon, said Todd Harrison, senior fellow for defense budget studies at the non-partisan Center for Strategic and Budgetary Assessments (CSBA).

“It could easily continue for another year or two,” Harrison said, “because where are we in terms of progress on reaching a breakthrough with the deficit, and all these big issues of spending and revenue? We’re nowhere close to a solution. And in fact, with the debt ceiling coming up again this summer we may hit another crisis without a good resolution – and that’s what put the Budget Control Act and the budget caps in place in the first place. We could see another lower set of budget caps out of that, even more uncertainty and a lower level of funding. Who knows?”

Harrison found the White House’s Office of Management and Budget’s (OMB’s) explanation of the reason for the OCO placeholder – “Final decisions about the pace of the drawdown in Afghanistan have not yet been made” – equally baffling. “It doesn’t quite make sense to me,” he said. “And the hint they gave at the proximate level of that – that it would be somewhere around $80 billion, the current level of funding – that blows my mind, because troop numbers in Afghanistan are coming down, and they’re coming down rapidly, in 2014.”

Why would the White House and the Pentagon propose defense budget numbers that have no chance of being appropriated? Harrison is reserving judgment on motives.

Another analyst, Travis Sharp at the Center for a New American Security (CNAS) – a think tank with strong ties to the Obama Administration – called the defense budget “a placebo, a placeholder with no effect … its specific budget allocations almost certainly will have to change. What will not change, however, is that the overall level of defense spending will be lower in 2014 and beyond than in years past.”

In floating a placebo budget, Sharp says the department faces a “credibility challenge” – one that can only be resolved by changing the way it does business and by increasing jointness between services.

Similarly, Harrison, in his preview of the budget proposal, released on April 5, points to two underlying structural problems that will have to be addressed by the Pentagon, now that smaller budgets are a certainty: snowballing costs in both personnel and operations and maintenance (O&M) accounts.

The Pentagon can do little to address these problems, however, until it knows what Congress’s answer to sequestration – if there is one – will be. As of mid-April, there were at least five sequester-altering bills being discussed in Congress.

“If these budget caps remain in effect at the current level, then all of this is just going to get thrown by the side,” Harrison said. “It really boils down to what they do with the budget caps – and that question actually has very little to do with defense. It has to do with revenues. It has to do with entitlement spending: Social Security, Medicare, Medicaid. Defense is a secondary issue in deficit reduction. So a lot of this is going to be up in the air for the foreseeable future – unless they reach some kind of grand bargain this summer.”