Congressional and administration negotiators this week will try to break a $6 billion deadlock between the Office of Management and Budget and the Congressional Budget Office over the extent to which the proposed fiscal 1998 Pentagon budget fails to account for real expenditures.
The dispute already has stalled markup of the FY98 defense authorization bill.
In formally scoring the FY98 defense request for its deficit impact, the CBO estimates that Pentagon outlays will total $265 billion, or $5.6 billion more than the OMB's estimate of $259.4 billion, Defense Week reported this week. The disagreement over outlay projections has multi-billion-dollar defense and domestic budget implications.
In last year's budget resolution, Congress set defense outlay rates at $263 billion. Under the CBO's current projections, the budget request already is over that figure.
This is significant because Congress in both 1996 and 1997 added $7 billion and $11.2 billion in budget authority to the defense bills, mostly for new weapons systems.
On its face, the new outlay controversy would seem to prevent any similar FY98 additions without resorting to pure deficit spending.
The $5.6 billion difference is the largest since 1987, when it was $14 billion on projected outlays of $296 billion.
House National Security Chairman Spence told Defense Week that the markup of the FY98 defense authorization bill is on hold pending the issue's resolution.
Said a Senate aide: "If we are going to cut a deal on the budget, we will cut a deal on defense. If we cut a deal on defense, it will deal with this problem."
Budget negotiations between House Budget Chairman Kasich and Senate Budget Chairman Domenici and OMB Director Raines are slated to resume sometime this week. Kasich has traditionally supported CBO scoring.
"I have not heard anything to suggest people will walk away from the CBO," a House appropriations aide said.
"If I were a betting man, I would bet that Mr. Kasich would support CBO's figures over OMB," addedd a House GOP defense budget aide. "He would have more comfort in them, given the food fights that have erupted over scoring issues in the last few years."
The 1998 outlay disparity is raising suspicions among GOP staffers and analysts that on the road to a 2002 balanced budget, the administration is using budget gimmicks to hide excessive outlay rates.
The GOP suspicion is fueled even further because the CBO and OMB outlay differences are only $1.6 billion to $1.2 billion in FY99-2001.
They soar to $4.2 billion in FY2002, the balanced budget target year, and dip to under $100 million in FY2003.
"Cynics believe the administration couldn't afford their program, so it underplayed outlays," said one Senate appropriations expert.
OMB spokesman Larry Haas declined comment on the OMB's methodology.
The OMB is late in submitting to Congress its assessment of budget areas where the executive branch and CBO disagree.
"Potentially, it is very serious," the Senate analyst said of the problem. "It all depends on how we solve it."
This source added, "The worst-case scenario would be that, assuming we would buy the president's program, we would need to add $6 billion in outlays, highly unlikely."
The House and Senate defense authorization committee chairmen have suggested simply adding to the defense topline, a move that in practice translates into either shifting dollars from non- defense funds or raising the overall deficit.
Spence, in a March letter to Kasich, recommended adding outlays to cover the disparity.
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