New budget would kill Pentagon contingency ‘slush fund’

President Biden’s fiscal 2022 budget proposal released Friday would eliminate the Pentagon’s long-standing and highly controversial “overseas contingency operations” account, which critics have blasted as a secretive slush fund that allows the military to hide some of its spending.

The account, commonly known as the OCO, was established in the aftermath of the Sept. 11, 2001, attacks on the U.S. It was originally meant to cover necessary military spending in the early days of the war on terror and invasion of Iraq, which had not been anticipated in the yearly budget planning cycle.

But the OCO swelled over the past two decades, as administrations of both parties tapped the fund for spending priorities. Last year, it included about $69 billion in spending. Since 2001, a whopping $2 trillion has flowed into the account despite the objections of defense policy analysts and lawmakers of both parties.

The OCO exists outside the caps established by the 2011 Budget Control Act, which reined in spending across the federal government, including at the Pentagon. That meant that the Defense Department technically could increase its overall budget by trying to shift money to the OCO rather than dip into its traditional coffers.

But Defense Secretary Lloyd Austin this week said that the OCO’s time has come and gone. The unfolding U.S. military withdrawal from Afghanistan, he said, removes a key justification for the account.

“We will now transition to a new bilateral relationship with our Afghan partners. … And that is one reason why we are asking to move overseas contingency operations funding inside the base budget,” he told the House Appropriations subcommittee on defense Thursday. “This will give us — and you — greater transparency, accountability and predictability in the budgeting process. And because all necessary provisions currently established in OCO funding are retained, we expect no impact to other operations.”

“This is the right thing to do, and frankly, it’s overdue,” he said.

The move to eliminate the OCO in the 2022 budget is a remarkable turnaround for the Defense Department. Just two years ago, Pentagon officials asked for $164 billion in OCO funding — a 140% increase from what they asked for a year earlier.