Defense Boost May Unravel Into a Deep Cut Amid Congress Gridlock
Defense Budget Cuts Across the Board Loom as Soon as January
(Bloomberg) -- U.S. national security funding may be slashed by about $65 billion in January as lawmakers forge ahead with a spending plan that collides with a budget ceiling under a six-year-old law.
A $614 billion bill passed by the U.S. House in H.R. 3219 is caught in a political vise: President Donald Trump and most lawmakers want to see increases in Pentagon spending, yet that intention isn’t backed up by an agreement to undo the 2011 Budget Control Act.
Without another budget agreement in place, the Defense Department faces automatic across-the-board cuts of 9 percent to 10 percent starting in mid-January, according to Chris Sherwood, a Pentagon spokesman. That’s about $65 billion, the Congressional Budget Office estimates. Enforcement of the act’s caps are returning for the coming fiscal year that begins Oct. 1 after they were adjusted in fiscal 2016 and 2017 for discretionary domestic and national security spending.
That was the third time since the act passed that the limits were adjusted, in those cases for both defense and domestic discretionary spending. Trump wants to cut domestic spending while adding to defense, a proposal opposed by Democrats and many Republicans.
Across Accounts
If the mandatory cuts go ahead, they would be leveled across thousands of Pentagon programs. The White House would have the option of exempting military personnel funds from the automatic cuts, known as sequestration. Such cuts are likely because all of the pending congressional defense bills so far propose busting the cap of $549 billion in national security spending for fiscal year 2018, or $522 billion for the Pentagon alone.
National security spending also includes programs such as the Energy Department’s maintenance of the nation’s nuclear warheads, environmental cleanup, and some activities of the FBI and Transportation Department.
Still, because the automatic cuts wouldn’t take effect until mid-January, there would be time for an agreement even after the fiscal year starts on Oct. 1, said Byron Callan, a defense analyst for Capital Alpha Partners LLC.
Senate appropriators have yet to act on their defense bill, but Budget Committee guidance puts their number closer to the $549 billion national security cap than the House version.
Under a stopgap measure known as a continuing resolution, Pentagon spending, not including the special account for war-related costs, would be about $50 billion less than the fiscal 2018 request, according to Sherwood, the Defense Department spokesman. Congressional leaders are anticipating a continuing resolution, even if a short-lived one, because they don’t have enough time to resolve their spending differences by Sept. 30.
The House has scheduled 12 legislative days next month, five fewer than the Senate. That increases the likelihood that Congress will have to pass a short-term continuing resolution to keep the government funded during negotiations over 2018 appropriations later in the fall.
Industry ‘Says Whoa’
Defense Secretary Jim Mattis told reporters on Aug. 15 that a continuing resolution would be damaging because “we cannot start new programs” needed “to adjust to the changing character of warfare -- electronic warfare, space issues, cyber issues” and counter-drone efforts.
“Plus it holds you in position so American industry says, ‘Whoa, you know, I can start doing something here and then there’s no budget for it down the road, so I’ve just put a lot of money into my capital investment, and now, it’s going to sit and idle.’”
A stopgap measure “just creates unpredictability,” Mattis said. “It makes us rigid.”
The differing budget numbers proposed by the congressional defense committees “illustrate the range of uncertainty in next year’s defense budget, and that uncertainty is not going to diminish until Congress starts negotiating a budget deal that can attract at least eight Senate Democrats,” said Todd Harrison, a budget analyst with the Center for Strategic and International Studies.
‘Fourth Fiddle’
“In many ways, getting a budget deal that raises the budget caps is harder than passing a health-care bill because they need to get to 60 votes in the Senate,” Harrison said. “So far, we are not seeing any real movement toward a bipartisan budget deal.”
Trump’s defense budget request “is playing fourth fiddle to tax cuts, cutting non-defense discretionary by 30 percent over a decade to a record low of 1.4 percent of” gross domestic product “and balancing the federal budget within 10 years,” Katherine Blakeley, a defense budget analyst for the Center for Strategic and Budgetary Assessments, wrote in a new report.
Instead of formally proposing legislation to repeal the budget caps, the Trump budget calls for extending caps for six years through 2027 while giving national security programs a pass to increase spending 2 percent annually, for an additional $489 billion, Blakeley wrote.
“It offsets these raises with $1.6 trillion of deep cuts to non-defense discretionary spending that are unlikely to be enacted” as “many of these cuts have drawn criticism from conservative Republicans,” she wrote.
“The wide gulfs between the political parties, and between the defense hawks and the fiscal hawks, will not be closed soon,” Blakeley wrote.
To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net, Roxana Tiron in Washington at rtiron@bloomberg.net.
To contact the editors responsible for this story: Katherine Rizzo at krizzo5@bloomberg.net, Larry Liebert, Bill Faries