‘Tremendous Uncertainty’ Surrounds the Defense Budget

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With just a few weeks remaining until the beginning of fiscal year 2018, topline spending on national defense is still up in the air.

President Donald Trump has proposed a $603 billion base defense budget for 2018, with another $65 billion for overseas contingency operations. The Budget Control Act would limit base defense spending to $549 billion in 2018. Trump’s proposal would exceed the budget caps by $54 billion.

Lawmakers have proposed even higher funding levels.

“Although the exact figures vary, … [key congressional committees] have all marked to a total national defense topline that is about $30 billion more than the Trump administration’s PB 2018 request,” Katherine Blakeley, a research fellow at the Center for Strategic and Budgetary Assessments, said in a recent policy paper.

Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies, said: “It’s not clear if, when or by how much the BCA caps will be lifted. There’s a tremendous amount of uncertainty in the FY 18 [outcome] because of this. Since the BCA went into effect we haven’t seen such a big disparity between the caps, what the president has proposed and what Congress is proposing.”

Analysts are doubtful that the caps — which extend through 2021 — will be permanently lifted anytime soon as part of a comprehensive budget agreement. “Outright repeal is complete fantasy,” Mackenzie Eaglen, a defense budget analyst at the American Enterprise Institute, said in an email.

Harrison sees greater prospects for a one-year budget deal that would boost overall defense spending through some combination of raising the budget cap levels, and injecting additional OCO money to help fund base budget needs.

Eaglen is pessimistic that any agreement to raise the BCA caps will be reached this year. She said it’s more likely that Congress would have to rely entirely on additional OCO funding — which isn’t subject to the budget caps — to boost Pentagon spending.

“This requires no amendment to the current law,” she said. “If this is the route to more defense dollars, it will be significantly less than the committee marks … and even less than the president himself is seeking.”

Without a deal to amend the BCA caps for 2018, Congress would have to increase OCO funding to $118.6 billion to reach the Trump administration’s proposed topline or to $147.5 billion to reach the topline agreed to by House lawmakers, Blakeley noted.

“Such a large increase in OCO funding may be difficult for many in Congress to swallow, particularly fiscal conservatives,” she said. “This would amount to a de facto increase in defense spending without any commensurate increases for non-defense spending, which the Democrats have pledged to oppose.”

Although Republicans control the White House and have majorities in Congress, Senate Democrats are in a position to prevent them from passing a budget that increases defense spending without boosting funding for non-defense programs.

“In the Senate you need 60 votes to change the budget caps, so you need a deal that includes Democrats,” Harrison said. “And as far as we can tell, negotiations … in the Senate haven’t even started.”

More fiscally conservative Republicans are unlikely to accept higher non-defense spending as a compromise to achieve higher military spending, Blakeley said. “These … policy differences are likely to lead negotiators to the same impasse that has made prior BCA cap deals difficult to broker and exceedingly modest in scope.”

Trump’s proposal to exceed the cap by $54 billion would be nearly three times the average amount of negotiated sequester relief, and twice the largest amount by which Congress has previously raised the caps, she noted.

“If there is a budget deal of some sort eventually worked out, it will at most fully fund the president’s request — but no more,” Eaglen said. “And it will require a hefty sum for increases in non-defense discretionary spending, likely to the tune of $35 billion or $40 billion.”

Analysts said it’s unlikely that a bipartisan budget agreement could be reached before Oct. 1. In that scenario, fiscal year 2018 would begin with the government being funded through a continuing resolution that would freeze most government spending at fiscal year 2017 levels, and make it difficult for the Pentagon to start new programs.

Topics: Budget, Defense Department