DEFENSE DEPARTMENT
Defense Budgets Could Fall Victim to COVID-19
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The coronavirus pandemic, which has already exacted a staggering human and economic toll, may soon take a bite out of Pentagon spending.
The Congressional Budget Office recently estimated that the federal budget deficit will be upwards of $3.7 trillion in the current fiscal year and exceed $2 trillion in fiscal year 2021 as a result of spending on COVID-19 response and recovery.
“This is just off the charts compared to what we have seen in the past,” said Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies. Once the crisis subsides, there will be increasing pressure in Congress to reduce the deficit and government spending, he predicted during a recent webinar.
There is a history of military cuts when deficits get high, including in the 1980s during the later years of the Reagan administration, and in the 2010s during the Obama administration following the 2008-2009 recession, he noted.
“When Congress and fiscal conservatives come out and get serious about reducing the debt and reducing spending, defense is almost always part of what they come up with for a solution,” he said. “We could be looking at a deficit-driven defense drawdown coming in the next two to three years.”
House Armed Services Committee Chairman Rep. Adam Smith, D-Wash., suggested there may be a push to trim the Pentagon budget.
“Even in the best case scenario, this [pandemic] is going to have a profound economic impact on us, so I think it’s going to become even more important that we look for ways to save money within DoD,” he told reporters. The nuclear enterprise is an example of a place where savings could be found, he added.
The Pentagon requested $705.4 billion for fiscal year 2021. Defense Secretary Mark Esper said efforts to control the deficit may jeopardize U.S. military modernization efforts.
“I am concerned that the massive infusion into the economy by the Congress and the executive branch — nearly $3 trillion — may throw us off that course,” he said during a recent webinar.
At a press conference he was asked what programs would be in jeopardy if defense spending is constrained.
“We are going to look at those things in due course,” he said. “My inclination is … to go back and pull out more of the legacy programs. We need to move away from the legacy, and we need to invest those dollars into the future [systems]. We have a lot of legacy programs out there right now. I could pick dozens out from all branches of the service. So that is where I would start.”
Esper isn’t the only Pentagon leader concerned about the situation.
“On the other side of COVID-19 in terms of funding, I think everyone will be worried about what will the defense topline move to and what choices will that push upon us,” Assistant Secretary of the Air Force for Acquisition, Technology and Logistics Will Roper told reporters.
Nuclear modernization is the Pentagon’s top priority right now, he noted.
“If the budget comes down there will be more tough choices ahead,” he said. “My worry is less about any individual program in the nuclear triad; it’s more outside of that — where will we find that bill payer?”
Previous concerns about deficits led to the 2011 Budget Control Act, which put in place spending caps and a sequestration mechanism for a 10-year period, although lawmakers repeatedly raised the limits as part of a series of subsequent bipartisan budget agreements. Smith doesn’t anticipate Congress will enact another BCA-type of law to deal with COVID-19-related deficits.
“It didn’t control the budget particularly well, led to several government shutdowns, a number of continuing resolutions, and more threatened government shutdowns than frankly I can even remember,” he said. “There’s going to be considerable skepticism that a Budget Control Act-like approach is the right approach to any sort of [new] fiscal policy. I would think there would be considerable pushback on that.”
Topics: Defense Contracting, Defense Department
Defense budgets not only might take a hit but will take a hit depending on how big that hit will be will depend upon who is the President and which party controls congress. If Trump is president the hit will be less than if Biden (or any other democrat that may replace him before the election) and if the republicans control one house of congress. The worst case would be if the democrats win the whole shebang. In that cast the democrats have a pent up spending plans and a very progressive agenda in extending government into every notch and cranny of our lives. So the democrats if they control all three, the presidency and the house and the senate will have to do expanded social spending or they will be replaced in two years. To do that spending they will increase the tax rates to more what they were back under President Truman's administration. That is in the 90+% range for the top income earners and a much higher rate for the lowest earners that have to pay taxes. But even with the increased taxes and maybe even with a tax on wealth they will still not have the money to cover their planed spending. So the place that they can get money is from the military and NASA. Our space industry will come to a screeching halt because of the lack of funds while the US military will become more like what our allies in Europe and the EU are like.
Curly at 11:55 AM