Kim Hong-ji / Reuters An F-18 fighter jet lands on the USS Carl Vinson aircraft carrier in South Korea's East Sea, March 2017.

Trump's Small Change

Why U.S. Defense Spending Will Continue to Muddle Through

The aerospace and defense industries are optimistic that President Donald Trump will follow through on his campaign promises to rebuild the U.S. military—the first sign of which was a modest defense spending increase in Trump’s first budget request. A sampling of recent industry headlines captures the mood: “Trump Victory Puts Rocket Under Global Defense Stocks”; “The Trump Effect: Tweets Aside, U.S. Defense Stocks Are Booming”; “Defense Stocks Soar Despite Tough Talk from Trump.” Combined with Trump’s unprecedented personal involvement in specific Pentagon acquisition programs, defense watchers are surely in for a wild four years. Yet peeling back the surface layer of tweets and canned speech lines reveals a more sobering outlook for the defense industry. Although Trump is new to Washington, the larger federal budget dynamics are still the same.

The current outlook for the U.S. defense budget is middling with a chance of disappointment. When Trump’s first budget is eventually signed into law, it will likely just be a more muscular version of the status quo, increasing defense spending only a few percentage points above last year’s enacted levels. The election of a Republican president and GOP control of Congress ostensibly provided a path to rescind the 2011 Budget Control Act (BCA), which places arbitrary limits on defense and domestic discretionary spending. Repealing the BCA would require 60 votes in the Senate, meaning that Republicans must convince eight Democrats to join them without also angering the Republican fiscal hawks in the House of Representatives. But without presidential leadership, this needle is impossible to thread. As a result, there is currently no talk of repealing the BCA. Instead, lawmakers are only considering a tweak similar to the mini-deals cut in 2013 and 2015, which marginally adjusted the spending caps. A grand bargain would entail changes to taxes and spending on entitlements such as Social Security and Medicare, the appetite for which still does not exist.

Given the more modest spending increases that are likely to materialize, the primarily on military modernization rather than on readiness. Defense contractors generally prefer that the government either purchase equipment through existing modernization programs or, secondarily, that it grow the size of the military, which requires equipment purchases for new soldiers, sailors, airmen, and marines. Yet the spending priorities of the Trump administration, Congress, and much of the Pentagon focus instead on readiness programs, such as training and maintenance, as well as investing small sums in futuristic technology. 

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