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US Budget Deal Provides Industry, Military Stability

October 31, 2015 (Photo Credit: SAUL LOEB/AFP)

WASHINGTON — On the eve of Halloween, the US Congress delivered a treat for the Pentagon and defense industry when it approved a crucial bipartisan budget deal with the White House that lands just $5 billion shy of the president's 2016 defense budget request.

The sweeping two-year budget deal unveiled Oct. 26 would give Pentagon planners the fiscal stability they have been begging for, and a two-year reprieve from scare scenarios involving government shutdowns and lengthy stop-gap spending measures.

“This compromise removes the uncertainty of ongoing continuing resolutions and possible government shutdowns, allowing the United States to honor our debts, reform entitlements, set realistic overseas contingency funding levels, and provide predictability for the Defense Department and defense industry to invest in programs and technologies to meet the national security needs of our country,” said National Defense Industrial Association Chairman Arnold Punaro.

Typically logjammed, Capitol Hill saw a flurry of activity in the last week of October to include the budget deal and the passing of the House speakership from Rep. John Boehner, R-Ohio, to Rep. Paul Ryan, R-Wis., who helped negotiate the last major budget agreement in 2013.  

Yet to come for defense: Authorizers must conference on the vetoed defense policy bill, expected to be resurrected with its policy provisions intact. Appropriators will likely conference and pass their spending bills before Dec. 11 to avoid a government shutdown.

Senate Armed Services Committee Chairman Sen. John McCain, R-Ariz., said the path of the revived policy bill, either by attaching it to an omnibus spending bill, advancing a new version of the bill that includes $5 billion in cuts, or by overriding the president's veto, depends "on what Ryan wants to do and obviously he's just arrived."

On Oct. 29, House and Senate authorizers were about halfway through identifying $5 billion in cuts. McCain said he expects appropriators to match the resurrected bill, "but that doesn't always happen."  

House Armed Services Chairman Rep. Mac Thornberry, R-Texas, was confident that the bill he and McCain had worked months to craft would be approved by Congress "one way or another." 

"Nobody [is] going to walk away" from the myriad policy provisions it contains, including defense acquisition reform measures, Thornberry said. 

The budget deal, reached in quiet negotiations with the White House and Democrats in Congress, will increase federal spending by $80 billion over the next two years, and provide an additional $32 billion in overseas contingency operations funds for the Pentagon. The defense budget is $607 billion, down from the president's $612 billion request.

President Obama and congressional Democrats had opposed any budget plan to fully fund defense spending without equal increases in non-defense programs and stalled a series of federal appropriations measures — including the fiscal 2016 defense budget — over the spending fight.

In addition, Obama vetoed the 2016 National Defense Authorization Act over those spending differences, despite Republican assertions that the measure was largely a policy bill separate from the budget impasse.

Under the compromise, non-defense spending caps are upped by $25 billion in fiscal 2016 and $15 billion in 2017, and another nearly $15 billion will be added in non-military costs to the temporary war funding accounts each of the next two years  — in spite of Democrats' earlier protestations of the use of the account.

Conservatives within the House's splintered Republican caucus opposed the deal, made possible by Boehner's retirement. The lower chamber voted 266 to 167 to send the deal to the Senate, with only 79 Republicans voting for it.

Chairman of the House Armed Services seapower and projection forces subcommittee, Rep. Randy Forbes, R-Va., voted against it, arguing that it funds defense below what the last Joint Chiefs chairman called, “the ragged lower edge” of what's needed for national defense. He also opposed suspension of the debt limit to March 2017, calling it a "blank check" for the administration.

“At a time when we’ve seen consistent cuts to national defense and the systematic dismantling of our military, this bill continues to under-resource our military by cutting national security," Forbes said. 

Thornberry and McCain each voiced measured support. 

“That’s the agreement which today I will vote for, but I don’t want anybody to think that this will repair the damage inflicted on the military by sequestration and cuts over the last four years,” Thornberry said.

McCain told The Hill newspaper that he was "not happy, but I'm largely satisfied" with the budget deal.

"I think it's the best deal we can probably get," he said. "It's bipartisan, and it prevents a government shutdown."

Rep. Mike Turner, R-Ohio, who has emerged as a leading voice for defense hawks, helped organize a letter from 102 House Republicans to chamber leaders calling for a federal budget that "fully funds defense" at $612 billion. Though the deal fell shy of that number, he indicated ahead of the vote that he would back it, in part because of the certainty it provides the military.

Even as some hawkish lawmakers offered measured praise, the defense industry appeared pleased.  

"This is as close to the 'full bull' case as you can get," Roman Schweizer, of Guggenheim Partners, said in his investor newsletter after the deal was announced.

Mackenzie Eaglen, an American Enterprise Institute analyst and former congressional defense aide, said she expects congressional staffers, in consultation with the Pentagon, to spread the $5 billion thinly across the budget. To boot, the base defense budget grew slightly, setting a higher baseline for future years. 

"Should industry be happy? Absolutely," Eaglen said.

Email: jgould@defensenews.com

Twitter: @reporterjoe

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