WASHINGTON — The first Trump administration budget plan fails to live up to the president's claims of a "historic" defense increase, and will likely meet stiff resistance on the Hill for what analysts say are unrealistic plans for cuts to non-defense spending.
Details of the fiscal year 2018 budget, released to reporters Monday evening, also confirm an increase in nuclear weapons funding and changes to foreign military aid, as previously reported by Defense News.
The budget — which includes $603 billion earmarked for national security issues, including defense — certainly reflects a major attempt at reshaping the social safety net. But when it comes to defense, the planned increase is fairly pedestrian, or as House Armed Services Committee chairman Rep. Mac Thornberry, R-Texas, said Monday, "basically the Obama approach."
For full FY18 budget coverage, click here.
Todd Harrison, a budgetary expert with the Center for Strategic and International Studies, wrote Monday that the real numbers don't match up to the rhetoric from President Donald Trump that his spending plan will rebuild the military.
Harrison notes that the budget plan represents only the ninth-largest increase in the past four decades for defense spending, While the budget request features $54 billion for defense above the Budget Control Act (BCA) caps in place for FY18, that’s only $19 billion more than was planned for this year by the Obama administration.
Mackenzie Eaglen, a defense analyst with the conservative American Enterprise Institute, called the defense plan "middle of the road, vanilla stuff. It’s a budget that is in line with recent historical precedent and is nothing extraordinary or historical."
The budget documentation notes in a footnote that defense spending in the future will be based on the results of several major strategic reviews now underway, including the National Security Strategy and the Nuclear Posture Review. That was echoed by a source familiar with the defense budgeting process, who told Defense News that the budget is largely a placeholder until those decisions can be made.
There was "largely good work" done by the team that started assembling this last year, the source said, but this budget reflects awareness that strategic shifts are coming and was designed to leave wiggle room for the administration and DoD’s incoming leadership to color within the lines.
Instead, this budget focuses on doing repairs where needed — something that leaves Eaglen skeptical about major shifts coming in the future.
"They’re going to try and spin it that they will get the rebuild next year. I’ve seen that movie. Anytime you try to do things the next year, it just becomes the next year," she said.
DOA on the Hill
Eaglen sees the fingerprints of White House Budget Director Mick Mulvaney all over the document, even more so than Trump.
"This budget is Mick Mulvaney’s dream. He had a lot of discretion in terms of what choices were made. There is some Trump stuff here — no cuts to Social Security, new paid parental leave — but this is a Mulvany budget through and through," Eaglen said.
And like Mulvaney’s budget plans when he was a member of the House Freedom Caucus, this plan will likely be dead on arrival on the Hill, due to the budgetary tradeoffs it relies on.
In the budget documentation, the administration expresses plans for an annual 2.1 percent growth for defense discretionary spending, accompanied by an annual 2 percent reduction in non-defense discretionary spending — not just for FY18, but for the next decade.
"As we’ll see with the ‘18 budget, the one defense dollar up and one non-defense dollar down trade will never, ever have enough votes to pass, period," Eaglen said, noting that Democrats will never agree to such a tradeoff. "So this notion that for the next 10 years it will happen is kind of crazy."
Asked about the budget’s chances on the Hill, Harrison said, "Dead on arrival is an understatement. The cuts to non-defense discretionary spending in the out years may even spook some fiscal conservatives."
Interestingly, the documentation also calls for keeping budget caps in place through 2027, despite the caps associated with the BCA set to expire in 2021. Aside from a few members of Mulvaney’s Freedom Caucus, there is zero appetite on the Hill for continuing mandatory budget caps after they expire, Eaglen said.
Speaking to reporters Monday, Mulvaney acknowledged that Congress will have its say, but defended the budget plan as one required to meet the vision laid out by the president.
"Do I expect them to adopt this 100 percent whole-heartedly, without any change? Absolutely not. Do I expect them to work with the administration on trying to figure out places where we’re on the same pages? Absolutely," Mulvaney said. "I don’t think it invalidates the importance, the credibility of the president’s budget, just because they’re not going to fund it wholeheartedly."
As a House member, Mulvaney made targeting the use of overseas contingency operations (OCO) a signature issue. At first glance, that appears to be reflected in the budget, as the 10-year plan calls for the dialing down of OCO funding to almost nothing.
Harrison isn’t impressed, noting that a footnote in the budget document says the OCO numbers are based on several assumptions that simply may not happen.
"The Obama admin used to do this, too. It’s just a placeholder and not a proposal," Harrison said. "Obama’s OMB had talked about phasing out OCO, as well. Nothing happened."
OCO remains popular on the Hill, where it has served as a useful vehicle for supporting DoD despite the BCA-imposed restrictions on spending. The wartime fund is exempt from the budget BCA caps.
Speaking Monday at the Brookings Institution, Thornberry reiterated a call for defense spending to reach $640 billion in base dollars, with an additional $60 billion in OCO. The chairman told the crowd he was not trying this year to change the longstanding practice of parking base budget costs in OCO — but it was something he was open to.
"It does not accomplish that goal," he said. "I think that is a worthwhile conversation to have. What concerns me is if there are transfers from OCO to the base budget and people call it a defense increase, it will not be accurate. It will not tell you the facts, which is you have not really increased anything at all. You've just changed the label on the money."
Putting base requirements into OCO, Thornberry said, "makes it very difficult to plan and that that we are not spending it as efficient as it could be, and yet, we have become very dependent on that."
Foreign financing changes
Mulvaney confirmed that changes would be coming to the State Department’s Foreign Military Financing programs, including details, first revealed by Defense News, that Pakistan’s military aid will be slashed compared with previous levels.
The OMB director also confirmed that several countries would have their FMF financing changed from grants to loans, although he noted Israel and Egypt would be exempt from such changes.
"Our argument is instead of giving somebody $100 million, we can give them a smaller number with a loan guarantee so they can actually buy more stuff," he said. "State still has some flexibility to come up with the final plan on that, but writ large, we have proposed to move several countries from a direct grant program to a loan guarantee program."
Foreign Military Financing has largely taken the role of a grant given to U.S. allies to allow them to buy defense equipment. With the exception of Israel, all countries that receive FMF have to spend it on goods made in the United States, a boost for the domestic defense industry.
Analysts have questioned whether countries which receive FMF grants now will be able to take on the costs of a loan program, and whether those nations may instead look to buy cheaper goods from competitor nations such as Russia or China.
According to the budget materials, the National Nuclear Security Agency (NNSA) will receive a $1.4 billion increase from 2017 levels, a roughly 11 percent increase on the agencies budget. That will certainly be welcome from NNSA head Frank Klotz, a retired Air Force general who has expressed a desperate need for funding to help balance out a backlog of maintenance projects at nuclear facilities.
However, the funding is expected to largely come in the form of NNSA’s weapons accounts, according to a budget leak from the Third Way group revealed last week. A recent Government Accountability Office report warned that NNSA’s weapons development funding was too small to meet requirements for the coming decade.
Andrew Webber, who served from 2009 to 2014 as Assistant Secretary of Defense for Nuclear, Chemical & Biological Defense Programs, believes that plus-up to NNSA accounts reflects that Trump is following through on his stated desire to modernize America’s nuclear weapons.
"The big spike in weapons activities must mean that Trump is accelerating his new nuclear weapons like the LRSO," Webber said, referring to the new nuclear cruise missile project that some Democrats on the Hill have tried to delay.
Joe Gould in Washington contributed to this report
Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.