Political Report: 9/20/16

September 20, 2016

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By Matt Vallone, Senior Analysis Manager

Main Story: Congress Looks to Leave Town Early as Presidential Election Heats Up

After failing to reach agreement on a short-term funding resolution to keep the government open through the election, Congress returns this week looking to find the right solution to let them go home and campaign. Last week began with optimism in the Senate that a deal could be reached that would allow them to adjourn by September 16, but disagreements over a variety issues big and small, including emergency funding for the Gulf region, Zika funding, and the transfer of internet domain naming authority prevented anything from being adopted. House leaders worked to avoid a controversial impeachment vote on IRS Commissioner John Koskinen while quietly signaling a willingness to accept a potential Senate budget deal. This week looks to be more of the same. The House has laid out a relatively quiet schedule and the Senate will continue negotiations with the hopes of wrapping everything up by Friday, September 23. While leaders in both parties appear to be interested in an early finish to the work period, it remains to be seen where they are willing to compromise in order to hit the campaign trail.

The outlook for funding after the election when the CR ends remains murky. The House GOP leadership has discussed the possibility of ‘minibus’ packages of appropriations bills. But given that each of these bills would face the same set of obstacles a broader omnibus would face, it remains unclear how they would be easier/less challenging. A Republican win in November would encourage Congress to pass an additional CR to delay funding discussions until the new administration is sworn in. Conversely, a Democratic win might provide incentives to Congress to strike a deal with the departing Obama administration that sets funding levels for the rest of FY2017. Either way, the election will loom larger and larger the longer Congress remains in session.

Source: NY Times Upshot

The past two weeks have seen Donald Trump surge closer to Hillary Clinton in a variety of state and national polls. While Clinton remains a favorite, the possibility of a Trump win and unified GOP control of government has become a more realistic possibility. This means that the three most likely outcomes for the November election remain a Democratic White House and a Republican Congress, a Democratic White House and split control of Congress (Democratic Senate and Republican House), and unified Republican control. Fundamentally, who wins the White House will be determinative as to the budget outlook for the next four years.

Democratic White House

The election of Hillary Clinton would yield a budgetary climate similar to what we have seen over the last six years. Passage of routine budget legislation would remain difficult and defense toplines would be constrained by the caps of the Budget Control Act (or whatever patch-like solutions are worked up every couple of years). While Clinton is generally seen as being more hawkish than President Obama, the basic dynamics of the budget dispute (Democrats linking defense and non-defense spending together and Republicans opposing non-defense spending increases) are not likely to change. Otherwise, our expectation is that there will be fundamentally a similar outlook for DoD under a Clinton administration as there is today.

Republican White House

The election of Donald Trump as president would result in a significant increase in defense spending. On September 7th, Trump outlined his defense policy, which advocates returning to defense toplines roughly equivalent to those from the FY2012 budget proposal. This spending level would be between 17 and 19 percent higher than the FY2017 to FY2021 budget plan requested by the Obama Administration earlier this year. Trump’s plan would support a significantly expanded force (50 Army brigade combat teams instead of 32, 346 combat ships instead of 288, 36 battalions in the USMC instead of 23).

However, Trump has also made commitments to a variety of other expensive fiscal policies (a $4.4 trillion tax cut, no cuts to entitlement programs, and $550 billion in infrastructure investments), making it difficult to know which policies may have priority. This also would potentially put significant strain on non-defense aerospace funding, particularly space investments. As Trump has proposed a 1% a year cut to non-defense discretionary funding that would represent a steep reduction below budgeted levels after a few years.

The outlook for funding after the CR remains murky. House leadership has discussed the possibility of ‘minibus’ packages of appropriations bills, but given that each of these bills would face the same set of obstacles a broader omnibus would face it remains unclear how they would be easier/less challenging.

Government Activity Round-Up

Nothing too new this week from GAO, though they have a pair of reports out on the VA. One looks at potential improvements in VA contracting and the other looks at IT management. Last week, GAO looked into defense construction projects, DHS’s work in consolidating CBRNE programs, DoD’s renewable energy programs, and, lastly, NOAA’s satellite maintenance and planning schedules. Nothing new at the CBO, so we’ll link again to their recent review on military force structure (available here).

Other DC/Defense Activity

As always we encourage you to listen to our new podcast, ‘Avascent on the Record’. This week we have David Belcher discussing ‘The Future of On-Orbit Satellite Servicing’.

There are a variety of interesting events this week in DC. On Tuesday at noon the Institute of World Politics is hosting a discussion on ‘Strengthening US-India Defense Ties: Trade, Trust & Technology’ featuring Congressman Rob Wittman. On Wednesday, the Atlantic Council will be discussing ‘The Future of the Army’ with General David Barno (Ret), Nora Bensahel, and Brad Carson, former Undersecretary of Defense for Personnel and Readiness. Two events of note on Thursday, the first being a look at THAAD on the Korean Peninsula by the Young Professionals in International Affairs. In addition, CSIS is hosting a look at ‘Deepening U.S.-Australia Cyber Security Cooperation’ at 4pm.

For more information about this Political Report, contact mvallone@avascent.com.