By Matt Vallone, Senior Analysis Manager
Main Story: Short-Term CR Sets up Bitter December Debates on Funding
Last week, Congress finally conceded to the inevitable and passed a short-term CR. The legislation, which will fund the government through December 9th, sets spending levels at roughly the same as FY2016, but includes a handful of alterations. First, it contains the full year appropriations bill for Military-Construction/Veterans Affairs, which ends up being a few billion below the 2016 appropriation. Second, it contains a variety of emergency funding measures to combat the Zika virus and provide aid to Gulf coast states hit by flooding. Third, an agreement was reached to provide emergency funding to support Flint, Michigan as it recovers from lead in its water supply, though in a separate bill. All of this was done well in advance of the Friday deadline and allowed everyone to observe a relatively stress-free Fiscal New Year’s.
After the election, Congress will return to try to hammer out a funding agreement for the remainder of FY 2017. This fight is likely to be considerably more contentious and far more likely to result in some type of shutdown than the September deadline we just passed. There are several reasons for this. First, members of Congress heading into an election are on good behavior, but once the election is passed they have far less incentive to avoid potentially disruptive activity. Second, the bitterness of the election is unlikely to have dissipated heading into December and, third, depending on the outcome of the election, the motivations of the various actors may have shifted considerably. All of this makes the outcome of this winter’s debate far harder to predict than September’s. Budget watchers may need to wait until 2017 to get a sense of what FY 2017 spending may look like.
Source: NY Times Upshot
Who wins what in the election will do quite a bit to determine how the lame-duck session proceeds. The most likely outcome remains that the status-quo continues with a Democratic White House and a Republican Congress. In such a configuration, it is less likely that any sort of fireworks will occur heading into December 9th. However, if control shifts either direction, either to unified Republican control or for Democratic control of the Senate and White House, then there will be a much more combustible mix of incentives. If Trump wins, Republicans will want to simply run out the clock on the Obama White House, almost guaranteeing another CR (or a possible shutdown). If Democrats retake the Senate, they’ll have fewer incentives to compromise before moving into the majority. In any event, we will be here to document negotiations as they go on and keep you informed as to what Congress is doing in defense and aerospace through the end of the year.
- SASC – No hearing scheduled
- HASC – No hearing scheduled
- HAC-D – No hearing scheduled
- SAC-D – No hearing scheduled
Government Activity Round-Up
Not much to report in terms of federal reports. The Congressional Budget Office takes a look at ‘How Preferential Trade Agreements Affect the U.S. Economy’ (headline is ‘small positive effects’). The GAO meanwhile has a variety of reports out but few are directly related to aerospace and defense. Instead, we will link to a piece on how the Federal government is engaging millennials (and other age groups) available here.
Other DC/Defense Activity
As always, we encourage you to listen to our podcast, ‘Avascent on the Record’. Our most recent episode features August Cole & Jim Tinsley discussing AUSA and land warfare. In addition, Dan Yoon, one of our Senior Market Analysts, had a write-up on the Indian Rafale purchase in War on the Rocks.
This week will feature the vice-presidential debate on Tuesday night between Governor Mike Pence (R-IN) and Senator Tim Kaine (D-VA). Expect something more policy focused than the top of the ticket slugfest last week. Beyond following the highs and lows of the election, there are a surprising number of interesting events in DC this week. First of all, the Association of the U.S. Army has its annual show this week (generally known simply as AUSA), meaning plenty of brass and hardware will be on display in Convention Center Monday to Wednesday. Full schedule of events here. In addition, on Monday at 4pm the Institute of World Politics will feature an event on ‘Aligning Strategy, Programs, and Resources: Alternative Defense Strategies in a Cost-Capped Environment’. Tuesday Brookings is hosting an event titled, ‘Reykjavik and arms control in U.S.-Soviet/Russian relations’. On Wednesday, the East-West Center will be presenting ‘Competing Economic Initiatives in Asia: The Stakes and Role of the US-Japan Alliance’at the Rayburn House office building at noon. Lastly, on Thursday the Atlantic Council will look at Europe after Brexit with Frederick Kempe, the President & CEO of the Atlantic Council and Miroslav Lajcak, Minister of Foreign and European Affairs of Slovakia.
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