By Shane Mason, Senior Market Analyst
Main Story: Spending Bill Up for Vote
Capitol Hill breathed a sigh of relief after Congressional leaders reached a budget deal for the remainder of fiscal year 2017, averting a government shutdown. The spending bill meets the base spending caps provided by the 2015 Budget Control Act, and provides a total of $598.5 billion for the Department of Defense (DoD). A vote on the spending bill in the House is expected on Wednesday, and in the Senate later in the week. Both parties will work this week to shape narratives surrounding the legislation. The Speaker’s office highlighted defense spending increases, while the Minority Leader emphasized that the bill continues to fund Planned Parenthood and does not include funding for a border wall, denying President Trump a political victory.
The Omnibus Bill provides $593 billion for the Defense Department, an increase of $19.9 billion over the FY2016 enacted level. This total includes $516 billion in base discretionary funding, and $76.6 billion in Overseas Contingency Operations (OCO) funding. When combined with the $5.8 billion in supplemental funding in the CR passed in December 2016, total DoD funding for FY2017 is $598.5 billion. Key procurement highlights include: $21.2 billion to procure 13 Navy ships, three Littoral Combat Ships (LCS), $8.2 billion for 74 F-35 aircraft, $1.2 billion for 62 UH-60 Blackhawk helicopters, and $1.1 billion for 14 F/A-18E/F Super Hornet aircraft. The bill also includes funds for an addition 1,000 active-duty Army soldiers and Marines.
Overall this tracks slightly beneath what we had forecast for FY 2017, indicating that defense spending levels may be suppressed by ongoing partisan disputes over spending. In addition, the Trump White House has so far been less bullish than expected in its requests, as seen in the chart below. The net impact is to present a lower topline than defense hawks would prefer and even below our relatively modest estimates.
House Activity – The main issue for the House will be voting on the FY 2017 Omnibus. The Rules Committee meets to consider the bill on Tuesday afternoon, with a vote in the full House expected on Wednesday. If House leadership feels they have the votes, they may bring forward legislation repealing and replacing the Affordable Care Act later this week, though as of publication it was unclear if the revised American Health Care Act would secure 216 votes. The House will also vote on North Korea sanctions.
Senate Activity – The Senate will vote on the nomination of Heather Wilson as Secretary of the Air Force. A vote on the 2017 Omnibus is expected on Thursday.
- 5/2 ‘United States Transportation Command,’ Full Committee Hearing, SD-G50 Dirksen, 9:30am
- 5/3 ‘Department of Defense Laboratories and Their Contributions to Military Operations and Readiness,’ Emerging Threats and Capabilities Subcommittee, SR-222 Russell, 10am
- 5/3 ‘Building a F.A.S.T. Force: A Flexible Personnel System for a Modern Military,’ Personnel Subcommittee, SR-222 Russell, 2:30pm
- 5/4 ‘United States Special Operations Command,’ Full Committee Hearing, SD-G50 Dirksen, 9:30am
- 5/2 ‘Three Decades Later: A Review and Assessment of Our Special Operations Forces 30-Years After the Creation of U.S. Special Operations Command,’ Emerging Threats and Capabilities Subcommittee, 2118 Rayburn, 10:00am
- 5/2 ‘Overview of the Annual Report on Sexual Harassment and Violence at the Military Service Academies,’ Military Personnel Subcommittee, 2118 Rayburn, 3:30pm
- 5/3 ‘Littoral Combat Ships and the Transition to Frigate Class,’ Seapower and Projection Forces Subcommittee, 2118 Rayburn, 3:30pm
- HAC-D – No hearing scheduled
- SAC-D – 5/3 ‘A Review Defense Innovation & Research Funding,’ 102 Dirksen, 10:30am
Government Activity Round-Up
On April 24, CBO released a report, “Costs of Building a 355-Ship Navy,” estimating the costs of achieving the Navy’s objective of increasing the size of the current fleet of 275 ships to 355 ships within 15, 20, 25, or 30 years. CBO estimates that the earliest the Navy could achieve its goal would be in 2035. The cost to build 355-ship fleet would average $102 billion per year through 2047, CBO estimates, or more than one-third greater than the amount appropriated for fiscal year 2016 for today’s 275-ship fleet. CBO concluded that shipbuilding costs would be at their highest point over the next 10 years, while operating costs would be highest between 2037 and 2047, once the fleet numbered 355 ships. CBO concluded that implementing proposed North Korea sanctions legislation would cost $10 million through 2022. H.R. 1644, the “Korean Interdiction and Modernization of Sanctions Act,” would require the President to expand existing sanctions and impose new sanctions against North Korea.
GAO has released a report on actions that could strengthen DHS counter-smuggling efforts. The report recommended that DHS establish procedures for addressing tunnels, assess ultralight aircraft technology, and establish performance targets. DOE’s management and oversight of its contractors was scrutinized in another GAO report. It found that DOE does not use leading practices for managing fraud risks, including data analytics.
Lastly, Avascent Analytics released a new white paper that analyzes how countries in Europe in Asia would fare if President Trump executes an “America First” defense policy. In “Allied Preparedness in an ‘America First’ World,” we use data from our proprietary GPS database to create a scorecard for nine countries based on threat environment, platform age, U.S. presence, defense spending, industrial base, and political will. Take a look.
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