By Matt Vallone, Director of Research & Analysis
Main Story: Congressional Budget Process Update
There has been a flurry of defense budget activity over the last few weeks. While health care and the ongoing Trump-Russia imbroglio have received all the headlines, Congress has moved forward with both National Defense Authorization Acts (NDAA), and the House Appropriations Committee has moved forward with defense spending legislation. This week, we will provide a quick rundown of the status of the four main bills for defense, as well as a broader update on the budget process. Congress is positioned to pass both authorization and appropriations for defense prior to the end of September, but significant budget issues remain both within the House Republican Caucus and more generally in the Senate. While we expect budget issues to remain in the periphery of discussion as long as health care, and potentially tax reform, dominates the news, the start of FY2018 is getting closer and closer.
One important takeaway is that, while the numbers seen in legislation are significantly higher than the White House’s request, there has been no progress on a spending deal that involves Senate Democrats. Given their ability to filibuster appropriations legislation, they will likely have some say in the final spending bills. Current plans by House Republicans are likely to incorporate $200 billion in reductions in mandatory spending, as well as cuts to discretionary spending, neither of which will be easily accepted by Senate Democrats. It remains unclear what the final spending deal will be and defense budget watchers should hold off on the champagne pending these negotiations.
House NDAA – Last week, a bipartisan majority of the House of Representatives passed the FY 2018 NDAA, 344-81. While the report for the final version of the legislation is not yet available, the committee report does provide some information as to what was in the base bill. This document does not contain any information from any of the dozens of amendments that were adopted during the week of floor debate (information on those amendments can be found here). Overall, this bill sets a significantly higher spending level than President Trump’s request, with $667.4 billion going to DoD compared to $639.5.
Senate NDAA – The Senate has not yet debated the SASC FY18 NDAA, but it did pass unanimously out of committee, reflecting bipartisan support for the legislation. It sets an even higher topline than the HASC NDAA, with $692 billion going to DoD including base and OCO. It is likely that any consideration of the NDAA will await the return of Chairman John McCain, who is currently recovering from minor surgery. Senate Majority Leader Mitch McConnell has indicated this might be something considered in the first two weeks of August, though it remains to be seen if this threat to recess will actually take place.
HAC-D – The House Appropriations Committee has begun marking up spending legislation and, on June 29th, it passed the FY2018 Defense Appropriations bill on a voice vote. When you combine this legislation with the previously passed MilCon-VA bill it sets funding levels generally in line with the HASC NDAA. Base spending would be $593.8 billion and OCO would get $74.5 billion. It is unclear when this legislation may go to the floor.
SAC-D – The Senate Appropriations Committee has only marked up the MilCon-Va bill. It remains to be seen what level of spending the Senate will agree to, as Democrats can filibuster any appropriation that they object to.
Other Activity – The House Budget Committee has announced that it will mark-up a budget for FY 2018 on Wednesday (only three months late). This will likely feature defense spending in line with the House Defense Appropriations bill.
House Activity – The House will consider a variety of rule bills on energy regulations, reauthorizing the FAA, and legislation on land exchanges. For those of us in the Washington area, the House will also take up a suspension bill creating a Washington Metrorail Safety Commission.
Senate Activity – The Senate had planned to consider the replacement to the Affordable Care Act, the Better Care Reconciliation Act, this week, but with Sen. John McCain being out recovering from surgery, they will likely defer consideration for at least a week. This will likely allow the Congressional Budget Office to complete its analysis of the bill. Instead, the Senate is likely to continue to work through nominations this week, beginning with the nomination of Patrick Shanahan to be Deputy Secretary of Defense.
- 7/18 ‘Nominations Hearing’, Full Committee Hearing, SD-G50 Dirksen, 930am
- 7/18 ‘Nominations Hearing’, Full Committee Hearing, SD-G50 Dirksen, 230pm
- 7/18 ‘Options and Considerations for Achieving a 355-ship Navy from Former Reagan Administration Officials’, Subcommittee on Seapower, SR-222 Russell, 4pm
- HASC – No scheduled hearings
- HAC-D – No scheduled hearings
- SAC-D – No scheduled hearings
Government Activity Round-Up
Nothing directly defense-related from CBO this week, but there are two articles of interest for those who follow the budget. The first is a release of the CBO’s analysis of the President’s 2018 budget request. This has all sorts of interesting stats and conclusions, but one of the more salient is that military spending would be ‘sharply lower’ in the out years than under current law. More here. The second interesting document is CBO’s regular update of its budgetary and economic outlook. This piece looks at the impact of recent economic data on CBO’s ten-year forecasts for outlays, revenue, the deficit, and other key indicators. In order to understand how the CBO views the next ten years, this is an important document to read.
Two interesting GAO reports out this week. The first is a GAO review of Navy shipbuilding that follows up on a 2013 report that found the Navy frequently takes delivery of ships with considerable defects. The GAO found that the Navy continues to take delivery of ships with defects that persist even through the post-delivery period. They recommend that the Navy develop policies to identify possible defects earlier in the process and ensure that they are addressed prior to delivery. The second report looks at DoD’s use of incentive contracts and whether they outperform award fee contracts. The GAO found that the DoD “does not consistently collect data on the outcomes of these incentive contracts,” making it difficult to assess how they impact performance. GAO recommended that DoD develop practices to gather and review relevant performance data.
No new defense-related publications from CBO this week.
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