Political Report: 7/24/2019

 In Political Report

Main Story: White House and Congressional Negotiators Agree to FY20 and FY21 Budget Deal

After weeks of trying, White House and Congressional negotiators reached an agreement on topline spending levels and suspending the debt ceiling through 2021 (full text here). The deal would set the topline for National Defense (050 spending, including some activities in DoE, DHS, and DoJ) at $738 billion in FY2020 and $741 billion in FY2021.

If the deal passes in the House and Senate, it would adjust Budget Control Act (BCA) caps for both Defense and Non-Defense in its last two years, lifting the threat of sequestration. These new toplines would mean growth in National Defense spending of 3.1 percent from FY2019 to FY2020, and then 0.4 percent from FY2020 to FY2021. Non-Defense spending would grow by 1.4 and 0.8 percent, respectively over those years.

This agreement also includes a commitment by House Democrats not to append difficult policy riders to the eventual appropriations bills, setting the stage for fairly rapid adoption of funding legislation prior to the end of FY2019 in September. The legislation should pass the House this week and the Senate next week.

The agreement results in a compromise that is likely to be unsatisfying for almost anyone. Liberals will be unhappy that the deal does not block funding transfers to fund the southern border wall, while deficit hawks will decry that the bill will add hundreds of billions of dollars to the deficit in just two years, and trillions over a decade. For defense hawks, the deal yields a topline that, while higher than planned in the FY2019 FYDP, is still lower than the FY2020 President’s Budget request.

Defense spending took a backseat to deficit reduction in the White House’s negotiating position. The topline for national defense spending under the deal will be fairly significant—$738 billion in FY2020 and $740 billion in FY2021. However, the totals for defense spending for those two years are lower than almost any of the other proposals made for this year, including the Democratic House’s proposed budget. A compromise that revolved primarily around matching defense and non-defense spending increases would have seen a spending level that was higher than the House Budget proposal but lower than the President’s request. While the FY21 figures may eventually change due to ‘emergency’ requests or supplementals, the fact that the combined figures for FY20 and FY21 are beneath the House totals is an indication that factors beyond matching defense and non-defense spending were driving negotiations.

Avascent has long held the view that defense budgets would start to see slower growth in the early 2020s. This spending deal, with its very low year-over-year growth, may indicate that a return to slower growth or even decline is closer than we expected. We will have more on this as our team monitors the budget deal’s implementation and the passage of appropriations in September. While nothing is certain in Congress until the votes are counted, with set toplines and policy disputes banished from the appropriations process, there should be no major obstacles to wrapping up appropriations quickly.

House Activity

The House will take up and likely pass the budget deal this week before leaving for the August recess. Most of the press, however, will cover the testimony of Robert Mueller before the House Judiciary Committee and House Permanent Select Committee on Intelligence.

Senate Activity

On Tuesday, July 23, the Senate confirmed Mark Esper as Secretary of Defense, ending a prolonged period when the Department of Defense has been operating with only acting secretaries. There has been no confirmed Secretary of Defense since Jim Mattis announced his resignation in December of 2018. The Senate will also take up and pass legislation providing funding for 9/11 first responders health care.

Congressional Defense Activity

  • HASC
    • No hearings this week
  •  SASC
    • 7/24 ‘Nominations – Norquist’, Full Committee Hearing, SD-G50 Dirksen, 10am
  •  HAC-D
    • No hearings this week
  •  SAC-D
    • No hearings this week
  • SFRC
    • 7/24 ‘Reviewing Authorities for the Use of Military Force’, Full Committee Hearing, SD-419 Dirksen, 1015am
    • 7/24 ‘Confronting Ebola: Addressing a 21st Century Global Health Crisis’, Subcommittee on Africa and Global Health Policy, SD-419 Dirksen, 230pm
    • 7/25 ‘Business Meeting’, Full Committee Meeting, S-116 The Capitol, 1030am
  • HFAC
    • 7/24 ‘The FY20 Budget: State Department Counterterrorism and Countering Violent Extremism Bureau’, Subcommittee: Middle East, North Africa, and International Terrorism, 2172 Rayburn, 2pm
    • 7/25 ‘Human Rights in Southeast Asia: A Regional Outlook’, Subcommittee: Asia, the Pacific, and Nonproliferation, 2172 Rayburn, 10am
    • 7/25 ‘Russia and Arms Control: Extending New START or Starting Over’, Subcommittee: Europe, Eurasia, Energy, and the Environment, 2172 Rayburn, 2pm
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