Political Report: 11/13/2018

 In Weekly Wire

Main Story: Democratic House Victory Muddies Already Murky FY2020 Budget Forecast

At around 9pm on Election night, as Democratic senators in Indiana and Missouri were losing their races and Democratic House victories were few and far between, a rough consensus seemed to emerge that there would not be a “blue wave” during the midterms. But as things stand now, it is difficult to argue that case. Despite losing three incumbent Senators, Democrats are poised to only lose between one and three Senate seats as races in Arizona and Florida are heading into recounts. In the House, Democrats have picked up the most seats in an election since Watergate and should head into the 116th Congress with a clear majority (FiveThirtyEight estimates they will net 38 seats, giving them a 15-seat majority). While Republicans picked up seats in the Senate, the most significant impact of this election will be Democrats seizing control of the House and gaining an even larger voice in the Congressional budget process. While exact leadership positions will be finalized in January, we have a pretty reasonable idea of what the structure will look like for DoD’s authorizing and appropriating committees in the House.

This new majority is arriving at a time when assumptions about growing defense budgets now seem premature. While the FY2019 Future Years Defense Plan (FYDP) called for a steady increase in spending at roughly the rate of inflation from FY2019 through FY2023, the White House surprised DoD in October by asking for plans that would accommodate a cut in overall defense spending from a scheduled $733 billion to only $700 billion. This would represent a significant setback for the modernization plans laid out in the National Defense Strategy earlier this year. As the table below shows, even if one assumes that such a cut would be equally distributed across accounts, this would represent a major blow to planned investment, with a cut of over $31 billion over the next four years. Even this seems optimistic, as it is almost always easier for DoD to cut planned procurement and development than personnel costs. Between 2011 and 2013, procurement and R&D reductions accounted for 36% of all topline cuts. Similarly, DoD frequently plans to reduce O&M spending but only rarely succeeds in doing so. A more accurate cut would thus fall more heavily on investment spending.

Luckily for Pentagon, the fight for FY2020 has only just begun. The White House may propose cuts in both defense and non-defense spending, but it is unclear if Congress will acquiesce. It is difficult to envision newly empowered House Democrats accepting significant reductions to non-defense spending while defense hawks in both chambers are unlikely to accept cuts to the Department of Defense. In addition, it is almost certain that the Democratic House and Republican Senate will run into significant policy obstacles during the appropriations process, leading to even more hurdles. At this point it is hard to see Congress managing to pass FY2020 appropriations until well after the end of September. Making any other predictions such as on spending levels, policy riders, or shutdowns is premature.

Estimated Impact of Proposed Defense Cuts ($millions)

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House Activity

The House is in session this week, but with most of the focus on leadership elections for the 116th Congress, not much is going on. The only non-suspension bill up this week is legislation that would remove the gray wolf from the endangered species list.

Senate Activity

The Senate will continue to focus on nominations, but may find time to take up legislation reauthorizing the Coast Guard.

Congressional Defense Activity

  • HPSCI
    • No hearings this week
  • SSCI
    • 11/15 ‘Closed Briefing: Intelligence Matters’, Hart 219, 2pm
  • HFAC
    • 11/14 ‘U.S. Department of State Counterterrorism Bureau: Ensuring Resources Match Objectives’, Subcommittee on Terrorism, Nonproliferation, and Trade, 2172 Rayburn, 2pm
  • SFRC
    • 11/14 ‘Nominations’, Full Committee Hearing, SD-419 Dirksen, 230pm
  •  SASC
    • 11/14 ‘Department of Defense’s Cybersecurity Acquisition and Practices from the Private Sector’, Full Committee Hearing, SR-222 Russell 3pm
  • HASC
    • 11/14 ‘Interagency Cyber Cooperation: Roles, Responsibilities and Authorities of the Department of Defense & the Department of Homeland Security, Full Committee Hearing, 2118 Rayburn, 3pm
  • SAC-D
    • No hearings this week
  • HAC-D
    • No hearings this week

Government Activity Round-up

Reviews of CBO and GAO reports will resume next week.

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