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Analysis: Uncertainty clouds defense spending forecast

Lingering issues and partisan discord mean that a lot can still change when it comes to fiscal 2024 defense spending

Questions remains about the future of fiscal 2024 defense spending.
Questions remains about the future of fiscal 2024 defense spending. (Bill Clark/CQ Roll Call)

Even with a budget deal firmly set in law, the size and characteristics of the fiscal 2024 defense budget remain even more in flux than defense bills usually are this time of year. 

A number of factors now in play could drive defense spending far above — or far below — the budget caps set in a law enacted earlier this month under pressure of a looming debt default.

Congress never knows in summer exactly how much will be spent on defense — or for what — in the fiscal year that starts each October. But more clarity might have been expected at this year’s midpoint, because of the new budget law’s caps on discretionary defense and nondefense appropriations in fiscal years 2024 and 2025, which permit modest growth in spending for both categories.

Instead, uncertainty reigns. 

First, the law does not limit emergency spending, and a measure or measures appropriating such money, mainly but not only for Ukraine, is distinctly possible. If that happens, the defense budget would rise above the law’s prescribed levels — maybe by a lot — though key House Republicans are resisting that.

Inflation, meanwhile, will have an enormous bearing on how much of a real increase the Pentagon will receive or not. Yet no one knows what inflation will be in the fiscal year that does not even begin for three months. 

Defense spending could also go way down under another scenario. Under the June budget law, if all 12 appropriations bills are not enacted by Jan. 1, 2024, then defense and nondefense spending caps would be cut in fiscal 2024 to 1 percent below the fiscal 2023 levels — a potential multibillion-dollar retrenchment for defense and nondefense programs alike.

Arkansas Republican Steve Womack warned his fellow House appropriators about this possibility at the full committee’s June 22 markup of the draft Defense bill for fiscal 2024, which covers $826.4 billion of the national defense money total. 

“If we believe that this was an important bill, and it is,” Womack said, “we need to put emphasis on the other 11 as well, because it all gets undone if we can’t get our work accomplished.”

In addition to uncertainty over the total amount of appropriations — the so-called topline — how it is allocated is still up in the air. 

The Armed Services panels and Defense appropriators agree on most things. But the House Appropriations Committee’s Defense money bill, which the panel teed up for floor consideration in a vote last week, proposes spending additions and subtractions worth billions of dollars that may or may not be supported by Senate appropriators, who have yet to mark up their bill or even schedule it. 

A new ‘sequester?’

Under the June budget agreement, total discretionary national defense spending, excluding emergency money, at the Pentagon and the Energy Department’s National Nuclear Security Administration would rise from $858.6 billion in the current fiscal year to $886.3 billion in fiscal 2024 and then $895 billion in fiscal 2025.

From fiscal years 2023 to 2024, that would be just over a 3 percent increase before inflation’s effects are considered, so it may turn out to be an actual cut from the fiscal 2023 level, though that was among the largest sums appropriated for defense since World War II, even after adjusting for inflation.

A much more challenging scenario for defense (and nondefense) budgets would occur if all 12 appropriations bills are not enacted by Jan. 1. In that instance, for defense accounts, the resulting 1 percent cut in fiscal 2024 would slash the defense total by almost $9 billion compared to the fiscal 2023 level.

This 1 percent cut would be even more serious when compared to the fiscal 2024 total prescribed in the budget deal. Using that as a comparison, a 1 percent cut would make defense budgets fall fully $36.3 billion short of what the recent agreement outlined for fiscal 2024.

The 1 percent cut is not a far-fetched prospect. Congress has not enacted all its funding bills on time for years. 

And this year could be harder than usual to reach agreement. House Republicans’ proposed cuts to nondefense programs and a number of partisan policy provisions in that chamber’s spending bills — not to mention the polarized political climate at large — could trigger spats and delays.

Womack told his fellow appropriators that the 1 percent reduction would be “unacceptable, given the security issues that are going on around this world.” 

He urged his colleagues in both parties to compromise to avoid that scenario. 

“So I hope that everybody will kind of lock arms,” he said. “We’re going to have some divisions in here, and we’re going to have to negotiate, and both sides are probably going to have to give up a little bit in order to get where we need to go.”

Supplemental surge?

The budget deal covers so-called base budgets, but allows for the possibility of emergency spending. That creates the prospect of defense spending going up even higher in fiscal 2024 than the budget framework prescribes.

The Senate Armed Services Committee’s draft National Defense Authorization Act, which the panel approved last week, hews to the $886.3 billion total set in the budget deal, as does the House’s newly minted version.

However, the Senate Armed Services Committee approved an amendment to its bill calling for more defense spending than the budget deal prescribes.

The panel’s “sense of the Senate” language, while not binding on the Biden administration, says “there are growing national security concerns that require additional funds beyond the defense spending limit and urges the President to send emergency supplemental funding requests to address those concerns, to include continued support for Ukraine, additional munitions production, and additional naval vessels and combat vehicles,” according to a committee summary. 

Such an emergency spending increase would affect either the fiscal 2023 budget or the fiscal 2024 total, depending on when it would be enacted. 

Congress has already allocated more than $35 billion for the Defense Department alone in fiscal 2023 to support Ukraine, part of an overall appropriations total surpassing $100 billion since Russia’s February 2022 invasion.

Leaders of the defense oversight panels in both chambers want such a supplemental, and the party leaders in the Senate issued an unusual joint statement earlier this month endorsing one too.

By contrast, House members in the Freedom Caucus and others oppose such a supplemental. Speaker Kevin McCarthy, R-Calif., appeared to oppose it too in an interview earlier this month with Punchbowl News in which he said a defense supplemental is “not going anywhere.”

Despite the definitive sound of that statement, McCarthy appeared to allow for the possibility of enacting emergency defense money if it is part of regular appropriations bills. 

“We will go through the appropriations process and we will do the numbers that we just agreed to,” he said, referring to the debt limit deal.

What they agreed to in that arrangement was caps on only nonemergency spending, as Schumer and McConnell noted in their statement.

“This debt ceiling deal does nothing to limit the Senate’s ability to appropriate emergency supplemental funds to ensure our military capabilities are sufficient,” the Senate leaders said.

House cuts on table

Even if the total amount for defense were somehow set at this point in the calendar, major unresolved funding questions loom.

The House Appropriations Committee’s fiscal 2024 Defense money measure made several multibillion-dollar proposals, both as a result of what the panel included in addition to the budget request and what it denied from the request.

Senate appropriators are likely to completely or partially disagree with at least a few of these proposals. 

First, consider a few top-dollar programs the House panel either didn’t fund or cut from the request. 

House appropriators chose not to provide more money to keep building LPD 33, an amphibious transport dock ship that was not in the budget request but that the Marine Corps craves and the House and Senate NDAAs both approve. The Marine Corps commandant would like $1.7 billion for the ship in fiscal 2024. 

Senate appropriators — especially Susan Collins of Maine, the top Republican on the committee — are keen to boost Navy ship procurements, including for so-called amphibs. 

More broadly, the House committee denied $4 billion of the overall procurement request and moved the money elsewhere in the bill. For example, they nixed a request for fully $1.9 billion that the Pentagon wanted to set aside for bulk buys of components under multiyear munitions procurements. 

House appropriators also proposed reducing Defense Department civilian payroll accounts by $1 billion. 

The House bill would also claw back $805 million in previously appropriated funds for a variety of programs. Senate appropriators will draw up their own list of these so-called rescissions.

Senate appropriators may also not go along with a proposed $715 million cut in climate programs. 

Culture wars

Meanwhile, House appropriators added money for a number of programs that their Senate colleagues may or may not agree with. 

The House Defense spending bill would funnel fully $800 million into raises averaging 30 percent for junior enlisted military personnel next year. That boost would come in addition to the 5.2 percent across-the-board raise that the president requested for all uniformed personnel and civilians. 

And they would create a $1 billion “hedge” fund to help incubate cutting-edge military systems.

“A hedge in this sense will resource organizations capable of developing non-traditional solutions from non-traditional sources by intentionally taking calculated risks to incentivize positive, deliberate, accelerated change,” the committee’s report said. 

On top of those possible flashpoints, the House bill’s so-called culture war provisions — on abortion, LGBTQ issues, diversity and counterextremism programs and more — may also run afoul of the Senate. 

And heated debate over these policies could gridlock the entire appropriations process.