Huge Deficit = Defense Budget Cuts? Maybe Not

The congressional calendar and strategic inertia may come together to keep the defense budget relatively high. The calendar helps because the fiscal 2021 defense budget will likely be passed while Congress is in a free-spending mood.

By MARK CANCIAN

The current Washington consensus sees deep defense budget cuts in the face of soaring deficits driven by the emergency legislation to stabilize the American economy as it reels from the effects of the COVID-19 pandemic.

It may be wrong. The congressional calendar and strategic inertia may come together to keep the defense budget relatively high. The calendar helps because the fiscal 2021 defense budget will likely be passed while Congress is in a free-spending mood. The next administration — Republican or Democratic — will develop budgets beyond that, but the constraints of long-standing strategy will prevent major changes to force structure and acquisition that would drive deep budget cuts.

The Challenge

The conventional narrative holds that the defense budget will be squeezed as the debt level rises, and the public focuses inward on rebuilding the country's health and economic position. These are reasonable concerns.

The deficit in fiscal 2020, initially projected to be about one trillion dollars ― itself getting into record territory without emergency spending― is now projected to be $3.7 trillion, and Congress is not finished spending. Debt held by the public will rise to 101 percent of GDP, a level not seen since World War II. Even if the world is willing to take US debt, rising interest payments will squeeze the rest of the budget.

Simultaneously, the electorate is likely to focus inward. The pandemic is already the leading popular concern, not surprisingly. The economic devastation caused by restrictions on normal commercial activities has produced the greatest downturn since the Great Depression.

It would be reasonable to put these factors together and project a substantially reduced defense budget. However, the congressional calendar and the inertia of a long-held strategy will likely mitigate any downturn.

The Calendar

The calendar will help because Congress is likely to pass the 2021 appropriation this fall, when the government will still be operating under emergency conditions. Congress has already passed four bills for pandemic response and economic stimulus and is developing another in the multi-trillion range. There are a few voices for fiscal constraint, but they are overwhelmed by a sentiment to “do more.”

Indeed, some lawmakers and commentators are proposing increases to the defense budget to stimulate the economy, enhance deterrence of China, or protect the defense industrial base. Adam Smith, chairman of the House Armed Services Committee, has indicated his reluctance to do more than protect the industrial base, but a future stimulus bill could include such enhancements as part of a bipartisan deal.

Finally, last year's bipartisan budget agreement set levels for defense and domestic spending in fiscal 2021. Undoing that agreement would be a major lift, requiring a bipartisan consensus that does not seem to be occurring. Even if the Democratic left wanted to make such cuts, defense hawks in the House and Senate could block them.

Thus, in the near-term proposals for enhancements seem to be offsetting thoughts about cuts. As both the House and Senate consider their authorization acts, they seem to be aiming at roughly the level of the president's proposal and the bipartisan budget agreement.

Strategic Inertia

The United States has had some variation of the same national security strategy since the end of the Second World War (or perhaps more accurately, since the Korean War and publication of NSC 68, which enshrined a long term competition with the Soviet Union). That strategy involves global engagement, forward-deployed forces, alliances to offset global competitors, and commitment to maintaining an international system of free trade, human rights and secure borders. Scholars can argue about the details and how well the United States has implemented such a strategy, but the major elements have been constant.

President Trump has chafed at many of these elements but has generally gone along, however reluctantly. One would expect such reluctant continuity in a second Trump administration, should that occur

One would also expect strategic continuity in a Biden administration. Biden was, after all, vice president during the Obama administration, which, after the shocks of 2014, laid out a strategy of confronting five threats: Russia, China, North Korea, Iran, and terrorism. One would expect Biden to implement something like that strategy if he were in office. That does not mean that a Biden administration would do everything a Trump administration would do. The left-wing of the Democratic party would push some level of cuts, perhaps 5 percent, and take aim particularly at nuclear modernization, foreign arms sales, and Middle East conflicts.

But this longstanding strategy of global engagement will put a floor on defense cuts. Remaining engaged with NATO, supporting our Asian allies like Japan and South Korea, and maintaining some presence in the Middle East, even if scaled back, takes a lot of forces. These need to be at a relatively high level of readiness to deploy globally and be credible. The all-volunteer force needs to maintain compensation and benefits at a sufficient level to compete for labor in a market economy. Competing with China and Russia requires investment in a wide variety of high technology―and costly―new systems, as well as the R&D foundation to support these innovations.

Other strategies are certainly possible. Members of the Democratic left and Republican right, as well as some elements of the academic and think tank community, have proposed strategies of “restraint”, whereby the United States would significantly scale back overseas engagements. Such strategic change would produce a substantial cut in the defense budget. However, neither major candidate has supported such a change, and the national security policy community (aka “the blob”) is adamantly opposed.

Despite this relatively optimistic assessment, the future is still cloudy. The president's budget proposal forecasts a level budget in constant dollars. That meant that the defense buildup was over, even if Republicans continued in office. Such budgets do not come close to the 3 to 5 percent real growth that defense officials had talked about to implement the National Defense strategy and would entail choices between readiness, force structure and modernization.

A Democratic administration, with a notional 5 percent cut in the defense budget, would not constitute the deep cut that a Sanders or Warren administration might have entailed, but the $35 billion that a 5 percent cut would entail is still a lot of money. Forces would get smaller, likely wiping out all the recent force expansion, and new programs would be delayed.

Bottom line: Defense may not be heading into a budget hurricane, but it is not heading into sunlight either. It faces the friction that occurs when expensive plans collide with constrained resources.

Mark Cancian, a member of the Breaking Defense Board of Contributors, was a Marine colonel and senior official at the Office of Management and Budget before he joined CSIS.

https://breakingdefense.com/2020/05/huge-deficit-defense-budget-cuts-maybe-not/