Defense spending could increase by $136 billion over the next four years because of Donald Trump’s win and the Republican retention of both the House and Senate, one analyst predicted.
Roman Schweizer, an analyst with the Cowen Washington Research Group, said the Pentagon’s current plan to spend $136 billion more than Budget Control Act caps between fiscal 2018-21 is likely to become the “bare-minimum target” for Republicans in control of government.
“Fiscal conservatives will demand deficit/debt reduction, so how this all comes together will depend heavily on other major elements of a reconciliation package and on President-elect Trump’s pledge to improve non-defense infrastructure. This will be the key watch issue in the coming months,” Schweizer wrote.
One sector that could see some of that additional money is the shipbuilding industry, since Trump has called for a 350-ship Navy, including 13 carriers. Today’s fleet has 272 ships, including 11 carriers.
Mackenzie Eaglen, an analyst with the American Enterprise Institute, also predicted Trump’s administration will build more of current platforms to accomplish his stated goal of growing the military while he works to reinvigorate the defense and aerospace industrial base.
“He is going to need a modern day [Navy Secretary] John Lehman [who served under President Ronald Reagan] to help him speed up acquisition and show results quickly. Which means he’ll also need to build what’s available now, like more LCSs, Arleigh Burkes and Joint Strike Fighters to name a few,” she said.
The littoral combat ships are built by Lockheed Martin and Austal USA, the Arleigh Burke-class destroyers are built by General Dynamics Bath Iron Works and Lockheed Martin makes the F-35 joint strike fighter.
Contractors might also stand to benefit if Trump reverts to the typical Republican strategy of a smaller federal government and more help from the private sector.
“We would expect a GOP government to go back to prior playbooks to shrink the size of the federal government and outsource more work (as opposed to the in-sourcing that has taken place under Obama). This would definitely take longer to enact, but it would be a multiyear effort that should benefit the entire sector,” Schweizer wrote.
One negative for the Defense Department: Schweizer predicted that the Democrats preparing to lose the White House could throw a wrench in finalizing the fiscal 2017 appropriations bills before the current continuing resolution expires in the beginning of December.
“We could easily see a messy end to FY17 appropriations process, depending on how Democrats try to use any remaining leverage in the lame duck. Another three-month punt into March could be very possible, meaning a half-year CR would have cost/schedule impacts to major programs,” the report says.
