Analysts: Two-Year Spending Deal Likely in New Congress

The next Congress will be split between a Democratic House and a Republican Senate, and analysts expect debates regarding budget spending caps for defense and domestic spending to begin early next year.

Roman Schweizer, an analyst with the Cowen Washington Research Group, said in an email that another two-year spending deal is likely to occur in the 116th Congress. Aerial view of the Pentagon, Arlington, VA

“We do not expect defense spending to experience the rate of growth it did in [fiscal years 2018 and 2019] nor do we believe it will decline substantially,” he said, adding that Democrats will want to spend more on domestic issues, while GOP defense hawks will want to fund their own priorities. “Fiscal conservatives will be in a deep minority,” he noted.

William Hoagland, senior vice president of the Bipartisan Policy Center in Washington, D.C., said that lawmakers will be eager to negotiate the budget cap levels early next calendar year, “so the appropriators can get to work to fund defense for [fiscal year] 2020.”

Congress previously negotiated a two-year lift on the caps imposed by the 2011 Budget Control Act, but that agreement concluded with the fiscal year 2019 budget. If lawmakers do not reach a deal, defense spending will be capped at $576 billion for FY ’20, a $71 billion reduction from this year’s appropriated budget, Hoagland noted. The current FY ’21 budget caps for defense stand at $590 billion.

“I see another major debate over the level of these caps … and a negotiated settlement with the House Democrats [to] increase spending for defense so long that there is an increase in spending for non-defense, almost the same scenario that existed this last spring,” he said.

Lawmakers will likely be loath to touch operations and maintenance and personnel dollars, Hoagland noted. That means that procurement and research-and-development funds will be under pressure, even if there are cap increases, he added. President Trump has called for a cabinet-wide budget decrease by 5 percent next year, an effort that Pentagon officials are working to meet, Deputy Defense Secretary Patrick Shanahan told reporters in October (Defense Daily, Oct. 26).

If Democratic leaders are able to negotiate an infrastructure deal with President Trump, “that could be the nondefense piece of a budget deal to get defense back to flat or higher,” Schweizer noted. “A flat budget that keeps the FY ’19 level of $716 billion for national security is achievable, while [overseas contingency operations] spending could come down as Democrats may work to step away from overseas missions in Afghanistan, Syria and elsewhere.”

A “protracted battle” over the 2020 budget seems likely given the split Congress, noted Byron Callan of Capitol Alpha Partners. However, it is unlikely to result in sequestration come January of that year, and “there will be a deal to avoid that outcome,” he added.





More Stories You Might Like