Quick Hits - what it means
What’s Coming Next Week in Defense…
On February 9 the Obama administration will release its budget proposal for the 2017 fiscal year. The expected topline defense proposal according to the October 2015 budget deal should be $583 billion, split $524 billion in base budget funding and $59 billion for Overseas Contingency Operations funding.
The OCO Debate…
The debate now comes from Republicans who fear that the presently proposed budget will not be enough to account for today’s military threats that have evolved even since the November 2015 budget agreement. The main source of contention is the OCO budget. The administration opposes OCO funds as a gimmick to circumvent sequesters from the Budget Control Act of 2011. Recall sequester amounted to a $50 billion dollar cut each year to the topline defense budget. However, as the Pentagon has faced increased, shortfalls the OCO funds have become necessary to cover everyday military costs. Last year, $30 billion of the $58.8 billion OCO budget paid for base budget services. What Republicans want from next week’s budget proposal is an increased defense budget that will supply sufficient funds for everyday military operations without touching the $59 billion allocated for OCO. Senate Armed Services Chairman John McCain has stated the problem will not go away until the BCA caps are repealed. At present, the most recent budget deal in November 2015 leaves BCA caps in place through 2021, as the law is written.
Comments from Secretary Carter…
Today, Secretary of Defense Ash Carter foreshadowed the administration’s intention to prioritize funding a “Third Offset” agenda over legacy programs in the upcoming FY17 defense budget proposal.The goal of “Third Offset” programs is to modernize U.S. military technology, assigning greater investment towards cyber intelligence, weapons development, and superior artificial intelligence capabilities. Specifically, funds and technologies being used to combat ISIS will be expanded, as well as funds for rotational forces in Europe and undersea weapons technology. The administration has proposed several cuts to existing programs in order to pay the $12-$15 billion cost of “Third Offset” programs over the next five years. Some of these suggested cutbacks are the Navy’s Littoral Combat Ship program, a delay to the F-35A production schedule, and shrinking active-duty Army troops by an additional 40,000 over the next few years. Overall, the FY17 defense budget is expected to preference development of new technology over upgrades to existing programs.
Secretary Carter’s budget plans are already ruffling feathers inside the Pentagon and on Capitol Hill. By prioritizing modernization over force structure, he’s setting up a showdown with lawmakers whose states and districts benefit from legacy programs.
SAVE THE DATE –
HASC NDAA MARKUP SET FOR APRIL 27:
The House Armed Services Committee is slated to mark up its FY17 National Defense Authorization Act on April 27, according to multiple sources familiar with the panel’s tentative plans. The date of the markup, subject to change, puts this year’s defense policy bill on a similar track as last year’s legislation. HASC marked up the FY16 NDAA on April 29.Read more
- Congress has returned for the second session of the 114th Congress;
- Floor actions on the near horizon include: North Korea sanctions enforcement; Iran Terror Finance Transparency and proposed changes to Senate filibuster rules
- FY17 budget will be delivered one week later than usual on February 9th (technically budget is due to Congress on first Monday of February)
- Anticipate agency posture hearings to begin the week of February 8th
- Despite the Balanced Budget Agreement (BBA), it looks like the defense spending figure will again open the dialog on a new budget agreement
- Most recent BBA (reached in Nov 2015) called for FY17 baseline defense budget of $573B with and additional $59B for Overseas Contingency Operations (OCO)
- HASC Chairman Thornberry and SASC Chairman McCain have both publicly expressed concerns that significant terror attacks have continued since the time of that agreement. Rumors abound that the FY17 budget about to be delivered cuts defense top line by $15B.
- The appropriations process (hearings, request deadlines, mark-ups, etc.) for FY17 is expected to move very quickly due to the election year
- Clients should be meeting with Congressional staff about their FY17 concerns in February and March at the latest
- State of the Union occurred earlier than usual this year
- President Obama focused more on past achievements for his final State of the Union, rather than policy initiatives for the coming year
Congress’s Holiday Gift to Obama…
Today, the Senate finalized the $1.8 trillion spending deal and tax package in a 65-33 vote. It is expected that the bipartisan legislation will be signed into law by the President shortly.
The Republicans got:
Lift on long-time ban on oil exports
Permanent tax breaks for business
Sec. 179 small-business expense deductions
The Democrats got:
30% solar tax credit extended, wind protection tax through 2022
Most GOP policy riders (Syrian refugee blocks, rollbacks to Dodd Frank) did not make the bill
Corporations not required to disclose political giving to SEC
Block to IRS rules regulating 501(c)4 group activities
The Cybersecurity Act of 2015 is passed under the spending and tax package, marking the most significant cyber legislation in years. The law permits private companies, such as Facebook and Google, to share private information with intelligence agencies and DHS in an effort to prevent cyber attacks. The issue is extremely controversial, not across party lines, but between privacy rights advocates and members of the intelligence/security community.Read more
Race to the Finish...
Late Tuesday night House Speaker Paul Ryan announced a $1.1 trillion spending bill and $500 billion tax package deal to fund the government through fall 2016. The spending legislation and tax package will go to the House, to be voted on separately, on Thursday. The bills are expected to pass despite criticism from Democrats who feel the tax breaks are too costly and far right GOP members who refuse to concede on the refugee issue. Senate Majority Leader Mitch McConnell has not specified whether the Senate will take up the spending and tax bills separately or together, but has until Dec. 22 to seal the issue before the most recent continuing resolution expires. Expect both bills to be passed before the weekend. Text of the 2009 page Omnibus may be found here: http://docs.house.gov/billsthisweek/20151214/CPRT-114-HPRT-RU00-SAHR2029-AMNT1final.pdf. Accompanying tables should be released within 24 hours.
FY16 Spending Negotiations
The original deadline Dec. 11 deadline for the omnibus bill is likely to be extended through the weekend to Dec. 18. Congress has been struggling to complete the spending legislation in time due to ideological contestations over certain policy riders including refugee policy, financial regulations, and Planned Parenthood funding. A short continuing resolution will prevent a government shutdown, but it is not a permanent solution. Stay tuned.Read more
The NDAA Officially Signed
Last Wednesday, as most had left town for the Thanksgiving weekend, President Obama signed the $607 billion NDAA into law. Some highlights:
How Big is a House Governing Majority?Read more