President Trump's fiscal 2018 defense budget request could 'add to budget gridlock'

Specialist David Baldwin (C) and other soldiers with the 1st Battalion, 5th Infantry Stryker Brigade Combat Team of the 25th Infantry Division out of Ft. Lewis, Washington charge in formation during a firefight with insurgents January 16, 2005 in Tal Afar, Iraq.
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President Donald Trump's fiscal 2018 defense budget request is probably "dead on arrival," an influential industry analyst said Tuesday.

As reported Monday, the White House wants an additional $54 billion more in military spending for fiscal 2018, which would represent a nearly 10 percent jump overall for defense spending to $603 billion. The additional money for defense would come from essentially slashing non-defense discretionary spending to boost the military budget by the same amount.

"The proposal lacks meaningful detail and has the potential to add to budget gridlock because it doesn't seem to be fashioned in a manner that will allow Congress to form a coalition for an orderly passage of appropriations bills," Howard Rubel, a defense industry analyst at Jefferies said in a research note Tuesday.

Trump: Budget will include increase in defense spending

In short, Rubel sees little chance of success on Trump's defense request as it currently stands. "His budget is likely to be dead on arrival," the analyst said.

The president will likely provide more clarity on his spending priorities and defense policy on Tuesday evening during his formal address to Congress.

According to the Committee for a Responsible Federal Budget, non-defense discretionary spending represents only 15 percent of the budget and 5 percent of spending growth over the next decade.

"Getting that much money that quickly from that small a share of the budget I think will be challenging," said Marc Goldwein, a senior vice president and policy director for the CRFB, a non-partisan think tank focused on budget issues. He pointed out that some of the non-defense discretionary spending goes to core functions of government as well as areas such as the Department of Homeland Security.

Goldwein expects it would be easier for the Trump administration to focus on the mandatory part of the budget and use those areas for savings. "The mandatory budget is huge and most of the health and retirement parts are growing rapidly," he said.

As an example, Social Security, Medicare, Medicaid and other health programs make up about half of the federal spending this year and are projected by the CRFB to be responsible for about two-thirds of spending growth over the next decade.

However, if the Trump administration were to make cuts to entitlement programs, such as Social Security and Medicare, it could trigger more resistance particularly from Democrats. So far the administration has maintained it doesn't plan cuts to these major entitlement programs.

Trump said Monday the hike in defense spending will be offset by "finding greater savings and efficiencies across the federal government. We're going to do more with less and make the government lean and accountable to the people."

The administration is expected to make major cuts in funding to the Environmental Protection Agency. Also, foreign aid cuts are possible.

The defense stock train is still going

Either way, Trump faces an uphill battle ahead because his fiscal 2018 defense proposal also received criticism from key defense hawks who want a bigger boost in military spending. For example, Senate Armed Services Chairman John McCain (R-Ariz.) on Monday called Trump's fiscal 2018 budget request inadequate and stated, "We can and must do better."

"The efforts to gut the domestic discretionary elements of the budget hurt popular home town funding projects, support diplomatic relations overseas, and cut public health and environmental programs," said Rubel. "The actions fail to address entitlements, which account for the largest part of the budget; this enflames the budget hawks. The defense spending is not large enough, so the defense hawks are likely irritated."

Meantime, the Defense Department is expected this week to present its supplemental request for the fiscal 2017 budget to the Office of Management and Budget. The current fiscal year started Oct. 1, 2016 but the funding under the continuing resolution extends only through April 28, 2017.

The fiscal 2017 defense budget amendment request is expected to go primarily to fund readiness spending and total at least $20 billion, according to analysts.

Defense Secretary James Mattis outlined in a memo released Feb. 1 that his first priority will be to focus on military readiness, not modernization initiatives. The readiness spending is likely to include such things as more troops as well as money for training and maintenance.

"We believe the amendment will be well supported in Congress given the current state of readiness, which the dollars will flow through the Operations and Maintenance and procurement line items," said Baird analyst Peter Arment in a research note Tuesday.

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