The Pentagon is proposing a $583 billion budget, about $2 billion more than enacted for this year, with increased funds to combat Islamic State terrorists and counter Russian aggression.

The base defense budget of $524 billion for fiscal 2017 would be supplemented by $59 billion in war-fighting funds under the White House spending plan sent to Congress on Tuesday. Considering inflation, the defense budget would be a slight cut from this year, Bloomberg Government senior defense analyst Robert Levinson said.

Spending for the fiscal year that begins Oct. 1 would include $7.5 billion for the fight against Islamic State, a 50 percent increase over this year. It’s part of what the budget calls a strategy that “draws on every aspect of American power” to deliver blows to the group’s leaders and “attack plotters, infrastructure and revenue sources.” An additional $4 billion would go to the State Department and other international programs for efforts such as countering the group’s propaganda and providing humanitarian assistance.

Counterterrorism initiatives would include $1.2 billion next year and $4.5 billion through 2021 to expand intelligence, surveillance and reconnaissance orbits of Gray Eagle, Predator and Reaper drones, according to budget documents. The pilotless aircraft made by General Atomics would make 90 patrols a day worldwide by 2020, up from about 70 today.

Responding to “increasing attempts by the Russian Federation to constrain the foreign and domestic policy choices of neighboring countries,” the budget would provide $3.4 billion for the Defense Department’s European Reassurance Initiative “to increase security and reassure our NATO allies and partner states in Europe.”

The budget, including war funds, would provide $184 billion for research, development and procurement. That includes $12.5 billion for “future technologies to reshape the battlespace,” such as hypersonic, pilotless and autonomous systems.

While the Pentagon would spend $1.2 billion through 2021 to improve its surface warfare capacity, it would invest $40 billion over the same period to improve underwater warfare capabilities, including a new lightweight torpedo and technologies to make submarines quieter.

The budget also would upgrade the underseas fleet by spending $2 billion through 2021 for continued development and production of an extension built by General Dynamics Corp. for the Virginia-class submarine so it can carry 40 Tomahawk cruise missiles instead of the 12 that’s now its maximum. Spending on the submarine upgrade would increase from $205 million next year to $1 billion in 2021.

Budget documents say the Navy would make significant progress in reaching a goal of 308 vessels by fiscal 2024, up from 272 today. While Republican presidential candidates have criticized the administration for letting the fleet decline, Defense Secretary Ash Carter has cautioned the Navy that the 308-vessel goal “should be met but not irresponsibly exceeded” so that more can be spent on advanced weaponry and upgraded systems for electronic warfare.

Lockheed’s F-35

While budget documents emphasized procurement of the F-35, a major increase for the fighter made by Lockheed Martin Corp. wouldn’t come until the projected purchase of 105 of the jets in fiscal 2021. From fiscal 2017 through 2020 the Pentagon’s new five-year plan calls for 299 aircraft, 37 fewer than previously planned.

The budget calls for 63 F-35s in fiscal 2017, down from 66; 70 in 2018 instead of 88; 80 in 2019 versus 90; and 86 jets in 2020, down from 92, according to Pentagon figures obtained by Bloomberg News.

Cyber Operations

The Defense Department is requesting $6.7 billion for cybersecurity operations
in fiscal 2017, including to develop offensive hacking capabilities, or about $870 million more than enacted for this year.

U.S. Cyber Command is developing 133 cybersecurity teams with almost 6,200
military and civilian personnel, which are scheduled to be fully operational by
2018. The funding would provide for “innovative approaches to provide a virtual environment for cyber personnel to train,” according to budget documents.

The fiscal 2017 request also would develop “offensive cyber capabilities to support military operations and provide response and deterrence options to leadership,” according to the documents.

The U.S. finds itself in a cyber-arms race with other countries. Russia, China
and other countries "will almost certainly continue developing" offensive
weapons, Director of National Intelligence James Clapper said in a summary for
Congress of the global perils facing the nation.

"Many actors remain undeterred from conducting reconnaissance, espionage, and even attacks in cyberspace because of the relatively low costs of entry, the perceived payoff, and the lack of significant consequences," Clapper said in the assessment prepared for a Senate hearing.

Sidestepping Controversies

The Pentagon request sidesteps some past controversies. The Defense Department isn’t seeking to cancel any weapons systems and has said it won’t try again until 2022 to retire the A-10, an aging close-air support plane that’s popular in Congress and is being used against Islamic State.

Still, a fight is developing already over the size of the budget. Carter says the amounts for the basic budget and the war-fighting fund are mandated under the two-year budget deal. But Representative Mac Thornberry of Texas, the Republican chairman of the House Armed Services Committee, says the amount for war-fighting is a floor, not a ceiling, and he’ll push for more money.

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