Trump’s Defense Spending Hike Counts on a Reagan-Era GimmickBy
‘A fantasy,’ analyst says of finding enough waste to cut
Contractors, investors buoyed by prospect of more spending
Defense contractors and investors are celebrating Donald Trump’s plan to boost weapons spending, but Pentagon budgeting experts say he’s counting on savings that won’t come true -- the old Washington saw of rooting out waste, fraud and abuse.
“It’s a fantasy,” Mackenzie Eaglen, a defense analyst with the conservative American Enterprise Institute who has briefed Trump’s advisers, said of the president-elect’s campaign pledge to finance a more robust military partly by slashing bureaucracy and duplication at the Pentagon.
“I tried several times to disabuse them of the notion that this could ever pay for even a fraction of Trump’s buildup costs,” she said.
As a candidate, Trump called for defense initiatives that analysts such as Eaglen say would add $55 billion to $80 billion annually to a spending request that totals $583 billion this year. Trump envisions a Navy with dozens more ships than the service has sought and an Army as big as the one President George W. Bush sent into Iraq and Afghanistan for full-scale invasions.
Encouraged by those prospects, the S&P Aerospace & Defense index climbed 3.9 percent on Wednesday, outperforming the broader S&P 500, to the highest level since 1989. It was led by Raytheon Co., L-3 Communications Holdings Inc., Lockheed Martin Corp. and General Dynamics Corp. The index climbed an additional 2 percent Thursday.
Fulfilling his campaign promises is only part of the defense spending challenge facing the new president.
There’s an immediate issue: delivering on Trump’s pledge to remove caps under the 2011 Budget Control Act that would constrain Pentagon spending over the next four years. President Barack Obama, backed by Democratic lawmakers, has resisted eliminating the defense caps unless those on domestic spending are eased as well.
Howard Rubel, a defense analyst with Jefferies Inc., said in a note that “the election appears to embolden fiscal conservatives and military hawks. The prospects for eliminating” the caps “jumps substantially. The problem is that domestic safety net-type spending may suffer” and “addressing the deficit may be an afterthought.”
The caps, which have been temporarily modified three times, are due to return in fiscal 2018, the first budget of the new administration. Through 2021, the caps would force about $106.6 billion in Pentagon cuts if no agreement is reached and the automatic cuts known as sequestration kick in, including about $33 billion in fiscal 2018.
Senator Jeff Sessions of Alabama, who’s Trump’s top defense adviser and is said to be a leading candidate for defense secretary, told Defense News last month that “it is painful for me as a budget” hawk “to acknowledge that we can’t stay at a sequester-like level. We are just not going to be able to do that.”
Trump also faces pending weapons decisions such as whether to increase purchases of Lockheed’s F-35, the Pentagon’s costliest weapons system, to 70 in the fiscal 2018 budget from the 63 requested this year.
And then there are long-term funding questions that require advanced planning, including how to cope with what the military calls a “bow wave” of spending after 2021. That includes the planned modernization of all three legs of the air-land-sea triad of nuclear arms, which Trump has endorsed.
Trump’s broad aspirations are clear. In April he said his “administration will lead a free world that is properly armed and funded, and funded beautifully.”
Among his promises were to increase the Army to 540,000 soldiers from about 475,000 today, reversing Obama’s downsizing that would reduce the force to 450,000 in the next fiscal year. Trump also has vowed to “build a Navy approaching 350 surface ships and submarines,” up from about 272 today and the service’s goal of 308 ships.
For now, at least, the familiar -- and elusive -- Washington refrain of cutting “waste, fraud and abuse,” as President Ronald Reagan put it in the 1980s, remains the centerpiece of Trump’s financing plan.
His campaign website site used a variation on the Reagan theme, saying he would “pay for this necessary rebuilding of our national defense by conducting a full audit of the Pentagon, eliminating incorrect payments, reducing duplicative bureaucracy, collecting unpaid taxes, and ending unwanted and unauthorized federal programs.”
Eaglen, who has worked for Republican lawmakers and served in the Pentagon under Bush, said those are goals that should always be pursued but “cannot yield $55 to $60 billion per year in new money to reinvest -- period.”
“Some of Trump’s ideas for a larger Navy, etc. will take a lot more money up front than any reform agenda” can generate, Michael O’Hanlon, a defense and foreign policy fellow at the Brookings Institution, said in an e-mail. “Unambiguously, what he wants to do will take more money,” said O’Hanlon, author of “The $650 Billion Bargain: The Case For Modest Growth in America’s Defense Budget.”
Other passages in the Trump campaign statement “seem to indicate he would raise revenues or cut other parts of government to pay for defense,” Todd Harrison, a defense analyst with the Center for Strategic and International Studies, said in an e-mail. “That is much more realistic, but the devil is in the details and no details are provided.”
But “the idea that auditing the Pentagon is going to uncover billions of dollars of waste is a myth,” he said.
Dov Zakheim, who was Pentagon comptroller under Bush, said that while an audit “will not save money per se,” it can focus attention on needless bureaucracy.
“Some 70,000 positions have been added since 1990,” Zakheim said. “Has DoD become more efficient as a result? I don’t think so.”
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