Defense outlays for FY 2020 continue to accelerate to record levels. Outlays = earnings.
- August 2020 Treasury data shows that DoD investment (Procurement + RDT&E) outlays are running $22.4B or 12.7% ahead of the same period last year.
- FY 2020 outlays had been forecasted to be $18.6B or 8.7% higher than FY 2019. With two months left in the government fiscal year, outlays appear to be on track to be $27B higher than last year. Just three months ago, FY 2020 was running "only" 10% above the same period in 2019. The further acceleration reflects the Administration's increased push to get authorized items on contract and more money into the economy ASAP.
- The rate of change in annual outlays will flatten out in FY 2021 when outlays are forecasted to be only 6% higher than FY 2020. In constant FY21 dollars, FY 2021 will be the second highest level of defense outlays in the nation's history. Even with a relatively optimistic Trump defense budget forecast through FY 2025, outlays will decrease in constant dollar terms after FY 2021.
The FY 2021 Budget Authority will be flat to the FY 2020 appropriation but that's still a lot of money.
- Congress enacted $712.6B in Pentagon spending for FY 2020 ($622B in baseline spending, $11.3B MilCon and $79.3B in OCO/emergency spending). The President requested $705.4B for FY 2021 ($629B in baseline spending, $7.8B for MilCon and $69B for OCO)
- The Senate and the House have each completed their versions of the National Defense Authorization Act (NDAA) and are waiting to go to conference to resolve differences. The toplines of the two versions are in sync with each other and with the President's request and are in keeping with the two year topline deal made in 2019. While there are a few programmatic differences (79 F-35s as requested by the President in the House version but 95 in the Senate version, one Virginia class sub in the Senate version but two in the House version), these programmatic differences will be relatively easily resolved given that this is an authorization bill. The hard to resolve differences between the two NDAA versions and with the President are policy issues like Confederate statues, transgender, etc. We expect that the final NDAA will not be approved until the lame duck session.
- On a party line vote the House has already completed its version of the Pentagon appropriations bill. Similar to the NDAA, the House appropriations is generally in sync with the President's request in terms of dollars, but policy riders on Confederate statues, Pentagon reprogramming authority and repeal of the authorizations for the use of force first passed in the wake of 9/11 are veto bait for the President. Moreover, the Senate Appropriations Committee has not even scheduled its mark up yet and there are few remaining work days until the election recess to complete that, get to the floor, go to conference, etc. Staffers have already begun to work on Continuing Resolution language. We think it unlikely that there will be a final Pentagon appropriation bill much before Thanksgiving. In the end it will look a lot like the Administration request.
