The now apparent election of Joe Biden (it is over, folks) has inspired dread of 10% cuts to DoD budget authority in favor of large domestic agenda items, e.g., healthcare, climate change accommodation, etc. Fear not.
The poorer-than-expected performance by the Democrats in their Senate races is going to be determinative of Defense budget prospects. So far Democrats have flipped two seats, Arizona and Colorado, and the Republicans one, Alabama, for a net gain of only one, well below pre-election forecasts. At 50-48, winning both of the two Georgia runoff races on January 5th and then using VP-Elect Harris as the tie breaker is the only path for Democratic control of the Senate. This is of course possible and monumental resources will be spent on both sides to that end, but the probability of Democrats winning both of these runoffs is relatively low. For the most part Americans seem to like split government.
Meanwhile the Democratic caucus in the House has been reduced by five seats to 226, just eight above the minimum of 218. The smaller House majority will increase the power of the progressive wing within the Democratic caucus in a way very similar to the clout enjoyed by the Freedom Caucus within the Republican majority from 2015 to 2018. At that time, the 36 caucus members essentially had veto power on the Republican leadership and on the party agenda. With a Democrat in the White House, it can be expected that the 95 members of the House Progressive Caucus will be more assertive in pursuing their goals which have included calls to reduce defense spending by 10%.
However, a Republican-led Senate or even one with a very fragile Democratic majority will act as a brake on the more aggressive parts of the Democratic agenda whether from the House or the White House and will extract concessions if anything is to pass at all. One area of concessions likely to be sought is the size of the defense budget. Maintaining a robust defense budget will garner support from even some Democrats in both the House and the Senate and as long as there is so little concern over deficits, there may still be room to fund domestic agenda items, e.g., infrastructure, broadband, etc.
The chart shows the track of the DoD topline since 2012.
- The FY21 budget has not yet been passed but should be before Christmas. However, the FY21 topline has been agreed by both parties and delays in passage may be attributed mostly to policy issues and solvable allocation issues.
- The topline for FY22 and beyond will be established by the Biden Administration and will become public no earlier than early February and possibly later depending on the transition.
- Shown below on the orange hashed line is the Trump proposed topline which is the basis for current Pentagon planning (include $20B OCO). The blue hashed line shows the magnitude of a 10% reduction as proposed by some members of the progressive wing of the Democratic House caucus. A 10% cut has been flatly rejected by House leadership (HASC Chairman Adam Smith) who did seem, however, to be open to a $10-20B cut.
