“DEFENSE NEWS“
“For the defense industry, budget documents teased an emphasis on shipbuilding, which dovetails with the Pentagon’s focus on China and Indo-Pacific.
It comes amid a push from seapower advocates and after Chairman of the Joint Chiefs of Staff Gen. Mark Milley said he would advocate for “heavy investment” in sea-, air- and space-centric platforms, with “bloodletting” in other areas of the budget.”
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“U.S. President Joe Biden’s fiscal 2022 budget request asks for $753 billion in national security funding, an increase of 1.6 percent that includes $715 billionfor the Defense Department.
The request, rolled out Friday, amounts to a slight decrease for the Pentagon when adjusted for inflation, and it’s well shy of the Trump administration’s projected $722 billion request for FY22. The proposal would also end the off-budget funding pool known the overseas contingency operations, or OCO, account.
The first installment of Biden’s budget plan contained only top-line discretionary spending numbers. A more detailed budget is expected in May or June, although that is not expected to include reliable numbers for the Future Years Defense Program, or FYDP, projections.
Lawmakers, for years under the Budget Control Act caps, have carved spending deals with rough parity between defense and nondefense spending. With the BCA expired, Biden wants to boost nondefense by 16 percent, to $769 billion. (Administration officials tout the number as 3.3 percent of gross domestic product, which is roughly equal to a 30-year average.)
“A chunk of this budget request, on the defense side in particular, is to pay for the pay raise for men and women in uniform, and then the civilians that support them; I think that’s something we could find support for on both sides of the aisle” an administration official told reporters Friday. “The focus will be on investments on nondefense, but also ensuring the Defense Department he can continue its strategic goals as we outcompete China, and as we ensure that the men and women in uniform have everything that they need.”
The overall national security top line of $753 billion includes $38 billion not earmarked for the Pentagon. While the budget document does not spell out where that money is going, a large chunk of that is traditionally tied up in the National Nuclear Security Administration, a semiautonomous agency within the Energy Department that handles nuclear warheads.
The defense top line is unlikely to satisfy key Republicans, who have claimed the Department of Defense needs a 3-5 percent annual increase to stay ahead of China and other evolving threats, nor progressives, who have asked for cuts of as much as 10 percent.
That’s not a bad thing, said Roman Schweizer, a defense industry analyst with Cowen.
“As we’ve said before, a flattish number would be positive because the Biden Admin will be signaling to Congress that it doesn’t want big cuts in defense,” Schweizer wrote in a note sent to investors Friday. “In Washington, when both sides are angry, that’s called a compromise. There will be a lot of griping along the way, but it’s the kind of outcome that probably makes sense.”
There will be no separate OCO request, the administration official said. Though intended as a wartime account, OCO became a tool to skirt congressionally mandated budget caps, with critics in both parties.
“Both sides of the aisle considered [OCO] a budgetary gimmick given that many of the overseas operations that they supported had been around for many, many years,” the administration official said. “So we had bipartisan interest in ensuring that those things were accomplished in the base defense budget. That’s what you’ll see presented from us today.”
Skinny on details
The document broadly discusses defense issues, with almost no dollar figures appended to any priorities. Deputy Defense Secretary Kathleen Hicks issued a memo in February outlining her biggest programmatic focus areas. While several of those areas are highlighted, dollar figures are currently missing.
Statements about global security are heavily weighed toward the State Department having the lead — a trend since the start of the Biden administration. For instance, the document pledges a “significant increase in resources to strengthen and defend democracies throughout the world, advance human rights, fight corruption, and counter authoritarianism.”
The only place where specific funding streams are called out comes when broadly discussing the need to update information and cybersecurity systems, which will include “$500 million for the Technology Modernization Fund, an additional $110 million for the Cybersecurity and Infrastructure Security Agency, and $750 million as a reserve for Federal agency information technology enhancements.”
However, there are some hints as to the administration’s defense-budget thinking:
China as the top challenge. The budget identifies China as the “top challenge,” and calls out the need to “leverage” the Pacific Deterrence Initiative. That would seem to imply that most, if not all, of what U.S. Indo-Pacific Command head Adm. Phil Davidson has sought will be included in the budget request.
R&D focus. Throughout the document, there is a focus on research and development for new technologies across the government, and the DoD is no exception. The budget request “prioritizes defense research, development, test, and evaluation funding to invest in breakthrough technologies that would drive innovation and underpin the development of next-generation defense capabilities.”
Cuts are coming. Paying for R&D and new capabilities requires cuts elsewhere, something previewed in the Biden administration’s early strategic guidance. The budget request supports the “DOD’s plan to divest legacy systems and programs to redirect resources from low- to high-priority programs, platforms, and systems. Some legacy force structure is too costly to maintain and operate, and no longer provides the capabilities needed to address national security challenges. The discretionary request enables DOD to reinvest savings associated with divestitures and other efficiencies to higher priority investments.”
Shipbuilding as a priority. Figuring out the right balance of shipbuilding was a major focus for President Donald Trump’s national security team, and it remains so for the Biden administration. Although details are thin, the budget document proposes “executable and responsible investments” in the fleet, including “the recapitalization of the Nation’s strategic ballistic missile submarine fleet, and invests in remotely operated and autonomous systems and the next generation attack submarine program.” Speaking to reporters Friday afternoon, Pentagon spokesman John Kirby said “certainly shipbuilding is something the secretary is going to be focused on, with a mind towards making sure we have the right mix of capabilities now and into the future.”
Nuclear on track for now? One of the biggest questions facing the defense budget is about nuclear spending, particularly around the Ground Based Strategic Deterrent, America’s replacement for its intercontinental ballistic missiles. Opponents have pushed for GBSD to be paused while alternatives are studied, but advocates say the program must stay on track or risk total derailment. An early sign of what the Biden administration has decided to do: “While the Administration is reviewing the U.S. nuclear posture, the discretionary request supports ongoing nuclear modernization programs while ensuring that these efforts are sustainable.”
Long-range fires wins out. “The safety and security of the Nation requires a strong, sustainable, and responsive mix of long-range strike capabilities,” according to the document, echoing a major focus from the Pentagon as it moves toward its new joint war-fighting plan. The budget invests in “the development and testing of hypersonic strike capabilities while enhancing existing long-range strike capabilities to bolster deterrence and improve survivability and response timelines.”
Climate and energy. Discussions about climate change as a security issue were a sensitive subject during the Trump administration, but Defense Secretary Lloyd Austin made it clear early in his tenure that the issue will be front and center for him. The budget request includes money to “plan for and mitigate impacts of climate change and improve the resilience of DOD facilities and operations. The discretionary request also invests in power and energy research and development in order to improve installation and platform energy performance and optimize military capability.”
Biological threats. In the post-pandemic world, the DoD may play a major part in gearing the U.S. up for another biological threat. At a time when a think tank is calling for tripling the biological threat R&D funding, Biden’s budget will fund “programs that support biological threat reduction in cooperation with global partners, emerging infectious disease surveillance, biosafety and biosecurity, and medical countermeasure research and development.”
Budgets traditionally are released in February, but a delay is common for the first budget request of a new administration. Budget planning takes most of the previous year, and a new team can only change so much without an extended timeline.
The Pentagon’s budget planning has been particularly difficult this transition, according to officials who point blame at Trump appointees they say blocked Biden’s landing team from seeing the budget documents until just before the inauguration.
The budget, initially set to be rolled out last week, was reportedly delayed in a disagreement about the size of the defense budget.
During her Feb. 8 confirmation hearing, Hicks told members of the Senate Armed Services Committee that she was concerned about the budget schedule.
“I think the biggest challenge that I will face, if confirmed, because of this is around budget transparency,” she said then. “Typically that information is shared with the transition team because the administration will owe to Congress a president’s budget submission in the spring.
“So the inability to look at that information … I think it will cause some delay in the timeline by which we can give budget quality information back to Congress. So that would be the area [where] I would ask for a little relief or understanding.”
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