2023 budget negotiations start soon, WH expected to propose small Defense increase

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In just a few weeks the annual budget dance, this time for 2023, will start. People who follow these things closely predict the White House will request only a very small increase for the Defense Department, knowing Congress will plus it up anyway. For the latest detail, the Federal Drive with Tom Temin turned to Bloomberg Government reporter Roxana Tiron.

Interview transcript:

Tom Temin: Roxana, good to have you back.

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Roxana Tiron: Good to be with you.

Tom Temin: So the analysis you have looked at says that the administration’s request for DoD is going to be up only a tiny bit.

Roxana Tiron: That is correct. The budget analysts who do this for a living have sort of made their prognosis. And honestly, it’s quite a wide range, it would range somewhere between 735 billion to 765 billion. We have to take into account the fact that you have the defense budget, but the national security budget, that President Biden’s going to put out, also includes nuclear programs at the Department of Energy. So overall, I think you’d be looking at somewhere around 770 billion, close to 800 billion, ultimately. But they have to take into account the inflation numbers, because they did not budget for that last year.

Tom Temin: And now we know that the pass backs have been sent to the various components and to the Pentagon.

Roxana Tiron: Correct.

Tom Temin: But we don’t know exactly what they said.

Roxana Tiron: What we know so far is that they have decided to basically take into account 4% for inflation instead of the 2.6% that they were planning on last year when they did sort of their forecasts for future years. So we do know that and we do know that the Office of Management and Budget has sent back the Defense Department’s budget proposal with the top numbers. And now each of the military services is working from those numbers. Obviously, they’re not disclosed yet, but all we know is that the numbers are likely to increase because they’re accounting for a higher inflation number.

Tom Temin: So that range up to 755. How does that compare with what Congress actually will have appropriated for 2022? That’s coming out, presumably after the CR in a couple of weeks?

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Roxana Tiron: Yes, so the highest range that the analysts were predicting, I think, was 765. And that actually, you know, Congress is still working on a Defense appropriations bill, Defense spending bill for this fiscal year, which is fiscal 22, started Oct. 1. Our understanding from our reporting is that Defense will get about 5 billion more than has been authorized. So the Pentagon has been authorized at $740 billion, just the Pentagon alone. We’re not counting here to DOE number. And because Republicans in Congress, particularly in the Senate, have pushed for a much higher number for defense and for domestic spending to come down. What we’re hearing is that potentially the spending number that will be approved for the Pentagon would be around 745 billion.

Tom Temin: All right, so they’re basing it on the authorization but not the appropriation. I mean, there’s always a delta there, because as your article points out, there’s almost an assumption that Congress will put in more than the administration wants, that’s part of that deal of the parity or so to speak between defense and non-defense spending.

Roxana Tiron: Yes. And that’s exactly what the Defense authorizing committees have done. The Senate and House Armed Services Committee, basically, they were in unison, by, you know, they increased the defense budget authorization by 25 billion already. So President Biden has signed that into law. So he signed the authorization for 740 billion, so to speak, and now they have to get the spending money is just an authorization. So they have to get the spending money, so they would potentially get more money than the Defense authorization bill. So they will get about 745 billion if not more from Congress, which means they’re gonna have about six months to spend that, at that rate.

We’re speaking with Roxana Tiron, she’s a reporter with Bloomberg Government. And looking at the analytics outputs that you reported on, those people build numbers based on something. So besides the top line number, do we know what the priorities are that are expressed in that budget for the Biden administration? Because if you’ve got 4% inflation, well that could be eaten up by health care costs and salaries for troops. And that’s it.

As you already know, the personal costs are the highest and so that’s exactly right. You will have to account for those expenses. We’re looking at a 4.5% pay raise that is already planned for, so that’s gonna eat up a lot of the funds as well. And then you have the whole focus that has to leave room for development in hypersonic weapons, AI, cyber and obviously for some of the unplanned operations that are most likely to come up.

Tom Temin: And that energy department piece, too, that’s kind of crucial because that’s where this ongoing back and forth about what, how much, and how far to modernize the elements of the nuclear arsenal. And that’s been a back and forth debate for years.

Roxana Tiron: And I think that’s gonna stay at a steady pace, despite the disagreements between Republicans and Democrats on nuclear weapons and how much we need to fund. That has been a topic where Republicans tend to win on just making sure that we have a modernized nuclear arsenal. However, it is a common understanding in Congress that our nuclear arsenal needs to be modernized.

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Tom Temin: Yes, because Russia has modernized its, as far as we can tell, and China is modern kind of to begin with, relative to ours.

Roxana Tiron: Yes, correct.

Tom Temin: Anything else we can discern from these documents in these analyses with respect to strategy?

Roxana Tiron: Well, the Biden administration still has to release their national defense strategy, which they haven’t done. And normally, that would inform some of the budget as well. So we’re still waiting to see that. I mean, we’re clearly aware that there’s been a pivot, so to speak to the Pacific region. So China concerns are at the forefront. But as you can see now, don’t just have the Pacific region, now our focus has been on Eastern Europe as well. So it’s going to be interesting to see how the Biden administration is going to spell out its national security priorities and how it wants to sort of show them to the world.

Tom Temin: And even though they’re not saying, the contractors do have some influence over these budgets, because the acquisition lines get influenced, I think, to some degree by contractors, if not directly, then through the Congress members in which their districts operate so that we don’t really know yet how many more see this x that or n the other?

Roxana Tiron: We don’t, but what we know is that every year, Congress does change that budget, particularly in defense and includes their own priorities, which is fair, it is what their job is, to decide what should be funded and what shouldn’t. However, you already have a Pentagon budget that is eaten up by the F-35. You have some major, major programs that need to be successful. And I think you’re going to see a lot of oversight, if not necessarily more money towards this programs, but a lot of oversight. You have the F-35. You have the the Ford carriers, you have, like I said before, the development for hypersonic weapons, AI, all of that, you know, needs a careful eye from Congress.

Tom Temin: Every year I asked them for a C 17 that says Federal Drive on the side, but they haven’t granted me that yet. So I have to fly commercial.

Roxana Tiron: You might have to hire a good lobbyist.

Tom Temin: All right. Roxana Tiron is a reporter with Bloomberg Government. Thanks so much.

Roxana Tiron: Thank you for having me.

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