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Defense spending--winners and losers

The $1.1 trillion omnibus spending bill that was be passed recently also contains a defense appropriations bill for 2014. The defense appropriations bill blunts the impact of full sequestration by providing extra cash for the military. It essentially maintains military spending at the same level as last year.

Critical highlights of the defense bill include:
• Stopping the Navy’s plans for the early retirement of nine ships, including 7 cruisers;
• Forcing the Air Force to retain Global Hawk block 30 drones;
• Directing the Secretary of Defense to essentially avoid furloughing civilians at all costs in the coming year regardless of the budget squeeze.
• The COLA retirement cuts that we complained about were maintained.

The bill contains clear winners and losers in the service modernization plans for 2014:
• The Army is taking a big hit with its equipment spending down over 12 percent from last year.
• Army research and development was also cut significantly.
• Army aviation and the Stryker dual-use vehicle, while the funding is down slightly, light utility helicopters received increased funding; Apache attack helicopters are fully funded; and Blackhawks for the National Guard were approved for their multi-year request.
• The Army’s readiness issues were not dramatically reduced

Navy procurement spending is essentially static from last year however Congress added over $1 billion in new shipbuilding money. The biggest beneficiary as a result is the Virginia-class submarine program. Congress also approved advanced funding for 22 F/A-18E/F Super Hornets for the Navy while cutting the EA-18G Growler program, the UH-1Y helicopter, the P-8A Poseidon, and the KC-130J tanker aircraft..

Aircraft spending across the services was cut. The Air Force is absorbing another large reduction to its procurement account. Congress directed:
• A cut of over half a billion in Joint Strike Fighter program funding, including for the Marine Corps’ STOVL variant.
• The Air Force to purchase an additional eight MQ-9 Reaper drones above the President’s request for 12.
• Reductions for modernization of the bomber fleet, F-22s, C-17s and C-5s.
• The C-130 program increases for engine and propeller upgrades

Full sequestration budget cuts were avoided, and reportedly Pentagon leaders say they intend to spend the money that was given back in the next budget year of 2015 on readiness. Time will tell.

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