Biden will struggle to cut defense spending despite pressure

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WASHINGTON (Reuters) – President-elect Joe Biden will come under immense pressure from progressives in the Democratic party to cut the defense budget once he takes office in January.

But defense spending is unlikely to be cut since it supports countless U.S. jobs during the coronavirus recession.

In three years, U.S. President Donald Trump’s administration has increased defense spending 19% from $619.5 billion to $740 billion.

Progressive (NYSE:PGR) Democrats in U.S. House of Representatives have called for a reduction in military spending to combat the coronavirus.

“Even if Democrats end up taking the Senate, I don’t think they’ll want to start putting in cuts for defense right away,” said Todd Harrison the director of Defense Budget Analysis at Center for Strategic and International Studies adding, “because we’ll still be in, or slowly emerging from, this recession.”

Harrison said sudden changes could mean job losses in the lead up to mid-term elections. The possibility of cutting defense jobs could hurt vulnerable Democrats seeking reelection at a time when their majority in the House is already razor thin.

For that reason deep defense cuts may not be popular with many moderate Democrats either, a former Pentagon official added. The economic impacts of a weapons order are far-flung. Experts say each defense job often indirectly contributes to three or four additional jobs in a community, making them the type of jobs politicians will go out of their way to protect.

The defense industry also does not see lower budgets any time soon. Raytheon Technologies (NYSE:RTX) Chief Financial Officer Toby O’Brien told Reuters following their recent earnings announcement, “You are kind of looking at 2022-ish time frame if there were to be a downward adjustment.”

The Pentagon’s own budget projections “would be relatively flat through 2025, averaging about $707 billion per year in 2021 dollars,” the Congressional Budget Office said in a September analysis.

The deep ties to the defense industry of current candidates to become Secretary of Defense also suggests radical cuts are unlikely.

Michele Flournoy, a former top U.S. Department of Defense official has a deep history inside the Beltway working with defense contractors, including a current stint on the board of Booz Allen (NYSE:BAH) Hamilton.

Another contender, former Secretary of Homeland Security Jeh Johnson, sits on the board of defense contractor Lockheed Martin (NYSE:LMT) Co.

If a smaller budget were adopted, the first items any administration would put on the chopping block include Army troop levels and the number of multi-billion dollar Navy aircraft carrier groups deployed.

That assessment came out of a mid-October, Center for Strategic and Budgetary Assessments/Ronald Reagan Institute exercise where a bipartisan group including staff from Capitol Hill and former Pentagon officials who will influence a Biden administration envisioned those cuts if smaller budgets came to pass, people familiar with the exercises said.