(Bloomberg) — The emerging deal Kevin McCarthy is discussing to make him speaker of the House could make agreements on new defense spending impossible next year, at a time when the US is intent on backing Ukraine against the Russian invasion and growing more wary of China’s stepped up aggression toward Taiwan.
(Bloomberg) — The emerging deal Kevin McCarthy is discussing to make him speaker of the House could make agreements on new defense spending impossible next year, at a time when the US is intent on backing Ukraine against the Russian invasion and growing more wary of China’s stepped up aggression toward Taiwan.
Part of the agreement being discussed would be to cap fiscal year 2024 discretionary spending across government at 2022 levels, according to three people familiar with the discussions. National defense spending, which primarily funds the Pentagon, was about $782 billion in fiscal 2022 and rose $75 billion to $857 billion in fiscal 2023.
Lawmakers would have to contend with a $130 billion cut to discretionary spending, including a potential $75 billion cut to national security, if not more, as defense hawks want to increase the budget above this year’s levels.
Shares of defense contractors declined on the news. Northrop Grumman Corp. and Lockheed Martin Corp. erased gains and were down more than 1% as of 12:17 p.m. in New York, while Raytheon Technologies Corp. pared its advance to trade up 1.2%.
The deal that McCarthy has agreed to would have the House commit to passing bills that would cap all discretionary spending at fiscal year 2022 levels, meaning roughly $1.47 trillion.
His team is working to fill in members of the Republican caucus on what that could mean: If such a budget resolution is passed, lawmakers could divide that anyway they like, with a defense cut, or with a defense increase with cuts in other discretionary spending. A GOP aide said that the Appropriations Committee has no intention to cut defense spending.
Even so, adhering to a total discretionary cap could lead to chaos and unpredictability since House Democrats and the Senate would not support anything that would significantly hobble domestic spending, leaving two possibilities: A cut in defense, but more likely that the US government being funded through continuing resolutions for a long time, handicapping the Pentagon.
Slashing defense won’t sit well with most GOP defense hawks on the Armed Services and Appropriations panels, who for years have pushed for major increases in national security. Those lawmakers such as Michael McCaul of Texas and Mike Gallagher of Wisconsin have so far backed McCarthy. It would also need to get signoff from Democrats and the Senate.
“If report of this deal are accurate, it doesn’t reflect the will of the party or the will of Americans and imperils our national security,” said Roger Zakheim, the Washington director of the Ronald Reagan Presidential Foundation and Institute and former general counsel on the House Armed Services Committee.
Indeed, one person familiar with the matter said the issue came up on a call McCarthy had with Republicans Friday and that defense hawks were concerned about it.
The 2023 spending boost underscored bipartisan concerns about rising inflation, strategic competition with China and the Russian invasion of Ukraine. It was also the only way to receive Republican support for the annual defense authorization bill and the omnibus spending bill containing the Pentagon’s budget as well.
“China and Russia are watching,” former Republican Representative Liz Cheney wrote in a tweet that included a link to the Bloomberg article. “If @GOPLeader agreed to weaken our national defense for his own personal gain, that will be his legacy, and our nation will suffer.”
Some holdouts against McCarthy such as Representative Matt Gaetz of Florida are also fierce opponents of continued military assistance for Ukraine, and have threatened to try to block additional aid. Later Friday, the Biden administration was set to announce a new package of assistance including about 50 Bradley Fighting Vehicles, for Ukraine’s military.
–With assistance from Erik Wasson.
(Updates with details of proposal, starting in fourth paragraph.)
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