Defense Bill Sets Up Clash With Trump

Plus, $2.1 trillion 'out the door'  [The Fisc](   By Yuval Rosenberg and Michael Rainey Defense Bill Sets Up Potential Clash With TrumpThe Senate Armed Services Committee this week approved the National Defense Authorization Act (NDAA), the annual bill that defines the budget and key policies for the Pentagon. Though the full details have not yet been released, the committee set a topline defense spending number of $740.5 billion for 2021 while including some controversial policy prescriptions. Here’s what we know so far from the committee’s [19-page summary]( Budget breakdown: The bill authorizes $636.4 billion for the base Pentagon budget and $69 billion for the off-budget overseas war-fighting account. In addition, it provides $25.9 billion for defense-related activities at the Department of Energy, and $9.1 billion for “defense related activities outside NDAA jurisdiction.” A larger military: The bill prohibits the Air Force from shrinking, and it renews calls for a significantly larger Navy. It authorizes the Defense Department to spend $9.1 billion for 95 F-35 Joint Strike Fighters, 14 more than requested by the Trump administration, while preventing the Air Force from retiring A-10 Warthog ground-attack jets and some F-15 fighters stationed in Europe. It also delays the retirements of KC-10 and KC-135 tankers until their replacement is ready. The bill would authorize $21.3 billion for Navy shipbuilding, $1.4 billion more than requested by the White House. And it affirms the national policy of building a fleet with “not fewer than 355 battle force ships” — a target Navy leaders have been backing away from in recent months. The bill also authorizes a slight increase in the size of the Army, to 485,000 soldiers, up from the 475,000-480,000 troop level it has sustained over the last year. Potentially controversial amendments: The bill comes at a time of growing [tensions]( between President Trump and his top military leaders, and some of its provisions could further destabilize the relationship between the White House and the Pentagon. The committee approved an amendment from Sen. Tim Kaine (D-VA) that would prevent the military from deploying active-duty troops against protesters. In a statement, Kaine said that the amendment “was something I would never have thought I needed to do until last week: prevent the use of military force against peaceful protesters.” The committee also approved a provision that would require the Pentagon to change the name of military bases named after Confederate commanders. "If we're going to have bases throughout the United States, I think it should be with the names of individuals who fought for our country," Republican Sen. Mike Rounds of South Dakota said Thursday. "This is the right time for it. And I think it sends the right message." The White House has signaled that it will veto the NDAA if the final version contains any such a language. In a tweet, Trump said his “Administration will not even consider the renaming of these Magnificent and Fabled Military Installations. Our history as the Greatest Nation in the World will not be tampered with. Respect our Military!” What’s next: Just the first step in a complicated annual process, the bill will head to the Senate floor for debate and a likely vote. The House will write its own NDAA, which then has to be reconciled with the Senate’s version. Both chambers must then pass an appropriations bill that provides the funds for defense spending – a separate and sometimes lengthy process that could drag well into the fall. A Bailout for Defense ContractorsThe Pentagon has announced that it is providing financial assistance to defense contractors who have been hurt by the coronavirus pandemic, Defense One [reports](. The Defense Department said this week that it has paid $135 million to five “mid-tier defense companies” as part of an effort to “sustain defense-critical workforce capabilities in body armor, aircraft manufacturing, and shipbuilding.” The money reportedly will be used to retain skilled workers and in some cases to rehire those who have been laid off due to the slowdown in business. The Pentagon also said that it plans to ask Congress for funds to defray costs for contractors as they address the crisis, including reimbursements for the costs of protective gear and the redesign of factories. The CARES Act allows defense contractors to be reimbursed for coronavirus-related expenses, but Congress has not provided any funds to make those payments. Charts of the Day: More Than Half of Coronavirus Response Funds Are ‘Out the Door’Congress and President Trump have responded to the coronavirus crisis with $4 trillion worth of measures to support the economy. The Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, says that just over half that money, $2.1 trillion, has now been disbursed or committed. “While several programs and policies got off to a rocky starts, including the [Paycheck Protection Program]( and [expanded unemployment benefits]( disbursement appears to be moving at record speed,” the group says. “For comparison, it took [14 months]( for half of the American Recovery and Reinvestment Act to be disbursed in 2009 and 2010.” Here’s CRFB’s breakdown of what’s already “out the door” and what remains to be spent along with a look at how the money has been disbursed over time. Quote of the DayFrom the Federal Reserve’s semiannual monetary policy [report]( to Congress, dated June 12:"The path ahead is extraordinarily uncertain. First and foremost, the pace of recovery will ultimately depend on the evolution of the COVID-19 outbreak in the United States and abroad and the measures undertaken to contain it. Importantly, some small businesses and highly leveraged firms might have to shut down permanently or declare bankruptcy, which could have longer-lasting repercussions on productive capacity. ... In addition, there is uncertainty about future labor demand and productivity as firms shift their production processes to increase worker safety, realign their supply chains, or move services online. Furthermore, if employees are not called back to their former jobs, their period of unemployment could increase, potentially leading to lower wages when they do eventually find a job.” Senators Considering Corporate Tax Breaks for Next Coronavirus Bill: Report Republicans on the Senate Finance Committee are studying a proposal from business lobbying groups to speed up some corporate tax breaks as part of the next coronavirus relief package, The Washington Post’s Jeff Stein reports: “Under current law, corporations are generally not allowed to claim federal tax credits if the credits exceed their overall tax liability, meaning they cannot receive more from the government than they pay in. If corporations cannot claim their federal tax credits, they can roll them into future years. The current proposal being discussed by several Republicans on the Senate Finance Committee would void that limit, allowing firms to ‘cash out’ on all their credits this year.” The proposal is reportedly one of the top priorities for business groups and some tax policy experts on the right back the plan. But Steve Rosenthal, a policy analyst at the Tax Policy Center, warned that the change presents risks for the federal government’s finances. “This form of cashing out could strip the government of revenue in the future to give money away to business owners today. That’s very dangerous,” Rosenthal told the Post. “This is another overreach by big businesses to grab tax dollars at a time when small businesses need assistance.” [Read more at The Washington Post.]( Senate GOPers Eye Bill to Prevent Next Shutdown Fight Before It Starts: Report It’s safe to say that President Trump and House Speaker Nancy Pelosi don’t enjoy a [warm working relationship](. Senate Republicans looking ahead to the fall are already worried that tensions between the two leaders could lead to another government shutdown fight — and concerned that they may pay the price for any such showdown in the November elections, The Hill’s Alexander Bolton [reports]( “There is widespread anxiety among GOP senators that Trump’s penchant for picking fights is a political liability as his response to nationwide protests against police brutality appears to be the cause of his declining approval ratings. “Republicans are now worried that he’s likely to pick a fight with Pelosi in September over government funding for the next fiscal year, which starts Oct. 1.” To defuse the risk of a shutdown, some Senate Republicans are reportedly considering legislation that would keep the government running even if the required annual spending bills haven’t been passed. The Senate hasn’t yet passed any of the 12 appropriations bills, while House Appropriations Committee Chairwoman Nita Lowey (D-NY) plans to mark up the spending bills next month. Sen. Mike Braun (R-IN) tells The Hill that the aim of the legislation would be to “get rid of shutting down the government as a lever that can be used by whoever chooses to do it” — or at least to get Senate Republicans on record as opposing a possible shutdown, helping them pin any blame on Democratic leaders Chuck Schumer and Nancy Pelosi. Some Democrats may be wary of automatically extending spending at previous levels or may object to the details of GOP proposals to prevent shutdowns. “If Schumer and/or Pelosi wants to keep that open as an option, I think it will be pretty easy to connect the dots on whose fault it would be if we ever have a government shutdown,” Braun told The Hill. Send your tips and feedback to yrosenberg@thefiscaltimes.com. 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