US Debt Ceiling Deal Puts $16 Billion Defense Side-Projects at Risk of Being Unfunded

Learn how the US debt ceiling deal affects $16 billion defense side-projects, leaving them in funding uncertainty and impacting national security priorities.

Jun 2, 2023 - 13:06
Jun 2, 2023 - 13:07
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US Debt Ceiling Deal Puts $16 Billion Defense Side-Projects at Risk of Being Unfunded
US Debt Ceiling Deal Puts $16 Billion Defense Side-Projects at Risk | Representative Image

In a significant development, the US debt ceiling has been raised, but it comes with a catch: federal spending cuts that could impact $16 billion worth of lower-priority defense projects. These projects, which typically fall under the defense budget, may now face a funding shortfall due to the new bill's provisions.

The recent agreement to avert default has left lawmakers, the Department of Defense, and various agencies scrambling to figure out how to finance projects that were previously added last-minute to must-pass defense policies. These projects would often be approved without much debate.

Under the debt deal, national security spending for fiscal year 2024 has been capped at $886 billion, aligning with President Joe Biden's budget request. Among the "unfunded priorities" on the military services' lists are tanks manufactured by General Dynamics, aircraft produced by Lockheed Martin, and a ship for the Marines by Huntington Ingalls Industries. Each branch compiles its own list, which this year includes new facilities, ship upgrades, munitions, and long-range radars aimed at safeguarding the nation.

Before the debt deal, insiders estimated that the relevant committees were looking at a national security budget exceeding $900 million for fiscal year 2024. Typically, a portion of the $16 billion in unfunded priorities, along with additional billions in lawmaker initiatives, would be added to the overall defense budget. This could have resulted in a boost of $30 to $40 billion in funding.

Congress has historically surpassed the president's defense spending requests by significant margins, often increasing spending by tens of billions of dollars. In recent years, annual increases of over $20 billion were approved for defense spending in both 2022 and 2023. In the past, the Pentagon utilized "Overseas Contingency Operations" (OCO) funds to supplement budgets and overcome congressional budgetary constraints.

However, the current debt ceiling deal presents new challenges for securing additional funds. It was widely expected that President Biden would seek further funding to support Ukraine against the Russian invasion, following the $48 billion already approved in December. However, the Ukraine supplemental spending request is now anticipated to encompass a broader range of military expenditures and may include overlooked items and pet projects.

To address concerns raised by defense hawks, the Senate's Democratic and Republican leaders have made a formal commitment to ensuring that the spending caps imposed by the bill will not hinder the passage of supplemental spending legislation to provide additional funds to the Department of Defense.

Mackenzie Eaglen, a senior fellow at the American Enterprise Institute, predicts the introduction of an emergency supplemental spending bill for Ukraine that will encompass both Ukrainian defense needs and non-Ukrainian defense priorities. While this bill may not bridge the entire gap between Congress's desired defense spending increase and the final enacted budget, it is expected to alleviate some concerns and prioritize select initiatives.

The fate of the $16 billion defense side-projects remains uncertain, leaving questions about critical defense requirements and priorities in the years ahead. It is a waiting game as policymakers, defense officials, and lawmakers grapple with finding alternative funding sources or revisiting project priorities to ensure the nation's defense capabilities are not compromised.

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