Trachtenberg tells Jane’s: “Fireworks” expected between defence spending and other priorities, as supply chain reels from Covid-19 impact

First instalment of Jane’s Defence Industry Conversations sees Hon. David Trachtenberg discuss the impact of Covid-19 on US defence priorities, while defence budgets data from Jane’s reflects the likely squeeze on military spending

LONDON (4 May 2020) –– Speaking in Jane’s inaugural Defence Industry Conversation, Hon. David Trachtenberg reinforced the need to work together in order to protect US security interests in light of Covid-19. The new webinar series from Jane’s brings together experts – such as the former U.S. Deputy Under Secretary of Defense for Policy– to discuss the most pertinent issues affecting the defence industry.

Trachtenberg discussed the implications any disruption in the supply chain has on the defence industry, whilst also noting that multi-national initiatives such as the F-35 programme are crucial to US defence success.

“Global partners are essential to American security. By partnering with others, especially on sophisticated high technology products that will improve the American competitive edge, the United States can distribute our programme costs more broadly and more equitably,” said Hon. David Trachtenberg in a conversation with Jane’s head of industry, Doug Dixon. “Failing to do that simply increases the cost for the American taxpayer.”

Trachtenberg further stressed the need for government to work with private industry.

“How well prepared the defence enterprise is to deal with threats – such as Covid-19 – depends on the ability of government and the private sector to work together to confront challenges,” said Trachtenberg.

What next for the world’s largest defence budget?

Jane’s notes that the impact of the American political situation has high impact on American security policy and defence discretionary spending.

“In this presidential year I might expect some fireworks between mandatory spending on the one hand and discretionary defence spending on the other,” said Trachtenberg. “With shifting power dynamics on Capitol Hill, we are destined to continue to have this enduring debate over the proper allocation of resources between mandatory spending and discretionary spending.”

The President submitted his FY21 President’s Budget Request (PBR) to the Congress for review on 10 February 2020. Baseline discretionary FY21 requested outlay for defence is USD753 billion and for non-defence is USD733 billion totalling USD1,486 billion in planned discretionary spending. Planned FY21 mandatory outlay is USD3,010 billion with USD379 estimated for interest on the debt. Total FY21 discretionary and mandatory spending thus equals USD4,875 billion.

Jane’s highlights that FY21 defence spending equals 15.4 per cent of total outlay and 3.2 percent of FY21 initial estimate of GDP, which is expected to contract at 5.4 per cent.

“Given that the defence budget is over half of discretionary spending for the US government it will likely be seen as a bill payer for a deficit driven drawdown,” said Guy Eastman, senior budget analyst at Jane’s. “With an expected fiscal downturn Jane’s anticipates downward pressure on the defence budget. At this point, it is too early to predict how fast and how much the defence budget will drawdown.”

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