A year after Trump's election, plenty of uncertainty remains
- By Ross Wilkers
- Nov 01, 2017
President Donald Trump’s election to the White House last year was widely anticipated as a disruptive force to both the economic and political environments, certainly here in the U.S. and eventually overseas also.
And yet many factors under those umbrellas still have somewhat stayed the same almost 10 months into his current term. Uncertainty over various pieces of the global economic picture remain and the government continues to make its way through continuing resolutions save for this year’s May-September period under full appropriations.
U.S. economic growth remains stuck in the 2-3 percent range, according to the Professional Services Council’s latest macro-economic forecast unveiled Wednesday at PSC’s annual Vision conference. There are the North Korea and global terrorism situations, plus the fact that debt held by the public is almost three-fourths of the U.S.’ gross domestic product.
Promised massive defense spending increases touted by Trump during his 2016 campaign also have not borne out that way. Some of that comes from the Budget Control Act spending caps that limit defense and non-defense funding but there are also the numerous continuing resolutions over the past decade.
But the forecast does show there is modest growth to be seen in the Defense Department’s topline budget -- both base and overseas contingency operations. The presentation given by Vision volunteer Lou Crenshaw shows total DoD funding is projected to show a 2.3 percent compound annual growth rate from fiscal 2017 to fiscal 2027.
The Pentagon received $606 billion in total appropriations for fiscal 2017. According to the presentation, that will then climb at a 2.3-percent CAGR to $675 billion for fiscal 2021. All amounts in that time period are above the BCA limits, which have notoriously proven difficult to adjust in Congress.
Defense industry giants like Lockheed Martin and Raytheon for instance are responding to the overall modest growth outlook in defense with largely the same framework. For the most part, revenue will climb but that outlook is murky given the budget drama.
Lockheed expects its revenue to rise 2 percent next year but with some caution if the current continuing resolution gets extended past its current Dec. 8 expiration date and holds all federal spending at current levels. Raytheon sees 3-5 percent growth over the midpoint of its expected sales this year.
Then there is the outlook on federal IT budgets, which also has a big caveat coming from the macro-economic environment.
The PSC Vision forecast for the total federal IT market through fiscal 2023 estimates a 2 percent CAGR to $95.4 billion. That is roughly equal to the rate of inflation, according to the presentation. Blame that oo the BCA budget caps also, as well as the recurring debt ceiling debate.
Civilian IT will likewise grow 2 percent on a compound annual basis to $58.1 billion through fiscal 2023, according to the forecast presented by Vision volunteer Robert Haas. That is roughly half the 5.5-percent CAGR shown over the last five years.
Unclassified Defense Department IT shows a similar story although the growth prospects here look slightly more promising. The new Vision forecast projects a 3 percent CAGR to $38.7 billion through to fiscal 2023.
That rate would reverse a trend over the last five years that showed civilian IT’s 5.3-percent CAGR outpace defense IT’s CAGR of 0.9 percent.
Of course, that does not count spending in the classified arena. In various earnings calls with investors this year, executives with public government contracting companies have pointed to restricted programs as a growing area for them.
Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at email@example.com. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.