Will Trump's budget slow modernization efforts?
Since President Trump’s address before a joint session of Congress on Tuesday night I’ve been trying to think of a commentary on the speech.
The obvious is that it was decidedly pro-business and Wall Street reacted accordingly. But how does that translate down to the level of government contractors and the federal IT market?
One thing that was missing from the speech was how the government will pay for the initiatives Trump presented – building the wall, a huge infrastructure investment, health care, and of course, the $54 billion increase in defense spending. And that’s before we get to the tax cuts.
Trump’s budget proposal balances the defense increase with parallel cuts in civilian spending. On paper that might work, but in reality, I have my doubts.
One thing that keeps coming back to me are some of the macro economic factors the country faces, such as the growing debt and limits on GDP growth.
But those are longer term factors that might not have an impact for a few years.
The more immediate factor is the cuts in civilian spending that is being proposed. The level of cuts at the State Department and EPA are deep and will likely lead to layoffs and severe cuts to programs.
The impact of these kinds of cuts was apparently on the minds of many attendees at Wednesday’s ACT-IAC and GSA event on category management. FCW reporter Mark Rockwell spoke to several attendees on the sideline of the event to get their perspective.
Several told Rockwell that IT is likely electricity and fuel – a utility that government has to buy to operate. They expect IT spending to continue and for category management to survive because it is a mechanism for reducing costs and improving efficiency.
But former Professional Services Council president Stan Soloway (and WT columnist) offered a more pessimistic view of the severe cuts – “Agencies will stop doing things,” he told FCW.
When faced with making severe cuts immediately, there is not an incentive to upgrade IT, even if the IT spending lowers long term costs.
"It's hard to see to two to three years ahead" when faced with a mandate to reduce a budget immediately, Soloway said.
To me, that hit the nail on the head and was an ah-ha moment for me. Soloway's words should be a warning to contractors, or at least be greeted as a dose of caution when looking at the opportunities presented by the Trump administration.
Many customers are going to face some harsh realities in the next year or two and contractors might suffer along with them.
I’m doubtful that the Trump administration will convince Congress to support what many say is a 37 percent cut to the State Department. But the president calls himself a negotiator. That 37 percent is likely a starting point, but is the end point 20 percent? If that is the case, it is still a drastic reduction and one that will likely set off the kind of thinking Soloway describes.
But we are just the beginning of this process so we’ll see what happens next.
With a president and a Congress all being part of the same party, there is a stronger likelihood that we’ll see a budget passed closed to the start of fiscal 2018. Cuts or no cuts that will be an accomplishment in itself.
Posted by Nick Wakeman on Mar 02, 2017 at 2:57 PM