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Nick Wakeman

Too soon to tell specific impact of budget deal

Wow: that was my first reaction to the budget deal passed by Congress and signed by President Trump.

Billions more in spending for both civilian and defense agencies looks certain. I’ll spare everyone my arm-chair economic analysis of how huge tax cuts plus huge spending increases can equal economic disaster.

Because this is a two-year deal, I’ll take a much more short term view and ask the question of what does it mean for contract opportunities.

Right now, it is too early to say anything definitive.

“We will need to wait for appropriations to determine the specific impact on contractors,” said Deniece Peterson, Deltek’s director of federal market analysis.

I received a similar message from Ray Bjorklund of BirchGrove Consulting.

“Final appropriations are not a done deal,” he said. “There is still a lot of reconciliation needed between the House and Senate.”

Congress is hoping to finalize appropriations between now and March 23, when the continuing resolution expires.

Once that is done there will be more specifics on where the money is going. Right now the White House and Congress have only approved the very top-line numbers.

But even without the details, “this is a remarkable injection of spending in the discretionary budgets for the next two years, rivaling in some respects the economic stimulus of 2009,” said Kevin Plexico, vice president of information solutions at Deltek.

Remarkable is a good word for it, especially when you look back about a year to President Trump’s so-called "skinny budget" that called for deep cuts in civilian spending at agencies such as the State Department and the Environmental Protection Agency. That document called for a $54 billion increase in defense spending alongside a $54 billion decrease in civilian spending.

Instead, the budget agreement increases spending by about $300 billion over two years. DOD will get $80 billion more in fiscal 2018 and another $85 billion in 2019. Civilian budgets would see a $63 billion increase in 2018 and $68 billion in 2019.

That’s a huge swing from Trump’s original 2018 budget proposal. DOD gets $26 billion more in 2018 than the president asked for. As for civilian spending? Well, that’s a $117 billion swing.

Again: wow.

On Monday, President Trump is supposed to release his budget proposal for fiscal year 2019. It is hard to imagine that the document will have any relevancy now that the president has signed the Bipartisan Budget Act of 2018. If released, I expect the 2019 proposal will mirror the skinny budget with increases for DOD and cuts for civilian agencies.

But now that Congress has passed top-line increases with the president’s approval, where does that leave the 2019 budget proposal?

I’ve heard that many agencies have been spending as if the skinny budget would be passed. But now that it has not, we might just see a floodgate of spending begin once the appropriations are based over the next six weeks.

There will only be six months left in the fiscal year. How will agencies spend the billions more they may find in their budgets?

The final fiscal 2018 appropriations will give us the details on the rest of the fiscal year and a window into 2019.

But we all know what they say about details: that’s where the devil is.

Posted by Nick Wakeman on Feb 09, 2018 at 8:27 AM


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