The American defense industry is requesting that Congress avoid adding to the deficit with its new proposed tax reform measures. The defense industry is worried that increasing deficits will result in cuts to defense spending in the future.
The recently passed House budget allows for a tax bill that could add as much as $1.5 trillion to federal deficits over a decade. Following the recently passed budget, Chairman of the House Ways and Means Committee, Kevin Brady (R-TX), released his long anticipated proposed tax reform agenda.
In a quick response from one of the defense industry’s leading voices, The Aerospace Industries Association (AIA), is requesting that lawmakers “get as close to a revenue-neutral tax plan as possible, given the political environment,” said Doc Syers, vice president for legislative affairs. AIA represents most of the major American defense contractors including: Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, Raytheon and others. Its member companies make up 13 percent of the entire U.S. manufacturing base.”
Many Republican lawmakers are not publicly acknowledging the difficulty of reducing the national debt, passing tax reform that includes major cuts to federal revenue while simultaneously attempting to increase the defense budget by passing a GOP-led House defense appropriation bill that breaks the self-imposed statutory budget caps (Budget Control Act) by $91 billion.
Todd Harrison, the Director of the Defense Budget Analysis and Aerospace Security Project at the Center for Strategic and International Studies, says it’s about simple math and complicated politics.
“There is a natural tension between tax cuts and defense budget increases because both drive up the deficit,” Harrison said. “There are limits to how much Republicans, particularly the more fiscally conservative wing of the party, are willing to increase the overall deficit. And making offsetting cuts in other parts of the budget to balance out tax cuts and higher defense spending is politically difficult because most of the remainder of the federal budget goes to Social Security, Medicare, Medicaid, veterans benefits and other services.”
Though there have historically been disagreements between the Republican’s defense hawks and the more fiscally conservative wing of the party, Rep. Mark Meadows (R-NC), Chairman of the conservative House Freedom Caucus pushed back against the idea that tax cuts put an additional squeeze on discretionary defense spending.
Historically, the annual defense budget has made up half of federal discretionary spending and as a response, Republicans have usually called for cuts on the non-defense side of domestic spending. As a boost of confidence for the increased defense spending desires, Congressman Meadows suggested that he predicts a “very robust” defense budget for 2018.
Chairman of the Senate Armed Services Committee, Senator John McCain (R-AZ), was a holdout on the Senate budget over increased defense spending, but ultimately voted for it. McCain, a known defense hawk insisted tax reform and defense spending must be addressed as separate issues.
“We have a military where we’re losing men and women’s lives because we haven’t funded them for training and equipment,” McCain said. “That has nothing to do with tax cuts.”
- Gould, Joe. “US defense industry to Congress: Don’t let tax cuts add to the deficit.” Defense News. October 28, 2017. Accessed November 06, 2017. https://www.defensenews.com/congress/budget/2017/10/28/us-defense-industry-to-congress-dont-let-tax-cuts-add-to-the-deficit/.
- Todd Harrison, Director, Defense Budget Analysis, Director, Aerospace Security Project and Senior Fellow, International Security Program, Center for Strategic and International Studies.