US debt ceiling deal strands $16 bln of defense side-projects
By Mike Stone and Patricia Zengerle
WASHINGTON, June 2 (Reuters) -A $16 billion list of lower-priority defense items like tanks, helicopter upgrades and a ship, that would normally be paid for as part of the defense budget, could go unfunded after the U.S. passed a landmark bill that lifts the debt ceiling but curbs federal spending.
The agreement to avoid default left legislators, the Department of Defense and other agencies wondering how to pay for projects that in past years were last-minute additions to the must-pass defense policy and appropriations bills, that generally get approved with little discussion.
The debt deal capped national security spending in fiscal 2024 at $886 billion, which is what U.S. President Joe Biden requested.
Among the military services' "unfunded priorities" lists are Abrams tanks made by General Dynamics GD.N, a plane made by Lockheed Martin LMT.N, and a ship for the Marines made by Huntington Ingalls Industries HII.N.
Each service generates its own list and this years' included new facilities, ship upgrades, munitions, and long-range radars to protect the U.S.
Congressional aides said that prior to the debt deal, the relevant committees were eyeing a national security budget of more than $900 million for fiscal 2024.
Ordinarily, some of the $16 billion worth of unfunded priorities would get tacked on, as well as billions worth of lawmaker initiatives. Ultimately aides said $30 to $40 billion more could have been added to the defense top line.
In recent years Congress has increased defense spending by more than any president requests, generally by tens of billions of dollars.
In 2022 and 2023 Congress increased spending by more than $20 billion each year. Prior to that, the Pentagon used "Overseas Contingency Operations" (OCO) funds for a decade to boost the amount of money available to avoid budget caps passed by Congress.
This year, the debt ceiling deal could make that more difficult.
ADDITIONAL FUNDING
Biden has been widely expected to request additional funding in August or September to support Ukraine against the Russian invasion, after the $48 billion lawmakers approved in December for Ukraine is spent.
That Ukraine supplemental spending request is now expected to include a broader range of military spending and could include some items and pet projects left behind.
After complaints by defense hawks, the Senate's Democratic and Republican leaders made a formal commitment late on Thursday before the debt ceiling bill passed that the spending caps in the measure would not prevent the Senate from passing supplemental spending legislation to provide more money to the Department of Defense.
Mackenzie Eaglen, a senior fellow at the American Enterprise Institute said: "I am certain there will be an emergency supplemental spending bill for Ukraine that includes non-Ukraine defense needs and priorities in it.
"This supplemental will not be enough to entirely make up the spread between what Congress likely would have increased defense above the president's budget and final non-Ukraine enacted toplines," Eaglen added. "But it will be a relief valve for select priorities."
Reporting by Mike Stone and Patricia Zengerle in Washington; Editing by David Holmes
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