PREDICTING THE FY’24 DEFENSE BUDGET: HAWK, DOVE, OR SOMEWHERE IN BETWEEN?

An increase in defense spending in 2024 is far from a certainty, despite rising international tensions.  A deal on the budget ceiling may require either flattened growth, similar to that proposed by the administration in its latest budget, or some degree of cuts if the support of spending-conscious Congressional Republicans is required to reach an agreement.  Defense News recently laid out five “what if” scenarios in trying to predict the future of defense spending.  They encompass everything from accelerated spending to prepare for a potential threat from China to cuts of as much as $100 billion under specific political scenarios.  Based on research from the firm of Oliver Wyman, even the most lofty DOD spend rate would not approach more than 5% of US GDP.  Defense News calls this scenario “unlikely” accept in the event of a major rupture in US-China relations.  More likely is some form of slower, but sustained growth, though exactly how much is hard to say.  The central question in the short term is whether House Republicans will prioritize national security preparedness or reductions in overall government spending.  The answer to that question won’t be known until sometime this summer.  This makes it difficult for both DOD and its contractors to plan, but is still better than the “deep cut” scenario in the article, something that the authors of the study believe would only happen with substantial Democratic majorities in each house of Congress.  Right now is an excellent time for industry to weigh in with its recommendations.  Contractors often see where gaps exist in current programs and provide realistic assessments of the technology and solutions available today to fill them.  Congressional authorizers and appropriators are excellent potential audiences for industry’s message.  Helping shape your market is better than waiting for your market to shape you.