As Congress heads into its annual August recess, the status of critical spending bills for the aerospace and defense industry remains muddled. On a surface level, there has been progress. Both chambers have advanced their versions of the NDAA, though there are major differences that will need to be resolved in conference. Larger challenges face the appropriations bills. Both House and Senate appropriations committees have passed their versions of the Defense funding bill, though only the Senate has passed their version of the Commerce-Justice-Science mark that supports NASA and NOAA funding. In most years, this would be normal progress for the always halting Congressional funding process.
From a broader perspective, there are several issues that could cause major problems for these spending bills. While it is unlikely that there will be a long-term disruption to spending such as an extended government shutdown or a year-long continuing resolution, there are major disagreements between the House and the Senate & White House. The House has decided to move forward with legislation that cuts non-defense spending to FY 2022 levels and have been appending socially conservative policy riders to relevant legislation – both in the NDAA and in appropriations. Beyond that, there are issues within the House Republican caucus that will make any resolution to these questions even more complex. If Speaker McCarthy cannot corral 218 Republicans to vote for a bill, it will become even more difficult to see how negotiations will proceed to keep the government open.
Drilling down to ADG spending, there is less controversy about topline spending. Both the House and the Senate seem likely to agree to similar toplines (Senate appropriators are adding in an additional $13.7 billion in emergency funding). This consensus also appears to be true on the Space side, where House Appropriators largely shielded NASA from major cuts. One point of contention might be spending on the National Oceanic and Atmospheric Administration, where House Appropriators would cut its budget by over 12%. Even there, investment in new equipment is largely protected, with only $19 million coming out of its acquisition accounts.
However, as noted above, beyond these sectors there remain major differences between the House and the Senate on spending levels and on policy. Indeed, while the House and Senate NDAAs have very similar spending levels, the House NDAA passed its chamber on an almost party-line vote of 219-210 due to a variety of amendments that would place restrictions on service members access to abortion, LGBTQ service, and diversity, equity and inclusion initiatives in the DoD. Whereas normally the NDAA has broad bipartisan support (last year’s version passed 350-80), it is unclear how there will be a compromise between the House and Senate versions.
Almost all of this debate will have to wait until the fall for a resolution. After July 28th, the House will be out of session until after September 12th, giving Congress only 12 session days to agree to a continuing resolution or see the government shutdown on October 1.