The emerging deal Kevin McCarthy is discussing to make him speaker of the House could make agreements on new defence spending impossible next year, at a time when the US is intent on backing Ukraine against the Russian invasion.
Part of the agreement being discussed would be to cap fiscal year 2024 discretionary spending across government at 2022 levels, according to three people familiar with the discussions. National defence spending, which primarily funds the Pentagon, was about $US782 billion in fiscal 2022 and rose $75 billion to $857 billion in fiscal 2023.
Shares of defence contractors declined on the news. Northrop Grumman Corp. and Lockheed Martin Corp. erased gains and were down more than 1 per cent as of 12:17pm in New York , while Raytheon Technologies Corp. pared its advance to trade up 1.2 per cent. Even so, adhering to a total discretionary cap could lead to chaos and unpredictability since House Democrats and the Senate would not support anything that would significantly hobble domestic spending, leaving two possibilities: a cut in defence, but more likely that the US government being funded through continuing resolutions for a long time, handicapping the Pentagon.
“If report of this deal are accurate, it doesn’t reflect the will of the party or the will of Americans and imperils our national security,” said Roger Zakheim, the Washington director of the Ronald Reagan Presidential Foundation and Institute and former general counsel on the House Armed Services Committee.
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