The president and lawmakers are sending signals to the Defense Department not to expect any major increase in next year’s budget, and that some form of cut could even be in the cards.
On Oct. 17, President Trump said he is demanding his cabinet members cut 5 percent from their future federal budget plans, and specifically mentioned defense would cost about $700 billion. 
“Last year … I had to do something with the military,” Trump told reporters, per the White House pool report. “The military was falling apart. … It was in very bad shape.”
He added that to provide the military with a $716 billion budget, the budget had to include concessions to Democrats, “things that I would never have approved.”
“But we had to do that in order to get the votes, because we don’t have enough Republican votes to do this without them,” he said.
Analysts noted that it is unclear whether Trump was referring to the Department of Defense’s budget or the broader national security budget, which would include elements of the Department of Energy and other non-Pentagon agencies.
The fiscal year 2019 (FY’19) Defense Department budget was $686 billion, while the national security budget included $716 billion. The FY ’19 presidential budget request, released in February, indicated a projected $701 billion budget for fiscal year 2020. Meanwhile, total national security spending could top $730 billion next fiscal year.
Byron Callan, an analyst with the Capital Alpha Partners, said in an email that if Trump’s comments are reflected in the five-year future years defense program, or FYDP through fiscal year 2024, it would be “far below” the 3 to 5 percent increase that DoD leadership has indicated is necessarily to meet national security needs.
“Lower spending will entail rearranging DoD force structure and modernization goals with implications for contractor growth rates in the 2020s,” he said.
A flat budget in the next fiscal year cycle may be the best the Pentagon can hope for at this point, said Shaun McDougall, a military market and budget analyst at the Newtown, Connecticut-based Forecast International.
Pentagon and administration officials have previously acknowledged that they expect to only receive inflation-related increases after two years of relief from the 2011 Budget Control Act spending caps. That would have only resulted in about a two percent increase over the next five years, McDougall said.
“But between the Budget Control Act coming into force in FY ‘20 and now Trump calling for potential cuts across the board, flat would be the best-case scenario,” he said.
Over the past two years, the Defense Department has funneled much of their increased budget into logistics, maintenance and sustainment in an effort to boost its readiness rates, McDougall noted. Officials may be loath to backtrack on that progress, he added.
As a result, such a cut would probably affect planned upgrades for many of the service’s older equipment that may not be a priority for the high-end conflict DoD is preparing for, Callan said.
“DoD has been on a course to curtail investment in older weapons systems deemed less relevant to future high-end conventional conflict and so upgrades, in general, may take a hit,” he said. Readiness is expected to remain a “paramount concern,” he added.
Such cuts are already being made, McDougall added. For example, the Army has chosen to cancel one of its planned upgrades to the Bradley fighting vehicle in favor of its next-generation combat vehicle.
“You’re already actually seeing that without the budget cuts, and we might see more of that … so they can prioritize the newest tech coming up,” he said.
Infrastructure spending is another area that could see a decrease if cuts are required, and funding for Trump’s desired Space Force could also be affected, McDougall added.
Callan noted that any areas that the Pentagon identifies for cutting costs could still be pushed through, depending upon lawmakers’ own priorities.
“DoD is on a quest for more efficiencies and cost savings, but these still have to pass muster with Congress,” he said.
Sen. Jack Reed (D-R.I.), who serves as ranking member of the Senate Armed Services Committee (SASC), told reporters Wednesday that Democrats are likely to insist on maintaining a 1-1 ratio between defense and domestic spending for future budgets in the next Congress.
Such a return to equal spending could be a bigger cause for concern than Trump’s calls to cut 5 percent across the board, McDougall said.
“In order to keep that flat budget, [DoD] would need another two-year budget deal as big as the last one,” he noted. Should one of the congressional chambers flip to Democratic control after the November midterm elections, a bigger push for increased domestic spending is to be expected, he added. Should lawmakers fail to compromise and eventually return to passing continuing resolutions, “it’s possible the cuts would be more than 5 percent if they can’t come to a compromise,” he added.
Reed noted that to excel in national security U.S. lawmakers must not only fund defense-related procurement and other needs, but ensure the country is prepared to meet the realities of the future job market and training needs as advanced technologies such as machine-learning and self-driving vehicles will alter various industries.
‘If you’re looking over on a domestic side and you’re not investing in long-term job training, education and preparation for education, then we’ll find ourselves in a very, very precarious position in terms of our national power,” he said. “This isn’t just, ‘you get one, I get one.’ This is, if you’re looking forward about the country, we have to raise these caps on both sides of the ledger.”
He noted that the domestic side of the ledger also includes national security investments for the Departments of State, Homeland Security and Veterans Affairs, along with intelligence agencies such as the Federal Bureau of Investigation.
“To kind of say, “Well, wait a minute, we can’t touch that or we’re just going to increase the topline,’ is not going to help our national security,” he said.