New 2027 Defense Bill Pushes Back on Some Trump Priorities

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SOPA Images
By Yuval Rosenberg and Michael Rainey

Happy Wednesday! This summer's celebration of America's 250th anniversary will include a "Great American State Fair" on the National Mall in Washington, D.C. The organizers of the event today announced the lineup of music hitmakers who will be performing there from June 25 to July 3, including Martina McBride, Young MC, C+C Music Factory, Vanilla Ice, Milli Vanilli, The Commodores, Morris Day & The Time, Flo Rida and Bret Michaels. "The performers, innovators, military heroes, and everyday Americans showcased here represent the very best of who we are, and the boundless opportunity ahead," Freedom 250 CEO Keith Krach said in a statement. And now we're sad.

Here's what else is happening.

Draft 2027 Defense Bill Pushes Back on Some Trump Priorities

The House Armed Services Committee on Tuesday released a draft of the base defense budget for fiscal year 2027, outlining key parts of the roughly $1.5 trillion in defense spending that President Trump is seeking for the military.

The so-called chairman's mark of the National Defense Authorization Act of 2027 would authorize $1.15 trillion in spending in the base budget, with $1.1 trillion going to the Pentagon and $41 billion to the Department of Energy to support the nuclear weapons program. Republican lawmakers plan to provide another $350 billion in defense spending through a reconciliation bill that they hope can pass the Senate with a simple majority, bypassing the need to secure Democratic votes.

The committee plans to mark up the draft bill on June 4.

What's in the bill: Armed Services Committee Chairman Mike Rogers and Republicans on the panel say the theme of the 2027 budget is "rebuilding the arsenal of democracy," according to an outline of the bill. They say the bill addresses concerns that the United States has underinvested in its defense industrial base and lost the capacity to produce armaments rapidly and at scale.

Among other things, the bill would authorize multiyear acquisitions of major weapons systems, including F-15EX and F-35 fighter jets, naval destroyers and amphibious ships, with the goal of stabilizing production plans for military contractors.

The bill contains other provisions aimed at shoring up the defense industrial base, including money for workforce development and some streamlining of financial regulations to make it easier for small businesses to become suppliers.

Military personnel would receive pay raises ranging from 5% to 7%, depending on rank. And the services themselves would grow in size, with the Navy adding 13,000 servicemembers, the Army 15,000, the Air Force 8,900, the Space Force 2,800 and the Marine Corps 1,400.

Pushing back on Trump: The bill would authorize $1 billion for development of the "Trump class" of battleships, but it blocks the construction of the first ship until the military certifies that the required technologies are ready to go, something experts have warned could take many years.

Trump's proposed "Golden Dome" missile defense system also receives funding, but just $400 million, far short of the $17.5 billion the White House requested. More funding for that program may be included in the reconciliation bill.

Lawmakers are also making it clear that they have concerns about Trump's threats to withdraw troops from Europe amid his ongoing feud with NATO. The bill reminds the president that there is a requirement to inform Congress of planned troop withdrawals at least 60 days beforehand and extends a ban on removing troops from Europe and South Korea.

Trump's effort to change the name of the Department of Defense to the Department of War also gets some pushback. The bill does not use the new name and makes no mention of making the change, which would require an act of Congress.

Has the Long-Feared Debt Spiral Finally Arrived?

A trio of recent articles by center-left economists and policy wonks warn about the trajectory of the national debt, especially given the recent rise in long-term interest rates.

* "America is heading for a debtpocalypse," Noah Smith warned in a Substack post published on Saturday. "Trump has been about as bad on deficit spending as Biden was (which is actually less bad than I expected him to be!), but a rise in long-term interest rates is making the debt less sustainable, and Trump seems uninclined to do anything about it. Nor do I expect rate cuts or AI-fueled growth to ride to the rescue here."

* Then on Monday, Jared Bernstein, who was chair of President Biden's Council of Economic Advisers, wrote in The Atlantic that, while he has long dismissed warnings about any debt-to-GDP ratio representing a "crisis" level, "I also now believe that if you're not worried about this country's fiscal outlook, you're not paying enough attention."

Bernstein points to a policy brief he co-authored last year: "We concluded that the combination of higher deficits and climbing interest rates raises the risk that borrowing will become more expensive and will push government debt levels to climb relentlessly. This is a debt spiral."

Bernstein notes that addressing the fiscal outlook makes for an unappealing political message and adds that he's not recommending that Democrats become "the party of fiscal responsibility and eating your spinach." Still, he suggests that explaining the economic implications of fiscal policy to the American public would help - and, as one step toward a fiscal fix, "we need to start thinking about how to tax wealth if we want a fair and sustainable budget."

* "Time to freak out about the national debt," Matthew Yglesias writes today at his Slow Boring Substack. Interest rates, he says, are now 0.55 percentage points higher than the Congressional Budget Office projected in their most recent forecasts. "That's a relatively small number, but it amounts to $2 trillion in additional spending over the next 10 years if rates stay elevated. That's a lot of extra money in exchange for literally no extra government services."

Yglesias looks at how Democratic politics around fiscal policy have turned since the battles of the Obama era, with the policy wonks who were dovish about deficits around 2010 growing more concerned about the outlook after Covid: "Because the macroeconomic situation changed fundamentally in 2021-22, those of us who care about things like inflation, interest rates, and unemployment have changed our tune. But at this point it's become hardened conventional wisdom on the Democratic side that deficit politics is a loser."

Yglesias also sparked a discussion on what used to be called Twitter by saying he's surprised by how little attention fiscal issues are getting now compared to 15 years ago. That drew comments from budget hawks who argued that the current situation is what they were warning about back then.

Brendan Duke, a budget expert at the left-leaning Center on Budget and Policy Priorities, argued that the warnings of an imminent debt crisis back in 2010 and 2011 have made it harder to convince political leaders that they should pay attention now: "Policymakers don't randomly have the wrong focus at the wrong time--the previous episode and the hysterical predictions of an imminent debt crisis not panning out have made it harder to make the same arguments today and get them to take action."

Perhaps inevitably, the discussion on X also revived a debate among budget experts about just what has driven the debt to this point. Was it mostly because of spending increases under Presidents Obama and Biden? Or was it because of a series of large tax cuts under Presidents George W. Bush and Donald Trump?

Ernie Tedeschi, the chief economist at Stripe who formerly served as chief economist at the White House Council of Economic Advisers under the Biden administration, posted this useful visual breakdown of how tax cuts, stimulus measures and other spending increases have affected the debt as a percentage of GDP since 2001.

 

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