At first glance, the 2018 budget deal passed by Congress and signed by President Donald Trump this month seems to herald boom times for contractors. The new two-year bipartisan deal boosts defense and civilian spending by $300 billion over the next two years, much more than what Trump has asked for in his 2018 budget proposal.
Trump had originally only called for an additional $54 billion in defense spending and a $54 billion decrease in civilian spending. Now Congress says defense can spend $26 billion more this year alone while civilian spending will see a $63 billion jump this year and another $68 billion jump in 2019.
The New York Times estimates that last year’s tax cuts couple with the spending increases over the next two years is likely to jack up the deficit by another $7 trillion over the next decade.
Picture Will Become Clearer in March
While the immediate future looks good for contractors, many are waiting until March 23 to break out the bubbly. The House and Senate still need to agree on the specific numbers and they have until March 23 to come to an agreement concerning the appropriations. Only then would the overall picture become clear for contractors.
Still, the huge spending increases planned for the next two years will certainly stimulate the US economy which is already chugging along fairly well. Some observers commented that the deficit spending planned for the next two years is similar to the 2009 stimulus package enacted during the last recession.
The Infrastructure Plan
Meanwhile, critics are jumping all over Trump’s touted $1.5 trillion ten-year infrastructure plan. Even though Trump billed it a $1.5 trillion plan, he is only asking from $200 million from Congress. The other $1.3 trillion is supposed to come from the already cash-strapped states and from private entities.
The plan is not likely to gain much support from the states which would face far harder choices to raise money to enjoy matching federal funds. Many states have already raised gas taxes and other levies just to keep pace with infrastructure repairs.
Trump’s infrastructure plan also involves the sale of federal properties like airports and the conversion of existing highways to privately-owned toll roads.
Reuters also reports that Democrats even claim that Trump does not even have a $200 billion infrastructure plan since some elements of his plan actually cut $168 billion in planned infrastructure spending. Reuters quotes Rep. Peter de Fazio as saying that the Trump plan would “pay or Wall Street and foreign investors to toll our roads, and it would gut bedrock environmental, clean water, and clean air protections under the guise of speeding up projects.”
Contractors hoping to cash in on a new infrastructure El Dorado promised by the White House will need to have more than a few grains of salt on hand.