Capitol Hill Stalemate Threatens U.S. National Security Funding - PandaForecast.com
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Capitol Hill Stalemate Threatens U.S. National Security Funding

December 5, 2023

Funding Uncertainties Threaten National Security

In the face of potential risks to national security, the deadlock over critical foreign policy funding continues to persist in the halls of Capitol Hill. President Biden, back in October, made an urgent request for $106 billion in supplemental funding to bolster international relations and defense initiatives.

This proposal included significant funds: $61.4 billion to aid Ukraine amidst its conflict, $14.3 billion to support Israel, $7.4 billion aimed at Taiwan and the Indo-Pacific region to counteract China’s influence, and $13.6 billion for issues at the U.S.-Mexico border.

The President has repeatedly called on Congress to pass this funding through a bipartisan agreement, yet tensions remain high, particularly concerning aid for Ukraine and polarizing debates over immigration and asylum policy.

The Ticking Clock for Ukrainian Support

White House Budget Director Shalanda Young sent a stark message to Congressional leaders through a dire letter, emphasizing the immediate need for action. Young warned that the failure to approve the supplemental funding would mean the U.S. could not supply Ukraine with additional military equipment and arms.

She pointed out that the Ukrainian economy’s collapse could halt its defense efforts against Russia, given that Russian strategy includes attacking Ukraine’s financial stability by targeting its grain exports and energy infrastructure.

The Impacts of Legislative Stalemate

The threat of a government shutdown loomed over the U.S. in September, narrowly averted by an eleventh-hour agreement that deferred resolution into the new year, without addressing vital foreign aid issues. Young underlined that the sought-after funding isn’t just for international support; it’s beneficial for the U.S. economy too.

She mentioned that defense systems are manufactured domestically in states like Alabama, Texas, and Georgia, with key components sourced nationwide. The inability to pass the funding, she cautioned, would leave Ukraine at a substantial disadvantage in the conflict and could lead to increased Russian military advances.

Defense Industry Trends Amid Funding Impasse

In 2022, top defense companies such as Lockheed Martin (LMT), Raytheon (RTX), and Northrop Grumman (NOC) saw their stock values soar due to heightened defense spending in the wake of Russia’s invasion of Ukraine.

Yet, 2023 has seen a downturn in their share values, which have dipped between 6% to 18%, despite a stream of new orders. Industry hurdles like production backlogs and the difficulty of ramping up production capabilities suggest it may be some time before these new orders contribute to financial returns.

Despite an uptick in military conflicts worldwide, there was an unexpected decline in U.S. arms sales last year. Millennial Dividends, an analyst from Seeking Alpha, expressed surprise at the underwhelming financial performance of companies such as Lockheed Martin in light of the current global military tensions.



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