Trump Revs Up Defense ETFs With Military Budget Plan

March 03, 2017

Earlier this week, President Trump unveiled "a historic" increase in military spending during a speech to the National Governors Association, adding fire to the red-hot rally in defense stocks.

Trump's budget blueprint, which was submitted to government agencies on Monday, calls for a $54 billion increase in defense spending to $603 billion for the 2018 fiscal year beginning on Oct. 1.

"This budget will be a public safety and national security budget," said Trump. It "will include a historic increase in defense spending to rebuild the depleted military of the United States of America at a time we most need it."

The jump in funding for the military fulfills one of Trump's main campaign promises and comes at the expense of other government agencies, which are expected to see their budgets slashed by an equivalent amount. Nondefense discretionary spending will fall by $54 billion to $462 billion under the budget blueprint.

"We are going to do more with less and make the government lean and accountable to the people," pronounced Trump. "We can do so much more with the money we spend. The government must learn to tighten its belt; something that families all across the country have had to learn to do."

Resistance From Congress

The areas that won't be affected by the shifting budget are mandatory items such as Social Security, Medicare and Medicaid. Also known as "entitlements," these areas make up 60% of federal government spending and are forecast to take up an even greater share of spending in the coming years.

It remains to be seen whether Trump's budget blueprint ultimately becomes a reality. Congress has the final say on spending matters, and there have already been signs of early resistance to the blueprint from Trump's own party.

“There have been many attempts made to try to balance the books of the U.S. government on the backs of the discretionary dollar, and we all know that’s a fantasy because the drivers of the debt are on the mandatory side: Medicare, Medicaid, Social Security,” Republican House member Steve Womack told Politico.

 

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