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Defense ETFs In Focus As Trump Pledges To Boost Defense Spending

Monday, February 27, 2017 6:03
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(Before It's News)

From Tyler Durden: As part of his proposed budget, President Trump will instruct federal agencies on Monday to assemble a spending plan for the coming fiscal year that includes sharp increases in Defense Department spending and “drastic cuts” to domestic agencies such as the State Department, the EPA and other non-defense programs.

This is so that he can keep his promise to leave Social Security and Medicare alone, according to four senior administration officials cited by the NYT. The budget outline will be the first move in a campaign this week to reset the narrative of Mr. Trump’s turmoil-tossed White House.

Coming one day before delivering his high-stakes “State of the Union” address on Tuesday to a joint session of Congress, Trump will demand a budget with tens of billions of dollars in reductions to the Environmental Protection Agency and State Department, administration officials reported. The NYT adds that social safety net programs, aside from the big entitlement programs for retirees, would also be hit hard. Treasury Secretary Steven Mnuchin, speaking on Fox News earlier on Sunday, said Trump’s budget would not seek cuts in federal social programs such as Social Security and Medicare.

While preliminary budget outlines tend to be little-noticed administrative exercises, the first step in negotiations between the White House and federal agencies that usually shave the sharpest edges off the initial request, this plan, a product of a collaboration between the Office of Management and Budget director, Mick Mulvaney; the National Economic Council director, Gary Cohn; and the White House chief strategist, Stephen Bannon, is intended to make a big splash for a president eager to show that he is a man of action.

Resistance from federal agencies could ease some of the deepest cuts in the initial plan before a final budget request is even sent to Congress. And Capitol Hill will have the last word. To meet Mr. Trump’s defense request, lawmakers in both parties would have to agree to raise or end statutory spending caps on defense and domestic programs that were imposed by the 2011 Budget Control Act.

As Reuters adds, one of the officials said Trump’s request for the Pentagon included more money for shipbuilding, military aircraft and establishing “a more robust presence in key international waterways and chokepoints” such as the Strait of Hormuz and South China Sea. Meanwhile, the State Department’s budget could be cut by as much as 30%, which would force a major restructuring of the department and elimination of programs.

Last Friday, speaking to conservative activists, Trump promised “one of the greatest military buildups in American history.”

Some defense experts have questioned the need for a large increase in U.S. military spending, which already stands at roughly $600 billion annually. By contrast, the United States spends about $50 billion annually on the State Department and foreign assistance. The amounts that Trump is proposing to add to the Pentagon budget and trim elsewhere are not yet publicly known.

Quoted by Reuters, John Czwartacki, a spokesman for the White House’s Office of Management and Budget, said the budget blueprint would be released in mid-March.

“It would be premature for us to comment – or anyone to report – on the specifics of this internal discussion before its publication,” he said in a statement. The budget plans that the White House is expected to send to departments and agencies on Monday are just one stage in a lengthy process.

The agencies can argue for more funding, and final spending plans must be approved by the U.S. Congress.

Pouring cold water on previous reports of optimistic economic projections, Trump’s budget assumes annual economic growth of “only” 2.4%, an official told Reuters. While campaigning for the presidency last year, Trump called for a “national goal” of 4 percent economic growth. For next year, the operating assumption is only slightly higher, “a sign that the budget process will not be too out of step with economic reality.”

Meanwhile, the NYT notes that Trump’s top advisers huddled in the White House this weekend to work on his Tuesday night prime-time address.

They focused on a single, often overlooked message amid the chaos of his first weeks in the White House: the assertion that the reality-show candidate is now a president determined to keep audacious campaign promises on immigration, the economy and the budget, no matter how sloppy or disruptive it looks from the outside.

“They might not agree with everything you do, but people will respect you for doing what you said you were going to do,” said Jason Miller, a top communications strategist on the Trump campaign who remains close to the White House. “He’s doing something first, and there’s time for talk later,” Mr. Miller added. “This is ultimately how he’s going to get people who didn’t vote, or people who didn’t vote for him, into the fold. Inside the Beltway and with the media, there’s this focus on the palace intrigue. Out in the rest of the country, they are seeing a guy who is focused on jobs and the economy.”

The budget plan, which will probably be substantially altered by House and Senate Republicans, and vociferously opposed by congressional Democrats, will be Mr. Trump’s first big step into a legislative fray he has largely avoided during the first 40 days of his administration.

Mayor Rahm Emanuel of Chicago, who was Mr. Obama’s first chief of staff, told the NYT in an interview Sunday night that Mr. Trump was trying to create a “sense of urgency, which most people aren’t feeling right now, which was a reality to us” in order to generate support for his unspecified economic agenda, including an infrastructure bill and a tax overhaul.

One West Wing official, who requested anonymity to speak candidly about strategy, said the administration craved the split-screen television images of Mr. Trump at round-table discussions with business executives every few days on one side, and the vehement protesters of his administration on the other. But his critics say such photo opportunities are all an act, a not-very-entertaining real-life rendition of “The Apprentice” by an ineffective rookie president.

“This man is not a doer,” said Representative Nancy Pelosi, the House minority leader, who will host a Monday “pre-buttal” of Mr. Trump’s Tuesday speech. “Oh, please. He has nothing to show for what he’s been doing in office for 40 days. It’s all been squandered.”

Other disagreed: “During his first month in office, President Trump has done exactly what he said he was going to do,” said Thomas Barrack Jr., a longtime friend of Mr. Trump’s who ran his inaugural committee. “No president has worked harder or accomplished as much, even with tremendous political resistance forcing him to operate with a small team of outsiders possessing little government experience.”

The iShares Dow Jones US Aerospace & Def.ETF (NYSE:ITA) was unchanged in premarket trading Monday. Year-to-date, ITA has gained 7.12%, versus a 5.91% rise in the benchmark S&P 500 index during the same period.

ITA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 33 ETFs in the Industrials Equities ETFs category.


This article is brought to you courtesy of ZeroHedge.

You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)



Source: http://etfdailynews.com/2017/02/27/defense-etfs-in-focus-as-trump-pledges-to-boost-defense-spending/

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