Market Data 
Investing.com — The outcome of the U.S. elections could impact defense spending, particularly in the context of defense modernization efforts.
As per analysts at BofA Securities, political party control is a key driver in determining the scale of such expenditures.
Historically, defense spending has seen fluctuations based on which party holds the reins of the Executive branch, the Senate, and the House.
The analysts provide a framework to assess how future election results could shape defense budgets in the coming years.
One high-end scenario outlined by BofA suggests that a Trump Administration, coupled with a Republican majority in the Senate and a Democratic-controlled House, could result in a robust increase in defense modernization budgets.
Specifically, this combination could lead to an annualized spending increase of up to 17% for fiscal years 2025 through 2027.
This is in part due to the Republicans’ traditionally stronger advocacy for defense spending, particularly in areas like research, development, and modernization programs.
In contrast, the low-end scenario projects a more modest increase in defense spending under a Harris Administration, alongside a Democratic majority in the Senate and a Republican House.
Under this political setup, the defense modernization budget might grow by only 2%, barely enough to keep pace with inflation, suggesting a much more restrained approach to defense spending.
The analysts also emphasize that the U.S. Senate has historically been the most influential driver of defense budget outcomes, followed by the House of Representatives.
However, in this election cycle, the role of the President could be a more prominent factor than in previous years. Kamala Harris’ record in the Senate reflects a more fiscally liberal profile compared to other Democrats, which may result in more conservative spending on defense if she were to be elected President.
On the other hand, Donald Trump’s previous administration saw defense budget increases, and a similar pattern could be expected under his leadership.
The framework provided by BofA analysts underscores that while political control of the Senate typically exerts the strongest influence on defense modernization budgets, the President’s fiscal policies, especially in this cycle, could become a decisive factor.
They estimate that the influence of the President could contribute a swing of up to 340 basis points in defense spending growth, compared to around 170 basis points from the Senate.
