Shutdown Solutions, Trump's Asia Trip and Golden Dome Contracts

Joe Gould:
China had announced controls on exports of these 12 elements that are used in missiles, radar, jet engines. Trump at least got a pause there for a year, but I think the whole thing illustrates that China has a button that it can push at some point.
Roman Schweizer:
From DOD to Congress, and from the White House to Wall Street, the Nat Sec Need to Know Podcast, an unrehearsed podcast presenting insightful discussion and forecasts of the major national security and defense issues of the day. Welcome to the Nat Sec Need to Know. We've got our reporters roundtable to discuss the top national security issues in Washington and around the world, and preview what to expect over the next several weeks. Joining me is a murderer's row of experienced Washington editors and reporters. Tony Bertuca from Inside Defense, Joe Gould from Politico, and Aaron Mehta from Breaking Defense. They've each covered Washington and the Pentagon for decades and are as well sourced as anyone in town. Thank you all for joining. Let's get after it.
Gentlemen, thanks so much for joining us for another episode of the Nat Sec Need to Know. It has been another hectic couple of weeks here in Washington. Perhaps momentously, President Trump has just returned from his foray into Asia, 12 out of 10, would do it again based on the president's own grading of his engagements with Chinese President Xi, as well as a number of engagements with the Japanese government, South Korean governments and otherwise. We'll get into that a bit. But the president returns home to a government still in shutdown. We have heard, and I'm sure you can tell us, the latest on what that shutdown outlook may look like. It seems like there's been some bipartisan activity going on, but then of course the president piled in last night encouraging Senate Majority Leader Thune to go nuclear and spike the filibuster.
So why don't we start there and figure out what the path ahead is on shutdown. Who's got the first call?
Tony Bertuca:
I think the biggest thing for me in shutdown that I've been covering and spending the most time on is where the Pentagon is getting its money from to pay troops during the shutdown. So this is where the information has been very close to the vest from the White House. Congress hasn't especially demanded this information. There's a lot of politics associated with this because a lot of people, analysts and lawyers, think that it is illegal for the White House to take money that has not be appropriated by Congress, reprogram it unilaterally and use it to pay the troops. So we saw the first set of money was about $8 billion, though I saw some reports that said it was really 6.5 billion. They just said it's all from DOD R&D and they haven't identified yet, at least not publicly, what the accounts are that are the bill payers.
And now we've seen the most recent conference from the White House that they're doing it again and this time they're going to use budget reconciliation money, around $4 billion I think. And then I think the rest of it in change was going to be split between DOD weapons programs and DOD R&D. Again, not identifying where that money's coming from to pay the troops.
So the movement you're starting to see on the Hill is at least you've got Senator Coons and some Senate Democrats going, "Okay, we're good with paying the troops. Don't tar us and feather us by saying we don't want to pay the troops. But all right, let's do it the right way. Let's actually pass a law around here that says here's how we're going to pay the troops," as opposed to letting the White House claim the president's powers as commander-in-chief enable him to unilaterally move money and hit programs. And meanwhile, he's also said in his executive order, "We should do everything in our power to replenish the money." So I don't know what that means. Does that mean the money's going to go back? Congress might have to figure this out.
So from my perspective in shutdown, it's been all right, where are the accounts that are being raided? We still don't know. Were they really going to hit reconciliation money? Well, yes, they are, they're raiding that, too. And how much longer are they willing to do this?
Joe Gould:
I second Tony there. My guess would be once the money's appropriated, they're going to backfill it. But just the process being used here speaks to the further erosion of Congress' power of the administration's disrespect for Congress's power of the purse, that it can just decide unilaterally to move money around.
To your point about where the dynamics are today around Trump urging Senate Republicans to scrap the filibuster, my read on that is maybe that's just to put pressure on the two sides to get talking. I think we see that the Democrats are starting to ... We've seen that Schumer is under pressure from his left flank and I think he's maybe starting to come under some pressure are more middle ground Democrats, Warner in Virginia, which happens to be home to a lot of federal employees, the Federal Employees Union adding pressure on Democrats. But as far as the filibuster goes, the Majority Leader Thune and the Majority John Barrasso both came out and said that they support the filibuster, so I doubt that that's going to be a card that they play.
I think maybe next week we'll start to see, or in the coming days we'll start to see some of the pressure come to bear. And maybe the Democrats are waiting to see the effects of the shutdown take hold. I think they want to be able to show their voters their leverage point or their demand is to restore healthcare benefits, so they want to be able to show their voters, "Look at what Republicans have done where healthcare premiums are going up," and we're going to start to see that. I think also elections and the outcome elections are probably going to be informative for them.
Aaron Mehta:
Do you remember, guys, when reconciliation happened and already, immediately off the bat, you heard from hawkish Republicans say, "Okay, so now we have this money and now we're going to get the extra money for appropriations." And the White House said, "Well, no, the extra plus up for defense is going to come from reconciliation. And by the way, we're going to use," whatever it was, "two-thirds of the reconciliation money for defense this year as opposed to spreading it over five years." And all the Republican hawks got mad in Congress and threatened to raise their own appropriations and but their own bills out, et cetera.
I'm really curious how they're feeling about taking more reconciliation money that was supposed to be used for modernization and using it in this way. Tony said it's possible that this gets back filled when the government opens up, but I don't think any assumptions about appropriations, about backfill, about anything like that can be assumed at this point. Particularly when it comes to reconciliation, which I'm on record and still believe is simply a wizard's spell that nobody actually understands and Russ Vought just gets to wiggle his fingers and make stuff happen with.
Roman Schweizer:
I would agree there is sorcery involved as well. And first off, it's got to annoy appropriators because they didn't write any of the bills. The committees of jurisdiction did, the armed services committees did in this case. And to the point the reconciliation bill was a partisan vote, a party line vote, so back filling that might require a bipartisan piece of legislation. Again, does it probably get rolled into some sort of package? Yeah, probably, but we'll have to see.
The one thing I do want to point out again, which is fascinating, is Trump repeatedly used to bludgeon former Majority Leader Mitch McConnell over the head about the filibuster, consequences be damned. I had to look this up and check, but it was on November 21, 2013 that Harry Reid changed the filibuster rules for Supreme Court justices and that's why we have the Supreme Court we do today, so I'm sure Democrats lament that short term decision and the longterm implications. And I think there's probably a view, you've got a number of Senate Republicans, at least three, Collins, Murkowski, McConnell, and other, that you would need all the Republicans to vote to go nuclear. So I do think that's a long shot, but we'll see. Trump's gotten everything he's wanted almost out of Congress so far.
On the point of discretionary appropriations, this is the one thing and this is once we get out of the shutdown, looking at some of the math on CBO, just the ACA subsidies are 350 billion over 10, so a one-shot deal, a one-year deal would be let's just say 35 billion. And Mitch and the hawks would like to add 22 billion for defense, so I am curious if there is some sort of trade space in there. Again, I know they've talked about passing some mini buses and stuff, and I don't track every appropriations bill at what level that at. I don't know where the puts and takes defense via non-defense are at.
The second thing I would just say and I know it's too early to start thinking about this, but I will one will go on record saying the Republicans will try another reconciliation bill next spring. This is their chance to shine and do what they want. Particularly if Trump wants more money for border, more money for Golden Dome, et cetera, he would have to get it before the midterms, a potential House loss, or something like that. So we'll see how that plays out.
I guess to pin you down guys, what are we getting out of this shutdown? I had heard it was sounding like end of next week, they would get to some sort of bipartisan deal and we'd be out soon thereafter. Does that jive with what you've been hearing?
Tony Bertuca:
I would say the strongest thing the strongest thing I've heard on the Hill is nothing will happen until the president is back and ready for something to happen. So just negotiations aren't going anywhere until the president looks like he's ready to do it. And if you see what we just saw, he's saying, "Go nuclear," so the president's not ready to negotiate obviously. I see no end in sight.
Roman Schweizer:
All right. Or maybe that's just Trump going over the top again with his usual outrageous demands to sit down at the table.
Okay, let's shift gears a little bit. The president was in Asia, a bunch of high profile meetings. And I think perhaps the one surprise for everyone was his tweet, Truth Social post, that the government of South Korea would be building a nuclear submarine in Philadelphia, presumably at Hanwha Philly Shipyard. I've seen no other details. In looking at all the White House readouts about all the technology agreements and trade agreements with Japan and South Korea, there was nothing discussed really about any of this. So I'll just throw this out. Where do y'all think this stands right now?
Joe Gould:
Yeah. This one was a little bit of a head scratcher. He said that he'd approve South Korea to build these nuclear power submarines. It's a big policy shift. He claimed that they would be built in Philadelphia as part of this bigger trade package where South Korea would be investing in the United States, it's part of tariff relief. But if it's true, it would make South Korea only the third ally after the UK and Australia to be cleared for it.
I and my colleagues I think were a little bit confused, is that Philadelphia does not build nuclear subs. It's a yard for commercial ships. So what's the design of this thing? Where does the fuel come from? How does the tech get shared? Is it a real co-production agreement or is it a political statement? I think for now, the details don't add up and there are plenty of more questions to be asking the administration.
Aaron Mehta:
Yeah. So a couple weeks ago, I interviewed Mike Coulter, who's the defense chief for Hanwha globally and we talked a little bit about Philly. And at the time he said, "Hey, we're looking to expand Philly, we're also looking at potentially buying other US shipyards to be able to get into stuff." Now, he did not at the time say anything about submarines, and whether that's because he doesn't to scuttle a surprise deal or because he had absolutely no idea this statement was coming, I think you can take your pick on that one.
That said, it would still require significant changes to Philly. To Joe's point, that has been a commercial yard. Hanwha does have a couple of ships they're building there for the Korean government basically as a way to start getting the workforce built up and trained on their technologies and capabilities. But they've had no indication they ever planned to build subs there. So even if there's a build up to develop and produce submarines, that is at least a five-year process to get that yard ready if they started tomorrow.
Joe Gould:
The big question to me, aside from just what is this, is this actual real, does anybody know anything about this, or did the president of South Korea just mention to Trump and Trump decided to send it out to social media? The big question is what does building a nuclear submarine mean in this context? Because there's important legalities here.
If we're doing what has happened with AUKUS, where effectively a submarine is going to be built and then the US comes in with the nuclear power, and puts it in and it's a closed system, and the Australians and the Brits never handle the HEU at all, that's one thing. And there's a process roughly in place for that, based off of AUKUS. If this is a situation where the Koreans are getting the HEU from us, which is something they've always wanted because, by the way, it's pretty easy to take HEU for subs and then turn them into HEU for weapons, that is a very different things. It actually comes with legal issues where Congress has to get involved.
Now, as we've discussed ad nauseum over the last few months, Congress to this point has never once pushed off on to something that Trump personally wants. But this is something which involves nuclear material, it involves giving that material to an ally in a way that hasn't really been done before. It could get dicey if that's what's going on. We just simply don't know the details yet, but the details are going to matter.
Tony Bertuca:
Yeah. Just a couple of quick data points here. Obviously, a lot is at work here, not to mention the reaction of South Korea's neighbor to the north and how this whole situation could impact their response to the way they view their position in the world. Huge question mark.
Also, interesting to bring up that the administration kind of began very skeptical of AUKUS and that was certainly the review that was going on at USDP, US Defense, Undersecretary of Defense for Policy. Lots of skepticism about AUKUS, whether or not it was a good idea, a good deal, and now you announce something like this.
And then when it comes to the shipyard, we do have some reason to think Hanwha is going to put some money into it. I think in August, they announced there was a $5 billion infrastructure investment plan they were looking to make. And then I think in July maybe, they talked about wanting to deliver Navy auxiliary vessels within a decade. So they've certainly talked about it and said they wanted to pursue this kind of stuff. But yeah, it's several years off and the devil's obviously in the details.
Roman Schweizer:
So I would just make a couple of points to this. One, I believe Hanwha has hired Alex Wong, who was deputy national security advisor in the White House up until he got Laura Loomer-ed earlier this year, so that is clearly a solid strategic hire. And then I noticed a few weeks ago, Hanwha had hired retired Rear Admiral Tom Anderson, who was formerly the program executive officer for ships, so all non-nuclear acquisition programs in the Navy. Having worked the Tom, he is a shipbuilder shipbuilder and certainly would be a good guy to teach them how to make that commercial to military transition.
From my perspective, I think the only way this works is if it is a South Korean design built with US hands and probably fueled with US nuclear fuel, probably provided maybe an American built reactor. I cannot see the US sharing any technology. And that's the one thing, if I would quibble with some journalists out there or some of the news reporting that says the president has said we would share technology. I didn't say, maybe I didn't read that in Trump's tweets. I think he just said the sub was going to be built here. And I think that's jobs, that's manufacturing, and I think there are second and third order benefits to maybe help the US supply chain. I can't imagine any US nuclear technology ... Naval nuclear reactors is famously close guarded and restrictive about sharing any US technology.
And I think that's even the case, as I pointed out in a note that I wrote. With AUKUS, if the Australians do buy three to five gently used Virginia class submarines, they're not obtaining any of the design or manufacturing know-how. They're just jumping in them and driving them. So I think a lot of the tech transfer in AUKUS is actually on the UK-Australia side because there's going to be the joint boats, the UK, the RAN RN boats that'll be built for both of those countries.
I think the point that all three of you have made is qualifying a shipyard as nuclear capable is incredibly complex, as well as the workforce training. It's a whole different specifications and standards on welds, and construction, and materials, and all that stuff, let alone the nuclear handling piece of it. I think it's something that would stretch well beyond the Trump presidency, perhaps even beyond a Trump third term.
Go ahead, Joe.
Joe Gould:
No, I was just going to jump in on something other than South Korea on the president's trip. I think the other big development is that Trump and Xi announced that China's not going to implement the rare earth export restrictions. So that's a big one for the defense industry because China had announced controls on exports of these 12 elements that are used in missiles, radar, jet engines. I think magnets, maybe a separate category there. Trump at least got a pause there for a year, but I think the whole thing illustrates that China has a button that it can push at some point. There's a lot of scrambling going on with the Trump administration trying to secure minerals from other countries, namely Australia. So it'll be interesting to see what they do in the time that they have for this next year to cut back on that leverage that China has.
Roman Schweizer:
Aaron, do you want to jump in?
Aaron Mehta:
Yeah, just that's a good call there, Joe. The other thing we didn't touch on, which is probably good because nobody seems to know anything about it, is the nuclear testing statement from Trump. I think let's leave that alone because it's pretty clear from everything officials have said in the wake of that that nobody knows what that's about.
Just to bring it back to South Korea for one moment though. It's worth noting that ... And I do agree, ultimately what this will be will be a South Korean designed submarine that's built in the US. We have seen in the last five years, the South Korean government very supportive of going into another country and saying, "We will build everything here, we will tech transfer it to local people to be able to build it because the geopolitical benefits and the economic benefits as well are worth that." Obviously, Poland's been the monster test case where pretty much anything the Koreans make can now be made in Poland. But there's other aspects around the world where this has happened and this is something I think the Korean government has sought for at least three decades, probably longer than that.
They will do, my guess is, Seoul will do everything to make sure this happens. And if that means saying in American company is the co-producer of these things in a non-Korean owned shipyard in the US and it's all American workers doing it, that's great, we're going to get ti done.
Roman Schweizer:
Yeah. I would just say if you want to convert John Fetterman into a Republican, have his state build Korean nuclear submarines. McCormick and Fetterman must love this.
Tony Bertuca:
Yeah. I just want to be class clown for just a second. So talking about the president saying we were going to restart nuclear weapons testing. What do you think the pucker factor was for the prep team, for Vice Admiral Richard Correll who had his nomination hearing to take over strategic command the morning after that got tweeted? It's got to be just one of those, I'll say it, it's a house of dynamite, man. It's a house of dynamite.
Aaron Mehta:
There you go.
Roman Schweizer:
Boo.
Joe Gould:
Hey, no free ads.
Roman Schweizer:
I got to tell you folks, I was going to bring that up because highly anticipating, unfortunately I did not go to a movie theater to see it. I waited for it to come out on Netflix. Maybe when we can close, we can do a round about. I would hope all you fellow nerds have seen it by now, and if not we'll put it on your watch list.
Just, Joe, to piggyback on your comment. I know it was 12 out of 10 grip and grin between Trump and Xi, but I just see this as maybe the end of round two. Let's say Trump won was round one, and it's like both fighters are going back to their corners and getting instructions from their coaches and taking a breather. And trying to figure out, for the US, where the hell are we going to sell soybeans other than China? And how are we going to insulate ourselves from these rare? How quickly can we spool up this stuff?
And the other thing that somebody pointed out to me, which does hearken back to the phase one trade deal and pretty much every other trade deal in history, is how long does this stick? Do both parties follow through on their commitments to keep this cool, I guess what, until April is the proposed Trump visit to China? So we've got a good, call it five months, six months to see how this all comes together and whether both parties can stay within the guardrails.
Let's shift. The word on the street, and I will let you all piggyback with this, is that Secretary of War Hegseth will be meeting with defense CEOs in town next week, I believe the date is November 7th. I don't believe there is a PT session on the agenda, even thing that's what the Sec War loves to do. So if any CEOs are listening, maybe hit some pull ups and kettle bells over the weekend just to get ready. So fellas, what do we know about what we're expected to hear?
Joe Gould:
Yeah. So invites are out as of today. I don't think we know who from these companies are going to be there necessarily. Senior executives are invited. Some of the agenda has leaked out or been floated. One of the main things that we know is that the foreign military sales process, specifically the Defense Security Cooperation Agency, is going to be announced moved from under the policy shop at the Pentagon into the acquisition and sustainment side. And the thought is that this is going to speed up arms sales and deliveries, and line up that process with procurement. So that's the big one. I think there's some other acquisition within proposals. I think what we found out initially was that this was going to be an acquisition reform speech, so I think there's plenty of other things that can go under that bucket.
I'll kick to any of my friends on the call about this one, too.
Tony Bertuca:
One of the things that I've been saying is if you want to know what they're going to talk about, a pretty good place to start would be the FoRGED and SPEED Acts on the Hill right now that are part of the NDAA, which hasn't officially begun conference, who knows if they'll actually go to conference, but the staff have already begun meeting to iron out the final version of a compromised NDAA for FY26. So there's some stuff in there that talks about more like portfolio management of acquisition and trying to streamline the roles of officials for international security cooperation. Well, that's DSCA being moved out from under policy over to acquisition. And some people I talk to, especially staffers on the Hill who worked on both of the SPEED and FoRGED Acts see this as an extension of stuff that lawmakers are already agreed on that needs to get done.
One of the more interesting things I have heard is that folks from industry who have been having discussions with the office of the Deputy Secretary of Defense Feinberg, who has said at the beginning he wanted to remain anonymous doing this job and has done a pretty good job so far. But he meets with industry quite a bit, so folks in industry I think have reasonable understanding of what to expect when it comes to the organizational moves that are going to be announced because a lot of it I think bears a great deal of his influence and the work people in his office have put in in the last couple of months.
Aaron Mehta:
Yeah. I think first off, my buddy Joe is humble as always. He was the first person to report on some of the details about the meeting, so let's give him his flowers here.
It's a little unclear exactly how much Hegseth's actually going to announce, "Here's our big changes." And partly that's because there have been a series of rolling changes since really January. As a thought exercise, we did a piece today at Breaking Defense basically just being like what has happened at the service level up to this point? And there's been a lot of shuffling. There's a sense, I think, Joe, your story said this, that the REPOs are going to be changed in some way. We started hearing rumors about that back in April. So if Hegseth comes out and announces that's the first big change, it's not something that he came up with on the spot. It's something that has been working on for a while.
Another thing we're watching out for is this idea of creating czars that report up to Feinberg for some of the biggest programs. That's been out there, too. That hasn't officially happened yet. Could he announce that at his speech? I certainly think that would make a certain amount of sense, but that's something we've heard names going back a couple months ago about who's going to be leading those. So I think it'll be interesting to see how much of what he announces is actually new, how much of it is stuff that we've all reported on and been expecting, but hasn't formally happened, and how much of it is here's things that we've actually had in place for several months and are ongoing.
The other aspect that I'm really very curious about is the tone. Is this going to be a lecture to defense primes of, "Hey, it's time for you guys to clean house because we have all these tech companies here?" You have all the primes on the left side, all the tech companies on the right side, and Hegseth's throwing his flowers to those guys instead and saying, "These are the guys we want to back." It's going to be an interesting thing to see how the legacy defense companies come out of this and if they're feeling a lot more concerned than they were going into it.
Roman Schweizer:
So that's one point that I would make. So one, I have to ask the big question. Like the powwow at Quantico, will Trump be able to stay away? Or are we going to get a surprise cameo from the president? And I would say when we say we don't know who's coming from the companies, I would imagine if you're a CEO that's not there, that would be a tremendous mistake. So I think you're going to see CEOs, I would expect.
And if you are, and you mentioned it, all the traditionals, because I'm expecting all the names we all know at the tops of the traditional defense primes. But is Elon Musk going to show up? Is Palmer Luckey going to show up? Is Alex Karp going to show up? Because those are the guys knocking on the door, so I think that will be very interesting.
And then the other thing which we haven't heard about in some time is is Donald Trump, or Pete Hegseth, or Howard Lutnick going to come in and say, "Oh, by the way, we all want you to give us 10% of your companies?" Because that issue has gone quiet in a while. So, "Hey, here's our term sheet. Lockheed, you got that F35 contract, I want 3% of the company." I'm obviously making a little light of this because we haven't head it in a while and Treasury Secretary Scott Bessent seemed to talk it down. So you probably see some discussion on the idea of capex spending or shareholder returns in dividends and buybacks, there's been some talking about that.
But then again, also I would just say, the Secretary of War's speech at Quantico was also heavy on the woke stuff and the rah-rah stuff. So I wonder if he's also going to perhaps upbraid some of these CEOs about some of those practices as well. So it'll be fascinating. I just hope it's televised. I assume it will be, like we saw some from the Quantico stuff.
Aaron Mehta:
My understanding is there will be a live stream, and my understanding is also that the invite went out to CEOs and there was a note saying you can send your COO if you'd prefer. But like you, Roman, if you're a CEO and you get this invite, this is a cancel everything else you got going on for the two days around it and your butt better be in that seat or else.
Joe Gould:
Something I'd wondered, and Aaron, you flicked at it, and so did you, Roman. But if the tone of the speech is telling defense industry executives that they're the problem, then how do you turn around and say, "Actually, we're going to change all these things because we're the problem?" Or is it possible to do both?
Aaron Mehta:
Well, that's been my understanding is somewhat the messaging from industry, from the primes to this particular group is, "Yeah, we agree there are problems and we're doing our best to change, but there's got to be change inside the building." So in theory, Hegseth could turn around and say, "Hey, we've heard your complaints, there's fair things, the building has been too slow. We're changing that now, so now you have no excuse." Or it could be, "You guys are still too slow and you're the problem, and we're just not going to put up with it anymore."
The thing I'm going to be listening for from a phraseology standpoint is if he brings up the phrase "the first supper," which is what the tech girls, the Andurils, the Palantirs-
Joe Gould:
First breakfast.
Aaron Mehta:
... have been pushing. Sorry, first breakfast. Thank you, Joe, first breakfast. It's about lunchtime, I'm getting hungry. If that phrase leaves his mouth, to me that's fireworks going off in Silicon Valley and a whole lot of hung heads in their DC offices because that means they're fully bought in in a way that we've seen. But if that phrase slips in there that is a, okay, so who wrote this speech type situation.
Roman Schweizer:
Well, yeah, sure. If you have Dan Driscoll popping in there saying he wants to bankrupt a prime, which again, I think that's unlikely.
Look, I would say, again, to piggyback on those comments, that the defense industry as it is structured today exists because of the way DOD and Congress have set the rules over the last 50 years when we really did not ... Maybe 40 years, let's go back to maybe the '80s, end of the Cold War. There was not a peer threat, maybe rapid innovation except in specific cases was not needed. Production levels went low, programs were long cycle and it didn't matter. Programs started and died. Each one of you guys as well as myself could count the number of programs, we've been doing this long enough, that have been started and then canceled during our time in this town. But it exists because there are a certain set of rules that exist. Rules of the road, rules, the laws of the land, whatever you want to call it. And if that changes, I think the defense industry will change as well.
And that's the one thing I think that some of the tech companies may not understand, maybe they will understand in five years. If you change the rules, those companies are going to evolve and I think they are. The things that I would point out. Jim Taiclet, the CEO of Lockheed Martin, on the earnings call, one, talked about how they're changing, about how they do their IRAD investment, they're going to more targeted. Both Lockheed and Northrop talked about how they're developing space-based interceptor prototypes on their own dime. So I do think that it's changing and that's what we're seeing. That's the price of entry into some of these competitions and I think you'll start to see some of that behavioral change. But again, just judging about how the Sec War upbraided "fat generals and no beardos," I can't imagine defense management's getting off lightly either.
I guess this is maybe perhaps an opportunity to give Breaking Defense a shout-out as well. I received a number of inbounds about Wall Street Journal article about SpaceX potentially winning a $2 billion Golden Dome contract for satellites. One thing I would quibble a little bit in some of the details, I think there's some fine reporting in that article as well as elsewhere. I'll save this caveat until the end, but maybe, Aaron, do you want to lead off with this?
Aaron Mehta:
Yeah. So the Wall Street Journal article is basically confirming something that our Theresa Hitchens, our space reporter, had been digging into and published on I think about a month ago, something called MILNET. This was something that it had money in reconciliation, but it was unclear what it was for. And as far as we can tell, based on her reporting, it's basically replacing the planned Tranche 3 satellite system from the Space Development Agency, and also to do with some ground-based targeting. Space-based GMTI ... Space-based, I'm getting all my acronyms confused today. The point is doing a lot of stuff that had been planned for SDA to manage, but basically giving it all to SpaceX to do.
And what the Journal article that came out says is it's a $2 billion contract with SpaceX. And people in the Pentagon, and this is not a new complaint, are worried about putting too many eggs in the SpaceX basket. Already, we've heard little pings of emails from people saying, "Hey, remember that Troy Mink was Elon's guy." Elon helped push Mink into the role of the AFSEC. Now obviously, Elon has had his ups and downs in relation to the administration, and there was that brief moment where he said he was going to cancel all of his contracts with the government, and then Trump said he was going to cancel all the contracts with SpaceX, and then they seemed to make up. But I think this is a pretty clear sign that SpaceX remains a player and Elon remains somebody who has a lot of influence inside the Pentagon in terms of being able to cash in.
There's also this ties into Golden Dome, which is the other aspect to this. Where supposedly soon, that document's going to hit that says what the heck Golden Dome actually is going to look like. And if the Wall Street Journal's reporting is correct, then this is maybe the first big Golden Dome related contract to go out.
Roman Schweizer:
I will just point out a couple of things. I am not one to parse reporting or pick at reporting, but yeah, Aaron, I think you were referencing the AMTI, air moving target indicator.
Aaron Mehta:
Thank you.
Roman Schweizer:
That's all right.
Aaron Mehta:
Yes.
Roman Schweizer:
I'm not a nit. But you'll remember, this was a satellite constellation to replace the AWACS program. That's part of the reason why the Air Force canceled or it had intended to cancel the E-7 Wedgetail purchase. AMTI is the eye of Sauron. It can see everything, aircraft, missiles, and things like that. And AMTI, in a low Earth orbit altitude will be amazing. I don't know how necessarily suited it is for the Golden Dome missile defense mission. I think there might be some mixing because Golden Dome is space and missile defense, but there's still a lot of different space stuff and there's still a lot of missile defense stuff that isn't Golden Dome either. So there may be a little conjoining of some different things.
But the one thing I would say, and I will point this out, I've not published on it. But there was a published report in Ars Technica, to give proper credit which we're supposed to do. After the Starship 11 launch, there was one little blurb in there that really caught my eye because this is ... They said that, "During the test flight, Starship released eight Starlink satellite mock-ups mimicking the larger size of the company's next gen Starlink spacecraft. These new Starlink satellites will only be able to launch on Starship." The fine guys and gals over at SpaceX have a larger version of Starlink, which I will imagine do both comms and ISR type stuff. It's the larger satellite bus and will probably go into neo orbit.
So I would have to say for the companies out there, again, "space is so hot right now," to quote Zoolander. There's a reason why SpaceX is crushing it. And again, I understand the Troy Mink NRO Starlink Starshield thing, but SpaceX is almost the US space flight program at this time, and as well as the satellite.
The other thing I would say is, and this is going to sound absurd, but a $2 billion contract is not all that much. Now, I'm not going to be able to find it lying in my couch cushions, but we're talking about, what was the president's estimate? $175 billion for Golden Dome and there's 25 billion in the reconciliation bill. CBO or others have pegged it at half-a-trillion dollars. $2 billion is a lot of money, but it's not a handout, and I would suspect there might be other contracts along the lines of that.
Joe Gould:
The Golden Dome $175 billion, the two billion here. Anybody who has really looked into this seems to be in agreement that 175 billion in three years to build, quote-unquote, "Golden Dome" is impossible. That simply is not going to be. So the question is what is that supposed to cover? Is it just getting a tranche of satellite systems up? Well, then that seems possible if the systems are working and ready to go. It's going to be very interesting to see what information comes out about this contract. If they try to keep it classified or not, we have no idea. Space systems can be a little bit weird, but it seems like a big enough deal they have to talk about it.
What the president has envisioned for Golden Dome does not match up with the dollars and time that he has also proposed. So it's going to be very interesting in the next series of budgets and if there's another reconciliation as you mentioned, Roman, to see where the actual money starts to flow.
Roman Schweizer:
I would just say, to piggyback on that. You guys have an unenviable task because I really don't expect much to be unclassified period. Let alone this administration and this defense department's already displayed desire to not fully disclose or be completely transparent upon where it's getting sources of funds and things like that, but also simply just from a straight-up security perspective. I'm a taxpayer, I believe in the free press and all that kind of good stuff, but China reads the justification books just as much as we all do, too. So I do think there are some desire to keep a lot of this stuff classified for a good reason, I would argue. But yeah, it's going to be tough to see how they roll that out.
One thing I did want to just maybe throw in here towards the end. Joe, I think it was you maybe, but I think it was Politico, you guys got some of the reporting on the first tranche of reconciliation dollars. I know this was maybe a week old or something like that, right? Was that not your story?
Joe Gould:
It was not. That was my colleague Connor O'Brien. I agree with the broad brush strokes, which is that there are some of the big picture moves have leaked out. As of late last week, it sounded like staffers were still trying to sort through what was largely a classified document. And I have to imagine they regarded it as a day late and maybe a few hundred million dollars short, in that they were expecting a much more robust accounting of that money. So yeah, I think some of the details, I could leave it to my colleagues to flesh it out a little bit more.
Tony Bertuca:
Well, I think one of the more striking things about it is just that it's classified. This is a $90 billion spending plan that's supposed to help inform Congress about the next budget it might have to work on and what programs are going to get money under reconciliation, what might not. It's also supposed to be a huge demand signal for industry about what DOD's going to do with this windfall. And at the moment, nobody can see it. It's classified, and DOD isn't all that interested in anybody seeing it.
In my reporting of it, I had more than one person who opined to me that, "Well, maybe this is because of shutdown and the people doing classification review at the Pentagon are furloughed." Which would be really interesting if that were the case because it goes to the fact we don't have a Senate confirmed comptroller yet and they withdrew the nominee, and you might don't have a lot of direction in terms of what you want to present to Congress and in what way. Everybody I talked to hopes for sure it will be unclassified very shortly. But it's also possible, I talked to some people, is this weird canary in the coalmine. That maybe DOD starts to choke off information about the fit up and it all gets marked controlled unclassified information, and they just stop wanting to share information about public money. So just a lot of questions raised when they classified it.
Aaron Mehta:
It's also worth nothing that the classification and the lack of information is also impacting to Congress. We've seen the memo from Hegseth and Feinberg saying basically, "Hey, we're going to consolidate all talking to Congress through one office as OSD. You better make sure all you service guys, who just go and talk to the Congress and tell them stuff they want to know, that you get it through us first."
We've talked about this in previous episodes, but is there another budget or is it just another CR that comes out of this whole situation? And in that case, do you have to send over more budget documents talking about programs, or do you just say, "Whatever we did last year is all we need to do, so why should we talk some more about it?" I think the flow of information, obviously, Tony, you're exactly right. You send this information out in part because it is a signal to industry, "Hey, this is what we're going to do." But we might hear a different signal to industry which is, "We'll tell you exactly what you're doing and fall in line next week," in which case maybe that allayed some of the need to be sending signals through budget documents that you'd prefer simply to not make public.
Roman Schweizer:
This week on the L3 Technologies earnings call, the CEO talked about that demand signal for munitions programs, and where are the multi-year contracts that give the companies the comfort or security in spending that capex, hiring folks. If you're going to build another production line, if you're going to hire the people to work on that production line, you're laying out those funds basically on an assumption that you're going to make your money back over some certain amount of time, five, 10 years, whatever that is, and that it's going to be a profitable endeavor. I think that's perhaps one of the challenges that the secretary has to address next week is that I think companies are willing to do that if there's some payoff. But again, this is the challenge with Golden Dome. You're going to lay out all this money and then a Democrat is going to win the next election and kill Golden Dome. That's one of the things that everybody's chasing right now.
Joe, go ahead, please.
Joe Gould:
No. Just that I would say coupled with the lack of transparency around the budget, coupled with the moves to shift money between accounts, the instability on the Hill in terms of full-year funding, it's not really a recipe for industry to place bets, as you guys were all saying.
Roman Schweizer:
Just quick around the horn, did anyone watch A House of Dynamite? Feel free to be honest. I did.
Aaron Mehta:
I got two little kids, man. I don't watch anything.
Tony Bertuca:
I am also a no, but I have something funny to share with our listeners and some things to direct you. So my excellent friend and colleague Jason Sherman over at Inside Defense wrote a story last night that appeared today on our website, insidedefense.com. And it's because he interviewed retired Lieutenant General Daniel Karbler, who was huge back when he ran Strat Con. And now, he is advising Netflix and he advised House of Dynamite. So he wrote this story last night and he explained to me, "Look, I've got a lot of spoilers in here about the movie. It's a great movie to see the first time, but don't edit the story if you don't want to see the spoilers." And I went, "Well, dammit, I'm going to watch it this weekend, I don't want to edit it."
So then we called up of course the venerable Thomas Duffy, who Roman knows at Inside Defense, and Thomas said, "I can't edit this right now, I'm going to watch the movie." And then eventually, we cobbled together a team of people from our organization saying, "All right, you guys have already seen it, these spoilers are in here, please edit the story." The story's great, I recommend everybody go read it. Excellent stuff about how Karbler advised House of Dynamite.
Roman Schweizer:
Excellent. Well, I will say I did watch it. I think it is incredibly well done. There was a piece in the Journal I guess, what do they call it, not a Mulligan, a MacGuffin, a plot assumption. There are a number of plot assumptions that are used to propel the story. I think there are some question marks for us defense nerds out there. But I call it a gritty Golden Dome thriller because you do get into some of the issues and complexities certainly about missile defense and ending the world as we know it. So I do recommend it to folks. It's pretty well-balanced, grim as it may be.
Tony Bertuca:
Did you notice Karbler in the movie? He's in the movie.
Roman Schweizer:
I will have to go back and check.
Tony Bertuca:
He plays a two-star general named Dan apparently and there's a freeze-frame briefly that you can see.
Aaron Mehta:
So he got downgraded from a three-star to a two-star?
Tony Bertuca:
Yeah, I know. He plays a two-star in the movie apparently, so there you go. The strat comm chief is in the movie. Former strat comm chief.
Roman Schweizer:
Well, gentlemen, I think we're going to bring it to a close there. We've done a good amount of looking back and some looking forward. I want to thank you all again for your time and insight. And listeners, thanks for your attention and we'll do it again soon. Thanks so much, guys.