OMB Director Russ Vought On The FY 2027 Budget And The Big Spend On Defense
OMB Director Russ Vought joined Hugh to talk about President Trump’s proposed budget for FY 2027 which includes a proposed $1.5 trillion in Pentagon spending.
Transcript:
HH: We start with OMB Director Russ Vought. Now not a lot of you will know this. There is the A.G., there’s the Secretary of State, there’s the Secretary of Defense. There’s the Secretary of the Treasury. Arguably, Director Vought is more important than all of them, because he holds the purse strings over at OMB subject to the President’s direction. And our good friend, John Campbell, Russ Vought, always likes to brag on this show that he knew you were a budget genius before anyone else did. Do you want to throw any darts at him? I always like to throw darts at Campbell whenever possible.
RV: I appreciate John, and those are very kind words. And I’ve got my navy blue tie on for New York Giants draft night tonight. So I’ll be watching it with you.
HH: You know, they’re going to draft five right before the Browns. If they take Caleb Downs, I’ll be very, very upset. Director Vought, I want to start by saying the FY-2027 proposed budget is the budget I’ve been waiting for my whole life. $1.5 trillion dollars for Defense, a special appropriation for Defense. What turned the tide to finally get the Department what it needs to resupply and rebuild America’s defenses?
RV: Well, I think we’re at a particular moment in history where the President is incredibly active. His administration is active across the country, across the world in hot spots. Obviously, we’re involved in activities in Iran, and previously in Venezuela. And I think the President’s been intimately involved in what our military Armed Forces need. And we have a great team at the Pentagon. They are coming up with paradigm-shifting ways of having additional capacity. Let me just give you an example. We’re trying to get more out of our contractors so that they don’t just add ships to a workforce, but they actually have new facilities, that they also pay for those new facilities. And the way you do that is to then ensure that they have years’ worth of business that they can trust and account for, and then plan accordingly and ramp and scale. And so this is coming at a time when we are using the military effectively across the globe, and we’re going to need to continue to invest in it accordingly. And look, the Biden administration left us with a lot of problem, Hugh, and we’ll probably end up talking about shipbuilding. But we’re trying to fix those problems, and you can’t do it without the resources. And you’ve got to have sound management, creative management, innovation, but you also have to have the resources.
HH: Oh, we’re going to talk about shipbuilding. You folks are asking for 18 warships and 16 adjacent ships that are like oilers and things like that. And that’s the biggest ship, I think, since 1955. So I love that part of the budget. Before we get there, I noted you broke it down to a baseline of $1.1 trillion, and $350 [billion] in reconciliation. Is that $350 [billion] inclusive of what we need to make up for, for what we expend in Iran? Or is that going to be in addition to whatever supplemental the Department of Defense comes up with after the guns fall silent in Iran?
RV: A part, possibly a little bit of both. We’re still working on the supplemental. We have a request in for the Department of Defense that we’re still working through. And part of that is trying to, just attempt to assess how long operations are going to go over there, to what extent were bills pulled forward from Fiscal Year ’27. So we’re in a good place for what’s necessary, what was needed right now. We will need a supplemental, and it will not necessarily, that will be a Fiscal Year ’26 spend as opposed to Fiscal Year ’27. So we are, obviously, we’re thinking ahead for what’s going to be necessary to put everything back on the shelves and make sure we have what we need into the future.
HH: Now Director Vought, when Leader Thune comes on next, I’m going to quarrel with him a little bit, because they want to do a skinny reconciliation. And I understand the reasoning – get the votes. But if we turned it into a Patriots reconciliation and put the supplemental for ’26 and all the Defense spending for ’27, both baseline and supplemental, I defy anyone to vote against that right now. Do you like the idea of a skinny reconciliation? Or do you want to get a little bit bigger, especially when it comes to Defense spending?
RV: Well, the reason what has informed our desire for a skinny bill for DHS is just the urgency of what we are facing at DHS. And it is really a unique moment in the life of that department. When Secretary Mullin was confirmed, we went over the books and what he was facing, and they department was disintegrating in terms of the sickout rates, people that they were worried about going and leaving the agency. And there was no other way that we saw to make sure that the department gets funded than to move in the direction of the Senate bill, and then fill those holes for CBP, Customs and Border Patrol, and ICE with reconciliation. And I think what’s important to let everyone know about, it’s not going to be our last reconciliation. We are fully planning on doing a reconciliation bill for the normal Fiscal Year ’27. We did this last year as part of the One Big Beautiful Bill. We kind of cut through the paradigm to be able to do a significant portion of our Defense needs on reconciliation. But we’re not relying on reconciliation alone. We have part of this is a big increase for the discretionary base that we don’t ever create a cliff. And we want to make sure that that increase goes through the normal appropriations process. So this year, we’re just going to be, people, I think, have to trust that, you know, we’re sailing a ship to get these resources enacted in a very divided Congress with a lot of different competing priorities. We’re going to get there, but it’s going to take a little bit of tacking, and things may change week by week, month by month. But I’m pretty confident that we’re going to get there.
HH: Well, I did learn to trust the President and you and Leader Thune and Speaker Johnson, because you got the Working Families Tax Cut through, the One Big Beautiful Bill. But I would love to see some of the Defense spending get in there so that that demand signal for munitions and ships and shipyard improvements gets sent early and often. With that, let’s turn to this massive Defense thing. Let’s talk about the demand signal on ship, and importantly, infrastructure – shipyards. Do you think it is clear from this budget that shipbuilders in America, and those from abroad who might want to invest in America, know that their money is coming and it will keep coming at least from this administration?
RV: I don’t know how there could be any doubt. This is one of the largest shipbuilding budgets in history. It would add, it would come to a total of 120 ships of those that are requested and funded. 18 battleships, as you mentioned, 16 non-battleship auxiliary ships. But those auxiliary ships are all intended not just to meet requirements of the Navy, you know, fireboats is probably the easiest one if you’re following the press over the Navy of the last ten years of why that’s necessary.
HH: Yup.
RV: But to also cause additional shipyards to come online that can do this work and then provide competition for the other yards that are behind and creating a mass backlog. I mean, I remember you challenging us in the first terms, Hugh, that our shipbuilding budgets weren’t what they should be. And we took it to heart. And over the next two years, Robert O’Brien and I really spent a lot of time making sure that our budgets were getting to where they needed to be to have maritime superiority. What has changed since we left office, and this is really interesting, is we came in just expecting, hey, you know, we’ve got to just keep increasing the amounts. And obviously, with this budget, we are doing that. But the backlogs are tremendous. And the backlogs have gotten much worse. So when we left office, I thought if you just created the demand signal, you could go from two Virginia-class submarines to go to three, and that industry would respond to those demand signals and act accordingly. They really haven’t. And we’ve gone backwards, and we have backlogs in every class of ship. And so right now, we have to do two things. Number one, we obviously have to continue the resourcing, and we’re doing that. But we have to do it in such a way that we don’t have the wrong demand signals to industry that honestly has become a little comfortable with those backlogs. If you listen to how they talk on their earnings calls, they almost treat their backlogs as an asset for their stockholders so that they can do buy-backs and dividends. And we’re pushing back hard on that. So it’s kind of a, we’re going to support you with the resources, keep going, expand, scale your business. But at the same time, we have schedules to meet, and we have to get to the point where we can build faster and have more shipyard capacity and competition here in this country.
HH: Oh, bravo. You and Steve Feinberg, of course, Secretary Hegseth as well, are cracking the whip on the primes, and I’m glad to hear that and see that. And I talked to, I had on Shyam Sankar about his book, Mobilize. The primes are really fat and happy, and it’s time to make them less happy and more productive. I’ll talk to you during the break about the new primes. But have they gotten the message? Do you think they’ve gotten the message about now is now, not five years from now?
RV: I definitely think so, particularly across the whole depth and broad scope of the Department of Defense. You know, the President’s having them in. Pete’s having them in to continue to say look, what’s necessary to scale in this moment? And we’re going to continue to send those signals to the industry leaders.
HH: I’m going to talk with Director Vought for the four minutes during the break, and he’ll be back on the other side. I’ve got lots more to talk to him about. Don’t go anywhere. Yeah, it’s mostly about the Defense budget. I know they’re cutting the non-Defense discretionary spending. I don’t care. 10% is fine. Everyone can suck up 10%. But we need the Defense spending. Stay tuned.
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HH: Now Director Vought, I only own mutual funds. I don’t own any stocks. I got out of the business when I started pushing the new primes. Whenever Anduril goes public, I might buy some. But I don’t own any Palantir, so this question is neutral. I did talk to Shyam about this. They have a new system called Ship OS. Can the OMB just demand that all the old primes adopt that? Can they just put into the rules all of you will use a Palantir or name whatever operating system you want. But we’ve got like 30 different systems with all the different Defense contractors in the country. No wonder it’s screwed up.
RV: No, it’s a really impressive proposal. I got briefed by Shyam as well, and it was very eye-opening particularly when you look at, you know, you just assume the main problem is workforce, and it is a big problem. You know, workforce rates are, we’re just not paying people what we need to, to compete. But then you look at their technology, and they have it down to a specific valve that they know that you can’t get the workforce to work more than two or three hours if that valve is a shortage. And then they know there are only two suppliers for that butterfly valve. So it’s a really impressive briefing that they did. When I had it, I went immediately to some of the services and said, “Are you doing this?” And I think they are going down that direction. So we’ll see how far and whether we need to push a little bit, but I think it’s an incredibly interesting birds-eye view that you get otherwise. And honestly, I want to find a way for OMB to get our version of that birds-eye view so we can see it as well.
HH: Now there’s also a bunch of people out there like Palmer Luckey. I used to live in Orange County, and I’d see Palmer occasionally. I don’t know him. He’s quite the figure in his flip-flops and his Hawaiian shirts. But he’s an innovator. I mean, he’s like you. The guy’s just way smart. Any idea about giving some of our best new talent dollops of money and saying hey, we need a drone that can go X thousand miles and carry X amount of munitions, it’s got to launch from anywhere on the ground or the platform? Give us four prototypes from which we can pick, as opposed to doing procurement the old-fashioned way? Are you an innovator in that regard?
RV: No, I mean, that’s the direction that I think the Department and we want to move. You know, incredibly impressive, you know, they work on low-cost munitions and a number of other items where they put their own capital, invest it, and they come up with something they think we need. They do their own research, and then they try to sell it to us. And it’s really incredible. I was out there not too long ago visiting their factory when I was at the Reagan Defense forum. And I think that’s, we are looking at that, and that is, we don’t, want to make sure there’s a blend. You know, we have these big, prime contractors that have operated on a particular model that you can’t, you know, change in one day. You can’t pivot in one week. But that, I think, is the future. And we want to make sure we’re providing the right demand signals there to where people are successful and to the extent that the current contractors can move in that direction over time of just investing their own money as opposed to investing in dividends and grow their company accordingly, and give us things that they know we need.
HH: Amen. We’ll be right back on the network. Stand by.
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HH: Director Vought, let’s talk a little bit about getting money out. Your budget is a proposal, and you have to persuade. Congress gets persuaded, and they appropriate. Then, the Pentagon’s got to allocate the money to primes, and then it’s got to get out. You can’t make a cap-ex expenditure on a drone, on a ship, on the border wall until the money’s actually in your hand. Do you see Pentagon advancing their ability to get the money through the system to the contractors?
RV: I think so. I have not, you know, been concerned about our ability to get the money out the door. My main concern is the extent to which we just, all of our lives are budgeting. You know, we’re already working on the next budget with regard to DOW. And I think over time, that should change that people can spend more of their time working on reforms and move the ball forward. And they are. But there’s an amount of time in the day. But we have challenges in terms of getting this past and secured through Congress. But thankfully, we have, I think, done paradigm strategic work to be able to use reconciliation and other processes to make sure we’re not requiring Democrats all the time to get this funding done. So a lot of work to do. You’re right. This is the proposal phase, and now we’ve got to get it executed and secured.
HH: Now everyone should be on board with Golden Dome. After the war that we are still in and we are watching, Golden Dome obviously becomes a necessity for the defense of the United States. But everyone can say yay, and everyone can appropriate the money. How in the world are we going to get it out to the field with the missile interceptors built and deployed in the appropriate places around the country? Tom Cotton today was calling for making sure that our power plants are not exposed. That’s a lot more, not just our shipyards, not just our bases, but now we have to defend a bunch of points that we hadn’t previously thought about before.
RV: Well, I can’t imagine the challenges that the DOW faces to not only ensure that our war fighters across the globe have what they need, but also to ensure that we are protecting everything we do here. We will resource everything that’s needed. I’ll let the folks at DOW respond with the urgency of those types of oversight ideas and initiatives that are coming from the Hill. But I’m confident that with this budget, I think finally at the levels of 4 ½% or so that has been called for, we’ll finally have the resources that are there to be able to ensure that we can cover what people have drawn attention to.
HH: Now you mentioned during the break, Director Vought, that our workforce is not paid enough. They’re finding it incredibly hard to buy a house or even rent a house near the shipyards, for example, in San Diego or Portsmouth, New Hampshire, or Bath, Maine. It’s hard to find. Anything in the budget about the Pentagon, go out and build these people housing like you used to build housing for officers and enlisted people, build housing for your workforce and guarantee them the right for as long as they work at the shipyard or the munitions plant, they can live there?
RV: You know, we have very healthy increases for military construction in this budget. And something that as I have visited military bases and installments I’ve been keeping my eyes on, what are the troops and sailors living in. And sometimes, we need to make some significant investments so that people are living in dorms that have, are air-conditioned, and they have a modern ability to live and work and provide for their families. And so this is the type of budget that’s going to be addressed to that. And then when it comes to the shipbuilders, I mean, they’re not, they’re working for private companies. We’ve got to be able to ensure that the incentives are there for the companies to pay their workers more so that we put those stories away. And they’ve been real stories of fast food companies paying more than you could see at the local shipbuilding company. And that is something that we are watching very carefully. You used to be able to have three or four times what, as a shipbuilder than what you would make at the average workforce wage. Now, it’s 1.2, 1.4 according to a recent study. So we are watching that very carefully, and we think that’s part of what’s necessary in terms of putting pressure on these contractors. When they do a fixed price contract, and we want to move people towards fixed price contracts, it has to have a realistic view of what’s necessary to be able to pay their workers appropriately and meet the calendar deadline.
HH: You know, my hometown was full of union guys – car builders and steel workers. I think your dad was in the trades. They are, it’s hard work. They’ll do it. They love doing it. They’re craftsmen. But you’ve got to pay them so that they can have a house and send their family to school and feed them. And I don’t think the Defense industry has kept up with this. I’m glad that you’re talking about it. I want to close with your last paragraph in the top line. Support artificial intelligence and quantum research, and you go on and talk about the budget. Is David Sacks sitting down with you and talking about this, because it seems to me his counsel and you have got to make some big decisions about how we’re going to go about things like Anthropic and Mythos, whether it’s a danger or a breakthrough. How do you know what you’re buying? You don’t want to buy Frankenstein’s monster, but you want to buy one that we can control.
RV: Sure, and those are active conversations. David’s a part of them. Pete and Steve at the DOW are part of those conversations. We are going to ensure that we use artificial intelligence responsibly, and that we have, we go with the right companies that are willing to do this in an American way with respect for both the need to be able to use the military on our own terms, and also to ensure that it’s done in a safe and responsible way. And you know, I’m thankful that there are people smarter than me with regard to AI like David that are part in leading those conversations. But we’re certainly going to resource it effectively.
HH: My last question is about President Trump and the Golden Fleet. I think this is great legacy with Golden Dome. A lot of the other stuff matters, but Golden Dome and Golden Fleet, how often does he ask you about it? Is it like you get briefed every day before you go to see the President on what ships have rolled down the line, or what parts of the lasers have been built?
RV: You know, the President is very interested in the Golden Fleet, the battleship, the aircraft carriers. I mean, he is, he has a lot of interest and believes this is incredibly important. I talked to him just yesterday on these issues. And so it’s one of the reasons we want to get it fixed so bad, not just because it is necessary, but I think he’s brought an attention to what this, the potential of what this could be for the country. And when we talk about bringing the battleships back, which is kind of the front and center of the Golden Fleet, and then making sure we have all the smaller ships that are needed for coverage to deal with all the requirements that we have militarily across the world, so he’s very leaning forward on this. And that’s why we at Office of Management and Budget are trying to make sure from an all of government perspective we can rally the government, not just DOW, but Coast Guard, DOT, to make sure that we’re thinking about how to scale industrial capacity, add competition, and making sure we get where we need to be.
HH: A bonus question, though. A bonus question. We’ve got less than a minute, Director. The United States Navy nabbed two oilers over the last four days that were full of hot Iranian oil. I think four million barrels total. Who gets that oil and the profits there from? We don’t send it to Iran. Does that go into our Strategic Reserve? Does it go to Iranian victims of terror? Who’s it go to?
RV: It’s a great question. I’m not going to speak to that and get myself in trouble, Hugh. I’m going to foul that pitch off and let either Chris Wright or Scott Bessent answer it.
HH: Okay, I’ll try and get either or both of them to do so. Russ Vought, thank you for joining me, Mr. Director. An honor to talk to you. Keep doing what you’re doing. Great budget. Good luck with the Hill. I’ll be right back, America. Stay tuned.
End of interview.
The post OMB Director Russ Vought On The FY 2027 Budget And The Big Spend On Defense appeared first on The Hugh Hewitt Show.
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