That drop in defense spending was also driven by the decision by Congress to enact the Budget Control Act of 2011 (BCA), which established specific limits on annual appropriations for fiscal years 2012–2021. Due to the gridlock in today's highly polarized Congress, the BCA has been amended numerous times resulting in a large fluctuation in DoD spending, including a 7% decline in spending in 2013 followed by flat DoD budgets in 2014 and 2015.
The good news for General Dynamics is that in 2016, 2017, 2018, and 2019, the Pentagon's budget increased 5%, 3%, 15%, and 2%, respectively. At least for the last few years and the next two, almost all U.S. defense contractors should have the growth winds at their backs.
However, General Dynamics' dependence on the U.S. government for 61% of its 2017 revenue means that the firm will remain sensitive to ongoing concerns over rising U.S. deficits. As seen below, the Congressional Budget Office (CBO) expects the deficit to rise by about 150% to $1.5 trillion per year within a decade. As a result, future defense spending cuts might be more severe then in the past and make it much harder for the company to grow its top and bottom lines.
Source: Congressional Budget Office
