Private Industry Is Biggest Barrier To Military Budget Cuts

The Aerospace Industries Association (AIA), the premier trade association for this country’s most successful (and deadliest) weapons companies, has recently released its own damning review of proposed defense cuts: Slash the military’s budget and the economy dies.

The AIA’s leading conclusion is that if the government slashes its defense budget, then the defense industry will have to respond with layoffs and the shutting down of production to the tune of a 25% hit to projected GDP. In total, the report screams a simple headline: $1 trillion defense cuts means a million jobs loss. To further complement doomsday, there are vague predictions of the whittling away of America’s engineering and manufacturing capacity. This scenario puts this deficit-laden government into a deep bind but it’s not a scenario the government has to acept in the first place.

It may be an oft-repeated cliché but perhaps President Dwight Eisenhower’s warnings over the military-industrial complex should have been taken more seriously. If anything, the connections between private industry and the military are stronger than ever.

The business of war is a racket. There will – sadly – never be an end to the demand for more and more efficient ways to hurt, maim, and kill one’s opponents. While the wider economy has stagnated, aerospace and weapons manufacturers have maintained healthy profit margins aided, in part, by a Pentagon that always wants the shiniest and latest toys (that we don’t always necessarily need), and the persistence of two major wars and several other "secret" ones conducted by drones and special forces.

To put it into perspective, leading manufacturers General Dynamics and Northtrop Grumman – two of the biggest post-Cold War winners – both posted profits in excess of $500 million last year. As leading members of the AIA, both companies have prospered in the last decade. Their successes are generally indicative of market performance across the defense industry.

I’d like to emphasize that I’m not arguing against necessary defense spending. Obviously, the brave soldiers, marines, sailors, and airpersons in the field deserve the best equipment money can buy. But the extent to which the AIA, and the defense industry in general, hold themselves above other, arguably more pressing, needs on the public purse points to their hubris.

It is not as if the government is deliberately targeting the defense industry and, quite obviously, the Pentagon is not the only government department that has been instructed to make deep cuts. In fact, defense procurement will hardly be affected and the government will not only honor all existing contracts but intends to continue to make long-term strategic purchases. Lockheed Martin, developer of the sophisticated F-22 fighter, has announced to its shareholders that if President Barack Obama’s next defense budget passes Congress, Lockheed stands to make just as much as it did last year. This doesn’t exactly presage an austere period for the industry.

Defense cuts will inevitably mean some job losses. There’s no doubt that there will be some “structural readjustment” but this won’t mean – and shouldn’t mean – a collapse of the defense industry. If the firms themselves are still turning healthy profits, then one way to retain staff would be to – like other companies who value their people and production capacity – take a slight hit in earnings. Furthermore, the feared decline of America’s manufacturing and engineering capacity is a trend that has existed for decades. Not only has manufacturing migrated overseas but defense companies find it more and more difficult to attract the best talent in this country despite competitive salaries. This is something that won’t magically reverse itself with larger government contracts.

But let’s also not forget that the military enjoyed its year-on-year profit rises thanks to a policy reaction to an emergency: the War on Terror. This is now a conflict that is, at least for the military’s biggest hitters, winding down. American troops are poised to leave Iraq by the end of 2011 and even the “longest war in American history” in Afghanistan is drawing to its own end. The defense establishment has enjoyed a decades-long spending spree – using borrowed money – on equipment that will have little long-term application outside of brushfire wars.

The defense industry is already in a privileged position in this economy, brought to its current prosperity thanks to some wild spending in the last decade. There should be no further reason to give it the privilege of not having to deal with a scaling-back of government patronage.

Instead, we should turn this crisis into an opportunity to restructure the way the government does business with private manufacturers. For too long, policy makers have treated military procurement as jobs programs – the B-2 bomber requires parts manufactured in factories from all 50 states – but as former Secretary of Defense Robert Gates has (quite rightly) proposed, military procurement should be tailored to a greater defense and national economic strategy, scaling back, or scraping all together, surplus programs. All government-linked industries are asked – if even – to make some cutbacks and adjustment for the duration of this financial crisis. Unless these same corporations are willing to accept higher tax rates to sustain this government’s spending, they will have to learn to exist without wasteful government patronage.

The fight is out on the field; the Pentagon does not need one with lobbyists in Washington too.

Photo Credit: Wikimedia Commons

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