Gunpoint Stimulus: Defense contractors are saying Pentagon budget cuts will destroy the economy. It’s bogus
Since 1998, U.S. military spending has grown exponentially, reaching 20 percent of overall federal spending and more than half of discretionary spending-levels not seen since the end of World War II. In particular, the portion of the budget used to purchase equipment from private industry has doubled over the last 14 years, growing from about $100 billion in 1998 to nearly $200 billion today.
Unsurprisingly, the defense industry has enjoyed remarkable prosperity during this time, with industry profits quadrupling between 2001 and 2010. But with a struggling economy and the conclusion of two wars, the United States can no longer afford to fund a massive defense buildup in the absence of an existential threat. Every bipartisan group confronting the deficit problem — including the President’s Debt Commission (Simpson-Bowles), the Domenici-Rivlin Task Force, and the Gang of Six — has recommended reducing defense spending by about $1 trillion over the next decade. And the Budget Control Act (BCA), passed last summer, called for Congress to identify $1.2 trillion in cuts, revenue, or both to address this fiscal dilemma. If Congress failed, the act stipulated that $500 billion be automatically “sequestered” from defense (an equivalent amount would also be “sequestered” from non-defense programs) to meet the shortfall.
Faced with the prospect of declining government spending, the defense industry has stepped into the fray. Whereas for much of the last decade the defense industry relied on fears of terrorism and the ongoing conflicts in Iraq and Afghanistan to secure lucrative contracts, the end of the wars and the economic downturn have forced it to dramatically change its approach. Now, the defense industry is marketing itself as an essential job creator. Lockheed Martin, in particular, garnered headlines last week by announcing it will issue layoff notices to the majority of its 123,000 employees the week before the November elections unless sequestration is averted. It’s certainly a tactic tailored to the times. The question is: will it work?