Defense Firms Seek Insulation From Cutbacks Associated With Stimulus
By John M. Donnelly, CQ Staff
cqpolitics.com
The economic recovery package now under construction appears to have something for nearly everyone — except defense contractors.
While many in the defense industry would like to see spending for weapons programs included in the roughly $800 billion measure, they have refrained from pushing too hard.
After benefiting from years of rising defense spending, they reasoned that asking for more in the stimulus would be a tough sell. And, perhaps equally relevant, they will have another shot at federal dollars in the months ahead, when Congress takes up a new fiscal 2009 war spending bill, as well as the annual measure providing funds for all Defense Department operations.
What defense lobbyists are instead most focused on is making sure that a government dominated by Democrats does not cut too deeply into regular defense accounts. That worry has intensified as the cost of the stimulus package has grown.
“The defense industry’s main goal right now is to avoid being a bill payer,” said Loren B. Thompson, chief operating officer of the Lexington Institute, a conservative think tank, and a consultant to defense contractors. “They know they are not going to get more money. They just don’t want to end up being the piggy bank for other projects.”
Death by Theory
Some economists argue that defense spending is an engine of job growth and should be a part of the stimulus plan.
But other economists — and, privately, even some defense lobbyists — say that weapons outlays are not the best answer to what ails the U.S. economy. Building a ship, tank or plane takes a while to accomplish and is not the sort of quick-hit solution being sought to stimulate the economy. Politicians also favor spending on projects such as roads or schools that benefit their constituents directly and visibly.
The incoming Obama administration appears to agree with the latter school of thought.
“These are Democrats,” Thompson said. “They think we’re spending too much on weapons. The notion that we would put more weapons into the stimulus plan was a non-starter to them.”
As a result, there will be little to no military procurement spending in the stimulus package, though there will probably be about $10 billion allocated for upgrading infrastructure at military bases, according to John P. Murtha , D-Pa., chairman of the House Defense Appropriations Subcommittee. “This is stuff the military has needed for years, but it just never got done,” Murtha said.
Though weapons themselves may not be part of the stimulus plan, lobbyists for aircraft, satellite and weapons manufacturers may yet be successful in obtaining some other forms of relief in the bill.
The Aerospace Industries Association, an advocacy group representing firms that do business with military and commercial customers, has asked congressional leaders to include in the stimulus plan some $4 billion in upgrades for civilian aviation infrastructure — from airports to runways to cockpit computers.
The group is optimistic that those programs will be included.
What’s more, aerospace advocates have lobbied leaders to include several policy changes — such as reducing corporate tax rates and making permanent a tax credit for research spending — that they say would help defense and other companies make investments that would create jobs and boost competitiveness. Some of these proposals may prove a tough sell with Democrats, proponents admit.
Guarding the Castle
To be sure, some defense companies had sought to obtain weapons funding in the stimulus bill, particularly after the Obama transition team asked military acquisition offices for information on projects that might create jobs, said lobbyists who requested anonymity.
“In December, defense lobbyists went nuts,” one said.
But it became clear that weapons projects were not what the Obama team was looking for, they said. And justifying such spending was difficult after the increases of recent years.
“Defense has had a pretty good ride,” another lobbyist said.
And the ride is not over. Another fiscal 2009 war spending bill could total $69.7 billion, according to Defense Secretary Robert M. Gates . Murtha said his panel will probably add programs to the request, bringing it to about $88 billion, though that figure is subject to change.
After that, though, there is more mystery. The next Pentagon budget request, covering fiscal 2010, is expected on Capitol Hill sometime this spring.
Defense contractors are girding for cuts. How much is available for defense will be driven largely by the effect of withdrawing troops from Iraq while adding them in Afghanistan.
But given the twin expenses of the financial industry assistance and the economic stimulus, other parts of the federal budget are almost certainly going to be reined in, and defense appropriations is an obvious target.
Fearing that prospect, the Aerospace Industries Association has spent nearly $2 million on ads to convince decision makers that the defense sector plays an important role in the economy. The group is under no illusions that the rate of growth in defense spending since the Sept. 11, 2001, terrorist attacks can be sustained, but it hopes to limit the cutbacks.
“We are concerned about any proposals to dramatically reduce defense spending, particularly in the military modernization accounts,” said Cord Sterling, a vice president of the aerospace association. “We don’t want them to take actions — whether funding or policy — where the unintended consequence would be to actually create harm in an industry that is doing well at providing good-paying jobs and at developing technologies that lead us into the future. We don’t essentially want to sink one boat in order to raise another.”
Josh Rogin contributed to this story.
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