It is now 20 years since the Soviet Union began breaking up, removing the threat to American survival that spawned the modern defense industry. Industry fortunes have oscillated wildly in the post-communist world, from the despair of Billy Perry’s last supper — when the deputy defense secretary warned industry leaders that two-thirds of their companies would soon disappear — to the Bush Administration’s trillion-dollar crusade against terrorism. The industry did well during Bush’s tenure, but it never won the respect of his security team: defense secretary Rumsfeld didn’t meet with a single industry executive in six years.
Since taking office, the Obama Administration has signaled that it intends to continue the bipartisan tradition of bashing the defense industry. In March the President warned that “the days of giving defense contractors a blank check are over,” proposing reforms that he wrongly expects will save $40 billion. In April, defense secretary Robert Gates canceled a raft of big-ticket weapons programs, some of them vital to the nation’s future security. In May, deputy defense secretary William Lynn directed military components to “review all contracted services for possible in-sourcing.” There isn’t much the industry can do about any of this, since the government is its only customer. But you’d think all the oversized intellects populating the Obama White House would be able to look beyond left-wing stereotypes when dealing with the defense business. Here are three things they seem to have left out of their calculations.
Jobs. Several months ago, in the midst of the worst economic downturn since the Great Depression, the Pentagon’s Comptroller said that policymakers had prepared the 2010 military budget without any thought at all about its impact on employment. And sure enough, decisions were made that promise to wipe out tens of thousands of high-tech industrial jobs over the next few years. It’s true that the defense industry only represents 1-2% of the economy, but manufacturing is down to 12% — which means something like one in ten manufacturing jobs are in the defense sector. Is there any other country in the world that makes military investment decisions without thinking through their impact on employment or the economy?
Trade. Military goods are one of the few technology categories in which America still has a positive balance of trade. According to the Congressional Research Service, the U.S. government signed weapons agreements valued at $38 billion in 2008 — much more than the $28 billion earned by all of Hollywood’s cultural exports that year. If the U.S. defense industry is such a morass of corruption and inefficiency, how does it manage to claim two-thirds of the global market for arms? Does the Obama Administration really want to weaken this performance, and that of the overlapping aerospace sector, when the U.S. trade deficit in manufactured goods already exceeds a billion dollars per day?
Politics. There was a time when the Democratic Party was considered a champion of blue-collar workers. Apparently that image no longer is valid beyond metropolitan Detroit. How else can you explain the Obama White House’s indifference to the elimination of thousands of defense jobs held by members of organized labor? Many of these jobs are in swing states such as Colorado, Florida, Ohio, Pennsylvania and Virginia. With mid-term elections only 14 months away and the President’s popularity showing signs of weakness, the failure to weigh local impacts in making weapons decisions shows a blind spot in the White House political operation. A more seasoned chief executive would match military choices to key political constituencies, rather than putting them at odds.
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