Defense spending now – and it’s mostly for foreign troops – represents investment in
simpler arms for
contracts. Withdrawal would shift budget toward future weapons, and industry lobbyist are compensated
New York Times 9
( Christopher Drew, Covers military contracting and Pentagon spending for The New York Times. He is also the
co-author of “Blind Man’s Bluff,” a best-selling book about submarine spying during the Cold War.
The good news for big military contractors from President Obama’s budget this week was his proposal
to increase the basic Pentagon budget by 4 percent, to $534 billion.
But now the companies are
contending with a new question: what will the priorities of the new administration — which has made
clear it wants to shift spending from futuristic weapons systems to simpler arms that troops can use
now — mean for the industry?The big contractors “are sitting on the edge of their seats
,” said Gordon
Adams, a professor at American University in Washington and an expert on the defense budget.
defense secretary, Robert M. Gates, said this week that he would probably not decide the fate of some
marquee weapons systems — including the Air Force’s supersonic F-22 jet fighter and the Navy’s
plans for a new high-tech destroyer — until April.
In an effort to blunt some of the inevitable
lobbying, he has taken the extraordinary step of requiring members of the Joint Chiefs of Staff to sign
documents promising not to leak any details of the deliberations.
In addition to the basic budget, the
Obama administration expects to spend at least $130 billion to cover the cost of the wars in Iraq and
Afghanistan, bringing the total defense budget to $664 billion in fiscal 2010
, which begins Oct. 1.
That is slightly higher than the $654 billion the government has set aside in the current fiscal year —
the most it has spent, in inflation-adjusted terms, since World War II.
Some military executives
acknowledge that the spending proposal for next year remains generous given the government’s
spiraling budget deficits.
“It’s a good number in this economic climate,” said Kendell Pease, a
spokesman for General Dynamics, the giant military contractor.
But, he said, “There are so many
contentious issues to decide, and nobody is going to do anything in Congress until they see the line-
Investors also seem unnerved by the uncertainty; the stocks of the leading military
companies fell even harder than the general market averages Friday.
Investors were also concerned
that with the plans to gradually withdraw forces from Iraq, the level of supplemental war funding will
drop sharply in the future
Ronald Epstein, an analyst at Merrill Lynch, said in a research note that this