While both parties in Congress scramble to do the bidding of the defense industry and put off some or all of even the modest cuts to defense spending in the sequestration deal, the Pentagon and the defense industry is preparing for a little less gravy on the train in coming years.
Sequestration or not, the defense industry is bracing for a bad decade.
Contractors are hoarding cash. Top firms are eyeing potential mergers. And old alliances are cracking. Even senior Republicans on the House and Senate Armed Services Committees acknowledge a shrinking military is inevitable as the U.S. withdraws from Afghanistan after more than a decade of war.
Gosh, what a shame. After a decade of war that has cost trillions of dollars, none of which we bothered to pay for as we spent it, the defense budget might go down a little bit in the future. Or at least not go up quite as much as before.
Defense insiders are cautiously optimistic Congress will act to avert sequestration, which would reduce Pentagon spending by about $55 billion during the current fiscal year. For them, the real problem is what comes next.
“There are few companies, if any, planning for a full-year sequester,” said defense consultant James McAleese.
But a deal to stave off the automatic spending reductions is almost certain to include defense cuts of its own, he said. And that’s only the beginning. “This confrontation is going to be happening either every year or every other year,” he warned.
The president’s latest deficit-reduction plan would slash the defense budget by another $100 billion over 10 years. And McAleese said he views that number as a floor, not a ceiling. “The market’s expectation is that the compromise would be $15 [billion] to $20 billion,” he explained, referring to cuts carried out each year over a decade.
Oh, the humanity! A whopping 2-3% cut! How ever will we survive only spending 45% of all the world’s military spending instead of 47 or 48%? We might have to put off bombing a nation full of brown people who haven’t done anything to harm or threaten us by a year or two instead of sticking to our rigorous schedule of at least once per decade. Defense contractor CEOs might have to start taking only seven-figure annual bonuses instead of eight-figure ones. Once someone think of the plutocrats?
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