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Pentagon Pressured by Financial Crisis


Pentagon pressured by financial crisis
By Jen Dimascio | Politico.com

Barack Obama’s aides reached out to the aerospace industry last month to ease fears that massive cuts were headed its way, according to numerous sources within the defense industry.

“There have been waves of, ‘The world is going to fall apart,’” said F. Whitten Peters, a former Air Force secretary who advised Obama’s Democratic presidential campaign on defense industrial base issues. “That was not the view of the campaign.”

Though he wants to begin pulling combat troops out of Iraq, Obama does not anticipate making major cuts to defense programs in the near term, his aides have said. And that message was circulated just before Election Day in meetings and background conversations with industry officials and analysts.

But the aerospace industry might have good reason for its fears. House Financial Services Committee Chairman Barney Frank (D-Mass.), for one, has called for a 25 percent reduction in the defense budget.

Even if that proposal doesn’t fly in the new Congress, the Pentagon still can’t afford its own plans. The Defense Business Board, which advises Defense Secretary Robert Gates, recently studied the impact of the global financial crisis on the Pentagon and concluded it would need more money.

“All indications are the department is entering a prolonged period of fiscal constraint in a tough economy with deficits increasing and competitive spending pressures,” said a draft presentation on the board’s findings. “Actions related to the Wall Street crisis will exacerbate the pressure. Business as usual is no longer an option. The current and future fiscal environments facing the department demand bold action.”

Supplemental funding for the wars in Iraq and Afghanistan is likely to continue for some time. But the question of what might be folded into the larger defense budget remains open.

Any shift in money from the supplemental budget to the larger budget, combined with plans to increase the size of the Army and Marine Corps, would eventually put pressure on the Pentagon’s ability to develop new weapons, budget experts say.

That might not mean that weapons programs would disappear, however.

“What I see is really not a message by killing programs but doing the classic budget drill to extend programs,” said Mackenzie Eaglen, a senior policy analyst for the Heritage Foundation.

Regardless of how the budget takes shape, the new administration will quickly face decisions on the course of a number of multibillion-dollar defense programs, said John Young, the Pentagon’s top weapons buyer.

In addition to tackling the Air Force’s ongoing quest to buy new aerial refueling tankers, the incoming administration’s plate includes:

• How to handle continued cost overruns for the new presidential helicopters, the VH-71s.

• Whether to maintain a production line for C-17 cargo planes.

• How to proceed with development of the Army’s Future Combat System.

• At what rate the Pentagon should produce Joint Strike Fighters for the Air Force, Navy and Marine Corps.

• How to navigate divisions between Congress and the Pentagon on the Air Force’s F-22 Raptor.

The Pentagon is currently buying 20 of the F-22 advanced fighter jets a year, but this fiscal year is the last in a multiyear contract with Lockheed Martin.

While there is no guarantee that the program will continue beyond next year, Congress has set aside money toward new planes for purchase in 2010. But now Pentagon officials have nixed an Air Force request to put that $140 million toward new F-22s.

Top lawmakers on the House Armed Services Committee and six senators wrote letters to the defense secretary, pointing out the discrepancy and asking him to keep the production line alive.

The argument for keeping the production line open in 2010 has long focused on the need to keep making the advanced Air Force fighter jets while the new Joint Strike Fighter is still being tested.

But the nation’s top defense contractor, Lockheed Martin, is now also promoting the plane’s importance to the economy and warning that huge job losses could result from closing the line.

“Premature termination of F-22 production would have considerable consequences in an already ailing economy,” the company said in a recent white paper, stressing that closing the line could threaten 95,000 manufacturing jobs.

More than 2,200 of those jobs are in Georgia, where the planes are assembled and where Republican Sen. Saxby Chambliss is fighting in a runoff election to keep his seat. The Senate Armed Services Committee member has been a champion of the program.

Chambliss’ seat on the committee, though, is not the only one being watched closely by the defense community.

Arizona Sen. John McCain is returning from his campaign loss to resume his role as the ranking Republican on the Armed Services Committee, his spokesman confirmed.

That’s good news to many in the defense industry — primarily because of the dynamic within the committee.

When McCain was on the campaign trail, the former committee chairman, Sen. John Warner (R-Va.), filled in for him. Warner and Sen. Carl Levin (D-Mich.), the current chairman, have traded leadership of the committee for years and share warm relations.

McCain and Levin also work together well, say industry officials and Senate aides.

Last year, the Democrats had a one-vote majority on the committee, but the margin might grow in the new Congress to reflect the Democrats’ big election gains, according to a Senate aide.

The biggest obvious loss on the committee — especially for the shipbuilding community — is Warner’s departure.

A guiding force in the Senate for 30 years, Warner also served as secretary of the Navy in the 1970s and has become a leading moderate voice on defense policy issues. Virginia’s coast is home to many defense installations and, in part because of Warner’s clout, Northrop Grumman Newport News, where nuclear submarines and aircraft carriers are built.

During Bill Clinton’s presidency, Warner was instrumental in ensuring that Newport News would produce nuclear submarines and be the only provider of nuclear aircraft carriers, said Les Brownlee, a former acting Army secretary who was Warner’s aide for 15 years.

In Warner’s retirement, “the nuclear carrier loses its protective godfather,” a congressional aide said.

Eaglen, a former aide to Sen. Susan Collins (R-Maine), noted the impact on shipbuilding is even greater because of last year’s retirement of Sen. Trent Lott (R-Miss.) and the fragile health of Sen. Edward M. Kennedy (D-Mass.).

“Warner and Lott were the shipbuilding glue in the Senate,” she said. With Kennedy’s health in question, “I see a void.”

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Aahh, yes. Our military industrial complex is just too big to fail. Too many jobs at stake. Well, I can't think of a better reallocation of resources than to charge the military industrial complex with the responsibility to provide jobs for Americans, and as quick as we can say, solar/wind, shift our energy infrastructure to one that provides America with safe, defensible, low-cost energy for all Americans.

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