With President Barack Obama’s reelection the possibility of cuts to the defense budget looms, although the likelihood of deep cuts to the defense budget is low. With the status quo of Obama in the White House and the power in Congress split between the two parties remaining the same, the next big political fight will be over the so-called sequestered budget cuts. The defense industry is already preparing for what they see is the worst possible outcome.
Yesterday the defense industry took a hit on Wall Street. Businessweek reported that the all the stock prices of defense industry giants took a dip. General Dynamics, down 3.9 %, Boeing down 2.1%, Northrop Grumman down 4.6%, L-3 Communications down 4%, Flir Systems down 2.8%, and Raytheon down 3.3%. According to the International Business Times, Boeing announced that it “plans to slash executive jobs and consolidate several business units as part of an effort to cut $1.6 billion in costs at its defense division by 2015.”
Across the industry, defense contractors big and small are sounding the alarm that cuts to the defense budget are going to be a “train wreck.” Of course, defense industry allies are also sounding the alarm. Loren Thompson, a defense analyst at the Lexington Institute, told the Boston Globe that “Obama’s priorities for the years ahead spell trouble for the Massachusetts defense industry.” The Lexington Institute is a defense industry think tank that advocates for increased military spending, and is funded by the defense industry that benefits from that spending.
The defense industry is claiming that budget cuts will lead to the loss of jobs, pointing to an industry funded study that predicted cuts of just $45 billion would lead to the loss of more than 1 million jobs. Experts have questioned these claims, including its methodology and conclusions. As the end of the year gets closer and Congress debates sequester, we should expect the defense industry to beat the economic and national defense drums louder. It’s unclear if the White House or Congress will dance to the beat.
Image: Jared Rodriguez / Truthout
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