BusinessU.S. defense industry fights budget cuts

The U.S. defense industry has been fighting budget cuts for two years now. The industry’s effort to prevent sequestration from taking effect has failed, but there is optimism in defense circles that this time the effort may well succeed.

Cord Sterling, the vice president of legislative affairs for the Aerospace Industries Association (AIA) told the Hill that his group is working on showing how the cuts are affecting federal agencies. He said the the defense industry will be able to make its case to lawmakers with evidence of grounded planes, idled ships, and layoffs.

“There a general consensus, that sequestration is bad and that what’s being done —  even though they’ve been able to do certain budget maneuvers in short term —  those are one time things, and it won’t stem the long term damage,” Sterling said.

“People on both sides are really anxious to come up with a solution. They know there’s a lot of damage.”

The Pentagon’s budget request for the 2014 fiscal year is $52 billion bigger than the budget set by the sequester in the 2011 Budget Control Act. If the sequester if not voided, the agency would face across-the-board cuts again.

Some in the industry are skeptical that the looming cuts will be enough to push lawmakers to act.

“The problem with sequester is it’s all about pain, and nobody’s feeling it,” one senior defense lobbyist told the Hill. “Nobody feels military readiness. We know it’s diminished dramatically, but nobody cares until all of a sudden those forces are called upon to fight.”

In an effort to create momentum to reverse the cuts, leaders of theSenate Armed Services Committee asked the Pentagon to demonstrate how it will cut $52 billion from its budget.

“The feeling in the defense industry is that the budget walls are closing in, but at a glacial pace,” Loren Thompson, an analyst at the Lexington Institute told the Hill.

“Many industry strategists feel like up to this point it was hard to tell the story because the pain was hard to detect, but that’s now going to change,” Thompson added.

Some defense analysts say the industry has no one to blame but itself, especially since some of the  more dramatic predictions about the consequences of budget cuts failed to materilaize.

“The reluctance of members of Congress to allow sequestration to go into effect, I think that’s evaporated,” Todd Harrison, a budget analyst at the Center for Strategic and Budgetary Assessments said. “They’re not scared of it anymore. Anything else DOD can try to say about how horrible the consequences will be, it’s going to fall on deaf ears.”

What is more, the stocks of Lockheed Martin, Boeing, Northrop Grumman, and other top contractors have all risen since sequestration took effect in March, showing that the industry is still thriving.

Opponents of sequestration hope that the debt ceiling debate in the fall may end the sequester, but one defense lobbyist is not so sure.

“The debt ceiling is kind of becoming everybody’s holy grail,” the lobbyist told theHill. “That’s what everybody is holding out hope for that it’s dealt with part of debt-ceiling discussions. But leadership has no idea yet how they’re going to deal with the debt ceiling.”