U.S. Defense Industry Adjusts to New Fiscal Environment

The United States has long sustained levels of defense spending that dwarf those of other nations, especially over the past decade. This has allowed the Defense Department and the military services to purchase vast amounts of weapons, vehicles and other gear—as well as services—from private defense firms. But in an era when the U.S. is scaling back its offshore military footprint and struggling to get its fiscal house in order, the amount of money available to sustain the defense industry is in decline.

Defense is also subject to approximately half of the current sequestration cuts, which amount to approximately $50 billion annually, constricting the DOD’s buying power and adding an extra level of uncertainty about the fate of many high-profile acquisition programs. Aerospace Industries Association President Marion Blakely told a congressional hearing last month that the sequester will “cripple” the ability of industry “to deliver when the next crisis develops.”

As industry adjusts to these new trends, it may have fewer friends in Congress than in previous years. The reliably pro-defense GOP has become more and more divided as domestic spending concerns take precedence. Certain Republicans, especially those on the relevant committees such as House Armed Services Committee Chairman Buck McKeon of California, continue to fight to restore defense spending. But many others in the GOP caucus appear to have accepted or embraced the sequester as a way to reduce government spending and chip away at the deficit. The Wall Street Journal threw in its lot with the latter group earlier this week, editorializing that “defense hawks exaggerate how severe the cuts are.”

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