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MAJORS RESULTS SHOW SIGNS OF WEAKNESS

MAJORS RESULTS SHOW SIGNS OF WEAKNESS – SEQUESTRATION NEXT?
By Julian Nettlefold

Third Quarter results from the U.S. Defense Majors suggest that the downturn in spending is starting to bite. However, discussing the future around the bazaars at AUSA National this year, most contractors appeared to accept the fact that some form of sequestration will be enacted, but the level and amount will depend on who wins the election. If Obama loses then the cuts will be delayed under Romney and may even never happen, whilst if Obama wins he won’t want to enter his new Term with the threat of a recession hanging over him, thus the cuts could be delayed by six months or a year. The 540bn cuts proposed over ten years would bring the Budget down to 2006 levels. In general terms AUSA was empty due to the rulings on attendance by the US Army whilst contractors such as FLIR Systems reported a growth of overseas delegations.

Defense News reported that a feisty Barack President Obama hit Republican nominee Mitt Romney’s call for increased military spending and a larger Navy — and also offered a curious promise that a pending round of Pentagon spending cuts will not happen. In the duo’s third and final debate of the campaign season on Oct. 22, matters of military budgeting and force structure bubbled to the surface. The candidates sparred several times over those issues, including exchanges that underscored their visions of how the military plays a role in U.S. foreign policy. Romney was criticized for months by Republicans and Democrats alike in defense circles for what they agreed was his vague foreign and national security policy vision. But, as the final debate made clear, the GOP nominee believes a large American military makes the world’s lone superpower even more powerful.

Unless Congress passes a $1.2trn deficit-reduction package before Dec. 31, twin $500 billion cuts to planned national defense and domestic spending will occur over the next 10 years. Any defense cuts, in Romney’s view, would make “our future less certain and less secure.”
“We’ve got to strengthen our military long-term. We don’t know what the world is going to throw at us down the road,” Romney said. “We have to make decisions based upon uncertainty, and that means a strong military. I will not cut our military budget.”

Romney’s vision is similar to former Republican President Ronald Reagan’s “peace through strength” strategy. The GOP nominee has vowed, if elected, to field a larger Navy. He returned to that plan during the debate, but Obama was ready with a counterpunch.

“Our Navy is smaller now than at any time since 1917. The Navy said they needed 313 ships to carry out their mission,” Romney said. “We’re now at under 285. We’re headed down to the low 200s if we go through a sequestration. That’s unacceptable to me.”

Obama responded with a veiled statement about how technology has altered modern warfare.

“You mentioned the Navy, for example, and that we have fewer ships than we did in 1916. Well, governor, we also have fewer horses and bayonets, because the nature of our military’s changed,” Obama told his opponent.

“We have these things called aircraft carriers, where planes land on them. We have these ships that go underwater, nuclear submarines.
“And so the question is not a game of Battleship, where we’re counting slips,” the president said, referring to the popular board game. “It’s what are our capabilities.”

Loren Thompson of the Lexington Institute has written that Romney’s plans to go from building nine U.S. naval ships per year to 15, and his other plans for the Navy Department, would cost “around $200 billion annually by the end of the next presidential term.”

The Washington Post reported on October 23rd that Washington is growing increasingly jittery about the prospect of automatic spending cuts decimating federal agency budgets in January. So when President Obama declared in Monday’s debate that the cuts “will not happen,”

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