America's Defense Industrial Base And Good Jobs Are At Risk

Jun 6, 2012
Investor's Business Daily Op-Ed By Rep. Buck McKeon
Even as our nation struggles to recover from the financial crisis, America's aerospace and defense industry embodies some of our greatest aspirations for the American economy.

It is a manufacturing industry at the cutting edge of technology and innovation. It is America's largest net exporter. It directly employs over 1 million American workers, and contributes to indirect employment of 2.5 million more.

America's aerospace and defense workers are well-educated, highly skilled, and earn wages and benefits to match — the average wage across the industry in 2010 was over $80,000.

But now all of that is in jeopardy. Because of the failure of deficit-reduction negotiations last year, our military faces up to $1 trillion in budget cuts over the next 10 years. Some $487 billion of that is already being implemented pursuant to the Budget Control Act.

If the president and Congress fail to enact savings of $1.2 trillion by next year, another $500 billion in defense budget cuts will be triggered in January 2013 through a process known as sequestration.
According to a major industry report prepared for Defense Secretary Leon Panetta last year, sequestration represents a tipping point that would "severely damage the Defense Industrial Base as a commercially viable enterprise."

Uncertainty emanating from Washington sends a clear signal to capital markets to move money elsewhere. In this case, production lines will close, skilled workers will be fired and investments in new capabilities will be drastically reduced.

Large companies would likely consolidate and bring supply services in-house. Small businesses would be cut off from the defense supply chain. Fewer suppliers would lead to reduced competition and higher costs overall.

These impacts are already being felt. The specter of sequestration alone is causing companies across the industry to lay off workers and postpone investments. Sequestration must be averted now because if we wait until the end of the year to fix it, it will already be too late for thousands of workers and their families who were laid off while Washington sat on its hands.

If we do not act to avert sequestration, we will inflict irreparable harm on our defense industrial base as a reliable and responsive provider of urgent wartime capabilities and erode its role as an indispensable strategic asset for the U.S.

That is why House Republicans have proposed multiple solutions to sequestration and passed a reconciliation package averting sequestration in 2013. We recognize that our troops have absorbed 50% of deficit-reduction efforts to date despite constituting only 20% of federal spending. Our solutions reflect the need to address the real drivers of deficits and debt — out-of-control entitlement spending.

Meanwhile, President Obama and Senate Democrats have rejected all proposals and offered no solutions. In one of the most rhetorical presidencies in history, the president has been virtually silent on sequestration despite the fact that the consequences of sequestration for the defense industrial base would directly undermine his stated economic goal of an economy built to last.

President Obama promised to spur innovation with investments in research and development. But budget cuts are already forcing defense companies to curtail new investments in plant, personnel, research and development. Sequestration would further choke off R&D spending and the innovation that keeps the U.S. military the most advanced in the world.

President Obama promised to keep jobs from being shipped overseas and keep American companies internationally competitive. But industry experts forecast that sequestration would mean declining revenues and dim prospects that would incentivize companies to shutter their U.S. factories and send remaining work to their facilities abroad. Small companies that cannot offshore would be unable to compete on a cost basis with operations based in developing countries.

President Obama promised to train and place 2 million new skilled workers. Yet sequestration could lead to layoffs of highly skilled and well-educated workers in the hundreds of thousands.

As a prime example of his commitment to an economy built to last, President Obama urged a taxpayer bailout of the auto companies he said would save over 1 million jobs. Yet when a study from George Mason University predicted sequestration would lead directly to over 1 million jobs lost, President Obama had nothing to offer except a threat to veto any plan to avert it.

If America's aerospace and defense industry doesn't have a place in an economy built to last, what industry does?

It's time President Obama and his chief ally in the Senate Harry Reid step forward and offer a solution to sequestration instead of issuing veto threats or simply shrugging it off as a "tough pill to swallow." Our plans to fix this problem will differ, but it is time we put those plans on the table and get to work on solution.

Investor's Business Daily
112th Congress