Will Defense Cuts Jeopardize US Manufacturing?
An article at Manufacturing & Technology News projects a steep decline in defense spending and warns against relying on the Pentagon to revitalize American manufacturing.
The author cites Dr. Gerald Abbott, professor of acquisition at the National Defense University's Industrial College of the Armed Forces, who believes that cutting the military budget not only won't revive the state of industry in the US, but will actually have the opposite effect.
While the military has been the recipient of a many-year spending spree, historically when defense budgets do get cut, the procurement account gets hit hardest. For example, between 1985 and 1998, the overall military budget was lowered 36 percent, while the procurement account experienced a 66 percent reduction.
Abbott told a recent audience at the AFL-CIO in Washington, D.C., "I believe we are about to enter another period of a significant defense budget decline and history will repeat itself particularly in the procurement account. This does not bode well for either the manufacturing base or the defense manufacturing base."
Adding to the dynamic, the number of major military firms has fallen sharply, leaving the remaining companies to shoulder a greater share of economic risk. The article names McDonnell Douglas, Litton, Hughes, Loral, Fairchild, LTV, Gould, General Instruments, Westinghouse, TRW and Vought among the large defense contractors no longer in business, with only Boeing, Lockheed Martin and Raytheon remaining.
The smaller defense manufacturing base has additional implications, namely the eroding of competition and innovation, especially if the playing field narrows even further through mergers and acquisitions.
The author warns that without a strategy for dealing with the defense industrial base during the coming economic belt-tightening, the health of the entire US manufacturing industry is at risk. Abbott's proposed solution? A "well-ordered downsizing plan to separate 'needs' from 'wants' to protect the present and future force and the industrial base."
