September 06, 2012
The Pentagon may have to kill or cut some arms programs and slow spending on research and development even if Congress delays automatic budget cuts due to take effect in January, the top U.S. arms buyer said on Wednesday.
Chief executives of major U.S. arms makers told Reuters this week that they are preparing for a significant decline in Pentagon spending even if the nearly $500 billion across-the-board cuts are averted.
The automatic cuts, called sequestration, are set to kick in on Jan. 2 unless Congress acts to delay or repeal a mandated $1.2 trillion in federal deficit-reduction measures by then.
The sequester would trim about 11 percent uniformly from each of the Defense Department’s 2,500 or so budget items other than military pay, which has been shielded by President Barack Obama, the Pentagon’s acquisition chief, Frank Kendall, told an industry conference.
These automatic reductions would be on top of another $487 billion in Pentagon budget cuts already mandated that would come over a decade from the growth the administration previously had planned.
If January’s cuts are held off, the Defense Department could manage any subsequently required budget cuts more efficiently than the pending meat-ax approach, the arms buyer said.
In this case, “we will probably end up with a mix” of reduced arms production, slowed research and development spending and “maybe some cuts, kills of programs as well” - assuming required spending cuts similar to the looming 11 percent but not uniform across all accounts, Kendall said.
He said any such additional budget cuts, if in fact required, likely would come largely from the Pentagon’s so-called investment accounts - the arms purchases and research and development contracts that fuel earnings of contractors such as Lockheed Martin Corp, Boeing Co, Northrop Grumman Corp, Raytheon Co and General Dynamics .