October 23, 2012
Credit: Credit: U.S. Army / Edward Martens
Continued uncertainty about future U.S. military budgets cast a shadow over this year’s big U.S. Army trade show, with industry executives and top Army officials urging U.S. lawmakers to avert further big defense cuts due to start taking effect in January.
Scott Donnelly, chief executive of Textron, said Congress needed to drop ideological positions and craft a solution that considered greater tax revenues and cuts to spending on social programs in addressing the U.S. budget deficit.
He said the presidential election in November would remove one element of uncertainty, but many other issues still needed to be resolved, including $500 billion in further defense budget cuts due to start taking effect in January, expiration of Bush-era tax cuts, and debate over the U.S. debt ceiling.
The automatic spending cuts were mandated by Congress as part of a deal to raise the debt ceiling for federal borrowing last year. Expectations at the time that a more considered plan would be developed have not yet been met.
Across the defense sector, U.S. companies are racing to consolidate facilities, cut payrolls and squeeze lower prices from suppliers so they can continue to generate solid earnings and enough cash to keep investors happy.
“As a business person, the uncertainty is worse than knowing ... where things are going,” Donnelly said, adding that it was not “practical” or “pragmatic” to exempt tax revenues or entitlements from efforts to improve the U.S. fiscal situation.
“People are too hung up on ideological issues around all the various pieces that have to be dealt with -- if you’re ever going to get back to having balanced budgets and getting the deficits under control,” he told Reuters in an interview at the annual Association of the U.S. Army conference.
Donnelly is the latest corporate executive to mention tax revenues in connection with averting defense cuts. David Hess, president of Pratt & Whitney, a unit of United Technologies, and James McNerney, chief executive of Boeing, have made similar comments -- which may help soften broad Republican resistance to raising tax receipts.
The Army chief of staff, Gen. Ray Odierno, said the “perfect storm” of fiscal issues facing the country made it difficult to plan future budget levels, and the military feared it would have “no flexibility at all” in fiscal year 2013 if Congress did not take action to avert the cuts from taking effect in January.