As “unexecutably stupid” as the specter of sequestration is, as Deputy Defense Secretary Ashton Carter recently described the prescribed across-the-board cuts in future defense spending, the prospect is causing rising uncertainty among aerospace executives.
At a gathering of industry professionals just a few days ago, many said they were inclined to think the nation’s political leaders would find a way to avoid allowing sequestration to take effect in January. But there seemed to be an equal number who fear that election-year politics compounded by extreme partisanship that has become the new norm in Washington, will block any sensible compromises.
They have a point, since members of the legislative and executive branches of government appear to have lost their capacity to do much of anything for the greater good of the country. After all, who could have imagined 12 months ago, when the super committee supposedly was working in good faith toward their November deadline, that the industry and the state of future national security would be at this juncture.
Even if industry and the country are able to dodge the proverbial bullet, there was a consensus among the gathering that further deep cuts in defense spending are inevitable over the next 10 years—something on the order of a couple hundred billion dollars. If that is accurate, difficult choices lie ahead, to say the least. They cited the macro environment, which is unlikely to improve much anytime soon. This includes low economic growth in the U.S. as it recovers from a deep recession, partisan gridlock in Washington, chronically high federal deficits, and Europe’s debt crisis and its effect on the rest of the industrialized world.
The deeper concern was whether the U.S. would be able to afford its new military strategy, with its emphasis on Asia/Pacific and a smaller fighting force that will rely on technology to offset a decline in numerical strength. “The problem,” ITT Exelis President and CEO David pointed out, “is that the threats facing the country are numerous, asymmetric and unlikely to abate.”
For industry, he added, “more uncertainty and a no-excuses environment for program performance” will characterize the future. He’s right, of course, because the affordability requirements imposed by the Defense Dept. under Robert Gates really do represent not a this-too-shall-pass phase, but a permanent structural shift in how the world’s largest defense customer does business.
Hopefully that message is beginning to sink in as equipment suppliers to the Pentagon try to figure out how they will manage through what may be the most difficult transition since the end of World War II.