Defense CEOs brace for fiscal cliff

Sign warning of fiscal cliff

Executives from some major defense contracting companies are the latest to lend their voices to the din surrounding budget cuts, sequestration and the impending fiscal cliff, warning Congress and the president against potentially disastrous outcomes across sectors.

The CEOs implored lawmakers to act to stop sequestration, offering a few ideas of their own to help address fiscal shortfalls. They also cautioned that a failure to resolve the ongoing partisan squabbling could result in significant job losses, particularly in the defense contracting industry, where as many as 2 million jobs could be in jeopardy.

“We are talking a good game, but are still unwilling to park short-term self-interest,” David Langstaff, chief executive of engineering services provider TASC Inc, said at a Nov. 3 event in Washington held by the Aerospace Industry Association. “Every trade group, special interest and corporate lobbyist is up on Capitol Hill clamoring that Congress solve the problem, avoid the fiscal cliff and not default to sequestration – but [then say], ‘don’t touch my budgets.’ We can't have it both ways.”

But Langstaff, speaking as part of a panel of defense CEOs, also acknowledged cuts will be inevitable, and his colleagues agreed.

“We need to stop believing — or pretending — that there is a scenario out there that offers no defense cuts,” Langstaff said, urging a less drastic approach than the potential $500-billion cuts that could hit the Defense Department over the next decade.

While Northrop Grumman CEO Wes Bush suggested $20 billion to $25 billion in cuts over the next 10 years – in addition to the $487 billion in cuts already mandated by last year’s Budget Control Act, which the panelists repeatedly referred to – Langstaff projected that cuts in the range of $50 billion to $150 billion could offer a more manageable, “stair-step” approach. He also said that “heavy lifting” should be shouldered by other, non-defense areas.

But with DOD’s roughly $600 billion annual budget, even Langstaff’s figures are “less than the amount of inflation,” said the Project on Government Oversight’s Ben Freeman on a call with reporters Nov. 3.

“If the Pentagon is not part of any sequestration deal or any fiscal cliff deal, Pentagon spending is going to increase over the next decade under current law. Calling [the nearly $500 billion from the BCA] savings is like saying you can cut your credit card debt by a quarter of a million dollars just by not buying a Lamborghini,” Freeman said. “Unfortunately, you can’t balance your checkbook like that, and neither can our government.”

Bill Hartung from the Center for International Policy noted that while sequestration is bad management, the Pentagon – and the private industry supporting it – isn’t necessarily facing the drop-off in spending that some are painting it out to be.

“Many of the companies have large backlogs; the Pentagon has $100 billion in unobligated dollars,” Hartung said. “There’s no fiscal cliff for the Pentagon. It’s more of a gradual slope.”

Still, more than 130 industry CEOs who signed an AIA letter to President Barack Obama appear to be bracing for the worst.

“For generations, America has prospered on a strong foundation of manufacturing excellence and technological innovation,” the letter noted. “But sequestration cuts would needlessly erode this economic bedrock, choking off critical investments in research and basic science and forfeiting our leadership in the markets of tomorrow. It’s a recipe for economic stagnation, and the worst possible way to tackle America’s long-term debt.”

Nonetheless, Bush acknowledged that even if the cliff is avoided it might not help create jobs. But he did say he believed that if an agreement can be reached, it would still stimulate economic growth.

“The defense industry should never be looked at as a jobs program,” Bush said. “The world is watching to see if the United States can get its act together ... or do we have to have this political theater to cause us to actually figure out how we’re going to take action?”

About the Author

Amber Corrin is a former staff writer for FCW and Defense Systems.

The Fed 100

Read the profiles of all this year's winners.


  • Then-presidential candidate Donald Trump at a 2016 campaign event. Image: Shutterstock

    'Buy American' order puts procurement in the spotlight

    Some IT contractors are worried that the "buy American" executive order from President Trump could squeeze key innovators out of the market.

  • OMB chief Mick Mulvaney, shown here in as a member of Congress in 2013. (Photo credit Gage Skidmore/Flickr)

    White House taps old policies for new government makeover

    New guidance from OMB advises agencies to use shared services, GWACs and federal schedules for acquisition, and to leverage IT wherever possible in restructuring plans.

  • Shutterstock image (by Everett Historical): aerial of the Pentagon.

    What DOD's next CIO will have to deal with

    It could be months before the Defense Department has a new CIO, and he or she will face a host of organizational and operational challenges from Day One

  • USAF Gen. John Hyten

    General: Cyber Command needs new platform before NSA split

    U.S. Cyber Command should be elevated to a full combatant command as soon as possible, the head of Strategic Command told Congress, but it cannot be separated from the NSA until it has its own cyber platform.

  • Image from Shutterstock.

    DLA goes virtual

    The Defense Logistics Agency is in the midst of an ambitious campaign to eliminate its IT infrastructure and transition to using exclusively shared, hosted and virtual services.

  • Fed 100 logo

    The 2017 Federal 100

    The women and men who make up this year's Fed 100 are proof positive of what one person can make possibile in federal IT. Read on to learn more about each and every winner's accomplishments.

Reader comments

Thu, Dec 6, 2012

As is pointed out in the book Generational Clash, the government could balance the budget tomorrow and still be on the hook for $221 trillion in unfunded liabilities that would actually still continue to increase by trillions per year, even in a balanced budget environment. This is what the authors call the "fiscal gap" as opposed to the cliff. There's been little if any discussion of this looming debt avalanche.

Wed, Dec 5, 2012

I really do not know how people get the idea that the politicians are going to save us from the "fiscal cliff". We have been heading that way for a long time and the last four years just saw an increase in the rate we were getting there - and it was all due to the politicians. So how can anyone think they will fix the mess they got us into in the first place? Also, this is no way can really fix this with a bunch of tax increases and especially any extra spending as that just makes the problems worse in both the short term and especially the long term. Cuts in government spending will have to happen and in just about every area. The question is just what will be the mix. Unfortunately, I doubt that will happen.

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group