What to expect when Congress returns; American fighter jets, made in India?; Textron to stop making cluster bombs.
Welcome to the dogs-days-of-summer-and-seersucker edition of the Global Business Brief.
Lawmakers head back to Washington to do...something
With Congress returning to Washington after Labor Day, all eyes at the Pentagon and defense firms will turn toward the defense budget. There’s just about no chance lawmakers will pass a budget for fiscal year 2017 before it starts on Oct. 1, but they are expected to pass a continuing resolution that keeps the government running, maybe past Election Day or through December.
Is anyone really surprised by this? Lawmakers have not passed an annual budget on time since 2009, as Center for Strategic and International Studies budget guru Todd Harrison reminds us in this slide (Note the red designates a transition year). They have relied on continuing resolutions, which freeze federal spending at levels from the previous year and do not permit new weapon projects to begin or, for what it’s worth, old ones to end.
Even as these continuing resolutions have become routine, Pentagon’s budget planners say they nonetheless still wreak internal havoc.
The White House has threatened to veto the House version of the defense appropriations bill because, among other things, it would once again circumvent spending caps by putting base-budget money into the emergency supplemental — whoops, that’s "overseas contingency operations," or OCO — account. The bill also does not fund the wars in Iraq, Syria, and Afghanistan throughout all of 2017, meaning a new presidential administration would need to immediately seek a funding bill.
Beyond the defense spending bill, Congress also hasn’t passed its policy companion, the National Defense Authorization Act, or NDAA. The Heritage Foundation’s Justin Johnson has a great breakdown of how the House and Senate tackled major policies and programs. Among the most controversial is legislation written by Sen. John McCain, R-Ariz., chairman of the Senate Armed Services Committee, that would eliminate the post of undersecretary for acquisition, technology & logistics (currently held by Frank Kendall) and create two new undersecretaries, one for research and engineering and one for management support.
So what’s going to happen? “Depending on the political terrain after November 8, a massive omnibus appropriations could be passed and signed into law during the lame duck, or another budgetary punt could occur until March (with the debt ceiling expiration as a potential catalyst),” writes Roman Schweizer of Cowen and Company.
What’s always surprised me is how much the budget fights in Washington weigh on the minds of troops deployed around the globe. In January 2013, I watched a young sergeant ask then-Defense Secretary Leon Panetta how the spending caps would hamper his unit in Vicenza, Italy. I almost fell on the base gymnasium floor when a second soldier asked another detailed budget question. Two years before that, troops in Iraq had bluntly asked Defense Secretary Robert Gates whether they’d be paid while Congress was playing politics with the spending bill back in Washington. “You know, as a historian, it always occurred to me that the smart thing for government was always to pay the guys with guns first,” Gates joked.
Even though troops’ pay and benefits have not been affected, and are always exempted from spending cuts and throughout a government shutdown, the budget wars are an unfair concern to lay on people fighting actual wars far from home.
Welcome to the Defense One Global Business Brief by Marcus Weisgerber, your new weekly source for all things future-of-the-business-of-defense. Today we are lamenting that we have only five days left to wear seersucker and linen suits. (Executive Editor Kevin Baron, a Floridian, disputes this fact.) Send your tips, comments, and random thoughts to firstname.lastname@example.org, or hit me up on Twitter: @MarcusReports. You can check out the Global Business Brief archive here. And don’t forget to subscribe!
From Defense One
Pentagon Eyes Missile-Defense Sensors In Space // Marcus Weisgerber
Even as the Defense Department begins to build a giant new flight-tracking radar in Alaska, it is already thinking bigger — and much higher.
To Counter Russia's Cyber Prowess, US Army Launches Rapid-Tech Office // Patrick Tucker
The battle for eastern Ukraine shows how the pace of innovation in electronic warfare is picking up.
Air Force, Pentagon Have More Work to Do Before Ditching the A-10, Watchdog Says // Charles S. Clark
Losing the aircraft would also mean a loss of U.S. combat search-and-rescue capabilities, the Government Accountability Office said in a newly declassified report.
American Fighter Jets, Made in India
U.S. Defense Secretary Ash Carter welcomed his Indian counterpart Manohar Parrikar at the Pentagon this week, part of Washington’s efforts to find new ways to deepen its defense cooperation with Delhi.
The two nations agreed to various collaborative projects involving jet technology and jet engine technology, chemical and biological protection and aircraft carriers. “That collaboration will surely bring further cooperation, co-development and co-production,” Carter said.
It could even pave the way for U.S. fighter jet makers Boeing or Lockheed Martin to build aircraft in India. Boeing Chairman and CEO Dennis Muilenburg made headlines earlier this year when he said the firm was in talks to build Super Hornets in India. India has encouraged foreign manufacturing inside its borders.
Boeing and Lockheed, America’s two remaining fighter jet makers, have been looking for buyers as the F-15 Eagle, F/A-18 Super Hornet, and F-16 Falcon are all slated to wrap up production in coming years.
“We expect India’s decision will be made based on more than just fighter production,” Schweizer wrote in a note to investors this week.
Textron Systems announced this week that it would stop building the Sensor Fuzed Weapon, a 1,000-pound cluster bomb, “in light of reduced orders,” the company said in a filing with the Securities and Exchange Commission. And that means layoffs. The move will “generate headcount reductions, facility consolidations and asset impairments within its Weapons and Sensors operating unit and also includes additional headcount reductions and asset impairments in the Textron Systems segment.” The firm has already deleted the bomb’s page from its website. (Google, of course, has it cached here.)
(Not So) Tough Questions at Local Zoning Board Meeting
When you’re building a 73-foot tower to house a powerful radar designed to track ballistic missiles smack in the middle of town, you’d expect to get lots of questions from residents at the local zoning board meeting. Not the case in Moorestown, New Jersey, where Lockheed Martin is building a prototype for an even larger missile-tracking radar in Alaska. The lone question asked by a resident at the April 19 meeting: Would there be any danger to pets? The response from Matthew Greuber, a Lockheed Martin representative at the meeting: “[T]here is no concern for pets.”
Amtrak Steals a Page from F-35’s Playbook
And finally: a $2.45 billion federal loan to for new high-speed trains on the publically subsidized railroad’s Northeast Corridor drew headlines this week, but a key to keeping the project funded (not mentioned in most articles) was tucked at the very bottom of Amtrak’s press release: “Alstom will be building these new trainsets in New York State, with 95 percent of the trainset’s components being made in America, and parts coming from more than 350 suppliers in over 30 U.S. states.” It’s not the “1,250 domestic suppliers in 45 states” touted by Lockheed for the F-35, but when you need 60 U.S. senators to make sure the project stays funded, that’s the way to do it.