STAFF NEWS & ANALYSIS
Military Industrial Complex on the Chopping Block?
By Staff News & Analysis - September 13, 2011

Harsh new realities for the military industrial complex … Congress has reconvened, which means lobbyists for the powerful defense industry will go into overdrive to stave off what some in the industry believe could be the greatest single threat to the military-industrial complex since the end of the cold war: The bipartisan budget-cutting "super committee." Given the acrimony in Washington between Republicans and Democrats, the stage is set for automatic cuts that could see the defense budget fall precipitously, potentially crushing the profits of some of the nation's largest military contractors. The industry is bracing for the worst, and it's responding by shifting its focus to foreign markets and high-tech automated weapon systems. Such moves will serve as a stopgap measure for now, but the budget shortfall could result in even deeper cuts in the near future. Any such cuts will most likely fall disproportionately on the military contractors, potentially compromising the nation's military readiness. You know things have gotten bad in Washington when the defense budget goes on the chopping block. – Fortune

Dominant Social Theme: The US military-industrial complex is on the chopping block and care must be taken.

Free-Market Analysis: The US military-industrial complex is supposedly due for major cutbacks, but the dominant social theme of mainstream media is that "care must be taken" to ensure America does not lose its military superiority.

In this article, we'll examine Fortune magazine's analysis of this most important of American industries. While Fortune predicts downsizing, the overall thrust of the article treats America's murderous military-industrial complex as a business. No moral judgments are passed.

That the US in the past decade has been busy murdering thousands and perhaps millions of Middle Eastern women and children via depleted uranium contamination and indiscriminate bombing is never mentioned. The article is clinical in this regard; it sticks to "business."

According to the latest budget deal, the military will need to swallow $350 billion in cuts over the next decade. The cuts will be in the area of $35 billion to $50 billion a year, according to Fortune, or "6% to 8% of the military's $570 billion projected budget for fiscal 2013."

However, this is not the end of it. There is now a budget-cutting super committee composed of six Democrats and six Republicans from the House and Senate that must find an additional trillion-plus in savings over the next ten years.

If it doesn't happen, then some $600 billion in cuts will be applied automatically that will potentially lower the projected 2013 defense budget by 16% to $472 billion, Fortune tells us. Congress will decide, in consultation with the military, what will be cut. Military contractors believe cuts will hit hard on them since it's easier to chop a project rather than fire a soldier. Here's some more from the article:

Profits at the big five U.S.-based defense contractors — Lockheed Martin (LMT), Boeing (BA), Northrop Grumman (NOC), General Dynamics (GD) and Raytheon (RTN) — grew from $6.7 billion in 2001 to $24.8 billion in 2010.

Profits grew twice as fast as revenue. And it's not just the pure-play defense contractors who cleaned up. Large conglomerates, like General Electric (GE), foreign defense firms, like BAE systems, and large construction firms, like KBR (KBR), also saw their profits jump significantly during that time thanks to all the defense spending.

Wall Street has rewarded the industry. Defense companies in the S&P 500 have seen their stock prices soar 67% in the last decade, while most other industries are flat or up just a few percentage points. But stock prices have started to come down on anticipation of the spending cuts.

During the last downturn in defense spending, which lasted from 1985-1997, stock prices for defense firms fell 33%, according to RBC Capital Markets. Northrop Grumman has already seen its stock price fall 25% since July on anticipation of harsh cuts, forcing it to announce layoffs.

The bottom-line point made by the article is that new weapons systems will still have to be developed if the US military is to maintain its edge. Thus eventually, the fighting force itself will come in for scrutiny, beginning with generous military pensions that begin after 20 years. Recommendations are that the military move from fixed pension benefits to a 401-K type plan.

Then there are outright cuts. The arm is supposedly scheduled to lose 27,000 uniformed personnel and the Marines some 20,000 troops, beginning in 2015. Cuts of even 10,000 troops can save US$1 billion, given the high salaries and benefits that soldiers now claim.

With all these cuts, how is the US going to maintain its current military dominance? Apparently via cyber-superiority and drones. If the US stays at the forefront of drone warfare, not only might it maintain its edge technologically, but the defense industry will find ready buyers abroad.

According to Fortune, even renewed arms sales of high-tech weapons will not entirely make up for the cuts that are coming. Defense contractors will take a hit no matter what and "slim down." Yet military sales abroad are a way that Pentagon vendors can replace revenue that's about to be lost.

For those who want to see radical reductions in the size of the US military, the prospect that the US military-industry complex might prove self-replicating abroad is a discouraging one. Nonetheless, this may be the future for US military vendors.

With over 1,000 military bases and at least five separate wars now taking place, it is a bit difficult to imagine that the corporations that make up the nexus of violence that the US visits upon the world will at any time soon be tamed. What this article is hinting is that to fund continued military dominance, marketing of non-conventional weapons may become far more aggressive.

What is also true is that the beginning of the 21st Century has seen US culture turn from overtly private to quasi-military. After World War II, the "establishment" was driven by military considerations but the public-at-large rejected overt militarization. Since the "war on terror" began, there has been a shift in public perception. One could argue that the society itself has been militarized.

There are various outcomes that come to mind when considering the next few decades of American military efforts. The first is that America somehow hangs onto its military dominance despite its unfolding bankruptcy. In a sense this is possible as the gap in military spending between the US and other countries is so huge and the military-industrial complex is so well entrenched.

But we can see as well hints of other efforts being made. The Anglosphere power elite has been making efforts to utilize NATO as a main enforcer of the global government that the great banking families are trying to build. Of late, one might conclude that the NATO experiment has been something of a failure. Afghanistan was to have been a great NATO victory; instead, it has turned into something resembling a debacle.

The power and wealth acquired by the American military-industrial complex will not easily be dislodged. Even as America is going broke, it is perfectly likely that the Pentagon and its military might shall be less affected than other parts of the failing American economy.

However, countries that are in decline inevitably find it more difficult to support vast military expenditures than countries that have vibrant economies. In support of its world-spanning plans, the Anglosphere elites have used central banking to hollow out the American economy and it is difficult to see how the US recovers anytime soon.

The Internet Reformation itself will probably provide increasing pushback to the kind of exaggerated military culture that has taken root in the US of late. Too many wars are unsustainable, absent total war, which seems unlikely in this era of nuclear proliferation.

We continually return to the idea that the Anglosphere elites have in a sense over-reached; they have pushed Western culture and economic vitality to the limit and now there may be a serious retrenchment. The European public seemingly has even less appetite for continued military ventures than America's.

After Thoughts

It is possible that as the West's rolling economic depression continues to unfold, the endless militarization of its culture may subside as well. This would be at least one positive outcome of the ruin that has been inflicted by the great Anglosphere banking families in their mad quest for world dominance. One can only hope.

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