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Defense Spending vs. Economy

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One of the most interesting undercurrents at last weeks Association of the US Army conference was worried talk about whether the recession or downturn or whatever were calling it will affect defense spending.

Army Secretary Pete Geren was relatively hopeful. Congress, he told reporters, understands what the Army is trying to do and largely supports it. FCS, the Armys premier modernization effort, is in good shape and has strong congressional support. As you can tell, Geren was all about Congress and declined to talk about the larger economic issues.

As I went from display to display on the floor I spoke with about a dozen industry sources about the economy and the budget. Most were gravely concerned about their 401Ks and a bit less worried about the budget. Still, they all expressed concern that the Army will have to begin choosing between so-called reset choices and those of modernization. This is one of several major friction points in the coming budget. First, the services have all made noises about how they are going to build the spending that has been in supplementals into their regular budget baselines. Thats one place for tradeoffs. Then there is the squeeze that will probably result from lower government revenue figures. There will be political pressure to withdraw from Iraq and thus lower operational costs. Operational and maintenance money has been very important to the Army, in particular. And then there is the normal budget wrangling. That offers an awful lot of places where Army or any other services spending can be whittled away.

And the Army is going to face skepticism over FCS even if the economy does hold relatively firm during first three months of next year. For example, when I asked Maj, Gen. Charles Cartwright during the big FCS briefing whether House Armed Services Committee Chairman Rep. Ike Skelton (D-Mo.) supported the Armys approach on FCS, the general offered all sorts of explanations about how the program was on track and, in the best tradition of message management, avoided issuing a potentially damaging statement. To his credit, Cartwright did it with style and humor, even when pressed. The problem is that Skelton made clear after the Army scrambled to restructure the program and get more FCS components to troops as quickly as possible that he (and Airland Subcommittee Chairman Rep. Neil Abercrombie D-Hi.) worries the Army may be rushing the testing on the programs. Included among them are: Tactical and Urban Unattended Ground Sensors; the Non Line of Sight-Launch System, network kits for Humvees; the Class I Unmanned Air Vehicle; and the Small Unmanned Ground Vehicle.

Of course, during AUSA reporters were watching the worlds stock markets plummet day after day and no one knew whether there would be an upside any time soon. With the encouraging ballistic trajectories in the market so far this week, one could argue its all moot except that the US economy already appeared headed to rough waters before the market plunges.

-- Colin Clark

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