Defense-Cut Hypocrisy Makes GOP Converge With Democrats | Businessweek

By Laura Litvan and Julie Bykowicz

He’s an anti-tax Republican representative from Ohio. She’s an anti-war Democratic senator from Washington state. Jim Jordan and Patty Murray have little in common, save this: Protecting multibillion-dollar defense projects in their states from budget cuts.

Together, they embody why reducing the defense budget is difficult, even with wide agreement that the government spends too much. The Pentagon’s largess is so sprawling that, through military bases and contracts, it touches all 535 members of Congress — money that translates into jobs and revenue for companies that are major campaign donors.

“It’s hellishly hard to cut a major defense acquisition program” because of those connections, said Gordon Adams, a U.S. foreign policy professor at American University in Washington who as an associate director of the Office of Management and Budget under President Bill Clinton reviewed the Defense Department’s annual budget requests.

Members of Congress are de facto lobbyists for defense companies, inviting colleagues to tour plants and organizing letters to pressure the Pentagon. The alternative to reducing or eliminating specific defense projects is a $1.2 trillion across- the-board, automatic budget reduction spread over nine years that would begin taking effect March 1. About half of that would come from national security programs.

Rippling Effect

Under that scenario, military funding would be cut about $46 billion in the final seven months of the current budget year. Those reductions would ripple across the country. On average, the Pentagon spends more than $10 billion per state each year, according to a November 2011 Bloomberg Government study of fiscal 2009 expenditures.

Uncertainty caused by the threat of automatic cuts already has affected the economy. The gross domestic product dropped at a 0.1 percent annual rate in the fourth quarter of last year as the biggest plunge in defense spending in 40 years overwhelmed gains in personal income and consumer spending. Pentagon contracts dropped to $12.1 billion in January, a 67 percent decrease from December, according to data compiled by Bloomberg.

Still, across-the-board defense cuts may be more palatable than attacking individual military programs because “the constituency for each factory and workforce is deeply embedded in the Congress,” Adams said.

Ike’s Warning

In his 1961 farewell address, President Dwight D. Eisenhower warned Americans to “guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

While the complex that arose hasn’t threatened personal liberties in the way that Eisenhower cautioned, it has become a sophisticated and voracious recipient of government contracts. Seventy cents of every federal procurement dollar in fiscal 2011 was awarded by the Defense Department, Bloomberg Government found.

Neither Jordan’s Ohio nor Murray’s Washington registers in the top 10 states of Pentagon spending, yet two multibillion- dollar projects in their states account for thousands of jobs.

“Cutting defense spending is difficult because of the jobs at stake in every corner of the country,” Murray, chairwoman of the Senate Budget Committee, said in an e-mailed statement that cited planemaker Boeing (BA) Co.

‘Tremendous’ Impact

“In my own state, a company like Boeing has a tremendous direct and indirect effect on hiring,” Murray said. “I can remember when I was a teenager, working in my father’s five-and- dime store, you could tell how well Boeing was doing by looking at the till at the end of each day.”

In Ohio, the tanks keep coming, whether the Army wants them or not. That’s thanks in part to the work of Jordan, who in his six years in Congress has become a top Republican advocate of budget cuts, winning a Tea Party group’s backing.

Jordan, 49, recently led the House Republican Study Committee, which in January 2011 proposed that Congress reduce spending by $2.5 trillion over a decade to help balance the budget. He wants to freeze or squeeze non-defense spending, while leaving the Pentagon mostly untouched.

When it comes to the Cold War-era M1 Abrams tanks that General Dynamics Corp. (GD) upgrades in Lima, Ohio, Jordan swaps penny pinching for hometown pride, jointly signing letters to defense officials backing project funding and inviting other lawmakers to take rides in the tanks.

Extra Tanks

“The conundrum we have is that we don’t need the tanks,” U.S. Army Chief of Staff General Raymond Odierno told the House Appropriations Committee last March.

The Army and Marine Corps have an inventory of about 6,000 Abrams tanks, built in anticipation of war against the then- Soviet Union, said James Hasik, a defense industry consultant in Austin, Texas. The Army used about 1,000 in the Iraq war and probably only needs about 2,000, he said.

The Army is seeking to stop production at Lima’s Joint Systems Manufacturing Center, where old tanks are gutted and rebuilt with new technology, for three years beginning in 2015, and then redesign the tank entirely. Army Secretary John McHugh, joining Odierno at the House panel last March, said it would cost $600 million to close the plant and later reopen it, versus as much as $3 billion to keep it open continuously.

‘I Disagree’

In an interview, Jordan challenged the Army’s position: “You’re going to lose a skilled workforce and have the cost associated with shutting down a facility and then reopening it? Is that really the smartest way to go about making sure our Army is best-equipped and the No. 1 fighting force in the world? I disagree.”

Jordan said taxpayers will be hurt if an already shrunken workforce is asked to stop production. Countering the Army’s assessment, General Dynamics produced its own analysis almost two years ago that found it would cost $1.6 billion to restart the plant, versus $1.3 billion to keep a production line working on 70 tanks a year.

Lima, population 38,000, once boasted 8,000 defense jobs, said the city’s mayor, David Berger, a Democrat. That changed with the closing of a Textron Inc (TXT).-operated facility that made jet aircraft engine parts and a plant once owned by Westinghouse that made aircraft ignition systems, Berger said.

Dwindling Employment

The Abrams tank plant, owned by the Army and operated by General Dynamics, employed 3,800 people in the early 1990s. It’s now down to about 600 workers.

The political action committee for General Dynamics, based in Falls Church, Virginia, has given Jordan $37,000 since 2006, making it his second-best contributor, Federal Election Commission data show.

So far, Jordan’s camp is winning the tank argument.

President Barack Obama sought just $74 million this fiscal year for the upgrade of 33 tanks. The House budgeted more than triple that amount — providing $255 million in an annual measure authorizing defense spending. In a compromise with the Senate that Obama signed into law in December, the program received $210 million.

Jordan’s role in keeping the tank line alive isn’t endorsed by all his constituents. His Northwest Ohio district has had a Republican representative since 1938 and smaller-government messages have appeal.

“He’s a budget hawk, supposedly,” said Jim Carder, a Lima real-estate agent and a Republican voter. “That is, until they want to cut something in his district.”

Murray’s Aircraft

Leading the Senate’s effort to cut government spending is new budget Chairwoman Murray, who in 20 years in office has amassed a record of antiwar votes and represents a state that made news last year by legalizing gay marriage and marijuana.

She voted against the Iraq war resolution and subsequent troop surges, instead favoring several measures aimed at bringing troops home. After the wars began, she backed spending to support those serving in Iraq and Afghanistan.

Her opposition to the conflicts hasn’t stopped her from working to secure one of the most expensive Pentagon projects: an aircraft whose prime purpose is to service warplanes.

Murray, 62, embodies the twin personalities of the state: “tree-hugging peaceniks who build bombers,” as Bryan Corliss, a spokesman for the machinists union that represents more than 30,000 Boeing employees, put it.

$51 Billion

The Pentagon’s plans to replace the nation’s 50-year-old fleet of midair refueling tankers with 179 new ones will have a big impact in Murray’s state. The KC-46 tankers will be based on Boeing’s 767 commercial jetliner and built at the company’s Everett facility, just north of Seattle. It’s a $51 billion program if the Pentagon exercises all of its options; the first $4.9 billion contract was awarded in February 2011.

The senator’s advocacy on behalf of Chicago-based Boeing Co. — the procurement process took a decade and was bedeviled with contract challenges and investigations — earned her an endorsement during her 2010 re-election bid. Murray has been a “champion for the Boeing Co.,” company spokesman Doug Kennett said at the time, breaking a company tradition of refraining from endorsements.

Boeing’s PAC and employees have contributed $110,410 to Murray since 2006, more than to any other member of Congress in that time. In a year when Democrats lost control of the House and saw their majority shrink in the Senate, Murray defeated Republican Dino Rossi by a 4-percentage-point margin.

Balancing Act

Murray recognizes the balancing act she must perform as a budget cutter from a defense-rich state.

“Across the board, indiscriminate cuts are not the way to cut defense,” Murray said in the e-mailed statement, adding that Congress should look for savings by quickly drawing down troops in Afghanistan, streamlining military procurement and cutting “waste and fraud” caused by private contractors.

At the same time, she added, “many defense programs, particularly in the aerospace industry, have a tremendous impact on our entire nation’s industrial base.”

Boeing officials have said they employ 86,000 in Washington, including 35,000 in Everett. When the tanker project, still in the design phase, is fully operational, it will support about 11,000 jobs, Boeing spokesman Jerry Drelling said in a statement.

The company’s presence in Everett, population 103,000, is a point of pride and a lifeline, said Ray Stephanson, its Democratic mayor. Boeing is the top employer for Everett and Snohomish County, which surrounds it, and Skagit County to the north. Everett’s deepwater port is nicknamed the “Port of Boeing” because of the company business that flows through it.

Six Degrees

Kate Reardon, the city spokeswoman, compares her town’s ties to Boeing to actor Kevin Bacon’s six degrees of separation: “I don’t know anyone who doesn’t know someone who works at Boeing.”

Federal defense spending two years ago accounted for 4.1 percent of Washington State’s gross domestic product, the November 2011 Bloomberg Government study found.

That helps explain why the state’s top elected officials — Democrats are in the governor’s mansion, two Senate seats and 6 of 10 congressional slots — are unapologetic defense boosters.

“Jobs are the bread and butter for any politician, and defense mostly has great jobs, with great benefits and great pay,” said Dan Gilman, a Vietnam veteran who leads Veterans for Peace in Seattle. “But we as a society need to step back and ask ourselves, when we’re supposedly ending our wars, why do we need all of this equipment?”

via Defense-Cut Hypocrisy Makes GOP Converge With Democrats | Businessweek.