Here are the defense companies that could be helped by Obama’s budget | MarketWatch

The federal government may be about to buy more of these Lockheed Martin F-35 fighter planes


WASHINGTON (MarketWatch) — President Barack Obama’s new budget proposal could provide an extra boon for big defense companies — if he and congressional Republicans agree to lift the so-called sequester.

And that’s a big if. Obama’s fiscal 2016 budget, released on Monday, would spend about $585 billion on defense, or $38 billion above sequestration levels. The defense side of the budget represents an area of potential common ground for traditionally pro-defense-spending Republicans and the Democratic president.

The budget “would end a drought in weapons spending,” says defense analyst Loren Thompson, “but only if Congress agrees to go along by raising spending caps” put in place by a 2011 deal.

Bill Hoagland of the Bipartisan Policy Center says Obama’s budget sets up a negotiation with the Republican-controlled Congress. He notes that Obama will demand reducing the domestic sequester as well, but says: “I think there’s a general recognition…that there is a need for providing more flexibility and more funding for defense.”

One major request is for $10.6 billion to buy 57 Lockheed Martin Corp. LMT, +0.70%   F-35 fighter planes. The Air Force would buy 44 of those, but would have to cut its planned purchase to 30 if the spending caps aren’t lifted, says Thompson, chief operating officer of the Lexington Institute.

Lifting the sequester would also pave the way for spending on equipment modernization.

Take Stryker DVH infantry vehicles. Upgrades to the vehicles — made by General Dynamics Corp. GD, +0.07%   — would be canceled if the sequester stays in place, Army chief of staff Gen. Ray Odierno told the Senate Armed Services Committee last week.

Upgrades to littoral combat ships — improvements like adding guns and increasing armor — could also be cut back if the sequester sticks, notes Mandy Smithberger, who directs the Straus Military Reform Project at the Project on Government Oversight. Lockheed and Austal ASB, -2.52%  make variants of the ships.

Meanwhile, the Air Force is planning to buy 29 Northrop Grumman Corp. NOC, +0.88%   drones. But officials cautioned that if the spending caps aren’t lifted, they would be able to buy 20, The Wall Street Journal reported.

Obama said in a speech on Monday that he wants to replace “mindless austerity,” and set up what promises to be a tense fight over replacing the sequester.

“I’m not going to accept a budget that locks in sequestration going forward,” he said in a speech at the Department of Homeland Security. “It would be bad for our security, and bad for our growth.”

Thompson, of the Lexington Institute, is skeptical of Congress loosening the budget caps. He says that would require Republicans backing more taxes or Democrats supporting cuts in domestic spending — unless both sides are willing to accept a bigger deficit in 2016. “I don’t see any of those things happening,” he said.

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