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FACT CHECK: After Myth-Filled Press Conference, National Security Experts Set Defense Contractors Straight

Earlier today, the Aerospace Industries Association (AIA) held a press conference in which Marion Blakey (AIA CEO) and Wes Bush (CEO and Chairman of Northrop Grumman) once again rehashed industry talking points in a last-ditch effort to protect their enormous corporate profits. This was Blakey’s first appearance back at the National Press Club since early December when several defense contractor CEOs, including Bush, admitted that Pentagon spending reductions should be on the table during sequestration negotiations. Today, Blakey and Bush focused on three myths that beg debunking:

• CLAIM #1: The industry has already absorbed $487 billion in cuts. – Marion Blakey
• FACT: The $487 billion claimed to have already been cut is merely a reduction in what the Pentagon hoped to spend. These phantom cuts are akin to a taxpayer saying they saved half a million dollars simply by not buying a Lamborghini. Remember, the Congressional Budget Office has fully debunked the myth that the Pentagon’s budget is already on the decline.  According to their most recent estimates, unless sequestration actually goes into effect, Pentagon spending will increase over the next ten years.

• CLAIM #2: Defense contractors have already had to lay off workers because of the threat of sequestration. – Marion Blakey
• FACT: The big Pentagon contractors have been laying off workers for years, even while the value of their Pentagon contracts was increasing. Lockheed Martin, for example, employed 17,000 fewer employees in 2011 than in 2006 even though the value of its government contracts increased by more than $10 billion during that same time period.

• CLAIM #3: The methodology of “The Fuller Study” is sound and shows that the defense industry can’t sustain reductions.
• FACT: The hyperbolic job loss claims of Stephen Fuller’s economic analysis (the Fuller Report) have been fully discredited by other notable economists, including Dr. Benjamin Zycher, working on behalf of the Cato Institute. Responding to Zycher’s critique, Fuller ultimately conceded, “If I were examining the impacts of sequestration in terms of job creation—is this a good way to create jobs? I might produce a different outcome than what I reported.” A recent analysis from the Center for International Policy similarly found that the Fuller report exaggerates job loss projections by double or triple.

One other fact you didn’t hear from Blakey today is that in the fourth quarter of 2012, top defense contractors saw far better revenue growth than in 2011. As Bloomberg Government pointed out last week:

• Lockheed Martin, the biggest U.S. defense contractor, saw its fourth-quarter revenue rise 1.9 percent, to $12 billion from $11.9 billion, between the fourth and third quarters of 2012 compared to a 0.8 percent increase during the same period in 2011.
• Raytheon Co.’s fourth-quarter revenue increased 6.5 percent, to $6.44 billion from $6.05 billion in the third quarter, compared to a 5.3 percent increase for the same period in 2011.
• Northrop Grumman’s revenue rose 3.3 percent from the third to the fourth quarter of 2012 compared to a 1.6 percent drop during the same period in 2011.

STATEMENT FROM BEN FREEMAN, PROJECT ON GOVERNMENT OVERSIGHT: 

“The meat-cleaver approach of sequestration is by no means ideal, but it’s clear that the amount of sequestration can be found in the Pentagon’s budget. The Center for Strategic and International Studies recently found that the Pentagon spending reductions under sequestration would be smaller than any drawdown since World War II, and would still leave the Pentagon with a larger budget than it had through most of the Cold War. Making surgical cuts to remove waste and pork-barrel projects from the Pentagon’s bloated budget is essential for reshaping our military to meet 21st century threats, and emboldening a thriving 21st century economy.”

STATEMENT FROM WILLIAM HARTUNG, CENTER FOR INTERNATIONAL POLICY

“Despite claims made by defense contractor funded reports, the Pentagon is not a jobs program. Pentagon spending is a drag on the economy, not a spur to economic growth. Defense contractors’ attempt to make jobs a central issue in the sequestration and budget debates is pure misdirection. Now is the time to get serious about developing a forward looking defense strategy that aligns with national priorities and a well-educated and healthy workforce supported by state-of-the-art technology, not wasteful Pentagon programs.”

Defense contractors are entitled to their own opinions, but not their own facts. Defense News recently reported on a Center for Strategic and International Studies (CSIS) finding: “How big would the U.S. defense budget be if sequestration happens? Turns out, despite the sometimes-apocalyptic rhetoric, big. And how would the post-Afghanistan defense budget draw down compare to slowdowns in Pentagon spending that occurred after the Korean, Vietnam and Cold wars? Turns out, it would be smaller.” These facts will be important to remember over the coming weeks.

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