Extending Raptor Production Would Save Existing Jobs, Swiftly Aid Ailing Economy
CBO Report: Federal Spending Would Boost U.S. Economy More Than Reducing Taxes
Yet another case has been made for increasing defense spending so as to spur the moribund U.S. economy, by adding military procurement funds to the pending congressional economic stimulus legislation.
If the roughly $775 billion to $1 trillion being discussed for the economic stimulus bill were divided in typical U.S. budget fashion, defense would stand to receive roughly $150 billion in the measure. (Please see
Space & Missile Defense Report, Monday, Jan. 19, 2009.)
However, defense programs have received scant attention from lawmakers who are assembling the stimulus bill, to the dismay of Tom Donnelly, resident fellow in foreign and defense policy studies at the American Enterprise Institute (AEI), a Washington think tank, and Gary Schmitt, AEI director of strategic studies. Their argument appeared Sunday in The Washington Post.
They propose adding just $20 billion to $25 billion annually for defense programs to the stimulus bill, which they say would be but a tiny amount of the overall measure, yet would be “both smart politics and sound policy.”
If President Obama adds funds to continue defense procurement programs instead of shutting them down, that would preserve coveted American high-tech jobs.
Injecting money into defense hardware programs where weapons platforms already are in production would yield immediate stimulative benefits to help pull the economy out of the deepest recession since the Great Depression, they asserted.
For example, extending production for two or three years on the Air Force F-22 Raptor super-stealth, supersonic-cruise fighter aircraft (Lockheed Martin Corp. [LMT]) and the Navy F/A-18E/F fighter (The Boeing Co. [BA]) would provide swift, predictable but temporary stimulus to the economy, since those aircraft production lines already are running.
In the Raptor program, the Air Force initially asked for 750 of the cutting-edge planes. Then that was cut to a need for 381 aircraft (which still exists), but Congress cut the buy further to 277, and then to the current 183, with a proposal to increase that to 203.
Continuing Raptor production for two or three years would keep the Lockheed fighter plane production line running until the future F-35 Joint Strike Fighter, or Lightning II, production begins. The F-35 is being developed by Lockheed, with major roles by Northrop Grumman Corp. [NOC] and BAE Systems.
Referring to the F-22 Raptor, the military analysts noted that the budget for the current fiscal 2009 ending Sept. 30 “contains the last monies for buying this amazing airplane, which combines all the desired attributes of a fighter: stealth, speed, maneuverability, the ability to fly at great height and do so economically, without using too much fuel. It’s intended to control the skies through the coming decades and is the centerpiece of how the U.S. Air Force intends to operate in the future.
“The Air Force initially wanted to buy about 750 Raptors, but the program has been scaled back to 183 aircraft, which will have to last at least 30 years until a substitute can be planned, designed and built. The Bush administration agreed to defer a complete shutdown so that the new administration would have the option of continuing production. The law requires Obama to determine whether to do that; he serves not just as commander in chief of the armed forces but, quite literally in this case, as chief executive officer of the defense industry.
“If he decides to terminate the F-22, Obama will, in effect, be firing the 25,000 people who directly work on the Raptor program (and the initial ‘stop-work’ orders and layoffs would begin within months) and perhaps another 50,000 to 75,000 in the supplier base that supports it. His administration will also forgo any chance of selling the planes to allies — Japan, Australia and Israel, among others — and any additional return on the tens of billions of taxpayer dollars spent in developing this dominant fighter.”
Initially called the Advanced Tactical Fighter, the F-22 took more than two decades to develop.
The analysts’ column appeared as Lockheed and others have launched an ad campaign noting that 95,000 people are employed directly in building F-22 Raptors, or by suppliers building components for the aircraft.
As well, the Navy fighter plane also should be continued, as the workhorse aircraft flying from the decks of aircraft carriers, the analysts continued.
Major procurement programs “depend upon nationwide networks of suppliers; the components that go into an F-18 Hornet fighter, for example, are designed and built in 44 states,” Donnelly and Schmitt noted.
They also endorsed Obama’s plan to increase the number of military personnel, to help lessen the strains of repeated deployments on troops.
“Increasing the size of the armed forces would have an even more direct and immediate effect on employment,” the authors note.
“Almost all military spending on personnel occurs within the year of appropriation. There would also be a secondary effect as thousands of young men and women who currently possess no skills receive training. People in military service learn a lot — not just technical and technological skills but also the valuable traits of personal discipline and leadership.”
Spending Stimulates
Separately, the nonpartisan Congressional Budget Office reported that if Congress aims to bolster economic growth, then federal spending would better accomplish that, as opposed to cutting taxes.
Especially when a tax cut goes mainly to the well off, such as easing the Alternative Minimum Tax, much of a tax cut is saved rather than spent on purchases stimulating the economy, the CBO stated.
In contrast, federal spending on programs that create jobs would be much more likely to bolster the economy.
“A dollar’s worth of a temporary tax cut would have a smaller effect on GDP than a dollar’s worth of direct purchases or transfers, because a significant share of the tax cut would probably be saved,” the CBO found.
It presented those findings in a letter to Sen. Jdd Gregg of New Hampshire, ranking Republican on the Senate Budget Committee, whom Democratic President Obama has said he will nominate to be secretary of commerce.
“The amount [of a tax cut] saved, and therefore the size of the effect on GDP, would depend on who received the tax cut and how temporary it would be,” the CBO noted.
“Most households probably save most of a temporary tax cut, to keep their purchases relatively smooth over time. However, the predominantly lower income households that spend all of their income and would like to borrow funds to spend more if they could (that is, households that are “liquidity constrained”) probably spend a large share of temporary boosts to income.”
The CBO analysis didn’t study or evaluate specific types of spending programs such as defense procurement.