The defense industry’s uncertain future

The U.S. defense industry is about to close out a bumpy year, when the country’s fiscal reality finally caught up with corporate, and investor, expectations. Next year will be as rough, with the queasy stop-start politics of an election year.

Lawmakers will be on political guard when dealing with defense matters during an election year, sequestration or not, while the White House goes into campaign overdrive to win over voters, and Congress, in a presidential race that is crucial to setting U.S. national security priorities post-Iraq. Some lawmakers will be emboldened. Others will shirk their duties to taxpayers and the armed forces. At the top, the economy won’t be a selling point for President Obama, so he will perform the delicate dance Democrats do around national security accomplishments.

Defense companies are therefore in a bind as political inaction on big strategy issues, and therefore big program and budget decisions, applies more financial pressure. Weapons contracts have gotten so big that losing one, like the F-35 Joint Strike Fighter, could trigger a financial landslide.

The industry is going to look back on the 1990s for guidance. It’s been at the crossroads before. There are some similarities, such as expected slides in procurement spending, with the period following the collapse of the Soviet Union. But there are significant differences at the corporate and political level today that will produce a different industry landscape than what emerged after the so-called “last supper” dinner that kicked off sweeping consolidation nearly 20 years ago.

I explore what’s next for the U.S. defense industry, by way of the 1990s, in an essay for that is included in a 12-part online series tied to the 20th anniversary of the Soviet Union’s fall. The series is a collaboration with The American Security Project, the think tank where I am an adjunct fellow.

My piece is titled “The Uncertain Future of the Military-Industrial Complex.”

Thanks to ASP colleague Joshua Foust and the Atlantic folks for editing the essay.