In a movement reminiscent of the collapse of the Soviet Union, American defense contractors are leaving the industry for greener pastures. Amid reports that the Department of Defense is going to dramatically scale back its reliance on contractors to reduce costs, the industry is moving on. Contractors are saying that the uncertainty of their future is forcing them to look for other options as they cannot take loans or hire new talent without being sure the money is going to be there to pay the bills.
Retired General Lawrence Ferrell, president of National Defense Industry Association, told Fox News:
“They’re losing good people whom they likely won’t get back, and with them goes the cutting-edge expertise.”
Secretary of Defense Leon Panetta told Congress that the Department of Defense is taking steps to freeze civilian hiring, putting off contracts that have already been awarded and leaving maintenance for another day to prepare for the automatic budget cuts that are headed for the department if Congress fails to reach a deal on the sequestration. Sequestration is the name given to the automatic budget cuts that were set to go into effect for Congress’ failure to enact the spending cuts recommended by President Obama’s deficit reduction committee.
Congress passed a delay in the budget cuts for two months as part of the bill to avert the fiscal cliff.
Panetta has also made it clear that, if the budget cuts are enacted, the United States will face serious threats to national security amid the financial instability.
The Pentagon is facing a spending reduction of nearly $500 billion over a decade should Congress fail to reach a deal. And an additional $110 billion in automatic spending cuts to military and domestic programs will take effect in early March if no agreement is reached.
Dawne S. Hickton, president and CEO of RTI International Metals Inc., said the cuts will imperil programs that have taken years to implement, saying:
“What we’re manufacturing in our plants today is going in a military program two or three years down the road.”
Economists are warning that the Department of Defense is but a symptom of the overall problem, which they say is the lack of stability. The Senate has not passed a budget in more than 6 years. Congress, in the absence of a budget, is forced to fund the government in small increments leading every spending bill into a political fight.