National Journal’s National Security Insiders said the Pentagon should not offer bailouts to keep defense companies or capabilities afloat, despite defense-budget cuts and shrinking military markets.
The Defense Department’s top weapons buyer said last week that defense companies feeling the pinch of budget downsizing could receive a Pentagon bailout to keep some key weapons-development and manufacturing capabilities alive. Frank Kendall, the acting undersecretary of Defense for acquisitions, technology, and logistics, did not explain how the government would assist failing defense companies, but said, "We have to be prepared to intervene where it makes sense, where we have to.”
Yet 73 percent of Insiders said this was a bad idea. “A little Schumpeterian creative destruction will be good for the moribund Cold War-era defense-industrial base,” one Insider said, referring to the theories of economist Joseph Schumpeter.
If the Obama administration is serious about preserving the industrial base, one Insider said, it will protect critical parts of defense industry even if it means touching “the third rail” of entitlements. “We should not engage again in ‘bailing out’ another industry,” the Insider said.
A few Insiders insisted that this era of budget austerity must run its natural course. “Profitability of defense companies over the last 10 years has been staggering. Time now for a reckoning,” one Insider said. “Darwin should rule here,” another added.
One Insider would not support a bailout, but would endorse support for at least two firms doing “at least R&D in all critical areas.” As another Insider said, “Bailouts, no. Investments to sustain an adequate strategically grounded defense-industrial base, yes.”
Yet 27 percent of Insiders said the Pentagon should consider offering bailouts – with a few caveats. “Only if a loss of a unique capability will jeopardize national security should this even be considered,” one Insider said.
Few companies will need this, one Insider asserted. “The big ones have already begun to discount the build down, and will survive,” said an Insider who did not support bailouts for the companies. “Virtually everyone else is already a commercial-technology provider and integrated into the global economy. This is not your grandfather's industrial base. Weep no more.”
Meanwhile, Russia sent its foreign minister to Syria in an effort to stop the bloodshed there as Syrian President Bashar al-Assad continues to crack down on protesters. But 96 percent of Insiders said Moscow’s pressure on its ally would not be enough to end the escalating crisis in the country. “This one will run its bloody course. Outsiders cannot do much to stop it. Outcome is unpredictable,” one Insider said. “Pray for the Syrian people.”
“There is a systemic reason why Russia fails in this high-stakes diplomacy: It has little hard or soft power to bring to bear,” another said. “Russia is not wealthy or generous or trusted, and it lacks the ability to project military power over long distances. Today Russia is a paper tiger in the Middle East.”
Russia, along with China, vetoed a resolution in the United Nations Security Council that would have called for Assad to step down. One Insider said Moscow’s diplomatic move signals to Assad it is willing to split from the Security Council majority. “[The Russians have] put themselves in a situation where they are losing leverage by their lack of support for the resolution,” the Insider said. “Serious miscalculation by Russia.”
1. The Pentagon indicated last week that defense companies feeling the pinch of U.S. defense-budget cuts and shrinking military markets could receive help. Should the Defense Department offer bailouts to keep defense companies, or capabilities, afloat?
- No 73%
- Yes 27%
“Time to diversify our economy.”
“So we can make defense acquisition even more efficient? No thanks. I'm done with White House crony-capitalism. How about buying something? That would be help.”
“DOD may need to spend money to keep essential capabilities, but those cases will be few and far between, and today there is no basis for such spending. We can't let politics make those decisions for us.”
“The industrial base must reconfigure to the new budget reality that will be for some time to come. Traditional defense advocates are generally those who support free markets so they should be prepared to let the markets respond.”
“It is strange that a budget-constrained Pentagon will find money to bail out its industrial base. Why not simply increase acquisition funding and thereby not only help industry but also our fighting forces?”
“Most defense companies have been diversifying for some time. DOD needs to make more-informed budget decisions, though, that take industrial base issues into account.”
“It's time to revisit the idea of shifting some vital capabilities back to the government itself -- reverse ‘outsourcing.’ ”
“Only if a loss of a unique capability will jeopardize national security should this even be considered.”
2. After Russia and China vetoed the United Nations Security Council resolution on Syria, Moscow sent its foreign minister to meet with Syrian President Bashar al-Assad. Will Russian pressure be enough to stop the bloodshed?
- No 96%
- Yes 4%
“Russia's goals have nothing to do with halting a humanitarian disaster; rather, they seek to prevent the U.S. from further entrenching itself in the region because they would view it as another potential threat to the Russian homeland. They are very concerned about the U.S. becoming the regional hegemon.”
“Syria is a long-term Russian client. No-brainer.”
“More likely Russians will just sell them more bullets.”
“Assad is incapable of the actions needed; he's headed directly for the cliff.”
“Russia has shown no sign of any motives other than preserving a good arms customer.”
“But Russia will be an integral part of any solution, which will have much more far-reaching consequences than any U.N. Security Council resolution. Most of the outrage in the U.S. centers on the human tragedy underway in Syria, while the larger target may be the huge vulnerability the fall of Assad represents for Iran. If handled deftly -- and that is a huge ‘if’ -- Syria could be the path for getting Iran back in the box. This doesn't mean overt military action, it means applying what used to be called the "third alternative," something between a Security Council resolution and sending in the Marines. Some quiet work might be appropriate.”
National Journal’s National Security Insiders Poll is a periodic survey of defense and foreign-policy experts. They are:
Gordon Adams, Charles Allen, Thad Allen, James Bamford, David Barno, Samuel "Sandy" Berger, David Berteau, Stephen Biddle, Nancy Birdsall, Milt Bearden, Peter Bergen, Kit Bond, Paula Broadwell, Steven Bucci, Nicholas Burns, Dan Byman, James Jay Carafano, Phillip Carter, Michael Chertoff, Frank Cilluffo, James Clad, Richard Clarke, Steve Clemons, Joseph Collins, William Courtney, Roger Cressey, Gregory Dahlberg, Richard Danzig, Andrew Exum, William Fallon, Eric Farnsworth, Jacques Gansler, Daniel Goure, Mike Green, Mark Gunzinger, Jim Harper, Michael Hayden, Pete Hoekstra, Bruce Hoffman, Paul Hughes, Donald Kerrick, Lawrence Korb, Andrew Krepinevich, Charlie Kupchan, W. Patrick Lang, James Lindsay, Trent Lott, Brian McCaffrey, Steven Metz, Franklin Miller, Philip Mudd, John Nagl, Kevin Nealer, Paul Pillar, Stephen Rademaker, Marc Raimondi, Celina Realuyo, Bruce Riedel, Barry Rhoads, Marc Rotenberg, Kori Schake, Mark Schneider, John Scofield, Tammy Schultz, Stephen Sestanovich, Sarah Sewall, Jennifer Sims, Constanze Stelzenmüller, Frances Townsend, Mick Trainor, Suzanne Spaulding, Ted Stroup, Dov Zakheim.
This article appears in the February 14, 2012, edition of NJ Daily.