US Weapons Industry Looks Forward to Doing Business with Joe Biden

November 8th, 2020 - by Aaron Gregg / The Washington Post

Sen. Joe Biden (D-Del.), right, and other Democrats watch as President George W. Bush signs a resolution authorizing the use of force against Iraq in 2002. (Mark Wilson/Getty Images)

 ‘Our Industry Knows Joe Biden Really Well’: Defense Contractors Unconcerned as Biden Clinches Victory

Aaron Gregg / The Washington Post

(November 7, 2020) — The defense industry is taking a largely positive view of its prospects under an administration led by Joe Biden, who clinched the presidency on Saturday.

Although defense manufacturers have benefited from increased spending, tax cuts and deregulation under President Trump, their executives have told investors that they expect the former vice president and longtime senator will largely maintain the status quo with respect to defense spending.

Compared with others who sought the Democratic nomination — notably Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) — Biden is a known quantity.

“Our industry knows Joe Biden really well, and he knows our industry really well,” said Arnold Punaro, a retired Marine Corps major general and Democratic Senate staffer who works as a defense consultant.

“I think the industry will have, when it comes to national security, a very positive view” of a Biden presidency, Punaro said.

The Associated Press and other news organizations called the race for Biden on Saturday, as his lead over Trump in Pennsylvania widened by about 30,000 votes, or 0.5 percent. A victory in Pennsylvania means that he has more than the 270 electoral votes needed to win the election.

Stock prices of major defense contractors increased Wednesday, as Republicans appeared poised to hold on to the Senate, and held steady throughout the week.

The three major industry associations representing government contractors ― the Aerospace Industries Association (AIA), the Professional Services Council and the National Defense Industrial Association ― did not endorse either candidate. But all three have close relationships with Democrats as well as Republicans.

AIA President Eric Fanning personally endorsed Biden, citing the Obama administration’s role in repealing the “Don’t Ask, Don’t Tell” policy that prevented gay people from openly serving in the military.

Fanning, a former Obama administration official who was the first openly gay person to serve as Army secretary, endorsed Biden in late June.

“The next president faces a monumental task: repairing our damaged democracy and our eroded moral leadership around the world,” Fanning said, according to the Associated Press.

To be sure, it will be hard for the industry to capture the same windfall profits it enjoyed under Trump.

The size of the annual defense budget increased by about 10 percent when Trump took office, and the Pentagon’s most recent budget request came in at $705 billion for fiscal 2021. Major defense contractors benefited from well-funded weapons technology initiatives, including numerous hypersonic-weapons programs and accelerated purchases of new fighter jets. Some major defense contractors saw record sales as a result.

Some Trump-era defense policies are unlikely to hold. A Biden presidency is likely to take a very different approach to foreign military sales, especially with respect to Saudi Arabia. Corporate tax cuts probably won’t enjoy the same support under a Biden administration.

Another fight could also flare over the spiraling national debt. Congressional gridlock led to deep spending cuts as part of the sequestration process between 2013 and 2015, a recent financial low for government contractors. Defense analysts have expected for years that the current defense budget would probably not increase further even under a second Trump administration.

“Obviously there is a concern that defense spending will go way down if there is a Biden administration, but frankly I think that’s ridiculous,” Raytheon chief executive Gregory Hayes told CNBC’s Jim Cramer shortly before the election.

Raytheon is counting on its defense division to offset severe disruption in its jet engine and aircraft parts divisions, which have been hit hard by the slowdown in commercial air travel.

“Defense has always been a bipartisan issue, and when Biden was vice president and previously a senator, I think he had a pretty good approach to national defense,” Hayes said. “He understood the need to work [with] both sides of the aisle and provide for the national defense.”

Even on the issue of nuclear weapons — an often-politicized issue that can inspire strong feelings on both sides — defense executives seem confident that the current program will continue.

Falls Church-based defense contractor Northrop Grumman has benefited significantly from the Defense Department’s efforts to overhaul the nation’s nuclear arsenal. In September, it became the primary contractor for the Air Force’s Ground-Based Strategic Deterrent program, allowing it to supplant Boeing as the nation’s primary supplier of intercontinental ballistic missiles. The ballistic missile program is worth an estimated $85 billion over the next several decades, adding to a Northrop Grumman nuclear portfolio that also includes the nuclear-capable B-21 bomber.

Northrop Grumman chief executive Kathy Warden was keen to point out in a recent call with investors that those two weapons systems were supported by nuclear deterrence plans from both administrations. Both are part of a huge nuclear recapitalization plan that started under Barack Obama and was accelerated under Trump.

“We’re confident that a new administration would recognize that value and continue to support the modernization efforts that are well underway for both GBSD and B-21,” Warden told investors last month.

Joe Biden: In lockstep with corporate militarism?

Mike Petters, president and chief executive of the Newport News, Va.-based shipbuilder Huntington Ingalls, brushed off concerns that the Biden administration would put less money into the Navy budget. Petters said the Navy is likely to continue with its current modernization plan — which he said calls for “faster, cheaper and smaller ships,” and more of them — regardless of who is in the White House.

He argued that the Pentagon will ultimately respond to the same global threats it currently faces.

“If you have a change in the leadership and the administration, the new folks are going to be looking at the same outside world that the folks that are there now are,” Petters said.

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