Northrop CEO: Budget Fight Is Not Over

Defense industry lost the first round of the fight against federal budget cuts, but it must continue to press on, a top CEO told corporate officials.
“There are just too many rounds left in this fight over the fiscal path ahead of us, and we have a responsibility to be clear about the consequences of that fiscal policy,” said Wesley G. Bush, CEO and president of Northrop Grumman Corp.
Bush spoke May 3 to a gathering of industry officials in McLean, Va., where he received theNational Defense Industrial Association’s 2013 James Forrestal Award.
Even if industry lobbying failed to undo the budget sequester, which would slash military spending by $500 billion over the next decade, companies in the defense sector still have a “real obligation to be vocal,” Bush said. “Going silent on this issue would be a real mistake.”
With the benefit of hindsight, industry CEOs see how their plan to fight back the sequester law — which Congress passed in 2011 — might have suffered from overconfidence. Industry executives had assumed that politicians would protect defense spending because it creates jobs.
The lesson from the past two years is that industry should promote more than just job creation, Bush suggested. “I think it is important to help our nation’s policy makers understand our industry because not all of them do,” he said. One of the underestimated benefits of defense spending is that it bolsters technological advances, and, indirectly, national security, Bush said. The current fiscal policy, he added, is causing a “devastating impact on the investments that are required to sustain our technological advantage.”
A steady decline in research-and-development budgets should be cause for alarm, Bush said. In the early 1960s, the United States spent 1 percent of GDP on defense R&D. In the 1980s, that share dropped to three-quarters of a percent. Over the last decade, it was one-half of one percent. Current projections show that the decline will continue, to one-quarter of one percent.  
Turning this trend around should be a priority for defense industry, said Bush. “If we don’t speak up, who will?”
Another cause that demands industry’s attention is export-control reforms, Bush said. “I would argue that innovation is our nation’s most lucrative export and our nation’s export policies need to support that commodity.” While some sensitive technologies should not be sold to foreign countries, current export rules are too restrictive, Bush said. “We have for years made the perfect the enemy of the good.” A case in point is satellites. “We somehow thought that we had a corner on that technology, but we were badly mistaken,” said Bush. “The very policies that were intended to keep this technology secure for us actually encouraged others who could not buy it from us to develop their own.”
Bush acknowledged recent efforts by the Obama administration to reform the export-control regime. He said he hopes these changes will spur sales of defense-related technologies such as unmanned aircraft to U.S. allies. “By broadening the international market for our industry’s high-tech products, like unmanned systems, export reform will translate directly into the preservation and expansion of our nation’s critically important high-tech workforce,” Bush said.
“We must be vocal and proactive to ensure our voices are heard,” he insisted. “Let’s remember who we are.  We are the leaders in America’s aerospace and defense industry.  We are responsible for seeing that our industry performs as the indispensable national asset that it is.”
Photo Credit: Scott Rekdal/NDIA

Topics: Defense Department, DOD Budget, DOD Policy, International, Procurement