The American Economic Recovery and the Defense Industry
On July 2, 2013, the Center for 21st Century Security and Intelligence hosted a discussion on defense spending, military strategy and sequestration in the context of the broader American economic recovery. Bruce Katz, vice president and director of the Metropolitan Policy Program at Brookings, kicked off the event, delivering keynote remarks on his new book, The Metropolitan Revolution (Brookings, 2013). Following Katz’s presentation, Michael O’Hanlon, director of research for Foreign Policy at Brookings and author of Healing the Wounded Giant: Maintaining Military Preeminence While Cutting the Defense Budget (Brookings, 2013), moderated the discussion on how sequestration is affecting the military and defense industry.
With many parts of the U.S. defense industry located in major urban centers, the fate of America’s metropolitan economies is tightly linked to the defense spending debate. While the economic health of those urban centers helps guide business strategy, the domestic discretionary accounts that help metropolitan regions build infrastructure, educate workforces, form public-private partnerships, and otherwise catalyze growth face similar indiscriminate cuts to those of defense.
During his presentation, Katz explained how metropolitan areas are the driving forces behind the United States’ economic recovery. There are 388 metropolitan areas within the US, constituting 12% of U.S. land, 66% of the total U.S. population, and 75% of GDP. Katz described the American economy as a “network” of metropolitan economies that catalyze growth and innovation. Katz emphasized that as expenditures continue to rise, it’s increasingly necessary to invest in American manufacturing to increase human capital, stimulate innovation, and develop new infrastructure to combat sequestration.
After Katz’s remarks, a panel of defense experts was welcomed to the stage to turn the conversation to sequestration and its effects on the defense industry.
Richard C. Bush III, director for the Center for Northeast Asian Policy Studies at Brookings, began the discussion by suggesting that sequestration has not affected U.S. defense strategy in the Asia-Pacific yet; however, there is a growing concern that defense budget cuts will change the United States’ “functioning role” overseas. Jay DeFrank, vice president of Communications and Government Relations at Pratt & Whitney, followed Bush, noting that the dangers of sequestration will increase as the effects magnify year after year. Furthermore, DeFrank explained that the pool of discretionary spending in defense is falling, causing procurement in research and development to decrease and creating possible harmful long-term effects in the military’s effectiveness.
To maintain U.S. global military superiority, as well as continuing the economic revitalization, Nelson Ford, president and chief executive officer of LMI Government Consulting, believes the Department of Defense needs to establish their policy objectives before making further defense budget cuts. Mackenzie Eaglen, a resident fellow at the American Enterprise Institute, added that United States needs more “defense unique” technology now more than ever, illustrating growth in military strength internationally. Both noted that sequestration further expedites the American military’s decline and narrows the gap between its capabilities and those of its foreign counterparts.
The role of the federal government is pivotal in finding an effective balance between reducing defense spending and looking to spur economic growth in metropolitan areas. Congress and the Department of Defense must marshal the nation’s resources to spark innovation while preserving U.S. national security effectiveness.
President and Chief Executive Officer - LMI Government Consulting
“The 21st century has revalued these small geographies. That’s what the 21st century demands,” Katz said, noting that these days, “[w]e aren’t innovating in isolated business parks” in the suburbs.