Record defense spending, which has been a durable support for Connecticut manufacturers, could begin to decline if Joe Biden is elected president and diverts Pentagon money to COVID-19 recovery efforts and restoring the economy.
The former vice president has said he does not foresee major Pentagon reductions. But his fellow Democrats in Congress could push his administration to cut in earnest, particularly if they take the Senate majority from Republicans on Election Day.
Connecticut manufacturers that reaped $37.1 billion from the Pentagon in 2019, according to the state Office of Military Affairs, may not face deep cuts. But they’re not immune to reductions, either.
The F-35 fighter jet, which is equipped with Pratt & Whitney engines, could face reduced Pentagon acquisitions, “but not in any sweeping way because we need air superiority,” Sen. Richard Blumenthal said. Even if Washington cuts funding, the fighter jet is popular abroad and benefits from robust sales to U.S. allies such as Israel and Japan.
In addition, Sikorsky has contracts to build the heavy lift helicopter, though Pentagon acquisitions of the famed Black Hawk helicopter have been slowing “as the immediate requirements of Iraq and Afghanistan are gone,” said Richard Aboulafia, a commercial and military aerospace analyst at Teal Group in Fairfax, Va.
General Dynamics Electric Boat, which is on schedule to boost production of Virginia class submarines and build the next generation Columbia class submarine, appears the safest when budget cutters take out their knives.
Blumenthal, a member of the Senate Armed Services Committee, said he sees “no speculation” about cutting production of the Navy’s submarine program.
“It’s an area of superiority we have to maintain,” he said.
Still, the focus in Washington will be on the public health emergency and recession, Blumenthal said.
“I envision a serious skeptical scrutiny of our defense budget that will eliminate some of the waste or less effective programs,” he said.
Blumenthal cited an aircraft carrier costing $13 billion to $15 billion, Bradley vehicles and Abrams tanks. The focus will be on cyberwarfare, information technology and unmanned vehicles, Blumenthal said.
Analyst Peter Arment at Baird Equity Research said in an Oct. 13 client note that military spending next year will likely be reduced for modernization and that legacy weapons will be retired. The result will be “shared pain for the industry relative to the current lofty spending levels,” he wrote.
A shift in federal spending is anticipated “with the Department of Defense as the main bill payer,” he said.
The stakes are high for Connecticut. Jet engine manufacturer Pratt & Whitney, a subsidiary of Waltham, Mass.-based Raytheon Technologies Corp., has been hit hard by the steep drop in commercial aviation due to the coronavirus. Its defense business will account for about two-thirds of Raytheon’s sales this year, Chief Executive Officer Gregory Hayes told industry analysts Sept. 16.
That’s far different from what Raytheon executives anticipated. Initial estimates of commercial aviation and defense revenue were about 50-50 “or maybe 55-45 with defense in the lead,” he said. Pentagon spending already is flat in the budget year that began Oct. 1, Hayes said. Adjusting for inflation, it will be down about 2.5%, he said.
Former Secretary of State Hillary Clinton, in an article in Foreign Affairs, took aim at the F-35 fighter jet. Defense spending spread across the 50 states and 435 congressional districts makes “clear why it’s so hard to retire aging weapons systems or close bases that have outlived their usefulness,” she said.
“Today, the poster child for this political reality is the F-35 fighter,” Clinton said. “Development of the plane ran way behind schedule and over budget, and it is estimated to cost $1 trillion over its lifespan, yet it is considered untouchable.”
Aboulafia said rumors always accompany elections that scramble assumptions and expectations.
“As I’m quick to point out it has little to do with the administration and everything to do with the Senate,” he said.
If Biden defeats President Donald Trump and Republicans keep their Senate majority, defense spending might not change too much, Aboulafia said. If the Democrats take the presidency and Senate — and keep the House of Representatives as expected — defense spending will be pared, he said.
The liberal, activist base of the Democratic Party, hoping to capitalize on its help electing Democrats, will likely insist on a shift to social spending from the Pentagon budget, he said.
The “worst predictions” for cutting that he’s seen with a Democratic House and Senate and Biden administration is 5% to 7%, Aboulafia said. “It would hurt a little,” he said.
Stephen Singer can be reached at ssinger@courant.com.