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Defense Industry worried about high Iraq spending


DP Veteran
Jul 31, 2005
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A surprising group of protesters is starting to voice concerns about the high level of spending on the U.S. occupation of
Iraq: the defense industry.

While many companies benefit from supplying vehicles and guns to U.S. troops in Iraq, some defense firms and industry experts are concerned that money spent on Iraq is taking away from more lucrative, longer-term multibillion-dollar programs.

The result is some confusion over the
Pentagon's strategy, and fears that the United States will end up with a "hollow force" if it doesn't fulfill its modernization plans.

"We're spending $6 billion to $7 billion a month in Iraq -- that's not efficient spending of defense money," said Frank Lanza, chief executive of defense company L-3 Communications Holdings Inc., in an interview last week.

Other defense contractors are thinking the same thing, even if they are not saying it in public, a leading defense analyst added.

The United States needs to scale down involvement in Iraq and pare back its uniformed forces to keep the large, so-called "transformational" programs on track, according to L-3's Lanza, founder of the Pentagon's ninth-largest supplier.

"We are in transformation -- we can't afford all the platforms we started," he said. "So two things have to happen: Iraqi (U.S. troop level) has to come down, and the U.S. uniformed military is going to be reduced by about 100,000."

That would mean a cut of about 7 percent for the active U.S. uniformed force of about 1.4 million. There are 138,000 U.S. troops in Iraq.

If high Iraq costs persist, large programs like the Army's Future Combat Systems modernization plan, led by Boeing Co., and Lockheed Martin Corp.'s state-of-the-art Joint Strike Fighter jet, are likely to be scaled back or stretched out, industry analysts said.

The Bush administration has signaled that the wars in Iraq and
Afghanistan would continue to be funded through supplemental budget requests, rather than the main budget.

But some warn that the administration will soon have to choose between Iraq and modernization programs.

"They did not seem to make the cash-crunch decision in the '07 budget and there was clearly not a specific list of things that should be stopped right now in the
Quadrennial Defense Review," said Michael Goldberg at consultant Bain & Co., referring to the Pentagon's four-yearly study on U.S. defense strategy, which was released on Friday. "So I think the can got kicked a little bit down the road, so to speak."

The White House said last week it would ask for a further $120 billion in new emergency funds for Iraq and Afghanistan. That comes on top of $320 billion allocated for the two wars so far. The nonpartisan Congressional Research Service reckons that the war and occupation of Iraq has accounted for $251 billion of that.

That cost -- along with broader budget pressure -- is already causing ripples among contractors who are anticipating a slowdown on new programs, said Goldberg.

"Every contractor I work with is saying they expect very few new starts," he said: "The number of long-term, transformational programs expected to be launched in the next few years is very few."


So basically it could come down to Iraq or keeping our military moderanized. With the rise of China to superpower status on the horizon I suspect keeping the military up to date would be very important.


DP Veteran
Feb 2, 2006
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Very Conservative
You're missing something important.

Modernization = new equipment
New equipment = new contracts
New contracts = new $ for contractors.

Defense contractors that build stuff don't make money when stuff isn't bought, so its natural that contractors will say that if the military doesnt buy new stuff, there will be problems.

Fact is, the military is modernizing as we speak - all kinds of new equipment and new tech is being fielded by our military -- Iraq, not only just a great opportunity for troops to gain combt experience, is a great opportunuty for troops and contractors to test new equipment.

The US army, when it leaves Iraq over the next 24-36 monthts, will be the best trained, most experienced and best-equipped army the world has ever seen.
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