The US and the global defence industry

With the US presidential election taking place today, the world’s focus will be on America and the ‘most powerful office in the world’.

America represents 43% of global defence spending, making it the undisputed leader on the world’s defence stage. Whatever the outcome of today’s contest between President Barack Obama and Governor Mitt Romney, the impact will be massive. But given the candidates’ differing views on the future of the military, what can the global defence industry expect from the next president after the election is decided?

Barack Obama

Barack Obama, in 2008, focused much of his campaign on reducing America’s involvement in the wars in Iraq and Afghanistan. In office the president has reduced the country’s defence spend, reduced the numbers of troops in Iraq, and accelerated the transition to a ‘security assistance’ role in Afghanistan, with combat missions due to end in mid-2013.

In his plans for the future, if re-elected, President Obama has outlined yet more reductions in defence spending, including a 2.5% decrease in the Pentagon’s annual base budget, cutting almost 100,000 troops and increasing reliance on digital technologies and internet-based defence solutions.

In January this year, President Obama said: “We will continue to get rid of outdated Cold War-era systems so that we can invest in the capabilities we need for the future, including intelligence, surveillance and reconnaissance; counter-terrorism; countering weapons of mass destruction; and the ability to operate in environments where adversaries try to deny us access.”

President Obama has long been a supporter of so-called ‘future technologies’ and of utilising the internet more in a bid to reduce defence costs. If re-elected, further investment in new technologies, while reducing physical equipment and spending on troops, can be expected. Indeed, in the second presidential debate, Obama was keen to stress his confidence in modern technology over that of his opponent:

“Well, Governor, we also have fewer horses and bayonets, because the nature of our military’s changed. We have these things called aircraft carriers, where planes land on them. We have these ships that go underwater, nuclear submarines…”

Mitt Romney

Mitt Romney, however, has called Obama’s plans for reductions in military spend ‘absolutely wrong’ and has pledged increased defence spend and more troops.

To help fund this increase, he has proposed a cut to the defence civilian budget, meaning a reduction in administration services associated with the US military and in the Pentagon.

Mr Romney said: “It is absolutely wrong to balance our budget on the backs of our military. We need a strong military, so strong no one in the world would ever think of testing it.

“The Pentagon’s civilian staff grew by 20% while our active duty fighting force grew by only 3.4%. That imbalance needs to be rectified.”

Governor Romney’s largest investment would be into the US Navy, pledging an increase in shipbuilding from nine per year to approximately fifteen per year, which will include three submarines per year.

Whatever the outcome of the election, defence will be at the heart of future plans for the USA, with massive amounts being spent over the next decade regardless of who occupies the White House. Mitt Romney is seeking $8.4 trillion in defence spending, while Barack Obama is proposing to commit a more modest $5.7 trillion.

Today America goes to the polls; for defence contractors around the world, the result could shape the prospects for their business well into the future.


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