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Is the Industry Too Dependent on the Pentagon Budget?

A question raised during the Cold War was what would happen if we declared peace? The impact would have been a reduction in Pentagon budgets, which in turn would eliminate many aerospace contracts. As a past member of the aerospace engineering community the thought of losing a contract usually meant that my participation would be no longer required. I always had a feeling that someone would tap me on the shoulder and say we lost a contract and you are laid off. There was always a feeling of impending doom when working in the aerospace industry.

Today, the U.S. is in the throes of economic problems that are pushing Congress to reduce the Pentagon budget. The Budget Control Act of 2011 allowed a raise in the debt ceiling, but put off details on specific federal budget cuts until November 2012. Then, Congress established a “super-committee” who proceeded to blow that deadline by agreeing to $1.2 trillion in deficit reduction over the next decade. That set the stage for difficult across-the-board cuts to go into effect in January 2013.

The automatic defense cuts are looming now because the super-committee failed to strike a deal in 2011. The big loser in these cuts will be DoD to the tune of about $492 billion. That’s about half the mandatory cuts scheduled to go into effect through the end of 2021, if the president and Congress do not reach a deal before January 3, 2013. Last summer’s debt-ceiling negotiations targeted the Pentagon’s budget for $487 billion in cuts through 2021. As a result, that would mean a 9% drop next year, if there is no agreement to stop the automatic cuts.

If these cuts occur, although there are some questions as to whether it will take place, engineers involved in aerospace programs will certainly be at risk. If these Pentagon cuts do occur, it might be worthwhile to look back and see the positive impact of previous Pentagon budgets.

There is no doubt that the Pentagon and NASA budgets played a major role in growth of the electronic engineering industry. Pentagon and NASA funded much of the early semiconductor developments. If that did not take place there are many consumer items probably wouldn’t be available today. That list includes smart phones, GPS, flat screen TVs, personal computers, photovoltaic panels, etc. The list goes on and on. If Pentagon and NASA support dries up who will provide the capital for future developments? And, what will happen to electronic engineers now working in aerospace programs.

Defense and aerospace industries employ about 1 million workers. Some companies are already contemplating layoffs. For example, Lockheed Martin has warned its employees about possible layoffs. This warning conforms to a 1988 law, the Worker Adjustment and Retraining Notification (WARN) Act, that says defense companies must notify workers 60 days in advance of plant closings and mass layoffs. That puts those projected layoff notices on November 2, two days before the presidential election. And, that doesn’t count the associated small business layoffs. As an example, Boeing estimates that it supports 1.3 million supplier-related jobs. The National Association of Manufacturers warns that almost one million jobs could be lost by 2014.

Obviously, layoffs will take their toll on the electronic engineering industry. The number of potential purchasers of high-end electronic equipment will decrease. And, the number of students going into engineering will go down. Plus, we will lose some of our readers. Maybe our dependence on aerospace, military, and associated systems was fraught with dangers we couldn’t perceive, although they did protect the U.S.

So the next question is what can we do to counter the potential loss of engineering jobs due to a reduction in the Pentagon and NASA budgets? For one thing, we can try to persuade Congress not to cut the Pentagon budget.

If that doesn’t work the industry will have to find other capital sources to support continued developments. To survive, the industry will have to pull itself up by its own bootstraps.

TAGS: Industry
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