WSJ Worries Debt Limit Fight Could Jeopardize Military Contractors’ Profits

Wall Street Journal (5/12/23): “The drama in Washington this spring reflects a deeper political impasse that risks crimping military-spending growth in future budget negotiations.”

The Wall Street Journal is very concerned about the effects of the debt limit fight…on military contractors. In an article (5/12/23) headlined “Debt-Ceiling Fight Weighs on Defense Industry,” the paper reported, “If the US defaults on its debt and is unable to pay all its bills this summer, the pain will fall squarely on the defense industry.”

A default could disrupt payments to military contractors, the Journal pointed out, and even a temporary suspension of the debt ceiling for several months “would raise the likelihood the Defense Department will have to make do with a temporary budget known as a continuing resolution.” This would likely “inflate the costs of military programs, delay the launch of new ones and prevent production increases.” In short, weapons producers might feel a momentary pinch after years of war profits.

But, given the unlikelihood of outright default, the more concerning scenario for the Journal has to do with budget talks. The piece noted that, as the largest item on the discretionary side of the federal budget—which excludes social programs like Social Security and Medicare, which are funded on an ongoing basis—military spending could soon find itself on the chopping block. And who’s taking the pain? Your friendly old drone supplier:

Concerns that military spending could be cut—or, at best delayed—in a debt-ceiling fight have weighed heavily on investor sentiment toward the biggest military contractors. Shares in Lockheed Martin are down this year more than 7%, with General Dynamics and Northrop Grumman off 15% and 20%, respectively.

Dear God, no! We must take action to address the “‘wall of worry’ among investors”!

All the valiant fighters for justice are concerned. We hear from a congressional representative who castigates Republicans who “play chicken with the full faith and credit of our country” and “jeopardize our national security.” Then an Air Force secretary is brought in to sound the alarm about the strategic harms of failing to fund the military.

Where are the voices opposed to increased military spending, who represent the majority of the US public rather than the minority of war profiteers? Probably off playing hackysack. The Journal evidently couldn’t reach them.

The cost of cuts

The Journal article featured an image of a weapons display for Lockheed Martin, whose stock is “down this year more than 7%.”

There’s a hint of hope, though! The piece notes:

While Republicans are seeking a spending freeze, many members have voiced support for a larger increase in the military budget, though it would come at the cost of cuts in other areas.

What these other areas would be remains unspecified. But let’s take a look. According to a recent analysis by the New York Times (5/8/23), if the military budget, along with veterans’ health and the border patrol, are spared from cuts, each remaining area of the discretionary budget would have to be cut in half to satisfy the Republican spending caps. That includes Health and Human Services, Housing and Urban Development, the Department of Education, the Department of Justice, the Department of Labor and the Environmental Protection Agency, among others.

It’s beyond absurd to exclude this context, and instead hand-wring about the area of the discretionary budget that appears least likely to face cuts—and, by any reasonable account, the most able to survive them.

Again, as the Washington Post (4/26/23) has reported, “Republicans have promised to focus…cuts on federal healthcare, education, science and labor programs, while sparing defense.”

An article by military analyst William Hartung from last month in Forbes (4/26/23) likewise opened:

House Speaker Kevin McCarthy (R-Calif.) announced the outlines of a possible Republican budget plan last week, and the big winner was the Pentagon [emphasis added]. Even as McCarthy called for a freeze in the federal discretionary budget at Fiscal Year 2022 levels as a condition for raising the debt ceiling—a move that he promised Freedom Caucus members when they grudgingly supported his election as speaker in January—he signaled that the Department of Defense would not be impacted.

This is a completely different story from the one that the Wall Street Journal has chosen to promote, and one that has far more basis in reality.

But let’s raise a glass to Raytheon. May they get through these tough times and thrive. If there’s one thing the world is lacking, it’s enough weapons contracts for war profiteers.

ACTION ALERT: You can send a message to the Wall Street Journal at wsjcontact@wsj.com (or via Twitter: @WSJ) Please remember that respectful communication is the most effective. Feel free to leave a copy of your communication in the comments thread.