Nation & World

Defense industry may feel sting of future budget cuts

Defense spending will be squeezed but not slashed in the first round of deficit reduction mandated by Congress, which likely means no major cuts in programs important to North Texas companies and their employees.

What happens after that, in 2013 and beyond, may well be another story.

Defense Secretary Leon Panetta and top Pentagon leaders will have difficult but not monumental decisions to make in the coming months to implement the 2012 defense budget dictated by the deficit-reduction bill approved last week.

But unless Congress makes hard political decisions in the next few months to cut other areas of the federal budget or to raise taxes, the defense budget in 2013 and beyond faces much deeper reductions. The military services could be forced to make broad and sweeping cuts in troop levels and, most importantly to the defense industry, spending on weapons development and purchases.

In the next year or two, defense analysts say, Panetta and military leaders will almost certainly be faced with choosing between programs that can and should be cut.

Programs like Lockheed Martin's F-35 joint strike fighter and littoral combat ships like the USS Fort Worth, the Bell Helicopter's V-22 Osprey and new Navy aircraft carriers will be scrutinized, as will a new Air Force bomber and a whole new fleet of helicopters the Army wants to spend billions to develop and buy.

The initial defense spending caps imposed by the Budget Control Act of 2011 are not much different from those announced by President Barack Obama in April, which involved cuts from long-term budget plans submitted two months earlier.

For 2012, the base defense budget -- excluding costs of combat operations in Iraq and Afghanistan -- is $525 billion. That's roughly $5 billion less than 2011 and $30 billion less than the Pentagon's proposed 2012 budget.

How tough is that?

"It's not draconian. It's not drastic," said Todd Harrison, analyst with the Center for Strategic and Budgetary Assessments in Washington.

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