Spending other people’s money (OPM) is fun. Just ask the federal government, and the crew running Detroit.
But the sequester will rattle smaller companies already toughening metals, crafting parts, and writing software for planes that won’t be ready for years. Some of these suppliers, analysts predict, will leave the defense industry or go out of business, imperiling the weapons they build. “With sequestration, what looks like modest cuts at the top of the system, down at the supplier level looks like the difference between life and death,” says Loren Thompson, chief operating officer of the Lexington Institute think tank and also a consultant to Lockheed. “It could be the difference between making and losing money for a small enterprise located far from the capital.”
Even for those that survive, the cutbacks will likely change the way they build their budgets, forcing them to reduce risk by raising costs—at taxpayer expense. Unexpected reductions will strain already-thin margins. If a company has prepared for more business, for instance, it may have invested in machines, buildings, staff, and even parking lots. Less volume means charging higher prices to defray those costs. It’s like a shared apartment: If one of three roommates moves out, the others still have to pay the same rent. They may need higher salaries to afford it.
It will come as a shock to some people who the men and women who serve as federal defenders eat food, live in homes, have children who get hungry every day. When they go to the supermarket, they have to pay the cashier just like everyone else. The gas pumps that fill their cars demand payment. They are not priests of the law, swearing an oath of poverty.
Unlike others, say assistant United States attorneys for example, whose budgets haven’t been touched by sequestration, they aren’t particularly well-paid and need that paycheck every two weeks to fill the stomachs of their children. When it doesn’t come, or has fewer zeroes than it’s supposed to, something has to give.
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How long will it take before the effects of sequestration aren’t felt throughout the defense side of the system? Five years after it’s over? Ten. It takes a long time to restaff, to gain the experience of those being chased away by the cost of living.
On the bright side, it’s not like the prosecution has to suffer the indignity of hunger. They remain well-fed, and have a bright future as a biglaw partner or corporate wank to look forward to. A few years of hunger now will pay off well later, since everybody wants a former federal prosecutor on their team. Just the title along makes clients open their wallets.
The Federal Defenders are a lot cheaper than the other method of appointing counsel — lawyers appointed under the Criminal Justice Act. There’s a stark table on page 3, but in a nutshell, the Federal Defenders cost around 71% per case of what an appointed attorney does. Because of the constitutional guarantee of appointed counsel, these cases have to be defended either way, but a shortfall in the Federal Defender budget will quickly translate into much bigger costs to the taxpayer in the end.
Big defense contractors are weathering the federal budget sequester far more easily than they projected, in part because they have gradually eliminated jobs over the past few years in anticipation of spending cuts.
Bethesda-based Lockheed Martin, the world’s largest defense contractor, reported Tuesday that its profit rose 10 percent, to $859 million, during the second quarter even as revenue dipped slightly. Northrop Grumman and General Dynamics, two other large contractors, are scheduled to report results Wednesday.
With the possible exception of Lord Obama, nobody seems much interested in the economy these days, or government spending, or jobs (and let’s be honest, Obama has been ignoring all of these since before he took office).
But for stimulatarians – you know, those folks who believe that federal spending is all good all the time – here’s some good news: It looks like the Pentagon – the entity comprising nearly half of all military spending on the planet – is gonna buy itself some more F-35 fighter jets. The Strike Fighter is already overdue and over-budget, but hell, shopping therapy is what it is.
Unfortunately, it seems that the future Aldous Huxley predicted in 1932, in Brave New World, is arriving early. Mockery, truculence, and minimalist living are best, then enjoy the decline. However, we do need a Revolving Door Tax (RDT), learn what Members of Congress pay in taxes, and prosecute politicians and staff and their “family and friends” who profit from insider trading. Oh, and pay “public servants” what they are worth.