Defense industry becoming pessimistic about chance of avoiding fiscal cliff


The defense industry may be becoming more pessimistic about a deal to avoid the fiscal cliff before the end of this year. They are also annoyed that they are sidelined during talks.
The industry feels that they will be able to demand a deal that will see military spending hiked back up some time in 2013. An anonymous source said:
“I think people resigned to the fact that this needs to be addressed in January,”
At the Pentagon, Obama administration officials have given those who crunch the numbers in the Defense Department permission to start the process of cutting $500 billion from their budget in January of 2013. Top defense industry lobbyists had been trying to convince both parties that going over the fiscal cliff would be a complete disaster. While John Boehner tried to implement a Plan B to deal with the fiscal cliff, he was unable to pass it through the Republican-controlled House since it involved tax hikes for the very rich.
It is still possible that there will be a last minute deal that will be a stop-gap measure. Obama has cut short his vacation to continue negotiations. One defense industry source said that its message of doom if the fiscal cliff were not avoided fell on deaf ears.
Top defense analyst, Loren Thompson said:
"I think there's a creeping sense of pessimism in the defense sector … I don’t think most people in the industry really understand why their pleas have [been ignored]."
Thompson said that among lawmakers many felt there was no urgency about avoiding cuts to the Pentagon budget since even with the cuts US defense spending will still be many times higher than its nearest competitor. Thompson went on:
"They don’t want sequestration but they’re capable of dealing with it."
Some analysts think that the problems created by jumping over the cliff will be addressed early in January. If the stock market begins to fall, there will be more pressure for a deal to be worked out. Even in the New Year, Thompson was pessimistic about any grand deal in the near future.


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