Arlington Chamber of Commerce

Timothy Keating, Senior Vice President, Government Operations, The Boeing Company
December 12, 2014

Ex-Im is but one case study of the U.S. political system losing its bearing.  Another is the legislative impasse over the size and composition of the federal budget. Through sequestration Congress has tried to address what really is a problem with entitlements and other forms of mandatory spending – which make up roughly two-thirds of federal outlays – by gutting discretionary spending.

Under current law more than $70 billion in immediate, across-the-board cuts to discretionary programs and activities will go into effect in Fiscal Year 2016, shared equally by defense and domestic agencies;   all of which will be felt, one way or another, by the companies and communities represented in this room and across the state of Virginia.

Remember that projected defense budgets have already been cut significantly since the post-9/11 peak – by nearly $1 trillion when you include program cancellations and other reductions by Secretary Gates,  the 2011 Budget Control Act, the sequester of 2013, and then Bipartisan Budget Act at the end of last year.

And because of the way sequestration is structured – with massive savings needed immediately and pay and benefits off-limits – a 10 percent top-line sequester amounts to significantly bigger cuts to training, maintenance, procurement, and research and development accounts;  this at a time when the world is growing more turbulent and rival powers are modernizing their armed forces.

Companies like Boeing saw the writing on the wall and made some difficult, at times wrenching, changes to our workforce and geographic footprint to prepare for the defense downturn.  The Department of Defense, by contrast, has been prevented from making the strategy-guided management choices necessary to maximize the funding available to sustain our military readiness and technology superiority.

Furthermore, with investment funding shrinking for military modernization it is all the more imperative to have a defense acquisition system that can make every dollar count – for the taxpayer and war fighter alike.  We applaud the initiative of Senate and House Armed Services Committee leadership to solicit recommendations to further reform and, more importantly, improve defense acquisitions to reduce unnecessary red-tape while encouraging more innovation.  Boeing is contributing to this effort and will provide the committees with its own list of recommended changes in a few weeks.

These management changes are so urgent because if sequestration returns – and stays for the rest of the decade – the U.S. defense and aerospace industry – most of which consists of small- and medium-sized firms in the 2nd and 3rd tier of the supply chain– will be forced to lay-off thousands of employees with unique military skills and close more factories and research labs. The lost capacity and capabilities resulting from these cuts cannot be rebuilt or brought back quickly if U.S. national security imperatives or budget priorities change in the future.

We can’t forget that sequester’s damage goes beyond the military to other key agencies of government – like Homeland Security, FAA, NASA, the FBI, NIH, and the State Department – that are important to public safety, future scientific breakthroughs, and America’s influence around the world.