House panel approves defense bill, setting up a clash with Obama

By Roxana Tiron - 05/20/10 11:48 AM ET

The House Armed Services Committee’s approval of a $726 billion defense authorization bill sets the stage for a clash with the Obama administration.

A veto threat has loomed since defense authorizers started writing the legislation, and now that the bill is headed to the House floor, the question is whether President Barack Obama will follow through.

The Armed Services panel included $485 million to develop a secondary F-35 Joint Strike Fighter engine built by General Electric and Britain’s Rolls Royce, despite repeated threats from Secretary of Defense Robert Gates to personally recommend a veto of any defense bills that includes funding for the second engine.

Gates is expected to address the Armed Services bill Thursday afternoon as well as elaborate on budget initiatives he unveiled a couple of weeks ago during a speech at the Eisenhower Library in Abilene, Kan. Gates took aim in that speech at the GE-Rolls Royce engine, describing it as an example of wasteful spending.

Congressional opponents of the funding will try to scrap it when the full House considers the bill — as early as next week — but they have not been successful in the past.

The massive Pentagon policy bill is not an easy bill to veto. Always viewed as must-pass legislation, the defense authorization bill is particularly tough to veto when the military is engaged in the wars in Iraq and Afghanistan.

Opponents of the funding back the primary F-35 engine-maker, Connecticut-based Pratt & Whitney, which for years has lobbied to remain the sole engine-maker for the large fighter jet program. The company not only has the Connecticut delegation on its side, but also the Obama administration.

“The extra engine program is exactly the sort of wasteful government spending that people across the country are so angry about,” said John Larson (D-Conn.), chairman of the House Democratic Caucus. “It is time we stand with our military and American manufacturing base and put an end to this wasteful spending. A vote against the extra engine program is an excellent opportunity for us to show the American people whose side we’re on.”

Defense authorizers also handed victories to Boeing with their work, approving eight more Boeing F/A-18E/F Super Hornets one week after the Pentagon informed lawmakers it had agreed to enter a multiyear contract with Boeing for 124 planes. Boeing and its congressional supporters have pressed for years to see the ink on a third multiyear contract for the jets.

Additionally, Rep. Adam Smith (D-Wash.), chairman of the Air and Land Forces subcommittee, won committee approval for an amendment requiring the Pentagon to submit an interim report on the impact of government subsidies on competition for the Air Force’s much-coveted midair refueling tanker. Boeing is going head-to-head with Airbus parent company EADS for the $35 billion tanker contract. Boeing plans to build the tanker in Smith’s home state.

The United States and the European Union are in a middle of a bitter dispute before the World Trade Organization (WTO) over subsidies their governments provide to Airbus and Boeing, respectively. The WTO found that the European government illegally subsidized Airbus, but has yet to issue a report on the U.S. government’s help to Boeing.

WTO processes are drawn out, and countries have the ability to appeal the decisions. Pentagon officials have said multiple times they cannot take WTO disputes into account for contract competition, but have ensured Congress that they extracted a commitment from the bidders that the contract would not be affected by the WTO case, even if it resulted in hefty penalties.

EADS, which plans to offer a tanker based on its A330, said it has repaid all reimbursable government loans related to that aircraft, including principal and interest. All reimbursable launch loans are carried on EADS’s balance sheet as liabilities and are listed in the company’s annual report. Pricing on both the Airbus and Boeing planes is determined through a complicated process that includes several market-driven factors.

Lawmakers also bucked Gates on military pay. Gates pleaded with Congress not to add to the pay raise for the military requested by the Pentagon, but the House Armed Services panel raised it from 1.4 percent to 1.9. The Congressional Budget Office estimates the cost of that .5 increase at $2.39 billion if it becomes law.