By Jeremy Herb - 03/27/12 09:00 AM EDT
The defense industry is counting on David Hess, the chairman of the Aerospace Industries Association (AIA), to prevent the unthinkable.
His mission: convince a Congress mired in partisan gridlock to work together — in an election year, no less — to reverse the hundreds of billions in sequestered defense cuts set in motion by the failure of the supercommittee last year.
“People joke it’s like asking, ‘How do you plan for the end of the world?’ ” said Hess, who was appointed chairman of AIA for 2012. “You’re not sure how bad it’s going to be, or when exactly it’s going to occur.”
While AIA serves primarily as the lobby for the aerospace industry, the group has been the loudest voice in the defense sphere on sequestration and has cranked out a series of widely cited studies on how the automatic cuts would affect industry.
Hess, the president of the aerospace giant Pratt and Whitney, hopes to goad Congress into action by focusing on the jobs that would be lost from a severe downsizing of the defense industry.
“We just want to go into this with everybody’s eyes wide open so they understand what it means,” Hess said. “There’s a huge economic impact to the U.S. economy with some of the very premium jobs in the United States: high-tech jobs, high-paying jobs, high-skilled jobs.
“To see those kind of jobs go away would, I think, have a severe impact on the unemployment rate,” he said.
But Hess and Marion Blakey, AIA’s president and CEO, are fighting an uphill battle to reach the top of the congressional agenda amid larger debates over taxes and deficits.
Sequestration, which was triggered when the supercommittee failed to find $1.2 trillion in deficit reduction in November, is set to take effect in January 2013, giving the defense industry a mere nine months to stop the cuts from taking effect.
But while most Republicans and Democrats agree sequestration should not occur, there’s deep disagreement about how to replace it, with Republicans pushing for cuts to entitlement spending and Democrats calling for tax increases. Few observers expect any action on stopping sequestration until after the 2012 election.
“The industry is really caught up in a much larger political debate that is ultimately about the two parties’ philosophies in governance,” said Loren Thompson, a defense expert at the Lexington Institute. “The jobs issue is important, but for the parties going into an election, this is about taxes and entitlements.”
That doesn’t mean the aerospace association is going down without a fight. After the August debt-limit deal cut $487 billion from the Pentagon budget over the next decade — and the supercommittee’s failure started the countdown to an additional $500 billion reduction — AIA’s lobbying skyrocketed.
The group spent $887,000 on lobbying in the third quarter and more than $900,000 in the fourth quarter, quadrupling its lobbying spending from the year prior, according to lobbying disclosure records. The amounts were more than double what AIA had spent on lobbying in any period in the last decade.
AIA launched a lobbying campaign last year called “Second to None” that focused on selling the defense industry’s importance to the larger economy. The group released a study in October that found 1 million defense-related jobs are at risk if sequestration occurs, though some questioned the figure.
The association followed that up with a report this month that provided a state-by-state breakdown of the jobs at risk.
A week later, the group held a lunch on Capitol Hill where Lockheed Martin CEO Bob Stevens told lawmakers and aides that sequestration would cause a “massive disruption” that would halt production on all current and future military programs.
The industry has many defenders in the Pentagon and the Capitol, and Defense Secretary Leon Panetta has used numerous colorful analogies, from “meat ax” to “gun to the head,” to describe the impact of sequestration.
House Armed Services Committee Chairman Buck McKeon (R-Calif.) has sponsored a bill that would push sequestration back one year, and he says Congress must act now because the industry will have to start preparing for the cutbacks with budget cuts and layoffs.
“This idea of not fixing things around here until the very last minute is crazy,” McKeon said in an interview with The Hill last month. “If we don’t fix it, we’re causing big problems for [the industry] right now, and then we’ll cause major problems for the military in January.”
With a background in mechanical engineering, Hess has been in the aerospace industry for 33 years, taking over as president of Pratt & Whitney in 2009.
He was named vice chairman of AIA in 2011, succeeding Jim Albaugh, president and CEO of Boeing’s commercial aircraft division, for his one-year term as chairman.
The Pratt & Whitney president is no stranger to big lobbying fights, as his company, a Connecticut-based subsidiary of United Technologies Corp., was locked in an expensive, years-long battle with General Electric and Rolls-Royce over the second engine for the F-35 fighter.
Pratt & Whitney appeared to emerge victorious in December, as GE and Rolls-Royce announced they were no longer funding their alternate-engine program.
Hess downplayed the F-35 fight, saying it was just business.
“There’s no hard feelings,” he said.
While AIA did not pick sides in its
intramember fight on the F-35 second engine, the group’s views will be heard clearly in Congress on sequestration, Hess said.
“We’re a pretty effective group with a very loud voice,” he said.
The defense industry is in a more precarious position than it was during the last military drawdown in the 1990s, Hess said, as the industry has seen further consolidation. He warned there’s a risk that defense companies would be unable to ramp production back up again if the cuts are too deep.
“We have to start worrying about falling below a critical mass,” Hess said.
Thompson said he’s seen more of a united effort by defense companies in recent months, with little movement in Congress on sequestration.
Hess acknowledged his industry would likely be in the dark about sequestration’s fate until after the election, when there will be little time left for Congress to find a way out.
“I don’t think until recently the companies had begun to focus on how likely sequestration is,” Thompson said. “There’s nothing like a gun pointed at your head to focus the mind.”