Defense secretary Robert Gates announces FY 2010 defense budget
Why
Defense Secretary Robert Gates announced sweeping changes to the Pentagon budget on Monday, reflecting a greater priority towards the type of irregular warfare already seen in Iraq and Afghanistan. In a press conference, Gates said the defense department would stop buying F-22 Raptors at 187 jets, cease orders of the C-17 Globemaster at year's end, and terminate the TSAT satellite program. The agency will cancel the CSAR-X, the Air Force's combat, search and rescue helicopter program, and delay and order for new presidential helicopters. Furthermore, the Pentagon wants to reduce the number of contractors as a percentage of total staff to 26% from the current 39%, to where it ballooned after 2001. "Our goal is to hire as many as 13,000 new civil servants in fiscal 2010 to replace contractors and up to 30,000 new civil servants in place of contractors over the next five years," Gates said. The Pentagon seeks to raise its budget for the F-35 joint-strike fighter to $11.2 billion from $6.8 billion to purchase 30 jets in fiscal 2010, up from 14 this past year. Over the next five years, the agency would like to buy 513 F-35s, and ultimately have a fleet of 2,443. The Pentagon will also increase spending to improve cyberspace capabilities and to field more of the terminal high altitude area defense, or THAAD, short-to-medium range missile defense, and add six additional Aegis ships to provide ballistic missile defense. Shares of Lockheed Martin Corp. (LMT: LMT News , chart , profile , more Last: Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: , , ) , the maker of both the F-22 and F-35, saw its share price leap 8% to $72.43 on the news. Also climbing higher were shares of Northrop Grumman Corp. (NOC: NOC News , chart , profile , more Last: Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: , , ) , General Dynamic Corp. (GD: GD News , chart , profile , more Last: Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: , , ) , Raytheon Co. (RTN: RTN News , chart , profile , more Last: Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: , , ) , Boeing Co. (BA: BA News , chart , profile , more Last: Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: , , ) , and L-3 Communication (LLL: LLL News , chart , profile , more Last: Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: , , ) . "My recommendations represent the cumulative outcome of a lifetime spent in the national security arena...and lessons learned from over two years of leading this department and in particular, from our experience in Iraq and Afghanistan," Gates said during the press conference. The change in priorities wasn't necessarily to Wall Street's liking, however, with Standard & Poor's Equity Research maintaining a negative view on the defense sector. "Overall, we view defense priorities as shifting significantly from conventional war priorities to so-called irregular combat priorities," said S&P analyst Richard Tortoriello. "We believe this shift, along with the planned withdrawal of troops from Iraq, will result in declines in real defense spending over the long term." Investors have been anticipating a reduction in Pentagon spending for large weapons systems since last summer, with the Spade Defense Index (DXS) falling nearly 30% since September. On Monday, it rose 2% to 1,427. The fiscal 2010 request is a 4% climb from last year's budget at $534 billion, making it virtually flat after adjusting for inflation. Supplemental funding, which includes money for overseas fighting in Iraq and Afghanistan, was $130 billion, down from about $136 billion in 2009. The latest budget request places more focus on increasing military personnel and benefits. Plans include growing the Army by 547,400 soldiers and the Marines by 202,000. Defense spending has nearly doubled since the terrorist attacks of Sept. 11, 2001. In total, the total U.S. federal budget has grown nearly 90% since 2001 to President Barack Obama's 2010 request of $3.55 trillion.
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References:
http://www.marketwatch.com/news/story/Pentagon-set-hire-13000-new/story.aspx?guid=%7B8E42785B-0FCF-480B-8AB4-4B599B022393%7D,http://washingtonindependent.com/37391/the-defense-budget-and-the-future-of-conflict,http://www.ktka.com/news/2009/apr/06/kansas_delegation_reacts_defense_budget/,http://www.mudvillegazette.com/031805.html
