Defense Contractors on Cloud 9

The backdrop: Money. More than ever before. 

The Senate is expected to pass by a wide margin a $700-billion defense bill today. When it comes to extravagant military spending, Congress is relentlessly bipartisan, and all bickering stops, as long as the bacon gets spread to every district and state.

“The 1,215-page measure defies a number of White House objections, but Trump hasn’t threatened to veto the measure,” the Washington Post mused. “The bill helps him honor a pledge to boost military spending by tens of billions of dollars.”

So who gets this money?

It’s going to get spread around, but defense contractors are going to get a chunk of it, and they’ve been on cloud 9 all year. Their shares – fired up by plenty of saber-rattling – have mostly soared from all-time high to all-time high.

These are some of the biggest defense contractors and their shares year-to-date as of this morning:

  • Rockwell Collins (COL), to be acquired by United Technologies: $130.90, up 40.6% YTD
  • United Technologies (UTX) is gobbling up Rockwell, got beaten down 8% since July, and is the exception: $113.04, up a measly 3.1% YTD
  • Boeing (BA), after implementing a series of big layoffs in the US: $253.51, up 61% YTD
  • Northrop Grumman (NOC): $274.23, up 16% YTD
  • Orbital ATK (OA) jumped 20% this morning to $132.60, up 48% YTD
  • Raytheon (RTN) $183.06, up 26% YTD
  • Lockheed Martin (LMT) $303.74, up 19.8% YTD
  • Honeywell International (HON) $137.50, up 18.4% YTD

Orbital ATK jumped 20% this morning after the announcement that Northrop Grumman would acquire it for $134.50 a share, in a deal valued at $9.2 billion including the assumption of $1.4 billion in net debt. Orbital ATK itself is the product of an earlier merger of Orbital Sciences Corp. and the Aerospace and Defense groups of Alliant Techsystems Inc.

This deal comes after Wall Street had been clamoring for a breakup of Northrop. For Wall Street, which gets big-fat fees off these transactions, it’s either breakup or acquisition, often in cycles.

And there’s a lot of dough involved. JPMorgan Chase committed to provide a senior, unsecured bridge loan of up to $8.5 billion, according to a regulatory filing cited by Bloomberg. Northrop is being advised by bankers from Perella Weinberg Partners and by lawyers from Cravath, Swaine & Moore. Orbital is being advised by bankers from Citigroup and by lawyers from Hogan Lovells.

This follows an even bigger defense contractor deal earlier this month, when United Technologies announced that it would pay $22.75 billion for Rockwell Collins.

The acquisition of Orbital — which has about 13,000 employees, is into missile technologies, and hoists payloads into space — will expand Northrop’s missile business. Among other things, it is already building the frames for Lockheed Martin’s disastrously over-budget and problem-beset F-35 fighter and won a contract to build the new B-21 stealth bomber.

Orbital “is a leader in solid rocket propulsion,” and Northrop “is strong in sensors and networks, enabling a comprehensive ballistic missile defense solution,” gushed Jefferies analyst Howard Rubel today in a note to clients, cited by Bloomberg.

Both firms combined are now competing with Boeing for a $85-billion contract to develop the next ground-based missile interceptor system. The combined company would be among the big four defense contractors.

The corporate and Wall Street hype about it is fascinating. Here’s what Northrop CEO Wesley Bush told analysts on Monday:

“As we watch what’s happening around our globe, the rather rapid advance of some of our potential adversaries is quite concerning,”

“This issue of technological superiority for the US and our allies is a real issue. It’s something that our customers are struggling with.”

In defense contractor parlance, “our customers” is either the Pentagon or the Intelligence Community. And ultimately the taxpayers.

Consolidation in the defense sector is a great thing for defense contractors. It whittles down competition. There are only a few feeble doubts that regulators will rubberstamp the deal.

“Given that Northrop already operates in the space field, it is possible that there could be some overlapping activity or increased vertical integration that could prompt regulatory scrutiny,” said Vertical Research Partners analyst Robert Stallard in a note to clients. “We have also not had a prime contractor acquisition under the current US administration, and so this is a test case as to whether concerns over the scale of the primes is still an issue.”

This comes at a time when the US gross national debt has reached $20.2 trillion and will likely reach $21 trillion by the end of the next fiscal year, and when budgetary discipline along with more competition in the defense sector would be sorely needed. But that’s something taxpayers can only dream of.

There was nothing in Friday’s lousy economic data that would deter the Fed from further tightening, because, actually, it wasn’t that lousy. Read… What Headlines Got Wrong about Today’s Data Dump

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  100 comments for “Defense Contractors on Cloud 9

  1. cdr says:

    People love wars. End of story. This is a historically proven fact. This does not mean they are good or necessary, just that they appear to be a part of the human condition.

    To the good, there are no Alexanders or Attilas out and about anymore. We are more civilized today than during their day. We are doing better.

    To that end, I see nothing wrong with flogging (sorry about that) chickenhawks. They deserve a kick in the butt and worse for manipulating others to do what they are too cowardly to do themselves. Once the chickenhawks are under control, ending the current crop of really bad guys can be done. Then we wait for the next crop of bad guys.

    • Tom Welsh says:

      Dulce bellum inexpertis.

    • Bobber says:

      When somebody doesn’t agree with your line of thinking, you can just shoot them and call it a war. It acceptable then.

      Some people even take that approach at their workplace.

      • R2D2 says:

        Why not? Did you think just cause many people shave and wear suits, we are any different from the cavemen? Most people are too stupid, too cruel, or too evil to truly understand the hell that is called war.

        For me, all I have to do is to imagine blood and body parts of men, women, and children laying everywhere to understand that I want to have any part in any war.

        • R2D2 says:

          That was supposed to be “that I don’t want to have any part in any war.”

    • TJ Martin says:

      1) People do not love wars in the modern age . Its the blatant unrepentant greed that goes along with it that people .. or at least the people pocketing the big bucks …are so enamored with

      2) There is no ” to the good “. Fact is we are today globally as bad if not worse than any conquerer / military leader in history . The only difference being our current capabilities to annihilate entire populations countries and peoples and the fact that that reality somewhat restrains us . Suffice it to say we’ve evolved not one iota

      3) Due to the human condition which you obviously believe in there will be no end to the really bad ( dudes ) guys . Like religious cults and greed mongers and the demons in the NT take one down and another five will take his or her place . Guaranteed !

      4) As for the ‘ chickenhawks ‘ you allude to assuming you mean the leaders at the top who continually engage their populations into one war or another .. suffice it to say historically … ” Such as it has ever been … and Such will it eve be ” … due once again to that human condition you reference .

      e.g. ” There is nothing new under the sun ” Nor will anything ever change

      • Dave says:

        Totally agree with you!

      • d says:

        Read it.

        Then you might learn what one is.

      • Dan Romig says:

        Style Council’s ‘Money-Go-Round’:
        The good and righteous sing their hymns
        The crimpoline dresses who have no sins
        Christians by day, killers in war
        The hypocrites know what they’re fighting for
        Killing for peace, freedom and truth
        But they’re too old to go so they send the youth

        Wolf nailed it with this observation, “When it comes to extravagant military spending, Congress is relentlessly bipartisan, and all bickering stops, as long as the bacon gets spread to every district and state.”

    • Joan of Arc says:

      “The 1,215-page measure defies a number of White House objections…”

      For the sake of memorization why didn’t they round the number of pages off to an even 1300. I’m sure that it wasn’t for a lack of words.

      At first I thought that Orbital made my Orbit sprinkler system parts.

      • Ricardo says:

        Orbital are an English electronic dance music duo from Sevenoaks, Kent, consisting of brothers Phil and Paul Hartnoll. The band’s name is taken from Greater London’s orbital motorway, the M25, which was central to the early rave scene and party network in the South East during the early days of acid house. In addition, the cover art on three of their albums shows stylised atomic orbitals. Orbital have been both critically and commercially successful and known particularly for their element of live improvisation during shows, a rarity among techno acts. They were initially influenced by early electro and punk rock.

        • alex in san jose AKA digital Detroit says:

          Interesting! I’d heard the name for ages and thought it referred to “orbitals” in chemistry, basically in modern chem, even first-semester stuff, you gotta learn some atomic physics stuff so there are “orbitals” which are the orbits of electrons … Nope it’s not Mr. Wizard chemistry they’re teaching kids now.

          Me, I like a little Atom Delta once in a while …

    • two beers says:

      Bull$h$t. People don’t love war, the rulers love war — the emperors, the imperialists, the industrialists. War may have preceded capitalism, but the two go together like cheese and crackers.

      • cdr says:

        Yet people keep voting for rulers (chickenhawks and an insane Senator) who love war.

        • TJ Martin says:

          PS; ” Chickenhawk ” Thanks for introducing me to the alternative definition of the word I was previously unfamiliar with . Thats a keeper … and all too relevant in this era we’re living in

          For anyone else as clueless as I was ..

        • Ricardo says:

          Chickenhawk: That’s the name of our rooster. So far his three hens have 17 baby chickens running around our property.

        • John says:

          Do tell, which candidate isn’t for war? I sort of thought DT wasn’t, but then he flipped on that too. Do I get to take my vote back?
          I hate smart asses who always say you deserve what you voted for. Because the truth is, that’s seldom the case. And you sir are one of those.

    • walter map says:

      “We are more civilized today than during their day.”

      And you posted that with a straight face, didn’t you?

    • interesting says:

      I dunno. Based on the insanity all around us i’m starting to think that war was necessary. It’s the only way to conduct a stealth eugenics program.

      The most incapable among a population is put up front so that they can’t breed……there’s a reason for the term “cannon fodder”

      Do you think we’d be living in this liberal insanity had we culled the heard with a nice fat shooting war as opposed to the video game wars of late?

      • intosh says:

        I wouldn’t say this man-made natural selection that is war is a necessity. But it is, as terribly wrong as it may sound, a very good motivation channel for the masses to rally around a common purpose and advance. It gives the masses, who collectively lack a sense of purpose (at some point, consumption is no longer a strong enough motivation), a very compelling reason for being and for working together. Fighting for “survival” against a deadly enemy is the ultimate purpose that one can inject into someone else’s mind to drive him.

        • Cynic says:

          War has always been a poor form of ‘natural selection’:.

          Most fatalities among soldiers in the past were caused by starvation, dysentery, epidemics, and little wounds turning gangrenous -this killed the best and the bravest as easily as anyone else.

          The British general Marlborough lots his whole personal retinue and even his hunting dogs to disease on one campaign.

          Army doctors killed many more than they saved up to the 20th century – applying dumb theories of infection, tight bandaging, etc, derived from the Ancient Greeks.

    • alex in san jose AKA digital Detroit says:

      cdr – Chickenhawks love wars. “Let’s you and him fight” they say to the working class.

      There are Alexanders and Attilas out there all right. They’re working in Asia and Africa and so on. I read a few days ago that there are 8 genocides going on right now. Right. Now. Just because it’s not happening in Europe at present doesn’t mean it’s not happening.

      It’s kind of interesting, on PBS many years ago they did a show where they traced Alexander’s route of conquest; it was quite interesting. They stopped at various places, went into the culture and cuisine, talked about how it was for Alexander’s men, and so on. What’s funny is when they got to the edge of the conquered area and got to where he’d petered out, and suddenly the name “Alexander” to the local people was like we’d think of “Hitler”.

      This is hilarious to me because I’m actually named after the guy. And many a time I’ve gone into a Middle-Eastern restaurant and ordered an “Iskander” which was supposedly Alexander’s favorite thing, the General Tso of the ancient world, it’s meat on top of hummus. And I’ve recently found out I’m tan because I’m literally related to Attila’s people, by way of the Lipka Tatars, and that’s hilarious because long ago my dentist had a guy who emptied the waste baskets and cleaned up around his place, named Attila, a mousy little guy who looked like he weighed 100 lbs soaking wet.

      • Cynic says:

        Known to this day in Iran as ‘Alexander the Devil’, not ‘the Great’.

        Rightly so.

        The book ‘The Madness of Alexander the Great’ is well worth reading, pulling together a lot to create a truly awful picture of the man.

    • intosh says:

      “manipulating others to do what they are too cowardly to do themselves.”

      The masters and the puppets. All wars are started by a handful of individuals who happened to not agree on something or who want something from someone else or who made mistakes and are trying to “repair” those mistakes (“repair” used very liberally here, as it could mean finding a scapegoat or diverting attention to said mistake and culprit). And there are millions of people willing to go kill and die for those people. That’s insane. Unless some nation invades yours, go fighting “for your country” is bullshit that unfortunately so many brainwashed citizens believe in. If these people actually understood that many of the problems were actually created by their own leadership, not by foreign agents, I wonder if they would still agree to go commit atrocities and die.

  2. Begbie says:

    Why do they call it “defense” spending. We start them all

    • TJ Martin says:

      A minor pedantic correction if I may . We started … most of them . Not all . But the genuine fact is without going into great detail not one solitary military conflict since WWI has been in any way shape or form a ‘ defensive ‘ action . Seeing as how none of them have defended much of anything having to do with us ( US )

      Fact is .. if anything those actions post WWII have been to our great detriment .

      • TJ Martin says:

        … should of read WWII not WWI … mea culpa

      • Wolfbay says:

        Eisenhower warned about the military industrial complex in the 50s. By ignoring the constitution and giving the president war making power and by going from a citizens army to a mercenary force we can now have endless wars. I’m bullish on defense stocks.

        • Ed says:

          Congress should use Medicare and when the White House and Congress engage in military action, each Congressional Rep should list his children and nieces and nephews and commit one of them to active duty.

          Old idea, but it sure would fix up two issues in Washington.

        • polecat says:

          Ahem ! .. Military Industrial .. ‘cough’.. CONGRESSIONAL .. ‘cough’ Complex ……

        • alex in san jose AKA digital Detroit says:

          Ed – the ruling class used to regularly go to war, right along with the proles. Hell, rich kid extraordinaire JFK went off to war, got his PT boat sunk out from under him and he and his guys should have died on a little speck of an island except JFK was a good swimmer and swam miles out into shipping lanes and ultimately to another island where he gave a friggin’ coconut with a message carved into it to an illiterate island chief to take to someone who could read it.

          Even Bush Sr. went out and flew a torpedo bomber in that war, got shot down, made sure he delivered the torpedo to the Japanese ship he was after and then put it down in the drink. He was in the water for hours before being picked up.

          The social obligation that you put your ass on the line if your nation is going to go to war seems to be gone now, maybe now that we’re using a mercenary army.

          And before anyone says something like “but but but … low military pay…” it’s NOT low. Not to a normal person. Imagine making $30k a year while having housing, food, medical, hell travel and fun at the shooting range, all paid for too. This is what an E1 or E2 gets now. Literally “Zero” in Beetle Baily would get this.

        • Smingles says:


          “And before anyone says something like “but but but … low military pay…” it’s NOT low.”


          The Pentagon publishes the average armed forces pay… it’s right around $100,000 with benefits.

          Read that again: the average person in the armed forces makes around $100,000 with benefits.

          In my city, the housing subsidy is about $2,500/month for a new recruit who is single with no children. This is enough to live in either a nice 2-br apartment, or a luxury 1-br.

          Base pay may be low, but when the rest of your expenses are essentially paid for, that goes straight to the bank. Doing 4-years will put you financially farther ahead of even the most frugal of your peers.

        • alex in san jose AKA digital Detroit says:

          Smingles – WTF???? In my day if you were single and below E-7, you lived in barracks. Plenty of guys would sneak out and rent a room on the sly, just to get away from the base for a bit, but there sure as hell wasn’t a housing allowance.

          If you were an “orficer” you lived in the BOQ; the Batchelor Officier’s Quarters.

          The general sentiment was that if the Army wanted you to have a wife, they’d have issued you one.

          And they’re putting their patches on now with Velcro! I swear to God it’s the Flannel Board Army, what’s next, Colorforms used in the field when they can’t use PowerPoint?

        • d says:

          Eisenhower Bitching about the MIC at the end of his terms was Hypocritical. And self serving.

          He and they, set up two of the greatest Post WW II MIC boondoggles, Vietnam, and the little hand grenade he left Kennedy “The bay of pig’s invasion” which almost started WWIII.

          An act of gross American imperialism from a POTUS who lambasted and threatened England and france over their attempting to exercise their wrights, over their property, the Suez canal. Which Egypt had nationalised under very unfair terms and placed in jeopardy, due to Egyptian aggression toward Israel..

          Kennedy wanted OUT of Vietnam, he was making moves to do so.

          The MIC (Bell helicopters in Particular) needed IN to Vietnam, Badly.

        • Lee says:

          “The Pentagon publishes the average armed forces pay… it’s right around $100,000 with benefits.”

          Publish the figures and the source.

          So let’s see an E-1 now makes US$1599 a month basic pay. That’s just over US$19,000 a year. (Way different that that imaginary $30,000 a year figure given and far far away from that $100k too.)

          Enlisted members get at BAS of US$368.29 a month for which they get for ‘food’. IF living on base on rations they get no extra pay and that BAS is taken away.

          If forced to eat a a military facility they get charged US$10.45 a day DMR or a full rate of $13.85 full a day of full meals.

          (Officers get US$250 or so a month)

          Enlisted and Officers also get a housing allowance based on the location of their assignment. If living on a military facility they forego that pay.

          That means usually sharing a room for lower ranks or in certain areas living in a tent or ‘under the stars’ (Not so much anymore.)

          If not living on a military facility rates vary greatly depending on where your assignment is.

          Looking at the rates today, I see that the BAQ for my rank as a 2nd LT at my first duty assignment is now US$1764 a month. Years ago my BAQ was around US$200 a month which didn’t cover the cost of housing.

          (I’d have to dig out my first payslip to to see the exact figure. I kept it as it was so low that I don’t anybody would believe how bad the pay was!!).

          These two pays are ‘tax free’ so there is an additional benefit there.

          As an E-1 I you would not be entitled to any of the others pays for service because of your ‘newness’ in the system.

          Given that level of pay, most E-1’s would still probably qualify for SNAP or what we used to call Food Stamps.

          And by the way my basic pay as an officer on AD was US$827 a month to start. So people are now getting twice as much BAQ as my basic pay. Starting pay is just under 4 times what I was getting back then.

          Finally, if you all think that going into the military is such a great deal, you haven’t served.

          I’m sure that you’d really enjoy having your entire life totally controlled 24 hours a day, putting up with the long hours for no extra pay (18 hour days are common), extra duty, endless BS, and of course the physical training which I doubt that many of you could do.

  3. TJ Martin says:

    So great . Now the already overwhelming majority of my tax dollar already going to what has become an irrelevant and ineffective military ( the leadership not the boots on the ground ) paying for ever more complicated albeit less effective technology accomplishing nothing other than filling the back pockets of politicians and the arms manufacturing corporations and shareholders ..

    .. is about to be increased once again … exponentially … and to no genuine purpose .

    • Maximus Minimus says:

      Relax. The Japanese and Chinese are paying for it in return for devalued paper. Devious.

      • Ed says:

        Yes, but it IS eventually going to devalue our paper and power. That will affect our children and grandchildren. Historically, military overreach has been punished. Really, bad treatment and disregard for a country’s peasantry and yeomanry, even worse.

        We are doing both, noticeably though maybe not terminally.

        • Realist says:

          As all empires, the American empire will decline and the sihns around augur that the decline is well under way. Overstretched and overconfident military, an economy that can’t pay for the military and civil infastructure, an decadent ruling class, a government in disarray due to internal feuds etc ad nauseam. Rome’s heyday did last longer then the peak of the US.

        • George McDuffee says:

          To rip off an aphorism “history does not repeat itself, but it does echo quite loudly from time to time.”

          IMNSHO the current socioeconomic/cultural problems in the U. S. are more analogous to what toppled the nominally Roman Republic, and introduced the imperial era.

          This change was not a smooth transition but needed two back to back civil wars, included the massacre of large numbers of the Republican Roman Senate, and the extinction of many of the old, politically power Roman [patrician] families and the confiscation of their assets, by the thugs currently in power, before the Principate was established.

          Our socioeconomic/political elites are playing with fire. While ONE of them will indeed emerge as the new American emperor, the cost in blood and money will be horrific for the American people, who will pay dearly, per the Vietnam catchphrase “When the elephants fight the grass gets trampled,” but the biggest losers will be the the elites on the many losing sides of this “Battle Royal.”

          To get a feel for what occurred, watch the series “ROME.” While fiction, it seems to mirror actual events. Available on Amazon Prime. Well worth the time to watch.

  4. TJ Martin says:

    Here’s my favorite quotation that is blatant propaganda verging on outright bs ;

    “As we watch what’s happening around our globe, the rather rapid advance of some of our potential adversaries is quite concerning,”

    “This issue of technological superiority for the US and our allies is a real issue. It’s something that our customers are struggling with.”

    Gee Mr (Wesley) Bush .. if you were genuinely observing the current state of the world around us you’d know our technical military capabilities already exceed that of every country across the globe . Fact is other than boots on the ground we’re more than double that of China Russia N. Korea combined . Double ? Try more like .. triple .

    But hey .. lets waste even more tax payers money on irrelevant technology that does not work .. what the hell … why take care of the needs of the country you claim to love when tis so much easier to profit from it .

    • intosh says:

      It is often shown that the US’ military spending is equal to or more than the rest of the world’s spending combined.

  5. Maximus Minimus says:

    The military industrial complex has quite shrewdly spread their facilities and jobs across many jurisdictions to gain additional political support.
    How will consolidation help maintain these overlapping and redundant facilities? These are de facto coveted government jobs shielded from outsourcing. The defence contracts amount to a hidden industrial subsidy.

    • TJ Martin says:

      Hidden ? Whats ‘ hidden ‘ about it ? One look at how the tax dollar pie is divided leaves that particular subsidy anything but … ‘ hidden ‘

      The subsidizing of the very drugs we’re supposedly at war with ? Now thats … ‘ hidden ‘


    • zoomev says:

      My friends in LMCO always call it white collar welfare.

  6. Tom T says:

    Homo Sapiens “wise apes” what? …….

  7. walter map says:

    The Battle Hymn of the Republic (Brought Down to Date), Mark Twain (1900),_Updated

    War is a Racket, General Smedley Butler, USMC (1935)

    Two-Thirds On Defense

    “BEA arrives at the ratio of 68 cents for defense as against only 32 cents on everything else.”

    Hope it’s worth it to you.

    • Dogstar says:

      Walter Map- your unapologetic bashing of Iraq war supporters, among many others, on Salon during the Bush years (along with your laser-focused, logical, arguments) encouraged me to speak out with confidence against so much BS. Nothing was more entertaining to me than reading your brutal take-downs of some of the more ignorant commenters, leaving previously boisterous blowhards more or less speechless. Your approach and your knowledge really opened my mind. I haven’t looked at the MSM the same since. You were like a literary tab of acid. Much appreciated.

      • walter map says:

        You’re very welcome.

        I miss scorpio, and pat, and vikingbobby on the old NYT forums, but that was a dangerous place. I haven’t had a single death threat posting here. Go figure.

        • d says:

          Threats indicate intent, and are admissible in evidence.

          Their existence makes it hard to talk murder I, down to man II.

          Many peopel here have more brain’s than in most other places.

    • alex in san jose AKA digital Detroit says:

      Walter Map – I really like that old tune, and right now am trying a little foray into singing rather than playing the trumpet. It’s just kind of hard to get “By Night I’m A Junk-Food Junkie” across on the trumpet; you kind of need the words. I love that Twain “updated” it but the original is pretty dank too.

      I’m actually off to a singing teacher in a couple of days and that in these dark Depression times I’m willing to pay $35 a lesson says something about how serious I am.

      Keep in mind the book “The Grapes Of Wrath” is titled after a line in the original.

      Very good links there.

  8. Jarhead John says:

    The United States has the highest military budget of any nation in modern history and yet we are being outclassed by the Russians….Read up on the T-50 fighter jet…The Armata tank…Nothing we currently have in service can match their S-400 and S-500 surface to air systems…How about Russian hypersonic anti-ship missles…Meanwhile, American Aegis-class tin cans don’t know how to safely navigate the the globe without suffering ship to ship collisions on a seemingly routine basis….

    • George McDuffee says:

      RE: Meanwhile, American Aegis-class tin cans don’t know how to safely navigate the the globe without suffering ship to ship collisions on a seemingly routine basis….
      We seem to have largely stepped on our own lolly here.
      IIUC the rigorous 1 year surface warfare/ship handling course which was required of all new naval officers before they were assigned to sea duty was eliminated in a return to the much cheaper “good old days” method of OJT [On the Job Training] where the new officer was given a stack of instructional CDs they were to watch on their [non existent] free time while serving as a ships jr. officer. The senior officers were to “mentor” them, but they were also overworked.

      We are now seeing the result of trying to get by on the cheap by skimping on required education/ enculturation/training as the jr officers become senior/bridge officers.

      Several anecdotes indicate another major contributing factor is chronic sleep deprivation of the all the crew because of the archaic watch scheduling system, and a fixation on “keeping them busy.” We must act to impose a rational shift rotation system, and minimum uninterrupted off-duty/sleep time analogous to that required for truck drivers and airline crews.

    • d says:

      Highest Declared budget.

      Add chinas paramilitaries, and undeclared spending, and the US is no longer # 1 Spender.

      and hasnet been for sometime.

      The thing with the US is, you can see so much unlike china Etal

  9. gorbachov says:

    I believe we should lower so called defence spending,

    until something happens, then I want them to spend unlimited amounts.

    It would be easier if we could have some confidence in our leadership.

    • polecat says:

      In all seriousness … What ‘leadership’ … ??

      We have none .. only people who never evolved much beyond the 5th grade domain of the schoolyard bully !

  10. GSH says:

    You can’t argue with the financial results. The MIC (e.g. XAR) is returning 2x of S&P 500 year to date. Up 300% since 2011.

  11. tony says:

    Watch pbs they just started i believe an 18 part show all about vietnam from it’s start with the french first show was great it will give you a good idea why creeps in office love war.

    • Paulo says:

      I was just going to post this comment, Tony, but you beat me to it!!. Excellent series and well worth the time.

      I like How Don Henley puts it as an add-on to Ike’s famous MIC quote. It seems apt for the times.

      “This is the end of the innocence
      O’ beautiful, for spacious skies
      But now those skies are threatening
      They’re beating plowshares into swords

      For this tired old man that we elected king
      Armchair warriors often fail
      And we’ve been poisoned by these fairy tales
      The lawyers clean up all details”

  12. Lee says:

    Nice topic.

    So, I just have to ask the question about all the people that have posted:

    How many of you have actually served in the military?

    And of those how many have actually spent time in the field, armed, and down in the dirt?

    Almost every time I see some General in the news the first thing I do is check their military career to see their assignments.

    Mostly likely, they will have never had that ‘down in the dirt’ experience.

    And if they have some type of ‘service’ in a war zone most likely is was spent in an office, in a tent, or on a ship directing the action rather than doing it.

    So what about all those new fancy ribbons and awards sprouting like some fungus you see on many high ranking officers you say?

    In particular all those people with that fancy new “Combat Action Badge”………..

    Oh, you can get one, but the requirements may surprise you:

    “There is no specific requirement for the enemy hostile contact to be direct.”

    How about that? You can get a nifty new badge for ‘combat’, but you don’t actually have to be in ‘combat’!!

    Or that “Global War on Terrorism” medal?

    Sounds impressive doesn’t, it? Makes you think that the person that gets one is out in trenches, shooting up some bad guy or out on patrol running through the jungle, or out in the field by himself…………

    Nah, you can get one by just being in the military sitting in a classroom or studying at one of the military academies. Never even have to get your hands dirty to get one.

    And when were these nifty medals started?


    Funny about that date.

    And they are not retroactive.

    Sounds to me like the US military has turned into the Boy Scouts with fancy merit badges.

    Ever wonder why the US military is in the shape it is now with the leadership it has?

    • intosh says:

      Nobody should be spending time in the field, armed, and down in the dirt, except the leaders who actually start wars.

      • Lee says:


        But it was so much ‘fun’: getting back to ‘basics’, ‘in tune’ with nature, living ‘under the stars’, and all that and getting paid peanuts to do it too!!!!

  13. Steve M says:

    Here’s a little story from my past in federal govt contracting land. I hope it’s amusing and contributes positively to thus discussion.

    To start, companies doing substantial business with the federal govt eventually make it their exclusive business. Getting a federal contract is  painstakingly complicated, so it takes focus away from any commercial enterprise you may have. But if you’re good at it, it’s highly lucrative.

    Boeing, Microsoft and a few others are the exceptions. When you look at Lockheed, Northrop, SAIC, etc., govt contracts are all they do.

    The federal govt puts out about $500 billion in contracts annually. Defense spending dominates, accounting for about 75 percent in dollar terms of all contracts. Mind you, I’d see innocuous studies being bid by agencies like the FDA, EPA and the Dept of Ed., and I’d see DOD riders on them, meaning the Pentagon or other national security agency would pay for part of the study in order to get the info.

    At the time (2010 and 2011), a group of smaller contractors were trying to organize because of the squeeze coming from the big guys, who were pushing hard to win entire contracts instead of just segments. If a contract required a competency the largest contractors didn’t have, they’d just open up a department or acquire some company that did.

    Call it industry consolidation by attrition.

    So the group was appealing to the feds, especially the SBA, for help. Specifically, they were asking for set asides, like the feds do for minority/female owned businesses and for small businesses. And they hired me as a consultant to help set up their communications: amongst themselves, with the govt and with the public.

    Problem was that the SBA defined a small business as an enterprise making $7 million a year or less. So the govt would help you get in, you’d start winning contracts and then – Boom! – you were on your own to compete against Raytheon and Lockheed.

    So they were trying to get the SBA to redefine what constituted a “small” business on the federal contracting side.

    I sat in on a meeting where the group’s brightest minds were trying to create new criteria for what to consider small. They looked at employee numbers, total contract wins, etc.

    Then someone suggested that a “small” business be defined as an operation making a fraction of what the big boys were hauling in. They ultimately decided a formula to define “small” as a company earning revenues that were two percent or less than the average earnings of the top ten federal contractors.

    It was the magic bullet and the assembled group were falling over themselves to congratulate each other on the genius of their idea. I mean, two percent of anything is small. Who could argue against it?

    Now I had the numbers myself and the top ten had averaged about $18 billion between them in 2009.

    And a hand went up in the crowd and the moderator acknowledged her.

    “I think we’re going to have a tough time convincing the American people that a company making $300 million a year is small,” she said.

    A hushed silence hung over the group of about 50 people that seemed to to last for a minute. Then the moderator reached a quick decision and acted decisive.

    We broke for lunch early.

    • harvey says:

      Hey Steve, I work for one of those small DOD guys, we just got acquired by a foreign company headquartered in England that has a even smaller DoD contracting department in the States. The new entity will have about 100 employees and doing about 15 mil a year for the DOD. It looks like even foreign companies are eyeing for the 700 billion pie that is handed out this year. Engineers are hard to come by too since the Dod contractors can not hire foreign nationals and most requires secret clearances as well.

  14. Mike F. says:

    How much longer until the reality of 20+ trillion dollars of debt sink in?

    If the US can’t pay it’s current liabilities with the actual money it takes it, does that not mean that our nation is essentially bankrupt. How much longer until our banker (creditors) pull the plug and say enough is enough?

    We spend more than we take in, and fools invest in UST’s thinking that it is backed with “full faith and credit” of the US? What does that mean?

    If a business can’t pay its bills on the profits it makes, than cuts need to be made on the spending side to compensate for that. Does this not apply to the US?

    How much longer can the US play this game until enough confidence is eroded in the US Dollar that trillions of US Dollars and Treasuries are sold by overseas holders?

    Then the US dollars suddenly wash back ashore onto US soil for consumers to be crushed by a crashing US dollar value, leading to hyperinflation for all goods produced overseas.

    It’s all about the confidence in a funny looking piece of printed cotton linen, that keeps the world from losing it overnight.

    That time is coming soon. What will be the trigger?

    • John says:

      Mike, “full faith and credit” means faith that the gov can force its subjects to pay any bill. Credit means that gov gets any credit they desire due to the faith part.
      When your real estate taxes double and triple and there’s not a damn thing you can do about it, except pay, then maybe you will realize what I’m telling you.
      When any country in the world refuses to play ball by the gov standards they find out also.
      So now you see how it works.

  15. Raymond C Rogers says:

    I don’t know what’s worse, the suggestive tone of the article that suggests that defense spending is one of the most damaging aspects of the national debt or the total lack of geostrategic ignorance in the comments section.

    1. Baseline defense spending is about 3% of GDP. Defense spending is not the 800lb gorilla in the room. Your may want to refer to all of these so called “rights” like healthcare not enumerated in the Constitution that are fiscally destroying text country.

    2. There is no other United States with a powerful military that will come to the rescue of the current United States if we were to lose a number of forces to the first strike. Germany is a defensive welfare state with defense spending at 1%. The Germans have big mouths with regards to the Russians, but where were they with the Russians entering the Ukraine. As much as they mouth off about European unity, they do nothing until they personally are threatened. They figure let the Poles and everyone east pay for defense.

    3. While Europe and Russia are evenly matched in men under arms that includes trained reserves, Russia has more twice the battle tanks than the EU combined. It has substantially more artillery, especially in the self-propelled arena with more than twice as many vehicles. The EU does has more afvs, but given the national and language barriers, combined with need to hold reserves to cover other strategic vunerabilities, you would not see this offset in a conflict.

    The EU does has an advantage in terms air power, if the ground infrastructure was in to allow for such (highly improbable to the numbers involved). But the problems lie in cost for further production. Euro fighter costs exceed those of the SU and Mig line by more than double.

    Russia also has a considerable advantage in both oil production and strategic reserves, the EU a vunerabilty. By way for those of you who want to claim Russian equiptment is inferior, don’t pester me with export variants not employed sufficiently by third world nations. And I ask what did the Tiger and Panther tanks of the Third Reich do to stop the T-35/85?

    Don’t take my word for it. NATO says just as much if not more. In the latest analysis Russia could crush Europe in 60 hours. I imagine it would take longer, although the Europeans being as weak-minded as they are, have already been invaded through their own immigration policies.

    4. China is embarking on a massive naval expansion. They will have the capability to shut down major trading lanes. What do you people propose, that we enact a policy like that of the Europeans- hope. Sorry, but in a decade or so, European “carriers” could only be nuisance to a power like China. Here once again , the United States is expected to keep the trading lanes open. Oh, and by the way, China has already demonstrated the effectiveness of economic war with regards to SK and THAAD. With a European mentality, they could easily keep the rest of the world from trading with their neighbors as well.

    So before people want to pretend they know know more than they do about the geostrategic needs of the US, do a little research.

    • Raymond C Rogers says:

      That should have been the T-34/85. I wish we had an edit button here as the timeout issues I get press me to post or lose the effort.

      • George McDuffee says:

        RE: I wish we had an edit button here as the timeout issues I get press me to post or lose the effort.
        Compose/edit in a word processor, and then cut/paste to web page. For free open source wp program that is at least as good as M$ Word goto

    • Wolf Richter says:

      Just in case you don’t know: in 2016, US defense expenditures were bigger than the expenditures of the next 8 countries COMBINED!

      Number 2 was China, and US expenditures were nearly three times as big.

      • MD says:

        Indeed; truly an armed madhouse.

        It really is ‘last days of Rome’ stuff.

        Trump is your Nero.

        As Jack Ma has pointed out, if the USA had spent all the money it’s wasted on pointless, perpetual, unwinnable wars in the Middle East on its own internal infrastructure, then it would be in a position to maintain its global preeminence.

        Not that the Chinese are bothered – they’re loving it – by NOT getting involved in any of these pointless conflicts, staying out of other people’s problems, and investing massively in its own infrastructure (Stalinist 5 year plans proving very useful rather than leaving everything to the ‘markets’), they’ve ensured that within 20 years’ time our grandkids will be learning Mandarin in order to get one of the low-pay service jobs the Chinese will be outsourcing to us…

      • wkevinw says:

        As a mostly Republican/Conservative/Traditionalist/Libertarian, the military BS in the US is ridiculous. The war for profit idiots are definitely unethical- as if that needed to be said.

        The US could easily cut back on its foreign base commitments, arm and train the countries it currently basically protects (as in almost the whole “free world”), and cut defense budget a lot. AND the world would be MORE peaceful.

        The Dems, like Hillary, are among the worst with this stuff.

        The dirty little secret is the countries we do protect like it the way it is too- they don’t have to pay for it financially or politically. If something goes wrong they can blame the ugly Americans.


      • d says:

        3 x chinas declared.

        china has HUGE multiple undeclared paramilitaries. That nearly triple the official military manpower figures.

        • Wolf Richter says:

          Similar in the US. The US doesn’t include in its defense budget a number of items, including the nuclear program which is in the budget of the Department of Energy, the war appropriations, which are separate, the Veterans Administration, which is separate, part of the intelligence budget (part of it black, part of it is in Homeland Security), etc.

      • Raymond C Rogers says:

        I’m aware of this. But it’s still a small perentage of GDP. Don’t worry though, non-discretionary spending will be so large in decades to come that we won’t be able to afford any military spending.

        And if the Chinese and the Russians are on the move now, wait until we reach defense spending equivalent to Germany’s 1%.

        By the way salaries make up a quarter of DOD’s request. Operations and maintenance about half. Procurement, R&D, construction, and everything else the last quarter. Procurement was down about 7%.

        I’d suggest those who want substandard equiptment be the first in the front lines. I’ve been in aluminum-bodied Humvees that carried sandbags and last minute scrap metal modifications. The only reason I’m alive is luck and improper timing of those setting off bombs with cell phones. Others were not so lucky.

        This is not to say programs should not be scrutinized, but if this country can afford “free” everything to people who don’t even belong here, then it certainly isnt much to ask that those on the front lines have a fighting chance.

    • MD says:

      Yes that’s right Roger:

      EVERYONE’S OUT TO GET YOU, and those horrible nasty Russkis can’t wait to plow through Europe in their battle tanks. And of course being the world’s largest exporter, the Chinese are DEFINITELY going to be shutting down trading routes.

      At least that’s true in the detached dream world that’s been created for you to live in, so that all your tax revenue is handed over to military contractors who can laugh their way to the bank.

      Consult Ike Eisenhower’s TV address for further reference. Or Orwell’s 1984 – because trawling the internet to find articles that tell you what you want to hear does NOT constitute ‘research’…

      • Raymond C Rogers says:

        You can quit with the strawman argument. I never suggested as much. In fact I said we were paying for the security of everyone else.

        I’m sure you were one of those who thought the big bad Russkis caused Hillary to lose, yet are headed by a peaceful regime. If you had any clue in the world, and knew anything about Putin, you’d know he misses the former glorious USSR. He is on record as saying that the old USSR was cumbersome and encompassed unproductive regions, but he hints that he would not be saddened to obtain those areas beneficial to Russia.

        And if your memory is short, he has basically anexed parts of Georgia and the Ukraine, and has recently held military exercises that entail nearly 100,000 troops. This is far larger than even Nato exercises. I’m sure those 14,000+ tanks are just giant confetti guns. The US by the way has in the 8k-9k range, just to give you some numerical comparative value.

        The Chinese will be transitioning to a economy based on internal consumption, so there’s that. And when a country is able to shut down trading lanes, they choose who gets punished.

        I’m very aware of the MI complex, but what I’m a dressing is a fallacy that if we just spend less on defense, a major spending issue will be solved. That and the fallacy that we won’t have our interests on the world threatened by others.

        • intosh says:

          The US is ranked #1 in internal consumption and #2 in exports. So both not necessarily mutually exclusive.

          China is going to “shut down” trading routes just like the US has been doing with its naval presence everywhere around the globe.

          But yeah, I ignored the American Exceptionalism there…

    • intosh says:

      You forgot Iran, the Muslims and the Mexicans and Doctor Manhattan.

    • Cynic says:

      There is no danger of a Russian invasion of Western or even Eastern Europe – all justifications for defence expenditure based on that premise are mere propaganda..

      The Russians can get everything they want geopolitically with patience, not guns.

      Americans have never taken losses, both military and civilian, nor damage to infrastructure as the Russians did in the 20th century: they are nervous and traumatised people, and military action is not a popular option among them -Putin knows this.

      The West is trying to break up the Russian Federation, and is to all intents and purposes the aggressor, while staging manoeuvres to show how it can ‘stand up to Putin’. Hilarious.

      With all due respect to American war dead – I live by one of the great cemeteries in Europe – the US got off scot-free in the 20th century,and in the 21st century so far.

      This should be borne in mind.

      • Raymond C Rogers says:

        No danger in Eastern Europe? Yeah, there is this place called the Ukraine where Russian troops recently entered. It was not only Ukrainian sepratists, but Russian troops in the country. You can find the YouTube of Russian equiptment being brought in by rail. By the way these large scale movements during previous Russian exercises allowed Russia to shuffle troops around to stage for later actions.

        Are going to suggest the Russians got the Crimea and Georgia through patience?

        And your not be truthful in trying to portray Russia as a simple defender, just ask the Fins or the Poles. Ask Latvia or Lithuania about that one? Before Romania joined Germany, the soviets were demanding territory from Romania. The fact that the soviets were not more aggressive is covered by the fact that Russia had killed all of its senior generals, were embarrassed in Finland, and had not ramped up industrialization efforts sufficienly. And I’m not even going into Russian annexation post-WWII, nor Russian expansion in SE Asia.

        If you want to talk about exercises, go ahead compare Russian numbers vs Nato numbers. As I mentioned before, Russia has used these exercises to position troops for later actions.

        The Americans got off easy? Tell the family members of those lost loved ones America got off easy, or look at the expenditures of the war. Besides American forces, supplies from the United States went a long way to sustain the UK and bolster the USSR. The fact that the Germany was wary of Japan attacking the US, was simply a matter of not wanting the fighting yet another country. So I’m suppose to hate the fact that history unfolded as it did because Russia shared a border with Germany, and not the US? By the way who led the fight against the North Koreans, lost the lions share in Vietnam, dealt with Milosovic in the former Yugoslavia, and defended Kuwait from Iraq.

        Speaking of Kuwait, you would have fit in well with the CIA at the time. They said Saddam would not invade, they would just use those massive forces at the border as leverage. You saw how accurate that turned out.

  16. George McDuffee says:

    Question to the group: why not spend the part of the military budget that is right wing acceptable economic “pump priming” on infrastructure replacement/maintenance/up-grade?

    Another YouTube video on war as an economic stimulus as advocated by Junior Bush.

    • MD says:

      Because George that’s horrible, nasty ‘socialism’ – and we don’t do that.

      Well, we do – but only when it benefits the wealthy, not the commons.

      The way people in the USA hand over a VAST amount of their tax money to military contractors with a smile on their face, but have been brainwashed into, for example, equating universal state healthcare with something morally equitable with paedophhilia, is quite something for the rest of the world to behold.

      An amazing feat of propaganda.

    • Raymond C Rogers says:

      Your post embodies a misconception that all “right wing” (what does that even mean?) People support yet another massive infastructure plan. Didn’t we already have one of those?

      By the way, the dems and the repubs like these large spending bills. They speak as if we dont have numerous layers of infrastructure spending.

  17. mean chicken says:

    Defense contractors represent the last vestiges of US industry. Pretty sad commentary this could’ve been changed but wasn’t.

  18. michael Engel says:

    “Fire & Fury” NK have completed their ballistic missiles test.
    US citizens, especially in the west, can return to tranquility.
    The threats are not from NK or China or Putistan.
    The threats to US are coming from within.
    RTN & LMT expensive ordnance will not be able to shoot them down.
    We witness sign of disintegration within this country every day, coast to coast.
    I will not be surprised that it will start BEFORE Nov 2020 election.
    The fault line, the earthquake, will be a California independent referendum.
    Internal volatility, in the next 4 years, will increase.
    The melt down, due to the climate change in this country, will happen,
    in the mid to late 2020’s.
    When James Polk will get a heart attack in his grave, outside forces will finish the job.

    • Wolf Richter says:

      Concerning your point on the “California independent referendum.”

      Look, we have referendums at every election in Cali, at the city level and at the state level. Sometimes there are dozens on the ballot. We call them “propositions.” So there could be an “independence” proposition on the ballot some day. But “independence” in California is a joke. We laugh about it… It’s silly. Sure there are some folks that take it seriously, just like there are folks that want to split Cali into five different states, or whatever. California generates a lot of crazy talk that is part of what we laugh about. But “independence” for California is not something you should worry about :-)

  19. Nicko2 says:

    I work in international development, the poor stepchild of defence contracting. The glory days of WoT have returned. $1500 day base salary, all benefits, tax free. Can’t beat that.

  20. Rocketshoe says:


    Great article. You may want to change Orbital to Orbital/ATK where mentioned. Orbital and ATK merged a few years ago which was quite a large consolidation given the budget environment. It aids in communicating the magnitude of how large the consolidation is with Northrop acquiring that whole Orbital/atk enterprise. Northrop is becoming a behemoth in the aerospace community. I could go on about how this is bad for customers and workers alike, but everyone has probably heard it before.

  21. Shawn says:

    Defense spending is not used for war, but to prop up a sluggish US economy and ensure the reelection of congressman in key districts. The US can borrow whatever it needs so it does.

  22. R Davis says:

    Doesn’t it sound fantastic – wow !
    What are they going to do with all the new toys ?
    Are we saying that there is a customer base for all these goodies ?
    Or is it only dreamers with empty pockets like the Saudi’s – just wishing & hoping & planning & scheming – wannabe legends.
    Or –
    Is President Trump planning to go into China & South Korea & therefore the monies will come from the public purse – but wait – the public purse is empty – the US FDA will print more money & give it to the defense manufacturing industry.
    Then of course H.E.P.C.D. Bibi Netanyahu wants to go into Lebanon & Iran & Russia if they can muster up the courage.
    A continuance of US troops in Afghanistan has been okayed.
    But guys – all this war spending – the US is set to pick up the tab.

    Can the US afford to take anymore ‘printed money’ from the FDA & it had better be a free gift to the US – right ?
    The FDA can recoup it’s / their losses from the spoils of war – can’t they ?

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