Defense Contractors Profit Despite Sequestration And Shutdown

Hayes Brown, “Defense Contractors Profit Despite Sequestration And Shutdown,” Think Progress, 24 October 2013

Defense contractors have managed to not only stay afloat but also thrive in a climate of government closure and massive cuts to the Pentagon’s budget, continuing to rake in billions upon billions of dollars in profits.

Under the terms of sequestration, the Department of Defense is slashing budgets left and right, with about $41 billion cut in 2013 alone. That hasn’t prevented the major defense contractors — including Lockheed Martin and Northrop Grumman — to continue to post huge profits according to Bloomberg. Northrop Grumman in particular has had a surprisingly good year, showing a 56 percent increase in the price of its shares. In the third quarter, Northrop’s net income grew to $497 million, compared to $459 million for the same period last year. …

The continued success of these companies matches the predictions of CAP experts Lawrence Korb and Alex Rothman last year, though the sequestration vehicle has been less discriminating about military cuts than many security experts would have preferred. The defense industry spent a large amount of time and capital last year hyping the threat that not just sequestration but any cuts to the military budget would have on their industries, even as experts expressed their doubts in the claims.

Sequestration also hasn’t prevented contractors from being paid far more than their federal employee counterparts. The Office of the Director of National Intelligence recently reported that the intelligence community pays contractors 1.66 times as much as a federal employee for the same work. An analysis from the Pentagon earlier this month also found that the Pentagon could save millions if it would only reduce the payout to some contractors to only as much as President Obama’s salary. …

Read the full article here.