409 Ss Econ Updates

DDI 2008 Page

F22/Econ Updates Strange/Serrano Index

Index........................................................................................................................................................................1 Fiscal Discipline Uniqueness...................................................................................................................................2 Fiscal Discipline Uniqueness...................................................................................................................................3 Fiscal Discipline Uniqueness...................................................................................................................................5 Fiscal Discipline Uniqueness...................................................................................................................................6 Key to Heg/Budget undecided.................................................................................................................................7 Chopping Block.......................................................................................................................................................8 Chopping Block.......................................................................................................................................................9 Aff—Next President/A2: Japan scenario...............................................................................................................10 Aff—Next President...............................................................................................................................................11 Aff—Next President..............................................................................................................................................12 Aff—F35s key to Heg............................................................................................................................................13

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F22/Econ Updates Strange/Serrano Fiscal Discipline Uniqueness

The record federal deficit has hit the brink—now is the critical time to reign in spending Jeff Jacoby 8-6 (http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/08/06/what_them_worry/) Last week, the Bush administration increased its estimated budget deficit for the coming fiscal year to $482 billion, an all-time high. The deficit could climb even higher, it conceded, since the new projection doesn't include the full cost of military operations in Iraq and Afghanistan or the potential drop in tax collections if the economy continues to worsen. Meanwhile, the current fiscal year is projected to close with a $389 billion deficit - less than the $410 billion originally forecast, but substantially higher than last year's final deficit of just under $163 billion. Unsurprisingly, the political class reacted to the news politically, mostly by upbraiding the Bush administration. The chairman of the House Budget Committee, South Carolina Democrat John Spratt, declared that because of George W. Bush, "the largest surpluses in history have been converted into the largest deficits." Spratt's Senate counterpart, Democrat Kent Conrad of North Dakota, predicted that "Bush will be remembered as the most fiscally irresponsible president in our nation's history." Neither mentioned that presidents can only spend money that Congress has appropriated, or noted that their party has had control of Congress for the past 19 months. The two members of Congress running for president likewise jumped on the bash-Bush bandwagon. The new deficit numbers, said John McCain, are a "striking reminder of the need to reverse the profligate spending that has characterized this administration's fiscal policy." Barack Obama slammed the "reckless" policies that have "busted our budget, wreaked havoc in our economy, and mortgaged our children's future on a mountain of debt." Too bad neither candidate used the occasion to speak seriously about the looming fiscal crisis. What they - and we - should be urgently focused on is not the budget deficit in any given year, but the crushing national debt that all those deficits cumulatively add up to: currently $9.6 trillion, and climbing rapidly. Just paying the interest on that debt will cost the government nearly $250 billion this year, making debt service the fourth-largest item in the federal budget. But the surging cost of interest is nothing compared with the tidal wave of entitlement spending about to crash over us. This is the year that the first of nearly 80 million baby boomers become eligible for Social Security payments; within three years, they will begin drawing Medicare benefits as well. Those two programs alone already account for one-third of the federal budget - 42 percent if you add Medicaid, which is also focused largely on the elderly. But in the years ahead, their costs will explode. If nothing changes, the Concord Coalition warns, Social Security, Medicare, Medicaid, and interest on the national debt will consume every penny of federal revenues in less than 20 years. Clearly, things will change. They have to. Either taxes will be hiked to unprecedented levels, or spending - especially on entitlement programs - must be forcefully reined in. There is no other alternative short of continuing to run up the national debt, thereby loading our children with an unconscionable financial burden.

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F22/Econ Updates Strange/Serrano

Fiscal Discipline Uniqueness Fiscal discipline is necessary to prevent an “economic train wreck” Journal Star 08-03 (http://www.pjstar.com/opinions/x280666525/Our-view-Fiscal-discipline-needed-in-D-C) Our view: Fiscal discipline needed in D.C. It's one for the record books: Next year Uncle Sam's deficit will surpass half a trillion dollars, once the cost of the war in Iraq some of our leaders so love to camouflage is figured into the equation, according to the Congressional Budget Office. All of that red ink sounds bad, though any editorial on this subject is certain to arouse those who argue that it's unnecessarily alarmist to jump to negative conclusions, particularly when deficit and debt figures are viewed outside of their proper context. That context is this: Whether debt is a burden depends on one's ability to repay it. The best way to find out on a national scale is to measure America's debt against its income and assets, our gross domestic product (GDP). Even as the nation's total debt hovers around $9.5 trillion, some $5.7 trillion of it held by the public, as compared to GDP the nation is far less strapped today than it was 60 years ago. Indeed, in 1946, the public debt hit 109 percent of GDP as the U.S. was coming off its financing of World War II. In other words, America's debt was bigger than its economy. Over the next 30 years the U.S. steadily whittled its public debt ratio, hitting its post-WWII low in 1974, at 23.9 percent. That soared during the Reagan-Bush I administrations - between 1980 and 1990, America's red ink more than tripled - then settled back down under Bill Clinton. The current public debt ratio under George W. Bush - even with the huge deficits of the last seven years and the war - is about 37 percent, still below the post-WWII average. So it's no big deal then, right? Well, not quite. Economists do not speak with one voice, of course, but some are getting nervous. First, interest on the national debt is among the largest (and fastest growing) federal government expenditures - it's consistently behind only Social Security, defense and Medicare - outpacing spending on the likes of education, veterans' benefits, foreign affairs and agriculture combined. Interest on the national debt is currently about $430 billion. That ain't chump change, and it's money going to yesterday's obligations that is no longer available for today's. Second, if nothing changes, mandatory spending on entitlement programs is expected to exceed all federal tax revenue sometime in the next 30 years. With Baby Boomers retiring, Medicare and Social Security are expanding at an inflationary rate well beyond GDP. That's why some economists have called the current course D.C. is on a "train wreck" waiting to happen. Even the conservative Heritage Foundation, which fears not red ink, acknowledged in a 2005 paper from its lead budget analyst Brian Riedl that "the largest danger posed by rising debt is that it represents a claim on future taxes," which translates to stifled economic growth, less incentive to work, save and invest. Unless Social Security and Medicare are reformed, "lawmakers risk allowing debt levels to increase until they cause the highest intergenerational tax increase in history." No matter one's ideological stripe, it is unfair to saddle our kids and grandkids with this liability. Third, one of the standard defenses for Washington's inability to live within its means is that we "owe the debt to ourselves." But that is far less true today than it was 20 years ago, with some 44 percent of U.S. publicly held debt now owned by foreign governments and investors; Japan and China lead the pack. While that's not reason to panic, it does create some political complications and economic vulnerability. Finally, there is that intangible of how this overspending undermines confidence in the federal government, whose leaders model all the wrong behaviors while simultaneously lecturing citizens about selfresponsibility and fiscal discipline. Where's theirs? In fact the only thing that has saved Uncle Sam's bacon is that, even while spending like mad, America's economy has grown like gangbusters over the last half century. Now the economy has slowed, and so this annual accumulation of debt matters more. Ultimately, while we are not quite members of the debt-is-good club, neither do we believe debt is necessarily bad, when controlled. The half-trillion deficit projected for next year, with the Baby Boomer drain just beginning, stretches our discomfort

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F22/Econ Updates Strange/Serrano

zone considerably. Fundamentally, the debt is symptomatic of this nation's lack of discipline, which can come back to haunt us on so many levels.

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DDI 2008 Page

F22/Econ Updates Strange/Serrano Fiscal Discipline Uniqueness

The federal deficit is spiraling- fiscal discipline is needed STL times 8-4 (http://www.stltoday.com/stltoday/news/stories.nsf/news/editorialcommentary/story/4bd188d1675d6250862574 98007c39f7?OpenDocument) The White House Budget Office said it expects next year's federal deficit to hit a record $482 billion, and that doesn't count the full cost of the wars in Iraq and Afghanistan. Add those costs and the deficit grows to well over half a trillion dollars. It will grow larger still if Treasury has to bail out mortgage giants Fannie Mae and Freddie Mac. A half-trillion dollar deficit casts considerable gloom over the hopeful talk of the presumptive presidential candidates. It makes Republican John McCain's tax-cutting plan look like fiscal lunacy. It makes Democrat Barack Obama's plans for near-universal health care coverage look like wishful thinking. Mr. McCain wants to remove the expiration dates on the tax cuts that were enacted in the early years of the Bush administration and also cut other taxes on individuals and businesses. That would shrink Uncle Sam's revenues by $600 billion over 10 years, according to an analysis by the Tax Policy Center, a Washington think tank. If Mr. McCain also continues the war in Iraq, the deficit will turn monstrous. Mr. Obama has advocated raising taxes on well-off people, mainly those making more than $250,000 per year, while trimming taxes for people with modest incomes. His plan would add $800 billion to tax collections over 10 years, but his plans for nearuniversal health coverage easily could eat that up. And aside from any new tax cuts or new programs, the nation also faces the reality that the first of the baby boom generation begins retiring this year. No matter who is elected president, he will face growing costs for Medicare and Social Security. And history indicates that the stumbling economy will leave more people qualifying for Medicaid health coverage as well. The most frustrating thing about the deficit is that it's back: We thought we'd solved this problem in the 1990s. A rare period of fiscal discipline in Washington, combined with a modest tax increase and a booming economy, lifted the budget into surplus for four years. The United States actually began paying down the national debt.

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DDI 2008 Page

F22/Econ Updates Strange/Serrano Fiscal Discipline Uniqueness

The supplemental military fund will sustain the F22 even if the budget doesn’t Bloomberg 7-14 (http://www.bloomberg.com/apps/news?pid=20601103&sid=aC32JAiU5Xz8&refer=us) Lockheed will have to start making decisions about supplies and material for the F-22 later this year, Stevens said. `Probably the most crucial material is titanium,'' company spokesman Rob Fuller said. Parts of the plane that will be affected later this year include bulkheads, horizontal stabilizers, radar and equipment for communication and navigation, Fuller said. Lockheed expects the main U.S. government defense-spending budget proposal of $515 billion for 2009 to hold up, Stevens said. There may be more flexibility in the so-called supplemental spending plan that is associated with the U.S. military operations in Afghanistan and Iraq, he said. The average supplemental request over several years is about $170 billion to $180 billion, he said. ``We think the supplemental budget will show some flexibility,'' Stevens said.

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F22/Econ Updates Strange/Serrano

Key to Heg/Budget undecided The F22 is a symbol of American power projection, but the plane’s budget situation is in limbo Wall Street Journal 7-14 (http://online.wsj.com/article/SB121599581309149673.html?mod=googlenews_wsj) It is a Catch-22 of military contracting: The fighter is so advanced that, under law, not even U.S. allies are allowed to buy it. At the same time, the Defense Department does not want to order any more because senior leaders believe it is not the right weapon for current missions, which command a growing slice of the Pentagon budget. That is a blow for Lockheed, which stands to miss out on revenue from its premier fighter. The plane, with a $143 million price tag, is rolling off the assembly line problem-free, and last year the Air Force declared it combat-ready. Australia and Japan have expressed interest in buying it, and many in the industry consider it the best fighter ever made. But currently, Lockheed has orders for only 183 of them. "The F-22 is clearly an icon of American power projection," says Tom Ehrhard, senior fellow at the Center for Strategic and Budgetary Assessments and a former Air Force officer. One of the plane's biggest vulnerabilities has been not in the air, but in Washington. The F-22 fighter program has been in development since before the end of the Cold War. The Air Force wanted to buy 381 of the aircraft, arguing that any less would leave gaps in their capabilities. But the current defense secretary, Robert Gates, has said the plane is not relevant to the conflicts in Afghanistan and Iraq. He neither funded more fighters nor funded a line shutdown. The curtailing of the F-22 has come to symbolize the tension in the Defense Department between future threats and today's fights. Mr. Gates wants the Pentagon to focus on weaponry that serves ground forces, like those in Afghanistan and Iraq, and he does not believe the F-22, which is geared more toward fighting a conventional foe, is needed.

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F22/Econ Updates Strange/Serrano Chopping Block

The F22 program is on the chopping block Miriam Pemberton and Lawrence Korb July 5, 2007 (“To improve security, follow the money” Boston Globe op-ed lexis) That is why we convene a group of security specialists every year to produce a mock-up of what we argue our government should be providing: "A Unified Security Budget for the United States." We bring all the categories of security spending in the president's budget request together in one budget. This exercise shows that in fiscal 2008, 90 percent of all our foreign policy and security resources are allocated to the military; 6 percent are devoted to homeland security; 4 percent go to the tools of conflict prevention, including diplomacy, foreign aid, peacekeeping, and nuclear nonproliferation. A single security budget would enable consideration of security trade-offs like the following: the F-22 fighter jet, one of the most troubled and strategically questionable programs in the US arsenal, is set to receive a $600 million increase in the president's budget. Forgoing this increase could permit any of these alternatives: tripling the amount budgeted to cancel the debt that is crippling development in the world's poorest countries; increasing US contributions to international peacekeeping operations by 50 percent; tripling the amount allocated in fiscal 2007 for domestic rail and transit security programs.

F22s are on the chopping block Washington Post 2004 (Local Firms Respond to A Changing U.S. Military; Smaller Contractors Benefit From High-Tech Emphasis, lexis) A lot of the technology contractors' work is related to intelligence-gathering, a high priority in the fight against terrorism. And their contracts are usually smaller, making them less dependent on a single program or agency, even as more of their revenue comes from defense and intelligence and their reliance on this spending grows. Defense contractors like Lockheed, the world's biggest with $32 billion in sales last year, and General Dynamics Corp., based in Falls Church, rely on massive, complex and enormously expensive weapons projects for the bulk of their business. If Iraq forces the Pentagon to make major trade-offs, programs like Lockheed's expensive and troubled Joint Strike Fighter and the F-22 fighter jet could be at stake, experts say, while the government simply tries to keep its forces in the field up and running.

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F22/Econ Updates Strange/Serrano Chopping Block

F22s are on the chopping block GAO Report 1998 (QUADRENNIAL DEFENSE REVIEW - OPPORTUNITIES TO IMPROVE THE NEXT REVIEW) DOD cited the tactical aircraft decisions as an example where significant technical or other capability advantages of next-generation systems over current systems resulted in force structure-modernization trade-offs. However, while the task force analyses of the F-22 resulted in an option to reduce aircraft by nearly 100 (from 438 to 339), possibly changing the future mix of tactical aircraft, DOD did not examine other options, such as whether advanced technologies like stealth could reduce the Air Force's 20 fighter wing force structure. Further, the reductions in F-18E/Fs and Joint Strike Fighters were generally based on a proposal that fewer aircraft would be sufficient to replace existing aircraft and affordable within the budget, not because the Navy expects to reduce its force structure by cutting the number of carrier fighter wings.

F22s are on the chopping block Jen DiMascio 5-1 (Iraq heats up military rivalries, politico.com) Part of the Air Force's problem, in the eyes of the Pentagon and many critics, is that the Air Force is too devoted to stealth fighter jets - the F-22 Raptor - when it's asking for $20 billion more than its budget request to upgrade its fleet and has made cuts to surveillance and radar programs that could help in Iraq The Air Force contends it needs the Raptor to face threats from "near peer competitors," a phrase frequently used by those in the military as a euphemism for China Stopping the purchase of Raptors now would leave the Air Force with nearly 190, but that wouldn't be enough for all of its fighter jet squadrons, Dunn said, adding that if Pentagon civilians were so opposed, they should have made a clear decision about the program's future The Pentagon did pass on the opportunity to kill or continue the Raptor in this year's budget The production line will close next year without continued orders, and the Pentagon provided in its budget neither money for Raptors nor money to close the line

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F22/Econ Updates Strange/Serrano Aff—Next President/A2: Japan scenario

F22s won’t be cut until the next administration; in the meantime Japan will adopt the F-35 Aviation Week & Space Technology 6-16 (End of an Era; USAF leadership changes further imperil threatened F-22 as Defense Dept. hails F-35 progress, lexis) Strong endorsement by the U.S. Defense Dept. is bolstering Lockheed Martin?s multinational F-35 after it achieved a critical flight milestone last week. However, the company is facing a loss of support for its F-22 after the program?s top two champions were ousted from the Pentagon?s inner circle. Pentagon acquisition czar John Young, known for setting rigorous technical maturity milestones for weapons programs, took the unusual step of releasing a statement only hours after the June 11 first flight of the short takeoff and vertical landing (Stovl) F-35B?the first production-representative Joint Strike Fighter. ?The JSF program is ahead of similar programs in terms of quality, software, testing and manufacturing readiness,? he said, praising ?the maturity and progress being made on JSF.? Initial flying is in conventional take-off and landing mode, and Stovl testing is still months away, but the first flight of the F-35B clears the way for release of $1.3 billion in funding to produce the first six aircraft for the Marine Corps. The contract should be awarded after Young has been briefed on the resolution of blade failure issues with the Stovl version of Pratt & Whitney?s F135 engine. Despite the engine problems, the flight took place within weeks of the late May target set in August 2006, says Marine Corps Brig. Gen. David Heinz, deputy JSF program director. The much-anticipated milestone is likely to shore up international support for the JSF. Japan, worried about the impending shutdown of the F-22 line, is turning its attention to the F-35 (see p. 55). With the surprise resignations of Air Force Secretary Michael Wynne and Chief of Staff Gen. T. Michael Moseley this month, the stealthy Raptor, in contrast, appears to be without a champion in the Pentagon?s upper ranks; without new funding, production will begin winding down. The ousted USAF leaders clashed with Defense Secretary Robert Gates over their dogmatic support for the F-22. Lockheed Martin says it needs long-lead funding for an additional lot of F-22s by November to avoid having to begin shutting down the supply chain, but the nominated Air Force secretary and chief of staff are not expected to step in with support for the Raptor. ?The leadership change will prevent the Air Force from pursuing additional F-22s in Congress for the remainder of the Bush presidency,? says Loren Thompson, a defense analyst and consultant with the Washington-based Lexington Institute. ?That diminishes the outlook for the program because neither of the major [presidential] candidates likely to succeed Bush is favorably disposed to the Raptor.? The timeline for Boeing, which makes the wing and aft fuselage, is even tighter. ?Advanced procurement for Lot 10 must be added to the FY [Fiscal Year] 2009 defense budget this fall to avoid the initiation of shutdown in October 2008,? says Bob Jenkins, Boeing?s F-22 business strategy director. Although Lockheed and Boeing are funded to produce aircraft until 2011, the long-lead suppliers will deliver their last parts as early as mid-2009 The termination threat comes as the program is stabilizing, says Larry Lawson, Lockheed Martin vice president and F-22 program manager. Aircraft are being delivered with zero defects, a month ahead of schedule, and the mission-capable rate of the fleet is running at a ?pretty good? 70%, he says. The F-22 has faced termination since February, when the Defense Dept.?s Fiscal 2009 budget request omitted funding for the fighter, leaving its fate to the next administration. Both defense authorization committees proposed plus-ups in order to procure some long-lead items, but a final decision awaits a negotiation between the House and Senate.

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F22/Econ Updates Strange/Serrano Aff—Next President

F22 funding will be decided by the next administration Defense Daily 5-2 (Money To Continue F-22 Production Line May Be Left Out of Budget Measures, lexis) Some House and Senate lawmakers are moving away from adding to defense legislation funding for Air Force F-22 Raptor jets beyond the 183 planned, potentially leaving the fifth-generation fighter's future in the hands of the next administration. Lockheed Martin [LMT] leads the industry team that builds the F-22 Raptor. The Senate Armed Services Committee (SASC) opted to do just that--leave the decision about whether to continue or close down the F-22 production line to the next president, Chairman Carl Levin (D-Mich.) said yesterday after his committee marked up the fiscal year 2009 defense authorization bill. The legislation that could hit the Senate floor in two weeks fully funds the White House request for buying 20 F-22s in FY '09, but does not address the contentious issue of whether to continue the production line to build more than 183 Raptors--the number in the Air Force's current program of record. The committee's marked-up bill includes $497 million for either F-22 advance procurement to continue the production line in FY '10, or for shutting down the aircraft production line, according to a summary. "Relevant to the [F-22's] future, we left it up to the next president," Levin told reporters yesterday. We are "very explicitly saying that the funding that we put in--the added advance-procurement or shutting-down costs, that either-or decision--will be made by the next president." just told me there's a couple things that can't get through."

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F22/Econ Updates Strange/Serrano Aff—Next President

The next president will make a decision whether to cut F22s in Jan. 09 BBC 7-14 (http://news.bbc.co.uk/1/hi/business/7506601.stm) But, as Mr Lawson points out, when it comes to warfare, merely surviving is not enough. "An ability to turn fast and accelerate away means you survive more," he says, yet it is the ability to "chase down an adversary" that wins the battle. F-22 Partners to the F-35 project may not want the F-22 to be sold outside the US Similar sentiments are apparent in the ongoing US election race, where the eventual winner will be asked to find the money to fund the cash to fund a further 198 aircraft in addition to the 183 F-22s already approved - 122 of which have already been delivered. And with each plane costing more than $140m apiece, plus development costs, it is a tall order, not least since there is no cash in the existing 2009 Congressional budget. A decision may not come until January 2009, which means there will be a troublesome delay that will at best make the project more expensive. A worse outcome, at least from Lockheed Martin's point of view, could be the scrapping of the F-22 project - the most likely outcome if the next president chooses not to order any more F-22s.

The next president will determine the fate of the F-22 Bloomberg 7-14 (http://www.bloomberg.com/apps/news?pid=20601103&sid=aC32JAiU5Xz8&refer=us) Lockheed Martin Corp., the world's biggest defense company, expects a decision on whether the U.S. will buy any more F-22 fighters or wind down the program to be delayed until after the coming presidential election. ``We're probably several months away, toward end of defense year, from notifying some long-lead providers of material as to whether there will be follow-on activities for the F-22,'' Chief Executive Officer Robert Stevens said at a press reception in London. ``Currently there are not.'' Stevens on March 4 called for discussions with the U.S. Congress and Department of Defense to determine whether more F- 22s are needed beyond the 183 due for delivery through 2011. The fighter, also called the Raptor, is the most expensive ever, with an inflationadjusted cost of $195 million apiece according to Pentagon figures, rising to $354 million with development costs. Bethesda, Maryland-based Lockheed supports U.S. Defense Secretary Robert Gates' position that a decision should be taken by next administration, the CEO said at last night's reception prior to the Farnborough International Air Show outside London. ``We don't expect this administration to make judgment about whether there are more F-22s,'' Stevens said. ``This will certainly be examined in great detail. I think it will be dependent on strategic need.''

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F22/Econ Updates Strange/Serrano Aff—F35s key to Heg

F 35’s deterrent capabilities are key to heg Tom Dixon 8-23(http://www.ft.com/cms/s/0/acbf27d6-584f-11dd-b02f-000077b07658.html, editorial) On the second point, the F-22 cannot land on aircraft carriers as it cannot be stopped by an arresting hook. This is why the F-35 will be developed. The F-35 is very much needed as a deterrent. Taiwan is protected immediately by the US Seventh Fleet. The F-35 will be an F-22 with compromises to ensure that the US Navy has an aircraft durable enough to be used at sea that can also land on an aircraft carrier. Fighter projects have a long history of coming in over budget, so whether or not the F-35 really does turn out to be a cheaper prospect remains to be seen.

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