Economy is undermined for lack of strategic industrial policy

by YankeeJim | January 30, 2012 at 10:24 am

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What is America's Industrial Policy?

I have been writing about this for two years. The aviation and aerospace industries sector are strategic to both economic and military security. The industry is a catalyst for the economy because it affects all aspects. It is true that recent wars have fueled it. That means that we go in debt. Except for foreign military sales, there is no GDP or direct return on cost.

However, it is essential to change the business rules such that defense contractors must produce commercial consumer products as a qualifier for doing business with the government. That way they have an incentive for producing superior products for global consumption that generates GDP from which a percentage goes back to them for military security. It is a round robin balancing act that has lost its equilibrium. Industrial policy can restore that. Furthermore, companies need to receive the benefits that President Obama has proposed, those that create domestic employment by adding to the GDP (not government work) should have a huge tax advantage.

“AIA: National and Economic Security at Stake

January 24, 2012

In advance of tonight’s State of the Union Address, AIA President and CEO Marion C. Blakey released the following statement:

“The State of the Union can be measured in many ways, but first and foremost is the security of the nation. By that measure, the future of our country is unclear. The President’s Budget Request scheduled for release Feb. 13 targets defense for a $487 billion reduction over ten years.

“However, that isn’t the end. Defense faces more than five hundred billion dollars of additional cuts under a sequestration scenario driven by politics rather than security. Simply put, this will jeopardize the nation’s security, knee-cap the technological edge we’ve enjoyed for generations in aerospace and defense and risk as many as one million American jobs. As a nation, we need to put our foot down when it comes to any more defense cuts and agreeto a bipartisan solution to sequestration.

“Our air and naval fleets are older and smaller than they’ve been in decades and we stand to lose vital industrial and security capabilities. These times demand a full commitment from the president and the congressional leaders of both parties to invest in the industrial base that has kept our country safe and developed the most impressive technology and research anywhere in the world.”

Background

The failure of the debt “Supercommittee” created by the Budget Control Act, triggers one trillion dollars in automatic, across-the-board discretionary spending reductions falling on our military and domestic programs beginning in January 2013. Defense Secretary Leon Panetta calls these “devastating” and “dangerous” cuts “completely unacceptable,” and warns they would hollow out the military and generate “unacceptable risk in future combat operations.” The bipartisan Chairs and Ranking Members of the House and Senate Armed Services Committees all oppose these “draconian” reductions, as Chairman Levin described them.

This would also undermine the nascent economic recovery, eliminating between one and 1.5 million jobs, according to economists at the University of Maryland and George Mason University. DOD predicts a full percentage point would be added to the national unemployment rate, which has only just come down below nine percent.”