May 19, 1999

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Weapons Makers Seek Rise in Pentagon Spending

By LESLIE WAYNE

WHATEVER lessons the war with Serbia may teach Nato's military planners, American weapons makers are already anticipating that Kosovo may help secure a strategic victory for them -- not on the battlefield, but in Congress.

After a decade of slashing armaments spending by nearly 70 percent and downsizing the military contracting industry, Washington now seems inclined to increase outlays for weapons. And this spending will go far beyond the request for $12.2 billion in Kosovo emergency funds now before Congress. Even before Nato bombs started dropping, the administration's budget proposal in February had requested $112 billion in additional Pentagon spending over the next five years to bring the Pentagon's budget up to $319 billion by 2005.

The increase, intended in part to head off Republican claims that the Democratic White House has let the military atrophy, would be the biggest increase in military spending since the late 1980s. For military contractors, the relevant portion of the Pentagon budget is the money earmarked for weapons -- as much as $53 billion for weapons procurement next year and $60 billion the following year -- compared with $44 billion last year, which was the lowest level in more than a decade.

Although there was already widespread support for the spending measures, many political and industry analysts say that the fighting in Kosovo can only strengthen the case for increasing weapons spending when Congress takes up the Pentagon budget early this summer. "Kosovo has definitely changed things here on defense spending issues," said Rep. Duncan Hunter, R-Calif., who heads the procurement subcommittee of the House Armed Services Committee, the subcommittee that helps set the level of weapons spending. "Folks who used to vote to cut defense massively are now voting to deploy our military more and more."

The spending increases would be used to replenish stocks of ships and aircraft, radar jammers and missiles that the Pentagon, for years, claimed have become dangerously frayed and dangerously low. Just how many, and what kinds of weapons would be the topic of much further debate and lobbying, even once the money was appropriated. But this much is already clear: Most of the transports, weapons and ordnance now in use in Kosovo is equipment no longer actively produced -- including the C-5 transport plane, the B-2 bomber and the Tomahawk cruise missile.

So the need for new generations of materiel, and the money to pay for it, represents the best business opportunity in years for military contractors. "Kosovo underscores what the industry has been saying -- that we need to get to a sustainable rate of spending," said Daniel T. Burnham, chief executive of the Raytheon Co., which made the Tomahawk cruise missile. "We need to get to $60 billion in weapons outlays," Burhham said. "We are now on that path. And we are getting there faster than we first thought."

Too fast, perhaps, for some. "The procurement amounts proposed are out of line," Rep. Neil Abercrombie, D-Hawaii, and ranking member of a House Armed Services personnel subcommittee, said on Tuesday. "We haven't answered fundamental questions of what size defense we want, how we get there and what are the costs the country can realistically absorb in a post Cold War environment." The downsizing and consolidation that followed the end of the Cold War has left the nation with three main military contractors: the Boeing Co., Raytheon and the Lockheed Martin Co., along with thousands and thousands of subcontractors that are attached to these giants.

Pentagon budgets have long been operated on a boom-and-bust cycle. But during this latest period of industry reorganization, fundamental changes were also taking place in the nature of warfare. No longer was the nation planning for a big two-country conflict of the type once feared with the Soviet Union. Instead, the 1990s have been characterized by many small military engagements. Compared with the Bush administration, when there were 14 military engagements -- most notably the Gulf War -- the Clinton years so far have seen American troops called into action nearly four dozen times, including the current engagement in Yugoslavia.

Those efforts include military missions in South Korea, Haiti, Somalia, the Balkans and Iraq -- as well as humanitarian efforts following hurricanes and earthquakes in Central America and other places. "These engagements wear out equipment faster, and the faster it wears out, the sooner you have to pay for new equipment," said Jonathan L. Etherton, head of legislative affairs for the Aerospace Industries Association, a Washington trade group. "A lot of this equipment will end its useful life faster than expected."

At the same time, in addition to the C-5 and B-2 planes and Tomahawk cruise missiles, many of other weapons now being used in the Balkans have aged and, often, are no longer in production. The Pentagon has not bought new F-16 Fighting Falcons in years, and the F-15 Strike Eagle production line is about to close. The list of aircraft out of production includes the EA-6B, a Navy anti-jamming aircraft; the A-10 Thunderbolt, the A-6 attack air-to-ground craft and the F-117 Stealth fighter.

While the next generation of weapons is still largely a matter for Congress and the Pentagon to decide -- with intense lobbying from military contractors -- the Pentagon has already drawn up a wish list. It includes additional F-22's, upgrades of the Abrams tanks and Apache helicopter, a new destroyer, attack submarine and a new aircraft carrier. And in what already is shaping up as a showdown between Boeing and Lockheed Martin, the Pentagon has proposed a Joint Strike Fighter to replace the F-16, now made by Lockheed.

One other impact of Kosovo for American military contractors is the realization that Nato might not be as much of a customer for their future products as previously imagined. For years, the military industry has lobbied for Nato expansion -- in fact the Committee to Expand Nato, the main lobbying force, is headed by a Lockheed Martin executive. The assumption has been that all these countries would want to buy all the latest and newest equipment that American arms makers could produce rather than relying on European-made armaments.

Certainly, Kosovo has highlighted the shortcomings of many of the European forces -- and thus of coalition warfare, when allies are not equally equipped. Only 10 percent of the aircraft used by European forces are capable of precision bombing, and few of the Nato countries have the smart weapons and communications systems now common in the American military.

But it is unclear whether other Nato nations will increase their military budgets enough to buy new equipment and, even if they did, whether they would buy from American military contractors rather then European ones. "Kosovo is showing the big disparities in Nato capability," said one military industry lobbyist, who insisted on not being named. "That will be looked at after the war. But will these countries have the political imperative to buy this new equipment? The answer is still out."