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Seeks to keep aid flowing to Pakistan; Republicans slam budget, push more cuts
- Tuesday, February 15, 2011 - From Print Edition


WASHINGTON: President Barack Obama proposed a budget on Monday that would cut the US deficit by $1.1 trillion over the next 10 years, but Republicans said it did not curb spending deeply enough.


The White House proposed to spend $671 billion on the US military next year, handing the Pentagon a short-term boost even as it prepares for tighter budgets in coming years. The Obama administration budget proposal for fiscal 2012 includes $118 billion for the wars in Afghanistan, Iraq and Pakistan, on top of the base budget of $553 billion.


It proposes spending just $16 billion in Iraq - a significant decrease as US diplomats take over from combat troops, and spending almost $110 billion on Afghanistan, signaling little let-up in the US war drive despite demands for tougher spending controls at home.


That base budget figure is $22 billion above the level enacted for 2010, setting a new record even as the government faces an overall freeze in federal spending. The budget would include $113 billion for procurement of weapons and services, down from about $120 billion projected a year ago, plus nearly $77 billion for research and development, roughly on par with the previous plan.


U.S. defense contractors including Lockheed Martin Corp, Boeing Co, Northrop Grumman Corp have been bracing for slower growth in defense spending after a decade of double-digit increases that have nearly doubled the Pentagon’s core budget since Sept. 11, 2001.


Obama also proposes maintaining significant aid to Pakistan to arm, train and equip its military to fight extremists with about $1.1 billion earmarked for the Pakistan Counterinsurgency Fund, roughly the same level as last year.


The proposed defense budget unveiled on Monday is largely in line with plans announced last month by Defense Secretary Robert Gates, who pledged to cut $78 billion from the Pentagon’s core spending over the next five years.


Total spending on national defense in the proposed budget would be $702 billion, a figure that includes spending on nuclear weapons and health care and retirement, down from $721.3 billion in fiscal 2010, according to budget documents.


That figure still does not include spending on defense-related items in the budgets for the Homeland Security, Veterans Affairs and Treasury departments, said Winslow Wheeler, a long-time defense analyst. “It’s very tricky to ferret out all the spending,” he said.


Defense consultant Jim McAleese said spending on weapons procurement and development remained at historically high levels, but Congress’ failure to approve a final 2011 budget and details emerging about the 2012 request meant that defense companies would not see some orders they had expected. At the same time, the widely expected drop in defense spending would be deferred until 2013.


Defense shares edged down on Monday after initial details of the budget emerged. Among large contractors, industry leader Lockheed was down 1 percent to $80.86 in early afternoon trading. Northrop shed 2 percent to $69.07 and Raytheon Co fell 0.5 percent to $50.82. Boeing was up 0.3 percent to $72.36.


“Big platforms are getting stretched out and that’s going to hurt the primes the most,” Morgan Keegan analyst Brian Ruttenbur said on Monday. Supplemental budgets, which have provided some growth for big contractors, are dropping.


“I think niche areas are going to do extremely well,” Ruttenbur added. Growth areas in the 2012 budget plan include cybersecurity, to be funded with $2.3 billion, satellites and nuclear security.


The Defense Department vowed to continue investing in its biggest procurement program, the Lockheed F-35 Joint Strike Fighter, albeit with just $9.7 billion, which is down from the $11.4 billion it had requested for the current year.


At the same time, the Pentagon proposed to cut $13 billion from what it deemed unnecessary “niche” weapons, including a $14-billion landing craft being designed by General Dynamics Corp, a surface-launched, medium-range missile being developed by Raytheon for the Army, as well as the SM-2 surface-to-air missile that Raytheon builds for the Navy.


Obama’s Republican foes in the US Congress slammed his budget as failing to slash spending deeply enough as they pressed for approving a far-reaching package of painful cuts. “We need a government that finally does what every other American has to do in their households and their businesses, and that’s to live within our means,” House Republican Majority Leader Eric Cantor said in a statement.


“Instead, President Obama’s budget doubles down on the bad habits of the past four years by calling for more taxes, spending and borrowing of money that we simply do not have,” said Cantor.


They blasted the Pentagon’s renewed bid to cancel an alternate F-35 engine being developed by General Electric and Britain’s Rolls-Royce Group, arguing that the primary engine built by United Technologies’ Pratt & Whitney unit is already $2.5 billion over budget and faces $1 billion in additional development costs.