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January 26, 2022 | International, Aerospace, Naval, Land, C4ISR, Security

Podcast: Sizing Up the U.S. Defense Industrial Base

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  • Opinion: Why Interest On Federal Debt Matters For Defense

    July 6, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

    Opinion: Why Interest On Federal Debt Matters For Defense

    Byron Callan June 30, 2020 The COVID-19 pandemic has stoked consternation that U.S. defense spending is going to be significantly pressured in the 2020s. Congress will likely stick to the $740.5 billion defense discretionary top line agreed to in last year's budget deal for fiscal 2021. But the combination of trillions more in federal debt from higher spending and lower tax receipts this year and next and the probability that there will be future federal spending to better prepare for pandemics raise a higher probability of defense spending pressure. “Flat” was already the new “up,” but “flat” now may be a budget that does not keep pace with annual inflation. The fears may be that defense spending will decline in the 2020s after a couple of good years of largesse from Congress and the White House. Despite trillions in additional deficits and federal borrowing in 2020-21, there is one bright spot that indicates less dire defense spending pressures than now perceived—the interest on the federal debt. U.S. federal debt is comprised of debt held by the public and intragovernmental debt, which is owned by different federal trust funds, the largest of which is Social Security. As of May, total debt held by the public was $19.8 trillion, and intragovernmental debt was another $6 trillion. Often, these two sums are lumped together, but they should be treated separately. The interest paid on debt held by the public is dispersed by the Treasury in the form of outlays to the owners of that debt. The interest paid on intragovernmental debt is, in essence, interest the federal government pays itself. The Office of Management and Budget (OMB), in its annual projections of outlays, breaks out these two components of interest outlays to show net interest outlays. This is mandatory spending, and so it has been paid along with the other mandatory and discretionary funding the U.S. federal government provides. One of the silver linings of the pandemic has been the Federal Reserve's aggressive lowering of interest rates. This makes federal debt more affordable, much in the way that a lower interest rate on a home mortgage can make a place to live more affordable. The OMB projections released in February showed net interest outlays of $378 billion for fiscal 2021 rising to $665 billion by 2030. One could take issue with the deficit projections behind these outlay projects, as they may have rested on GDP growth expectations that were too optimistic and nondefense spending cuts that were not going to be realized. However, dividing interest outlays on debt held by the public by debt projections implied an interest rate of 3% or more over the forecast period. The pandemic has trashed those rate projections. Federal debt held by the public is offered in different maturities. Treasury bills, which mature in a year or less as of May, were 23% of the total debt held by the public. Treasury notes that mature in 1-10 years were 51%, and bonds that mature in 10-30 years were 12%. (There is another 10% of other Treasury instruments.) Rates now are much lower, although clearly that would only matter for new debt that is issued by the Treasury. The rate on a 90-day Treasury bill is currently 0.13%. On a five-year note, it is 0.33%, and on the 10-year note, 0.69%. The 30-year note rate is 1.4%. This implies that interest outlay projections should be declining, although new projections may have to wait until the White House releases its 2022 fiscal budget request and out-year projections, presumably in February-March 2021. Net interest outlays could be at least $100 billion less in 2022-23 than the February 2020 projections on higher debt but lower rates. In the scheme of total federal outlays, which the OMB projected to be $4.8 trillion for 2021, $100 billion is not a lot, but it indicates there is a bit more headroom for defense spending and other nondefense discretionary spending than a focus on federal debt alone might suggest. Federal infrastructure spending could be one area of more traction in the 2020s, and the issue of social justice may also spur more demand for federal resources. One outcome of the pandemic, however, will be to make defense expectations more sensitive to interest rate expectations. It is not too difficult to project scenarios with rising debt and interest rates that increase to more “normal” levels. The pandemic also underscores that the unthinkable should be given a bit more room on long-term projections. It is quite conceivable that a major military conflict, a massive natural disaster or another economic contraction could further add to federal debt in the 2020s. https://aviationweek.com/defense-space/budget-policy-operations/opinion-why-interest-federal-debt-matters-defense

  • UK, Japanese, Italian partners agree next steps for fighter jet | Reuters

    September 12, 2023 | International, Aerospace

    UK, Japanese, Italian partners agree next steps for fighter jet | Reuters

    Britain's BAE Systems , Japan's Mitsubishi Heavy Industries , and Italy's Leonardo have agreed the next steps to deliver the concept phase of a next-generation combat aircraft, BAE Systems said on Tuesday.

  • US Air Force issues third production order for advanced electronic warfare pods

    July 30, 2019 | International, Aerospace, C4ISR

    US Air Force issues third production order for advanced electronic warfare pods

    HERNDON, Va. – July 30, 2019 – Northrop Grumman Corporation (NYSE: NOC) has received a $44 million contract award for the Electronic Attack Pod Upgrade Program (EAPUP) from the U.S. Air Force. Placed under an existing contract, this third production order will significantly increase the number of EAPUP systems for the Air Force. Operating in the modern air warfare environment with advanced, rapidly proliferating electronic warfare systems and radar-guided weapons requires an equally sophisticated level of protection and proven technology. The EAPUP — an upgraded, digital AN/ALQ-131 pod — will replace the Air Force’s current electronic attack pods. The AN/ALQ-131A is currently available to international partners. “The new technology in EAPUP will protect U.S. Air Force pilots and coalition partner aircraft from modern and future threats,” said Michelle Scarpella, vice president and general manager, global logistics and modernization, Northrop Grumman. Northrop Grumman received the order following a series of rigorous tests designed to verify the system’s capabilities and readiness for operations. The tests were representative of modern combat scenarios and involved multiple, simultaneous threats. The pod demonstrated the ability to identify, locate and counter sophisticated threats and keep aircrews safe during missions in contested airspace. “The advanced electronic warfare capability integrated in EAPUP is mature, scalable and in production today. Available globally, it is ready to give aircrews the protection they need in dense electromagnetic spectrum environments,” said Brent Toland, vice president, land and avionics C4ISR, Northrop Grumman. EAPUP will bring the Air Force’s electronic attack pod inventory into the digital age, delivering fifth-generation capability to fourth-generation aircraft and making it among the most capable electronic warfare pod in the Department of Defense inventory. At the core of EAPUP is Northrop Grumman’s advanced electronic warfare technology, built upon the expertise gained from the company’s broad portfolio of programs for multiple services. Northrop Grumman has more than 60 years of experience delivering electronic warfare systems for a wide variety of fighter, bomber and transport aircraft. Northrop Grumman is a leading global security company providing innovative systems, products and solutions in autonomous systems, cyber, C4ISR, space, strike, and logistics and modernization to customers worldwide. Please visit news.northropgrumman.com and follow us on Twitter, @NGCNews, for more information. https://www.intelligent-aerospace.com/military/article/14037164/usaf-electronic-warfare-pods

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