Tuesday, June 18, 2019
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Defense companies that were stunned by the achievements of the Democrats as the Republicans' hawks lose their influence

The companies that manufacture jets, bombs and aircraft carriers for the US military explain to investors that the defense business is booming under a Democratic Party-controlled House of Representatives, even though a split Congress threatens to return to partisan stalemate.

One of the defense attorneys said the reason for this was that the democratic takeover of the House could weaken Republican deficits in Congress if its influence is already lower.

"One concern we had was deficit hawks," said Thomas Kennedy, chief executive of Raytheon, at the Robert W. Baird Industrial Conference in Chicago. "And it turns out that most of the hawks were in the house and on the Republican side."

The democratic takeover "changes the equation" compared to public debt talks.

"The environment is really beautiful now, because we know exactly what it is," said Kennedy. "The uncertainty has been eliminated and we know that we do not have this problem as the deficit hawks move forward. So we are very optimistic. "

The Republicans of the House lost a number of deficit-oriented agents. Virginia MP Dave Brat and Texas MP Pete Sessions, both of whom advocated a constitutional amendment requiring Congress to pass a balanced budget every year, narrowly lost its Democrat opponents. The deficient hawks had already been marginalized in the Republican Party. Only one representative of the Republicans was against the GOP tax law due to budget issues.

Investment analysts involved in the defense industry seem to be broadly aligned with Kennedy.

In a Wednesday morning announcement to investors titled "It's always a party, regardless of the party," Jefferies investment analyst Sheila Kahyaoglu noted the 2006 midterm election that saw Democrats hit the house at the height of US Iraq Occupied. Defense stock prices rose an average of 18 percent this year.

It is believed that Wall Street defense stocks are among the most recession-proof assets. Companies earning their revenues from military spending are somewhat isolated from the ups and downs of global markets. However, DC space experienced its own mini-recession in 2013 as the so-called "sequestration" cuts – resulting from a budget deadlock in 2013 that also led to a temporary government stalemate – set new limits on defense spending.

For years, these defense spending limits forced many US defense companies to slow down their growth expectations. Companies selling, for example, land vehicles to the military saw their contract commitments fall by more than 50 percent between 2013 and 2015. This emerges from a recent report by the Center for Strategic and International Studies.

"We all have a hangover from the damage our military and our position in the world has done through confiscation," said Mac Thornberry (R-Tex.), Outgoing head of the House Armed Services Committee. "Cutting off the defense has real consequences for life and death. There are those who want to use defense as a lever … or I would say hostage to get things in other areas. We broke that up this year. "

Defense entrepreneurs and their lobbyists will closely watch Thornberry's replacements for hints on how he or she will approach procurement reform, oversight and other issues. The most likely choice appears to be Rep. Adam Smith, a Washington representative whose district includes the cities of Renton and Bellevue in eastern Seattle.

In initial platform statements, Smith had a decidedly different tone than Thornberry.

In early remarks describing political priorities, Smith talks about "aggressive control" of the Pentagon's budget and weapons programs, as well as about examining agencies of the Department of Defense to better determine where and how the funds are used. He also spoke out against a plan by the Trump government to rebuild the US nuclear arsenal, calling the $ 1.5 trillion plan "unrealistic and unaffordable." He argued that "President Trump's new nuclear arms race" would "ruin" the budget and deplete resources of other priorities.

Still, Thornberry says he and other congressional Republicans will be able to work with the Democrats.

"Of course there will be differences … he's talked about the nuclear issue, and that's a difference between Republicans and Democrats as long as I'm in Congress," Thornberry said Thursday. "But if we go into the secret briefings, Republicans and Democrats agree that the defensive cuts that started in 2010 were too much."


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