||Executive Intelligence Review, May 11, 2001 Internet Issue
Huge Defense Orders
Cover U.S. Industry Drop
by Lothar Komp
Following a preliminary release in late April, the U.S. Commerce Department on May 2 presented its final figures for new factory orders in March. According to the report, new orders for manufactured goods in March increased by 1.8% compared to February--but only due a strong rise in orders for transportation equipment. New orders excluding transportation equipment were down by 1.2% in March, falling for the fourth month in a row, marking the longest string of monthly declines since March 1991.
The most spectacular feature in the report by the Department of Commerce is the more than tenfold increase of new orders for--almost exclusively military--ships and tanks, going up from $568 million in February to $5.886 billion in March, a rise of 936%.
The monthly order income for shipbuilding and tanks in February was rather normal, so the dramatic rise from February to March cannot be explained by an anomalously low figure in February. It is rather the case, that what the Pentagon would normally spend on ships and tanks in a full year, it is now spending in a single month. New orders for aircraft, missiles, satellites, and parts--making up another sub-category of transportation equipment--increased from 11.356 billion in February to $14.122 billion in March, a rise of 24.4%. Overall new orders for transportation equipment thereby were pushed up in March by 24.8%, compared to the month before.
New orders for what the Commerce Department characterizes as "defense capital goods"--in particular ships, tanks, missiles, and some other categories--rose from $5.459 billion in January to $6.832 billion in February, a jump of 25%, and to $11.196 billion in March, a further monthly rise by 64%.
Rumsfeld Pushing Further Big Boost
According to a lengthy analysis in the Wall Street Journal for May 2, the series of Defense Department policy reviews ordered by Secretary Rumsfeld are nearing completion, and one certain conclusion is that there must be a big boost in military spending. Rumsfeld is expected to seek a supplemental budget of $10 billion for this year, and to seek a $20 billion increase in 2002 and a $35 billion boost in 2003.
All told, $25 billion of this $65 billion proposed jump in Defense Department spending is to go to hardware purchases. Of course, it is a big question whether the Congress will go along with this push. Already, senior Democrats are grumbling about Bush's massive tax cut, arguing that there is not enough money left to finance such a big military spending spree.