AIA: Budget deal doesn’t solve industry’s sequester problem

The budget deal poised to pass this week won’t fix the defense industry’s sequestration woes if it isn’t followed by a larger agreement to reverse the rest of the sequester cuts, Aerospace Industries Association (AIA) CEO Marion Blakey said Wednesday.

In her end-of-year remarks at the group’s annual luncheon, Blakey urged Congress to back away from the “altar of budget austerity” and undo the rest of the sequester still left in place after the budget agreement that the Senate will vote on Wednesday.

{mosads}She said that Congress now has a two-year window to finally address a long-term deal and fix the final half-dozen years of sequestration.

“At some point the excessive pursuit of fiscal austerity over and above all other national objectives will come back to haunt us,” Blakey said in her speech to defense and aerospace member companies and the media.

“I’m glad that we don’t have the specter of the worst two years of sequestration hovering over us, and yes, it’s nice the government won’t shut down in the foreseeable future,” she said. “But we can do better, folks.”

AIA’s year-end forecast said aerospace industry sales dropped $2 billion in 2013 to $221.1 billion amid the sequester, which took effect in March. The dip included a $4 billion decrease in military aircraft sales, which was offset by an increase in civil aircraft sales.

The association predicted things would tick upward again to an estimated $232.1 billion in 2014, when the Pentagon is likely to get $22 billion in sequester relief through the budget deal.

But even the drop in 2013 sales was mild compared to the dire predictions that AIA and the military had repeatedly echoed in the lead-up to the sequester. That message was on display during Blakey’s speech Wednesday, when the group placed a campaign-style video with clips of military leaders and Defense Secretary Chuck Hagel warning of lost lives and a hollow force.

Blakey stood by her warnings about the sequester, saying the industry had a much different year than it anticipated because the sequester was “reduced and mitigated.”

She cited the two-month delay that was part of the fiscal-cliff deal reached at the end of 2012, as well as the ability for the Pentagon to use last year’s unobligated balances to help offset the impacts of the sequester cuts.

She also noted that companies have protected their bottom lines through staff cuts. Blakey cited a study from consulting firm Challenger, Gray and Christmas that estimated 160,000 industry jobs have been lost over the past five years — a number she said was underestimated. Industry layoffs are on pace next year to increase by 30 percent, she said.

Blakey defended the AIA’s two-year campaign to try to stop the sequester, even if it wasn’t able to prevent the cuts from taking effect. She said the problem was bigger than the defense industry, requiring a deal on things like entitlements and new revenues amid a gridlocked Congress.

“I think we are very, very proud of the fight we have put up, the fact the word sequester is known everywhere, and the fact you are seeing a vote … that recognizes that across the board sequestration is not the answer,” Blakey said.