[Satellite News 11-16-10] If the U.S. Congress were to implement all of the suggestions made by President Barack Obama’s Deficit Commission, the U.S. satellite industry would be affected by nearly $100 billion cuts in defense spending and a scaled-back government presence in rural broadband projects, according to documents released by the National Commission on Fiscal Responsibility and Reform Nov. 10.
    While commission co-chairs Erskine Bowles and Alan Simpson generated expected criticism for their proposal from U.S. military supporters, both U.S. political parties and the Aerospace Industries Association (AIA), some of the suggestions may serve as talking points for a new budget-focused Republican majority, according to analysts.
    The U.S. satellite industry would feel the deepest impact among the government and defense sector, where companies have enjoyed sustained growth as the U.S. Department of Defense increases its reliance on commercial capacity for operations. In addition to suggesting that the United States reduce its 150,000-strong military presence in Europe and Asia by one-third, the commission also recommends reductions in communications procurement and research and development — two areas that satellite providers depend on for operational revenue.
    In an action item, “Reduce planned levels for ‘Other’ Procurement,” the commission specifically labels current communication technology funding levels as wasteful. “Other procurement is expected to reach $38.6 billion in the 2015 fiscal year. This option reduces that amount to $30.1 billion to reflect the buildup of inventory over the past 10 years because of substantial wartime funding and the prospect that the number of U.S. deployed troops may decline by 2015,” the commission wrote.
    The plan would set funding for each service at 50 percent above military funding levels in 2000 level. Over the past 10 years, the Pentagon received $400 billion in funding to procure communications and electronic equipment, such as tactical SINCGARs radios, radars, communications and information security as well as tactical vehicles and other support equipment. The deficit report would cut the $40 billion a year average in half.
    The report also suggested reducing the Pentagon’s research, development, test and evaluation budget by 10 percent, or $7 billion, in 2015. Research and development “spending could be reduced by slowing ongoing projects and cancelling particular projects, such as those associated with marginal procurement programs,” the commission said.
AIA CEO Marion Blakey blasted the plan’s defense cuts, stating that its recommendations raise grave concerns for the industry. “The highest constitutional responsibility of the federal government is to protect the American people from foreign aggression. While we agree that the Pentagon needs to reform its systems in order to achieve greater efficiencies, we cannot abandon the security of future generations. History provides all too many examples where cuts to defense spending were followed by the rise of a threat that we were unprepared to meet,” Blakey said in a statement.
    Blakey added that if the commission’s recommendations in the defense arena are implemented, the U.S. shortage of aerospace engineers would be exacerbated and undercut the capability of the defense industrial base to design, build and support new defense systems.
    The plan also reaches into the commercial satellite broadband sector. As if the $7.2 billion broadband stimulus issued in 2009 was not enough of a disappointment for satellite players, the commission suggested scaling back the program and criticized the U.S. Rural Utility Service’s (RUS) management of the program. “In recent years, the RUS has increased its focus on expanding broadband access to rural areas, a noteworthy goal. However, the agency also runs a number of programs which are outdated, overlapping and which provide limited or questionable public policy benefits,” the report said.
    Raymond James Analyst Scott Brown told Satellite News that the commission might be overreacting to public pressure and suggested that Congress and the administration focus more on the long-term impacts of private sector tax cuts than government program reductions.
     “To hear people say that government spending is ‘out of control,’ and that the Fed is pursuing ‘reckless’ policies that will fuel hyperinflation, and the dollar is ‘worthless,’ is absolutely ridiculous. The argument is off base and makes me want to say, ‘Get a grip, people.’ Supporters of deficit reduction also want to extend the Bush tax cuts. Pick one. There are good economic arguments for temporarily extending the tax cuts, but a permanent reduction would have serious implications for the deficit. The increase in the deficit over the last couple of years is due largely to the recession and efforts to minimize the impact of the economic downturn. … The dollar is down, but not out of line with its longer-term trend. Stop the hysterics, please,” said Brown.