Fighter Engines and Obama’s New Budget

President Obama just put out his new budget. I have my thoughts and I’ll share them. It’s what I do.

First, I must commend Obama, Secretary of Defense Gates, and those in Congress who were finally successful at killing the General Electric/Rolls Royce spare engine for the F35 fighter. Pratt and Whitney won the contract fair and square, but Congress has still funded the development of the GE/RR alternate engine.

Full disclosure before I continue. Pratt and Whitney is part of United Technologies Corporation, of which I’m an employee and I’m long UTC stock (ticker UTX).

This was a unique vote since it was based on geography versus party. Those who have GE/RR facilities in their districts (GOP leadership John Boehner and Eric Cantor) were the most ardent supporters of the GE/RR engine, while those who have UTC facilities in their districts (John Larson) were the strongest opponents. The GE/RR supporters claim that we can’t give UTC a monopoly on such a big engine contract and that having two engines developed would save money because it would encourage competition. There’s so much wrong there that I don’t even know where to begin.

First, developing two engines versus one means you’ll likely double your engine development costs or so. Second, you have to consider additional costs to the F35 program with regards to designing the F35 to accommodate two engines, like aircraft redesigns and more testing. Third, the military would have to be able to deal with two engines, meaning, among other things, they’d need to have two sets of spares on-hand and their mechanics would have to know two engines. The alternative would be not spending the extra money and ending up with far more grounded fighters because the right parts aren’t in the right place. To the military, that is completely unacceptable and it would be a nightmare. Whether it’s cost structure, logistics, or performance is moot. The GE/RR argument is complete nonsense. Common sense proves them wrong unless they’re able to develop an engine for a ridiculously cheap price. I somehow doubt GE/RR would think similarly if the roles were reversed. I also wonder whether GE thought having Jeff Immelt in the Obama administration would help.

Ok, back to the rest of the budget. Obama decided to offer up a budget that does absolutely nothing to entitlements (Social Security and Medicare), which is beyond ridiculous. Usually, defense is also held sacred, but the spare engine example challenges that for now. Entitlements account for about 60% of the budget and defense another 20%. We can’t get our fiscal house in order if we leave 60-80% of the budget completely untouched. There’s that darn common sense again. Granted, waiting on entitlements isn’t entirely unjustified because comprehensive entitlement reform requires a lot of time and analysis, but I somehow doubt that’s the real reason.

I think Obama’s angling for the 2012 election and is trying to preserve his chance at reelection by not rocking the boat. The problem is we’ve seen this movie before during the Clinton presidency. Obama’s gameplan goes something like this.

1. Talk tough on debt and promises to cut spending. (It’s all talk and this budget shows that).

2. Wait for the GOP to criticize the budget, expecting strong attacks due to the Tea Party’s influence (check).

3. Challenge the GOP to trim, particularly entitlements.

4. Criticize the GOP cuts.

5. Challenge the GOP to shut the government down and hope they do it like they did in 1995.

6. Paint the GOP as the party of Ebenezer Scrooge and the Grinch (before they became nice). The democrats will team with their liberal media allies to do this.

7. Wait for the GOP to concede and bless a budget that’s way too big for them, but only a bit too small for the democrats.

8. Ignore entitlement reform because that’s the next government’s problem.

9. Hope for an economic recovery.

a. If it happens, take the credit.

b. If it doesn’t happen, demonize people like me who contend that Obama’s policies are destined for failure. It doesn’t matter whether we use logic, facts, analysis, history, or whatever else. Obama and the liberal media can’t let such things get in the way of a good story.

10. Win reelection.

That gameplan and this budget won’t fix things. I don’t want to see a replay of 1995 because that’ll lead to this continued replay of the 1930’s. Does Obama and/or the GOP have what it takes? I hope so.