Interesting thoughts on the political, military and economic environment that may have broad implications to the health of the defense industry.
One of the author’s points is that DoD typicall does better under Republican political alignments than Democratic ones – no surprise there. The point he doesn’t explicitly make is that those political alignments themselves tend to pivot around perceived threats to the Republic.
On the flip side – fining the pony in the pile of sh!t – Loren Roberts views the same grim CIA data and sees an opportunity for the aerospace industry, based on the declining eye-share of the legacy media:
(Show) some imagination in leveraging any insights you have about how relevant audiences get their information.
If you don’t sponsor blogs then maybe you should, and if you do sponsor blogs maybe you should upgrade them, or make more of an effort to attract people to them.
Your host does not accept sponsorship from any major defense industry.
But he’s willing to consider offers…
(H/T to Richard for the links)
My little corner of the defense industry is willing to sponsor you for a beer should you ever find yourself in south Jersey.
My little corner of the internet is willing to sponsor you for beer should we find ourselves in the same location serving.
That is a great find btw.
Wow. I feel smarter after reading both. Thanks, those were nice finds – certainly worthy of a good pint.
The nagging question for me is, if we do suffer another round of consolidation of the major defense contractors or, as suggested as a very real possibility, one or more simply leave the business, how do you entice anyone back into it again?
As much as COTS and leveraging commercial technology is a good idea the requirements of war operations impose severe constraints not approached in other applications. The biggest one being the requirement to haul stuff half way around the world and have it work in primitive at best environment.
The hardware aspect of military operations isn’t something you want to outsource.
But, based on the larger economic issues raised it looks like we may have already reached the tipping point.
The one stat that really got me was that, for the lower 70 percent of the population, incomes have not increased (I’m assuming inflation adjusted) for 30 years. So much for adding to the middle class built in the 50s and 60s…
I’m not sure if these are worth a pint or simple demand a few to get through their depressing implications.
Well,
Let me say off the bat that the second article is one of those rare occasions where the author draws a false conclusion from a wealth of facts. Everything he gives as a fact, IE: comparative salaries, etc, is true. However, it falls into the trap of the three great lies: Lies, Damned Lies, and Statistics.
The average wages of American citizens have been driven artificially low through the invasion of some 20 millions of illegal immigrants. Where our economy would have grown on a steady rate, it was depressed through an influx of cheap labour, and a willingness of employers to pocket the difference as extra profit, rather than pass the savings along to the customer.
American citizens are perfectly willing to work, and work hard, for their pay. It’s a proven commodity and one that has driven our economic industry. Americans are NOT unwilling to do the jobs these illegals are doing. Americans cannot AFFORD to work for the lower pay rates the illegals will work for.
Why is that, one might ask? It is not because we are accustomed to a rich and flamboyant lifestyle, but because we are taxed onerously to pay for the costs incurred by the invasion of illegals into the nation.
The illegals, as a whole, do not vote, do not file tax returns, nor do anything such as might call attention to their situation. They do, however, attend public schools, many of them live in public housing, and the overwhelming majority receive their health care through emergency rooms, the most expensive way possible.
And who pays for all of this? Why, the taxpayer. Now, some will argue that illegals also pay taxes, but that is not a proven. Their are numerous cases of employers paying workers off the books, or deducting taxes from their employees wages and pocketing them and not turning them over to the IRS.
So we see a situation where almost 10% of the population is in the nation illegally, depressing the average wages and thus forcing many former tax-paying citizens into lower paying jobs, or unemployment, thus lowering the REPORTED numbers, not the ACTUAL numbers. We don’t KNOW what the real numbers are, because we have some 20 million people who are, in essence, holding their thumb on the scale when the measure is taken.
We have employers willing to increase their profits through illegally hiring these folks, and, in many cases, pocketing the excess profits as well as potential tax monies and still keeping the prices at higher levels.
If we can remove the illegals from the situation, we can readjust the numbers, lower our unemployment rates, increase our wages and decrease our taxes, for a better situation all round.
The aircraft has a maximum gross weight. When you exceed it, either some of the baggage, some of the passengers, or some of the fuel has to get off. Our Aircraft of State is way over gross and we need to remedy the problem before we all crash and burn.
Just sayin’…
Tim:
Good point but I doubt if 12 million illegals are solely responsible for this situation. The decline of manufacturing, the lack of growth in good paying jobs, the inability of companies to find workers to fill those jobs due to a lack of production of qualified applicants from our educational system at all levels are all factors.
It is a national disgrace that we have high tech employers having to plead for more H1 visas in order to hire enough engineers. We simply aren’t graduating enough of them because not enough Americans want to go into engineering for a variety of reasons. A large number who do need the H1 visas to stay as they aren’t from around here. Why is that? I have my theories…but not enough time or beer to expound here.
Immigration is a problem and living in Texas I see it everyday. As an employer I see what comes through the door looking for work and I have had (and gotten rid of) my share of employees who couldn’t produce a Social security card that wasn’t produced by photoshop. The sad thing was they wanted to work and the lower level employees who were legal citizens came in with a chip on their shoulder expecting everything to be handed to them. Its not a pretty picture on the front lines of our economy either – at least nobody is shooting yet but that might not be that far off.
The problem we have with the defense industries is the massive capital investments required. We are still running on the momentum industry acquired during WW2. It is easier to update, than produce totally new tooling. You are also able to make new tooling if you have a good income from the older stuff you’ve made. If we have any companies that exit the arena because of the current idiots in office, we will simply be further down the road to being unable to defend ourselves, or make wealth.
Dan Gallery said it well, and I paraphrase because I can’t remember the exact words, “we didn’t win the war because of brilliant strategy, we won the war because we were able to use our industry to recover from our mistakes.” And, we made some doozies.
The industry that built the country and won our wars is leaving because the business environment in our country is increasingly toxic. We can thank the left.
Most people are only dimly aware of the fact that over the last 25 years, the United States has largely lost its steel-making, commercial shipbuilding and consumer electronics industries.
Being intimately aware of consumer electronics, I can tell you that ten years ago this manufacturing was done in the U.S. The next thing you know the company told its engineers that some of the “overflow” would be manufactured in Mexico. Shortly there after all assembly techs, which BTW were good jobs for those with a HS diploma, were laid off and all manufacturing was done in Mexico.
The next iteration was the movement to China and the PI. Now, my husband spends at least 3 months/year in China, Taiwan or the PI. I guess he has chased his job to the dark side of the moon…
How long will it be until the Chinese no longer need manufacturing engineers from the U.S. to help them? Five or ten years I think.
Hey Virgil, that’s a secret message to you…
Mr. Adams,
Mr. Thompson derives tremendous sales revenue from LMT. Your
offer to buy beer is gratuitous.
?
“?”
oooh-oooh! I know the answer to this one…
Been there. Done it. Will again.
Comment in the wrong blog…
(slow afternoon at work…)
Well…since that particular comment thread has nothing from “Mr. Adams”, but otherwise fits the context…
“?”
AW1 Tim raises a valid point regarding the depression of real wages by illegals, but forgets another aspect or two of the non-growth of real wages in the last 30 years.
First, many products have come down in price to such a degree that they are now considered staples, not luxuries. To wit: a cell phone. Or PC, or color TV or what have you. This applies across many areas beyond consumer electronics.
Second, many of us enjoy benefits through our employers that simply were not offered 30 years ago. The cost of those benefits has to come from somewhere, and to a large extent, it comes fr0m what would have been increases in our wages.
We in the west have succeeded in creating a “new” society. It’s not one that is conducive to imparting wisdom and knowledge to its youth or understands the merits and inevitability of comparative advantage and it has taken the oldest motivators off the table. Hunger and shame are concepts foreign in the west.
Who would pay for a student to go off and study “Womens Studies” anywhere let alone in the Ivy League? You and I are doing that through our subsidy of the various student loan programs. It appears that our elementary schools don’t prepare students to study math or science in high school and so they arrive in college unfamiliar with either science and elect to get degrees in things that have no value and are of no use in the market place.
Let’s not forget that it was the unions that drove steel production and auto manufacturing out of America plus the endless regulations and interference from local, state and federal bureaucrats. While it all boils down to market forces that is simply stating that the market conditions in the US have become harshly adverse to most types of industry and nobody should be surprised when it goes offshore.
XBradTC,
And that dependence upon technology is our Achilles heel. Look at all those around you, and what is the one thing they all depend upon? Electronic transfer of data. From the cell phone through the Blackberry, the laptop to the Debit card and ATM: All are dependent upon the data streams being open and running smoothly.
Does anyone besides me even carry cash anymore? My wife doesn’t. I’ve been on her case for the past couple years because all she ever carries is her ID, and a debit card and a credit card. She NEVER carries cash. She always depended upon me to have it for the taxi or this or that.
Think about your daily routine and how YOU depend upon plastic and the intertubes. Buying gas, buying lunch, renting a car, a hotel room, buying online, or even getting cash from an ATM in an unfamiliar town.
Now think of what a single EMP could do to our way of life. What happens to the nation when all the elctronics stop? When you can’t get cash from a machine, or buy daily items because you can’t use your plastic? Gas? Nope.. the machines run on electric pumps. Cell towers shut down as circuits are fried. Cars and trains and buses stop.
If you are traveling and don’t have cash, you are SOL. Likely, it’ll be at least a couple days for you to get cash from your local bank, since everything they do is computerized now as well.
Nope, if’n I wanted to REALLY cause harm to this nation, I’d try and loft a nuke over the east coast with an airburst a hundred miles up.
People would literally starve, and panic would ensue because life these days depends upon gadgets and folks have forgotten how to get by without them.
But I digress…. yeah, with costs so low, people have muckled onto tech in a big way and it’s gonna be a nasty surprise sometime when it all crashes.
Respects,
Quartermaster and Babs have it in a nutshell, the business laws and tax laws in this country make stashing your money and your manufacturing elsewhere a better deal, all else being equal. That works for us short-term, keeping the costs of goods lower without those taxes and the extra folks on the payroll for HR regs and OSHA regs compliance, but at some point you might want to, you know, build something and find you can’t do it here.
Take the 16″ guns in the old Iowa class. Not a steel mill in the country that can churn that out. The only places I can think of that might even try are heavy equipment casting plants, but then you’ve cast barrels and not forged. It would take an entirely new facility to make them, and if we only need three or six, where’s the profit?
Seen it in everyday life too. When I was growing up there was a tool called a “bean hook.” It was a sharpened metal hook with a sharpened flat bottom, like a capital J only with the bottom flat, attached to a steel rod with a wooden handle. Farmers used to pay kids to walk their soybean fields with these things, cutting weeds.
I’ve not seen kids walking beans in over 20 years. Now I can’t buy a bean hook. As much as one would be useful in tending the garden or removing the occasional thistle from the pasture, they simply don’t exist.
Why? Minimum wage went up, the costs of labor increased, soybeans became more resilient to broadleaf herbicides, herbicides became more selective. We priced labor out and made chemicals more cost-effective.
We’re doing the same with jobs. A master machinist costs $130K/year to employ, but a CNC machining center can be programmed by a $40K junior engineer, tended to by a $25K tech, and churn out four times the work without a sick day and will be on the job for 20 years.
But then, if that engineer in Bangalore or Mexico City is willing to do the job for less money and can do equal work, is it fair to deny them the chance to work their way up to our level, given they’ve invested in themselves?
– Max
After WWII the US was basically operating within a closed economic system. Our potential economic rivals–Japan, Germany, Italy, France and GB were all flat on their backs and the rest of the world–relatively speaking–were all in the Stone Age. Thus we could afford things like “pattern” wage agreements across entire industries like the auto industry. And without significant overseas competition, large industries like the auto industry could simply pass increasing wage costs along rather than suffer debilitating strikes. No more. The rest of the western world was rebuilt and the rest invested heavily in the education of their workforce up to first-world standards. Both leap-frogged the US in many areas via installation of modern infrastructure and communications technologies without the drag of legacy technologies. Now, with highly educated labor forces and low labor wage rates, no one’s job in the US is safe as long as there is a Bolivian tin miner left alive willing to double his dollar a day salary by assembling washing machines on the Whirlpool assembly line.
We. Are. So. Screwed. (h/t Byron)
As in: “Fatally behind the power curve.”
All points about lower cost wages overseas draining jobs here are valid. A point I’d like to add to the discussion is the focus of our education system to steer people to college, or else. Not everyone wants, needs, or should go to college but our educational system, by and large, has made that the option of choice and has let all other vocational prep type pathways die on the vine.
There was mention of the CNC machinist – I know a bit about that as I employ them. You would think that the great State of Texas, who finds quiet a bit of them in its workforce would have in its educational infrastructure a solid path to train them. Well in the entire state there are exactly three community college programs for such a solid, well paying (up to 60-80K for good ones) jobs.
One is in Brownsville as far south as you can go. Anecdotally I have been told that Bell Helicopter in DFW hires 100% of the graduating class because that is their best source and it is over 500 miles away.
I’ve seen it up close in School Committee meetings designing new high school programs. All focus is on College Prep. All well and good I suppose but the gap between the Educated Upper tier and the lower tier widens.
Now when I talk educating the lower tier we need to raise the bar – computers, electronics, etc. should be part of EVERY curriculum as there is no job in the modern economy that does not expect you to be able to use them and use them well.
If we only prepare kids to go to college then those that don’t have to learn on the job or go in the military. As the miitary gets smaller the number left to wash up on the beach to flip burgers grow adding an increasing burdern to society.
The idea that everyone needs to go to college is one the Education mafia pushed to our detriment. And yes I am College Educated and this is not an elitist attitude rather a realistic and compassionate as well as self-motivated one.