As CEO of an aerospace and defense parts manufacturer, I am deeply concerned by the prospect of significant cuts to our national defense. At 4.9 percent, defense spending as a percentage of Gross Domestic Product is already below the postwar average of 5.3 percent. The U.S. aerospace and defense industry employs more than 800,000 high-skilled workers, and indirectly supports another 2 million jobs. Aerospace traditionally accounts for our largest manufacturing surplus – $51.2 billion in 2010, with total 2010 sales of $214.5 billion.
In North Carolina, the aerospace industry employs roughly 10,000 high-skilled workers across more than 180 companies. The state’s colleges and universities produce nearly 3,400 engineering graduates each year, many of whom enter aerospace and related industries. We have a well-defined and growing aerospace cluster, and the work-force to sustain it. In addition to aerospace, military installations and related industry in the state have an estimated $23 billion annual economic impact.
Thus, in addition to the paramount role in our national security, aerospace and defense manufacturing play a vital role in our country’s economic security. Investment in aerospace and defense leads to innovations that also benefit the commercial sector. Our country has a competitive advantage in aerospace manufacturing that our leadership would be short-sighted to undermine by ill-advised cuts.
Therefore, I urge the Super Committee and Congress to avoid fund sequestration and to work for a long-term, predictable and binding solution to reduce our extraordinary budget deficit. In addition to the impact of significant defense cuts, LORD Corporation cannot make decisions about its long-term strategy and growth in the absence of sound economic policies that are conducive to economic expansion. The solution to our country’s fiscal challenges must come from a combination of entitlement reform and comprehensive tax reform.
Currently, the federal government borrows roughly 40 cents for every dollar it spends. Moving forward, entitlement spending will make this problem worse if Medicare, Medicaid and Social Security are not addressed. Last year, Federal Reserve Chairman Ben Bernanke warned Congress that things will come apart if entitlement programs and the deficit spending they require continue on their current path.
Spending required by these programs is not sustainable – projections show that without entitlement reform, federal spending could consume one-half of the economy by 2056. The economy would either be sunk by the debt required to finance this spending or by the tax rates required to generate revenues to cover spending, or by a combination of both.
While spending cuts have to be a major tool to reduce the deficit moving forward, Congress should not pass up the opportunity to increase the productive potential of our economy by undertaking comprehensive tax reform. At the corporate level, America has the second-highest tax rates in the industrialized world. We also have a tax code that is unnecessarily complicated and burdened with loopholes.
Corporate tax reform should reduce the top marginal rate, broaden the base and spur new investment. Such reform could be accompanied by reduced deductions, subsidies and other tax breaks to make reform revenue-neutral. In this fragile economy, it’s critical that businesses have a predictable tax code that encourages job creation and new capital spending that will increase productivity.
I am confident that our country will continue to lead in the world and serve as an engine of global growth if we make the tough choices today about our fiscal future.