Washington – The Bush administration is seeking $439.3 billion for U.S. military spending in fiscal 2007, about 6.9 percent more than Congress approved for this year.
The request includes $118.8 billion for the Army, a 12 percent increase over this year and the largest increase of the three military services.
The proposed spending reflects the administration’s commitment to make the military more mobile, better-connected and equipped for a long war against terrorism.
It augurs well for defense contractors, said Scott Sacknoff, manager of the SPADE Defense Index, an exchange-traded fund that focuses on defense and homeland security companies.
“Protecting our nation remains the most vital and critical element of government,” Sacknoff said in an e-mail. “For investors, this is a factor that should not be ignored.”
The Standard and Poor’s 500 Aerospace and Defense Index of the top 10 companies, including Lockheed Martin Corp., Boeing and Northrop Grumman Corp., has risen almost 42 percent since February 2002 when President Bush offered his first budget after the Sept. 11, 2001, terrorist attacks. That compares with the 17 percent increase in the Standard & Poor’s 500 Index.
Boeing Co.’s Future Combat Systems of armored vehicles, sensors and radios would receive $3.7 billion in fiscal 2007 and a total of $22.4 billion by 2011. The budget includes $2.8 billion for Army helicopters, including $740 million for 38 more United Technologies Corp. UH-60 Black Hawk helicopters. Almost $29 billion would be spent through 2011 to add commando forces.
The defense budget is 15.8 percent of the $2.77 trillion budget that Bush sent to Congress on Monday.
That figure doesn’t include an extra $120 billion the administration said it will request within two weeks for operations in Iraq, Afghanistan and elsewhere in the war on terror – $70 billion this year and $50 billion in fiscal 2007.
Congress has approved $362 billion in supplemental spending since the Sept. 11 attacks for the war on terrorism, according to the nonpartisan Congressional Research Service.
“With thousands of U.S. troops fighting in Iraq, it’s hard for Congress to say no to any kind of military spending,” said Loren Thompson, a defense analyst for the Lexington Institute in Arlington, Va.
Shares of Bethesda, Md.- based No. 1 defense contractor Lockheed Martin rose 83 cents Monday to $70.02. Its shares have increased nearly 30 percent since February 2002.
Shares of Chicago-based Boeing rose 42 cents to $71.14. Boeing shares – which have also been influenced heavily by the cyclic nature of the commercial aircraft industry – have increased 74 percent since February 2002.
