A great Republican president took the opportunity at his farewell address to warn Americans of the dangers of private interests embedding themselves in government and using taxpayer dollars to grow large and powerful. It wasn’t George W. Bush discussing the bailouts or Ronald Reagan speaking on market deregulation following Black Monday, but rather Dwight D. Eisenhower speaking of the dangers of a military-industrial complex and a government-subsidized “permanent arms industry.”
Ike was a president of vision (for which the New York Times endorsed his candidacy, the last Republican they did so for before becoming a mouthpiece of the Democratic Party) but couldn’t possibly have seen the value of the American military expansion he warned against.
Greater military interests succeeded in bringing about a collapse of the Soviet Union, for instance, as well as developing the ARPANET technology that would one day become (contrary to Al Gore’s claims) the very Internet you are using to read this right now. Yet his words resonate at a pivotal moment in American history today, when we change the guard more dramatically than at any time before.
Echoes of the “Kansas Cyclone” can be found in Trump’s foreign policy strategy. As commander-in-chief, he’s made the unprecedented decision to ensure our allies pay their fair share for the privilege of American military protection. Such promises are meant to cajole, not threaten: NATO requires that all members commit 2% of GDP to defense spending and only half of its members do so. Yet this warning does not suggest a reduction in military spending. Far from it.
Trump is no leader to beat swords into ploughshares. He campaigned on the need to rebuild a “depleted” military after Obama disastrously decided Iraq and Afghanistan would no longer require further commitments, and the military no further funding growth. He was far from the only Republican to call for such change — recall Carly Fiorina’s attempt to demonstrate she had more stones than anyone else on the debate stage.
Military spending often increases during Republican administrations and decreases during Democratic administrations; one may wonder whether Clinton’s decisions to cut military spending might have hampered efforts to kill or capture Bin Laden during the 1990s.
The first day of the Trump Administration set the tone for his tenure as Commander-In-Chief, launching no less than 31 air strikes against ISIS facilities in Iraq and Syria. In fact, the new Secretary of Defense James Mattis managed to do something in one day that Obama couldn’t do in eight years, critically injuring (and possibly killing) ISIS leader Abu Bakr al-Baghdadi. After criticism of Trump’s failure to outline his strategy to defeat ISIS, it’s clear that some cards are best played close to the chest.
What will Trump’s military budget entail? Bad news for Lockheed Martin, for one. These contractors have been singled out by Trump for their absurd failure to deliver the F-35 after years of delays and going $163 billion over budget. In fact, some analysts stated that the new Russian Sukhoi and the Chinese Shenyang already have an advantage over our F-35s — before a single one even hit the tarmac.
Lockheed is by far the largest military contractor, but they’ve got ample competition. Boeing receives only a fifth the number of contracts, but unlike Lockheed Martin, they’ve done well delivering on time (and their stock has performed far better in the past 52 weeks anyway).
Other big winners under the Trump Administration will likely include Raytheon, who manufactures smart missiles, and General Dynamics, a major ship-builder. Humana Inc is an interesting opportunity for investment: rather than manufacturing military hardware, they sell insurance subscriptions to our active military members.
It’s likely Trump will continue the expansion of drone warfare began under George W. Bush, one big winner will be AeroVironment, the builders of 20,000 4.2-pound Raven drone that scout for combat units. The drone industry remains young, with fantastic growth potential: estimates of 50% growth by 2020 make it an opportunity to buy low with a very good chance of selling high.
For all of Eisenhower’s rhetorical warnings, military spending hit a post-war peak during his administration, amounting to five times that of today (as a percentage of GDP). Short of an all-out war, Trump will not and cannot possibly raise it to similar levels. But he will raise it, and not by insubstantial margins. This is good news for our soldiers, sailors, and airmen. It’s also good news for Americans who put their money where their patriotism is.
Regards,
Ethan Warrick
Editor
Wealth Authority
