DEFENSE CUTS - ANOTHER BIG LIE

BOSTON (MarketWatch) — Disgusted with Congress and the so-called “super-committee”? Cynical about politics? Convinced that America is in decline, and that our system of government is childish and corrupt?

If so, take a look at buying some defense stocks like Raytheon (NYSE:RTN) , Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC) . They may offer a way to bet on everything bad.

Why?

If you follow the headlines, and believe them, you would probably think that defense spending is about to be slashed to the bone following the collapse of the “super committee”. Defense secretary Leon Panetta is warning of a “doomsday” scenario for national security spending. Congressman Buck McKeon, the chairman of the House Armed Services Committee, warns that automatic cuts will end up “crippling our military.”

There’s just one problem. It’s total nonsense.

What Washington calls a “cut” is really just a more modest increase than you were expecting.
Veronique de Rugy, a senior research fellow at George Mason University’s Mercatus Center, says that under these alleged post-committee “cuts” defense spending is actually forecast to rise from 2012 to 2021 by 16%, from $695 billion to $818 billion. Boy, that’s some cut!

The Pentagon had been expecting a 23% rise, and in Washington a slow increase is called a “cut.” But even if we get some inflation ahead, she says, the worst case scenario under the current plans is to a see “a freeze in real terms.”

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