American Defense International, a Washington, D.C., lobbying and consulting firm, counts among its clients General Atomics, SpaceX, General Dynamics, Northrop Grumman, L-3 Communications and Raytheon. Its president, Michael Herson, who served in White House and Pentagon staff jobs and as national security adviser to several congressional candidates, weighed in as Congress returns from recess toward the end of one of the most unique election cycles in recent memory.
Q. Neither the defense spending or defense authorization bill are done. What’s your prediction for the pre- and post-election agendas?
A. Right. So we’re hoping progress continues to be made in conference, on defense authorization and defense appropriations. The problem [authorizers] face right now is what number to conference to since there are differences in the [top-line] numbers between the Senate and the House, both authorization and appropriations. So I think they can still make a lot of progress in conference, but unless one side agrees to numbers from the other chamber, or a deal is made by leadership, that’s going to continue to delay the process.
Q. The conventional wisdom is there’ll be a continuing resolution (CR) to fund the government, at least through mid-December. What do you foresee?
A. My prediction would be a short-term CR through sometime in December, probably mid-December, and then unfortunately I think they’re not going to be able to finish all the appropriation bills in time, so we would see another CR taking us into next year. I’ve heard it could be mid-March. The goal is obviously to pass as much as they can before they leave, but how the election turns out will impact what kind of lame duck they’re going to have, and the leadership would prefer not to pass and [omnibus] again. The optics of an omnibus-spending bill are very bad for everybody.
A. You’d pass a $1.1 trillion spending bill. So if they can break that up into two or three or four bills, it would be easier for them to pass and the optics are better publicly.
Q. Before the recess, Democrats blocked defense appropriations because they were afraid that once Republicans got it passed, Democrats wouldn’t have leverage to get the domestic spending they wanted. Should we expect defense appropriations to happen last?
A. Historically, if we go back even 20 years, defense is always considered a must-pass bill; it was one of the first bills to pass. As time has passed and things have changed on the Hill — I think you’re right that defense seems to be held hostage periodically to get other things done. There is still a sense among Republicans and Democrats; however, in light of everything going on in the world this is a must-pass bill. So it is not a question of if it gets passed, it’s when.
There is going to be a push for more domestic spending depending on what number they agree to conference the defense bill at. If they try to make up the $18 billion they feel was lacking from the president’s budget request, there might be some push to get some, if not all, of that made up on the domestic side. That’s going to be the rub. I have no idea how that is going to turn out. We tend to live budget deal to budget deal lately, which is really no way to govern. It is no way for the defense community to have any sense of certainty. Those discussions tend to take place in the fall. So they’re going to have to figure: "OK, how are we going to get this done?"
Q. How does that play out?
A. The fear here is that they don’t get it done; they come back in September and instead of staying the full four weeks, they just focus on a CR and leave early to go and campaign. Then they’ll come back a few days in November and come back in December and say: "Ah, let’s just throw everything into next year." Then next year comes and you have some new faces here, you have a new president and a new budget request is going to come over. Everybody is, "Oh, we have all this new stuff to deal with, the old stuff let’s just CR it for the rest of the year." That’s the fear.
Q. What are industry’s hopes and fears for the change in administration, or a potential change in Senate leadership, from GOP to Democratic?
A. Well, I’m lucky to work in the defense world because this is a less partisan world than tax and trade, and environment and energy, but what the defense world wants is just some sense of certainty and, sometimes, continuity, so that whoever the next president is is willing to work with Congress to lead to solve the problem. The problem we face right now really is the Budget Control Act is tying our hands. Both sides talk about improving readiness, they talk about the threats we face and the things the military can’t do that we need to do, and improving modernization, but they can’t do any of those things.
The BCA is not working. The BCA is Budget Control Act. It is not controlling the budget. The budget deficit this year is projected to be $600 billion, so it’s not working. Whoever the next president is has to step in and say: "Whoa, the Budget Control Act is not controlling the budget," number one. It is decimating our defenses and it is stressing us on the domestic side as well. Maybe our Ebola response could have been faster. Who knows how it’s impacting our Zika response. The problem is not on discretionary spending. The problem really is on the mandatory side. We saw Donald Trump make a lot of hay out of the omnibus-spending bill passed last year at just under $1.1 trillion. If the average American knew we actually spend $3 trillion more than that, they would be here with pitchforks and torches wanting to tear the whole place down. So they have to figure out how to get that under control so defense is not the bill payer.
Q. Reportedly the defense industry is contributing to Hillary Clinton more than Donald Trump. How are we to interpret that?
A. So those contributions are individual contributions. They are not given by the companies themselves, by their PACs. Whereas the PACs playing here on Capitol Hill are relatively equal between Republicans and Democrats, and they are working primarily with the folks on their oversight committees and with leadership, the defense community as a whole really sits out the presidential elections.
Q. How’s that?
A. Let the individuals decide on their own who they want to support and how. You see a little more support for Hillary Clinton than you have in the past versus other Republican candidates because she has experience in this world. She did serve six years on the Senate Armed Services Committee, did serve for four years as secretary of state. So she is more in touch with this community than Donald Trump has been. Historically there is no reason for him to have been in touch with the community. A lot of these people know her, know her people personally. And I think being in politics all the years I have been, people like to back a winner. She is No. 1 in the polls, and that becomes a self-fulfilling prophecy. I think if the polls were to change as we get closer to Election Day, you’d start seeing more defense folks giving more money to Donald Trump.
Q. The GOP is traditionally the more hawkish party, but there’s talk of the Senate changing hands this election. Are there concerns about a Democrat-led Senate?
A. No, because I don’t believe for a minute that one party has a hold on the national security issue. Both parties want America to be strong. They just have different approaches to it. The same on the domestic side. I don’t believe Republicans want children to go to bed hungry at night, you know. But we have different policies, different approaches to poverty and domestic issues than Democrats do. But if we take a look at, for example, the Budget Control Act, that is really strangling the defense community right now, was passed under a Republican Congress. So I wouldn’t say the Democrats are any less of an asset to us than the Republicans are. The question is always: "What is it we want the military to do, what forces and equipment do we need in order to fulfill those goals and objectives, and how much does it cost?" So if we’re going to repeal the BCA, what are we going to replace it with? How are we going to deal with the rising national debt? How are we going to deal with entitlements? And how are we going to deal with defense? It really takes a very broad view. That seems to be what a lot of people on Capitol Hill are waiting for.
Q. Spending aside, there are some fairly aggressive provisions in the policy bill, overhauling Goldwater-Nichols, aimed at acquisitions reform. What’s the industry view of provisions that promote outside-the-Capital-Beltway firms versus traditional firms?
A. With the first Goldwater-Nichols, the services were very resistant to Congress coming in and making any changes. But that was a time when Sens. Sam Nunn and Barry Goldwater and others spent years studying the problem and survived changes of control of Congress and they came up with a bipartisan solution, studying the problem so they knew what kind of solutions to offer. And it worked and it saved lives.
Q. But that is not the process this time around. Could you argue the most aggressive reforms are a Hail Mary from Sen. John McCain as the sun potentially sets on his tenure in Congress, if not as the chairman of the Senate Armed Services Committee? What does industry think?
A. I wouldn’t say that’s necessarily John McCain. It has been Congress’ approach ever since Goldwater-Nichols that everything has got to be quick. We see a problem, we put a commission together. The commission looks at it for six months at best. If we can put a commission together and they got legislation passed, problem solved and we walk away. And the problem’s not solved. What McCain’s done is float a lot of ideas. I don’t think John McCain’s going anywhere. I think John McCain is going to win reelection. Regardless of whether we have the majority in the Senate or not, he is going to be a very powerful influential force on the Senate Armed Services Committee going forward. Thornberry is taking a very measured and thoughtful approach to acquisition reform. He’s got six years as chairman so every year he is going to be doing something else. It’s smart because change in Washington tends to be slow and incremental. But at the same time while he is chairman, he can see what the effects are of what they’ve done in the early years and they can have time to modify it and change it and fix it if necessary prior to the end of his chairmanship.
Q. Aren’t there some acquisition reform provisions that industry has pushed back against?
A. Yes. There are definitely some provisions that concern industry, and the committee has been going into this with an open mind. They are meeting with industry. They are hearing what they say. But I also think at the same time is that everybody is looking to preserve their way and their piece of the pie. We need to also step back and say: "OK, here’s what’s working, here’s what’s not working." They have to come up with mechanisms that expand their scope to other companies in the US beyond the major products they are always used to dealing with.
Q. You have clients inside and outside the beltway?
A. We have seen a tremendous amount of consolidation; there was a reason. But at the same time we’ve seen a lot of cuts that have also impacted the [Defense Department's] ability to connect with where the ingenuity is taking place in America. So [defense] conferences are being cut, so there are less of those. Travel budgets are being cut, so it is hard to get uniform military to the conferences that still exist. That’s a way to get in front of those medium-size and small businesses out there. DoD has really brought this on themselves because they have been very closed off. There are a lot of companies out there that think they have technology the military can use. In many cases they probably can’t but in many cases, they can. The DoD is not open enough to meeting with these business and companies to see what’s out there, and it’s a mistake. So if they’re not going to do it, Congress is going to have to force their hand to do it.
Q. But of late, DoD has at least been moving in that direction, and Congress is pressing them to do more and faster I think.
A. Right. I think [Defense Secretary] Ash Carter is trying to do more, for example with Silicon Valley, which is a good start. But that’s just one piece of a much larger puzzle because there are companies all over the country that can provide a lot of value to DoD that just don’t know how to get their wares and their ideas in front of DoD or to understand what DoD is looking for.
Q. Does it cut in the other direction too? I mean, is there a real fear among traditional defense firms that they might lose ground to an upstart?
A. Yes. And look, the big primes aren’t going anywhere. But as the pie has gotten smaller, you see the primes going after things and doing things that they ordinarily would not have done in the past. Part of the process, too, is connecting some of these companies even with the primes because the primes end up being the system integrator anyway in a lot of these bigger programs. How do they also find out more about what suppliers and companies are out there, and what they can offer that can supplement the products that they are offering to the DoD?