It seems that depends on who you ask. The Wall Street Journal, in a recent editorial, made a strong case for the importance of naval power in an increasingly dangerous world. On the other side, Congresswoman Rashida Talib, in a response to President Biden’s State of the Union address, said “we can’t seek peace by spending three-quarters of a trillion dollars every year on weapons of war, making defense contractors and companies wealthier. We must put human rights and dignity first.”
Our blog of March 2, 2022, Guns or Butter, addresses the political conflict involved in the allocation of defense and social programs when deciding on a federal budget. We have also published a series of blogs, most recently on September 22, 2021, Sea Power, that address the importance of maintaining a significant American naval presence.
Consider, China has militarized the South China Sea, potentially threatening Taiwan, the Philippines and the Strait of Malacca, while other bad actors imperil freedom of the seas elsewhere.
Investors should recognize that federal budgets are political. Therefore, it’s up to the Biden administration to decide how to allocate money and political capital. So far it has been willing to spend on every priority except defense.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA