One thriving sector: The business of war

The growth in defense may not continue for long. Industry analysts are projecting budget cuts in major US weapons programs as the war in Iraq winds down and the incoming administration of President-elect Barack Obama wrestles with other priorities. Defense spending has climbed steadily during the Bush administration, reaching $671.7 billion in the 2008 fiscal year, including emergency supplemental appropriations for the wars in Iraq and Afghanistan. That represents a 72 percent increase from fiscal 2000, after adjusting for inflation.

But the budget reductions are not likely to start until next fall, when President Obama’s national security team will be in place and the next federal budget year begins, suggested Loren B. Thompson, chief operating officer at the Lexington Institute, an Arlington, Va., think tank.

“There will be breathing space because of the rhythm of the budget cycle,” Thompson said.

“And even when the cuts come, some companies, because of what they do or because of emerging threats, will fare pretty well. Companies in Massachusetts and New Hampshire will weather the downturn better than others are likely to.”

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