That rumbling you heard this morning was the mad, frantic shuffling of papers and budget proposals inside the offices of defense contractors around the Washington Beltway, as they prepare to justify their appropriations amid a political shift in the nation's capital.

The Democrats, led by U.S. President-elect Barack Obama, are taking over the town. And while the security needs of the post-September 11 era and two wars mean major U.S. defense spending cuts are unlikely, changes in priorities and the demands of the financial crisis could create "a dramatically different defense spending landscape" for defense contractors like Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC)," says economist Peter Dawson.

More support for troops on ground?

"What we may see from President-elect Obama is a shift toward increased U.S. Army troop strength and the basic armor and weapon systems that support them, to take stress off our forces in Iraq and Afghanistan, and to improve results in the wars, and less emphasis on costly, high-tech weapon systems," Dawson said. "If that's the case, an Obama Administration could seek to delay production of the Navy's DDG-1000 Zumwalt class destroyer, additional purchases of the new F-22 fighter jets, and other programs."

The DDG-1000 destroyer is jointly built by Northrop Grumman and General Dynamics (NYSE: GD). The F-22 is built by Lockheed Martin. Northrop's shares rose 44 cents to $48.50, Lockheed's gained 62 cents to $86.53, and General Dynamics fell $1.30 to $62.47 in mid-day Wednesday trading.

Last week when I suggested keepiing an eye on General Dynamics in Chasing Value: French Toast at 35,000 feet: Gulfstream - General Dynamics (GD) I had no idea we would receive an eyeful so soon. However, reports out this morning indicate I was on to something as the Wall Street Journal reported:

• General Dynamics Corp. posted a 25% rise in third-quarter net income, citing robust government defense spending and booming sales of business jets. It also raised its full-year outlook. General Dynamics, which makes Abrams tanks and Stryker troop carriers, two mainstays of U.S. ground forces in Iraq, reported net income of $546 million, or $1.34 a share, compared with $438 million, or $1.08 a share, a year earlier.

General Dyamnics during the quarter improved cash-flow, cash reserves, contracted back-log of work, profit margins and gave a positive outlook to top it all off.

One of the things that makes GD so strong going forward is that the United states war machine keeps finding new frontiers every time you might think that calm is in order. And speaking of orders, investors shoud keep in mind that even if the war in Iraq stopped today and by the wave of a magic wand we could bring the troops and equipment home right now, replenishing our military hardware that has been destroyed, damaged, or just plain worn out will cost billions. General Dynamics and the other defense contractors should do very well even in peace time.