The reasoning was that it will get shot down, it was gold plated and not needed because well..space...And here are 9 E-2D's to compensate for the capability..and they will be forward deployed and somehow survive even though you will need to have more of them to cover similar area for similar time and need them to be closer etc. Most other arguments are people working backwards and trying to justify the decision. Its cope for the most part

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OSD is willing to accept the risk of loss of AEWC capability and is bullish on space. Perhaps that optimism is because they've upped investments in space in their request and see the freeing up of resources allowing them to accelerate certain space based efforts. In which case, I'm sure they'll articulate that as they discuss this decision in the coming weeks.
We will see if Congress will let E-3's retire and be replaced by handful of E-2Ds. Also, apparently the E-7 Mid Tier Acquisition development program is still funded so Boeing is still working towards developing a USAF configured E-7 and delivering initial prototypes in 2027