Baxter fell into his second profession almost by accident. In the mid-1980s, his interest in music recording technology led him to wonder about hardware and software originally developed for military use, specifically data compression algorithms and large-capacity storage devices. His next-door neighbor was a retired engineer who had worked on the Sidewinder missile program. This neighbor bought Baxter a subscription to Aviation Week magazine, provoking his interest in additional military-oriented publications and missile defense systems in particular. He became self-taught in this area, and at one point wrote a five-page paper that proposed converting the ship-based anti-aircraft Aegis missile into a rudimentary missile defense system. He gave the paper to California Republican Congressman Dana Rohrabacher, and his career as a defense consultant began.

Backed by several influential Capitol Hill lawmakers, Baxter received a series of security clearances so he could work with classified information. In 1995, Pennsylvania Republican Congressman Curt Weldon, then the chairman of the House Military Research and Development Subcommittee, nominated Baxter to chair the Civilian Advisory Board for Ballistic Missile Defense.

Baxter's work with that panel led to consulting contracts with the Pentagon's Missile Defense Agency and National Geospatial-Intelligence Agency. He consults for the US Department of Defense and the US intelligence community, as well as defense-oriented manufacturers such as Science Applications International Corporation, Northrop Grumman Corp., General Dynamics, and General Atomics Aeronautical Systems Inc. He has said his unconventional approach to thinking about terrorism, tied to his interest in technology, is a major reason the government sought his assistance.

"We thought turntables were for playing records until rappers began to use them as instruments, and we thought airplanes were for carrying passengers until terrorists realized they could be used as missiles," Baxter has said. "My big thing is to look at existing technologies and try to see other ways they can be used, which happens in music all the time and happens to be what terrorists are incredibly good at."

Baxter has also appeared in public debates and as a guest on CNN and Fox News Channel advocating missile defense. He served as a national spokesman for Americans for Missile Defense, a coalition of organizations devoted to the issue.

In 2000, Baxter considered challenging Representative Brad Sherman for the 24th Congressional District seat in California before deciding not to run because the district which is where he lives is Democratic and Baxter would have lost by a landslide.

In April 2005, he joined the NASA Exploration Systems Advisory Committee.

Baxter was a member of an independent study group that produced the Civil Applications Committee Blue Ribbon Study recommending an increased domestic role for US spy satellites in September 2005. This study was first reported by The Wall Street Journal on August 15, 2007. He is listed as "Senior Thinker and Raconteur" at the Florida Institute for Human and Machine Cognition, and is a Senior Fellow and Member of the Board of Regents at the Potomac Institute for Policy Studies.