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Where Spending Will Retreat February 6, 2009

Posted by Stephen Abott in Analysis, News.
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Secretary Gates is quoted in today’s Washington Post as saying that “The spigot of defense spending that opened on 9/11 is closing.” He emphasized that “new weapons systems should be able to address a ‘hybrid’ threat from enemies that combine high technology with insurgent tactics”. If long term cuts are coming, as many say they are, where are they most likely to be?

In the piece, Jacques Gansler (former Clinton DOD weapons buyer), says that the Pentagon budget is “primarily on ships, planes and tanks.” While procurement and RDT&E, excluding the GWOT supplemental, is approximately $200 billion according to the FY09 Greenbook, O&M and personnel costs exceed $300 billion. Thus, one of the long term keys to limiting military spending is controlling for growing medical and personnel costs. Uniformed personnel have received a 3.5% increase in pay (recently enlarged by Congress), putting their salaries above 70% of their cohorts in the private sector. With these and other benefits, military personnel compensation has increased 1/3 between 1999 and 2005. Additionally, medical costs have been rising in tandem with civilian medical spending, far outstripping inflation.

Along with rising personnel and medical cost, the “ships, planes, and tanks” have become increasingly expensive. Such rising costs have been a major component in the Air Force’s, for example, cut in the number of F-22 procurement from 750 to 184 copies over the last two decades. The Pentagon has repeatedly traded numbers for quality as systems have become more expensive over the decades and it may be more politically acceptable to cut procurement rather than warfighters’ pay and benefits.

1.The Pentagon will soon need to decide whether to keep the F-22 production line open. The last of the 184 F-22s will be delivered in 2011 but the line will need to be closed this year, because of the long lead time in producing these complicated aircraft, if no new orders are made.

2. The comparatively inexpensive F-35 project, slated to produce thousands of aircraft to replace F-16s and other legacy platforms has been beset by developmental problems. Some have argued for the procurement of more recent versions of the F-16 instead of the comparatively more expensive 5th generation F-35.

3. The Army’s expensive, complex, and much maligned Future Combat Systems (FCS) may be ripe for cancellation while its advanced networked capabilities could be folded into current ground systems.

4. The Zumwalt Class Destroyer (DDG-1000) has experienced considerable production delays and cost overruns where some believe procurement may run over $6 billion a copy, more than twice what the Navy is slating for it. Additionally, will the cheaper Littoral Combat Ship (LCS) program be continued even after sever cost overruns?

Personnel, medical, and procurement costs have been rising over the past two decades. With limited ability to cut the size of the force, considering the recent expansions in the Marines and Army, and the politically complicated medical and benefits pay issues it is more likely that Gates and Co. will aim their cuts at one or more of the programs described above. Long-term benefits may be the larger problem, but the comparatively low hanging fruit may be some of the bloated acquisitions programs coming down the pike.

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