Procurement and research are in the ‘gaining’ portion of the budget
Hat tip reader ilsm for this article by Tony Capaccio, Bloomberg News, Bloomberg.com
July 6, 2010
U.S. spending on weapons through 2016 likely will grow faster than the overall defense budget, which will have annual increases of only about 1 percent above inflation, according to Pentagon Comptroller Robert Hale.
“Our goal would be to get forces and modernization to grow by 2 or 3 percent,” Hale said in an interview, while saying that “it’s not a given.”
An increase in weapons spending will include greater purchases of Bethesda, Maryland-based Lockheed Martin Corp.’s F-35 fighter, new ground vehicles, ship construction, satellite systems and unmanned drones, according to the Pentagon’s long- range plan. Northrop Grumman Corp., of Los Angeles, and Chicago-based Boeing Co. also stand to benefit.
Some money may be shifted into equipment and personnel accounts from an effort to cut $100 billion of overhead costs over five years, announced by Defense Secretary Robert Gates on June 28, Hale said.
“Procurement and research are in the ‘gaining’ portion of the budget,” Hale said. “The goal would be to move money from support-type activities — operations and maintenance, military construction — into acquisition.”
maybe it’s just so all too obvious to comment on
we have a deficit commission determined to cut the food budget of a growing section of the population,
but we are increasing the defense budget.
on accounta the War in Europe and the Soviet Menace?
I think what we have here is a failture to communicate. There are people whose only interest is to get more money for themselves, and they will lie and steal to get it.
Which is why “rational” discourse can never solve any of our problems.
Maybe a new cop show is needed like 24…reasoning with the robber while he goes about his/her business.
Economists are unfamiliar with the reason why the dollar ceased to be convertiable into gold. It was soley the overseas expenditures by the Pentagon that delivered the death blow. I.e, the private sector ran surpluses in every year but one, while foreign unilateral claims against the dollar were accumulated by our far flung military bases and operations, including the Viet Nam & Korean wars.
The problem with military hardware is that the goods are not offered in the free markets. Thus these expenditures tend to be very inflationary. Weapons procurement should be analyzed very carefully.
Flow5,
True.
Heating up the military sector takes resources away from better uses in the economy. Military spending delivers structural deficits.
The unit price of weapons the US DoD procures has skyrocketed. You might call it capitalization in exchange for smaller force structure. That is too kind by orders of magnitude.
The F-35 Lightning II renamed to hide the delays, failures and overruns, Joint Strike Fighter, has delivered a 76% increase in unit price and is way late to do any of its design tests and over weight to boot.
This is typical if rather more than the usual 25% increase in price, most systems keep the price down by trading quality which creates a bow wave of configuration changes, larger support burden and lost utility to the stuff being broken.
That said for a force structure 40% less than the one that faced the NVA and Red Army in 1970 the DoD spends as much inflation adjusted money.
That it wants a 1% over inflation increase to bottom line and a 2-3% above inflation procurement line means the US will spend much more on the military industrial complex than during the cold war.
There is no industrial age enemy to tilt against.
There is no enemy worthy of building such a capitalized military other than the enemy which would cut the profits of opulent military suppliers.
The deficit commission is a farce.
Resources are taken from the productive economy for the profits and jobs which do not increase productivity rather military spending decreases national productivity for things that matter in commerce.
Until the rest of the world starts building their war machine, the US needs to devote more investment to producing consumer goods, that sell and reduce the trade deficits.
Structural deficits are a security issue and they are caused by military spending rather than entitlements.
Maybe Obama is clueless or the pentagon is not listening or or the whole is run by the military industrial complex.
A link:
http://www.huffingtonpost.com/rep-barney-frank/why-we-must-reduce-milita_b_636051.html
Of course the reality was that for almost all practical purposes, the dollar ceased to be convertible into gold before the Defense Department spent much overseas. Indeed, before the Department of Defense or the Pentagon existed. FDR made the ownership of gold by US citizens ILLEGAL, except for small amounts of jewlery, rare coins and the like. It is a strange sort of “convertiable” when neither I, my friends, nor indeed the Rockefellers, can exchange their dollars for gold without breaking the law. The fact that under special circumstances they’ll allow some Saudi prince to convert a portion of his petrodollars into AU seems of little relevance.
The militarism of the cold war was a race to bankruptcy, the US out lasted the USSR, based on the capacity reserved from being the major supplier to the allies and not being bombed out during WW II.
What happens when a country devotes a large portion of its demand to satisfying militarists is that demand for consumer goods competes, loses and is satisfied by a trade deficit.
Thus the US could compete militarily in the 50/60’s since it had excess capacity from WW II that could be transitioned to cars and blue jeans and at the same time a war economy, while the USSR which was half occupied had little or no excess capacity.
While the US spent 10-14% of demand on warfare the rest of the world built up productive capacity so that by the 1970’s Germany, Japan, to a lesser extent France and the UK were selling consumer goods to the US which were not available due to resource demands of the cold war effort.
Thus Ike talked about taking shirts off the backs of working class people. Melman discussed the ‘sacrifices’ the economy was making for structural deficits to beat the soviets.
Once the soviets evaporated the US reduced demand for the war machine to about 3% coincident with the dotcom bubble and the 1990’s expansion.
The return to perpetual war has caused to US to approach soviet economic conditions.
Was it planned by republicans to bankrupt the US pursuing perpetual war on terror whatever that is and on the US economy as an alternate victim?
The undue influence of overly compensated jobs absorbing too many resources is self sustaining with enough money skimmed to buy congress and keep the harmful to productivity military demand going.
Bah, humbug! You guys are so ….. young.
We’ve been going through this for 50 years now, squeezing down the numbers of troops, getting rid of obsolete tanks and missiles and other hardware, replacing the Mark VI-vintage radar systems with Mark XIV’s, and the like.
It’s expensive, hideously expensive. But after the dust clears, in the couple of years between current wars and the wars of our next generation, the new expensive hardware and the new expensively-trained soldiers and sailors will costs us say 3% of GNP rather than the 4-5% we’re currently spending.
Military equipment becomes more capable with time, military capabilities more imposing, while costs drop — just like computers and washing machines and satellite communications. If you don’t like the military philosophically, fine, that’s your business. If you think a large military capability is a bad thing because US politicians will put it to bad use, I won’t argue, I might even agree with you. If you want to argue that the 4% or so of GNP currently devoted to military spending might better be spent on energy research or road building or boosting healthcare for children, I’d quibble about the amount but not the basic idea.
But it’s silly to argue that a steadily diminishing quantity of military spending is ruining our economy. Look at the last fifty years of history and wise up!
Mike Shupp,
Any facts?
“But it’s silly to argue that a steadily diminishing quantity of military spending is ruining our economy. Look at the last fifty years of history and wise up!”
The only things diminishing are force structure, because you don’t need as many battalions to deliver the profits for the profiteers.
This is fact: in 1970 the military consumed more than 8% GDP. In 1999 it was around 3.5% Gdp. In 2010, it is 6% GDP not including he war spending which is “supplemental”.
The fact is that GDP had risen faster than DoD waste spending until 9/11 and the only thing lower than in 1970 is the percent of GDP. The DoD squanders more than what it spent in the drive to bankruptcy in “combating” both the VC and Red Army.
The other things diminishing in military spending are value for the scarce resource, truth about the needs for the new expensive stuff for no enemy, and the number of specifications achieved for the useless stuff.
In the past week the Director of Test and Evaluation for DoD affirmed that more than half the systems tested were not “suitable”, meaning poor quality and too expensive to keep running even at reduced readiness compared to what was suggested in the requirement documents. That these failures were built throws away any reason for DoD to expect to cut operations and maintenance funding to pay for more unsuitable stuff to be broke all the time.
Good thing there is no one else tilting toward bankruptcy, they might be tempted to attack the wildly expensive useless stuff.
The force structure in terms of the number of units and their effectiveness has decliined but not the cost and profits.
All from “undue influence”.
Have to have facts.
Thanks for thinking we are young and have no historical sense. But I must disappoint…we do.
I am young, for my age………………..
I keep being told to stop acting like a kid!!
Boy, it’s hard to get a comment noticed here most of the time. Rdan and ilsm, thanks for your attention!
Consider this: Used to be a company named Grumman out on Long Island in New York. Gone now — it’s a branch of Northrop. Used to be a company named North American which built fighters and bombers and spacecraft. It got bought up by Rockwell (which made auto parts primarily) some years ago, and was eventually absorbed by Boeing. Douglas Aircraft was a thriving firm in the 1950’s, then a not so thriving firm bought up by the McDonnel Corporation in the 1960s, which in turn was swallowed by Boing in the 1990s. Vought Corporation built Navy fighter aircraft, then was acquired by Ling (a steel manufacturer, if memory serves), then spun off to be acquired by Northrop in the ealy 1990s, then spun off again this past decade to UTC (I think that was the buyer). Lockheed merged with Martin Marietta. Marquardt died. Alliance-cum-ATK-cum-Thiokol has been at a standstill for 30 years, supported chiefly by solid rocket boosters for the space shuttle, and is about to wither away now the shuttle program is ending. GE sold off its Space Division long ago. General Dynamics may still be reworking “electric boats” but no one’s designing new classes of submarines these days. Is Chrysler still building tanks? Anybody remember Chrysler? Anybody remember tanks for that matter?
Yes, I know the military budget is high, insanely high. I’d like to chop about 300 billion/year out of it myself, right now. But the overall picture _I_ see is that the military industrial complex has been melting away like an ice cream cone on a hot sidewalk since the end of the Viet Nam war. Soon we’ll be bailing out of the Middle East, and the military will be down figuratively to a soggy empty wafer which no one wishes to claim.
I repeat the basic point: The military industrial complex is shrinking. The companies that formed it are shrinking or dying or bailing out. You’re arguing that you don’t like the pace, but you are getting what you want.
Seriously, guys, do you think there will be more soldiers in ten years? Do you think there will be more ICBM-equipped submarines? more aircraft carriers? more landing craft for the Marines? more fighters in the skies? more armored troop carriers waiting in depots for deployment? more happy ROTC students in universities signing up for Infantry “because that’s where the action is and the promotions are”?
C’mon C’mon, dudes. We’re in the midst of a historical transformation. Have the grace to admit it.
Mike,
The company names disappearing only implies the concentration of profits and undue influence in fewer more powerful, no competition “players” who sell junk which Director of Test says is no good but still gets bought because of that undue influence.
Northrop and Grumman merged, there was no take over, and the larger more powerful corporation began to buy up smaller ones, keep their influence and get into other things than navy fighters and components for AF bombers. The larger NG is now a multi-faceted conglomerate, and from direct experience not very good at delivering anything for the money.
Most of the plant acquired through merger are still on the warfare state dole. The big names spread the dividends
“Seriously, guys, do you think there will be more soldiers in ten years?”
Of course not but there will be more spending, they don’t need soldiers there are no profits from the military personnel budgets.
Some years ago I was a student at the Defense Systems Management College’s program managers’ course a guy named Norm Augustine, Chmn of Martin AMrietta at the time told a story.
He said this to the whole multi hundred student class of aspiring program managers, military officers and high grade civil servants.
“In a few years the cost of military equipment will rise so high that the services will be able to afford only one fighter, the F-22/F-35 almost there, as are the next generation of most new unneeded weapons systems.
He said when that happened the “AF would get it one day a week, the Navy another and the Marines and Army would have it a half day each.”
The rest of the time the thing would be in maintenance because it would not be so reliable.
The shock was at the time it seemed probable. That was 20 years ago, I am not so old.
What your ice cream cone of force structure is melting an analogy that Norm, a multi millionaire on war profit stock options was talking about: undue influence, consolidation and power over need and reason.
The ice cream cone of unneeded forces is melting but the share of GDP is rising and the profits are concentrated to the extent that all we should do is save the manpower and resources and just cut dividend checks.
After all these years I remember it for the candor.
And if you think about it, from the Capaccio report in the post, increasing the DoD budget above inflation is how they increase the percent of GDP as well as the total dollars spent.
shupp
and i might agree with you about the military spending… military keynsianism and all. but with axles running around saying we have to cut social security because of the deficit… so we can raise the defense budget. i say we have gone insane. evil insane.
shupp
nice anecdotes. did you miss the part where the share of GDP is increasing. not even counting the collateral damage.
Shupp,
Worry why my grandkids’ shoes are made in Bangladesh, why micro circuits are made in Singapore? Worry why the US trade deficit is 300B or so a year.
Why is all that consumer stuff made overseas?
Why worry that Chrysler is not on the Army dole?
Chrysler, making tanks, hell they are not making enough cars.
Why should Chrysler make tanks when there are people driving old polluting gas guzzlers?
Tanks don’t do anything for anybody.
The US has 10,000 Abrams’. The Army decided it was smart to replace them (and Bradley and APC and Palladin….) all with air mobile tanks (a new class of common ground vehicles) all less than 30 tons, they could develop them in 5 years. That was 2003 there are no 30 ton replacements today they shuttered the waste and lies program. Air mobile tanks is contempt for the economy. Worry about Abrams growing old and need replaced when the enemy has no tanks is contempt for the taxpayer and working people paying taxes for the expensive war profits.
The Future Combat System (craziness, I did a little consulting in it) was a huge fleecing of the US taxpayer, like all the rest of these weapons. It was sacked because it was too epxensive and the idea insanity. 30 ton tanks to be airlifted where we have no logistics, to justify huge cargo planes and huge tanker aircraft, all to smoke some guerilla with no weapons in some remote place…………….
Shock and awe 2000 klicks for a decent road! That is pillaging the US, no more.
It is better Chrysler made cars than tanks.
As to the next generation aircraft carrier, the ones we own are bigger by an order of magnitude than the Brits’ and French ones, no one else has any.
That the new one costs $25B is craziness.
That $25B times 11 is better spent anywhere else.
Why American/Rambler does not make cars (it no longer exists) is because the US war machine made it cheap to import VW’s from Hitler’s old design house. And Toyotas, etc.
Worry less about faded war profiteers who are now subsidiaries of connected giants and care about the industries the US lost because the war machine took away resources and drove up technical and manufacturing labor and removed investment from the rest of the economy.
Chrysler making tanks indeed!!
GM made airplane in War Two, should they be worrying thatthey don’t get in on that welfare today?
Talking points about DoD spending growing less than inflation inferring wrongly that the war machine declined are duplicituous The war machine must justify the crazy tactics which sell hugely expensive hardware and do not match the reality, nor rational strategy in the world.
I came a cross a piece on the Ministry of Defence which is planning to cut aircraft “force structure”.
The UK exchequer funds it Ministry of Defence at about 7% of total outlays, this looks to be going down.
The US on the other hand funded war at 21% of total outlays (FY 08) including in that total health, social security and medicare.
If the UK has room to cut…………………
What should the US do?
There is all kinds of room to fix the deficit and not make Grandpa eat pet food.
The decline in the percent of GDP to devoted war seen in 1990 through 1999 was real growth in warfare spending but slightly less than inflation.
Need and successful tests not GDP are the measure of defense spending, the US is being fleeced.
ilsm says it
but just to be clear: the time to build up your army is when you see a real threat at least on the horizon. spending billions and billions before that time just means you start the next war poor and with the wrong stuff.
“Consider this: Used to be a company named–“
Yeah there used to be a company named Humble Oil, and Esso, and Mobil was not just a component of Exxon-Mobil and you had Standard stations. Doesn’t mean Big Oil went anywhere just because some store signs changed.
Or you take a look at the major manufacturers of computers circa 1990, while the companies mostly remain, the product lines don’t, this doesn’t mean we exited the Age of Personal Computing.
Seen Pan-Am planes recently? Allegheny Airlines? Southern? TWA? We could play this game all day.
“The militarism of the cold war was a race to bankruptcy, the US out lasted the USSR, based on the capacity reserved from being the major supplier to the allies and not being bombed out during WW II.”
Well, that and not being highly dependent on a single commodity for hard currency, having a non-centrally planned farm sector that never, ever left the domestic populace wondering where the next truckload of food would come from, and from gradually proving Kruschev wrong about burying us in the fruits of glorious Soviet production. The chioce of economic system was a pretty important factor.
“A portion of State department expenses are actually military as well. “
But even if all the State Department budget was a DoD expenditure, it wouldn’t change the DoD share of total discretionary outlays much. Housing some part of the State budget in DoD is, from the DoD perspective, trivial. You know – DoD spends more on military bands than …blah, blah. Faces, bases, supplies and weapons are what cost the bulk of the money.
kharris
i think you are overestimating the importance of economic system as compared to resources. (and yes i know about Japan).
the russians moved from the dark ages to a world power in about 20 years under their choice of economic system. don’t know how well they would have done with their system if they had enjoyed the advantages of the richest country on earth.
now, if you want to point to N Korea v S Korea and other examples of bootstrap economic miracles, i am open to persuasion up to a point. But give the Russkies a break. After all it was US forcing them to spend themselves into bankruptcy ™.
oh, yes.
they didn’t do so awful well with their choice of that other economic system after 1990. hmmm.
how about veterans disability?
The reported budget it will erode operations and maintenance budgets to pay for 3% above inflation annual increases in buying useless new stuff.
In 6 years that could amortize up to a 17% reduction in inflation adjusted logistic support, a thing I know.
Military personnel accounts are linked to inflation and won’t be reduced, likely to rise to put up cash for military retirement accounts which have no “trust fund” instruments. Construction is largely pork and often necessary for the new stuff increasing by 3% a year and will not be cut.
What is wrong is that the new stuff has a large maintenance and supply burden to keep them flying or steaming since the procurement never delivers a quality product and overruns take away support investments.
The budget will buy new stuff which won’t be logistically sustained.
So much for the fiction of military requirements.
But the military industrial complex’ healthy conglomerates will have steady dividends.
And they will cut social security………………………..
In many ways the US military industrial complex is run as the counterpart in the USSR.
A very thoughtful piece.
He did miss the point about a few making a lot of money and other economic aspects but he is touching on the psychological issues.
Why the US reverts to militarism……… “If you have a nuke and you spent spo much getting it.
Then every issue gets nuked.”
And exceptionalism!
A very thoughtful piece.
http://www.huffingtonpost.com/william-j-astore/hope-and-change-fade-but_b_640026.html
He did miss the point about a few making a lot of money and other economic aspects but he is touching on the psychological issues.
Why the US reverts to militarism……… “If you have a nuke and you spent spo much getting it.
Then every issue gets nuked.”
And exceptionalism!
Bruce, ilsm —
You’re right. I made a bad argument. Not totally correct, I hasten to add, but ineffective.
What I said was that the number of firms in the defense business had diminished. Coupled with layoffs in the early 1970s and 1990’s in that industry, this struck me as evidence that the defense business was shrinking in some terms — spending on it was diminishing either absolutely or relatively as the rest of the economy grew.
It’s a legitimate counterargument that while the number of firms decreased, the remaining firms did more business, so the total defense spending did not fall. I’m actually unconvinced that spending did not fall as the defense industry contracted, but I concede the logic of the argument.
A related argument you chose not to make is that manufacturing as a whole diminished as a percentage of GNP in the 1960-2010 time period, that manufacturing employment fell as well during that period, but that the value of goods manuactured continued to rise. Since defense industries are a subset of manufacturing, it could be expected that their performance would be the same. Of course the flip side of this is “Military spending continues to rise, although its relative portion of the economy continues to shrink.” Which is pretty close to the point I originally tried to make.
Really, what are we arguing about here?
Mike Shupp,
I get ‘hard over’ at time.
Peace.