Industrial Policy Debate: Should The Pentagon Pick Winners and Losers?

Sandra I. Erwin. National Defense Magazine, November 2009.


Acquisition and R&D accounts now make up 34 percent of the defense base budget. Assuming a flat budget and growth in personnel a bit above inflation, modernization accounts 10 years from now will be down to 25 percent of the budget, according to TechAmerica estimates.

Unless the Defense Department decides to reduce the size of the force, procurement spending will continue to be squeezed, says budget analyst Steve Daggett, of the Congressional Research Service. He estimates that the average service member costs 45 percent more — including salary and benefits after adjusting for inflation — than in 2000.

Industry analyst Jim McAleese, of McAleese & Associates, says he is certain that the Obama administration has effectively flat-lined defense spending for the foreseeable future. But many major decisions have yet to be made regarding how money will be allocated within a flat budget.

“I would caution you to really pay attention to Defense Secretary Robert Gates’ vision,” McAleese says in an interview with Federal News Radio. “I believe he is fundamentally using the QDR [quadrennial defense review] to put the finishing touches on his legacy. Gates wants to “optimize” the Army for long-duration counterinsurgencies, he says. “The priority in the Army will be investing in a world-class quality combat force, that is well-supported, and that the soldiers’ families are well-supported.” The upshot is that many of the expensive weapons systems that the services have been accustomed to buying will no longer be affordable.

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