Estimates: DOD budget peaks in 2006, and begins decade of slow decline

ARLINGTON, Va., 28 Oct. 2005. U.S. defense spending has peaked, and will see a slow decline over the next decade, report analysts at the Government Electronics & Information Technology Association (GEIA).

Oct 28th, 2005

By John Keller

ARLINGTON, Va., 28 Oct. 2005. U.S. defense spending has peaked, and will see a slow decline over the next decade, report analysts at the Government Electronics & Information Technology Association (GEIA).

Spending levels at the U.S. Department of Defense (DOD) should see a $98.6 billion decline over the next decade, which represents a drop of nearly 20 percent during the period, or about 2 percent each year, GEIA officials say.

Driving down defense spending will be political pressures to reduce the national deficit, cut taxes, increase spending for Social Security and Medicare, meet pent-up demand for increased domestic spending, and help victims of Hurricane Katrina, GEIA experts say.

GEIA officials released this information Oct. 25 at the organization's 2005 Vision Conference in Arlington, Va. The highlight of this conference is the GEIA's forecast for defense spending trends over the next 10 years.

In 2006 constant dollars, DOD appropriations, including supplementals, are expected to drop from $517.5 billion in fiscal year 2006 to $418.4 billion in 2016 -- a drop of $98.6 billion, or 19.14 percent over 10 years -- or roughly 2 percent each year.

The federal fiscal year begins on Oct. 1 and ends on Sept. 30. The federal fiscal year precedes the calendar year by three months.

The lion's share of the U.S. Department of Defense (DOD) spending for electronics, optoelectronics, and related technologies, lies in the procurement and research, development, test, and evaluation (RDT&E) portions of the Pentagon's budget.

Spending for procurement and RDT&E combined, in constant 2006 dollars, is expected to decline from $162.7 billion in 2006 to $129.8 billion in 2016, which represents a drop of $32.9 billion, or 20.22 percent over 10 years -- a decline of roughly 2 percent each year.

In 2006 dollars, DOD procurement alone is expected to drop from $89.3 billion in 2006 to $71.8 billion in 2016, which represents a decline of $17.5 billion, or 19.59 percent over 10 years -- roughly 2 percent each year.

In 2006 dollars, DOD RDT&E alone is expected to drop from $73.4 billion in 2006 to $58 billion in 2016, which represents a decline of $15.4 billion, or 20.98 percent over 10 years -- roughly 2 percent each year.

In selected spending areas, the Pentagon's aircraft spending should decrease from $48.3 billion in 2006 to $34.7 billion in 2016, down by $13.6 billion, or 28.15 percent over 10 years -- roughly 2.8 percent each year.

Electronics and communications spending should decrease from $16.4 billion in 2006 to $14.1 billion in 2016, a decrease of $2.3 billion or 14.02 percent over 10 years -- roughly 1.4 percent each year. These numbers suggest that electronics spending will not be hit as hard overall as the DOD budget as a whole.

Military ship spending, meanwhile, should decrease from $15.7 billion in 2006 to $12.7 billion in 2016, a decrease of $3 billion or 19.1 percent over 10 years -- roughly 1.9 percent each year.

These projected declines are inevitable in light of the strong military spending increases since President Bush took office in 2001. Over only the past four years total DOD spending has increased by nearly 40 percent, which is an unsustainable rate of increase over the long term, GEIA officials say.

Defense spending will be flat to slightly declining through 2008 or 2009, and steep declines should occur from about 2009 through 2012, followed by flat or slightly declining spending from 2012 through 2016, GEIA experts say.

Projected DOD spending decreases will not return the Pentagon's budget to the relatively low levels of 1996 during the Clinton Administration, but could wipe out about half the gains made in the DOD budget over the past decade.

At the same time, however, Pentagon planners are looking at cutting operations and maintenance costs by reducing the number of personnel in the armed services. Fewer people raises the need for machine automation, and machine automation raises the need for new technology.

Procurement and RDT&E will be pinched by internal & external budget pressures, but, another major terrorist attack like 9-11 would reset the clock on a slowdown in defense funding, GEIA experts say.

Projected declines in DOD spending contrast sharply with spending increases over the last 10 years.

In 2006 dollars, DOD appropriations, including supplementals, rose from $329.9 billion in 1996 to $517.5 billion in 2006, which represents an increase of $187.6 billion, or 36.25 percent over 10 years -- roughly 3.6 percent each year, with the biggest increases coming in 2003 and 2004.

In 2006 dollars, DOD Procurement and RDT&E spending combined rose from $90.9 billion in 1996 to $162.7 billion in 2006, which represents an increase of $71.8 billion, or 44.13 percent over 10 years -- roughly 4.4 percent each year.

In 2006 dollars, DOD procurement alone rose from $49.6 billion in 1996 to $89.3 billion in 2006, which is an increase of $39.7 billion, or 44.45 percent over 10 years, or roughly 4.4 percent each year.

In 2006 dollars, DOD RDT&E alone rose from $41.3 billion in 1996 to $73.4 billion in 2006, an increase of $32.1 billion, or 43.73 percent over 10 years -- roughly 4.3 percent each year.

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