Saturday, January 31, 2009

Defense Budget Cut 10%

The problem: cut 10% from the military budget. How is it possible to slash $55 billion from our national defense accounts? The president has stated as one of his goals the need to increase the size of the Army and Marine Corps. If that's to be realized, then his staff will provide some direction to Defense on how the cuts are to happen. I suspect they will think in terms of budget categories rather than services first. The distribution of Total Obligation Authority (TOA) may be able to give a starting point. Operations and Maintenance and Military Personnel make up 59% of the budget, so if they are left essentially unchanged the bulk of the cuts will fall to RDT&E and Procurement. (click for larger image)

I took a swag at one scenario, where the ground force growth increases personnel funding by about 2% in 2010 and O&M goes down by about 1%. To get to a $55 billion cut with those assumptions, each of the remaining accounts has to go down by 26%. In that case, we are likely to see $27 billion out of procurement and $21 billion out of RDT&E. (click for larger image)

What's the impact of that size cut? Twenty-six billion dollars out of the procurement budget, based on 2007 numbers, would eliminate 62% of Lockheed, 81% of Northrop Grumman, 95% of General Dynamics, or 122% of Raytheon. Add on half of the RDT&E cut (since the government labs do quite a bit of research), and you could put half of Raytheon out of work again. Looking at the number of people employed by these companies, that size cut will result in the elimination of between 122,000 and 137,000 jobs.

It's a good thing the “stimulus” package adds $36 billion in expanded unemployment “benefits” to make up for the $36 billion in valuable work that will be lost here. I know how important it is for the Democrats to make us all dependent on the government, and moving those highly-skilled defense workers from productive careers to the dole is just the ticket.