There has been much hand wringing, pontificating and reporting on the Federal Budget woes of late … and it got us thinking about our approach to federal budget issues. Here we offer a different perspective on the budget situation.
A Budget Reality Check
On September 10th, 2001 the total US Defense Budget was just over $310B. Adding National Intelligence spending and other budget items not counted in the National Defense Act of 2000 (NDAA), the total 2001 defense spending was likely closer to $390B; but let’s split the difference and call it $350B. Traditional defense spending was projected to rise to nearly $320B during FY2002. The defense industry was churning along and companies were making money.
The next day the world changed and before long the Defense Budget swelled to nearly $760B at its peak. Many new companies were formed and nearly everyone that provided a service or product made money under our nation’s war footing.
Today, the war in Iraq is over and the war in Afghanistan is winding down. The Defense Industry is scared of the shrinking federal budget in general and the defense budget in particular. The sky is falling mantra is parried about hither and yon.
However, the CBO report on Budget Sequestration (Update August 2013) shows our nation’s defense spending will likely drop to $498B in 2014 and then rise to $529B by 2021.
$498B – $320B = $178B; an increase of 55% in 12 years (2002-2014). Yes, it’s simplistic – but when you look at things this way – it isn’t so very bad.
Congress this week passed a two year Budget providing $630B for Defense. This is far better than Sequester projections and nearly double the 2002 budget. Time will tell how these funds are ultimately allocated among the Services and within programs, but it’s hardly draconian.
The bottom line is that the defense industry will still churn along and companies that provide excellent service or products will continue to make money. There just won’t be so many horses feeding at the trough. Being one of the surviving horses will take creativity and innovation – to be part of the solution…more on that in the next edition.
Want to learn more?
Gary Dunbar and Jim Tierney