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:: February 2002 Newsletter ::

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Dear Fellow Eager Pentagon Budget Watchers,

Many years ago, during the Anglo-German pre-War naval arms race, the British Government proposed a budget funding six new Dreadnought-class battleships (the “big ticket items” of the time). The Treasury protested that the country could only afford four. Crowds rioted in the streets. “We want Eight! We won’t Wait!” was their slogan. Needless to say, they got eight. After all, war fever ran high; when World War One finally broke out, it obliterated a generation.

There’s no risk of that kind of war happening now. After all, the US is an unquestioned “hyperpower” (as the French like to call us). The current conflict has more in common with Queen Victoria’s imperial police actions than the conflagration that began in 1914. But the FY 2003 defense budget is an echo of those pre-War times. It’s big, rising by 14% from 2002. And it’s going to get bigger—over $400 billion by FY 2005. There’s very little political opposition to this increase, at least for now.

But there’ll be more added when markup season starts. It’s not that there’ll be a huge call to plus things up; rather, it will be politically difficult to oppose plus-ups. Just like those Dreadnought-buying days, some politicians will add money for more F/A-18E/Fs, or C-130Js, or C-17s, “to show support for the War.” Opposing these plus-ups may be political suicide. After all, carrier aviation and military lift are hot button items. If a congressman adds money for a few more, you do not want to be seen standing in his way.

We can also now say that all current weapons programs enjoy an enormous level of security, for the next five years, at least. Before 9-11, doing a Jerry Lewis maneuver and making a name for yourself by opposing F-22 funding was do-able. No longer. The political winds have shifted. And funding increases will probably take care of that Tacair Train Wreck; this supplement’s Fighter Overview is our first to include JSF (F-35) production.

This will all have a profound effect on the export standing of US contractors. Now that F-35 looks like it is working out as planned, US fighter manufacturers can offer a seamless roadmap of export fighters. Countries can buy interim batches of F-16s or F/A-18s, and then transition to F-35. The once-large window of opportunity for the European planes is closing. Tellingly, Canada and the Netherlands have followed Britain into the F-35 development program. More countries will follow.

But perhaps, the most notable component of the budget, from the standpoint of US arms exporters, is the $19.8 billion to continue the war. The current conflict costs about $1.8 billion a month (I stole these numbers from the Washington Post, lest any reader accuse me of doing real work for this letter). It’s clear what’s going on. We’re funding continued operations against terrorists and their supporters for at least another year—basically until the next budget. Of course, some of this cash could be siphoned off for plus-ups, and Congress can just provide Supplemental money when needed for operations. That’s more the American way.

In short, we’re going to continue acting like a hyperpower, using military force as necessary. And if you were an arms importer, would you choose weaponry from a source with a “muscular” foreign policy, or a passive one? The tough guys are using, improving, upgrading, and supporting their equipment, and have forces roaming the globe to provide backup. They’re inventing new ways to channel data, new doctrine to improve performance, and stockpiling spares all over the place. The passive guys are buying stuff and parking it in squadrons, defending their nominal status as military entities (and, as someone joked, defending their national smugness).

Therefore, one of the consequences of September 11 is a return to US export market dominance. The funding for new systems is now in place. And only the US is acting like a military power.

Back to the budget. Remember Transformation? Well, that’s become a bit of a joke. This budget is exactly the same as the last three, only fatter. Nothing has been cut. Crusader, Comanche, V-22, everything’s fully funded. You can’t kill programs in a budgetary growth environment (and I’m not saying that you should). And if you can’t kill programs, you can’t start anything radically new (except for NMD, which will drain about $8 billion next year alone). For example, the much-lauded Global Hawk is only funded to the tune of three units. Total UCAV funding comes to $141 million, less than the cost of three F/A-18E/Fs (or one C-17). This is an embarrassing hot air-to-action ratio.

I’ve never been a fervent advocate of transformation. But history shows that defense spending is somewhat cyclical, and the high level we’re ramping up to is unsustainable for the long haul. This is especially true with the current situation—unlike in the Reagan era, we are not facing off against sophisticated enemies with large industrial bases and standing armies. This means that unless things go terribly wrong in the world, the budget will drop as soon as the threat diminishes and the traumatic memories recede. At that time, possibly very soon, we’ll take another procurement holiday. We will then coast on what we’ve got, and what’s already in the pipeline. New ideas, lacking cash or a constituency, will be snuffed out.

The classic example is the B-1/B-2 funding conflict. President Reagan revived the Carter-era B-1 because, well, because he could. Defense spending was tremendously popular again. We built 100 B-1s at enormous expense. Then, when defense spending dropped again, there was no case for funding more than 21 B-2s. We were going to buy 120, but the opposition was able to point to our expensive fleet of 100 recently procured B-1s.

In other words, a transformational system was vanquished by a non-transformational one. If you’re a UCAV believer, this could be happening right now with manned tactical aircraft. And if you like Comanche, note that the inevitable Longbow Apache plus-ups are going to really hurt your case.

Anyway, enough about the budget. In addition to Fighters, this supplement updates the Special Mission overviews, along with the F-16, A318/319/320/321, A330, 777, B-1, S-3, and others. Next month, we’ll update numerous Navy programs, including the P-3, AV-8B, and E-2. We’ll also update the Fairchild Dornier regional jets, the S-76, and a bunch of others. Let me know if you need anything, as usual.

Yours, ‘Til I Get My Own R-1 Funding Line Code Name,

Richard Aboulafia
 

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