Tags: Defense Budget, Economics, Europe, Shipbuilding
It is comfortable to say, “We are 5-10 yrs behind the Europeans when it comes to our budget challenges.” – I guess.
With the expansion of the budget deficit of the last few years and no move to make a serious effort to fix it, we are much closer to 5 years, if not inside that mark.
The now quaint Fleet number of 313 of just a few years ago was never taken seriously by anyone with a basic understanding of economics even before the latest budget issues, and the interesting accounting of the Fleet of 300 that we see today is also a non-starter.
Why make such a negative statement? Simple – budgetary gravity.
Back in 2008, European military budgets were sad in any event as a % of GDP. As demographics join with the inevitable default of the Western welfare state takes place in front of us, after a few years – we have this via our friends from DefenseNews.
Well – you can break these reduction in to three batches.
1. Doable at 5% or less: Norway, Sweden, or Germany.
1.a. Odds: minimal.
1.b. Reason for odds: We won’t be this lucky. Norway has averaged a budget surplus for over a dozen years; different planet. Sweden and Germany already made structural changes to their government systems – Sweden in the 1990s and Germany a little more than a decade ago. As a result – the budgetary stress on the defense budget is small to non-existent from the 2008 baseline. If we act soon to address larger budgetary issues though, odds of this taking place increase.
2. Painful but workable at 5% to 20%: yes, in order to protect the economic foundation that national survival requires – a 20% cut is workable. Netherlands, UK, Poland & France.
2.a. Odds: most likely.
2.b. Reason for odds: unlike Europe, we don’t have anyone we trust that we can point to and say, “Oh, they’ll take care of the international order.” These are serious nations with a serious dedication to military requirements – but they are doing what they feel them must – as shall we. Unlike those nations though, we still have a lot of inertia to maintain a global reach; close to 5% than 20% if we are lucky. More than 20% in the face of a climbing China is just hard to fathom for the USA unless ….
3. Budgetary POMageddon at 20% to 50%: if you wait too long to act on your structural budgetary challenges – the more difficult the fix. You will take on more national security risk in order to try to keep domestic tranquility. Italy, Spain, Greece, & Ireland.
3.a. Odds: small, but not minimal.
3.b. Reason for odds: Without a two-party consensus to make such a huge cut in defense, it is hard to see larger than 20% in the next half decade outside of a complete economic meltdown. With each year we delay having a budget (Senate over 1,130 days without a budget plan) and/or a view to a plan to fix present trends, the more the odds for this option grow.
So, what could POMageddon mean to the Navy? Well – let’s go to Group 3 above – Italy. Again from our friends at DefenseNews;
Italy is considering selling or donating up to one-third of its naval fleet in a bid to earn quick cash and slash maintenance costs.
The Italian Navy would be the first off the mark wit a plan to sell or donate up to 28 vessels over the next five or six years … (out of) 82 ships and six submarines. …
So, 28 out of 88 ~ 32%.
Let’s run with the fuzzy 300 ships. A 32% reduction would be a cut of 96 ships to a fleet of 204.
What was my worse case scenario a couple of years ago, 240? That would be a 20% reduction in five years. All of a sudden, doesn’t look all that out of control … if you consider what has happened to Europe.
Let’s be optimistic and cut that in half to a 10% reduction. 270 ships in 5-years. Let’s model and plan for that and consign 300 ships with 313 ships as they hang out with all those TQL books in the storage room.