The Mil & Aero Blog
Monday, February 22, 2010
  The 2011 DOD budget is out, and the news is good
Posted by John Keller

The Obama Administration's military budget proposals for next year are out, and I think we can all breathe a collective sigh of relief.

The aerospace and defense industry has spent months fretting about President Obama's 2011 defense budget -- more out of uncertainty than fear. It is this proposed budget, far more than the one last year, that gives us our first clear indication of how the Obama Administration plans to treat defense spending, and the verdict is, better than we thought.

The Administration's 2010 DOD budget request for the U.S. Department of Defense (DOD) last year essentially was George W. Bush's last defense budget. It wasn't until the 2011 budget proposal was released earlier this month that we see clearly how Obama wants to proceed with defense spending. The numbers speak for themselves.

The overall DOD budget is $708 billion, which consists of $549 billion in the discretionary defense budget, and $159 billion to support continuing military operations in Iraq and Afghanistan.

The discretionary DOD budget of $549 billion -- which includes proposals for military personnel, military construction, and family housing, in addition to military procurement, research and development, and operations and maintenance -- is an increase of $18 billion over the $531 billion enacted for 2010. This is an increase of 3.4 percent, or 1.8 percent real growth after adjusting for inflation, DOD officials say.

Those top-line budget numbers, fail to convey the real story for the aerospace and defense electronics industry. To do this requires us to look closely at DOD budget for procurement, as well as the budget for research, development, test, and evaluation (RDT&E), because these budgets largely deal with current and future military technologies.

The 2011 DOD procurement budget asks Congress for $137.48 billion, which is up only slightly -- 1.05 percent -- from current-year procurement spending of $136.06 billion, yet the trend is clearly going in the right direction -- particularly in light of concerns that the Obama Administration was looking to cut defense spending.

RDT&E is another story. The proposed military research budget for next year is $76.77 billion, which is down 5.13 percent from current-year spending of $80.92 billion, but was not as drastic a cut as it could be.

Now take a look at the combined procurement and RDT&E budget lines for military communications, electronics, telecommunications, and intelligence (CET&I) technologies. Next year's CET&I proposed budget is for $17.45 billion, which is an increase of 3.2 percent from this year's CET&I congressionally enacted spending levels of $17.45 billion.

All this is good news for the military electronics and electro-optics industries. It means we can be on solid ground as we plan for the future. Barring unforeseen circumstances, I don't think we are going to see substantial defense spending cuts over at least the next several years; there is simply not the political will to do so.

President Obama's agenda seems to revolve around domestic programs; for defense spending it's steady as she goes -- at least for now. If the Administration were intent on cutting defense spending, this 2011 budget was the one where this was most likely to happen, especially with a Democrat-controlled Congress that had appeared compliant to the Administration's wishes.

Now we're into an election year, and no one in the Administration or on Capitol Hill wants to rock the boat on defense spending and preparedness as we move closer to the congressional mid-term elections next November.

Again, barring unforeseen circumstances, we are not likely to see substantial increases in defense spending over the next several years, yet we are not likely to see major cuts, either.

So for all of you out there who have been in mental, political, and financial holding patterns, it's time to break out and start moving forward. I don't see any end in sight in the global war on terror -- ooops, sorry ... the "overseas contingency operations" -- which means we'll see a continuing solid market for advanced sensors, battlefield networking, optics and fire control, and many other new technologies that will be involved in counter-terror and counter-insurgency operations.

Everyone involved in the military technology business can get to sleep tonight, resting assured, that the Department of Defense is still open for business.
 
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