Prognasticators Agree Early on Defense Downturn

There have been a flurry of articles and commentary over the last few weeks about the future of the US Defense Budget and Contractors. The consensus is that there will be a tightening of the budget in the new administration and that will lead to cuts in programs by DoD. See stories at Reuters, The Washington Post, and BloggingStocks.com for example. While it is certainly clear that the Obama Administration has priorities in the areas of domestic spending he has also made specific promises about the ongoing operations and the US military.

Most new administrations, and often the press, feel that they can easily save money in current Defense spending through fixing management issues, or cutting waste and doing things more efficiently. In the past that has been hard to do. The Nineties saw smaller budgets as the big build up from the Reagan years was ended due to the end of the Cold War. Unless there is a complete pull back of US forces from Afghanistan and Iraq there will still be costs associate with those operations. There will also be costs with resetting forces and recapitalizing them after they return from overseas. The easiest savings are by cutting large weapons system procurements, but those have a lot of support in Congress - Democrat or Republican - as they bring money and dollars into districts. The House and Senate can easily keep alive programs that DoD wants to cut.

The future of the budget may not be as clear cut as some think.