Missile Defense Spending Is Going to Stagnate

Data on missile defense can be difficult to find. The Department of Defense gave only two missile defense estimates with its recent budget request materials. In FY2013, DoD requested $9.7 billion for missile defense programs. DoD estimated it would spend $47.4 billion on missile defense between FY 2013 and FY2017.

Making things more difficult, the Pentagon also fails to explain what counts as a "missile defense" program. Nor did it show year-on-year changes in total missile defense spending. So I got out my green eyeshade and combed the FY13 Budget Request Justification Books to recreate the Pentagon’s missile defense estimate.

A close examination of Pentagon budget data shows that overall annual missile defense spending is expected to hover around $9.5 billion through FY2017 – leaving it relatively unscathed by tightening defense budgets. I provide the full spreadsheet here (pdf). It includes a complete breakdown of missile defense spending data by program element, year, and agency.

Pentagon Estimates for Missile Defense Programs, FY13-FY17

FY 2013: $9.72 billion
FY 2014: $9.11 billion
FY 2015: $9.67 billion
FY 2016: $9.50 billion
FY 2017: $9.40 billion

It seems that DoD expects missile defense spending to be volatile and not grow with inflation. This is causing interesting problems for the Pentagon as procurement and operations and maintenance costs are growing within a flattening budget.
Interesting Trends

First, missile defense spending is expected to shrink on average by 0.6% per year. This stands in contrast to the Pentagon's base budget, which is expected to keep pace with inflation at about 2% growth per year.

The topline is volatile, with some years changing 6% over the last year. But the big culprits for those changes are the planned cancellations of the Army's Medium Extended Air Defense System (MEADS) and Pac-3 procurement. Set those programs aside, and the missile defense topline is relatively stable.

Second, procurement’s share of the missile defense budget is growing – from 20% in FY13 to 30% by FY17 - as programs move from research, design, testing and evaluation to deployment. Most of this growth comes from deploying Aegis systems and Terminal High-Altitude Area Defense (THAAD). The Missile Defense Agency (MDA) is footing the bill for procuring these two Navy and Army systems – allowing the services to get new gear without paying for it.

Third, the Pentagon is only counting the Missile Defense Agency, the Army, and the Joint Staff. No funds are counted for the Navy, despite its growing missile defense mission. It appears that MDA is footing the bill for procurement of and operations and maintenance for Navy assets.

It is unclear if MDA is paying its fair share. For example, MDA requested $12 million for operating Aegis systems in FY13. However, each Aegis-capable destroyer costs roughly $60 million in operations and support costs per year, and the Navy has 19 destroyers plus 4 guided missile cruisers in its Aegis fleet. Either missile defense represents less than one percent of these ships' mission, or MDA's contribution does not represent the whole cost.

Lastly, spending on systems for regional missile defense – seen through funds for Aegis, Aegis Ashore, AN/TPY-2 radars, etc. – does not grow, but instead keeps a stable 30% or slightly less of the entire missile defense budget. The strategic emphasis on Aegis may be growing, but budget growth is lagging so far. This is surprising given the amount of political focus on regional missile defense.
What's going on?

The missile defense budget is going stagnant. It could be from bad management or simply survival of the fittest.

The steady and stretched out program budgets could be symptoms of troubled acquisition programs. As the Government Accountability Office (GAO) noted in April, MDA uses highly concurrent acquisition strategies – overlapping technology and product development with deployment. This strategy harbors "considerable risk of future performance shortfalls that will require retrofits, cost overruns, and schedule delays," according to GAO. After a while, these slipping schedules and rising costs can look a lot like a steady and never-ending funding stream.

Or perhaps the Pentagon figured out it can only stomach (or get away with) spending around $9 billion a year on missile defense, particularly in a time of austerity. In that case, it’s survival of the fittest – where the weakest programs get cancelled so that growing programs can absorb the funds.

As evidence of this Darwinian dynamic, the budget hawks are already circling the weak programs.

The Congressional Budget Office in a March 2011 report on "Reducing the Deficit" estimated that cutting MEADS and the Precision Tracking Space System (PTSS) would save $17.5 billion from FY 2012 through FY 2021.

Sen. Tom Coburn (R-OK) in his "Back to Black" report echoed CBO's cuts to MEADS and PTSS. Sen. Coburn also recommended cutting the Joint Land Attack Cruise Missile Elevated Defense Netted Sensor System (JLENS), which the report projects would save an additional $5.8 billion through FY 2021.

It's no surprise then that DoD wants to cease funding MEADS after FY13. DoD also proposed cancelling the production phase for JLENS. Meanwhile, a recent National Academies report on PTSS recommended terminating the multibillion-dollar system on the basis that it cannot accomplish its intended mission. It's a good bet that PTSS is beginning to get threatening looks from budget offices.

This kill the weakest approach is one way to keep spending in check. However, if the DoD budget sees substantial cuts in the years ahead, it will need to rethink its missile defense strategy and reign in excessive spending.

Offering a more sustainable strategy, Lt. Gen. David Barno and his co-authors at the Center for a New American Security recommended prioritizing theater missile defense programs, scaling back experimental national missile defense programs, and cancelling PTSS. They estimated a savings of $37.5 billion from missile defense through FY2021.
Missile Defense and the Budget Builddown

A little extra budget transparency helps illuminate the troubles and tradeoffs we see above. It also allows agencies and experts to start gnawing on the hard questions.

For example, missile defense programs take a full ten percent ($7.3 billion) of the Department of Defense's FY13 request for research and development. PTSS, with $297.4 million requested for FY13, is included in that figure. Could those funds be put towards defense cuts or to preserve effective programs?

Missile defense also makes up five percent ($865.8 million) of the Army's requested procurement budget for FY13 and ten percent ($1 billion) of its research and development budget. Is there anything the Army could use more in the years ahead than its exceedingly expensive Patriot missiles?

These are the kinds of questions that we can't afford not to ask. Otherwise, the Pentagon could get caught off guard when steep budget cuts or sequestration cut off its food supply and better programs might have to go hungry.

For additional reading on this topic please see:

High Tide – Low Tide – Defence Budgets: Increase in Asia, Decrease in Europe and America
What We Bought: Defense Procurement from FY01 to FY10
Consulting the American People on National Defense Spending