Search

Begin New Search Topic Defense Spending

11. Defence Spending

Author:
Margarita Šešelgytė
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
International Centre for Defence and Security - ICDS
Abstract:
Russia’s war in Ukraine has highlighted Europe’s military weakness. But the changes to threat assessments that followed Russia’s brutal full-scale invasion have also created an opportunity for European Allies to reassess their defence spending. If they are serious about defence, they will need to address the impact of decades of persistent underinvestment, not least because higher defence spending will be key to the credibility of the new defence plans to be agreed at the Vilnius Summit. Allies should thus review and revise their defence investment pledge. If they do not do this now, it will be more difficult once the war in Ukraine ends.
Topic:
NATO, Defense Spending, Military, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

12. “Production Is Deterrence”: Investing in Precision-Guided Weapons to Meet Peer Challengers

Author:
Stacie L. Pettyjohn and Hannah Dennis
Publication Date:
06-2023
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
This report explores whether the fiscal year (FY) 2024 U.S. defense budget request for key conventional precision-guided munitions (PGMs) aligns with the 2022 National Defense Strategy (NDS) by prioritizing weapons needed for the “pacing challenge” China poses and dealing with the “acute threat” from Russia, while taking risk in lower priority areas. The FY24 presidential budget request builds on the shift that began in FY23 to support the NDS: increasing buys of key long-range and antiship missiles to prepare for a fight in the Pacific, starting to fill the cruise missile defense gap, bolstering production of the land-attack weapons needed in Europe, and test-running multiyear procurement and large lot procurement for key munitions to strengthen the defense industrial base. In the Department of Defense’s (DoD) budgeting process, ships, aircraft, and vehicles tend to be prioritized, leaving missiles and munitions with inadequate funding. Moreover, the Pentagon does not take a holistic approach to procuring key conventional PGMs, making it difficult to assess the joint portfolio. If the United States is going to effectively compete with China and Russia, that needs to change. To deter and—if deterrence fails—defeat China, the DoD needs large stockpiles of standoff missiles, maritime strike weapons, and layered air and missile defenses. The authors conclude that after years of underinvestment, the DoD is buying more long-range and medium-range missiles, which would be essential in a China war fight. While historically the Pentagon has overinvested in bombs and missiles to attack targets on the land and neglected antiship weapons, the FY24 budget saw a notable uptick in air-launched antiship weapons. For the past decade, the DoD has consistently invested in air defenses, but its purchases have focused on expensive ballistic missile defense interceptors, while neglecting cruise missile defenses. The FY24 budget reverses this trend. Additionally, the DoD is investing in PGMs to arm Ukraine and replenish American and allied stores of weapons that are needed to counter Russia. Except for surface-to-air missiles, the weapons for Ukraine are relatively short-range land-attack PGMs that U.S. forces do not need in the Indo-Pacific. A large portion of the funding for these weapons is coming from Ukraine supplemental appropriations, not the base defense budget. Supplemental appropriations are also resourcing significant investments in U.S. production lines, but the DoD has made only moderate progress rebuilding American stockpiles of the PGMs given to Ukraine.
Topic:
Security, Budget, Weapons, Deterrence, and Defense Spending
Political Geography:
China, North America, and United States of America

13. Arming the Revolution: Trends in Iranian Defense Spending, 2013–23

Author:
Henry Rome
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
The Islamic Republic boasts a large and expanding nuclear program, the most capable missile and drone force in the Middle East, and a broad network of proxies that threaten U.S. interests. Nevertheless, scholars have devoted little attention to a key area: Iran’s defense spending. Although the data is publicly available, tabulating it is more difficult than one might assume, and three particular hazards await: (1) conversion of Iranian rials to dollars at unrealistic rates, (2) reliance on spending plans as opposed to actual spending, and (3) undercounting. Thus, any attempt to understand Iran’s military spending must scrupulously avoid such traps. In this Policy Note, Iran expert Henry Rome offers the most detailed public accounting yet of Tehran’s recent defense spending, illustrated by charts showing domestic trends and comparisons with regional rivals. The findings show how spending surged following the 2015 nuclear deal and plummeted following the U.S. withdrawal from the deal in 2018. They also suggest that a new nuclear accord with Washington will likely prompt another increase, demanding a broader strategy to counter Iran’s military ambitions alongside its nuclear ones.
Topic:
Security, Nuclear Weapons, Economy, Defense Spending, and Military
Political Geography:
Iran and Middle East

14. Defence expenditure and public debt in Greece: A non-linear relationship

Author:
Ioanna Bardakas, Dimitris Doulos, and George Andrew Zombanakis
Publication Date:
03-2023
Content Type:
Journal Article
Journal:
Security and Defence Quarterly
Institution:
War Studies University
Abstract:
The aim of this paper is to consider and evaluate the widely–used argument attributing the growth of the public debt of Greece in recent decades to the country’s defence expenditure. We employ a two-equation model that focuses on the determinants of the military debt and how this has affected the public debt. The source of our military debt data is the Hellenic General Accounting Office, an option taken to cope with confidentiality issues. Finally, we insist on focusing on the expenditure on defence equipment imports rather than the total defence spending that the literature mostly covers, for reasons extensively analysed. Our methodology firstly assumes a linear relationship between military debt and public debt. We solve the system using 3SLS to obtain consistent and efficient estimates to derive interesting policy implications. The employment of a non-linear quadratic form not previously adopted proves to be superior in terms of performance and reveals the complexity of the above relationship. These point to the conclusion that the defence equipment purchases made since the beginning of the eighties have not had a decisive impact on the public debt of Greece. The defence equipment purchases made since the beginning of the eighties represent a very low percentage of the total public debt of Greece. Moreover, these are considered to be an investment activity rather than consumer spending, which has been acknowledged in the literature as the primary cause of Greece’s high indebtedness and the ensuing economic crisis.
Topic:
Security, Public Debt, Public Spending, Economic Security, Defense Spending, and Military
Political Geography:
Europe and Greece

15. Net spills among NATO allies: Theory and empirical evidence from dynamic quantile connectedness

Author:
Panagiotis Palaios, Anna Triantafillou, and George Andrew Zombanakis
Publication Date:
12-2023
Content Type:
Journal Article
Journal:
Security and Defence Quarterly
Institution:
War Studies University
Abstract:
The paper draws on the economic theory of alliances to stress the importance of considering both benefits and costs arising from the 0interaction between member states of a military alliance in terms of defence expenditure on equipment. We expand the theory of alliances to incorporate the spills that stem from the obligations of each ally by introducing the notion of spill-outs and net spills, the latter measured as the difference between spill-in and spill-out effects. To assess the net spills contribution of each of the members to the alliance, we test for empirical evidence of net spills among a group of North Atlantic Treaty Organization (NATO) allies, applying time-varying Dynamic Quantile Connectedness analysis. The results that stem from our model considering the cost of spill-outs suggest that there are strong incentives among the allies for free-riding behaviour. In line with our theoretical model, our empirical analysis shows that it is only during crisis period that NATO member-states contribute actively to the alliance, something that has become increasingly clear since the recent Russian invasion of Ukraine.
Topic:
NATO, International Security, Alliance, Economic Security, Defense Spending, Military, and Russia-Ukraine War
Political Geography:
Europe and North America

16. Ten Myths about US Aid to Ukraine

Author:
Luke Coffey
Publication Date:
10-2022
Content Type:
Special Report
Institution:
Hudson Institute
Abstract:
Ukraine is in a national struggle that will determine its geopolitical future: the country will either be a firm member of the Euro-Atlantic community or become a Russian colony. The outcome of this struggle will have long-term implications for America’s global interests, the future of the transatlantic community, and the notion of national sovereignty in the twenty-first century. Russia is a top geopolitical adversary for the United States. For Americans who believe in strong and secure national borders, the primacy of national sovereignty, and the right to self-defense, support for Ukraine in the face of Russian aggression is natural. Considering America’s other geopolitical concerns, such as a rising China and a healthy economic relationship with Europe that benefits the American worker, US support for Ukraine is an imperative. Ukrainians are not asking for, nor do they want, US troops to help them fight Russia. All they ask for is the equipment, weapons, munitions, and financial resources required to give them a fighting chance. Providing Ukraine what it needs to fight Russia effectively will not be cheap. So far this year, the US Congress has voted on three different supplementals for Ukraine: $13.6 billion in March, $40.1 billion in May, and $12.4 billion in September. The cost that American taxpayers incur to help Ukraine is money well spent and will pale in comparison to the cost of deterring a victorious Russia or an emboldened China on the global stage. As the war continues, Congress will likely pass additional spending. It is in America’s interest that Ukraine wins the war, and that Russia is decisively defeated. Even though polling overwhelmingly shows broad and bipartisan support for Ukraine, some in Congress are against further US aid for Ukraine.
Topic:
Foreign Policy, Defense Spending, Military Aid, and Russia-Ukraine War
Political Geography:
Russia, Ukraine, Eastern Europe, North America, and United States of America

17. Precision and Posture: Defense Spending Trends and the FY23 Budget Request

Author:
Stacie L. Pettyjohn and Hannah Dennis
Publication Date:
11-2022
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
This report examines the fiscal year (FY) 2023 defense budget request and assesses whether it sufficiently resources what was known of the Biden administration’s national defense strategy when the budget was released. Because of the delay of the full, unclassified version of the strategy, the analysis focuses on two factors—high-end munitions stockpiles and overseas posture—that past studies have indicated are critical for strengthening deterrence against China and Russia in the near term. This report concludes that while the FY23 request makes some strides on both issues, more must be done today to improve the United States’ chances of deterring and, if necessary, defeating the adversary tomorrow. The ongoing war in Ukraine has elevated the issue of munitions stockpiles to front-page news as both Ukrainian and Russian forces continue to consume high volumes of key weapons. We examine the sufficiency of existing critical conventional munitions stockpiles and the future procurement plans to meet the threats posed by China and Russia. We find that while the services have shifted to investing in longer-range weapons, they are still underinvesting in the specific capabilities, in particular anti-ship and area-effects weapons, that would be needed to counter China in a variety of scenarios. Moreover, the Department of Defense (DoD) is not buying enough of these weapons to blunt and defeat an initial invasion, and it certainly is not stockpiling enough precision-guided munitions (PGMs) for a protracted war.
Topic:
Foreign Policy, Budget, Defense Spending, and Russia-Ukraine War
Political Geography:
Russia, China, and United States of America

18. The Cost of Defence: ASPI Defence Budget Brief October 2022–2023

Author:
Marcus Hellyer
Publication Date:
11-2022
Content Type:
Policy Brief
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
Shortly before the recent election, the previous government released a defence budget that continued its record of delivering the funding it promised in the 2016 Defence White Paper (DWP) and subsequent 2020 Defence Strategic Update (DSU). The Albanese government’s first budget was not designed to focus on Australia’s security situation or defence spending. Tasked with sharing Australia’s difficult economic situation with the Australian public, the budget has more immediate fish to fry. For those Australians who want to see increased defence spending, this was not going to be that budget as it would have directly undercut existing defence reviews due within months. Certainly, the Prime Minister has stated that the government will do whatever is necessary to ensure Australia has the defence force it needs in these strategically uncertain times. But this budget gives no indication of how much the government is willing to spend to do that. With the Defence Strategic Review (DSR) under Stephen Smith and Angus Houston conducting its work and not due to report until March next year, the government has stuck with the existing funding line it inherited from its predecessor. That’s an artefact of the 2016 Defence White Paper—a document developed in a different era and quickly overtaken by events. So Defence is in a holding pattern while the government keeps its powder dry and waits for Smith and Houston (noting their interim report has recently been handed to the government). No doubt it has had conversations with the DSR leads indicating its comfort zone for additional spending, but that hasn’t been made public. What we can say from the information set out in this budget is that any increase to defence spending will require difficult reprioritisation. While the government received a revenue windfall this year due to high commodity prices, those are forecast to return to normal. And with the government committing to deliver the tax cuts agreed by its predecessor, its income is under further pressure. At the same time, it’s facing five growing spending pressures: interest on the growing debt, the National Disability Insurance Scheme, health care, aged care, and defence—and that’s before any increase to the existing defence funding line. The result is a forecast for deficit spending for the next 10 years. That’s not a good situation for the DSR leads. They’re tasked with delivering new military acquisitions faster in the next decade, but the existing acquisition plan is probably already unaffordable (without increased spending), with many entirely new capabilities or expensive replacement projects. And with nuclear-powered submarines and frigates on the untouchable list, the challenge of delivering more sooner gets even harder, as those two programs will consume tens of billions of dollars over the coming decade even before they deliver their first vessels. Moreover, inflation is rapidly eroding Defence’s buying power by billions of dollars every year. By the end of the forward estimates, Defence may have lost around $18 billion in buying power even if inflation rapidly returns to the Reserve Bank of Australia’s target rate. That’s the budget papers’ predictions, but those predictions haven’t been very accurate in recent years. This year, despite nominal growth of over 7% in defence spending, real growth is under 1% once inflation is taken into account (although, with inflation difficult to predict, it’s also difficult to reliably quantify real growth). It’s hard to see Defence affording its ambitious acquisition program with a budget that’s essentially static in real terms. Inflation is also driving nominal GDP growth at a predicted 8% this year. That means that defence spending is falling as a percentage of GDP for the second year in a row despite the government delivering the funding set out in the 2016 Defence White Paper and 2020 Defence Strategic Update. Predicted defence spending has also fallen significantly just since the March budget, from 2.11% to 1.96%, despite the funding line remaining fundamentally unchanged. In summary, there is no pot of gold available to cover increased defence spending. That doesn’t mean the government can’t or won’t increase defence spending, but any increase will require either higher taxes (which appears unlikely, since the government is proceeding with its predecessor’s planned tax cuts), greater borrowing (accelerating the vicious cycle of debts and deficits), or cuts to other priorities that have constituencies of their own. When we look at Defence’s big three areas of spending—capital acquisitions, people and sustainment—there have been no significant changes since the March budget. With the Australian dollar at a 20-year low against the US dollar, the Defence budget has received a large automatic top-up to maintain its purchasing, but there’s no adjustment to compensate for inflation. There are a few changes to spending, but they’re broadly consistent with what we would see in a mid-year budget update. For those who follow capability, the top 30 acquisition projects and sustainment products hold some interesting information, but the lists are quite consistent with previous plans. We’ll have to wait for the outcomes of the DSR to see anything new. Similarly there’s been no adjustment to Defence’s personnel allocation since March. But that still means the ADF needs to find roughly 13,000 more people this decade to operate the capabilities on its shopping list, even though it’s only managed to grow by an average of 300 per year since the 2016 White Paper. Smith and Houston may need to consider whether it makes sense to acquire capabilities that the ADF can’t crew, or at least how the ADF can maximise its combat power without many additional people. Of course, another HR strategy is one based on ‘if you build it, they will come.’ The situation is also difficult with Defence’s civilian and external workforce. To deliver its ambitious capability program, Defence has relied on growing numbers of contractors. They’ve helped Defence spend record amounts in its acquisition programs in recent years, despite the impact of Covid-19; however, they come at a cost. That growth may be over; in the October budget, the government is seeking $144.6 million in ‘savings from external labour and savings from advertising, travel and legal expenses’. That’s not a large percentage of Defence’s total budget but, if it means the organisation can’t hire the people it needs to manage the acquisition program, it’s hard to see how Defence will deliver more capability sooner. Overall, while there were no surprises, the October budget hasn’t made the job any easier for Smith and Houston.
Topic:
National Security, Budget, Economy, Industry, and Defense Spending
Political Geography:
Australia and Australia/Pacific

19. The cost of Defence ASPI defence budget brief 2022–2023

Author:
Marcus Hellyer and Ben Stevens
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
Shortly before the recent election, the previous government released a defence budget that continued its record of delivering the funding it promised in the 2016 Defence White Paper (DWP) and subsequent 2020 Defence Strategic Update (DSU). This year, the consolidated defence funding line (including both the Department of Defence and the Australian Signals Directorate) is $48.6 billion, which is 2.11% of GDP based on the Budget papers' estimates of GDP. That funding represents a very substantial nominal growth of 7.4%. It's the 10th straight year of real growth, but with inflation running hot, it's hard to determine a precise percentage; we've estimated it at 3.8% based on the Budget papers, but, if inflation stays around 5%, the real growth figure will be less. That will hurt Defence. Just as inflation eats into Australian families' budgets, it's eroding Defence's buying power.
Topic:
Defense Policy, Budget, Defense Spending, and Military
Political Geography:
Australia

20. Understanding the price of military equipment

Author:
Marcus Hellyer
Publication Date:
05-2022
Content Type:
Special Report
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
Confusion reigns in discussions about the cost of the Department of Defence’s equipment projects. Whether we’re talking about media articles, parliamentary committee hearings, letters to the editor, duelling internet commentators or any other forms of discourse that address Defence acquisitions, the only thing that’s clear is that we’re almost always talking past each other when it comes to the cost of military equipment. Defence doesn’t help when it releases only a bare minimum of information. This sorry state of affairs reached its peak several years ago, when it turned out that when Defence said that the cost of the Attack-class submarine was $50 billion it really meant that the cost was somewhere around $90 billion. The situation gets even murkier when commentators compare the cost of military acquisition projects here in Australia with ones overseas. It’s very rare that we can make a direct, apples-to-apples comparison between local and overseas projects, and very often it’s more like apples-to-orangutans. Being completely unaware of the basis of the costs they’re comparing doesn’t stop some commentators from making strong claims about the rapacity of foreign arms companies or the competence of the Australian Defence Department. This report attempts to be a guide for the perplexed. It’s not a technical manual, but a plain-English discussion that unpacks the cost of Australian defence equipment projects. While it would be useful for those working in the field of defence and strategic studies to read the whole report, it can also be used a reference tool explaining key terms such as ‘constant’ and ‘out-turned’ dollars or different cost-estimation methodologies. It’s important up front to acknowledge that the cost of modern military equipment can be eye-wateringly high, and there’s always a ‘sticker shock’ when we compare the costs of military systems with the costs of their civilian counterparts. Those costs are driven by the constant quest for better capability that provides an advantage in a life-and-death business. That striving in turn drives rates of cost escalation that greatly outstrip inflation in the broader economy. No Western country has yet found a way out of that endless cost spiral, and Australia is certainly not an exception. Anyone discussing cost has to understand what’s included in the price. It’s here that comparisons of Australian and overseas projects are difficult. Australian defence project costs include all the elements needed to get a capability into service, which are known as the fundamental inputs to capability. They comprise much more than the military equipment itself and can include facilities, training systems, documentation, intellectual property, integration of the new equipment (such as a missile) onto existing systems (such as the aircraft that will launch it), science and technology programs, and so on. Elements other than the equipment aren’t trivial and can sometimes make up half of the total acquisition cost. Australian projects also include significant risk provisions, known as contingency. In contrast, most overseas programs don’t include all of those elements, so their cost can appear significantly smaller. In this report, I provide a hypothetical example that illustrates how the cost grows as we include these factors. If we start with available off-the-shelf equipment costing $1 billion and adjust for price escalation (including inflation and capability enhancements) and factor in all fundamental inputs to capability and contingency, we quickly get to a total acquisition cost of $3.5 billion. That’s before we include operating costs. The report also briefly examines a current, real-world example by comparing the cost of Australia’s Hunter-class frigate project with analogous international projects. While we attempt to make some assessments, the exercise confirms that comparisons are difficult when we don’t have visibility of what’s included in the price tag. We also attempt to debunk the popular and deeply held view that Defence projects frequently go over budget. Based on the public evidence, the opposite is in fact the case. Once the government considers a business case and gives Defence approval to enter into contracts to acquire a particular system with a set budget, the department rarely goes over budget. However, it must be said that, before that point, Defence’s estimates of the funding needed to acquire a capability can grow significantly as its understanding of its requirements and the possible solutions develops. It’s here that the infamous ‘blowouts’ generally occur, not after actual acquisition commences. Some commentators have suggested that focusing on the cost ignores the value those systems provide—why quibble over a few billion here or there when the security of the country is at stake? I’d argue that it’s difficult to assess value for money if you don’t understand how much money you’re paying. This study aims to help Australians understand how much they’re paying. It’s only then that we can make informed decisions about military spending.
Topic:
National Security, Defense Spending, and Military
Political Geography:
Australia