Three factors of escalating defense costs, and some figures to go with it

The cost of maintaining our armed forces at adequate strength to deter war has steadily increased in recent years. This upward trend is likely to continue in the years ahead. Three major factors account for this development.

First, each new generation of weapons costs several times more than the one it replaces, and the lifespan of new weapons systems is becoming shorter year after year.

Secondly, rapid technological advances force an unprecedented investment in weapons development – an investment that will provide additional security in the future but contribute little to our current strength.

And third, expenditures by the armed forces, like those of everyone else, are affected by increases in prices and wages….

That was from Neil McElroy’s “Semiannual Report of the Secretary of Defense for 1958,” Jan 1 to June 30, United States Printing Office, Washington, 1959.

The three interrelated sources can be decoded: First, there are fewer production orders within defense programs, often leading to lower productivity and higher costs. Second, large technological advances between programs creates step-function increases in costs, such as increasing capabilities of submarines from diesel to nuclear power, and the subsequent addition of ballistic missile capabilities. And third, wage and price increases of defense resources affect the end cost, and are often driven by economic factors but also have defense-unique aspects.

Here is some more detail from McElroy on the trends in cost and performance:

The World War II B-17 was purchased for $250,000, while each B-47 costs more than $2,000,000; the new B-58 is likely to cost 10 times more than the B-47. In heavy bomber category, the World War II B-29, costing $700,000 apiece, was replaced by the $4,000,000 B-36, which in turn has given way to the B-52, costing nearly $8,000,000. Many of today’s fighters fly 3 times as fast as those of World War II but cost 30 times as much.

[Note: the B-21 stealth bomber is targeting a cost of $500 million, while the legacy B-2 was over $700 million recurring flyaway, and $2 billion average.]

Similar increases have occurred in ship construction costs. A World War II Essex-class carrier cost about $55,000,000; for the Midway-class carriers the cost rose to $90,000,000 and for the Forrestal-class carriers to $210,000,000. World War II submarines cost less than $5,000,000 and the present nuclear submarines more than $50,000,000; the price of a ballistic missile submarines is likely to reach $100,000,000. The cost of destroyers has risen from nearly $9,000,000 in World War II to $34,000,000 for the present guided-missile destroyers.

[Note: The Columbia-class ballistic missile sub is targeting an optimistic unit cost of $7 billion, and DDG-51 Flt III is about $2 billion a hull (the DDG-1000 is about 3-4x that cost).]

The Army, too, has not been immune from these cost increases. The capital cost of an air defense battalion equipped with 120-mm guns was $6,000,000, while a NIKE-AJAX battalion costs about $18,000,000 and a NIKE-HERCULES battalion about $20,000,000, not including the cost of the nuclear warheads.

[Note: THAAD, which may or may not be transferred to the Army, costs about $800 million a battalion.]