It’s not just prices and wages that are sticky, budgets are too. The Council on Foreign Relations points out that U.S. nominal defense budgets hardly ever fall. To get falling budgets as a percent of GDP (let alone falling real budgets) it helps to have inflation or real growth.
That was from a short blog post by Alex Tabarrok back in 2011 after the financial crisis. Of course, we may expect the same thing after Covid-19.
I argue that the reason budgets are sticky is the same reason the Department of Defense struggles to be agile and adopt new technologies quickly. I wrote about it in Defense News, and here I am discussing the matter on Government Matters:
To give you an indication of the complexity of the defense budget, the RDT&E and Procurement appropriations — which is about a third of the total budget — have over 1,900 program elements of specific weapon line items that you have to consider. The Department of Defense has limited ability once you make those decisions to reallocate across those program stovepipes.
… Just being able to consolidate those program elements, still provide Congress insight at the lower level, but allow them to make tradeoffs in the year of execution can go a long way.
In other words, if budgets provided defense leaders more flexibility to move funds between priorities — AND do new starts with Congressional notification — then budget cuts wouldn’t be as bureaucratically and politically difficult.
I could envision a kind of “deal with the devil” between progressives and defense leaders where defense accepts incremental reductions in top line for more authorities to pursue agile acquisition. Not that such a deal is likely in the slightest, but I could imagine it. [Clarification: neither side is actually devilish, it’s just that individuals on each side often perceive the other to be.]
One reaction to this concept of Congress having more flexibility to move defense budgets downward if they in turn provide the Pentagon more flexibility to manage program elements as a portfolio, is “what about the border wall?”
First, the PE consolidation into portfolios doesn’t need to apply to Military Construction appropriation. Second, too often are damaging regulations created because of one incident. Congress should understand that if it takes a harder stance on budget justification and reprogramming, then it will likely defeat the initiatives to bring in commercial tech, reduce cycle times, increase innovation, and so forth. Third, it is not an unreasonable claim that the Department of Defense might be able to transform itself and innovate better with lower funding, as was true of the Navy in the interwar years.
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