FY24 defense appropriations bill invests in more modern, ready force

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  6 juillet 2020 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité

  Opinion: Why Interest On Federal Debt Matters For Defense

  Byron Callan June 30, 2020 The COVID-19 pandemic has stoked consternation that U.S. defense spending is going to be significantly pressured in the 2020s. Congress will likely stick to the $740.5 billion defense discretionary top line agreed to in last year's budget deal for fiscal 2021. But the combination of trillions more in federal debt from higher spending and lower tax receipts this year and next and the probability that there will be future federal spending to better prepare for pandemics raise a higher probability of defense spending pressure. “Flat” was already the new “up,” but “flat” now may be a budget that does not keep pace with annual inflation. The fears may be that defense spending will decline in the 2020s after a couple of good years of largesse from Congress and the White House. Despite trillions in additional deficits and federal borrowing in 2020-21, there is one bright spot that indicates less dire defense spending pressures than now perceived—the interest on the federal debt. U.S. federal debt is comprised of debt held by the public and intragovernmental debt, which is owned by different federal trust funds, the largest of which is Social Security. As of May, total debt held by the public was $19.8 trillion, and intragovernmental debt was another $6 trillion. Often, these two sums are lumped together, but they should be treated separately. The interest paid on debt held by the public is dispersed by the Treasury in the form of outlays to the owners of that debt. The interest paid on intragovernmental debt is, in essence, interest the federal government pays itself. The Office of Management and Budget (OMB), in its annual projections of outlays, breaks out these two components of interest outlays to show net interest outlays. This is mandatory spending, and so it has been paid along with the other mandatory and discretionary funding the U.S. federal government provides. One of the silver linings of the pandemic has been the Federal Reserve's aggressive lowering of interest rates. This makes federal debt more affordable, much in the way that a lower interest rate on a home mortgage can make a place to live more affordable. The OMB projections released in February showed net interest outlays of $378 billion for fiscal 2021 rising to $665 billion by 2030. One could take issue with the deficit projections behind these outlay projects, as they may have rested on GDP growth expectations that were too optimistic and nondefense spending cuts that were not going to be realized. However, dividing interest outlays on debt held by the public by debt projections implied an interest rate of 3% or more over the forecast period. The pandemic has trashed those rate projections. Federal debt held by the public is offered in different maturities. Treasury bills, which mature in a year or less as of May, were 23% of the total debt held by the public. Treasury notes that mature in 1-10 years were 51%, and bonds that mature in 10-30 years were 12%. (There is another 10% of other Treasury instruments.) Rates now are much lower, although clearly that would only matter for new debt that is issued by the Treasury. The rate on a 90-day Treasury bill is currently 0.13%. On a five-year note, it is 0.33%, and on the 10-year note, 0.69%. The 30-year note rate is 1.4%. This implies that interest outlay projections should be declining, although new projections may have to wait until the White House releases its 2022 fiscal budget request and out-year projections, presumably in February-March 2021. Net interest outlays could be at least $100 billion less in 2022-23 than the February 2020 projections on higher debt but lower rates. In the scheme of total federal outlays, which the OMB projected to be $4.8 trillion for 2021, $100 billion is not a lot, but it indicates there is a bit more headroom for defense spending and other nondefense discretionary spending than a focus on federal debt alone might suggest. Federal infrastructure spending could be one area of more traction in the 2020s, and the issue of social justice may also spur more demand for federal resources. One outcome of the pandemic, however, will be to make defense expectations more sensitive to interest rate expectations. It is not too difficult to project scenarios with rising debt and interest rates that increase to more “normal” levels. The pandemic also underscores that the unthinkable should be given a bit more room on long-term projections. It is quite conceivable that a major military conflict, a massive natural disaster or another economic contraction could further add to federal debt in the 2020s. https://aviationweek.com/defense-space/budget-policy-operations/opinion-why-interest-federal-debt-matters-defense

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  28 juillet 2023 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité

  US OKs potential sale of 16 Assault Amphibious Vehicles to Romania

  The U.S. State Department has approved the potential sale of 16 Assault Amphibious Vehicles and related equipment to Romania for an estimated cost of $120.5 million, the Pentagon said on Thursday.

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  16 janvier 2020 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité

  Does the Pentagon need a chief management officer?

  By: Jerry McGinn Ms. Lisa Hershman, an accomplished former CEO who has been serving in the Department of Defense for over two years, received Senate confirmation by unanimous consent to become the DoD chief management officer shortly before Christmas. At the same time, however, the 2020 National Defense Authorization Act required two studies from the DoD that openly posit eliminating the CMO function altogether. What gives? The mixed signals coming out of these discordant events underscore the fact that the theory behind the current CMO function (and similar efforts over the past two decades) does not match the reality of the business structure of the DoD. The solution that will ultimately work best for the DoD is one that truly takes a business-based approach to DoD business operations. The CMO function is the latest in a long-running series of efforts since the early 2000s to reform the business of defense. The essential idea has been to bring the best commercial business practices into DoD business operations through organizational and legislative changes. While the rationale for these respective initiatives is unassailable, they have struggled in execution. The CMO and its predecessor organizations, for example, have focused on the acquisition or certification of DoD business systems. These efforts, however, have largely devolved into bureaucratic battles over resources and authorities, pitting the business-focused organization against the formidable military departments and the “fourth estate.” Whatever the outcome, the business-focused organization ends up being seen as weak and ineffective. Why is that? Having worked for years in and around these respective efforts in both government and industry roles, I have come to the conclusion that these well-meaning initiatives are just the wrong type of solution. This is largely because their respective organizations, often despite strong leadership and empowered by various degrees of legislative authority, have not had the bureaucratic throw-weight to succeed in Pentagon battles with the services and the fourth estate. The solution to this challenge, however, is not to further tinker with the CMO's authority or to create a larger or different CMO organization. Part of the solution is to recognize that while the DoD is not a business, it is in many ways a businesslike organization. There are no profit and loss, or P&L, centers in the DoD, but the military departments frankly function in much the same way as a P&L line of business. The services are directly responsible for training and equipping their soldiers, sailors and airmen just as P&L leaders are responsible for delivering products and solutions on time and profitably. Likewise, fourth estate entities such as the defense agencies and the Office of the Secretary of Defense have direct responsibility over their respective functions. Harnessing the power and authority of these organizations through the training and enabling of good business practices is a much more natural fit for the DoD. Devolving responsibility in and of itself is not the answer, however. The other part of the solution is accountability. Commercial businesses do not have a CMO function. Instead, well-run businesses are led by strong executives who are responsible and accountable for delivering results to their employees and shareholders. Those that succeed are rewarded, while those that fail are replaced. The same goes for the DoD. DoD leadership should focus on establishing business-reform objectives for each major DoD organization, and then holding leaders of these respective organizations accountable to the achievement of measurable business goals. This should be driven by the secretary and the deputy, and enabled by a much smaller CMO function. Secretary Mark Esper appears to be headed in that direction in his recent memo on 2020 DoD reform efforts, which focuses the CMO's efforts on the fourth estate and makes the services directly responsible “to establish and execute aggressive reform plans.” That is the right approach. In short, the DoD does not need a management organization to oversee the business of defense; it needs to enable its leaders to utilize business best practices, and then hold these leaders accountable for results. Jerry McGinn is the executive director of the Center for Government Contracting at George Mason University. He previously served as the senior career official in the Office of Manufacturing and Industrial Base Policy at the U.S. Defense Department. https://www.defensenews.com/opinion/commentary/2020/01/15/does-the-pentagon-need-a-chief-management-officer