Technology Offset in a New Budget and Security Environment

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Technology Offset in a New Budget and Security Environment
By: Ryan Crotty

Secretary of Defense Chuck Hagel recently announced the formulation of a “game-changing offset strategy.” Technology offset is rooted in then–Secretary of Defense Harold Brown’s countering of Warsaw Pact conventional overmatch with investments in stealth, precision-guided munitions, and many other technologies that have become hallmarks of U.S. military preeminence.

Today’s nascent strategy similarly seeks to leverage technology investment, but in an arguably more complex security environment. The Pentagon faces a diverse array of challenges ranging from anti-access/area-denial (A2/AD) threats to proliferation of advanced weapons to state and nonstate actors to cyber and space vulnerability to shrinking force structure.

Asking the question, “what are we offsetting?” will be important for focusing this strategy, but of course, so will “how can we afford to execute such a strategy?” Assuming that the expressed need for this strategy implies that current plans are insufficient, there are only two ways to answer this question: spend more or spend better. Although there has been discussion of repealing the budget caps to increase spending, prospects for such a shift in American political attitudes are not great, pressing international requirements notwithstanding.

So if the Pentagon can’t spend more, they have to spend better. In 2014, investment spending dropped to its lowest share of the defense budget since 1949 (28 percent). During the buildup after the Brown strategy, investment rose to 44 percent of the budget, which in FY2015, would be the equivalent of doubling the research, development, test, and evaluation (RDT&E) budget. Even in the president’s FY2015–2019 budget (which is $115 billion above the budget caps), investment spending remains well below the post–World War II average share of the budget. But to prioritize investment, readiness and force structure trade-offs will have to be made.

Spending better also means efficient use of existing investment resources. In inflation-adjusted terms, investment spending in the president’s 2015 budget is $30 billion above the Brown budgets. The fact of the matter is that, while sequester has been hard on DoD, spending on defense today remains historically above average and $100 billion above the normal trough of a down cycle. Acquisition reform, better incorporation of commercial technology, increasing competition, discipline in focusing investment priorities, and funding stability will all be crucial to delivering the right technology that serves the future needs of the military, no matter what is being offset.

Ryan Crotty is a fellow with the International Security Program and deputy director for defense budget analysis at the Center for Strategic and International Studies (CSIS). Other posts by .


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