U.S. defense industry advisor warns of potential post-sequestration funding shortfalls

Vector Strategy warns that sequestration might jeopardize the ability of the U.S. DoD to amass funding for armed conflicts during the next two decades.

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If the U.S. Congress takes no action before automatic budget sequestration kicks in on Jan. 1, 2013, the U.S. Department of Defense (DoD) might be unable to amass sufficient funding for future armed conflicts during the next two decades. That’s the contention of defense industries market research firm Vector Strategy Inc. (Southern Pines, N.C.). Using a mathematical model developed by Italian physicist Cesare Marchetti and statistical analysis, Vector Strategy has developed a funding scenario for the Iraq/Afghanistan War drawdown and what the consulting company predicts will be the next war-funding peak in 2027.

According to Vector Strategy president Marcia Price, “Cesare Marchetti has conducted several thousand analyses of historical time series and consistently finds that a logistic or diffusion model fits the data in a predictive format. Marchetti has applied his model to military and war cycles with well-documented results. We applied his model to DoD funding from 1805 to 2013 and used that analysis to present a historically derived scenario of future DoD funding.”
Vector Strategy’s analysis reportedly suggests that the U.S. could be involved in another conflict or contingency operation, with a DoD funding peak in 2027.

“Most DoD funding analyses initiate with 1947 data,” says Price. “By reaching back to 1805, our analysis includes 150 additional years of DoD funding data. This allows us to provide a more comprehensive analysis with tighter confidence intervals than other published DoD funding analyses.”

Since 1805, the U.S. has been involved in 12 significant wars or DoD funding ramp-ups. With Marchetti’s model, Vector Strategy uses these 12 funding cycles to predict peak annual funding and total spending associated with the next war. In addition, they have calculated annual DoD funding for 2018 to 2036 using the cumulative distribution function.

A significant takeaway from Vector Strategy’s analysis is that $533 billion is the minimum annual funding necessary to sustain DoD operation and still permit DoD to adequately ramp up support for the next war funding cycle. If sequestration is not enacted, Price predicts that the DoD could meet the initial cap requirements of the Budget Control Act of 2011 and successfully ramp up for the next war effort. If sequestration goes forward and annual DoD funding is capped at levels between $498 billion and $508 billion during the period from 2016 to 2020, Vector Strategy says that ramp up might be impossible. (All funding amounts are in constant 2013 dollars.)

Vector Strategy’s report is available for purchase. Visit www.vector-strategy.com or contact Marcia Price at (910) 420-2208.