Budget Forecast

The Aerospace Industries Association has released a new white paper on the "State of the Defense Budget."

Developed by AIA's National Security and Acquisition Policy division, the document "analyzes how the United States arrived at this budget impasse and the initial impacts of sequestration, followed by a look ahead at the potential cuts in 2014 and beyond."

Here are some excerpts:

Given the President's announced intent to once again exempt Military Personnel spending, expect between 15-20 percent reductions in investment spending should full sequestration be implemented in January 2014. . . .

Should sequestration occur in fiscal year 2014, the defense topline including overseas contingency funding will be reduced to its lowest level in constant dollars since 2002. While the topline dollars may be similar to 2002, the overhead costs within that total are not: DOD's military personnel costs have inflated by 29 percent and its health care costs by 45 percent since 2002.

As for the "way ahead":

Given the need to resolve the extension of the nation's debt ceiling this fall, Congress and the president may well come to some sort of agreement on a revised defense budget for fiscal year 2014 and fiscal year 2015 at the same time. Such a deal will be achieved only in the context of a number of issues that have little to do with defense and will almost certainly only be agreed upon with great acrimony. It is certain that any deal will not result in a defense topline below the Budget Control Act and it is probable that we will see a total budget somewhere between the BCA cap and the president's current request.