The Defence Budget [superthread]

[dimsum]

I'll just leave this poll/survey from Angus Reid here...

Half of Canadians say Trump right on increased NATO spending, but fewer actually want to meet that mark.

???

I'm getting a mental image of someone being interviewed and saying "well of course we need to spend more money.  Just as long as we don't pay for it", and the interviewer doing this:

 

[Good2Golf]

...BTW, that's what I've been saying (in far less eloquent language).  The main estimates take into account capital deferment of billions by both Harper and Trudeau.  If there is new money, it will be interesting to see if it's money that is pulled forward (again), or money that is actually new.

I mean, a lot of it really can't be pulled forward, as it's tied up in the shipbuilding schedule.

They are not tied together. 

The ships are funded from the accrual space in the Fiscal Framework.  Accrual space is not included in the Main Estimates, which refer only to the three Votes (1, 5, 10) of cash-accounted reference levels.

Regards
G2G

 

[jmt18325]

They are not tied together. 

You're right, and that makes sense based on the numbers that I'm seeing.  Sorry about that.

That leaves me confused - the 3% escalator is being applied, but the budget is not increasing by 3% - what operational funding was taken away by the previous budgets to make it so that the give and take results in a stand pat total (I'm genuinely curious, as I don't know)?

 

[jmt18325]

BTW, I apologize for being confrontational - looking at them, I don't dispute the main estimates, as I have doubts that operational funding will change - what I can see changing is that accrual space - I see it as likely that Canada will try to meet the 20% target rather than the 2% one.

 

[Good2Golf]

The 2%/3% escalator only applies to the cash-accounting reference levels.  One of the critiques of the Conservative's implementation of accrual accounting for DND as the time (and in years past) was/is that the accrual profile as not similarly adjusted by an escalator as the cash-accounted reference levels were.  The resultant effect is that without adjustment, DND's accrual space allocation actually reduces in procurement power as time progresses. 

When one looks at the details of the Liberal's 2016 budet, the ~$3.6B re-profile of 2016-2020 accrual space into $200M/yr increments in the 18-ish out-years, that was done with CY, or 'current year' dollars (2016 being the 'current' year) with the result that in 2035 the $200M re-profile chunk will only be worth (spit-balling here, because who knows what each year of inflation between now and 2035 will be) ~$140M in 2035 dollars (devaluation of 2%/yr for 18 years 2017 to 2035).  Furthermore, even using 2% for an escalator is notoriously low for defence inflationary factors.  Figures generally in the 8-12% range are considered more realistic for the technologically advanced defence industries' sector inflation factors, so the push of close-in accrual space to the out-years creates a de facto 25-40% reduction in acquisition power.  Add to that the increasingly complex layers of oversight without significant thinning of other processes and one should not anticipate a great improvement in effectiveness of DND's equipment and infrastructure buying power.

:2c:

Regards
G2G

edit: got my CYs and BYs crossed during my initial posting

 

[jmt18325]

I'm sure you would agree though that 8 - 12% is completely unrealistic.

 

[Edward Campbell]

I'm sure you would agree though that 8 - 12% is completely unrealistic.

It is a completely "realistic" reflection of what actually happens when we have to buy modern, sophisticated weapon systems and support for them ... but, it is, I agree, politically unpalatable, and will remain so until the consequences of decades (since 1968) of irresponsible political pandering come home to roost.

 

[jmt18325]

It's also economically unsustainable - the economy and government revenue doesn't grow near that fast.  If it makes you feel better, I felt the same about the provinces' position that the 6% health escalator should have continued to infinity.

 

[George Wallace]

It is a completely "realistic" reflection of what actually happens when we have to buy modern, sophisticated weapon systems and support for them ... but, it is, I agree, politically unpalatable, and will remain so until the consequences of decades (since 1968) of irresponsible political pandering come home to roost.

I have a feeling that the day that this all comes home to roost is going to be very soon.  But I have been wrong so many times before; often years before my time in such predictions.

 

[Edward Campbell]

It's also economically unsustainable - the economy and government revenue doesn't grow near that fast.  If it makes you feel better, I felt the same about the provinces' position that the 6% health escalator should have continued to infinity.

It ~ equipping the "right sized" forces with the right equipment is perfectly sustainable IF one has a sensible funding model for defence. The typical, government, "one-size-fits-all" model is not sensible ... popular but insane, by Einstein's definition.

The health care funding issue is different ~ that is a statist, even Stalinesque model that was imposed by temrinally silly people with zilch, zero, nada economic sense ...

   

    ... undoing that model is also essential, but will be wildly unpopular.

 

[Old Sweat]

And don't forget North Korea. An outbreak of hostilities or even a demonstration of the regime's ability to hit North America will provide a dash of reality like a bucket of ice water in the face. And don't think we can duck by suddenly discovering NATO or Mali or the Middle East. It didn't work in 1950 and it won't work now.

 

[Edward Campbell]

I read, recently, that the Trudeau regime might be considering joining the missile defence programme ... a decade, plus late but a smart move, if it happens, even if it's made under duress.

 

[Rifleman62]

Our Budget will be interesting. Trump is telling every countries leader to pay up.

https://www.axios.com/trumps-contentious-nato-meeting-with-angela-merkel-2318503024.html

Trump's contentious NATO meeting with Angela Merkel

President Trump pushed German Chancellor Angela Merkel very hard on the subject of NATO during their closed doors meeting today, according to two sources with direct knowledge of the events.

Trump said Germany has accumulated an immense lack of investment over many years, according to one of our sources, telling Merkel the U.S. feels taken advantage of for spending so much on defense while its allies have benefited without their own degrees of contribution.

Germany only spends 1.19% of its GDP on defense, far below NATO's 2% requirement. The U.S., meanwhile, spends 3.61% of GDP on its military.

 

[Old Sweat]

I read, recently, that the Trudeau regime might be considering joining the missile defence programme ... a decade, plus late but a smart move, if it happens, even if it's made under duress.

I read that as well, and share your assessment. That really does not address the issue of defence on the cheap by fuzzy thinkers. President Trump's line yesterday that the NATO allies who had not met the 2% target owed a large debt that had to be repayed was an interesting wrinkle.

 

[Good2Golf]

I read that as well, and share your assessment. That really does not address the issue of defence on the cheap by fuzzy thinkers. President Trump's line yesterday that the NATO allies who had not met the 2% target owed a large debt that had to be repayed was an interesting wrinkle.

...but needs to include a solid assessment of where the 2% is effectively contributing to! :nod:  Perhaps KPMG will get a good gig "re-accountig" how much Canada contributes towards "defence"?

Regards
G2G

 

[George Wallace]

KPMG?

Don't we now have a scandal going on involving KPMG accounting?

 

[Old Sweat]

...but needs to include a solid assessment of where the 2% is effectively contributing to! :nod:  Perhaps KPMG will get a good gig "re-accountig" how much Canada contributes towards "defence"?

Regards
G2G

It seems to me that is having fun with numbers, like saying I know I am not paying my hydro bill, but I only use my stove for cooking healthy meals, so I should get extra credit for that. A recompilation adding in other government departments with a defence and security role is one thing; trying to justify skimping because we spend smart or step up quickly when needed is another.

 

[Good2Golf]

It seems to me that is having fun with numbers, like saying I know I am not paying my hydro bill, but I only use my stove for cooking healthy meals, so I should get extra credit for that. A recompilation adding in other government departments with a defence and security role is one thing; trying to justify skimping because we spend smart or step up quickly when needed is another.

...and being told that by a large group of people who tell you that you should do your business with fewer people.

 

[Eland2]

Trudeau had better be careful on how he stickhandles this. If he vacillates on the defence budget, and Trump finds his efforts wanting, he could impose trade restrictions or other sanctions that could see a drop in Canada's GDP that would effectively cost the country more than it would have had to spend to bring defence up to the 2% recommended minimum. To say nothing of lost jobs and business revenues due to diminished trade opportunities with the US. And if we think the Canadian dollar is almost in the toilet now...

The West German government did the same thing to great effect back in the late 1970s when they told Trudeau Sr 'no tanks, no trade', thus forcing him to buy the tanks he didn't want to buy and station some of them in Germany to boot, at a time when he was in the midst of drastically downgrading Canada's NATO commitments in Germany.

 

[Kirkhill]

Given that the inflation escalator applies to capital - meaning that it whittles down the amount of equipment that can be purchased - but, at the same time most of the Canadian budget goes into bodies and infrastructure I will continue to argue that the solution is to whittle down the number of bodies on the full time pay roll and make better use of both technology and the reserves.

I will continue to argue for 50 man crews for the navy, two man crews for the cavalry and 8 man batteries for the artillery.

Close Combat Forces (Special or Regular) need to be maintained at some useful level but that majority of manpower can be held, after effective training, on the shelf at minimal cost with only an annual refurbishment.

For the Regular forces, outside the CCF types, the emphasis has to be on technical management of equipment rather than man-management.