Pressure to reduce the budget deficit, as well as increased costs for medical and other retirement benefits, are combining to force military planners to find savings in R&D outlays.

George Leopold, Contributor

October 26, 2005

2 Min Read

FALLS CHURCH, Va. — At a time when the U.S. high-tech industry is lobbying for greater federal investment in research and development, a new budget forecast is predicting sharp cuts in military R&D spending by the end of the decade.

A budget forecast released Wednesday (Oct. 26) by the Government Electronics & Information Technology Industries Association (GEIA, Arlington, Va.). found that Pentagon spending for research, development, test and evaluation (RDT&E) has likely peaked at about $68.8 billion in fiscal 2005. The forecast said “sharp reductions” are planned by the end of the decade that would bring the R&D total down to about $60 billion (in constant fiscal 2006 dollars) by 2011.

The anticipated cuts are especially disconcerting for the high-tech industry because the Defense Department currently accounts for the lion’s share of federal R&D spending.

“DoD needs money to put equipment into the field, and the money will come from RDT&E,” said Cecil Black, a Boeing Co. executive who presented the DoD spending forecast at a conference here.

Black noted that political pressure to reduce the budget deficit is forcing DoD planners to find savings. "Procurement and RDT&E will be pinched by internal and external budget pressures,” Black said. Among those pressures are soaring medical and retirement costs for medical personnel and the operational costs of the war in Iraq.

Black added that Congressional Budget Office estimates indicate that military R&D spending will steadily decline after 2012.

Overall, GEIA said U.S. military spending is expected to peak in fiscal 2006 at about $517.5 billion, a total that includes supplemental budget requests to fund the Iraq war.

Industry officials have been calling for greater federal support for the U.S. semiconductor industry. However, the director of the Defense Advanced Research Projects Agency recently told Congress that DoD’s program to pursue semiconductor research in areas like lithography was taking a “strategic pause.”

Boeing’s Black said the budget squeeze means technology companies must innovate to find ways to reduce the gap between soaring development costs and shrinking DoD investments. Industry "must find ways to bring down the cost of technology innovation," he added.

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