ABSTRACT
Forecasting future funding envelopes for defense programs is a daunting task. The challenge of allocating defense budgets among labor (military and civilian personnel) and capital (weapon systems, platforms and infrastructure) inputs is further complicated by three additional factors. First, the long-term planning horizon necessary in defense is in stark contrast to the relatively short-term planning outlook of most national governments, a consequence of the four to five year election cycles that exist in most modern democracies. Second, defense directly competes for discretionary funding with publicly popular programs such as healthcare and infrastructure spending. Third, defense faces external shocks in the form of dramatic changes in the international strategic environment, such as the end of the cold war in 1989, and the rise of multiple inter-state and intra-state conflicts throughout the world after September 11, 2001. Although some of these problems were anticipated by analysts, it is still difficult to predict the scale, scope and impact of those changes (Dorff 2005).
