The Congressional Budget Office released a report that shows that the current Pentagon plan to operate, sustain and modernize the US nuclear arms capability over the next 30 years will cost $1.2T. This is the first estimate ever released by an official agency that attempts to capture all of these costs over this length of time.
One of our three main themes continues to be that we are witnessing the irresistible force of critical, even existential, recap and readiness demands encounter the immovable rock formed by the supply of $ and time.
While analysts often warn of the long term impacts of incremental program decisions, "something like scales fell from the eyes" (Acts 9:18) of some members of Congress when confronted with the total impact of what is frequently assumed to be one of the safest portfolios in the Pentagon budget.
The total Pentagon nuclear program consists of:
- Operation and sustainment of the existing nuclear triad: B-1 (BA), B-2 (NOC) and B52 (BA) bombers, ICBMs (BA) and Ohio-class SSBN (GD) ballistic missile submarines
- Modernization programs for each of the three delivery systems, the B-21 bomber (NOC), the Colombia-class submarine (GD, BWXT), the Ground Based Strategic Deterrent (GBSD) (BA, NOC) and of the nuclear weapons themselves (BA, LMT, RTN)
- Weapon laboratories that maintain and develop the weapons that go on the triad delivery systems (government-owned, contractor operated, e.g. LMT, Bechtel, L3, et al)
- Nuclear Command and Control and Communications (NC3) system
The US spent $29B on these programs in FY 2017 and that amount will grow to $50B per year within ~ 10 years.
Nuclear programs constituted 4.9% of the baseline total defense budget (050) in FY 2017 and that proportion will grow to ~8% by the late 2020s.
Note that the data shown is based on the existing, Obama Administration-era, program and does not reflect President Trump's desire to strengthen US nuclear capability as noted in numerous remarks and recent reports. See for example, "Trump Wanted Tenfold Increase In Nuclear Arsenal"
As we note in our presentations to investors, the other components of the national defense strategy also demand increased portions of an uncertain resource pie. We retire more attack submarines every year (4) than we deliver (2) although we are already at or below Obama Administration requirement levels and significantly below Trump Administration goals. Similarly, ~ 350 USAF, USN and USMC fighters will approach their 30th "birthday" this year and we will only deliver 88 new aircraft.
Something has to give... but not probably not right away.
- While we believe that the FY 2018 budget will see an increase and the resource pie will get larger, (see our note of 17 Sep 2017), but even the most optimistic assumptions are still insufficient even in the mid term.
- The CBO report highlights nine alternatives to reduce the size of the nuclear forces bill. Significantly, it does not discuss any changes to the Colombia-class submarine (GD). Alternatives are variations on reducing the triad of delivery systems to a "dyad" and reducing the number of weapons. None of these seem likely to be recommended by the ongoing Nuclear Posture Review that will deliver the Administration position as part of the FY 2019 budget in February.
- That said, we believe that eventually, (after the mid-term elections?), the nuclear program will get a haircut. Most likely to be reduced are the programs that are still nascent ("last in, first out"). Our calls:
- Long Range Standoff weapon (LMT, RTN). (Stealthy nuclear cruise missile, primarily for the B52, see our note of 23 August) Competing tech maturation contracts awarded to LMT and RTN may get $ but procurement in the 2020's seems doubtful.
- GBSD. (ICBM replacement) (BA, NOC). Competing tech maturation contracts awarded to BA and NOC could well see an early downselect to save development dollars. (BA slightly more probable to win than NOC). Planned commencement of procurement will be slowed into at earliest the 2030s.
- B-21. (NOC) Classified development contract will continue and some aircraft procured but likely only half of the currently stated requirement for at least 100 (some have advocated for 165+).
