Obama Budget To Shrink Security Industry

Author: John Honovich, Published on Feb 27, 2009

With massive deficits building, Obama needs to cut long term spending. Obama's budget blueprint shows that cutting security/defense spending will be central to his plan.

Even the US government is acknowledging that the budget deficit  simply cannot be allowed to grow out of control indefinitely. The easiest choice for Obama is to cut spending around an unpopular war.

This should come as no surprise as we have anticipated such moves since Obama's election. Nonetheless the evidence is now clear that Obama plans to (and probably needs) to focus on security/defense spending cuts.

Here are the key findings:

  • Expect direct security/defense spending to drop
  • Expect significant pressure on new projects/equipment spending
  • Likely to have associated political resistance on general security spending

Cutting the Deficit

Obama plans to shrink the size of the deficit over the next 5 years by $2 Trillion USD. He expects to achieve 66% of that savings from lower Iraq/Afghanistan expenses. This is a massive 'reverse' stimulus to the security industry.

Equally importantly, Obama is focused on eliminating the loopholes and 'supplemental' spending mechanisms that allowed security/defense spending to grow so easily. Obama has referred to 'dishonest accounting practices' that did not tell the full truth on what taxpayer money was being spent on. The supplemental funding will be eliminated and war spending will be restructured to come from the normal DoD budget.

How this Hurts the Security Industry

The reality is the security industry has greatly benefited from the loose spending practices of the US government. It's almost legendary how easy it was for the last 6 years for government agencies/military commands to find millions of dollars for projects. A lot of these were supplemental appropriations that felt as easy to get as a homeowner finding a quarter under their sofa cushion.

At minimal, these changes in process structure are going to lengthen approval processes. It will invariably kill many projects. And as pressure mounts to cut the budget, will impact new security technology purchases. Indeed, NPR is already reporting that cutting of capital military projects is the most likely target.

Won't Cutting Security Spending Cost American Jobs?

Sure but the size of the deficit almost forces cuts to be made. Cutting defense/security spending is far less likely to result in negative reactions than cuts in education, unemployment, etc. Plus, Obama's political base is generally negative to the war.

Cuts and Pressure to Continue

Right now, this is a blueprint. The reality though is this is the core strategy that we are likely to see Obama execute over the next 4 years. The economy is still deteriorating which will continue to force more cuts to be made. This blueprint shows that Obama's go-to cuts will be in security/defense.

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