Shrinking Cities


One of the biggest challenges for the world this century is how to accommodate the hundreds of millions of people who will flock to cities, especially in emerging economies. Coping with this human torrent will be fearsomely difficult but at least the problem is widely acknowledged. That is not true of another pressing urban dilemma: what to do with cities that are losing people.They are hardly unusual. Almost one in ten American cities is shrinking. So are more than a third of German ones and the number is growing. Although Japan’s biggest cities are thriving, large numbers of its smaller ones are collapsing. Several South Korean cities have begun to decline a trend that will speed up unless couples can somehow be persuaded to have more babies. Next will come China, where the force of rapid urbanisation will eventually be overwhelmed by the greater power of demographic contraction. China’s total urban population is expected to peak by mid-century; older industrial boom towns are already on a downward slope.

An abandoned street containing a rotting nursery or primary school is a sad sight. And declining cities have more than visual problems. Disused buildings deter investors and attract criminals; superfluous infrastructure is costly to maintain; ambitious workers may refuse to move to places where the potential clientele is shrinking. Where cities are economically self-sufficient, a smaller working population means a fragile base on which to balance hefty pension obligations. That is why Detroit went bust. So it is unsurprising that governments often try to shore up their crumbling smaller cities. Japan recently announced tax cuts for firms that are willing to move their headquarters out of thriving Tokyo. Office parks, art museums and tram lines have been built in troubled American and European cities, on the assumption that if you build it, people will come. For the most part, they will not. Worse, the attempt to draw workers back to shrinking cities is misconceived. People move from smaller to larger cities in countries like Germany and Japan because the biggest conurbations have stronger economies, with a greater variety of better-paying jobs. The technological revolution, which was once expected to overturn the tyranny of distance, has in fact encouraged workers to cluster together and share clever ideas. Britain’s productivity is pitiful these days (see article) but it is almost one-third higher in London than elsewhere.  Policies meant to counteract the dominance of big cities are not just doomed to fail but can actually be counter-productive. The most successful metropolises should be encouraged to expand by stripping away planning restrictions. If housing were more plentiful in the bigger conurbations it would be cheaper, and the residents of declining cities, who often have little housing equity, would find it easier to move to them. Rent controls and rules that give local people priority in public housing should go, too: they harm the poor by locking them into unproductive places.

A new kind of garden city

Even so, many people will stay stuck in shrinking cities, which will grow steadily older. Better transport links to big cities will help some. But a great many cannot be revived. In such cases the best policy is to acquire empty offices and homes, knock them down and return the land to nature—something that has worked in the east German city of Dessau-Rosslau and in Pittsburgh in America. That will require money and new habits of mind. Planners are expert at making cities work better as they grow. Keeping them healthy as they shrink is just as noble. 

In the US at least, cities house poor people, often racial minorities or from lower classes, who global capitalism no longer wants to employ. The excesses of finance with harmful if not predatory mortgages, ended up kicking people out their houses, which become vacant and vandalized, driving people away from cities. Who will pay to restore or repair them? Excessive wealth inequality may favor a few high lifestyle metros, but also prevent capital from investing in places where the those who control capital seek only to exploit. Growing populations may keep property values inflated, but low and stagnant wages will not make cities liveable. Our biggest crisis is how to employ everyone, or if that is becoming more obsolete, to ensure that the productivity of the society is widely shared. Whether that happens in large metros, smaller cities or even repopulated and renewed farmlands is less important than that it happens at all.

Cities rise and fall. Take the former City States of Rome and Venice as two significant examples. This pattern will continue and the global pattern of key cities will also shift. Cities with strong economic drivers will prevail. Cities with attractive natural qualities will prevail. Cities which are well marketed and offer a better quality of life will prevail. Cities in countries whose governments offer significant financial and taxation advantages will prevail. Competition will always prevail at the Local, Regional, State, National and International level. Larger cities with characteristics such as those above will continue to prosper provided they can compete. Smaller centres located within short travel times to such cities will also benefit and transport technology here can play a large role. In addition locations with good cyber connections to people in such centres also have potential. The urban settlements patterns of the past and today will be quite different to those of tomorrow. Government will always have a regulatory role in ensuring that citizens are safe and prosperous and make a fair contribution to society. People will migrate to seek a better life. Those people captive to their own predicament and their country’s policies will be unable to move and policies of countries may restrict immigration. Humanity adapts.

By Garson Silvers & Naved Jafry 

Expanding the Business of Defense To Emerging Markets


As the defense budgets face downward pressure in the US and Europe, emerging markets are poised to spend more than a trillion dollars on defense over the coming decade, creating business opportunities for Western defense firms. A recent Frost & Sullivan analysis of 10 emerging markets concluded that between 2015 and 2025, emerging markets in Southeast Asia, South America, the Middle East and elsewhere would spend more than $1.2 trillion on defense. Over that period, military expenditures in Colombia, Kuwait, Malaysia, Morocco and Singapore are expected to see 3.6 percent compound annual growth rate, while Angola, Azerbaijan, Peru, Qatar and South Korea can anticipate a CAGR of 2.8 percent. Much of that spending will be on personnel, operations and maintenance, leaving relatively modest amounts for new equipment. While the first group will spend an average of $9.5 billion a year combined on new equipment, the second will spend an average of $18.95 billion a year combined, primarily driven by South Korea and Qatar’s acquisition spending. While some emerging markets are rapidly developing countries and some boast more established economies, the three main drivers for their increased defense spending are similar, said Alek Jovovic, an analyst with Avascent. 

First, governments want to develop what Jovovic terms “sovereign technical capabilities,” with spillover domestic benefits. “They look at the defense sector and they see certain things came out of defense spending that were just good for countries from a technological perspective. It drives broader industrial development,” he said.

Second, they want the ability to defend themselves as needed without relying on equipment from foreign suppliers. 

Third, boosting defense spending helps create high-quality jobs. “These are all trends that are remarkably similar, no matter what the threat context is, no matter where the country is,” Jovovic said.

Earlier this year, the London-based International Institute for Strategic Studies noted that global defense spending rose by 1.7 percent in 2014, the first year of growth since 2010. But the geographical distribution of defense spending is changing, with less coming from the US (which accounted for 38 percent of the global total in 2014, down from 47 percent in 2010) and Europe. “By contrast, defense outlays are rising in many emerging economies, particularly Asia, the Middle East and Russia,” IISS noted in its report Military Balance 2015. “In the Middle East and North Africa, nominal defense spending is estimated to have risen by almost two-thirds since 2010. Factoring in exchange rate and inflationary effects, this equates to a 40 percent increase in real defense outlays over the period.” The shift in defense spending creates opportunities for Western defense contractors as demand for sophisticated weapons will likely outpace emerging countries’ abilities to produce them domestically. As a white paper published by Avascent in March noted, the US has a leading position in these markets, but political friction between the US and its allies leaves an opening for competition from European, Israeli, Russian and Chinese defense companies. While mature markets in Western Europe and Northeast Asia continue to offer major competitive opportunities over the next 10 years, “many opportunities will be found in fast-growing emerging markets which have less well-developed industrial capacity to fulfill the requirements of rapidly expanding militaries,” the Avascent white paper states. “A growing share of revenues for most Western defense suppliers will come from these emerging markets.” For example, 95 percent of defense contracts in Gulf Corporation Council countries between 2010 and 2014 went to foreign companies, with the lion’s share going to the US (73 percent) and Western Europe (24 percent). In the coming decade, 64 percent of GCC contracts are up for grabs, according to Avascent projections. Similarly, the US (41 percent) and Western Europe (31 percent) were the largest defense suppliers for Southeast Asia between 2010 and 2014, but 63 percent of contracts for the coming decade are uncommitted. “On one side it is good news, because a number of new markets that aspire to world-class defense products and services to some smaller degree,” Jovovic said. “On the challenging side, these are sometimes hard markets to do business in. They require a bit of a paradigm shift, you have more partnering, more collaboration with folks on the ground.”

In a survey conducted in October by McKinsey & Company, defense industry executives largely predicted declining defense spending in North America and Europe versus growth in the Middle East and Asia-Pacific. The Middle East (77 percent), India (50 percent), US (33 percent), South Korea (33 percent) and the UK (23 percent) were seen as the most attractive markets, with Japan (20 percent), Brazil (10 percent), Indonesia (10 percent), Canada (10 percent) and China (7 percent) rounding out the top 10. “Declining budgets in the Western world and growth in Asia and the Middle East give rise to an overwhelming trend in the defense industry: affordability,” the McKinsey report states. “About 85 percent of executives believe that their customers will shift their focus from procuring systems with the highest possible performance to ones that are more affordable.”

Curated by N. Jafry & C. Pacheco

Advent Of A Sustainable Economy


There is a symbolic movement of our times that is promising a new lifestyle. A lifestyle that is not only transforming the vision of the future but changing the way we do business and invest. It is a possibility where the energy is produced and consumed sustainably, the environment is clean, and all of nature is in its healthy state. I know this could sound very idealistic when we are constantly bombarded by bad news. But if we look deeper the sustainable revolution has inspired and compelled governments and corporations to make goods and services such as clean power, extend green tax credits and encourage local recycling mandates that affect our day to day lives. This trend has also resulted in a new race to create better and more efficient cars and buildings which consume less energy and resources. New and advanced methods of growing food, and developing medications with organic ingredients are influencing nutrition and health care sectors as well. More humane procedures, like using fewer chemicals and minimizing animal testing’s has been advocated by consumers and activists alike. Even Local counties and schools are encouraging their constituents to recycle and conserve, this has resulted in many of us reusing shopping bags, using public transportation paying a premium for locally grown organic food and driving a fuel-efficient car.

But then we must also pay attention as to who are joining the movement to “LOOK” good and who are actually participating to” DO” good. Green washing is another technique where many may use to fit and conform into the new trend. Following the investments and the money chasing green projects is one way to keep abreast with what’s happening in the world of sustainability. As an entrepreneur or consumer pputting your money where your heart is another way to ensure the brightest idea will not get anywhere with the wrong funders. Don’t get intimidated by traditional start-ups and their glamorous image. You are not in the business of looking good, you’re in the business of doing good! And this is particularly what makes you stand out from the crowd. Invest in your purpose, put your heart and mind to nurture that big idea. Slowly, but surely, you can get the ball rolling further than you would have ever imagined.

Many VC monies may come with lots of strings attached and loss of creative liberty to steer businesses in the right direction hence not getting get stuck on the idea of VCs and cash in the bank but with key partnerships and  resources instead could be essential. People, skills, relationships that bring the right mix together to co-create things which at the end of the day may increase capacity to help move businesses further that otherwise would have been paid for. The right partners will embark on a journey with you because they believe in what you do and will give time, skills, networks and passion. That may be worth a whole lot than just cash!. If we must need to go the traditional route and go for the big money – VCs, grants etc – being picky about who we are pitching to may be critical. Research the VC’s or foundation’s history of giving, their pre-existing conditions and their relationship with their beneficiaries. Before pitching, try to meet with them informally and see if you click on the same things. Do you trust that person after you have left the meeting? Would they be an enjoyable teammate? Do you want to share more with them and value their advice, beyond just the business side of things? If your answer is yes, then go for it. Investments will come pouring.

In short align your values and stay true to yourself, your mission and your vision.  Never compromise and never lose sight of the purpose of your business, organizations or projects. Be authentic in everything you do!  Authenticity reinforces your purpose. Funding will only make it flourish. But if the Mission of sustainability is not there then there is nothing that can flourish.

Curated By Naved Jafry & Garson Silvers

Making Co-Housing Trendy 

  
In cities with rapidly rising rents, foreclosed hotels and office/ industrial buildings have steered the creation of hotel-like spaces that may also house the young or the penniless masses.  You can have a few hundred housemates in an abandoned office building that is turning into one of the world’s largest experiments in co-living, designed in response to London’s insane rents. Inside, residents will have private space to sleep, storage, and a bathroom. A kitchenette may or may not be shared. But they’ll also have access to 12,000 square feet of shared living space, including full kitchens, a library, a spa, a “secret garden,” and a theater. “The idea is that we provide a compact but well-designed living space where you can have all of your basics. … It’s really your crash pad,” says Reza Merchant, CEO of The Collective, the London startup that is developing the building along with several other co-living spaces around the city. “The wealth of amenity space is the modern form of the living room.”
  
If you want to have a dinner party, for example, you can book a room for that. “It’s the whole sharing economy phenomenon when you share things with other people you get a lot more bang for your buck,” he says. “How often are you going to have a 15-person dinner party? You don’t have that every night, so if you share that with other people, you can have access to all these amazing living spaces that you wouldn’t otherwise have.”It’s designed to be something that someone in their twenties or thirties can afford as London rents which have doubled in the past decade keep soaring. Depending on the neighborhood, the co-living spaces The Collective is building can be 15%-40% cheaper than renting a typical apartment.”At the moment, people earning less than £40,000-£50,000 a year don’t have the option of renting a flat in a decent location,” Merchant says. “So they’re forced at the moment to rent rooms in often illegally converted houses.” Merchant, who is 26, is also convinced that millennials prefer living in communities. “I think if you look at our generation, there’s a shift toward wanting to be part of a community and share experience with their peers,” he says. “The whole concept of sharing is much more acceptable today than it was previously. So on the one hand, people actually prefer to share. On the other hand, there are simply no options.”

  
The building is designed to be suitcase-ready and is a little like living in a millennial-filled hotel. “We change the linen, we clean the rooms, we have an on-site concierge, we fully furnish the rooms, even down to the knives, the forks, the TV, so that people can show up with their bag and they’re ready to live,” Merchant says. “That’s very much part of the psyche of the millennial generation. They don’t want to own material possessions.” When it opens in 2016, the building will be one of several massive co-living spaces The Collective is planning for London. PLP Architecture, which designed the space, also has plans for another big project, a 30-story skyscraper with co-living on the top and co-working for startups on the bottom.The Collective isn’t the only company to attempt co-living spaces, but there’s still questions about whether the business model works. Campus, a startup from Silicon Valley, notably failed at the same thing. Others, like a new co-living space in Brooklyn, have been criticized for charging rents that aren’t much better than a studio in the area. Still, more are being planned. Overall we think that the growing interest in co-living is a logical reaction to the housing affordability crisis many cities face. There is a massive issue in big cities like London, San Francisco and New York where the lifeblood of these economies simply cannot afford to live affordably. In short this idea is long over due as when you have such an acute issue for what is such a key part of the economy, the market will inevitably come up with solutions.

By Naved Jafry & Garson Silvers

Ref: A Peters

Tragedy Of The Homeless 

   
 
Every year over 70 million rural migrats are moving into urban centers around the world. Unfortunately most of them land up  into the slums of their new cities.  In such a situation can the buy-one-give-one model work for housing? Imagine if every slumdweller or homeless family on earth had their fully paid home. Thanks to our new social concious buyers Many such projects and proposals are well under way to make that a reality. Buy A Luxury Condo or home, Give A Slum Dweller A New Home is a reality and is launched one of the first partnership in the U.S. and India. Buy a new luxury condo in San Diego, and you can help build a home for a family currently living in a slum in Manila or Mumbai. The philosophy and the social impact behind this has inspired many developers a one-for-one real estate gifting model,” says Pete Dupuis, who co-founded World Housing with his business partner Sid Landolt in 2013, beginning with a development in Vancouver.

   

    

The business model is simple in theory: Real estate developers donate a portion of their marketing budget to the nonprofit, and then the nonprofit creates local factories that build low-cost homes in the developing world. Each home, which can cost about $5,000 in a place like Manila or Mumbai, is part of a bigger neighborhood with a playground, community garden, and other common areas. “Our mission at World Housing is to create social change by connecting the world to be a better community, so the idea of ‘community’ is foundational to how we think, design, and create our homes,” says Dupuis. In Cambodia, where the nonprofit has been building homes for the last two years, they’ve partnered with Cambodia Children’s Fund to help provide services like health care, nutrition, and education for residents.The team’s new project in Manila was inspired in part by a trip Dupuis took to a slum called Smokey Mountain, where about 300,000 people live in shacks in a landfill. “The abject poverty has left a lasting impression on how I saw the world,” he says. “However, the one thing I discovered was the welcoming and hopeful nature of the people there. One of my best memories was playing a game of pool in the middle of a slum, on a table reconstructed from garbage. The people made me feel like part of their family and I made a promise to myself that when World Housing opened we would return to help the people there.”
  
In India, anyone who buys a condo or house at any of its new developments in and near Mumbai, Houston and Tanzania called micro Cities will help change the lives of a family locally. The Bosa condo development in San Diego will fund 64 homes in Manila, housing 300 people.
The condos, which will be available in 2017, are polar opposites of the simple houses under construction in Manila, with amenities like ocean views, a pool and sauna, and even potentially an indoor dog run. But the developer thinks that buyers will respond to the idea of doing good as an added perk. “We hope to set a new norm in residential development and inspire buyers, who will be the driving force in building this community,” says Nat Bosa, president of Bosa Development, the company behind Pacific Gate. Companies such as Zeons Realty which builds off the grid Micro-Cities also donates to the local community in which it starts any project.  “We believe it will attract domestic and international buyers, so it is a natural progression for the company to expand its philanthropic footprint within the community it does business,” Garson Silvers says CEO for Zeons. World Housing has housed 2,000 people so far, and hopes to reach 30,000 by 2020. Bosa believes the model may start to spread in the development community. “As the industry continues to grow we believe this model of giving will also grow,” he says. “There’s nothing more powerful than having owners and developers see the physical impact they are having on a global scale. They are affecting lives in the most profound way.”

By Naved Jafry & Garson Silvers

Reference : A. Peters 

Why Does The Military Spends So Much Money?

The fuel of our military’s greatness comes in large part from the economic prosperity of the US and the incredible funding that the Pentagon receives. To put it in perspective  here’s how the US military spends its billions. In 2015, the US have a projected military and defense budget of $601 billion, which is more than the next 7 highest spending countries combined. The vast majority of the $601 billion will be funneled towards the military’s base budget, which includes funding for the procurement of military equipment and the daily operations costs of US bases. Of the $496 billion base budget, the vast majority of funding goes towards the cost of operating and maintaining the military and the cost of paying and caring for military personnel. A further $90.4 billion is set aside for the procurement of new weapons systems during the 2015 fiscal year.  In terms of investments, the US has dedicated a substantial chunk of funding into aircraft and related systems. This is due to the procurement of the F-35 fifth-generation fighter, which is entering into service with the Marine Corps this year. The 2015 budget also has started to allocate funds for the next-generation long-range strike bomber for the Air Force. In terms of major acquisitions, the F-35 has been the dominant cost with the procurement of 34 aircraft. The new Virginia-class nuclear-powered submarine, which is intended to help modernize the US submarine fleet, is the second main acquisition cost for 2015. The $6.3 billion price tag is for two subs. By department, the US Navy will receive the most funding in 2015. However, the Department of the Navy’s funding also includes the 2015 budget for the US Marine Corps.

Trimming the defense budget is one of the hardest tasks in Washington. Congress never met a weapons system it didn’t like. But with the nation’s debt problems, making sensible cuts has become essential. Senior Pentagon officials recognize that new technologies make it possible to reshape the budget without putting the country at greater risk. But this transition will require an honest evaluation of the “legacy systems” – the squadrons of manned bombers and fighters; the fleets of aircraft carriers, cruisers and submarines – that are wrapped in red, white and blue. The military loves these traditional instruments of American power, despite their immense cost. But as technologies change, they will gradually become as outmoded as a cannonball or a cavalry charge.

Defense analysts argue that the military needs to focus less on fancy platforms – its nuclear ships or supersonic jets. These systems will soon be vulnerable to attack from lasers and other directed-energy weapons. But more important, the platforms will matter less than what they carry. This is the age of “unmanned aerial vehicles” – and soon unmanned ships, subs and tanks, too. These simple, autonomous platforms will be cheaper and more robust but no less deadly to an adversary. If  our leadership seizes this opportunity and drives it through the inevitable congressional opposition, it can begin a real transformation of the defense budget. Technology should allow the United States to cut costs for traditional legacy systems as it prepares for the new threats that are ahead. The new technologies that will drive these changes are detailed in a study called “Technology Horizons” that was prepared last year by Werner Dahm, who was then chief scientist of the Air Force. He urged research on “cyber resilience” and “electromagnetic spectrum warfare,” including lasers and other beam weapons. And he stressed that unmanned systems, coordinated by advanced software, can give “operational advantages over adversaries who are limited to human planning and decision speeds.”

Lasers are only a few years away from being practical weapons, Pentagon officials say. Ground-based lasers could revolutionize air defense, and a new generation of solid-state lasers may be small enough for airborne platforms. “Directed-energy systems will be among the key ‘game-changing’ technology-enabled capabilities,” wrote Dahm.

Space will become, metaphorically, a vulnerable “low ground” in this new environment. Powerful ground-based lasers will be able to blind or disable satellites, so redundant forms of communication will be needed. So will alternatives to platforms that depend on space-based Global Positioning System (GPS) technology.

Though our “Buck Rogers” fantasies make us think of lasers primarily as offensive weapons, experts say they will be just as useful for surveillance – illuminating targets with pinpoint digital precision (when clouds aren’t in the way). Researchers are developing laser-driven air-defense systems that can instantly detect and then strike incoming missiles. This is a technology revolution that, among other things, could actually make Israel safe from missile and rocket attack.

The hard part of this defense transformation will be giving up the grand old systems that for generations have symbolized U.S. military power. But that process of shedding the past is absolutely essential. If we try to keep all the old systems and add the new ones, our already overstretched budget will rip apart like a gunnysack. The Pentagon knows it can’t have it all; hopefully, members of Congress (who love to bloviate about cutting the budget but hate cutting actual programs) will get the message, too. Gates has been an outspoken advocate of cutting programs we can’t afford, and he has strong backing from Adm. Mike Mullen and Gen. James Cartwright, the chairman and vice chairman of the Joint Chiefs of Staff. The military brass knows the country won’t be secure if it’s broke. 
As the military is obligated to protect and defend our constitution, the US military has unquestionably become the dominant force on the planet. With the greatest of its advances seen in technological developments and maintaining a massive network of military alliances. This has resulted in helping the US military retain overwhelming lead over the militaries of every other country on the planet. Overall the protection of the citizenry’s life and property while ensuring a reasonable environment for the freedoms we so very much enjoy, this we believe is a reasonable price that is worth paying for. 

Curated By N. Jafry & C. Pacheco 
 

Cost Of Security

  
Just like with cheap car insurance, the United States might not see the consequences of under-spending on defense until something really bad happens. It is worth spending more today to be prepared for the challenges of tomorrow. The debate about defense spending will likely reignite in September as Congress returns from recess and the end of the fiscal year draws near. Unfortunately, much of that debate will not be very helpful or informative.
Instead of arguing the merits of a particular military spending level, much of the debate will revolve around Democratic opposition to increasing defense spending without proportional increases to non-defense spending. The usual arguments for cutting defense spending will likely pop up as well. But what’s really needed is a more thoughtful debate. Once you get beyond the talking points and the political agendas, what should the United States spend on defense? The Ideal Defense Budget Debate Determining what the United States (or any country) should spend on national defense is much easier in theory than in reality. But let’s start with the theory.

The first step is determining the vital interests of the United States. What must we, as a country, protect? Almost everyone would agree that we must protect America and our citizens from attacks by terrorists or nation-states. But beyond protecting the homeland and its people, it gets more complicated. Should the United States protect its allies? International commerce and the commons in and on which this commerce happens? The human rights of individuals in other countries? These are the types of questions that need to be answered in order to determine the vital interests of the United States.
The next step is figuring out what threatens these vital interests. Some of these threats are obvious, such as nuclear war and terrorist attacks. Some threats seem to be growing, such as Russia’s aggressive actions and China’s cyberattacks. The goal should be a clear-eyed analysis of what truly threatens our vital interests today and what may threaten those interests in the future.
The third step is figuring out how to protect America’s vital interests from both the threats of today and those of the future. This will likely include elements of hard power (i.e. the military) and soft power (i.e. diplomacy, alliances, trade) used in concert to deter or, if necessary, defeat the threats. This should produce a cohesive strategy for protecting America’s vital interests. While outlining a full strategy is too large a task for this article, the most recent National Defense Panel report is a good bipartisan example that assesses vital interests and threats and then outlines a strategy.

  Once you have a strategy, you need to develop the tools to implement that strategy. For the military, this means figuring out the capabilities and the capacity needed to execute the strategy. For example, protecting America from North Korean nuclear missiles may require an interceptor (a capability). But one interceptor is probably not enough — instead you need enough interceptors (capacity) to defeat all of North Korea’s nuclear missiles. While capabilities are usually pretty self-evident, questions of capacity are often more complex. Most Americans would agree that the U.S. Air Force should have the ability to defeat the best fighter aircraft of our potential adversaries. But should the Air Force be big enough to fight against more than one potential adversary simultaneously?
Answering questions of capability and capacity will lead directly to a defense budget. The U.S. Navy needs a certain number of destroyers at any given time and the average lifespan of a destroyer is known, so the number of destroyers that need to be built per year can be figured out. This process can be repeated for each military capability, which eventually produces a defense budget.
Of course, reality is not that simple. The defense budget is often constrained for economic or political reasons. The gap between what the United States actually spends and what it takes to fully resource and execute the strategy is risk. Unfortunately, risk is difficult to measure, but all too easy to ignore. A particular threat may be out of sight and out of mind, but it still exists and could still harm a vital interest of the United States. It’s similar to buying cheap car insurance. It may save a few bucks and turn out fine as long as you never have an accident. That is what it means to accept risk.
To be clear, a strategy-based defense budget should not be an excuse for a wasteful defense budget at any level. On the macro level, if the United States spends too much on defense, it is wasting the precious resource of taxpayer money and contributing to the burden of debt on future generations. The total defense budget should not be one dollar more than absolutely necessary. On the micro level, wasteful and inefficient programs prevent capabilities and capacity from being used to protect the nation’s interests. Additional reforms must be implemented so that every dollar is used efficiently and appropriately.

  
So in theory, that is how a defense budget should be built. But where do things really stand? Since the imposition of the Budget Control Act in 2011, the base defense budget (excluding war costs) has gone down by 15 percent in real terms, while the threats to U.S. vital interests have, if anything, increased. The Heritage Foundation’s 2015 Index of U.S. Military Strength assessed the current capacity, capability, and readiness of the U.S. military as “marginal.”
In this context, President Obama has proposed increasing the base defense budget to $561 billion in FY2016, which represents a 5.8 percent inflation-adjusted increase over FY2015 defense spending. Republicans in Congress also want to spend $561 billion on defense, but plan to use overseas contingency operations (OCO) funding, or war budget, which is exempt from the Budget Control Act spending caps. In other words, the defense spending debate will not really be about defense spending. The true driving forces of the debate are the use of a budget gimmick and Democratic opposition to increasing defense spending without proportional increases in non-defense domestic spending.
While the White House and Congress propose a defense spending level of $561 billion, many believe this is still well below a strategy-driven defense budget. A Heritage Foundation analysis suggested $584 billion as a starting point, a 10 percent increase over FY2015. The bipartisan National Defense Panel argued that the last budget proposal from former Defense Secretary Robert Gates in 2012 should be the minimum defense budget. For FY2016 that would be $638 billion, which is 20 percent higher than FY2015 in inflation-adjusted dollars.
Let’s assume for a moment that the defense budget was increased to the Heritage Foundation or National Defense Panel’s preferred levels in FY2016. Where would this money come from and where would it go? Both the Heritage analysis and the National Defense Panel point out that entitlement programs are driving the national debt and must be reformed. For example, with two months of FY2015 remaining, the three major entitlement programs have already spent $108 billion more than last fiscal year. Until these programs are reformed, the budget situation will remain very challenging for discretionary spending. The Heritage Foundation analysis also proposes ways to save more than $50 billion in non-defense discretionary spending in FY2016 alone.
The reality is that imposing many of these reforms to pay for increased defense spending will be politically challenging. The tempting alternative is to either increase deficit spending or increase taxes. Neither is a wise route. Increased deficit spending (and therefore higher national debt) has been shown to hurt economic productivity. Similarly, increasing taxes also hurts economic productivity. Enacting reasonable entitlement reform and cutting non-defense discretionary programs is the best way forward. There is much debate to be had on how best to reform entitlement programs and where to cut non-defense programs, and it will not be easy, but it is the best path toward an economically strong and militarily secure country.
And where would this money go? The Heritage analysis proposes $31 billion in specific additions, primarily in preserving force structure and increasing readiness and modernization. This includes keeping the Army active duty end strength at 490,000 and the Marine Corps active duty end strength at 183,000. It also includes things like preserving the Navy cruiser fleet and accelerating F-35 purchases for the Air Force. Another obvious place to increase spending is in response to the military’s unfunded priorities lists. The FY2016 requests from each service total $21 billion and are largely focused on smaller items, such as an Army facility sustainment request for $912 million.
While these documents provide a good way to increase the defense budget by roughly $52 billion, defense spending advocates should be willing to recognize that increasing defense spending too rapidly can be wasteful. Immediate budget increases can preserve today’s force structure, increase readiness, and increase procurement quantities for current production lines. New technologies and systems, however, cannot be bought overnight and large cash infusions can actually wreak havoc. The ideal scenario is an immediate defense budget increase to preserve force structure while increasing readiness and modernization. This should be followed by a steady increase over time to allow for the development of future systems and technologies.
Whatever final defense budget number Washington settles on for FY2016, it will doubtless be well below the minimum level dictated by a rigorous, risk-informed, strategy-based analysis. Just like with cheap car insurance, the United States might not see the consequences of under-spending on defense this year. But when the accident happens, or when the threat grows so great not even Congress can turn a blind eye, the costs will be higher than if we had adequately invested in national defense today.
 
By N. Jafry & C J Pacheco