Why the Defense Department needs a chief economist

The Department of Defense budget is growing and the DOD is spending more money on new industries and non-traditional areas than ever before. To ensure that the Department of Defense spends wisely in this new environment, Congress should authorize a chief economist to help the Department of Defense think about dollars and cents.

Since 2000, the DOD has spent more than $15 trillion dollars and has an expected budget of more than $900 billion for fiscal year 2025. The DOD is the world’s largest consumer of bulk fuelthe largest employer in the world with 3.4 million combined civilians and military, and one of the largest healthcare providers in the world. The institution manages $3.8 trillion in assets, including: Real estate portfolio of 26 million hectares and more than 4,800 sites located in every U.S. state and beyond 160 countries. The DOD budget considers it the 20th largest GDP in the world, ahead of countries such as Switzerland, Poland and Taiwan.

Despite the sheer scale of economic complexity, remarkable efforts have been made in recent years to become a lake versatile And active market participant is still missing a crucial piece to help this financial giant better understand and improve its business activities in an era of competition among the great powers: a chief economist.

The DOD benefits from specialized personnel at all levels, with expertise in acquisitions, finance, healthcare, policy, intelligence, information technology and engineering. There are even a number of professional economists who support smaller firms, such as the Investments and economic analysis team under the Office of the Under Secretary of Defense for Acquisition and Sustainment (USD A&S), the Bureau of Commercial and Economic Analysis within the Air Force, and the Cost assessment and program evaluation.

While most of these specialties are obviously reflected in the highest ranks of the department, the role of chief economist is conspicuously absent among them. This absence is made even more prominent by the fact that several other federal agencies such as the Ministry of Foreign Affairs (DOS), the Department of Agriculture (USDA), and even the U.S. Agency for International Development (USAID) all have a chief economist.

Although DOS, USDA and USAID manage alone 4% of federal budgetary resources – compared to the Department of Defense’s 14.7% – few would question their need for a chief economist when considering some of their core responsibilities: DOS must understand the economic posture of countries around the world to monitor international conditions and negotiate a balanced foreign policy; USDA must carefully monitor resource and price dynamics to identify potential disruptions in critical food supply chains; and USAID should identify where aid-based interventions are needed and assess how successful these interventions have proven. Meanwhile, the Department of Defense must perform broadly similar tasks (albeit in a different context) while managing a much broader range of operational, technical, logistical, financial and administrative tasks to meet its needs. strategic objectives.

Whether it concerns highly specialized components intended for: $102 million F-35 fighter jet or a $13 billion Ford class aircraft carrier, cloud servers that will form the backbone JADC2, uniforms needed to equip service members for their service, traditional materials such as copper in the past produce ammunition or the scores of more exotic minerals that are considered critical to defense needsthe DOD consumes enormous amounts of goods both directly and indirectly. All of these commodities are affected by complex interactions among energy production, commodity prices, component production, system integration, labor policies, currency fluctuations, inflationary pressures, and any number of related economic variables. On a large scale and over time, such interactions could have a profound and increasing impact on the Department of Defense’s ability to moderate its resource consumption and maintain productive relationships with the suppliers who supply them.

Monitoring, analyzing and predicting these economic dynamics becomes even more important in light of the evolving definition of asymmetric warfare and under pressure time and cost overruns in major defense acquisition programs. The DOD recently released its very first document National Defense Industrial Strategywhich includes key priorities of building resilient supply chains, ensuring workforce readiness, establishing flexible acquisition processes and exercising economic deterrence against adversaries. The appointment of a chief economist to work with other senior leaders such as USD A&S and the comptroller is a logical next step toward implementing that strategy.

While the introduction of new executive functions or organizational components should not be undertaken without careful consideration of the long-term costs and bureaucratic implications, the relatively minor action of creating an Office of the Chief Economist within the Office of the Secretary of State of Defense, by definition, help the DOD spend money more efficiently, manage resources more effectively, and ultimately wield the full weight of its market power in a more productive manner. The opportunity gains produced can, in turn, have a truly positive and outsized impact, from the Department of Defense to the military and back to the American taxpayer.

As the saying goes, it’s common sense to care about dollars and cents.

David Rader is the former Deputy Director of Global Investment and Economic Security at the Department of Defense.

Adam Papa has extensive experience as a technology and national security professional, including experience as a deep-tech VC investor, international NATO staff member, McKinsey consultant, CFR term member, and policy researcher at the Harvard Belfer Center.