The Defense Industry: Tradeoffs Between Fiscal Constraints and National Security Challenges

Abstract

The global defense sector is faced with uncertainty and volatility in government demand, which is driven by fiscal constraints, as well as shifting defense priorities in various nations. This paper discusses the challenges facing the U.S. government and defense contractors, and provides perspectives on potential strategies for these groups which are designed to mitigate risks and to sustain the defense sector. It emphasizes the importance of the continued growth of the defense sector through greater stability in funding, which would, in turn, assist in sustaining defense demand in response to national security challenges. The paper discusses the trends and composition in U.S. defense spending, the strategies used by the armed services to handle national security concerns and fiscal constraints, the impact on the defense industry of closure or development of key programs, and the strategies used by defense firms to handle the volatility in demand. Collaboration between nations may be a key strategy for sustaining global stability, since combining equipment and forces in various regions helps to alleviate fiscal constraints in various countries.