Executive Summary
I. Introduction

Approach of this Report
Results in Brief
Affordability
Inevitable Uncertainty
II. FY 2002-FY 2016 AIR FORCE PLANS AND FUNDING REQUIREMENTS

Option A
Funding Requirements

Option B
Option C

III. A SMALLER AND DIFFERENT AIR FORCE

Current plans call for the U.S. Air Force to be modernized extensively over the next 20 years. Under those plans the Air Force is projected to buy, among other things, as many as three new types of tactical combat aircraft, and possibly new types of transport and tanker aircraft as well. At the same time, the size of the Air Force is projected to stay at roughly today’s level. Based on an analysis of these plans, the Center for Strategic and Budgetary Assessments (CSBA) estimates that, over the long-term, the cost of the Air Force’s current modernization and force structure plans is likely to exceed available funding levels by some $18-24 billion a year.¹

This conclusion should not be too alarming. Historically, the existence of a plans/funding mismatch is very much the norm, rather than the exception for the Department of Defense (DoD). In the past, DoD has generally resolved such mismatches by scaling back its plans. Similarly, there is good reason to believe that a prudently scaled-back Air Force plan would be sustainable within likely future budgets and would suffice to meet future U.S. security requirements.

CSBA finds that:

• The current FY 1997-FY 2001 Future Years Defense Program (FYDP), like most past ones, almost certainly suffers from a plans/funding mismatch. Although closing this near-term gap will not be painless, it should be manageable. However, reconciling the Air Force’s long-term, post-FYDP plans with projected resources will probably require substantial additional programmatic reductions or increases in funding.

• Assuming DoD’s overall budget remains flat at its projected FY 2002 level and the Air Force continues to receive roughly its historical share of DoD funding, the Air Force’s budget would be projected to average about $72 billion annually over the FY 2002-FY 2016 period.

• Due to uncertainty over funding levels, program costs and the future threat environment, the Air Force’s long-term plans are not precisely defined. Assuming the Air Force is modernized over the next 20 years at essentially the rates currently envisioned by the Air Force and its major component commands, CSBA projects total Air Force funding requirements of about $96 billion annually. By contrast, assuming that the Air Force is modernized more slowly, with the DoD only moving ahead with those new weapons programs to which it currently appears most committed, such as the F-22 and the Joint Strike Fighter, CSBA projects total funding requirements of some $90 billion annually.

• Because of the relatively slow rate at which potential adversaries are modernizing their own air forces, the small size of those forces, the dramatic expansion of U.S. precision-guided munitions capabilities, and other factors, the Air Force could probably meet future security requirements with a smaller force structure and less ambitious modernization plans than currently envisioned — at least assuming the administration drops the two-major regional conflict (MRC) capability called for in the Bottom-Up Review in favor of a “one-MRC-plus” or “win-hold-win” strategy.

• The Air Force seems to assume that it will face essentially the same kinds of challenges 20 years from now that it faces today. If the future conflict environment does indeed stay relatively unchanged from what was experienced in the Gulf War, the Air Force might well be able to adequately meet future security requirements within projected budgets of $72 billion a year by adopting a “smaller” version of its current plan. However, adopting a smaller version the Air Force’s current plan is unlikely to be the best approach to reconciling future Air Force plans with projected funding levels. This is because the Pentagon’s toughest future competitors are unlikely to be simply updated versions of the Soviet Union or Saddam Hussein’s Iraq. There is strong evidence to suggest that we are on the cusp of a military revolution that could dramatically transform the ways in which wars are fought.

• In order to prepare for this potentially very different future the Air Force needs to adopt a plan that is not only smaller than but different from the current plan. Since future budgets are likely to remain tight and the near-term risks to U.S. security are relatively modest, the Air Force should consider:

• slowing its aircraft modernization plans;

• adopting a smaller force structure; and

• investing relatively more in the development and operational testing — though not necessarily serial production — of promising new systems such as unmanned aerial vehicles.

The findings of this report clearly point to the need to reevaluate and revise the Air Force’s current long-term plans. It is, however, also important to understand that, given the substantial uncertainty surrounding future rates of cost growth and savings in both Air Force operations and support and investment programs, a considerable amount of uncertainty about future Air Force funding requirements is inevitable. This means that, as in the past, Air Force plans and/or funding levels will undoubtedly have to be modified, and perhaps even changed significantly, as the years go by and the future becomes clearer.