When we think of military costs, we often pay most attention to big ticket acquisitions. The U.S.
Army wants 582 Javelin anti-tank missile systems? That’s running them about $163 million dollars.
Want to upgrade a brigade's worth of Abrams main battle tanks? Well over $900 million dollars.
But new acquisitions are only a piece of the budgetary pie. In 2022,
Army acquisitions and R&D accounted for $37.3 billion dollars in spending,
as opposed to the total $178 billion dollar budget.
The less sexy aspect is the ongoing cost of running units. Not only the combat
units themselves, but also the logistics and support units they need to fight.
In this episode we’re comparing the costs of different types of units in the US Army, as well
as some cross branch comparisons, like an Armored brigade versus an aircraft carrier for example.
But first, if any of you are keeping track of the stock market, defense companies are
making quite a profit this year, even as most traditional investments suffer.
But now, 91 percent of U.S. CEOs are confident a recession is coming next year,
And stocks could fall up to 24%, according to Morgan Stanley analysts.
As a result, big-time investors are flocking to physical assets,
whose value is less likely to fluctuate when stocks do -
Like fine art.
It sounds odd, but think about supply and demand;
They aren’t making any more Picassos, but the demand has been climbing for centuries.
That’s how, even as most investments suffer this year, Masterworks has gotten amazing results.
Masterworks files paintings like Picassos’ with the SEC,
turning legendary art into an actual investment, for a fraction of the full price.
Since having started out in 2017, Masterworks has been featured on Techcrunch, CNBC and Forbes,
and they have over 650,000 users. To date Masterworks has sold 9 paintings, 4 of them just
in the last three months. Those 4 sales returned over 13, 17, 21, and 33 percent net to investors.
Paintings have sold out in minutes on Masterworks in the past,
But you can start investing right away, just by clicking the link in the description.
But back to the video.
Imagine you’re a single 27 year old American who makes a median income of $41,000. For those
with an employer, when it comes tax time about $3,100 dollars is withheld for Social Security
and Medicare specifically. But after lowering your taxable income with a standard deduction,
an additional $3,200 of federal income tax goes to a variety of programs, including the military.
National defense makes up about 12% of federal spending. But when excluding Social Security
and Medicare, defense comprises 17.8% of the remainder. So out of that $3,200, for the sake
of extreme simplicity, let’s say $573.73 goes to the military as a whole, and $133.14 goes to the
Army. Of this, $49.29 goes to personnel costs, like pay, housing, and subsistence allowances;
$49.44 to operations and maintenance; and $27.90 to procurement and research.
In other terms, $2.36 is what it takes to fund an active duty Army Armored Brigade Combat Team.
I just wanted to ground you guys with some human
numbers because it’s nothing but unrelatable morbillions from here.
Now what exactly is the Army funding? The forces the Congressional Budget Office are
concerned with are brigade combat teams, aviation brigades, and special operations forces which
include the 75th Ranger Regiment, 160th Special Operations Aviation Regiment, and Green Berets.
The brigade combat teams are the maneuver forces, and the Army currently has 32 on
active duty and 28 in the National Guard. This is enough to deploy 16 at a time.
The Army also has 16 active duty Aviation Brigades and 12 in the reserve components.
For budgetary purposes, the costs aren’t just limited to the personnel
and materiel in the combat units. For every 10 soldiers in combat units,
there are 13 [12.9] in support units and 5 in administration.
For example the Armored Brigade Combat Team, known for its Abrams tanks and Bradley fighting
vehicles, is currently templated out for 4,244 personnel at maximum strength. That
includes about 1,200 soldiers in its organic logistics units. But for budgetary purposes,
the ABCT actually eats up 16,330 personnel. This number could be called a “brigade slice”,
which includes all outside support, service and admin needed for a BCT to function.
This number doesn’t go down substantially between different types of brigades.
However, National Guard brigades require about 3,000 less personnel,
mainly because they have one-fourth the administrative overhead. Active
and National Guard brigades require the same amount of combat support and sustainment.
Aswell, pay for National Guardsmen is far less, being a part time force. National Guard pay made
up only 13.6% of all Army personnel costs in 2022 despite being 33.2% of the force.
Operations and maintenance costs were also 7 times greater for the active duty army than the guard,
so there are significant cost savings in National Guard units like-for-like.
In terms of dollars, the active-duty Army spends about $3.2 billion operating and
supporting one armored BCT, $3.1 billion on a Stryker BCT, and $2.9 billion on
an Infantry BCT. In the National Guard, an armored brigade costs $910 million a year,
versus $850 million for a Stryker Brigade and $780 million for an infantry brigade.
In aviation brigades the disparity is similar, costing on average $690 million
dollars in the active component and $210 million dollars in the reserve components.
So if 17 average Walmart stores pooled their sales revenue for a year, with an astronomical
amount of creative accounting, they could afford one National Guard armored brigade combat team.
But this is also only taking into account the federal side of National Guard funding.
But National Guard units generally remain under state control until federalized and can be used
by the Governors for state-specific emergencies, although they have to meet federal standards. So
states also have their own independent military budget, albeit with a high level of federal funds.
For example in 2019-2020, California spent about $132.2 million on its
Army National Guard, and received $548.8 million in federal funds.
So what are the takeaways? Armored brigades do generally cost more to operate and support than
lighter infantry brigades. About $240 million dollars a year more on average. But this is only
an 8 percent difference. National Guard brigades by contrast are generally about three and a half
times cheaper from a federal perspective than their active duty counterparts.
Support and admin is also most of the cost of maintaining a combat unit. In
an active armored BCT for example, only one-fifth of the cost is spent
within the brigade itself. The rest is spent on overhead and support units,
like logistics and engineers. At least in the US Army. This data shouldn’t be generalized
to other militaries as they have different costs, purchasing power, and force structures.
But onto our new segment, “How much fighting China will take away from the Army budget”,
where we compare Army brigades to various Navy and Air Force things.
The biggest of big ticket Navy assets are its nuclear-powered aircraft carriers. Clocking
in at $1.47 billion dollars per year, one carrier alone is about half an active duty
armored brigade. But when you make a Carrier Strike Group, with the carrier, its air wing,
1 Ticonderoga class cruiser and 4 Arleigh Burke class destroyers, the annual price tag comes
out to roughly $3.54 billion. Although CSGs are fluid and vary in composition.
This data considers replenishment ships as necessary “indirect support” for combat ships.
That’s a whole armored brigade plus a $380 million dollar excess.
As for the Air Force, their most expensive type of squadron is their B-2 Bomber Squadron,
which costs $2.1 billion a year. Although they do only have 1.
But how many F-16 squadrons equal an armored brigade? About 12 apparently,
although the CBO is assuming notional 12-aircraft squadrons,
due to the fact that Air Force squadrons vary in composition.
By contrast, an armored brigade currently buys
four and a half F-35 squadrons. Figuratively speaking that is.
Interestingly, each of the Air Force’s Minuteman III squadrons,
serving America’s intercontinental ballistic missiles, cost $520 million dollars. With a total
of 8 such squadrons, our nuclear ICBM deterrent is equivalent budget-wise to 1.3 Armored BCTs.
If you want to play with this budgeting stuff I’ve linked the
CBO’s interactive force structure tool in the description, which lets
you see what increasing or decreasing certain capabilities does money wise.
And if you want to learn more about what’s behind combat units, check out this video
on the complex logistics behind keeping tanks fueled. We’ll see you over there!