During the opening morning of TechAmerica Foundation’s Vision Conference, Vision Chair Wayne Schroeder provided the macroeconomic and Department of Defense (DoD) topline forecast. He discussed the macroeconomic environment, key U.S. and worldwide trends affecting the federal budget environment, macroeconomic scenarios and DoD internal environment, as well as provided a DoD analysis and forecast.
The economic and security outlook is impacted by new uncertainties including the U.S. and global outlook, U.S. budget/deficit situation, future interest rate increases and ongoing Middle East and Ukranian conflicts. Taking these factors into mind, Schroeder said to expect slow global growth and a more complex security environment.
The U.S. economy is still in moderate recovery but without a true “break out” factor which would enable robust GDP growth and deficit reduction. In fact, we should anticipate a transition to higher interest rates in the middle to the end of 2015, putting increased pressure on discretionary funds. Rising interesting rates are offsetting spending cuts. Interest is the fastest growing component of the U.S. federal budget, rising to $804 billion by fiscal year 2024.
Schroeder noted that the debt path is improving only marginally, underscoring longstanding challenges. After 2015, we will see a downward slope of the debt which will not be as steep as its 2008-2015 build-up. He stressed that the debt issue will last through Obama Presidency and move into next Administration but that U.S. is at the beginning of a long-term process to get its fiscal house in order.
Schroeder quoted from the Congressional Budget Office’s 2014 Budget Outlook and said, “The sooner significant deficit reduction is implemented, the smaller the government’s accumulated debt would be, and the smaller policy changes would need to be to achieve long term outcome.”
Debt and deficit reduction are not going away as public policy issues, and the post-Great recession recovery continues to be weak with an average 2 percent real GDP growth.
Schroeder said to expect another round of cuts to discretionary funding starting FY16. Several disruptive scenarios could alter the trajectory of discretionary spending, including sequestration, an economic downturn/recession, and national security/foreign crises—ISIS, Ebola, a more assertive China, etc. – all things to seriously consider in business planning efforts.
For the defense budget, we are seeing base budget cuts combined with redirection of resources. FY16 is the last full budget year the Obama Administration has to influence defense source planning. The Vision Forecast foresees the end of the base budget downturn in FY15, with the DoD budget growing to $625B by 2025.
Katrina G. McFarland, Assistant Secretary of Defense (Acquisition), addressed attendees on how the world has been studying us. She said we can see this in electronic warfare, counter defense capability and cyber. Funding is tight in these areas and we are in a period of uncertainty. To address challenges of national security, she said we must develop a technological surprise.
McFarland also discussed the acquisition process, specifically Better Buying 3.0 noting how it emphasizes innovation and technical excellence while remaining focused on continual improvement. She also pointed out the importance of prototype and demos, open systems architecture, and modeling and simulation. She called on the IT industry to invest in research and development and STEM education to retain where we are in our freedom.
A full analysis of spending and future business opportunities within the federal market continues to be presented at the 50th annual TechAmerica Foundation Vision Federal Market Forecast Conference today and tomorrow. To view the conference agenda, visit http://www.techamericafoundation.org/vision-agenda. Registration is available on-site, and a CD of the conference presentations is available at http://www.techamericafoundation.org/vision-cd. Results of the media briefing on the Vision Forecast are available at http://www.slideshare.net/comptia/techamerica-foundation-vision-forecast-overview.
* We are starting a new feature that highlights the observations of the TechAmerica Summer Interns. Please check back for more. Being able to hear brilliant people at a place like the Brookings Institute is always exciting. To put it simply, it is every nerds dream. And I got to live it when I attended…