Analysis Between the Navy's Planned and Executed Budgets and Its Effects On the Navy Working Capital Fund-Supply Management

Abstract

Amidst the global economic recession of recent years and sizeable injections of federal stimulus packages, the Navy's budget for ship construction (SCN) has experienced only modest real growth. While both the 2010 Quadrennial Defense Review and the 30-year shipbuilding plan have reaffirmed a fleet size goal of 313 ships, some suggest that $20 billion or more per year is needed to attain these fleet numbers. This research has analyzed the United States shipbuilding industry as a potentially rewarding source of economic stimulus and benefit through similar or identical measures used by economists at Oxford Economics. First, direct and indirect (supply-chain) monetary impacts from the shipbuilding and repair sector were analyzed using US Bureau of Economic Analysis input/output data and a Carnegie-Mellon University model of a Leontief inversion process. This sector was then compared with five alternative investments. Second, the direct and indirect benefits of the shipyard-related labor market was analyzed using data collected from the Bureau of Economic Analysis, Naval Sea Systems Command, and the American Shipbuilding Association. Finally, measures of Capital Intensity and Capacity were applied to the financial statements of the nation's largest private owners of shipyards General Dynamics and Northrop Grumman. The results suggest that US shipbuilding generates benefits comparable to alternative investments, while supporting more labor, and highly skilled jobs, than alternatives. In addition, high levels of capital intensity in shipbuilding suggest that a decline in demand may yield a permanent loss of US productive capacity. Finally, excess capacity throughout the industry shows a clear ability to absorb an increase in demand, providing prompt and immediate impact on sustained economic recovery.