The question of how the Department of Defense will pay for the Ohio-class submarine replacement program, which will build new ballistic-missile submarines (SSBNs) as the Ohio class retires from the Fleet in the 2020s and 2030s, looms as one of the most important budgetary issues facing the DOD over the next two decades. Recently, Secretary of the Navy Ray Mabus stated that unless the Navy receives additional funding above current levels of shipbuilding, the new SSBNs could “gut” the service’s shipbuilding budget for a decade while they are built.1 Other Navy officials have made similar statements. Although some analysts have questioned the value of building new SSBNs, there appears to be no question in the Navy’s mind of not building the submarines. In testimony before Congress in summer 2014, Chief of Naval Operations Admiral Jonathan Greenert called the Ohio replacement the Navy’s “top-priority program.”2
The budgetary challenge of building a new class of ballistic-missile submarines is enormous. Over the next 30 years, the Navy estimates it will need to spend $500 billion, or an average of $16.7 billion a year (measured in 2014 dollars), to implement its shipbuilding program of 264 new ships—just 12 of which would be the new boomers. (The Congressional Budget Office [CBO], in a report that I wrote, estimates the Navy will need to spend about 13 percent more than that.)3 That number does not include a number of other activities, such as refueling nuclear-powered aircraft carriers or outfitting and post-delivery costs for new ships, that the Navy must pay for out of its shipbuilding budget, raising the total fiscal demand to $18.6 billion per year. Of that amount, spending on ballistic-missile submarines would represent about 16 percent of the total, but would be concentrated in the years 2021–35 when the Navy is actually buying the Ohio replacements. In those years, SSBN funding could be expected to consume a quarter of the Navy’s proposed funding plan.
The problem, however, is that the Navy’s shipbuilding plan requires a level of funding well above what it has received over the last 30 years. When one includes all activities the Navy must pay for in its shipbuilding account, average shipbuilding budgets over the last 30 years were a little less than $16 billion per year. If the Navy only receives that amount in the future and the Ohio replacement boats are funded out of that total, SSBN funding would in many years consume about half of the new-ship construction portion of the Navy’s budget and, indeed, “gut” many other shipbuilding programs.
Create a Separate Account?
In seeking to address that very issue, the Navy’s Director of Undersea Warfare, Rear Admiral Joseph Tofalo, recently argued that the last 20 years is not a fair comparison because the Navy has not bought a boomer since 1991. (Even if you extend back to 1985 to capture 30 years, the Navy did not spend much money on SSBNs because by then the Ohio class was two-thirds completed.) Admiral Tofalo went on point out that historically the Navy received additional money to pay for SSBN construction when it was needed.4 Similarly, in testimony to Congress in 2013, Rear Admiral Richard Breckenridge, then-Director of Undersea Warfare, stated that “There was a supplement to the Navy’s top line at that time when . . . we fielded the the first generation of ballistic-missile submarines—the 41 Polaris missile-carrying boats, known as the ‘41 for Freedom.’”5
To try to mitigate the issue, some Navy officials and members of Congress have proposed establishing a special fund or mechanism to purchase the ballistic-missile submarines outside of the Navy’s shipbuilding account. The hope is that at least some of the funding in the “new boomers” fund would not count against the overall Navy budget and, thus, there would still be as much as $16 billion or so per year to pay for the Navy’s other shipbuilding programs. (In fact, the 2015 National Defense Authorization Act, signed into law in December, created such an account, but it is not yet clear how that account will be funded and whether it will be used.)
This raises an interesting question: Does the budgetary history of SSBN construction offer any insight into what the Navy can expect when it begins building Ohio replacements in earnest? Perhaps the key question is: Did the Navy receive additional funding during the years it purchased ballistic-missile submarines compared to periods when it did not? Or did the Navy receive a larger share of the DOD budget when the nation was building and then replacing its sea-based strategic nuclear deterrent? Both questions are relevant. The first examines the Navy’s assertion that it received more money when the service was building boomers. The second illustrates how the share of the Navy’s overall budget may have changed in years it was building SSBNs; if defense budgets remain severely constrained in the future, would historical shares in prior periods be sufficient to pay for the Ohio replacement program?
The relevant eras for SSBN construction are as follows: the construction of 41 Polaris missile–carrying submarines over the 1958–64 period, and, as replacements for the earlier classes, the 1974–91 construction of 18 Ohio-class submarines that could launch Trident ballistic missiles. Of those two eras, the Trident era is probably more useful as an analogy to the Ohio replacement program, as those submarines were purchased in a systematic and methodical way, similar to many other Navy programs. In contrast, the Polaris program was essentially a crash program executed at the height of the Cold War in what was a crisis-like atmosphere. Let us begin with the Trident era first.
Austerity-Prosperity Antecedents
The defense budgets between 1974 and 1991 included periods of relative fiscal austerity and prosperity for the defense budget. In the late 1970s, the military budget was relatively flat in real terms (that is, after adjusting for inflation). Between 1979 and 1985, defense experienced vigorous growth, especially with the military buildup of the Reagan administration, which increased the DOD’s budget by over 60 percent in real terms. Then, as the Cold War drew to a close, DOD budgets fell by 20 percent in real terms from 1985 through 1991.
Over the entire Trident era, spending on ballistic-missile submarine construction consumed 14 percent of the Navy’s shipbuilding budget. However, it is the beginning of that period, 1974–78, that seems particularly relevant as we look at the Ohio replacement program in the coming decades. Average shipbuilding budgets in that period were over 50 percent higher than average shipbuilding budgets over the 1968–73 period. The Ohio class represented about a quarter of the Navy’s shipbuilding budget, receiving a substantial fraction of those higher budgets.
Yet the Navy paid a price from other parts of its budget to buy those additional ships and submarines. Its average topline budget remained flat. Compared to 1968–73, it was only 1 percent higher over the 1974–78 period. To pay for new ships, including Ohio-class ballistic-missile submarines, the Navy sacrificed force structure. Its Fleet fell by over 40 percent, while both Navy and Marine Corps end-strength declined by 20 percent. The Vietnam War had come to an end, so it is perhaps not surprising to see those declines, but clearly in this early period of the Trident era the Navy was not receiving more money overall, although money was found within its budget to pay for new ships, including SSBNs.
In contrast, during the 30 years starting in 2015, the Ohio replacement would represent 16 percent of the Navy’s shipbuilding budget as proposed under its 2015 plan, which is comparable to the entire Trident era.6 But if one narrows the 30-year period to include only the years in which the Navy is spending large sums on the Ohio replacement (2021–35), then the program would consume 22 percent of the proposed ship-construction budget, which is similar to the 1974–78 period. However, for the middle decade of the shipbuilding plan, 2025–34, which corresponds to the height of the Ohio replacement program, the new boomer could represent 28 percent of the Navy’s shipbuilding budget—or twice the percentage of the 1974–91 period. If the Navy’s shipbuilding budget is limited to $16 billion per year, then the Ohio replacement program would account for 35–40 percent of the Navy’s shipbuilding budget in those years. Both in the Trident era and under the Navy’s 2015 shipbuilding plan, the submarines were or would be bought at a rate of about one per year. In only two years during the Trident era did SSBN spending reach a comparable proportion of the Navy’s shipbuilding budget, 1975 and 1978.
If one looks at the entire Trident era, the Navy’s budget enjoyed substantial growth. The Navy’s topline was an average 37 percent higher over the entire 1974–91 period, compared to the post-Polaris period of 1965–73, gaining budget share in the process. The overall average DOD budget grew by only 21 percent. Thus, the Navy’s share grew from 30 to 33 percent over the two periods (see the accompanying figure). However, it would be difficult to ascribe that increase to the Trident program. During the first period, which corresponds to the Vietnam War, the Army and the Air Force were naturally claiming as large or larger shares of DOD resources. And the period of the Reagan military buildup increased virtually all corners of the defense budget. The Trident submarines were fully paid for with only a tiny fraction of the additional money made available to the Navy between 1974 and 1991.
However, the Navy budget is only part of the story. When Ohios were being built, they represented 6/10ths of 1 percent of the DOD budget. What does that mean for the Ohio Replacement program? If the Navy were to get an increase in its budget equivalent to that same percentage (using the 2016 budget as a base), then the boost would amount to about $3 billion per year.7 If applied to the 15 years in which the Navy wants to build the Ohio replacement boats (2021–35), then the additional money would cover about 60 percent of the cost using the Navy’s estimates (or 50 percent using the CBO’s estimates).
High-Priority Polaris
The Polaris era (1958–64) is rather different from the Trident period. As noted previously, the program was launched and executed in a period of tense relations between the United States and the Soviet Union. The launch of Sputnik occurred at the beginning of the Polaris program, and many in the United States felt as though the country was losing the technological race to the Soviets. Histories of the program indicate it was given the highest of budgetary priorities, a wide degree of managerial and programmatic freedom, and in the words of one author, funds were “unquestionably appropriated” until the program was complete.8 Between 1958 and 1962, Congress authorized the purchase of 41 ballistic-missile submarines, composed of the George Washington, Ethan Allen, and Lafayette classes. All were serving in the Fleet by 1967, only ten years after the start of the program. (In contrast, the Ohio class took 23 years from first authorization to final commissioning; the Ohio replacements are projected to take a similar amount of time.)
Most of the money for Polaris missile-carrying SSBNs was appropriated between 1958 and 1964 (although research and other funding began in 1956). During that period of intensive construction, SSBNs consumed one-third of the Navy’s shipbuilding budget. (In 1961–62, SSBNs actually consumed about half of the Navy’s shipbuilding budget.)
To pay for that funding, the Navy’s overall budget increased compared to post–Korean War budgets and, like the Trident era, at a rate that was faster than the DOD budget as a whole. The average Navy budget between 1958 and 1964 was 13 percent higher than Navy budgets over the 1953–57 period. In comparison, overall average defense budgets grew by 8 percent between those periods. Perhaps more definitively, the Polaris submarines consumed about half of the total budget increases. But, similar to the Trident era, that did not mean that other parts of the Navy budget did not suffer from Polaris’ virtuous position. Harvey Sapolsky’s well-regarded study of the Polaris program states that the Navy paid for the expense of Polaris not from its shipbuilding budget but from reduced maintenance on existing ships and reduced research and development of future weapons.9
If the Navy can do as well with the Ohio replacement program as it did with Polaris, funding for new ships, including SSBNs, would be secure. Boomer spending was 5.6 percent of the Navy’s budget and 1.6 percent of the DOD budget—much higher percentages than during the Trident era. Thus, if the Navy received increases in its budget (again using 2016 as a base) equivalent to either of those percentages, the additional money would be more than enough to pay for the Ohio replacement program.
In short, history indicates that the Navy received sufficient additional funding during periods of ballistic-missile submarine construction—but at times it came at a cost to other Navy priorities. Furthermore, if defense budgets remained constrained by the Budget Control Act or simply by the overall federal fiscal situation, increases in the Navy’s budget share for SSBNs equivalent to the Trident era will not be sufficient. One factor to consider is that unit costs for SSBNs seem to double in real terms with each generation of boomers, including the Ohio replacement program, whereas average Navy shipbuilding budgets have moved in the opposite direction. In 2014 dollars, the Polaris-era submarines cost $1.9 billion apiece, the Ohio-class submarines $3.5 billion, and projected Ohio replacements are $6–7 billion each. Compare those numbers to the average Navy new-ship construction budget over the same periods: $34 billion for the Polaris era; $22 billion for the Trident era; and $19 billion (as proposed by the Navy) for the Ohio replacement era. On the other hand, total numbers of SSBNs being procured have dropped from 41 to 18 to 12.
None of this is to suggest that a special fund for the new SSBNs should or should not have been created. But the Ohio replacement program is going to need a Polaris-era level of funding. That may be difficult to come by in the absence of an equivalent Polaris-era crisis atmosphere in which cost was no object.
1. Tasmin Tadjdeh, “Mabus: Ohio-Class Submarine Replacement Could ‘Gut’ Navy Shipbuilding Budget,” National Defense, 15 September 2014.
2. Statement of ADM Jonathan Greenert, U.S. Navy Chief of Naval Operations, before the House Armed Services Committee on Fiscal Year 2015 Department of the Navy Posture, 12 March 2014, www.navy.mil/cno/12MAR14_DON_Posutre_CNO_Final_HASC.pdf. See also Bryan McGrath, “Why I Advocate Scrapping SSBNs,” Information Dissemination blog, 13 January 2014, www.informationdissemination.net/2013/01/why-i-advocate-scrapping-ssbns.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InformationDissemination+%28Information+Dissemination%29.
3. An Analysis of the Navy’s Fiscal Year 2015 Shipbuilding Plan (Washington, DC: Congressional Budget Office, December 2014).
4. RADM Joseph Tofalo, USN, “The Value of Sea-Based Strategic Deterrence,” Navy Live blog, 31 July 2014, http://navylive.dodlive.mil/2014/07/31/the-value-of-sea-based-strategic-deterrence/.
5. Spoken testimony of RADM Richard P. Breckenridge, USN, in a 12 September 2013 hearing on undersea-warfare capabilities and challenges before the Seapower and Projection Forces Subcommittee of the House Armed Services Committee, as reflected in the transcript of the hearing.
6. Report to Congress on the Annual Long-Range Plan for Construction of Naval Vessels for FY2015 (Washington, DC: Department of the Navy, June 2014), http://navylive.dodlive.mil/files/2014/07/30-year-shipbuilding-plan1.pdf.
7. The estimate for 2016 is taken from the Office of the Under Secretary of Defense (Comptroller), National Defense Budget Estimates for FY 2015, April 2014. (This is commonly known as the “Green Book.”)
8. Harvey Sapolsky, Polaris System Development (Cambridge, MA.: Harvard University Press, 1972), 160.
9. Ibid., 175.