since9
Campaign Veteran
Article.
I'm somewhat appalled by two paragraphs:
The F-22 was much more expensive than the F-35, yet the numbers to the F-22 were cut drastically, something like 80%, which drove the per-plane cost through the roof. Why? Was it really to save money? No! The incremental expense, the cost to produce one more plane, is NOT the fully ammortized cost, but rather only the additional cost:
Hypothetical example:
R&D cost: $10 Billion
Scheduled Production: 100 planes
Amortized R&D cost per plane: $100 Million
Finished cost per plane: $110 Million
How much does our 101st plane cost?
$100 Million? No, as that's only the R&D cost, which is considered a "sunk cost." It's spent. That doesn't mean it's not accounted for. It is most certainly accounted for! It's also a fixed cost and is associated with the entire program, much as rent is for a department store in the mall. Whether they have 10 employees or 30, whether they stay open 9am-9pm or just 2 hours a day, whether their gross profits are $5 Thousand a month or $50 Thousand a month, their rent is still a fixed amount.
$110 Million? Certainly not, as $100 Million of that is a sunk cost, having already been spent.
The cost of the $101st plane is just $10 Million. If you made 5 more, it'd be $50 Million. If you made 100 more it'd be $1 Billion
Still, both the politicians and the media say "These aircraft cost $110 Million apiece, so cutting production from 200 planes to 100 planes just saved us $11 Billion!"
WRONG.
It only "saved" 100 x $10 Million, or $100 Million, not $11 Billion, which is $110 times more. Furthermore, you now have 100 less planes, a gap which will have to be fulfilled by something, whether that's more of the same planes, more F-35s, or a mix of F-35s, Predators, Reapers, and other UAVs. Thus, the net savings isn't $100 Million, but probably closer to $0, given that new programs have their own huge R&D costs which will invariably overshadow the much smaller production costs.
In order to obtain a clear picture of military spending, one must look at the R&D costs, production costs, life-cycle, and utility for both the original program as well as all replacement programs required to match the same life-cycle, utility, or both. The problem is, different programs almost always vary with respect to both life-cycle and utility. There are some simple ways of equating them, but the media never manages to bridge that simple gap, a fact politicians use to their advantage when they spin the "cost savings" of program cuts.
The fact is had the USAF gone ahead with it's initial procurement numbers of both B-2 bombers and F-22 fighters, there'd have been no money left over for the F-35 JSF, but there'd be no need for it, either. On the other hand, the F-35 Joint Strike Fighter's commonality between the service variants results in some serious cost savings with respect to maintenance logistics, storage, and training.
Still, do we even need a JSF or ASF (air-superiority fighter) for the kinds of wars we've fought in the 1990s? In the 2000s? Perhaps the B-2s and F-22s, both designed from cold war requirements, were cut in numbers to pave the way for the JSF and UAVs.
My point is I really hate it when the media gets hold of the numbers, as they do NOT understand basic finance and always manage to present it in a meaningless fashion, but one spoon-fed to them by the politicians who're doing little more than trying to make themselves look good for re-election.
The other side of the SNAFU is due to the same reason: Politicians trying to make themselves look good for re-election, primarily by forcing unwanted, unnecessary, and wasteful programs down the military's throat simply because it's built in some Congressman's backyard.
Instead of allowing Senators to be directly elected as they are now, or appointed by a state's legislators as they specified in the Constitution, I think each state's legislators should appoint 10 candidates to a lottery pool from whom a total of 100 will be randomly picked to serve a six-year term, providing oversight of the House. A third would be replaced each year. Short, sweet, and to the point. No elections, no campaigns. If a state appoints 0 candidates, then they get what they deserve: 0 representation.
I'm somewhat appalled by two paragraphs:
The F-22 was much more expensive than the F-35, yet the numbers to the F-22 were cut drastically, something like 80%, which drove the per-plane cost through the roof. Why? Was it really to save money? No! The incremental expense, the cost to produce one more plane, is NOT the fully ammortized cost, but rather only the additional cost:
Hypothetical example:
R&D cost: $10 Billion
Scheduled Production: 100 planes
Amortized R&D cost per plane: $100 Million
Finished cost per plane: $110 Million
How much does our 101st plane cost?
$100 Million? No, as that's only the R&D cost, which is considered a "sunk cost." It's spent. That doesn't mean it's not accounted for. It is most certainly accounted for! It's also a fixed cost and is associated with the entire program, much as rent is for a department store in the mall. Whether they have 10 employees or 30, whether they stay open 9am-9pm or just 2 hours a day, whether their gross profits are $5 Thousand a month or $50 Thousand a month, their rent is still a fixed amount.
$110 Million? Certainly not, as $100 Million of that is a sunk cost, having already been spent.
The cost of the $101st plane is just $10 Million. If you made 5 more, it'd be $50 Million. If you made 100 more it'd be $1 Billion
Still, both the politicians and the media say "These aircraft cost $110 Million apiece, so cutting production from 200 planes to 100 planes just saved us $11 Billion!"
WRONG.
It only "saved" 100 x $10 Million, or $100 Million, not $11 Billion, which is $110 times more. Furthermore, you now have 100 less planes, a gap which will have to be fulfilled by something, whether that's more of the same planes, more F-35s, or a mix of F-35s, Predators, Reapers, and other UAVs. Thus, the net savings isn't $100 Million, but probably closer to $0, given that new programs have their own huge R&D costs which will invariably overshadow the much smaller production costs.
In order to obtain a clear picture of military spending, one must look at the R&D costs, production costs, life-cycle, and utility for both the original program as well as all replacement programs required to match the same life-cycle, utility, or both. The problem is, different programs almost always vary with respect to both life-cycle and utility. There are some simple ways of equating them, but the media never manages to bridge that simple gap, a fact politicians use to their advantage when they spin the "cost savings" of program cuts.
The fact is had the USAF gone ahead with it's initial procurement numbers of both B-2 bombers and F-22 fighters, there'd have been no money left over for the F-35 JSF, but there'd be no need for it, either. On the other hand, the F-35 Joint Strike Fighter's commonality between the service variants results in some serious cost savings with respect to maintenance logistics, storage, and training.
Still, do we even need a JSF or ASF (air-superiority fighter) for the kinds of wars we've fought in the 1990s? In the 2000s? Perhaps the B-2s and F-22s, both designed from cold war requirements, were cut in numbers to pave the way for the JSF and UAVs.
My point is I really hate it when the media gets hold of the numbers, as they do NOT understand basic finance and always manage to present it in a meaningless fashion, but one spoon-fed to them by the politicians who're doing little more than trying to make themselves look good for re-election.
The other side of the SNAFU is due to the same reason: Politicians trying to make themselves look good for re-election, primarily by forcing unwanted, unnecessary, and wasteful programs down the military's throat simply because it's built in some Congressman's backyard.
Instead of allowing Senators to be directly elected as they are now, or appointed by a state's legislators as they specified in the Constitution, I think each state's legislators should appoint 10 candidates to a lottery pool from whom a total of 100 will be randomly picked to serve a six-year term, providing oversight of the House. A third would be replaced each year. Short, sweet, and to the point. No elections, no campaigns. If a state appoints 0 candidates, then they get what they deserve: 0 representation.
