THE FEDERAL ACQUISITION SYSTEM: THE PAST 50 YEARS

After more than 50 years of war and near–world war confrontations, the American taxpayer was ready for a peace dividend in the form of lower taxes and an end to deficit budgets that hindered economic growth and their standard of living. This period in our nation’s history began in 1940 with President Franklin Roosevelt’s call to the nation to be the “great arsenal of democracy,” which occurred just a year prior to the United States entering into war with Germany, Italy, and Japan. For the next five years the nation’s industry and procurement system built and supported a two-ocean navy and a military of over seven million troops fighting simultaneously in Europe and the Pacific theaters. Materiel and supplies produced in this country also helped maintain the war efforts of our allies. After a short respite, during which U.S. military capabilities were cut back, the American people were again called to deter an external threat. This time it was communism, exported by the Soviet Union. The next 40 years would be known as the Cold War period, beginning with the European Recovery Program (Marshall Plan) in 1947, continuing through the Korean War (1950–1953) and Vietnam War (1964–1973) and ending with the collapse of the Soviet Union from within in the early 1990s. During this time the American economy not only supported significant defense and foreign aid expenditures, but also significantly increased its social programs.

At the end of the Cold War the balance sheet showed our national economy had been able to build and support an armed force second to none while providing the commercial sector with countless commercial goods and also expanding social services. A review of the Gross Domestic Product (GDP) between 1968 and 1998 (Figure 1-1, Federal Budget Categories as a Percentage of GDP), shows that the percentage of GDP allocated to entitlements increased 4.4 percent, while defense spending fell from 9.4 to 3.2 percent of GDP. This represents a reduction of almost one-third of the amount spent for defense in 1968. During the same period total outlays decreased by 0.9 percent, and the budget deficit as a percentage of GDP decreased from 3.2 to 0.3. Note that as entitlements rose from 6.9 percent of GDP, the deficit was decreased by 1.9 percent. The legacy of the era has downplayed how economic expansion enabled the nation to meet commercial and defense needs simultaneously. Instead, commentary concentrated mainly on the inefficiencies of the federal government. Public opinion questioned the federal government’s ability to operate effectively and efficiently. This apprehension was fueled by budget deficits, the individual tax burden, and stories in the media of unsuccessful programs and government purchases gone wrong.

Figure 1-1 Federal Budget Categories as a Percentage of GDP