In this history of the effects of the Great Recession and a national focus on deficit reduction on U.S. DoD decisionmaking, the authors detail a concurrent shift in strategic focus from a decade of counterterrorism operations toward possible future near-peer conflict. They examine DoD's efforts to manage resource constraints while maintaining its ability to meet changing security demands in a dynamic threat environment.

A History of the Strategic Implications of the Great Recession and Its Aftermath on U.S. National Defense

Stephanie Young, Gian Gentile, Benjamin J. Sacks, Nathaniel Edenfield, Adam Givens

ResearchPublished Apr 25, 2023

The Great Recession began in 2007, when a contraction in the U.S. housing market led to widespread losses in the financial sector and, subsequently, to economic shocks around the world. By December 2007, the country was officially in recession, and it would not emerge from this contraction for 18 months. Although national security decisionmaking was not immediately affected by the recession, uncertainties created by short-term political measures to address the deficit meant that DoD had to fundamentally reconsider its ways and means of ensuring national security in the 2010s.

This history considers the Great Recession's reverberations on the DoD as senior leaders in the Office of the Secretary of Defense (OSD) and the Joint Staff worked to shift from a decade of counterterrorism operations toward future threats amid a dynamic threat environment and budgetary uncertainty.

Key Takeaways

  • Policy decisions related to deficit reduction after the Great Recession drove resource constraints for DoD to a larger degree than did the direct economic consequences of the Great Recession.
  • Uncertainty about budget levels and constraints on discretion in achieving cuts presented a greater challenge than the depth of the reductions.
  • Decisionmaking by senior leaders about how to prioritize investments was informed by the concept of rebalance; that is, from current operations to emerging threats; from operations and sustainment to modernization; counterterrorism to potential conflict with near-peer adversaries and from the Middle East to other global areas of responsibility.
  • Increasing fiscal constraints incentivized internal DoD innovation and reform, including such efficiency initiatives as Better Buying Power (BBP), Strategic Choices and Management Review(SCMR), elements of the Third Offset, and Global Integration.
  • Agreement across stakeholders on a common analytic basis for decisionmaking became strained amid deepening budgetary challenges.

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Young, Stephanie, Gian Gentile, Benjamin J. Sacks, Nathaniel Edenfield, and Adam Givens, A History of the Strategic Implications of the Great Recession and Its Aftermath on U.S. National Defense. Santa Monica, CA: RAND Corporation, 2023. https://www.rand.org/pubs/research_reports/RRA854-1.html.
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This research was sponsored by the Joint History and Research Office (JHRO) and conducted within the International Security and Defense Policy Center of the RAND National Security Research Division (NSRD).

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