Compass Points - Opportunity Cost

Opportunity Cost is Opportunity Lost

Compass Points - Opportunity Cost

Opportunity Cost is Opportunity Lost

May 1, 2024

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Budgets matter.

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The House Armed Services Committee hearings begin today on the Department of the Navy's Fiscal Year 2025 budget. What the Marine Corps spends money on not only determines what the Marine Corps gets, it also determines what the Marine Corps does not get.

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One of the basic insights of economics is the iron rule of opportunity costs. The cost of buying anything includes the lost opportunity to buy something else. When a family that can only afford to buy one new car, decides to purchase vehicle "A," that means the family has lost the opportunity to buy vehicles "B - Z." The opportunity cost is the opportunity lost.

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In the article, "Marines getting new amphibious ship designed for critical China mission" the Washington Times reports on budgeting for the Medium Landing Ship (LSM) which the Marine Corps, in the past, said it needed as part of Force Design 2030 to keep China blocked inside the so-called First Island Chain. Originally, the Marine Corps said it needed 35 LSM. The FY 2025 budgets procurement dollars for the first LSM. The overall Navy ship building budget is building only 6 ships in 2025 while decommissioning 19. That is not the path to a bigger, stronger, more robust global Navy fleet.

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Navy and Marine Corps leaders called for 18 to 35 LSMs, with life spans of about 20 years. The Congressional Budget Office said 18 of the amphibious warships would cost $6.2 billion to $7.8 billion, or about $340 million to $430 million per vessel. The cost of a 35-ship LSM program would be $11.9 billion to $15 billion.

The Navy’s current amphibious force comprises large vessels, including “Big Deck” vessels such as the America-class helicopter assault ships and smaller but sizable warships such as the San Antonio class of amphibious transport docks.

The Navy wants to have the first LSM by the 2025 fiscal year and the second a year later. The Congressional Research Service said the Navy would get the third and fourth in 2027 and the fifth and sixth in the 2028 fiscal year.

-- Washington Times

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One experienced, retired senior Marine and Compass Points reader commented on the Washington Times article:

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When you read this article, you have to truly wonder about the oversight by DON, DOD, and the Congress!  A huge drawdown on the budget for a flawed strategy that duplicates capability ALREADY found in the other Services. We have emasculated significant combat capability across the Marine Corps…especially in III MEF…to the detriment of our world-wide expeditionary mission.

--Compass Points reader

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The LSM is not an expeditionary amphibious ship. It cannot sail with the Amphibious Ready Group / Marine Expeditionary Unit (ARG/MEU) on global operations.

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There are many ongoing questions about the LSM including the mission, capability, and cost, but the biggest problem with the LSM may be the opportunity cost. The Navy does not have enough staff, facilities or budget to perform either the ship building nor ship repair needed for subs, carriers, destroyers, amphibious ships, and other ships. The maintenance plagued USS Boxer, for example, has no dry dock available to repair its rudder. Repairs may have to be attempted by scuba diving welders.

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Every LSM under construction in a Navy yard, subtracts, directly or indirectly, from another critically needed ship including subs, carriers, destroyers, or amphibious ships. A case can be made that the overall lack of Navy ships today stems at least in part from the disastrous Littoral Combat Ship that wasted decades of time and billions of dollars. Spending time and money on one ship means that time and money cannot be spent on other ships.

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The Congressional Research Service continues to raise a host of questions beginning with "the merits of Force Design" and continuing with concerns about the LSM, including the need for the ship, the cost, the alternatives, and the entire theory behind the ship.

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Another potential oversight issue for Congress concerns the merits of Force Design and the EABO operational concept that the LSM is intended to help implement. Debate on the merits of Force Design and the EABO concept has been vigorous and concerns issues such as:

-- whether Force Design and the EABO concept are focused too exclusively on potential conflict scenarios with China at the expense of other kinds of potential Marine Corps missions;

-- the ability of Marine forces to gain access to the islands from which they would operate;

-- the ability to resupply Marine forces that are operating on the islands;

-- the survivability of Marine forces on the islands and in surrounding waters;

-- how much of a contribution the envisioned operations by Marine forces would make in contributing to overall U.S. sea-denial operations; and

-- potential alternative ways of using the funding and personnel that would be needed to implement EABO.

--CRS #R46374

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The purpose of the LSM is to help move and supply small missile units of Marines off the coast of China. But there are ongoing doubts about both the usefulness of missile Marines on islands and the LSM. Can Marines on Pacific islands block China? Even the Chinese themselves have addressed the issue:

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“From beginning to end, the idea of blocking the People’s Liberation Army of China within the ‘first island chain’ has been nothing but a pipe dream,” the state-controlled Global Times wrote in an April editorial. “With the continuous strengthening of China’s national defense capabilities, the ‘first island chain’ has become increasingly fragmented and broken, failing to form a solid ‘chain of islands.’”

--Washington Times

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With inflation, the FY 2025 budget for the Navy and Marine Corps is not going up, it is going down. When the Marine Corps advocates that scarce dollars should be used on a ship like the LSM, with so many ongoing questions, it forces a terrible opportunity cost.

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The Washington Times quotes one Admiral bluntly admitting that building the LSM will take away from building amphibious ships, "You can’t have an expensive LSM or even a moderately expensive LSM ‘and’ your Big Deck [amphibious ships]. You will double break our shipbuilding program,”

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The Marine Corps must not compete with itself. The Marine Corps must prioritize global amphibious operations. The ability to arrive rapidly to any crisis worldwide and expand, if necessary, from a MEU to a MEB, to a MEF gives US policy makers powerful options. It is not the LSM that needs to be upgraded, enhanced, and funded, is the global Marine MAGTF.

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Washington Times - 04/23/2024

Marines getting new amphibious ship designed for critical China mission

Beefing up 'First Chain' defense collides with budget, capacity constraints

By Mike Glenn

https://www.washingtontimes.com/news/2024/apr/23/marines-getting-new-amphibious-ship-designed-for-c/

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Congressional Research Service - 04/24/2024 

R46374

Navy Medium Landing Ship (LSM) (Previously Light Amphibious Warship [LAW]) Program: Background and Issues for Congress

By Ronald O'Rourke, Specialist in Naval Affairs

https://crsreports.congress.gov/product/pdf/R/R46374