Estimating Budget Relationships with a Leontief Input-Output Model

Forty years ago, the Office of the Secretary of Defense proposed using the Leontief input-output model to assess tradeoffs in the Department of Defense's (DoD) budget. We demonstrate that the Leontief input-output model can assess tradeoffs in the Air Force's budget. To increase one part of the Air Force's budget, we need to know the interrelationships between that budget area and the other areas. In this research, we look at different methods of how the functional areas might interact. We demonstrate our methodology on two data sets - DoD and the Air Force aggregate budget data. By looking at how the functional areas interact, we hope to be able to find a sound methodology that will provide assistance to Air Force leadership for determining appropriate levels of funding.