Uncertain U.S. fiscal policy to constrain biometrics spending
The largest market for biometric technology is the United States. Biometrics Research Group, Inc. projects that the U.S. market will spend a minimum of US$6 billion on biometric related products and services in 2013. Most of this funding will be driven by defense spending on biometrics programs, which will cumulatively total US$3.5 billion over the 2007 through 2015 fiscal years.
The balance of biometrics spending in the United States is directed to law enforcement. In terms of technologies, automated fingerprint identification systems (AFIS) and fingerprint biometric technologies account for the greatest share of the biometrics spending in the U.S. law enforcement sector, followed by face, iris, facial, and voice recognition biometric technologies.
A recent white paper published by Biometrics Research Group, Inc. in the inaugural edition of the BiometricUpdate digital magazine estimates that in fiscal year 2012, automated fingerprint identification systems accounted for US$3 billion in law enforcement spending, while combined spending on face, iris, facial and voice recognition accounted for approximately $1 billion.
Investments in newly unveiled “Rapid DNA” technologies only totaled US$50 million in 2012, but the Biometrics Research Group projects fast growth (US$250 million in rapid DNA spending by 2015) as the U.S. criminal justice system works to reduce its backlog of unanalyzed DNA samples.
In 2012, Biometrics Research Group Inc. estimated that the U.S. Government spent at least US$450 million per annum on pure biometric research. With the advent of new technologies such as rapid DNA and greater investment in facial recognition technologies, along with investments in “Big Data” systems, Biometrics Research Group now estimates that U.S. Government spending is at least US$700 million per annum on basic biometric research, despite severe spending cuts caused by budget sequestration.
Tighter fiscal policy will restrain U.S. economic expansion in 2013. Although the economy recently stepped back from the fiscal cliff this week by temporarily increasing the debt ceiling and ending the partial government shutdown, U.S. political uncertainty remains a threat to expansion.
Fiscal drag could amount to 1.5 percent of GDP this year. Assuming a resolution of the government’s funding issues early next year, business investment and job growth should strengthen. Together with improved household finances and pent-up consumer demand, this could spur three percent-plus growth, along with a decline in the unemployment rate. However, growth in biometric technology spending will be constrained by fiscal restraint.
While the U.S. Government will still allocate a tremendous amount of its spending authority on national security, the sequestration process, which implements a mandatory austere fiscal policy, will affect discretionary defense spending. The impasse over sequester between the executive and legislative branch that began in March 2013 as result of previous fiscal negotiations will slowdown government spending.
Over the 2014–2023 period, if sequester continues unabated, planned spending outlays will be reduced by US$995 billion, with interest savings of $228 billion, for a total of over US$1.2 trillion in debt reduction.
The Congressional Budget Office projected in February 2013 that under the “sequester” and Budget Control Act caps:
- Defense spending outlays (including “overseas contingency operations” for Iraq and Afghanistan) will be reduced from US$670.3 billion in 2012 to approximately US$627.6 billion in 2013, a decrease of $42.7 billion or 6.4 percent. Defense spending will fall again to US$593.4 billion in 2014, a decrease of US$34.2 billion or 5.5 percent.
- Defense spending will rise gradually from US$593 billion in 2014 to US$714 billion by 2023, an annual growth rate of 2.1 percent during the 2014 to 2023 period and 0.6 percent for the 2012-2023 period. The 2.1 percent growth rate approximates CBO’s projected rate of inflation and is well below the annual spending growth rate of 7.1 percent from 2000-2012.
- Defense spending will fall steadily from 4.3 percent GDP in 2012 to 2.8 percent GDP by 2023. Defense spending averaged 4.0 percent GDP from 1990 to 2012, ranging from 3.0 percent GDP to 5.2 percent GDP.
Due to the projected decline in defense spending, Biometrics Research Group expects a slight reduction in U.S. government spending on biometrics. Some of the reduction in spending will be directly attributable to the completion of military actions in Iraq and Afghanistan. The U.S. military had been actively engaged in using biometrics in the battlefield. The end of the active military operations will cause a reduction in acquisition of biometric equipment for deployment in the field.
Further, sequestration will ensure that homeland security spending will also slow, increasing the likely reduction in biometric technology acquisition by agencies such as U.S. Customs and Border Protection.
One major area of near-term growth in technology that Biometrics Research Group, Inc. expects is greater investment by the U.S. Government to expand its automated fingerprint identification system to include multi-modal biometrics, which will include face, iris, facial and voice recognition. Currently, the U.S. Federal Bureau of Investigation (FBI) has 110 million fingerprint records; the Defense Department, 9.5 million; and the Department of Homeland Security, 156 million.
Biometrics Research Group provides forward-looking and systematic data about the global biometric market, allowing industry stakeholders to calculate political, economic and investment risk.