[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
THE CLINTON DEFENSE PLAN: SHIPSHAPE OR TREADING WATER?
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HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, MARCH 11, 1999
__________
Serial No. 106-3
Printed for the use of the Committee on the Budget
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U.S. GOVERNMENT PRINTING OFFICE
55-438cc WASHINGTON : 1999
COMMITTEE ON THE BUDGET
JOHN R. KASICH, Ohio, Chairman
SAXBY CHAMBLISS, Georgia, JOHN M. SPRATT, Jr., South
Speaker's Designee Carolina,
CHRISTOPHER SHAYS, Connecticut Ranking Minority Member
WALLY HERGER, California JIM McDERMOTT, Washington,
BOB FRANKS, New Jersey Leadership Designee
NICK SMITH, Michigan LYNN N. RIVERS, Michigan
JIM NUSSLE, Iowa BENNIE G. THOMPSON, Mississippi
PETER HOEKSTRA, Michigan DAVID MINGE, Minnesota
GEORGE P. RADANOVICH, California KEN BENTSEN, Texas
CHARLES F. BASS, New Hampshire JIM DAVIS, Florida
GIL GUTKNECHT, Minnesota ROBERT A. WEYGAND, Rhode Island
VAN HILLEARY, Tennessee EVA M. CLAYTON, North Carolina
JOHN E. SUNUNU, New Hampshire DAVID E. PRICE, North Carolina
JOSEPH PITTS, Pennsylvania EDWARD J. MARKEY, Massachusetts
JOE KNOLLENBERG, Michigan GERALD D. KLECZKA, Wisconsin
MAC THORNBERRY, Texas BOB CLEMENT, Tennessee
JIM RYUN, Kansas JAMES P. MORAN, Virginia
MAC COLLINS, Georgia DARLENE HOOLEY, Oregon
ZACH WAMP, Tennessee KEN LUCAS, Kentucky
MARK GREEN, Wisconsin RUSH D. HOLT, New Jersey
ERNIE FLETCHER, Kentucky JOSEPH M. HOEFFEL III,
GARY MILLER, California Pennsylvania
PAUL RYAN, Wisconsin TAMMY BALDWIN, Wisconsin
PAT TOOMEY, Pennsylvania
Professional Staff
Wayne T. Struble, Staff Director
Thomas S. Kahn, Minority Staff Director and Chief Counsel
C O N T E N T S
Page
Hearing held in Washington, DC, March 11, 1999................... 1
Statement of John J. Hamre, Deputy Secretary of Defense,
accompanied by William J. Lynn III, Under Secretary of Defense,
Comptroller.................................................... 4
Prepared Statement of Hon. William S. Cohen, Secretary of
Defense, in connection with the Fiscal Year 2000 Defense Budget
(prepared for Defense Subcommittee of the House Committee on
Appropriations hearing, March 3, 1999)......................... 10
Mr. Hamre's response to question posed by Mr. Spratt............. 20
Additional questions posed by Messrs. Spratt and Markey.......... 21
Mr. Hamre's responses to questions posed by Messrs. Spratt and
Markey......................................................... 23
Mr. Hamre's response to question posed by Mr. Gutknecht.......... 40
Statement of Andrew F. Krepinevich, Executive Director, Center
for Strategic and Budgetary Assessments........................ 47
Prepared statement of Mr. Krepinevich............................ 50
Statement of Robert B. Zoellick, President and CEO, Center for
Strategic and International Studies............................ 60
Prepared statement of Mr. Zoellick............................... 63
THE CLINTON DEFENSE PLAN: SHIPSHAPE OR TREADING WATER?
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THURSDAY, MARCH 11, 1999
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10 a.m. in room
210, Cannon House Office Building, Hon. John R. Kasich
(chairman of the committee) presiding.
Members present: Representatives Kasich, Chambliss, Shays,
Smith, Hoekstra, Gutknecht, Knollenberg, Thornberry, Collins,
Wamp, Fletcher, Spratt, McDermott, Rivers, Minge, Markey,
Clement, Moran, Lucas, and Baldwin.
Chairman Kasich. This morning's hearing obviously will be
on national defense. And although we have heard a lot in recent
weeks from the Joint Chiefs of Staff sounding the alarm that
the defense budget is $150 billion short over the next 6 years,
it is not the purpose of the hearing to simply take that on
faith.
I just read the first paragraph, John.
Mr. Spratt. OK. I beg your pardon.
Chairman Kasich. That is OK. I was going to finish mine and
let you go.
Rather, we want to take the broadest possible look at
defense. Here are the main questions we are going to be asking:
Is the underlying strategy sound? Does concentrating most of
our defense dollars on fighting two regional wars make sense,
or does the post-cold war world pose a different set of
challenges, such as weapons proliferation, terrorism and
information warfare? Are all the deployments, Somalia, Haiti,
Bosnia, Southwest Asia, potentially Kosovo, undermining
readiness and hurting retention without any clear advancement
of the national interest? Is the administration solution to the
retention problem a cure or a Band-Aid?
Is Pentagon reform alive or dead? It has been over a decade
since the media reported on the $600 hammer, one of which I
found. I am not sure what sort of progress it is, but I can
report to you that a new improved Pentagon has traded in the
$600 dollar hammer for a $75 set screw.
We will be hearing from two panels. One will be the Deputy
Secretary of Defense, John Hamre, who has done an outstanding
job and is an outstanding public servant, and the Pentagon
comptroller, William Lynn. They are going to present the
administration's view on defense.
And, John, you may also want to comment on the status of
infrastructure in America, and in addition to that perhaps
whether the services have all been disappointed about the
Congress of the United States ordering the buying of systems
that the military doesn't want. I mean, you have full range.
And then panel No. 2 will look at national defense in
broader terms: Do we have the right strategy? Is it an
affordable strategy? What alternative strategies, if any,
should we be thinking about? We will have Bob Zoellick and we
will have Larry Korb\1\ and we will have Dr. Krepinevich, and
there will be witnesses that would represent both the
Democratic and the Republican requests for witnesses. So I look
forward to your testimony.
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\1\ Lawrence J. Korb is Vice President/Maurice R. Greenberg Chair,
Director of Studies of the Council on Foreign Relations. Due to a
schedule conflict, Dr. Korb was obliged to leave before he could
testify. There was no unanimous consent to insert his statement.
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Mr. Spratt. Mr. Chairman, I apologize for being late, but I
appreciate your allowing me to make an opening statement. I
just want to take a minute to put things in context.
You have heard some of this in the House Armed Services
Committee, but particularly in light of the testimony of
Director Crippen last week, which had some serious flaws in it,
I want to put defense spending in context. The first point I
want to make is that the President has proposed more for
defense in each of the past 3 years.
Back in 1996 when your side was trying to put through a
budget that would balance the budget by the year 2002, you put
forth a budget resolution for fiscal year '97 which included
for, budget function 050, $1.371 trillion between fiscal year
'98 and fiscal year 2002.
The next year, 1997, the President sent up his budget for
fiscal year '98. It requested $1.383 trillion for defense over
that same period, which was $12.3 billion more than the
Republicans requested over the same period in your fiscal year
'90 budget resolution.
That year, 1997, we did the Balanced Budget Agreement, the
BBA. We added to the President's request $4.4 billion
altogether in the BBA, which meant that it was $16.7 billion
more for 050 for defense then you were able to get into your
concurrent resolution the previous year, over the same 5-year
period of time.
The next year, 1998, the President's budget for fiscal year
'99 included $2.9 billion more in budget authority for defense
than either the House or the Senate budget resolutions. There
was no concurrent budget resolution provided for that year.
And this year, 1999, calendar year 1999, setting up this
budget for fiscal year 2000, the President has provided $54.9
billion more in budget authority for the period fiscal year
2000 through fiscal year 2003 than either the House or the
Senate budget resolution last year provided over the same
period of time.
That is point No. 1. It is a matter of record.
Point No. 2. We all, I think, voted for the Balanced Budget
Agreement of 1997. We all set the level of spending that we
have been at since then, so we all have a hand in determining
how much defense got. It was not a liberal allotment, but in
truth the BBA, the Balanced Budget Agreement, gave defense a
pretty fair shake when you compare it to nondefense
discretionary spending, and defense gets an even better deal in
the President's fiscal year 2000 budget.
Basically, the President's budget for fiscal year 2000
provides discretionary spending levels through 2009. Before
making any allocation of the surpluses that are anticipated
over this time, defense outlays, that budget is going to grow
from 2000 to 2009, from $277 billion in fiscal year '99 to $374
billion in 2009, an increase of nearly $100 billion over that
10-year period of time; that is an average rate of increase of
3 percent.
The anticipated rate of inflation over that period of time
is, CPI, 2.3 percent. So that means in this budget that the
President is putting forth we are seeing real growth in defense
over a sustained period of time for the first time since the
mid-1980's.
By contrast, nondefense discretionary spending in this same
budget grows from $304 billion to $325 billion, $21 billion.
The rate of increase is .7 percent, as compared to 3 percent
for defense.
Now the President says once we have resolved Social
Security for the long run, Medicare for the long run, he sees
11 percent left over to be allocated to discretionary spending,
and he would put most of this money, $206 billion, in
nondefense, but $112 billion more in defense, which would raise
this rate of growth to 3.3 percent over that 10-year period of
time. That is a 1-percent real rate of increase over a
sustained period of time, and that is a pretty substantial
commitment.
Now we have got a problem this year. The firewalls have
come down, and they have been substantially increased, proposed
by the President this year, and we are going to have to figure
out how we get that under the caps and what gets displaced in
order to accommodate the increase in defense. It is going to be
difficult on our side. I don't know if you have tried to push
your numbers on your side, but it is going to be difficult. And
if you go beyond the President's level of increases that the
Senate has, I really don't know where we are going to come up
with the offsets in order to accommodate in a budget with no
increase in the caps.
Let me say one other thing about inflation, because CBO
tends not to give the President credit for inflation, but in
truth when we pass something like the BBA and provide budget
allocations over a 5- or 6-year period of time, and inflation
is less than we assume, then the outyear money actually buys
more goods than services than we anticipated at the time. This
is a real phenomenon; it is more spending power. In the case of
the Pentagon, this trend, lower inflation than we have
projected, has produced tangible savings, and if the trend
holds, it will produce more savings over the fiscal year '99 to
fiscal year '05 time period.
Let me just give you a sample of what the savings we have
already realized are. From fiscal year '95 to fiscal year '98,
according to CBO, they equaled $23.6 billion. In '99 alone they
are $15.4 billion. The total savings over the period '95 to '03
come to $75 billion over and above the amount that we thought
we were providing when we expressed the budget in nominal sums.
These are CRS numbers and not CBO numbers. We requested the
out-calculation. They did it in a memo dated February 17.
Now one of the things we have done in the past when we have
had a problem with defense spending, as everybody in the room
who has had a hand in trying to shim these budgets knows,
particularly Mr. Hamre because he has been at this business for
a long time, is we increase BA and we shave outlays. That way
the outlay number, which is the deficit number, stays in the
ball park that we are trying to keep it in, but the BA number
goes up.
And the BA is the number that we use for display, and the
outlay number is the number that we use to claim that we have
achieved our success. And it works the first year, sometimes it
works the second year, but sooner or later you get to the
outyears and the misalignment between BA and outlay becomes a
serious problem.
I will tell you how serious a problem it has become. Last
year what we did, we had a $3.7 billion outlay problem, what
did we do? By legislative fiat we said it doesn't exist. This
year CBO tells us that the problem is $10 billion. Sooner or
later we have got to deal with that.
Finally, Mr. Chairman, and I will----
Chairman Kasich. Some places, Mr. Spratt, where we think
OMB does a good job.
Mr. Spratt. Well, we did it ourselves last year with just a
magic wand.
Let me just comment on one final thing because Dr. Crippen,
I don't think he did this deliberately, but he was referring in
his most recent testimony to the amount of increase over the
baseline. The CBO baseline is derived from prior years'
spending, in this case fiscal year '99 spending, adjusted each
year for inflation. That is baseline spending.
And if we measure each year's request and each year's
appropriation against that baseline, the problem of using
actual defense spending in fiscal year '99 as a baseline is
that it includes $8.3 billion in emergency spending, so it is
swollen by that amount.
If you carry it forward, you are miscalculating or
misrepresenting the baseline because this is not recurring
money. It happened that year; these items, Bosnia and Iraq,
which were emergencies last year, can't be classified as
emergencies this year. They have to be included in the regular
budget, and a baseline shouldn't have $8.3 billion. If you
exclude that from the baseline, the President's request is $40
billion more in budget authority over the period 2000 to 2004.
That is just to set the record straight, Mr. Chairman, and
I appreciate your indulgence in letting me put it in the record
and inform the members.
Chairman Kasich. Mr. Hamre, you have got the floor.
STATEMENT OF JOHN J. HAMRE, DEPUTY SECRETARY OF DEFENSE,
ACCOMPANIED BY WILLIAM J. LYNN III, UNDER SECRETARY OF DEFENSE,
COMPTROLLER
Mr. Hamre. Thank you very much, Mr. Chairman. We are very
grateful to be invited. I know in the rush to make sure you got
through your statement, you skipped the part about Bill Lynn
being a great American as well. He is not as great as I, of
course, but he is a great American, and I wanted to make sure
that everybody knew that.
Mr. Chairman, I have a brief statement, and I am a little
alarmed that Mr. Spratt thinks I am a great shimmer, but I take
that as a compliment rather than as a criticism. I would like
to go through briefly to show you our budget request, but I
know we will move very quickly so we can to get into questions
because I think that is your primary interest.
So let's go to the first chart, please. Mr. Chairman, we
are really at a pivot point. We are ending this century and we
are looking at the first budget request for the next century.
So I think there are two questions that we need to put to you
and to discuss as a government: Where are we at the end of this
century? And how well postured are we for dealing with the
challenges that we face in the next century?
First, let's look where we are right now. And I am not
going to give you just a Pollyanna-ish report, but I do want to
go through. We had a number of important operations last year,
just last fall, in October, November, and December. I was
astounded at how well the troops did. It was a flawless
operation in the Persian Gulf in December. I know of only one
mission that we had to cancel because of mechanical problems. I
mean it just went in a splendid manner.
The accuracy of our strikes was unprecedented. We had
virtually no collateral damage, and we worked very hard to make
that the case. But I think that it says that the troops,
despite 10, 12 long tough years of drawdown, are really
performing well. We share pride, and I know you should too
because you made this possible with the--the rather splendid
way in which the troops have behaved.
We remain the glue that holds together the international
security order. You see that every day, and frankly you are
going to confront that today when we talk about Kosovo, and you
are going to be talking about it on the floor. Like it or not,
the United States still is the glue that holds NATO together.
Many of us, of course, would prefer to have stronger
leadership in Europe, and I think you are starting to see that
emerge. But dealing with the crisis in Bosnia, dealing with the
crisis in Kosovo, would not happen without the United States'
leadership, and I think it is an important dimension that we
have to acknowledge.
There are no peer competitors to the United States right
now on the global stage. That doesn't mean there wouldn't be
one in 10 years or 15 years. We have to look to that, and I
think there are very, very important and troubling signals that
we have to watch for. But right now we have an important and
unprecedented posture in the international security order.
We, of course, want to keep it that way as long as we can.
I am astounded at the excellence of our combat forces, and
also the innovation in our officer corps. We are dramatically
better than we were just 5 years ago in thinking about the
craft of warfare, and we are going to be dramatically better in
5 more years.
We have innovation that is going on just explosively
throughout the department. You would see it at the Joint
Experimentation activity that is underway down in the Tidewater
area. Each of the services have set up innovation battle labs,
really doing exciting things, and to be able to do that at a
time when we are 10 years after the fall of the Berlin Wall, I
think testifies to the strength and the vitality of this
remarkable officer corps and NCO corps that we have built over
the last 20 years.
Finally, I would say it is American forces. We are the only
military where we can go around the world and we are welcomed
around the world. There are an awful lot of countries, when the
army rolls in, they hide their families. But when the Army
rolled into Honduras, when we had the flooding and relief
activities, they came out to greet us and to welcome us, and I
think we should all take great pride in that.
Are we ready for the next century? And, Mr. Chairman, you
raised those questions in your opening statement. Some people
criticize us for being conservative to hold on to a two-major-
regional contingency strategy. I would agree that that is
conservative, but three times in the last 5 years we had two
nearly simultaneous regional contingencies. We were able to
deter both of them, but I think it validated the fact that we
need to retain this capability right now.
Which theater do you want to say you are going to neglect?
The Persian Gulf theater or Northeast Asia? I don't think
anybody is prepared to say we are prepared to walk away from
that right now.
We have initiated a number of major initiatives in this
budget and from the last couple of years to deal with this new
threat of chemical, biological warfare, especially brought
home, homeland defense. It is a major initiative of the
department. The Secretary really made this one of his premier
initiatives when we did the Quadrennial Defense Review 2 years
ago, and we would be glad to discuss any of that.
We are dealing with the cyber threats. A year ago we
wouldn't have known we were under attack, frankly; today we do,
and we have done a great deal to defend ourselves. We have 24-
hour-a-day watch centers. We have intrusion detection devices
in all of our networks. We have strong firewalls in all of our
networks. We have created forensic and diagnostics laboratories
to track down what is happening and to come up with corrective
actions. We have strengthened our counterintelligence
activities in the department.
We have done a great deal in the Department of Defense, but
America as an entity is not protected in this environment, and
this is a very new and significant challenge we all have to
deal with. It is largely the vulnerability in the private
sector that is most worrisome to us, and we can talk about any
of that.
The budget we have submitted to you funds the deployment of
a national missile defense system when a decision is made to
deploy it. We have not had that in the past, and I think we
have been criticized for that. I frankly think that we have
undercut our own credibility with our program by not funding
the deployment side. We now have done that, and we put forward
to you a program that at least would fund it when a President
decides we should make a deployment decision.
Let me go on to the next chart, because I covered the other
points. I do want to say, despite these very positive things at
this pivot point of the century, there are things that worry us
a great deal as well.
It is tough to recruit in this environment. It is really
tough to recruit in this environment. We are not after the
young men and women who really don't have options in life, you
know, and are just kind of looking at hanging around the bus
stations. We are after quality young men and women, and it is
tough to recruit them. They are heading off to college at
unprecedented levels in American history, and we are trying to
attract them to come into the military. We need that kind of
quality, and it is tough getting them right now, to be honest,
and it is tough holding onto people.
Any young man or woman in the military right now that has
computer skills, 2 months before they get to the reenlistment
point, gets job offers at two to three times their salary. I
mean it is really hard to hold onto them. So this is a major
problem, especially when the economy is so strong. There are so
many opportunities. It is not just pilots. We are seeing this
problem across the board in lots of career fields.
Our pace of activity and, Mr. Chairman, you mentioned this,
our pace of activity is a real strain on us. We are managing
it, but I will tell you it is tough. It is tough keeping forces
in Bosnia, and it is tough having forces in the Middle East,
and sending 1,500 folks to Honduras and Guatemala for relief
activities. It is a strain on the Department. We are working
it.
It contributes to the difficulty of holding onto people,
but it is a real challenge in this environment. And it is one
of the reasons why it was very difficult for us to come to this
decision that we could support a deployment to Kosovo, because
it will be a challenge for our troops. We know that.
After 14 years of drawdown, we have a very threadbare
infrastructure here in the United States. We have had four
rounds of base closures. Those have been very important to us.
We are now saving about $5 billion a year because of the base
closures. A tremendous amount of controversy, and the chairman
jabbed me a bit when I was back saying hello on what happened
in California; I understand that.
I think we have worked our way through that, but we really
do need, and I hate to say it, we need to come back to you
again and ask for authority to be able to do a couple more
rounds of base closures, partly so we can turn those dollars
back and replenish the infrastructure that we have. It is
tough, and you have seen it. I mean those of you who have
installations know that our infrastructure is getting fragile,
especially the underground infrastructure, the stuff you can't
see, the utilities, you know, the water systems, things of that
nature.
Let me give you an example. We have about 300,000 housing
units that the Department of Defense operates, you know, for
our personnel. The average age is 35 years old. I mean that is
the average, I mean, and we are only buying replacement
housing, about 5,000 houses a year. You can do the math. We are
not keeping up with this kind of stock. So we need to do
something.
Chairman Kasich. Would you suspend? I think what we ought
to do is get over there and vote.
Mr. Spratt. We have got a series of votes.
Chairman Kasich. OK. Do you want to----
Mr. Hamre. We will wait.
Chairman Kasich. How much----
Mr. McDermott. Two votes on Ed-Flex and then three
suspension votes, so you have got five votes.
Chairman Kasich. John, if you can, go ahead and wrap it up.
Mr. Hamre. I will pick up the pace. Let's go down two
charts, Ken, to the line chart, and here I want to just show
you what our budget is.
The President gave us $112 billion more to spend. It is
real, and here is how we did it. First of all, the dashed blue
line that is right in the middle, that was our 5-year plan that
we had last year, and that is the one that Mr. Spratt was
talking about.
Now, inflation has come in lower and fuel prices are lower,
and so it has lowered that bar to the solid blue line. That is
what it costs to buy the program we had a year ago. Now, we
were given additional dollars. As you can see, we were given an
additional $84 billion. This area here was added to our top
line. The $28 billion was purchasing power we were allowed to
keep. So altogether we got another $112 billion of real
purchasing power that we could spend.
Now let's go to the next chart. What is really
controversial about that is that while we got dollars in the
outyears--and that is that additional topline that you see, the
third line down, and that adds up to $84 billion--the real
problem is in '00, because the problem we had in '00 was we had
to get under the caps. So the problem you see is we only got
$4.1 billion of additional topline in '00, even though we got
$12 billion worth of extra purchasing power.
OK, how did we do that? Now some people say it is a
gimmick. It is not a gimmick because you could do it. You could
legislate this and it could be real, unlike I think the
traditional motion of gimmicks: It is something to get you
through a press release and then you have got to figure out
what you can really do. You can really do it. Some people don't
think it is necessarily a good idea, but it is doable.
First is the economic changes and that is the inflation
savings that we talked about. Then there is the MILCON advance
appropriation. Now what this in essence--we didn't change a
single MILCON project, it is the same MILCON projects but we
put only the dollars to do '00 part of the MILCON project in
'00, and then there is the $3.1 billion that is added in '01 to
do the remaining funding of the same projects.
Mr. Spratt. It is taken out, isn't it? You said it was
added, it was taken out.
Mr. Hamre. I don't know why it shows as a negative on this
chart.
Mr. Lynn. The money is actually in '01 but the purchasing
power is '00, is what that means. The sign is confusing, but
that is the point.
Mr. Hamre. I think it is part of that shimming stuff that
we talked about, Mr. Chairman. So to do this program, in order
to buy it, what we really need you to do is to legislate 2
years' worth of appropriations, legislate the MILCON dollars in
both '00 and '01, and you can buy this program. It is not a
gimmick. It is real, and we do this in other accounts. You know
we don't traditionally do it in DOD.
We do it in other accounts. We do it in the Department of
Energy, for example. And we have done it in cases in DOD,
primarily hospitals and things of that nature. But it is real,
although it is not our preference for the way to do business.
We would much prefer to do full funding. That would be our
preference, but we couldn't get under the cap, and this way it
brought purchasing power under the caps.
And then there are $1.6 billion worth of rescissions. Now,
coming up to the Hill and talking about rescissions when you
just gave us the money last year, that is a little like
inviting the undertaker to show up at the 70th anniversary of
your high school reunion. Nobody is looking forward to doing
that. It is real. But it does mean we would have to sit down
and go through a process with you to identify what those
programs are.
Our preference is that we don't have to sit down and do
that with you, but we will do that if we are asked to. But the
only reason we went through that was because we had the caps. I
mean once we are past the caps, we have got new budget
authority. Now the new budget authority, of course, is only
unlocked when you pass a budget resolution. I mean we do have
to have, in order to execute this program, we do have to have a
budget resolution that gives us new dollars throughout the 5-
year plan.
So I would ask you please, I know you are getting very
close to that and we are very grateful that you are moving it
so fast this year, but that really becomes very important both
for the larger program that you are working on and the defense
program we are trying to build.
OK, Ken, let's go on. We put our highest priority on
people; 50 percent of all the dollars that--$112 billion that
we added, 50 percent of it went to people because that is our
highest priority. About another 40 percent went to readiness.
Chairman Kasich. We have got 5 minutes. I think we better
suspend and get over there and vote.
Mr. Hamre. Yes, sir. We will be here.
Chairman Kasich. Whenever we can get here, we will get
here.
[Recess.]
Chairman Kasich. Let's get started.
Mr. Hamre. Yes, sir. And I just have three charts, 2
minutes. It won't take any longer than that.
Contingency funding, of course we have funded the costs of
Bosnia operations and the cost of Southwest Asia, that is,
Northern Watch, Southern Watch. That is included in our budget.
We do not have any money in our budget if we do have to go into
Kosovo. And we cannot do Kosovo without getting some
supplemental funds, otherwise it is going to come at the
expense of our readiness activity. I just needed to mention
that. I know you have got a big debate going on on that
subject.
Ken, next chart. This is where we are on modernization. You
know, you look back at where we were here when Secretary Cohen
got over there, we were down in the 40's--actually when he
first came we were at $42 billion. This year we are--as you can
see, the top line is our goal. We wanted to be at $54 billion
in '00. This year we only made $53 billion; even though we
added $12 billion, we didn't make our procurement target. We
wanted to be at $54 billion; we only got to $53 billion because
we put most of our money in O&M and personnel.
As you can see, once you get past '00, we get up, and you
go to '05, we plan on spending about $75 billion here on
procurement. Now I know people will ask will that really hold
true, and I think that is always a fair question to put to us,
because we have had falloff on procurement over the years. That
has been the lowest priority of all of our high priorities. But
I do want you to see what those numbers look like.
Ken, let's go to the last one. Mr. Chairman, I am only
showing this one because of your question, are we still doing
business reform? And I think the answer is very much yes. As a
matter of fact, I don't think we have any credibility coming to
you and asking for another $112 billion dollars if I can't
demonstrate to you that I am doing everything we can internally
to streamline our activities.
We want to close some more bases. We are asking permission
to do two more rounds of base closures. We want to compete
jobs. We are not simply privatizing it at all costs, we want to
allow government workers to compete for those jobs, and we plan
on doing 229,000 of those. And I can bore you endlessly with
the other things, the business practice reform. But we were
very working very hard to become a more streamlined
organization.
Mr. Chairman, let's turn at this stage to questions, I know
the hour is getting late.
[The statement submitted by Mr. Hamre follows:]
Prepared Statement of Hon. William S. Cohen, Secretary of Defense, in
Connection With the Fiscal Year 2000 Defense Budget
(Prepared for Defense Subcommittee of the House Committee on
Appropriations Hearing, March 3, 1999)
Mr. Chairman, members of the Committee, it is a pleasure to be here
to present President Clinton's fiscal year (FY) 2000 Department of
Defense (DOD) budget request. Special greetings particularly to new
members of this committee. My department and I look forward to
developing a productive and cordial relationship with you as together
we work to secure America's future.
We convene at the twilight of a century in which military power
came to dominate much of human affairs. Through world wars, crises, and
the cold war, America learned the folly of appeasement and wishful
thinking and the wisdom of preparedness and resolve. Now we meet to
consider the defense budget of the nation that good fortune has cast as
the one most able to lead the world toward a more peaceful century.
A prudent security strategy and defense posture remain essential to
America's global leadership and its ability to foster a favorable
international order. Our aim is an environment in which critical
regions are stable, peaceful, and free from domination by hostile
powers; the global economy and trade are free to grow; democratic norms
and respect for human rights are widely accepted; and nations cooperate
to prevent and, if necessary, respond to calamitous events.
The FY 2000 DOD budget advances these goals. It reflects my
Department's May 1997 Quadrennial Defense Review (QDR)--a comprehensive
analysis of our nation's defense posture, strategy, policies, and
programs. In view of the security threats and opportunities facing the
United States, both today and well into the future, the QDR developed
many far-reaching recommendations on force structure, readiness,
modernization, infrastructure, and more. It presented a new strategy
that can ensure America's military superiority as well as implement the
defense requirements of the President's National Security Strategy for
a New Century, which stresses global engagement and leadership.
In support of our strategy, America's armed forces continue to
excel in the multitude of missions given them. From Desert Storm to
Desert Fox, our forces have performed with skill and precision in the
vital Persian Gulf region. In Korea our troops maintain their
relentless vigil against aggression from the north. In Bosnia our
forces are adeptly accomplishing the military tasks needed to foster a
permanent peace there. In humanitarian crises from Rwanda to Central
America, our military has delivered relief whatever the obstacles.
Around the globe our uniformed men and women are operating with high
effectiveness, training hard, keeping our weapons and systems in good
shape, and mastering all the other essentials of our defense strategy.
Over the past year our national security leadership has become more
and more concerned that this military excellence could begin to wane
without substantial new investments. Although our forces continue to
accomplish their missions splendidly, there are warning signs of
potential problems. Recruiting and retention are increasingly
difficult, readiness harder to maintain, and modernization tougher to
fund sufficiently. General Shelton, the Service Chiefs, and I conveyed
our concern to President Clinton, and he agreed that corrective action
was needed. The President decided to propose substantial increases in
military compensation and the first sustained long-term increase in
defense resources in over a decade. His action meets the most pressing
requirements identified by our uniformed leaders and will enable us to
continue the military excellence that has become our nation's pride.
This statement highlights how the President's FY 2000 budget
proposes to keep America's defense posture strong. It emphasizes how
the FY 2000 budget:
1. Supports the QDR strategy of Shape, Respond, Prepare
2. Provides substantial new resources through a higher topline and
reapplied savings
3. Puts people first with the largest military pay raise in a
generation and increases in military retirement benefits
4. Protects readiness priorities with increased funding for
operations, training, repair parts, and maintenance
5. Achieves QDR modernization aims including $60 billion per year
Procurement by FY 2001
6. Reaffirms our commitment to streamlining and reform of DOD
infrastructure and support
7. Continues the strengthening of our critically important Reserve
components
Supporting the QDR Defense Strategy
The QDR defense strategy has three elements:
1. The United States must shape the international security
environment in ways favorable to its interests. We work to do this by
promoting regional stability, preventing conflicts, deterring
aggression, and reducing threats. Especially crucial are the overseas
deployment and superior capabilities of U.S. forces, our international
alliances, and our peacetime engagement with selected nations with the
aim of them being friends, not adversaries in the future.
2. The United States must respond to the full spectrum of crises.
America's military must be capable of responding effectively to crises
in order to protect our national interests, demonstrate U.S. resolve,
and reaffirm our role as a global leader. U.S. forces must be able to
execute the full spectrum of military operations--from deterring
aggression and coercion, to conducting concurrent smaller-scale
contingency operations, to fighting and winning major theater wars.
3. The United States must prepare now for an uncertain future.
Among our efforts to do this, we must pursue focused modernization to
replace aging systems and incorporate cutting-edge technologies to
ensure U.S. military dominance. We must streamline and improve our
Defense infrastructure and support activities. And we must hedge
against the possible emergence of a major unanticipated threat through
such priorities as carefully targeted research and development.
The essence of this defense strategy is balance between current
dangers and opportunities versus those we might face in the future. We
need sufficient forces and capabilities to meet today's requirements,
while at the same time investing wisely for the future. The FY 2000
budget provides balanced support of the QDR strategy of Shape, Respond,
Prepare. All three elements benefit from proposed funding of our top
priorities--people, readiness, and modernization.
The requirements of the QDR strategy determine the size,
composition, and posture of U.S. forces. Our forces are configured not
only to meet current threats, but also to succeed in a broad range of
missions and environments. The Defense program seeks to ensure that the
U.S. military has the capabilities to dominate future foes and give
national leaders a range of attainable options for promoting and
protecting America's interests in peace, crisis, and war.
Our defense strategy and program includes a major focus on
countering the serious threat of weapons of mass destruction (WMD).
Efforts to reduce this threat include the Cooperative Threat Reduction
(CTR) program to support the destruction and nonproliferation of
weapons of mass destruction in nations of the former Soviet Union, the
Chemical Weapons Convention, and various other measures to discourage
the proliferation of these weapons. The FY 2000-2005 budget to address
WMD dangers includes: $2.9 billion for the CTR program; almost triple
the previously planned spending for National Missile Defense (NMD); and
additions to other programs to counter WMD threats, particularly those
associated with the Special Operations Command.
Increasing Defense Resources
Proposed budget authority for FY 2000-2005 reflects President
Clinton's plan to make available to DOD $112 billion in additional
resources, which will enable DOD to fund the most critical priorities
identified by our military leaders. This constitutes the first
sustained long-term increase in defense funding since the end of the
cold war. The additions are being made to resource levels planned at
the time of last year's FY 1999 budget request.
The added $112 billion consists of an $84 billion increase to last
year's planned topline and $28 billion in savings from lower inflation,
lower fuel prices, rescissions, and other adjustments - savings the
President directed DOD to retain and allocate to pressing needs.
President Clinton's $84 billion topline increase reflects his proposal
in the State of the Union address to allocate to defense spending a
portion of the projected federal budget surplus once a resolution on
Social Security is achieved.
For FY 2000 the budget includes $12.6 billion in additional
resources--$4.1 billion from a topline increase and $8.5 billion from
economic adjustments and other provisions. These added resources
enabled DOD to increase military compensation, provide balanced support
to readiness and modernization priorities, and fund the expected cost
of Bosnia and other operations.
The allocation of the total $112 billion reflects our balancing of
current and future needs:
$35 billion to Military Personnel accounts, primarily for
higher pay and retirement benefits
$49 billion to Operation and Maintenance accounts for
various readiness enhancements, Bosnia costs, higher civilian pay
raises, and CTR increases
$28 billion to modernization (primarily Procurement and
RDT&E accounts) for funding increases for weapons, facilities, and
support systems, plus added funding for NMD
Putting People First
Providing a good quality of life for our uniformed people and their
families remains essential to sustaining U.S. military strength.
Reflecting that reality and to address mounting warnings about
retention and recruiting, this year's budget includes the largest
increase in military compensation in a generation. The compensation
package proposals:
1. The REDUX change in military retirement would be reversed by
raising benefits from 40 percent to 50 percent of base pay for members
retiring after 20 years. Also proposed are changes to ensure that
retirees get cost-of-living (COLA) increases during periods of low
inflation. Restoring military retirement benefits was the military
leadership's top priority. For FY 2000-2005, these changes cost $6
billion.
2. Military base pay in FY 2000 would be raised 4.4 percent--the
largest military pay increase since FY 1982. This raise exceeds the
forecasted rate of civilian wage growth (employment cost index or ECI)
and is more than two percentage points above the general inflation rate
as reflected in the Consumer Price Index, projected at 2.3 percent for
FY 2000. Planned FY 2001-2005 raises are 3.9 percent per year, which
matches the projected ECI. For FY 2000-2005, the incremental cost of
these higher pay raises compared with the lower raises planned for
these years in the President's FY 1999 budget request is about $14
billion.
3. Pay also would rise in connection with military pay table
changes to increase the raises associated with promotions. This change
will reward performance, compensate people for their skills and
experience, and encourage them to continue their service. These
targeted increases will range up to 5.5 percent, and will be in
addition to the across-the-board raises. For FY 2000-2005, these pay
table changes will cost $4.5 billion.
4. For FY 2000-2005, the budget also includes another $2 billion
for initiatives to improve recruiting and retention. For example, DOD
is proposing higher compensation for military members possessing
critical military skills.
From the $112 billion in additional resources for FY 2000-2005, the
Department allocated a total of $36.5 billion to ``put people first.''
This includes these four military pay and retirement increases plus $10
billion for higher pay raises for DOD civilians.
Protecting Readiness
The readiness of our first-to-fight forces remains high, and
overall our forces continue to be fully capable of executing the
National Military Strategy. However, the intensity of operations, the
less-ready posture of some later deploying forces, and other concerns
require extra measures to ensure sufficient readiness in the years
ahead.
Readiness continually needs monitoring and refreshing. Over the
past 12 months, added funding has been needed to preclude our readiness
being eroded from unbudgeted costs and other unforeseen requirements.
To protect readiness in FY 1998, DOD proposed and Congress supported an
emergency supplemental of $1.8 billion for Bosnia and other unbudgeted
costs, plus a reprogramming of $1 billion--primarily into key readiness
accounts. For FY 1999, Congress approved the President's request for
emergency funding of $1.9 billion for Bosnia and $1.1 billion for
readiness needs. This responsiveness by the Congress demonstrated its
appreciation of the importance of quick and substantial action when
readiness concerns arise.
Bolstered by added resources, the FY 2000 budget funds the
training, exercises, maintenance, supplies, and other essentials needed
to keep U.S. forces prepared to achieve their combat missions
decisively. Most of this readiness-related spending comes in the
Department's Operation and Maintenance (O&M) accounts. When adjusted
for today's lower troop strengths, O&M funding in FY 2000 is well above
levels during the 1980s.
The FY 2000 budget funds the military services' most pressing
readiness requirements--those that could put readiness seriously at
risk. It supports traditionally high OPTEMPO, flying time, and other
readiness enhancers; readiness-related maintenance and improvements at
DOD facilities; and readiness-related modernization, in areas like
electronics and maintainability.
For FY 2000 the budget includes $1.8 billion for ongoing Bosnia-
related operations and $1.1 billion for operations in Southwest Asia
(SWA) at the force level and operating tempo in place last September.
The Department has also incurred unbudgeted FY 1999 costs from
providing assistance to Central America in the aftermath of Hurricane
Mitch and from Operation Desert Fox in SWA. The FY 2000 budget contains
an allowance to deal with these kinds of unanticipated emergencies.
The Department will continue to work to ensure that unexpected
funding requirements, such as unbudgeted military operations or
recovery from natural disasters, do not force us to divert funds away
from readiness, modernization, and other priorities. We appreciate
Congress's strong support of our requirements during the past year.
Achieving Modernization Goals
As reconfigured by the QDR, the Department's weapons modernization
plans include development of cutting-edge capabilities as well as cost-
effective upgrades to existing systems. Helped substantially by the
President's addition of resources, the FY 2000 budget meets the QDR
recommendation to increase Procurement funding to $60 billion per year
by FY 2001. The complete Procurement funding profile:
DEPARTMENT OF DEFENSE PROCUREMENT
($ in billions)
----------------------------------------------------------------------------------------------------------------
Budget Authority FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05
----------------------------------------------------------------------------------------------------------------
QDR Goal................................................ $49 $54 $60 (*) (*) (*) (*)
FY 2000 budget.......................................... 49.0 53.0 61.8 $62.3 $66.6 $69.2 $75.1
----------------------------------------------------------------------------------------------------------------
* QDR did not specify funding goals beyond 2001.
For FY 2000, our full funding of readiness and personnel needs left
us $1 billion short of the QDR's Procurement goal. Still, in real terms
Procurement at $53 billion is nearly 7 percent higher than the FY 1999
level, and it will grow another 15 percent in FY 2001.
America's military preeminence depends on investments in new
technologies. A high priority for achieving this is DOD's science and
technology program, which funds research that should help field
superior weapons and support systems at affordable prices. Also
critical are advanced concept technology demonstrations (ACTDs), which
link relatively mature technology with new operational concepts and
enable us to expeditiously evaluate important innovations.
The $112 billion addition of resources will enable DOD to make
important augmentations to its previous modernization plans. It will
enable the Department to:
Include $6.6 billion more for NMD deployment (includes FY
1999 supplemental funding)
Add 8 ships to the Navy's shipbuilding plan
Procure additional aircraft such as the F-16, C-17, T-45,
and V-22.
Fix underfunding shortfalls for the LPD-17, NAVSTAR GPS
Satellite, and evolved expendable launch vehicle (EELV).
Increase funding for the Army's training ammunition
requirements and invest $2 billion in critical combat service support
equipment
Add $1 billion to the Marine Corps budget for critical
Procurement needs
Address bow wave funding challenges in the years beyond
2003
major service programs
The ambitious DOD modernization program is especially critical for
achieving the needed transformation of U.S. forces to reflect new
technologies and other military-related trends. Transforming U.S.
forces requires implementation of Joint Vision 2010, our new concept
for how U.S. forces will fight and achieve what we call ``full spectrum
dominance.'' At the heart of JV 2010 is the ability to collect,
process, and disseminate information to U.S. forces, while denying the
enemy the ability to gain and use battle-relevant information.
DOD's long-term campaign to exploit such advanced technology to
ultimately bring about fundamental conceptual and organizational
improvements to U.S. forces is called the Revolution in Military
Affairs (RMA). This transformation promises to enable our forces to
attack enemy weaknesses directly and with great precision--and
therefore with fewer munitions, less logistics strain, and less
collateral damage. Our RMA campaign is a critical way in which we seek
to prepare for an uncertain future, derive maximum military capability
from constrained defense resources, and exploit America's human and
technological advantages. To advance these aims DOD is exploring new
war-fighting concepts and capabilities, and establishing a new joint
RMA experimentation program. Also key is the planned acquisition of new
command, control, communications, computers, intelligence,
surveillance, and reconnaissance (C4ISR) capabilities.
Modernization of aviation forces includes DOD's largest acquisition
program: the Joint Strike Fighter (JSF). The aim is a family of
aircraft, with variants configured to meet several sets of
requirements. The JSF will replace the F-16 in the Air Force, F/A-18C
in the Navy, and F/A-18C/D and AV-8B for the Marines. The JSF will
continue in its concept demonstration phase into FY 2001, in
preparation for procurement to commence in FY 2005.
The F-22 will replace the F-15C/D in the air superiority role and
have substantial air-to-ground capability as well. Aircraft testing is
continuing, and F-22 production is expected to build to 36 aircraft per
year by FY 2004. The Navy's F/A-18E/F will provide much greater
survivability and payload over earlier F/A-18 models. Initial
operational capability is planned for FY 2001. For the longer term the
Navy plans to transition from F/A-18E/F to JSF procurement at a time
based on the pace of JSF development.
Modernization of ground forces will stress upgrades of primary
combat platforms like the Army's Abrams tank, Bradley Fighting Vehicle,
and Apache Longbow helicopter. Major development efforts include the
Comanche helicopter and Crusader artillery system. Marine Corps
modernization features the V-22 tilt-rotor aircraft, the Advanced
Amphibious Assault Vehicle, and upgrades of utility and attack
helicopters and the AV-8B.
Modernization of naval forces includes procurement of the DDG-51
Destroyer, LPD-17 amphibious transport dock ship, T-ADC(X) logistics
support ship, and New Attack Submarine (NSSN). The tenth Nimitz-class
carrier (CVN-77) is fully funded in FY 2001. The budget also supports
development of the next generation aircraft carrier and destroyer.
The FY 2000 budget advances the QDR-stressed capability of
projecting military power to distant regions. Procurement of 120 C-17
aircraft will be completed by FY 2003, and further purchases are
planned for FY 2004-2005. The C-5 transport and KC-135 tanker will
receive major avionics upgrades and other enhancements.
The new budget continues the QDR's emphasis on precision
munitions--both with new systems and upgrades to existing missiles,
bombs, etc. Also supported are the scores of lesser-known programs
needed to ensure the decisive combat superiority of America's armed
forces.
To get the most for our modernization dollars, it is important to
institutionalize acquisition reform so we can improve our ability to
provide effective weapon systems. It also is necessary to modernize
logistics to cut costs, infrastructure, and cycle time, thereby
providing better support to our 21st century forces.
ballistic missile defense
The FY 2000 budget continues DOD's strong ballistic missile defense
(BMD) programs, which remain critical to a broader strategy seeking to
prevent, reduce, deter, and defend against WMD and missile threats. The
Department remains committed to advancing its missile defense efforts
as fast as technology risks allow.
We continue to emphasize theater air and missile defense programs--
aimed at meeting today's regional threats. The primary goal is to
develop, procure, and deploy systems that can protect forward-deployed
U.S. forces, as well as allies and friends. Our plan envisions the
phased acquisition of a multi-tier, interoperable, defense-in-depth
capability against ballistic and cruise missiles. To defeat shorter-
range missiles, our key lower-tier programs include the Patriot PAC-3
and Navy Area systems. Key upper-tier programs are the THAAD and Navy
Theater Wide systems. To defeat theater-range missiles during their
boost phase, we are developing an Airborne Laser system.
This budget includes substantial new resources for the National
Missile Defense (NMD) program. It increases NMD funding by $6.6
billion, including $600 million in FY 1999 supplemental appropriations.
Total NMD funding for FY 1999-2005 is $10.5 billion. This substantial
investment includes funding for NMD deployment and underscores the
administration's commitment to NMD. However, no deployment decision has
been made. A decision about deployment is planned for June 2000 and is
expected to be based primarily on the maturity of NMD technology as
demonstrated in development and testing.
The primary mission of the NMD system being developed is the
defense of the United States--all 50 states--against a limited
strategic ballistic missile attack such as could be posed by a rogue
nation. Such a system also would provide some capability against a
small accidental or unauthorized launch of strategic ballistic missiles
from more nuclear-capable states.
In order to deploy a technologically capable system as quickly as
possible, we will phase key decisions to occur after critical
integrated flight tests. As a result, instead of projecting a
deployment date of 2003 with exceedingly high risk, we are now
projecting a date of 2005 with a more manageable, but still high risk.
If the testing goes flawlessly, we could seek to deploy sooner.
Streamlining and Reforming DOD Infrastructure and Support
My Defense Reform Initiative (DRI) continues to spearhead a
comprehensive DOD campaign to streamline and reform our support
activities. Our goal is to substantially improve these activities and
get them to consume a smaller portion of the defense budget. This
effort is smart in and of itself; but it also is imperative in order to
free up funds to help pay for high priorities like weapons
modernization.
During its first year DRI made major progress. For example, we have
nearly completed a one-third size reduction in the Office of the
Secretary of Defense (OSD) and are advancing similarly ambitious
streamlining in other DOD components. We are incorporating successful
private sector processes and practices. We are shifting from paper to
electronic transfer of information. We are using public-private
competition to improve functions and cut costs. This competitive
sourcing will save $11.2 billion from 1997 to 2005, and $3.4 billion
per year thereafter. For FY 1997-2005 about 229,000 DOD positions are
expected to be competed. Having developed momentum with DRI, new ideas
have been added to improve processes affecting the quality of life and
professional development of our military people and DOD civilians.
The resources added by the President for FY 2000-2005 in no way
diminish DOD's resolve to shrink the portion of its budget consumed by
infrastructure. They especially do not alleviate the critical need for
congressional approval of two more rounds of base closure and
realignment (BRAC). Without such approval, scarce defense dollars will
continue to be spent on excess infrastructure, rather than on the vital
needs of America's armed forces.
Between 1988 and 1995 four BRAC Commissions proposed the closure or
realignment of 152 major installations and 235 smaller ones. Complete
implementation of those decisions is projected to net $14.5 billion in
savings by FY 2001. After FY 2001 recurring savings from them will be
about $5.7 billion per year.
The estimated up-front costs for implementing decisions of BRAC
rounds in FY 2001 and 2005 are included in the FY 2000-2005 budget.
These BRAC actions could begin to generate savings by 2005 and
ultimately save over $20 billion by 2015. I realize that some in
Congress are dissatisfied with aspects of past BRAC implementation. But
in writing legislation for new BRAC rounds, the Congress can tailor the
law to address such concerns. Please join me in working to shift
resources from redundant infrastructure to military muscle.
Strengthening Reserve Components
The FY 2000 budget reflects the essential role of the Reserve
components in America's defense strategy, and it continues the
critically important integration of the Active and Reserve components.
The National Guard and Reserve were closely involved in resource
decisions.
The FY 2000 budget provides $20 billion for Reserve component
personnel, operations, and facilities accounts. For FY 2000, over $1
billion was added to previous plans for crucial training and other
requirements including added funds for Active/Reserve integration,
OPTEMPO, base operations, Reserve component support to combatant
commanders, and programs to engender critical employer support required
as a result of increased utilization of the National Guard and Reserve.
This budget advances DOD's goals for equipment modernization and
interoperability for the Reserve components by providing over $1.6
billion in FY 2000. It funds special youth development initiatives such
as the National Guard Youth ChalleNGe Program and the Starbase program.
And it continues funding of the Innovative Readiness Training Program,
providing valuable military training while benefiting America's
civilian communities.
Strong support was given to the larger role that Reserve components
are to play in increasing DOD's capabilities to support federal, state,
and local agencies in responding to domestic incidents involving
weapons of mass destruction (WMD). The Department has begun to train
and equip members of the Reserve components to better support civilian
authorities in mitigating the consequences of a WMD attack.
The FY 2000 budget promotes the Department's objectives in
supporting the Reserve components as fully integrated partners within
the Total Force, and seeks to use specific talents of the Guard and
Reserve in new and innovative ways.
Closing
I look forward to continued cooperation as together we work to
reinforce America's military strength and global leadership.
Chairman Kasich. Mr. Hamre, let me just ask you, 4 years
ago this committee was told by the Department of Defense that
robust actions to improve bookkeeping and auditing had been
taking place, but 3 months ago the IG said, ``The DOD remains
unable to comply with the various laws requiring auditable
financial statements for its major funds and for the Department
as a whole. We do not anticipate a significant difference in
financial statement audit results in the near future.'' What is
that all about?
Mr. Hamre. Sure. Let me ask Bill. Bill is the Under
Secretary for Financial Management. I would ask him to give you
the response, sir.
Mr. Lynn. Mr. Chairman, the IG and the GAO, which has done
similar studies, are right that at the current time we are not
able to produce an auditable financial statement. That is
largely because the systems that we have put in place frankly
over 200 years were never designed to do that. They were
designed to provide assurance that the money that we were
allocated by Congress was spent in the way Congress directed.
We have recently, over the past several years, been asked
to meet commercial audit standards. We were endeavoring to do
that, but what that will require is to change our systems. We
have a plan over the next 5 years to make those changes, to
upgrade those systems and to produce an auditable financial
statement.
Since that is I think too long a period of time in
Washington, we also have an interim plan where we are going to
try work-arounds, using the systems we have to try and produce
auditable statements, working closely with the auditors both at
OMB, at GAO, and at the Inspector General. And we have
developed a series of plans that should produce some
improvement over the next couple of years.
Chairman Kasich. It is pretty unbelievable, though, isn't
it?
Mr. Hamre. Can I put it in perspective though, sir? The one
thing--when I first went to the Department as the comptroller,
we had about $50 billion worth of what we call problem
disbursements where we had difficulty, kind of like balancing
your checkbook. We were off by $50 billion. Over the next 3
years that got whittled down so it is now I think about $8
billion. Now that still is a big number. But I have got to tell
you that is 8 billion of the dollars that have been spent over
the last 7 years, so it is $8 billion over a base of about $1.7
trillion.
If you do the math you will find out we have done it right
99.5 percent of the time. It is that .5 percent where we have a
problem, where we transposed numbers or we did something. We
researched $35 billion over the last 3 years and have not found
wide-scale problems; that is not to say we are free of
problems. We have some. We actually had to arrest a couple of
people, but that is a very small percent of where we have had
problems, sir.
Chairman Kasich. Mr. Spratt.
Mr. Spratt. Thank you both for a good presentation. I am
sorry for the interruption.
Let me ask you about the President's personnel
recommendations. You were saying that half of the increase of
$112 billion goes to people.
Mr. Hamre. Roughly.
Mr. Spratt. As you break it down, as I recall, there is
about $29 billion for modernization, which is procurement and
R&D; about $35 billion for personnel; and then about $48
billion for O&M. Is that a roughly right allocation?
Mr. Hamre. Yes, that is right. I misspoke. It is roughly
half went into the readiness money.
Mr. Spratt. I was wondering if there was some personnel
money in the O&M package when you said there is $48 billion for
O&M.
Mr. Hamre. Go ahead, Bill.
Mr. Lynn. The civilian pay raise would largely be in the
O&M package, so in that sense, yes, there would be some pay,
but no military pay to speak of in O&M.
Mr. Spratt. But to the extent of the inflation savings,
then they would be realized in operating costs, O&M, and in
procurement costs?
Mr. Hamre. Yes, sir.
Mr. Spratt. So that $28 billion in programmatic savings and
inflation savings were largely to the benefit of the goods and
services package rather than the people package?
Mr. Hamre. These dollars are fungible and you can book them
wherever you want. I mean the point is the $112 billion was all
real. It was all extra purchasing power, and we used it both to
buy better benefits for people, make sure we had the readiness
problems fixed, about half of it was for readiness, and then we
put as much as we could into modernization.
Mr. Spratt. Now the Senate took the President's pay and
personnel package which came to, as I recall, about $35
billion, and added to it over 10 years about $21.2 billion.
Over the next 7 years the increase comes to about $7.7 billion,
and I think that is roughly divided between discretionary
programs and mandatory programs; and some of it would be, I
believe, Veterans Administration costs, wouldn't be your costs.
How do you accommodate those additional expenses?
Mr. Hamre. Mr. Spratt, at the time that the bill was on the
floor in the Senate, the Secretary wrote I thought a very
strong letter saying, you know, until you pass a budget
resolution that accommodates this increase, this bill
represents an unpaid IOU that can only be paid by cutting the
readiness of the forces or cutting modernization.
And that is where we still are. We still need to have a
budget resolution that is passed that would accommodate this
higher level of resources for personnel costs. Now, we are not,
you know, we are not opposed to doing better by our troops,
don't get me wrong, and I don't think anybody in the Senate is
that way. But right now it is not paid for.
And unlike other parts of the Federal Government, you put
in a pay raise now for the troops and it is higher, we are
going to book that through the next 5 years. We have to do that
because we are programmed for 5 years. And if there isn't a
topline adjustment that accommodates it, we are going to have
to unload, cut other things in the budget, more likely than not
procurement.
Mr. Spratt. With respect to the $112 billion as a $28
billion item, it is $84 billion in new money and $28 billion in
new values, so to speak. How much of that is in programmatic
savings that you propose to achieve through various management
measures, and how much of it is just pure inflation adjustment?
Mr. Hamre. The $28 billion, and Bill should correct me, I
believe is entirely an economic adjustment based on economic
cost adjustments. There is a very important reason. We did
not--there are some management efficiencies that we put into
this budget where it specifically identified primarily base
closures and A-76 competitions. Those are the two big ones.
We have not tried to identify savings from individual
management reform initiatives, largely to not take the
incentive away from organizations to do the change. As soon as
you identify here is how much we plan on saving in this
organization by say going to paper-free contracting, what
happens around this town is you lose the money, and we are not
trying to take money away from people. We want them to reform.
Mr. Spratt. You are trying to say if you will do this, you
can free up money that we will let you have in return to spend
on other projects?
Mr. Hamre. Absolutely, and the services have control over
that money and we want it to be that way.
Mr. Spratt. There is a little bit of disdain for the $28
billion on the grounds it is kind of funny money, it is just an
inflation adjustment, as you put it. Is it real? Can you
actually spend it?
Mr. Hamre. Oh, yes, sir and we programmed it. I mean it is
a little like saying when you sit down with your architect, say
``I want to build a house,'' and the house is going to cost
$200,000. When you get done adding up the all the bills and the
bills come in and it is $190,000, you got 10,000 more and you
can say, ``OK, let's take and put that bathroom that we didn't
think we could afford when we were first building the house.''
It is real and we are spending it.
Mr. Spratt. Are you actually seeing these savings turn up
in your procurement accounts? In particular, are you seeing
cost projections come in lower because inflation is lower?
Mr. Hamre. Well, yes, sir.
Mr. Spratt. Actual costs incurred coming in lower?
Mr. Hamre. Yes, sir, but I am going to be honest, I think
most calculations in inflation are highly abstract. You are
looking at data that is quite removed from an individual
program manager, so an individual program manager, he doesn't
have an item in his budget that says ``inflation.'' I mean he
budgets what he thinks is the costs for all the things he has
to do, and sometimes those costs aren't, you know, everything
he wants to do; he doesn't have the dollars to cover it.
Sometimes he has more, he can get more done. But individual
program managers don't have a line item that says
``inflation,'' so when we take dollars from them because we say
inflation has gone down, to me that looks like a real cut and
that frankly is causing a problem.
Chairman Kasich. Do you have off the top of your head the
number of systems that were--weapons systems or any
expenditures that the Pentagon did not want, that the Congress
added to your request? Do you know offhand?
Mr. Hamre. You have just invited me to shoot myself in the
head or the foot, I am not sure where.
Chairman Kasich. Why is that?
Mr. Spratt. Why doesn't the comptroller do it, then?
Mr. Hamre. I will spare him. There is no place in the
Constitution that says the comptroller appropriates money, and
that is clearly reserved for the Congress. The Congress
appropriates it, and sometimes you put in things that we don't
think are the highest priority, but I can't say that that is
wrong.
Now I can give you a list of things that we didn't ask for
and I can tell you we think those are lower priority than
things we asked for, but I am not going to say to you that they
are unimportant. Actually, you are the ones that decide what it
is that we are supposed to have every year. And I am trying to
be honest. I used to work up here for you and that is the way I
viewed it at the time. I would----
Chairman Kasich. You are really getting good, John. You
keep at this, you could run for office pretty soon. Seriously,
you are really getting good. So what is the answer to my
question?
Mr. Hamre. The answer is I will give you a list of all the
things that were added that we didn't ask for, and I will
identify which of those things that we added that are in our
future budgets so you could argue it is simply buying earlier
what we would like to ask for. But I will see that you get that
list.
Chairman Kasich. OK.
Mr. Spratt. Let me ask you again about Kosovo. You
indicated that the Kosovo deployment, if it occurs, is not
included in your budget request for the forthcoming fiscal
year.
Mr. Hamre. Right.
Mr. Spratt. What is the incremental cost?
Mr. Hamre. Sir, it is obviously a good deal more expensive
to get in because you got the costs of deploying the forces,
getting the infrastructure in place, et cetera. So we think the
cost here in this fiscal year, if we have to do it, could be
between $1.5 billion and $2 billion, depending on timing, when
it happens and that kind of thing.
Mr. Spratt. Is that fiscal year 2000 or the current fiscal
year?
Mr. Hamre. That is '99. We would need a supplemental to
help us with that. Of course, we will not go in if we don't
have a peace agreement. So this is going to be in a benign
environment, but it will be expensive. I don't want to mislead
anyone. It is going to be expensive if we have to go in. I
don't think that should really dictate whether we think it is a
good idea or not. We ought to decide that on its merits.
Mr. Spratt. Over the next fiscal year, 2000, it would be--
--
Mr. Hamre. Probably roughly the same range, you know, for--
--
Mr. Spratt. The initial cost of getting them in there is
the same cost?
Mr. Hamre. The initial cost is heavy but we only have half
of the year left, so it is a steady state cost. We just
patterned it after Bosnia. It is roughly going to be comparable
to the Bosnia cost, and I think you saw the chart. I think it
is $1.8 billion for Bosnia in this year.
Mr. Spratt. In submitting the list that the chairman
requested, I think it would be useful if we could show how much
you downsized since the end of the cold war. You can pick the
date----
Mr. Hamre. OK, sure.
Mr. Spratt [continuing]. When that begins and give us the
number of civilian personnel and DOD and related agencies, the
number of active duty personnel, the number of Reserve
component personnel, and then the changes from the baseline
year to the current year that----
Mr. Hamre. We will certainly do that.
[The information follows:]
DOD's FY 1999 personnel levels are substantially below
levels in FY 1997, the post-Vietnam war peak for end strength
of both active duty military and DOD civilians, as shown below:
DEPARTMENT OF DEFENSE PERSONNEL END STRENGTHS
(End of Fiscal Year in Thousands)
----------------------------------------------------------------------------------------------------------------
Cold War Current Percent Change
-----------------------------------------------
FY 1987 FY 1999 FY 1987-1999
----------------------------------------------------------------------------------------------------------------
Active Military................................................. 2,174 1,390 -36
Selected Reserves............................................... 1,151 877 -24
DOD Civilians................................................... 1,133 724 -36
----------------------------------------------------------------------------------------------------------------
Mr. Spratt. If you can also give us an indication of what
the average pay and benefit package for a DOD civilian and
active duty person is, I don't know if you can average that,
but if you can give us some notional accounting of how much has
been saved in personnel because of these reductions, it would
be helpful to have.
Mr. Hamre. All right. We may have to call back to the staff
just to make sure we have your question properly framed, but we
will be glad to provide any of that.
Mr. Spratt. OK, fine. Thank you very much.
[Questions submitted on behalf of Mr. Spratt and Mr. Markey
follow:]
Additional Questions Posed by Representatives Spratt and Markey
representative john m. spratt, jr.
1a. Please specify the reductions that have occurred in military
personnel, civilian personnel, and National Guard and Reserve personnel
from their peak levels in the 1980's to your estimate of what they will
be by the end of FY 1999.
b. How much would the FY 2000 DOD budget have to be increased if
those personnel levels had not been reduced?
2. By my staff's calculations, the FY 2000 budget will provide, in
constant FY 1999 dollars, more than $73,000 in O&M funding per active-
duty member. This is 3.8 percent more than the FY 1999 level, and 48
percent more in real terms than in 1985, the peak year of the Reagan
defense build-up.
a. What accounts for this increase?
b. Specifically, to what extent does higher op-tempo and
deployments contribute to this increase?
c. Specifically, to what extent does higher repair and maintenance
of older weapons contribute to this increase?
d. Specifically, to what extent does personnel reductions since
1985 that are disproportionate to overhead/infrastructure reductions
contribute to this increase?
3. The ``tagline'' often used to defend and justify new weapons
systems like the F-22 or the Joint Strike Fighter is ``technology
overmatch.'' However, it is generally true that the more one ``pushes
the envelope'' for these systems, the greater the risk of cost
overruns, technical shortfalls, and schedule slips.
a. Are you concerned about bringing these major acquisition systems
in on-cost, on schedule, and on specification?
b. Are there major systems that are now indicating major cost
growth in the future? If so, please identify and describe the potential
for cost growth both in terms of program cost, program unit-cost, and
procurement ``fly-away'' cost.
representative edward j. markey
1. As I understand it, the budget request is based upon an
assumption that the United States must be prepared to fight two major
wars in different parts of the globe simultaneously. In his testimony,
Mr. Korb argued that this assumption had been developed initially by
the Joint Chiefs back in 1990 in order to preserve as much of the
existing force structure as possible following the collapse of the
Soviet Union. Isn't Mr. Korb correct, and isn't is also true that the
two-war assumption is really just a rationalization for the status quo
that bears little if any relationship to the real military challenges
facing America in the 21st Century?
2. If you believe the two-war assumption is still valid, please
explain what you believe to be the most realistic future scenarios in
which the United States would have to fight two simultaneous wars.
3. Isn't it true, as Mr. Korb's testimony suggests, that both
former Secretary William Perry and former Air Force Chief of Staff Tony
McPeak have both concluded that this assumption is unrealistic?
4. Why is it that the civilian leadership over at the Pentagon has
not really challenged this assumption?
5. Don't we really need to do a full ``bottom up'' review of our
real national security needs for the post-cold war era before we
proceed with the major increases in Pentagon funding contemplated in
the administration's budget request?
6. It is my understanding that many critics of the Quadrennial
Defense Review believe that the QDR essentially looked backward in time
and determined what is needed to better fight a war like Operation
Desert Storm, rather than determining whether the next military
conflict the United States enters into will be different than Desert
Storm (and if so, what forces and equipment would be needed). How do
you respond to this criticism? How have you addressed the possibility
that future wars might be smaller, and located in more urban
environments where the enemy is difficult to identify?
7. Have any of the major QDR assumptions changed since the last
time the Pentagon attempted to reassess the size and scope of U.S.
Armed Forces since the end of the cold war? If not, why does the
administration's budget request include such a large increase for
defense?
8. Are the underlying assumptions of the QDR valid and realistic?
Are there any assumptions that, if changed, will reduce force
requirements and/or costs without degrading our national security?
9. I understand that the levels of defense spending provided for in
the Balanced Budget Act were derived directly from figures provided by
the administration and the Pentagon. Now, less than two years later,
the President is asking for a substantial increase in defense spending.
Why was it that the Pentagon was apparently so far off the mark two
years ago regarding its estimates of the amounts needed for defense?
10. Given the fact that the Department was apparently off the mark
two years ago regarding the amounts needed for defense, how can we be
sure that it is not now overestimating the spending levels needed for
defense today?
11. Mr. Korb estimates in his testimony that ``if DOD adopted a one
war plus policy, it could safely reduce its Total Force from 2.3
million men and women to 2 million.'' Do you agree with this estimate?
If the Congress were to adopt such a force structure, how much money
could be saved compared to the current baseline level? How much could
be saved compared to the administration's 5-year defense plan?
12. Mr. Korb's testimony also suggests that the United States could
reduce its strategic forces to a level of 1,000 strategic nuclear
weapons. How much money could be saved compared to the current baseline
and compared to the administration's proposed five year defense plan if
we would to make such reductions?
13. Mr. Korb's testimony suggests that the United States move to a
one war plus strategy, reduce troop deployments to Europe and Asia by
at least 75,000, employ a tiered readiness posture, adopt a realistic
procurement strategy and take account of various defense spending
``myths'' which he outlines in some detail in his testimony. He
estimates that if such a strategy were to be pursued, an adequate
national security budget would be about $230 million a year. Has the
Department undertaking any assessment of the merits of this proposal
and its potential cost savings? If now, why not? If so, do you concur
with Mr. Korb's conclusions?
14. In your presentation to the Committee, you indicated that the
administration is seeking to nearly double the budget for National
Missile Defense over the next few years, beginning with a request for
$1.3 billion in Star Wars weaponry in FY2000. As you know, the Russians
have warned against U.S. deployment of missile defenses that violate
the ABM Treaty, and it is quite possible that if the United States
proceeds down the path to deployment that it will endanger prospects
for the Russian Duma to ratify START II or to conclude a START III
agreement. Isn't it in our national interest to maintain the ABM
Treaty, secure Russian ratification of START II, and conclude a START
III Treaty that provided for additional reductions? Why should we
jeopardize the national security benefits these agreements represent
for an expensive missile defense scheme that may not even work?
15. How likely is it that the United States may be attacked with a
ballistic missile? For decades, the United States relied upon our
nuclear forces to deter any missile attack by Russia or China. Why
wouldn't deterrence continue to work against these nations should they
become hostile or to other potential attackers?
16. How likely is it that a country like Iraq or North Korea would
attack the United States with a weapon of mass destruction (i.e.,
nuclear, chemical, biological) delivered by a ballistic missile, when
it could hide such a weapon on a cargo ship, a disguised civilian
airliner, smuggle such a weapon into the country, drop biological
weapons into a reservoir, or deliver a chemical attack in a crowded
subway?
17. In light of the comparative costs and ease of delivering a
weapon of mass destruction to a U.S. target, what is the justification
for spending billions on a missile defense that would be ineffective
against such weapons delivery mechanisms?
18. The Department's budget request includes a request for actual
procurement funding to field a ground-based missile defense. Why have
you asked for procurement funding for a missile defense that hasn't
even been tested yet?
19. In his prepared testimony to the Committee, Mr. Korb indicated
that the Department is still spending roughly the same amount of money
each hear on missile defenses as it was spending during the Reagan
years, when there was still a Soviet Union. In light of the end of the
cold war, why hasn't the budget for missile defenses been adjusted
downward?
20. According to Mr. Korb's testimony, the Department has spent
about $50 billion on missile defense research over the last 15 years,
and ``to date the billions have yielded no tangible results.'' In light
of this rather sorry record, what is the justification for accelerating
spending for this same program?
Responses to Questions Submitted by Representatives Spratt and Markey
responses to questions submitted by mr. spratt
Question 1a: Please specify the reductions that have occurred in
military personnel, civilian personnel, and National Guard and Reserve
personnel from their peak levels in the 1980's to your estimate of what
they will be by the end of FY 2000.
Answer 1a: The peak year for military and civilian personnel levels
is FY 1987. The following table shows the reduction in military and
civilian personnel from FY 1987 to FY 2000:
------------------------------------------------------------------------
FY 1987 FY 2000 Delta
------------------------------------------------------------------------
Active Military............... 2,174,217 1,384,806 -789,411
Reserve/Guard Military........ 150,855 865,298 -285,557
Civilians..................... 1,127,052 700,219 -426,833
-----------------------------------------
Total................... 4,452,124 2,950,323 -1,501,801
------------------------------------------------------------------------
Question 1b: How much would the FY 2000 DOD budget have to be
increased if those personnel levels had not been reduced?
Answer 1b: The cost of adding 1,501,801 end strength to the FY 2000
column of the budget cannot be easily quantified. However, increasing
the force structure in FY 2000 by 51 percent (1,501,801 end strength)
would likely require the DOD budget to be increased by a similar
percentage of 51 percent (or $137.0 billion). The cost of pay and
benefits alone would be approximately $63.0 billion. The cost to
procure weapons systems for a significantly increased force structure
would drive the costs even higher.
Question 2a: By my staff's calculations, the FY 2000 budget will
provide, in constant FY 1999 dollars, more than $73,000 in O&M funding
per active-duty member. This is 3.8 percent more than the FY 1999
level, and 48 percent more in real terms than in 1985, the peak year of
the Reagan defense build-up.
What accounts for this increase?
Answer 2a: The primary focus for the Department continues to be the
protection of the near-term readiness of deployed forces. Recently,
maintaining the readiness of deployed forces has become increasingly
challenging. The FY 2000 budget includes increases in Defense funding
to reverse the signs of degradation in the readiness of deployed
forces.
The O&M increase from FY 1999 to FY 2000 includes a program growth
of $3.6 billion. Some of the significant program increases include the
following:
Increase for ongoing contingency operations in Bosnia and
Southwest Asia. These amounts fund the force structure and operating
tempo in place as of the end of FY 1998.
Increase in Land Forces to fully fund Army's ground
OPTEMPO and the replacement of existing M1 tank tracks.
Increase in Air Operations to adequately fund all aspects
of flying hour program, particularly spare and repair parts.
Increase in Real Property Maintenance to repair aging
facilities which have been inadequately funded in the past (repair of
barracks, work places and other quality-of-life facilities).
Increase in Defense Health Program that includes two
congressionally directed projects to test new health care options for
over-65 military beneficiaries as well as a redesigned pharmacy
benefit.
A meaningful comparison between 1985 and the current O&M costs per
active-duty member needs to recognize the significant number of
functions that are now paid from the O&M appropriations. For instance,
from FY 1999 to FY 2000, the Department transferred $2.2 billion, from
Defense Commissaries and Pentagon Renovation programs into O&M. Some of
the other notable O&M funding changes that have occurred over the
decade which should be considered include the following:
Increased operation and maintenance support for more
advanced and sophisticated weapon systems. Technology enhancements have
and continue to increase our maintenance, training and other operating
costs. At the same time, more sophisticated equipment is usually less
manpower intensive. Therefore, a per capita measure of cost will
increase.
Transfer of Depot Level Repairables (DLRS) funding from
various procurement accounts to O&M accounts to introduce more
efficiency into spare parts management.
Transfer of funding from procurement accounts to O&M
accounts due to changes in expense/investment criteria. For instance,
the expense, investment threshold was $3,000 in FY 1985 but the current
threshold has been increased to $100,000.
Increased government contribution into civilian retirement
plan with the establishment of the Federal Employee Retirement System
in FY 1987. a Increased O&M funding for Voluntary Separation Incentive
Pay (VSIP)/Voluntary Early Retirement Account (VERA) due to force
structure reductions associated with the Defense drawdown and the Base
Realignment and Closures (BRAC).
Question 2b: Specifically, to what extent does higher op-tempo and
deployment contribute to this increase?
Answer 2b: Higher OPTEMPO and deployment will have a minor impact
on the increased per capita cost between FY 1999 and FY 2000. The Army
increased OPTEMPO funding to restore their readiness accounts to the
800 mile metric. Otherwise, budgeted OPTEMPO and deployments are
relatively the same from FY 1999 to FY 2000.
Question 2c: Specifically, to what extent does higher repair and
maintenance of older weapons contribute to this increase?
Answer 2c: The DOD has experienced increased operating and support
costs at least in part due to increasing age of weapon systems. As
systems age, resources needed to extend the service life and provide
the necessary logistics and engineering support to maintain an aging
weapon system may also continue to rise. These costs are visible as
either maintenance or additional spare and repair parts, but the
Services have difficulty in segregating those costs related to aging
equipment from other maintenance and support costs.
Question 2d: Specifically, to what extend do personnel reductions
since 1985 that are disproportionate to overhead/infrastructure
reductions contribute to this increase?
Answer 2d: Reducing personnel more quickly than the associated
infrastructure results in higher O&M funding per average manpower
strength. As stated in the Quadrennial Defense Review (QDR), the total
active duty military end strength since 1989 will be reduced 36 percent
by FY 2003. However, the worldwide base infrastructure will only be
reduced by 26 percent. Therefore, more O&M resources are funding
infrastructure with less number of people than previous years.
Although significant infrastructure has been eliminated, future
rounds of base closure are essential to further reduce excess capacity,
reshape our infrastructure, and apply our scarce resources to
modernization and recapitalization.
responses to questions submitted by mr. markey
Question: I understand that the levels of defense spending provided
for the Balanced Budget Act were derived directly from figures provided
by the administration and the Pentagon. Now, less than two years later,
the President is asking for a substantial increase in defense spending.
Why was it that the Pentagon was apparently so far off the mark two
years ago regarding its estimates of the amounts needed for defense?
Answer: We have had some shortfalls in recruiting and a couple of
the services are having retention trouble in second and third term re-
enlistments. While else are not across the board problems they are
warning signs which we don't want to let fester. If we let the quality
people we have now in the force leave; it will take us not years but
decades to restore. So our highest priority is to take steps to address
the recruiting and retention issues, followed by increasing readiness
and improving our modernization program.
The package we came up with is the so-called triad with three major
provisions which starts with the Chief's highest priority to restore
the 50 percent retirement benefit, to provide a large pay raise which
puts more dollars in the pocket or our personnel, and to reform the pay
table whereby we reward performance. In addition, although not formally
part of the triad but an important incentive, is targeted specialty
pays and bonuses for surface warfare offices, nuclear officers, special
operators as well as increasing enlistment and reenlistment bonuses so
that we can target these areas where we see recruiting and retention
problems. We have addressed the full gamut of readiness issues such as
non-deployed readiness in the Air Force and the Navy and National
Training Center issues in the Army. Finally, we're moving towards the
QDR modernization goal of $60 billion and have significantly increased
procurement budgets to deal with the coming bow wave in procurement as
more and more systems go into production.
Question: Given the fact that the Department was apparently off the
mark two years ago regarding the amounts needed for defense, how can we
be sure that it is not now overestimating the spending levels needed
for defense today?
Answer: In addition to the additional funding provided to the
Department, we assume two major initiatives from which we can realize
savings. The first is additional rounds of BRAC. The prior four BRAC
rounds have generated substantial savings, recently ratified by GAO.
Our procurement funding begins to increase when we begin to realize the
savings from these BRAC rounds. The other major source of savings is in
the competitive sourcing area. We had an order of magnitude increase in
the number of jobs we've been able to compete. We're hoping to continue
this over the next several years because whether the private sector or
the public sector wins the competition we realize 20-25 percent
savings.
12. Mr. Korb's testimony also suggests that the United States could
reduce its strategic forces to a level of 1,000 strategic nuclear
weapons. How much money could be saved compared to the current baseline
and compared to the administration's proposed five year defense plan if
we would (sic) to make such reductions?
Answer: The Department has not estimated potential savings
associated with a reduction to 1,000 strategic nuclear weapons because
that posture does not provide a reasonable deterrent force. The risks
associated with such a force reduction preclude its serious
consideration. Before possible cost savings could be calculated,
analysis evaluating the possible weapons and platform mix
alternatives--along with risk assessments would have to be done. From
an analytic perspective, there is no easy answer.
Chairman Kasich. Gentlemen, let me just ask you one other
question, and that is, is the administration contemplating any
action in regard to the recent revelations regarding the
transfer of technology to China, whether it is the WTO, where
are we on that right now?
Mr. Hamre. Well, sir, this is probably a little longer
answer than you want. I will try to keep it short.
As to the specific question regarding what Secretary
Richardson did here recently in terms of firing the guy and
that sort of thing, I really don't know enough about that. I
will find out. But I would like to say I think that we thought
about this problem the right way when it got to the satellite
launches, and we designed a security system where we thought we
were able to control technology loss.
Now, we had a breakdown. We didn't police it as well on the
ground as we should have, and that is where the problems came.
But I think the basic concept, yes, we can let American
companies do business with China as long as for sensitive
technology we design the security conditions properly. We
thought we did that, we tried to do it, and we failed in terms
of some of the implementation. I think that is one of the real
messages that is embedded in the Cox Commission report. And I
would be happy to sit down and go through that with you.
As to additional steps, let me come back, if I may. I will
find out what is going on, because it really largely isn't in
our area. Everything in the Cox Commission that they told us to
do, DOD, there were eight recommendations, we have already done
them. But I will find out what extra is going on.
Mr. Spratt. Mr. Chairman, I was on the Cox Committee, if I
can say just a word about it. One of the things that we found
is that it would be useful if DOD carved out a group of people
who were dedicated for a particular period of time. I know you
had people from time to time for these security details, the
company, for the launches.
Mr. Hamre. Yes.
Mr. Spratt. Just a little bit of emphasis and more
continuity. It is not the greatest unit in the world, but it
shouldn't be one of these things where punching your ticket
doesn't count for anything if you pull this kind of duty. It
needs to be enhanced.
Mr. Hamre. We heard you say that loud and clear last fall.
We actually incorporated that in the budget that we built as
basically the execution of '99. We already started hiring those
people, and we agree with you on that.
Mr. Spratt. Basically the technology transfers occurred, to
the extent that they did, in the failure analysis process----
Mr. Hamre. That is exactly right.
Mr. Spratt [continuing]. Not in really having somebody
derelict in duty and not watching the satellite while it was
sitting in a building somewhere in China.
Mr. Hamre. I think our concept for controlling our
technology was right but we executed it poorly. And that is--we
do owe responsibility for that.
Chairman Kasich. Mr. Chambliss has 5 minutes.
Mr. Chambliss. Thank you, Mr. Chairman.
And John, let me just start out by saying I couldn't help
but see a little humor in your statement about the fact that
the United States Army is welcomed all around the world. You
know, I liken that to Santa Claus being welcome in my house,
but come January the 20th, I don't look forward to getting
those bills, and having to scrape and scrounge to try and pay
for it.
I mean if we are going to send a billion dollars over to
Kosovo, I can understand why they would welcome us coming in
there, and we as a Congress need to have serious reservations
about whether we do that. I hope the White House is having
those same serious reservations.
You also mentioned in your opening statement that with
respect to base closure, that we have achieved some $5 billion
in savings to this point. I have seen your figures and I have
also seen GAO's figures, and frankly I don't feel comfortable
with either one of them. I think it would be a good idea to get
some independent audit of exactly what we have achieved, and I
would think that you would welcome that, as well as GAO would
welcome that, and Congress and the administration would be
better served by having that done.
Let's find out what we are saving before we go through the
pain and the agony of additional base closure. And if we are
not saving big dollars like we think we are going to save, then
for goodness sakes, let's figure out another way to achieve the
end result that you are talking about to get to those savings.
I was also pleased to hear your statement with respect to a
national missile defense system and the priority of that system
in this budget. But I am a little bit puzzled by that, because
if I understood what you said, that the administration has done
an about-face on the need for deployment of a national missile
defense system; am I quoting you correctly, John?
Mr. Hamre. I didn't say we did an about-face. I would like
to give--I think what we did, we always said there were two
conditions that had to be met: one, you had to have a threat
that is immediate that you needed to act on; and the other was
if you had to have the work, you had to have the technology in
hand.
I think we feel, because of the Taepo Dong launch and other
things, that we have seen that first condition largely met, and
that is why we got the dollars in the budget. Now, we still
have big questions about will it work. I think there are huge
risks associated even with the program we put in front of you,
and some people would like us to go even faster.
So I wouldn't characterize it as an about-face. I think it
is really funding the program we said would be there before
when the threat came, and I think we have honored that. But I
realize that from your perspective we made quite a change in
direction.
Mr. Chambliss. But I guess maybe it is because you have not
seen the threat, when I say the about-face, at least one of the
conditions that you have out there has been met. What bothers
me about that is that you are taking--in this budget you are
taking $230 million out of the national missile defense program
to pay for Wye River. What possible connection could the Wye
River peace accord have with the national missile defense
system?
Mr. Hamre. Sir, we of course were given a billion dollars
in the supplemental last fall which was supposed to go for
missile defense. We could do it from national missile defense,
we could do it for theater, whatever. It was up to us. We had
to come back and tell you what we wanted to do.
The administration felt that in order to get the Wye River
Plantation going without having made--declaring it an emergency
was to use some of those funds. But they gave us every bit of
it back, and it is included in the extra $112 billion that we
got when added to our topline. We didn't give away that $230
million. It was a phasing issue. We got everything we needed in
'99, everything we needed in '00, and that $230 million shows
up in the outyears. So we actually did exactly what you told
us. It was simply a timing.
Mr. Chambliss. Well, but the fact of the matter is that you
want to take that $230 million out of the current appropriated
money for the national missile defense system to pay for part
of Wye River, which I think is going to be difficult, John.
Mr. Hamre. Sir, I know it is difficult. It just doesn't
have any effect in the field. We couldn't have spent it in the
time that we had it right now, and it was coming back when we
did need the dollars. I understand your perception of it, but I
actually think on the ground it doesn't have an impact.
Mr. Chambliss. OK.
Mr. Hamre. I would be glad to go through that with you.
Mr. Chambliss. The other real red flag that sticks out at
me or jumps out at me with respect to your budget is regarding
the funding for Bosnia. Now, there has not been any funding in
the budgets, previous budgets, for Bosnia. I appreciate the
fact that you have come forward this year, put money in there.
But as I look at your budget, basically you funded Bosnia for
'00 and for 6 months of '01, but there is no money in there
after about the first 6 months of '01.
Is that by design, that we are going to be out of there by
then, or is there some other underlying reason why we are not
funding it, such as this President will be out of the White
House by the time we get to the end of that money?
Mr. Lynn. It is certainly not the latter. The approach we
took to Bosnia was, as you suggested, was to fund it in the
budget request, I think as really requested or directed by
Congress, and not to seek an emergency designation for Bosnia
this year. We embedded it in the budget. We would plan to do it
again in '01, which is a budget this President in fact will
submit to the Congress.
We don't know how long or how large a presence we are going
to have in Bosnia in '01, so we have put $1 billion in the
planning level right now, with an agreement with OMB that next
fall when we are building the '01 budget, we will revisit that.
I think there is some prospect that our presence in Bosnia
might at least be smaller at that point and therefore costs
less. But we will revisit what the actual costs are and we will
budget for those actual costs in '01.
Mr. Chambliss. I hope you are right, Mr. Lynn, that it is a
smaller presence. Thank you.
Mr. Hamre. Mr. Chairman, could I say--it will take 30
seconds, sir. You pinned me on BRAC, and I know that BRAC is a
hard decision. You asked how real were the savings.
The two organizations that estimated the savings
independent of us, it is the Congressional Budget Office and it
is the General Accounting Office, and they are both
congressional organizations. They don't report to us. I think
they are an independent report, and they showed that frankly
the savings are higher than we had estimated and the costs were
less than we thought they were.
So I would be glad to sit down and go through it and see if
there is some other area that we need to estimate here to try
to find out, to reassure you. We are saving real money. That
doesn't make it an easier political problem to face. It is a
tough problem, and you have had to live through it. I know it
has been very hard. So I would be glad to sit down and go
through it with you.
Chairman Kasich. Ms. Rivers.
Ms. Rivers. Thank you, Mr. Chairman. I have several
questions, some having to do with policy and some having to do
with particular decisions.
You mentioned early on in your testimony that you felt that
leadership in Europe has been hard coming but it is starting to
emerge. I get a lot of questions about the expenditure of
American dollars defending other parts of the world. Is this
kind of leadership likely to emerge as long as we continue to
take the lead role in all of these places? As long as we put
the most troops in, we use our equipment, as long as the
American taxpayers underwrite defense of other countries and
peacekeeping, why would anybody come forward and take over that
role?
Mr. Hamre. Ms. Rivers, first let me say we are not over
there defending them. We are over there defending us. I mean we
are there because we think it is in our interests not to have a
conflict in Kosovo explode and drag all of NATO into a bigger
fight or create fights, frankly, inside of NATO.
Now, there has been definite progress. When we went into
Bosnia, we were 35 percent of the force that went into Bosnia;
on this one we are 16 percent of the force, and the leadership
role is actually with other countries in Europe. They are
needing our help as we are formulating it and building it, but
frankly I think we are heading in the right direction, exactly
what you articulated.
Ms. Rivers. I was talking about two separate issues,
peacekeeping being one, but also our role relative to Japan,
for example, roles that we have historically taken and
underwritten. And now as we look at a budget that is making it
increasingly difficult to be in many places at the same time,
my question is really whether we can expect help from any of
our allies in this area or if it is our intention as a policy
to maintain that role, no matter what it costs us.
Mr. Hamre. Well, our forces in Japan, the Japanese
Government pays for everything except for the salary of the
troops. They build the buildings. They pay for the heat that
goes into the buildings. I mean it is a huge contribution on
the part of the Japanese, and they have been doing that for
years.
Ms. Rivers. Those are just the troops that are in Japanese
territory or in the region in general?
Mr. Hamre. No, it is in Japanese territory. Now in Korea,
we have a cost-sharing thing with the Koreans and the Koreans
contribute substantially to our forces, not 100 percent, as do
the Japanese, but the Koreans help extensively. Again let me
say we are there because we think we need to be there, not
because we are just trying to give them a handout. This isn't
foreign aid, this is national security, and we think it is
important for us.
Ms. Rivers. OK. I have another question about a specific
decision that is moving its way through Congress. When we were
talking about the package that was passed in the Senate, you
mentioned that it was not paid for from your view.
Mr. Hamre. Right.
Ms. Rivers. I am less interested in whether it is paid for
at this point than if it is justified. And I am particularly
interested in the pension proposal, given that REDUX was
supposed to be implemented to increase retention. Is there
anything to suggest that increasing pensions is actually going
to pay off in increased retention, particularly when we are
dealing with the claim as you made that people at the lower
ranks of pay are the ones who are leaving?
Mr. Hamre. Ma'am, the military we have today is
dramatically different compared to the military that we had in
1986 when REDUX was first legislated. Back then we had a much
bigger military, the employment wasn't as strong, frankly
people had good jobs being in the military. And now we are
having a hard time holding on to folks.
We implemented--everybody that was in was grandfathered.
And so all of a sudden we were looking at a situation where
people who had been in 12 years were at a critical reenlistment
point, the economy is booming, they can double their salaries
by walking out the door. And we are saying we are trying to
hold them, and one of the things that they say, ``You really
don't respect me because you are lowering my retirement, and I
am standing side-by-side with another guy who has 50 percent
and I am at 40 percent.''
It is enormously corrosive. Had we not made that change, I
think we would have had a hemorrhage in our senior NCO corps. I
think we did the right thing, and I think that the data is very
clear if you talk to people. It is a lot harder to see
analytical, machine readable data from. And there we felt there
was a much higher payoff for providing changes to the pay
tables so that more senior people got paid better, that is,
where they were really underpaid. Our junior people, E-1s, E-4s
are not so badly underpaid. It is the E-5s through E-9s that
are underpaid.
Ms. Rivers. Right. Doesn't the salary proposal raise
everybody's salary, including the people at the very highest
ranks where there is no indication that that was necessary?
Mr. Hamre. Everyone is getting a cost-of-living adjustment.
The President proposed 4.4 percent, and that is going across
the board. The pay table reform increases pay for those in the
grades where the analytic data is very clear we are underpaying
them and where we really have retention problems, and that is
the more senior NCOs, E-5s and up, and field grade officers.
That is where we have the biggest additional increase beyond
the 4.4 pay raise.
Ms. Rivers. You are saying outside of those two groups, the
pay increase would not--other than cost-of-living, would not
impact any other troops? It would not have--you would not have
colonels, like colonels, generals, majors, getting pay
increases?
Mr. Hamre. They may. I will have to get the pay tables and
get it to you. They get the 4.4 percent. I will have to find
out what they get beyond that.
Ms. Rivers. In terms of retention, if somebody has got 18
years invested, I mean are we having a problem that they are
washing out just a couple of years before they would draw
retirement because salaries aren't high enough?
Mr. Hamre. No, no, clearly not. But we are also really
cheating them. These people are working enormously hard. The
data is very clear. I would like you to get this briefing from
the Rand Corporation that shows that the people who are badly
underpaid are our senior NCOs and our officers, and that is
part of the reason we wanted to hold them, that is the biggest
productivity advance, that we can give them a pay adjustment.
But I will get both the pay tables to you and that study.
Ms. Rivers. OK, good. The last question--I am out of time.
I apologize.
Chairman Kasich. You can have one more. Go ahead.
Ms. Rivers. The last question I have is about peacekeeping
in general. In the time I have been in Congress, since '94,
even though we have had peacekeeping forces deployed in other
parts of the world with an expectation that they would continue
on beyond a single fiscal year, we have not had line items in
the budget to pay that cost. Do you think it would be
reasonable to have a peacekeeping line item in your budget and
put the onus on you to make those--to handle that within the
general spending that you do?
Mr. Hamre. Congresswoman, we tried that back in 1983 and we
got shot down. Excuse me, '93. We tried that, and we got shot
down badly. We asked for a line item of $300 million to do
exactly that, and we just can't get it appropriated. The reason
is that Congress doesn't want to give us a line. We don't know
where our peacekeeping activities are going to be 18 months
from now.
So we proposed to have an entry that would cover the costs
of that, and we can't get it funded, and it is because
Congress--I understand this, by the way. I don't quarrel with
this. I think this is one of those fault lines in the
Constitution, and I can understand why the legislative branch
doesn't want to preposition dollars for us to go off and do
exercises without their having oversight. That is what you are
really debating on Kosovo.
Ms. Rivers. Which brings me to my last question relative to
peacekeeping, which is, if in fact supplemental funding was not
available, do you think the recommendations would be different
about deploying troops in these peacekeeping places? In other
words, if the money had to be found within the existing budget,
you said it shouldn't be an issue but I am asking you if it
would be an issue.
Mr. Hamre. Ma'am, I was a comptroller for 4 years, and
every time the Secretary came to me and said ``Can we afford
this?'' I said, ``It doesn't matter. We will find a way to pay
for it.'' If the Commander in Chief gives us an order to
undertake a mission, if it is to go to war or to go impose
peace, we are going to do that in the Department, and it is up
to the political back and forth between the administration and
the Congress to decide is that a good idea or not, and under
what terms should we do this. But from our standpoint this is a
military exercise, a military operation. We are going to do it.
We will find it. We will have to give something up.
Ms. Rivers. Thank you.
Thank you, Mr. Chairman.
Chairman Kasich. Mr. Thornberry is recognized for 5
minutes.
Mr. Thornberry. Thank you, Mr. Chairman.
Dr. Hamre, I want to go to your second big question that
you posed, ``Are we ready for the challenges of the next
century?'' There are a number of people who believe that we are
in or about to be in a revolution in the way warfare is
conducted, on such a scale that has only occurred maybe a dozen
times over the last 800 years or so, where it is not just the
tools that we have or could have that are changing but also the
threats and the security environment we operate in.
Do you think that that is where we are historically? And
are you haunted, as I am in a way, by these historical
analogies which may be precedents, that sometimes a country
seems to be on top of the world and they can't ride this wave
of change and warfare, and in the blink of an eye nearly they
are under somebody's boot?
Mr. Hamre. Sir, two ways I would like to answer. First of
all, I agree, I think we are at an historic point.
And let me use the analogy: We had so many casualties
during the Civil War for one reason, and that was the
technology of communications lagged badly behind the technology
of firepower. So all of the troops had to be close enough so
that the commanding officer could yell an order to them or they
could hear a drum beat or a bugle, you know. So everybody was
close by, and of course firepower just exploded at that time
with the breech-loading musket--I mean rifles and cannon, et
cetera, and we just had astounding casualties because of it.
We have exactly the reverse condition that is right in
front of us, where our troops don't have to be anywhere close
and can be well out of harm's way and can bring precise fire on
the bad guy through information technology. We are in a--I hate
to say in an exciting time, but an exciting time from the
standpoint of efficient military operations where we can
minimize our casualties, impose maximum leverage on the bad guy
and get it over with fast.
Now the question you have asked--and nobody has worked at
this harder than you have, and I really respect everything you
have been doing the last 8 months. There are other what we call
assymetric threats that we are facing, because we are so good
on the battlefield and people aren't close to us right now, and
I don't think they are going to get close any time soon. But
there are other ways the bad guys want to get at us, and that
is things like chemical or biological acts by a terrorist here
in the United States.
This is a heck of a problem, and this is one where we need
to spend a lot of time and a lot of energy. We have started. I
don't think we have got it all in hand yet, but it is really
where we need to put some emphasis here.
Mr. Thornberry. But aren't you concerned, I hope like I am,
that it seems like that we are spending so much of our time,
effort, money, intellectual energy on worrying about problems
of today, that we are not giving the attention that we need in
the future? If you look at where our money goes in the budget,
for example, the things that seem to be out there which can
give us enormous advantages like arsenal ship, carrier-after-
next, get pushed back or go away. We heard last week, Joint
Strike Fighter pushed back, I understand in your budget the R&D
funding goes down nearly 20 percent over the FYDP. So are we
really doing what we need to in the future? Aren't we
mortgaging that really for today?
Mr. Hamre. Well, sir, I guess I don't think so. But I would
have to sit down with you and go through what we need to spend
on this face-to-face and look at specifics and try to give you
an answer. I think that we have some really very exciting work
going on in the services. You have seen it, frankly you pushed
us into it with the Joint Experimentation down at Tidewater.
Each of the services is designed battle labs, and they are
doing very exciting things.
It is a little bit like yeast in dough. You know, you don't
need a lot of it for the whole thing to get better, and I
really think that is where we are right now as a Department.
Are we diverting efforts from the future in order to
sustain the present? That is a big question. Frankly, we are
fighting in the present, and it is hard to know if you are
prepared to make trade-offs. I don't know of things I don't
want to do today, that I am willing to set aside simply to
invest more in the future that I can't predict, and I think
that becomes the dilemma.
Mr. Thornberry. I think that is one of many concerns that
people may have with the vote that we are going to have today,
and our continued deployments in other places around the world
that cost in so many ways beyond dollars even, and what that
takes away from what we need to do.
I might just mention to you, and I know you have looked
into this far more than I have, but historically it is usually
not the technology that causes the problem, it is the failure
to have the organization and the concepts to take advantage of
the technology that causes the problem, and that worries me
where we are.
Let me ask you one last question, if I may. Following up on
Ms. Rivers, if we cannot establish by some convincing standard
of evidence that changing the retirement system is going to
help our retention this year, do you think it would be a better
idea to hold off for a year at least on that part of it, and
study and try to know the effects of what we are doing before
we commit such an enormous amount of money which may not really
help the problem that we are trying to solve?
Mr. Hamre. Sir, I actually think it will help the problem,
and you feel it every day when you go out and talk to the
troops. Failing to change it now I think would have a
devastating effect.
I think there are other elements of the Senate bill which I
think are problematic. I would ask you to take a hard look at
some of the things that were proposed to change veterans'
benefits. For example, one of the things that was proposed was
to let a veteran pass on his GI bill benefits to his kids. That
sounds good in the abstract, but what is it going to be to
recruit those kids in 15 years if they can inherit their GI
benefits rather than earn them?
I think there are some real questions that we need to take
a look at, and so we would be happy to go through any of that
with you. Your point is right, we need to study this before we
jump off with both feet.
Mr. Thornberry. Thank you.
Mr. Chambliss [presiding]. Now is Ms. Baldwin.
Ms. Baldwin. In your presentation you outlined some of the
reasons for celebration and some issues of concern. What I
would like first in sort of outline form, but also if you can
follow up in writing, is some sense of how much of the increase
is directed at responding to those concerns.
Let me follow up on a couple of the pieces of information
or questions that have been asked regarding recruitment and
retention. You talked about having some recruitment issues,
particularly with regard to some highly skilled positions. Are
any of the increased funds aimed at people specifically focused
on the issue of addressing those recruitment issues that you
are challenged by right now?
I know a lot of the things that we have been talking about
are across the board, pay increases across the board, benefit
issues, which will certainly help incrementally, but you have
some specific problems. Are there initiatives specifically
focused on those?
Mr. Hamre. Yes, there are. What I would like to do is give
a list of those, but there are, for example, targeted bonuses
for enlistment. There are, especially in the retention area,
there are targeted bonuses to try to hold onto people. And we
have a long list of things that we added and asked for in the
budget request, and I would like to submit that to you, if I
may.
Ms. Baldwin. OK. With regard to another concern you
address, equipment aging at an unacceptable pace, I would like
to see a breakdown of the procurement budget, and what
percentage roughly would you say right now is aimed at that
particular challenge and that particular concern versus
expansions or--you know, I guess basically expansions?
Mr. Hamre. We can get more detail. I don't know, Bill, if
you have a sense of how much is new procurement versus, say,
upgrades.
Mr. Lynn. I don't have those numbers in my head.
Mr. Hamre. We are not buying nearly enough things. What we
are--our budget has a fair amount for upgrading existing
weapons systems, so we will put on a new radar or we will put
on a new fire control system or this sort of thing. I will get
you a breakdown on what that is like in the budget. I don't
have that off the top of my head.
Ms. Baldwin. And you know, if you look at the spectrum of
remedial work versus maintenance versus expansion----
Mr. Hamre. Yes.
Ms. Baldwin [continuing]. You know, that type of pay
breakdown----
Mr. Hamre. Yes.
Ms. Baldwin [continuing]. With some specifics would be
helpful.
Mr. Hamre. Of course.
Ms. Baldwin. One other question relating to--you were
indicating that in terms of missile defense, national missile
defense, now a condition has been met that wasn't previously
there. But the questions relating to the technology, we are
shortly going to be considering a resolution on the floor, my
understanding is that there is no cost estimate associated with
that. But I would like to hear, you know, your thoughts right
now on how much deployment and operation is going to cost, you
know, in the next 5 years.
Mr. Hamre. Well, we have budgeted I think a total of $10 to
$11 billion for both development and deployment. But may I say,
I think that while there were two basic conditions that were
important, that there had to be a threat and that this thing
has to work, there is also a big debate going to emerge here
this week or maybe next week in the Senate, and probably over
here as well, and that is over the impact this might have on
arms control treaties under the ABM treaty.
This is a big deal, and it is not one that we ought to
sidetrack. This is the centerpiece, I think, of dispute between
the various groups up here on the Hill: Should we retain the
ABM treaty? Is retaining the ABM treaty holding us back from
deploying a missile defense system we need for the country? Can
you deploy a viable NMD system and do it within the terms of an
ABM treaty? If not, what do you need to change in the ABM
treaty?
I think those are all the crucial questions, and I think
the administration's view is there are definitely things that
we need to do that probably will require an amendment to the
ABM treaty, and we need to start talking with the Russians
right now to do that.
We don't intend to deploy a system that is designed to
counter--kind of the old ``Star Wars'' against a huge, huge,
missile threat coming from outside. We are trying to deal with
a system that is effective against small numbers from a rogue
state or from an unauthorized launch, some individual that has
kind of grabbed control of a bunch of missiles.
That is not a threat to Russia, we believe. We believe that
actually this sort of a capability would be reassuring to
Russia. And it is very possible to do this, but we will have to
amend the ABM treaty to do it. We think we ought to start and
talk with them about that now, and we think it is possible to
get them to agree with us that it is in their interests and our
interests to do it. But I think it is a very important issue we
have to talk about together.
Ms. Baldwin. Thank you.
Mr. Chambliss. Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman.
Mr. Hamre, I want to go back to this $28 billion in
reapplied savings. What portion of that is available in this
current fiscal year?
Mr. Hamre. Oh, I think about $3.9 billion of it, sir,
something like $3.8, $3.9 billion.
Mr. Collins. If those funds are available, then why are we
behind in modernization a million dollars?
Mr. Hamre. Well, because frankly we needed the dollars to
put against our O&M costs and our personnel costs. They were a
higher priority. So we put the dollars against--we funded the
Bosnia operations, the operations in Southwest Asia. We had
higher personnel costs because of the pay raise, things of that
nature. So all of those things had a higher priority when we
were going through and spending the $12.5 billion, and that was
part of how we got the $12.5 billion. So we fell a billion
short.
Mr. Collins. You have $3 billion that is available this
year of the $28 billion?
Mr. Hamre. Yes, sir. We diverted it and put it on to other
things that were a higher priority.
Mr. Collins. OK. You have a list of suggestions on $1.6
billion in rescissions for '00?
Mr. Hamre. No, sir, not yet. You know, we certainly are
holding back to make sure that we are able to execute on that
when we get a clear direction. Most of the direction we have
had from the first day we said we were going to propose it is
that Congress has said, ``No way.'' And so we don't think we
ought to develop a list if the clear guidance says ``We are not
going to agree to it, no way.'' So right now we have not built
a list.
Mr. Collins. How did you arrive at the figure?
Mr. Hamre. We needed that amount of money. I mean it was--
we knew that we would have to dig in, and in some cases it
wouldn't be a hard decision to make, and in some cases it would
be a hard decision to make. How we really did it was, we took
the total request that the Chiefs felt that they needed to
have, we narrowed that down as much as we could, deferred the
things that we thought were deferable, we got the list as small
as we could get it. I think that was in the neighborhood of $14
billion initially. We then went through some further policy
changes that got it down to about $12.5 billion, and then we
said, OK, how are we going to pay for the $12.5 billion?
We then had dollars, topline adjustment we got from OMB. We
were allowed to keep the inflation money. We had this change in
concept for military construction, and what was left over we
said, well, we will just have to propose a rescission and find
the dollars that way. So it wasn't derived from individual
programs per se.
Mr. Collins. But it is an admission that there were $1.6
billion in rescissions that could be made?
Mr. Hamre. Yes, sir. Yes, sir, that is right.
Mr. Collins. If you needed $3.6 billion, would you have put
$3.6 billion?
Mr. Hamre. Yes, sir, but I think it would have been a lot
harder. I think it would be a lot harder to come up with a list
of $3.6 than $1.6 billion.
Mr. Collins. It is interesting that you would concede that
there are moneys that could be rescinded, and not rescind them
in your budget when you submit.
Mr. Hamre. Well, sir, what we actually submitted, and there
isn't anybody up here that likes this idea, but what we
actually submitted was a provision that lets the Secretary of
Defense decide which $1.6 billion were the things he doesn't
want to do. Now nobody up here likes that idea, Republican,
Democrat, House or Senate. I mean that is basically saying the
Secretary of Defense gets to decide, has a second bite of the
apple as to what we just appropriated, and that is why of
course nobody likes it.
Mr. Collins. Would you not have that decision when you make
a decision--or could you not make that decision when you submit
the budget?
Mr. Hamre. For a rescission?
Mr. Collins. Yes.
Mr. Hamre. If we were directed to do it, we would do that,
yes, sir.
Mr. Collins. When you submit a budget you are proposing to
spend X number of dollars. You can say, ``We don't want to
eliminate this program,'' and ``include this program.'' You do
have that authority?
Mr. Hamre. We have the authority to do it if we were
directed to do it that way. We were not directed to do it that
way. Instead it was a provision we asked for 2, 3 years ago. It
was basically I guess two times, and we simply reproduced
exactly the same proposal that we had before. Congress didn't
approve it then either.
Mr. Lynn. Congressman, if I can add, Congress actually has
the last several years approved rescissions; $1.6 billion is
somewhat larger. The rescissions have been generally in the
half-a-billion to a billion-dollar range. So this is not
inconsistent with some of the actions Congress itself has taken
in the last several years.
It is somewhat larger and therefore a little bit more
aggressive. And the reasons for that--the reasons Dr. Hamre
gave having to do with the requirements that we thought were at
an irreducible minimum.
Mr. Collins. My point is, if you are going to produce a
budget and you admit you have $1.6 billion of rescissions that
you could make, why not put through rescission requests in the
budget that you present?
Mr. Hamre. Sir, you could do that. We were not directed to
do that, and instead we submitted a legislative proposal that
would give the Secretary the authority to do it. Again, I would
rather doubt that Congress is going to give us that, but that
is what we proposed in the budget.
Mr. Collins. We were talking about two different things, in
my mind, maybe different to you.
Thank you, Mr. Chairman.
Mr. Chambliss. Mr. Minge.
Mr. Minge. Thank you, Mr. Chairman.
It is nice to see you, Dr. Hamre.
Mr. Hamre. Good to see you. Thank you.
Mr. Minge. Even though I am from Minnesota, I don't handle
the ice too well. So I am trying to struggle through this. I
have read with interest comments by Lawrence Korb from the
Council on Foreign Relations, and I would like to start by
asking you about the weapons systems that have been challenged
in his briefing paper. I expect you are familiar with that.
Mr. Hamre. I am, and he is sitting right behind me, so I
will be polite in how I respond if I disagree with him. I am
not sure I do, I don't know yet.
Mr. Minge. Well, there is a chart in there, and they detail
a whole series of adjustments in both the configuration, the
size of the Armed Forces, and also the weapons systems that
would be necessary. One of the suggestions, just to give you a
specific, is to reduce the size, I believe it is of the Marine
Corps, to 150,000 personnel, which is the number suggested by
the former Chief, Chairman of the Joint Chiefs of Staff, Gen.
Colin Powell, and generally to reduce the size of the force
from 2.3 million to 2 million.
Going beyond that, there is a great deal of discussion
about specific weapons systems: Just as an example, to reduce
the number of Seawolf submarines being purchased to those
currently in the pipeline, and challenging the purchase of 30
new submarines at a cost of $64 billion. The Nimitz carriers.
The Comanche helicopters, as I understand it there is a request
to purchase 1,292 of these at a total cost of $48 billion. And
the list goes on and on.
And one concern that I have is that we are sort of in the
``guns or butter'' situation here in the country, and by
``butter'' I guess I am referring to the collapse of the farm
economy and sort of a matter of priorities, and what we can
afford to try to handle through our budget and what can be
deferred.
The question I would like to ask is, to what extent could
the Defense Department accept a reduction in the outlays in the
next 5 years for these weapons systems in order to allow us to
try to deal with some of the other pressing problems that we
face in areas such as the agricultural economy, while at the
same time maybe having budget authority so that as we work
through these other problems, the Defense Department knows that
there is support for adequate hardware.
But just a question, do we have to invest in this hardware
at this point in time? So I would just like to pose that more
general question based upon the report from the Council on
Foreign Relations.
Mr. Hamre. Yes, sir. First, the question you posed was
exactly the one that President Clinton posed to the Secretary
and the Chairman when we sat down with him this fall and said
``We need $148 billion added to our budget,'' and he said, ``I
don't know that I can afford $148 billion for the budget right
now. I need you to go through and parse out what do you have to
have right now and what can you defer.''
And that led us to the process where we backed down our
request to go from $148 billion down to $112 billion, and
almost everything that we took off the list was in the area of
procurement and installations. That is why the highest amount,
75 percent of it, is all for basically ongoing operations,
readiness-related spending, and we did indeed defer on the
procurement side.
We feel that we have really deferred a long time on
procurement. We have now had 12 years of making that the
primary place where we have drawn down, and you are seeing
very, very tough aging problems in our aircraft and in our
fleets, for example. We should be buying in the neighborhood of
9 to 10 ships a year in order to maintain the average age of
our fleet, and instead we are buying six and seven ships a
year. We should be buying several hundred aircraft a year, and
we are buying in the dozens of aircraft a year.
So I fully appreciate the problem that you pose, and it is
a ``guns-butter'' time. The President basically decided that of
the surplus, he was going to put roughly one-third of the
surplus in the discretionary account to the guns side, us, and
two-thirds to the butter side, the domestic side. The domestic
side in the Presidents program is about twice what he was
proposing to increase to us. I think he tried to take
consideration of the point that you made and still realize that
we do have to have some increases in DOD.
Mr. Minge. In that regard, I have not had a chance to read
all of this testimony, I didn't benefit from some of the
earlier comments, but is there a table in here that shows what
the caps are, what they would be for fiscal year 2000 if we
simply continued from 1999 without anything other than an
inflation adjustment?
Mr. Hamre. Sir, there could be, and Mr. Spratt went through
some of that in his opening statement as well. I don't have
those numbers under my belt.
Mr. Minge. OK.
Mr. Hamre. We are barely above kind of a ``hold the line''
sort of budget. There is a little bit of growth in this 5-year
plan that we submitted to you, but it is not a dramatic
reversal; and you would see that where we are at, you know, an
historically low point in terms of gross domestic product that
we are devoting to the national defense, even in the
President's budget with an increase. It still is around 3
percent and, boy, we are in the late '30's when we were at that
level. So I don't think it is an unacceptable burden on the
American economy.
Mr. Minge. You talked about the 4.4 percent increase for
inflation for the personnel, 4.4 inflation increase, I think
you said.
Mr. Hamre. No, sir. That we have paid for, but across the
board how much extra dollars we added for DOD and does that
keep us even with inflation, what it does, it puts us slightly
ahead of inflation, which is the first time in 12, 14 years
where we are slightly ahead of inflation.
Mr. Minge. I was under the impression when you used the
term 4.4 it was related to the compensation package.
Mr. Hamre. That is right, it is pay.
Mr. Minge. Over what period of time was that 4.4 percent?
Mr. Hamre. The 4.4 is for fiscal year 2000, and then it
drops down to 3.9 percent all the succeeding years in the 5-
year plan.
Mr. Minge. How would that compare to the civilian work
force?
Mr. Hamre. Well, the civilian work force it is----
Mr. Minge. That is, not the entire U.S. economy but the
Federal civil service.
Mr. Hamre. Oh, that is the same. It would be comparable. We
budgeted the same amount for civil servants. But if you say
what is the comparability to the private sector, it is based on
private sector wage rates. That is how we got to the 4.4
percent. And in both cases it is above the rate of inflation,
but that is because frankly right now there is a scarcity of
skilled labor in the country, and you have to pay higher than
the rate of inflation in order to get people right now.
Mr. Minge. Well, I know one thing I run into when we talk
about people who are retired and are on Social Security, they
are told they have a 1.3 percent inflation factor, they are
quite upset. And then they ask what is happening with
compensation with the Federal employees, and if the inflation
factor used for the Federal employees is higher than for
themselves, they begin to see red. I am wondering if you had
any discussion about that.
Mr. Hamre. Yes, sir. They really are measuring different
things. In the case of the retirees, you know, that is a case
of how do their costs of goods compare, last year to this year,
and their cost-of-living adjustment ought to be with the change
of the prices they pay. When it comes to pay comparability the
question is, what does it cost you to get that kind of talent,
and frankly right now there is such a scarcity in the economy
of talented labor that you have to pay more than the cost-of-
living adjustment for just goods and services.
So we are really measuring two different things, which
accounts for the disparity, even though politically I realize
lots of people say they ought to be the same.
Mr. Minge. On one of the charts here there is--I guess it
appears throughout the budget material, the outlays and of
course above that, the budget authority. I notice that the
budget authority appears to be substantially greater than
outlays in almost every year. At what point does that catch up
with us?
Mr. Hamre. Well, sir, it has caught up with us several
years in the past, and it is really a function of the relative
proportion of dollars that are going into procurement versus in
operations. Because there is big increase in our procurement
budget here over the next 5 years, budget authority is going to
outstrip outlays over this 5-year period, because frankly we
are putting dollars into accounts that aren't going to be spent
as fast.
But I think as you are talking about the outlays, sir, this
is--I know there is a controversy about a disconnect between
OMB's estimate of outlays and CBO's estimate of outlays. It
isn't any more money for DOT. We are not getting another penny
if you were to agree to a higher outlay estimate. It is simply
the dollars are spent faster under CBO's estimate than under
OMB's, but there is no more money coming to DOD.
Mr. Chambliss. Mr. Minge, we are going to need to move on.
We will try to get back to you.
Mr. Gutknecht.
Mr. Gutknecht. Thank you, Mr. Chairman. I got a meeting I
am late to, Dave.
Mr. Minge. I wasn't watching the clock. Sorry.
Mr. Gutknecht. I want to follow up, though, with my
colleague from Minnesota, what he was talking about, because
you know he is talking about there are only two options, guns
or butter. I think there is a third option, and I think we in
the United States have been slow to pursue that, and that Ms.
Rivers talked about, essentially about cost sharing.
Do you recall what the total cost of the Desert Storm
operation was?
Mr. Hamre. Well, I think about $62 billion.
Mr. Gutknecht. And what proportion did ultimately the
United States taxpayer have to shoulder?
Mr. Hamre. It was--I don't remember the precise numbers. I
can get it for you, but it was overwhelmingly paid for by
contributions both from Arab allies in the region and then also
from others overseas. We received significant contributions,
some in kind, but from other countries, Japan, Germany and
others.
Mr. Gutknecht. But approximately what, 95 percent was paid
by taxpayers?
Mr. Hamre. Let me get the number. I don't have it off the
top of my head. It was a very high percentage.
[The information follows:]
Incremental U.S. costs of Operation Desert Shield/Desert
Storm totaled $61.1 billion. About $56.4 billion, or 92 percent
was offset by contributions from U.S. allies ($53.8 billion)
and by minor other offsets ($2.6 billion). Net U.S. cost was
about $4.7 billion.
Mr. Gutknecht. That was my understanding, it was close to
95 percent.
Since we started bombing Iraq again on December 16,
approximately what has been the cost of that operation? And
those bombing raids continue as we speak.
Mr. Hamre. Sir, the number I have in my mind is one that
includes both the November-December operation--Bill knows it--
Bill, why don't you.
Mr. Lynn. It is approximately $200 million, and that
doesn't----
Mr. Gutknecht. That seems a little light. How many cruise
missiles did we fire? I thought they were half a million to
fire.
Mr. Lynn. If you included the cost of munitions, which
traditionally we haven't done when we asked for supplementals,
but if you were to do that, the cost would approximately
double. It would be in the $400 million range.
Mr. Gutknecht. Have we gotten any help from our allies on
that expense?
Mr. Hamre. Sir, we feel that is our obligation. We have not
asked for it. Now, our ongoing presence in the region, in Saudi
Arabia, for example, the Saudi government substantially pays
for our forces there. They pay for fuel, they pay for food,
they pay for lodging, so----
Mr. Gutknecht. Are we getting any help from the European
allies? The reason I ask that is, now my understanding is we
get very little oil from the Middle East; is that correct?
Mr. Hamre. Well, I don't know the answer to that.
Mr. Gutknecht. I am told that almost all the oil from the
Middle East either goes to Asia or Europe.
Mr. Lynn. It is correct that we get more from Venezuela and
others, although we get I think more than--I think we are
approaching over 50 and up to 60 percent of our oil from
foreign sources, and that any disruption in the Middle East oil
would obviously have a worldwide impact and would disrupt the
flow of oil into the United States.
Mr. Gutknecht. Well, the point that I am making is that we
did a very effective job back when we fought Desert Storm of
getting our allies to help shoulder the costs, and it seems to
me that is an idea that is beginning to slip away.
And I want to come back to you. You mentioned in Kosovo we
would supply only 16 percent of the ground troops. I believe
that is correct, but I don't think it is correct to assume that
16 percent of the costs would be borne by the American
taxpayers. I understand that if there are air raids that they
will be heavily--that the brunt of the aircraft and all that
goes with any kind of air raids that might take place would be
American aircraft; is that correct?
Mr. Hamre. On the combat side, sir, I think that is right.
Mr. Gutknecht. I mean 95 percent?
Mr. Hamre. Probably.
Mr. Gutknecht. Would we get any help from our allies? Would
NATO help cover some of the costs?
Mr. Hamre. I mean they were contributing in other ways, if
there is to be an air operation. We don't know if that is going
to be the case. And obviously with the ground operation, we
tend to resource our forces more handsomely, give them better
protection and that sort of thing, so that is why the bill is
different for us.
Mr. Gutknecht. Well, I do hope that the folks in DOD and
policymakers here in Congress will not forget the lesson that
hopefully was learned in Desert Storm, that it is not all, you
know, that it is all our responsibility and all the expenses
have to be borne by the American taxpayers.
Finally, and I would encourage any Members who have not
spent some time meeting with our troops, I had the privilege
last year of going out on an aircraft carrier for a weekend. I
will tell you what, the greatest salesman that you have are
those kids that work out on the deck. Average age of 19, I
mean, what we pay them and what we get back in return for the
taxpayers, I mean I felt guilty when I got on that plane and
came back.
Clearly we have got a problem, and I understand we are
14,000 sailors short. But the other issue I think we have got
to address, and it seems to me that this will not happen
without the prompting of the Congress and frankly this
committee, and that is the issue of bureaucratic inertia. I
mean at the same time I think we are 14,000 sailors short, I
submit we probably are not one admiral short.
And I know that we had a Speaker until a few months ago who
had said on many occasions that it was his intent to turn the
Pentagon into a triangle. Implicit in that comment was that
bureaucratic inertia happens in every organization, and the
Pentagon is certainly not exempt from that.
I think at some point we do have to do a better job of
trying to see if, in fact, compared to any other corporation
that has gone through downsizing and restructuring, that
perhaps we have become a bit top-heavy over the last 20 or 30
years.
I think here is one question, and I don't expect to have
the answer today, but I have been told, and I don't know if it
is true or not, but I would like to know the exact numbers, the
numbers of generals and admirals one star and above that are
currently in the Armed Forces, compared to the number that were
in the Armed Forces at the peak of World War II. Now I am told
that we actually have more generals and admirals today than we
had at the peak of World War II, and I would really like to
know the exact number, because I think each one of those has
their own staff and their own little bureaucracy and so forth.
I am not saying what is right or wrong, but I think we do
have to monitor the tendency of every bureaucracy to sort of
become extremely top-heavy. I think we probably have that
problem in the Armed Forces today and it is something that, as
I say, I think this committee above all has got to do
everything we can to make certain that we combat. So if you can
get that information for me, I would very much appreciate it.
Thank you, Mr. Chairman.
Mr. Hamre. Can I just say we will absolutely get the
information for you, and I hope I might be able to sit with you
and give you some context for it. We probably do have as many
admirals and generals as we had in World War II----
Mr. Gutknecht. I am told it is more.
Mr. Hamre. Maybe. I hope there is, frankly, because in part
you mobilize people to bring them on board. But back in World
War II, we didn't have people worrying about developing a
national missile defense. We didn't have the sophisticated
weapons systems we have now. We turned it over to industry. We
weren't managing that like we have to do that now. We want that
kind of talent. I would like to talk to you about it because I
know it is, on its face--people say why in the world do we have
as many or more flag officers today than we had in World War
II? I think there are very good reasons. I may not convince
you, but I would like to talk to you.
Mr. Gutknecht. I will certainly listen. Thank you.
Mr. Chambliss. Can I take that statement to mean we are
going to have less privatization in the military?
Mr. Hamre. No, no, sir. I don't think so, because we are
pushing----
Mr. Chambliss. I am asking somewhat facetiously, since you
and I have been fighting over that for 4 years.
Mr. Hamre. I think we have got a flag down there that is
running one of the better depots in the country.
Mr. Chambliss. I agree.
Mr. Clement.
Mr. Clement. Thank you, Mr. Chairman.
Deputy Secretary, Under Secretary, I'm pleased to have you
before the Budget Committee. I think we do have a real
opportunity, a wonderful opportunity for a substantial increase
in the defense budget this year and for the future years, and I
think we need a substantial increase. I am for a strong
national defense.
I am a veteran myself and proud of it, and realize we are
spread extremely thin and the cold war is over. We have got
more regional ethnic conflicts in the world, and I expect that
to continue. I did want to ask you about the National Guard and
the Reserve as well. You know we have that so-called total
force concept now.
Mr. Hamre. Yes, sir.
Mr. Clement. And I know in the National Guard and Reserve
you are utilizing the support elements, the service support
units, but you are not using the combat arms in various places
around the world. If we are going to have this total force
concept, are we going to start utilizing them as well, or are
we still going to depend strictly on the service of the service
support units in the Guard and the Reserve?
Mr. Hamre. Sir, we utilize reservists in combat arms. For
example, the Air Force extensively deploys reservists, for
example, in Bosnia or in Southwest Asia or wherever. It is a
lot harder for ground units, although we are trying something
very bold, and I give great credit to General Rymer for this.
One of the rotations in Bosnia is going to be done by a Reserve
brigade.
That is going to be a real challenge, because that means
that whole unit has now got to go through an incredible buildup
period for the next 6 months or so and then deploy as a unit.
That is hard for Reservists and it is difficult in the
community. All of a sudden we are going to take out everybody
and say for the next 6 months or next 10 months I am going to
take out all the guys who do bus maintenance for the school
district or whatever, because these guys tend to be in
government-related service jobs as well. So it is harder to do
but it is something that we are trying to do, but it is a
challenge.
But if I could say, there is an absolutely new important
role that is coming for the Guard and the Reserve, and that is
this homeland defense role where we are trying to find ways to
protect this country against acts that could be both chemical
or biological terrorist incidents. In this case we have our
forces--the entire thing is on its head. The forward deployed
forces for homeland defense are Guardsmen and Reservists. They
are the forward deployed element, and we need to find ways to
utilize them for this mission. And it is a mission of honor and
it is one we know they are going to be in the forefront of
dealing with.
Mr. Clement. I also want to ask you about Kosovo. I was in
Bosnia last year and realized the importance and significance
of the United States' presence. Whether we like it or not, we
are the superpower, and I don't want us to be the big brother
of the world. I do like other countries coordinating with us,
and I do like burden sharing; it has been mentioned as well.
But I also know that Milosevic watches and observes
everything we are doing or fail to do, and now we have got a
vote today on Kosovo. Senator Dole just said yesterday before
the House International Relations Committee, ``I would rather
have the vote come after the agreement between the Kosovar
Albanians and the Serbs.'' Do you agree with that?
Mr. Hamre. It is very much our preference that we not
confound the negotiations right now with a vote. It would be
our preference not to have this vote, because it is very
delicate ongoing discussions about how we can land this. We do
need to find a peaceful resolution for the problem in Kosovo,
and we think that could very well involve ground troops, part
of--the United States is a small contributor, but the United
States and others. We need to land these negotiations
successfully, and they are tough. And frankly it would be a lot
better if we didn't have the vote, but I understand Congress
needs to be consulted and be a part of this decisionmaking.
Mr. Clement. Aren't we also sending mixed messages to NATO?
NATO has been through a lot since the cold war, so there were a
lot of changes, a lot of organizational, structural changes and
all, and now we seem to be giving very confused messages
concerning Kosovo and even our presence in the entire area.
Mr. Hamre. Yes, sir. I mean the guidance that we received
in all of our informal discussions with Congress was that this
is an operation that ought to be under NATO control, not UN
control. You remember how things got fouled up in Bosnia when
it was UN control, and we got that straightened out; we went
into Bosnia under NATO auspices. And we do need to do this
under NATO auspices.
That means NATO as an alliance is making this decision and
as an alliance, it is a consensus process. I mean we would be
really letting people down in a damaging way if we walked away
from this now, because we have been working very closely with
them, dealing with a security threat that is important to NATO
as an alliance and to us. And this isn't something that we are
doing, as you said, out of the generosity of our heart. We have
real security interests to ourselves that are at risk here.
Mr. Clement. Thank you.
Mr. Chambliss. Mr. Knollenberg.
Mr. Knollenberg. Mr. Chairman, thank you very much.
And welcome again, gentlemen. I appreciate your being here.
I have a couple of questions, but I appreciated your revisiting
the Civil War in terms of what the conditions were then.
It seems to me that today firepower versus technology is
not the clash. It would seem to me that technology plays such a
huge role, whether it is offense or defense, whether it is
firepower, whether defensive-type techniques that are used. And
I know that one of the challenges that you face and we face is
the defense against ballistic missiles, any attack.
As you know very well, the American people are finding out
that there is no defense that we have against incoming
ballistic missiles. It appears to be that now a need has been
shown, North Korea being the one in question, the rogue state,
that we have to worry about. Russia, it seems that her weakness
threatens us more than her strength, because now we have these
potentialities occurring around the world. And it is not just
North Korea, it is Iraq, it is Iran, as you know, and we seem
to be--the administration, which has held to a policy of being
against deployment, seems to be moving more favorably in the
direction of doing something.
The question is, what and when? North Korea claims that,
through U.S. intelligence sources, and some of this gets into
the classified arena, that there may be other sites, and we
have urged in my other subcommittee, the Foreign Operations, to
look at those other potential sites. But in revisiting our
failed policy, which I feel is failed regarding the Kyoto
agreement, of rewarding Korea, right now they are holding out
in a fashion that demands that we give them a carrot, that
being the $300 million, to allow us to get in and to see what
is taking place what actually is happening on-site.
There is a bipartisan bill in Congress that I was an
original or a very strong cosponsor, the original cosponsor,
and I know that many people in this committee probably are as
well. Congressman Spratt, the ranking member, I believe is one
of the original cosponsors of that bill as well, and it
declares that the U.S. policy should be to deploy a missile
system.
The questions I have for you, and I hope that the
Department of Defense will join us, join Congress in bringing
about something as soon as possible, does the Department of
Defense sincerely support the idea of making this commitment?
And as a secondary question--this may have been asked
previously but I wasn't in attendance--what is the possibility
of doing it within the next 2 years, if in fact you do support
it?
Mr. Hamre. You are talking about deployment in the next 2
years for NMD?
Mr. Knollenberg. Yes.
Mr. Hamre. Sir, you said that you felt the administration
was against deploying an NMD system. I don't think that they
were.
Mr. Knollenberg. Let me correct that and say that there
hasn't been a system put in place.
Mr. Hamre. Well, we were developing it, but we didn't have
dollars allocated in the budget for the deployment of it until
this year. I mean basically we had a program to develop a
system, and we have been working at that pretty hard.
Mr. Knollenberg. Then go to the second question, which is,
could we do something, do you think, within 2 years?
Mr. Hamre. Sir, I think that the risks would be so
astounding that it would be rushing to failure if we were to
try to do that. I think we absolutely need to press ahead to
develop this capability, not a question in my mind, and I don't
think there is a question in the administration's mind now.
I don't think that we press ahead in order so fast that we
throw all discipline overboard and then end up with a failed
program. We kind of did that on the THAAD missile system. We
said, ``We are just pressing ahead as fast as we possibly can,
come hell or high water,'' and what did we get? Six failures in
a row in the test shots. We don't want that here in national
missile defense.
Mr. Knollenberg. Do you agree there is a problem in North
Korea?
Mr. Hamre. Sir, we believe that we are either at it now or
very soon confronting a problem that we want to have a national
missile defense to confront, I don't think that is a question
any longer.
Mr. Knollenberg. We reached that----
Mr. Hamre. I think that is right, sir. May I say that we
now have to have a system that will work, and we want to do it
in the manner where we can still retain the value of the ABM
treaty so we don't have a bigger problem downstream with
Russia.
Mr. Knollenberg. Do you think that we are doing enough
right now in North Korea to prevent any further actions by
North Korea? I refer back to the three-stage rocket. The
Rumsfeld report indicated very strongly that, back prior to
that event taking place back in midsummer, that we are
vulnerable to those rogue states. No one really thought it
would come about quite so soon, but it has happened, and you
can say that it hasn't gotten to us yet but the potentiality
for that is there, to get to the U.S. coastline.
I think that that alone would begin to accelerate the
action that the Department of Defense would take. Certainly
Congress is moving in that direction, and I think it is a
bipartisan idea here that I believe needs to be fulfilled
sooner than later. And I know money is an issue, but can we do
anything in the meantime, while we are struggling to put this
thing together, to neutralize North Korea in particular and
other rogue states who might sneak up on us and do it quicker
than we thought? Technology, again, isn't unavailable to them.
Mr. Hamre. Sir, we were surprised that it turned out to be
a three-stage launch. I don't know that anybody forecasted
that. Clearly we do have a problem in that they were moving
faster than we had thought. And having said that, I don't think
it was faster than was contemplated when the three-plus-three
strategy was developed, in the sense that we would have the
capacity to deploy something in 3 years. It is still an
enormously high risk to try to do that.
I would also say that while we--and I don't want this to be
interpreted in the wrong way--we absolutely do want to deploy
an effective national missile defense system once we can work
out the details with Russia in terms of modifying the ABM
treaty, but frankly there are a lot of other ways that the bad
guys can get at us besides ICBMs. If I were a bad guy, I
wouldn't do it with ICBMs because it is unequivocal where they
came from. It is a lot easier just to sail a ship into New York
Harbor, you know. If you wanted to do it with a nuclear weapon
or if you wanted to do with chemical or biological, there are a
lot of easier ways to get at it than to do it with an ICBM.
Now we still want to be able to protect ourselves against
an ICBM threat, because I think it is more important from the
continuum of deterrence, to be able to maintain that
deterrence, to have an effective NMD system. But I mean we have
got bigger problems that I think are more realistic from a
warfighting standpoint today than this. But we are still
pressing ahead with the program.
Mr. Knollenberg. I appreciate those responses. I do have
some additional questions I will submit for the record, rather
than asking you now.
Mr. Chairman, thank you.
Chairman Kasich. John, do you have anything further?
Mr. Spratt. I have two questions for the record, that is
all. Thank you very much.
Mr. Hamre. You have got another panel here.
Chairman Kasich. Gentlemen, yes, we do. And we are going to
go vote and come back. And to Mr. Krepinevich and Mr. Zoellick,
we appreciate your patience. And to Dr. Hamre and Mr. Lynn,
thank you very much for your time, for being here and for your
service to your country.
Mr. Hamre. Thank you so much, sir. Thank you, sir.
Mr. Chambliss. We will stand in adjournment pending these
two votes.
[Recess.]
Chairman Kasich. I understand Mr. Spratt is not going to
make it back, so, gentlemen, it is going to be us.
Mr. Krepinevich and Mr. Zoellick, we are pleased to have
you all here. And we look forward to hearing your opening
statements, and then we will proceed from there. So I don't
know who would like to go first, but all right.
STATEMENT OF ANDREW F. KREPINEVICH, EXECUTIVE DIRECTOR, CENTER
FOR STRATEGIC AND BUDGETARY ASSESSMENTS; AND ROBERT B.
ZOELLICK, PRESIDENT AND CEO, CENTER FOR STRATEGIC AND
INTERNATIONAL STUDIES
STATEMENT OF ANDREW F. KREPINEVICH
Mr. Krepinevich. I will lead off.
Chairman Kasich. Dr. Krepinevich, that is great.
Mr. Krepinevich. Thank you. As you know, I have submitted
prepared testimony for the record and will summarize my
remarks.
Mr. Chairman, the purpose of any strategy is to apply the
resources available to the Defense Department so as to minimize
the overall risks of the national security; that is, not only
to address the threats we see today but also to prepare for the
kinds of challenges and threats we will see tomorrow.
This is particularly important right now, and especially
stressful for defense planners, because, as many believe, we
are in a period of transformation, a period of discontinuous
change in the threat environment. So it is not self evident
that the forces we buy to be effective against the threats of
2000 or 2002 are necessarily going to have the same level of
efficacy in 2012 or 2022. And yet our major systems are
intended to last 20 or 30 years or longer.
In examining the defense budget, the defense planners
typically address two questions: First, how much is enough to
execute the strategy and protect our security at a certain
level of risk? And, second, how wisely are we investing? In
other words, is this strategy likely to minimize the near-term
and long-term risk to our strategy? I would like to briefly
address these two questions, with emphasis on the latter.
So, first, you have the $112 billion increase proposed by
the administration warranted? In order to support the full
increase, one would have to assume that the QDR represents the
optimal defense strategy, which I believe it does not, for
reasons I will elaborate upon in a moment. However, whatever
strategic flaws may characterize the existing defense posture,
we should ensure the immediate readiness of our existing
forces.
Along these lines, therefore, I believe that additional
funding to cover maintenance backlogs, training shortfalls, and
the 4.4 percent pay raise proposed for year 2000, is warranted.
On the other hand, it is not clear to me that other proposed
increases, such as locking in long-term future pay raises or
returning to the pre-REDUX retirement system, offer the best
way of addressing recruitment and retention problems in
particular, or our readiness problems in general.
I now would like to move on to my second, and what I
consider to be more important, issue, the issue of how wisely
we are investing our defense resources. Again, we assume that
we have an optimal strategy, that a dollar invested in this
strategy will produce a good result. However, if we have the
wrong strategy, we may find ourselves investing very
efficiently, but not getting a very effective military force in
return.
Simply stated, I am concerned that the QDR focuses far too
much emphasis on creating an improved version of today's force,
when what we will actually need are very different kinds of
forces and capabilities to meet the very different challenges
our military will encounter in the coming years.
Now, in my testimony I mentioned a number of these emerging
threats. I would like to concentrate on the power projection
challenge, because this really drives most of our requirements
and much of our modernization program.
I would like to consider, for example, the growing
disconnect in terms of how we utilize our forces in power
projection operations. That is to say, I think over the next 10
or 15 years we are going to find our access, our ability to use
forward bases and fixed facilities, increasingly problematic.
This will invalidate to a significant extent the way that we
have projected power over the last century.
Typically, we mobilize forces here in the United States,
and then move them through major nodes overseas, such as ports
and air bases. Next we build up supplies, and then go on the
offensive. Whether it was in France in World War I, Australia
and Britain in World War II, Pusan in Korea, or the ports along
the Gulf, that is how we projected power.
I am concerned that the diffusion of military technology is
going to make this an increasingly problematic proposition.
Simply put, over the next 10 or 15 years or so, other
militaries are going to gain the ability to do what our
military showed it could do 10 or 15 years ago. As a
consequence of the proliferation of satellite technology and
satellite availability, potential adversaries will be able to
stare at a fixed point on the earth's surface for a protracted
period of time, to focus on key ports and airfields, and even
choke points in the littoral area. And with the diffusion of
ballistic missile and cruise missile technology, they will
acquire the ability, over time, to hold these large, fixed
nodes at increasing risk.
This is something that not only concerns me, it is
something that has concerned our senior military leaders to an
increasing extent. As General Fogleman pointed out when he was
Chief of Staff of the Air Force, this emerging threat could
even deter us from deploying forces into theater in the first
place. Admiral Jay Johnson, Chief of Naval Operations, observed
a little over a year ago that he considers this challenge, and
I quote, ``the single most crucial challenge in projecting and
sustaining U.S. military power where it is needed in the early
part of the 21st century.''
In essence, our competitors will fulfill the prophecy of
Joint Vision 2010, which says it is not the symmetric
competitor, the enemy that will attempt to build a better air
force or a better army than ours, that we have to concern
ourselves about. Rather, we must prepare for an adversary that
will admit it can't beat us on a technological plane or a scale
in terms of the forces that we can deploy. They will try and
defeat us by having a better strategy.
This strategy, which some have called the ``anti-access''
strategy, does not invest in an air force, but creates a
missile force, to hold fixed facilities at risk. When this
challenge emerges and comes to pass, how will the Army be able
to deploy its heavy digitized divisions into theater? How will
we be able to forward base our short-range tactical Air Force
that we are in the process of modernizing at great expense?
In fact, a number of our senior military leaders have
indicated to me that this base access problem already exists,
in embryonic form, on the Korean Peninsula. We have no clear
way of getting at the numerous ballistic missiles that the
Northern Koreans possess. If they choose to mate these missiles
with chemical warheads to threaten some of the key ports and
airfields--Osan, Kimpo, Pusan--it could really throw an
enormous monkey wrench into our ability to quickly resupply and
reinforce our forward-based forces.
In effect, the enemy will say to us, ``I can't shoot down
your F-22s. I can't outgun your upgraded M-1 tanks. I am going
to practice virtual attrition by denying you the ability to get
such forces into theater or resupply them.
Now, in examining this threat and in looking at the budget,
we are essentially putting the budget cart before the strategy
horse. We are now engaged in a rampup of our procurement
program, increasing it by about 37 percent over the period of
the FYDP, while simultaneously necking down to relatively few
new systems, ``buying in bulk.'' That is the way to buy new
equipment efficiently. But we are locking ourselves in to
single point solutions inconsistent with the military's
strategic vision document, Joint Vision 2010, which says the
future is going to be characterized by uncertainty and by these
asymmetric kinds of challenges.
In a sense, our budget offers a false efficiency, because
we have a modernization program that does not take this kind of
uncertainty into account--the uncertainty of not knowing who
the next challenger will be, when they will appear, and how
they will compete, or whatever a symmetric form they might take
and how they may use this rapidly diffusing technology.
A good budget strategy would take uncertainty into account.
It would do so through at least two means. First, it would
avoid locking us into large numbers of new systems before we
have identified how we are going to meet these very different
emerging challenges.
Secondly, it would support a program of vigorous
experimentation with a wide range of systems to find out what
works, what kind of new capabilities we will need to develop,
and what kind of old capabilities we will need to sustain. We
would be buying ourselves options that we could exercise once
the threat comes into clearer focus. But this is not what we
are currently doing.
Look at some of the options that we have denied ourselves:
We have canceled the arsenal ship. The B-2 has been terminated.
Conversion of the Trident submarines into cruise missile
carriers is presently under review, and it is unclear whether
the Pentagon is going to move forward. Development of unmanned
aerial vehicles and UCAVs is proceeding, but at a relatively
slow pace.
Mobile offshore bases have been discussed for at least 5 or
6 years now. While we have talked about them, there has been
little experimentation involved. And the same issue may apply
to the Sea Shadow, a stealthy surface combatant which the Navy
calls their ``street fighter.''
The Army strike force, which was touted as the experimental
force that would lead the service to the Army-After-Next, has
been reduced down to a headquarters element. Sea Dragon, the
Marine Corps' initiative, is sustained on chewing gum, string,
and paper clips.
Atlantic Command which, as Dr. Hamre mentioned, assumed the
responsibility for Joint Experimentation in 1998, received only
$40 million this year, and its first really significant joint
experiments won't begin until 2004.
In my estimation there is very little sense of urgency
here. Yet we should be conducting the experiments on how to
meet new threats before buying the equipment, before committing
to purchasing equipment that we expect to maintain for 20 or 30
or 40 years.
As procurement increases by 37 percent, it essentially
locks us into systems before we get answers, while at the same
time RDT&E, which is designed to address questions and give you
answers, is programmed to go down about 17 percent in real
dollars over the course of the new FYDP.
In conclusion, let me say, Mr. Chairman, that in minimizing
the overall risks to our security, both in the near and long
term, the challenges are not principally budgetary in nature,
they are strategic. To be sure, some additional funding is
certainly warranted to maintain the near-term readiness of our
forces.
The greatest gains, though, in terms of reducing the risks
to our security, are not going to come from accelerating a
modernization process that will allow us to arrive in the wrong
future more quickly. Rather, what we need is a modernization
strategy that focuses on addressing tomorrow's challenges, as
opposed to preparing yesterday's; a strategy that reduces
uncertainty surrounding future investments rather than assuming
it away; and a strategy that buys capability options we can
execute quickly when the future threats come into clearer
focus.
In short, there is much to be gained from questioning the
fundamental defense strategy and the resources needed to
accomplish it, as opposed to simply adding money to the current
approach.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Krepinevich follows:]
Prepared Statement of Andrew F. Krepinevich, Executive Director, Center
for Strategic and Budgetary Assessments
Defense Strategy and the Defense Budget
A defense strategy's principal purpose is to minimize the overall
risk to national security, both by addressing those challenges that
exist in the near term, and by preparing now for those challenges that
will emerge over the longer term. A defense strategy does this by
informing the allocation of resources--the means available to achieve
the strategic end of minimizing the nation's security risks. The
strategy that currently informs the allocation of our defense resources
was developed in the Pentagon's Quadrennial Defense Review (QDR).
As it serves as the blueprint for resource allocation, it is
extremely important to ``get the strategy right.'' Unfortunately,
nearly all of the recent debate over the defense budget has concerned
``How much is enough?'' to fund the QDR program. Very little discussion
has focused on the more critical question of ``How wisely are we
spending?'' our defense dollars.
This is regrettable, as the QDR strategy that guides the use of
defense funding has some major flaws. The Defense Department continues
to focus the vast majority of its resources on familiar threats,
requiring ``traditional'' kinds of forces, despite the fact that future
challenges to our security are likely to be very different from those
we face today, and thus require very different kinds of forces and
equipment. This prospective change is the result of both the
geopolitical revolution marked by the end of the cold war, and the
ongoing military revolution (or ``revolution in military affairs '').
The latter is related especially to the dramatic advances being made in
information-related technologies.
My testimony provides some observations on the two questions raised
above: ``How much is enough?'' and ``How wisely are we investing?''
with emphasis on the latter. It concludes that:
The additional funding proposed by the Clinton
administration to shore up the readiness of today's force is, in many
respects, warranted. However, it is far from clear that locking in
future pay raises for the military, and returning to the pre-REDUX
retirement system offer the best ways of attracting and retaining
quality people for our Armed Forces.
The administration's modernization plan does not take into
sufficient account the very different security challenges (and
capabilities) that are emerging as a consequence of the ongoing
geopolitical and military revolutions. Far too much emphasis is placed
on modernizing U.S. forces to meet today's threats, and far too little
on preparing for the very different emerging threats that will confront
us in the not-too-distant future. This can be seen in a procurement
budget that focuses on producing a few major systems in large numbers,
and in an RDT&E budget that is projected to decline by 17 percent in
real terms over the Future Years Defense Program (FYDP).
A budget strategy is needed that will allow the military
to reduce the high level of uncertainty that exists with respect to
future threats and emerging capabilities, and that creates capability
options that can be quickly exercised once the future threat
environment comes into clearer focus.
How Much Is Enough?
In May 1997 the Clinton administration unveiled the results of its
Quadrennial Defense Review. In doing so, the administration determined
that essentially flat defense budgets would be sufficient to fund the
Quadrennial Defense Review (QDR) defense plan over the long term. That
conclusion was reaffirmed only a year ago when the FY 1999 defense
budget request was submitted. Yet, this February the administration
announced plans to add $112 billion to the defense budget over the next
six years. Why, in such a short span of time, has the administration so
substantially changed its assumptions about the QDR's funding
requirements? There are three main factors that have contributed to
this sudden about-face.
higher operation and maintenance (o&m) costs
First, after years of ``O&M migration''--shifting funds intended
for modernization accounts to cover O&M funding shortfalls--the
administration has taken a more realistic view of funding requirements
for O&M activities. O&M funding covers the costs of fuel, spare parts,
depot maintenance and other activities critical to the day-to-day
operation of the military, as well as most Department of Defense (DOD)
infrastructure activities, such as base operations and health care.
Over the years this has been the area of greatest cost growth within
the Defense Department. Given this trend, last year's Future Years
Defense Program (FYDP) appeared to substantially underfund O&M. This
fact became increasingly apparent over the course of last year. For
example, in 1998 Air Force mission capable rates for major weapon
systems fell to about 10 percent below their 1991 levels, due to spare
parts shortages and other factors. Likewise, in 1998 Army tank crews
fell short of their training goals by some 22 percent (measured in tank
miles per year), while Navy aircraft crews fell 15 percent below their
goals for flying hours.
The administration's new request represents a reasonable estimate
of the funding required to sustain high levels of readiness in FY 2000.
At $103.5 billion, it would provide far more O&M funding per troop than
the Defense Department provided in FY 1990, the year the United States
began sending forces to the Persian Gulf in preparation for Operation
Desert Storm. This is true even if one subtracts that portion of the
O&M budget allocated to tasks which some observers have argued are not
closely related to traditional military missions, such as contingency
operations, environmental clean up at military bases and drug
interdiction.
It is less clear whether the funding levels projected for the
latter years of its FY 2000-05 defense plan will be adequate. In real
terms, O&M costs per troop have tended to increase over time. Moreover,
the idea that O&M costs will continue to increase might find support in
DOD's projection that the average age of many aircraft, ships and other
weapon systems in its inventory will grow by 20-25 percent over this
period. The military's O&M costs would also obviously increase if U.S.
forces are deployed to Kosovo for peacekeeping duties. On the other
hand, the administration's latest budget proposal clearly provides far
more for O&M activities over the next six years that was projected to
be provided in last year's defense plan. And, if DOD's plans for
outsourcing and other reforms are aggressively pursued and successful,
the level of funding projected in the administration's plan for O&M
over the longer term may prove to be adequate.
declining recruitment and retention
Second, recent problems with recruitment and retention have
persuaded the administration to increase military compensation. Both
the Navy and the Army fell short of their recruitment goals last year,
and the Navy and the Air Force have experienced declines in retention,
especially among pilots. Although these problems are centered primarily
in certain military skill categories, the administration is right to
take these trends seriously. The administration has decided to address
these personnel problems, in part, by providing substantially higher
military pay raises and improved retirement benefits. Figures released
by the Congressional Budget Office (CBO) suggest that this plan could
add some $37 billion to DOD's costs over the next 10 years. The Senate
recently passed a bill, S. 4, that would provide even more generous pay
raises and retirement benefits. CBO has estimated that this plan would
cost about $55 billion over the coming decade.
There are some very positive elements in the administration's
proposed compensation package. These include the 4.4 percent across-
the-board pay raise in FY 2000, substantial targeted pay raises, and
various initiatives to improve recruitment and retention. Taken
together, these measures would add some $10 billion to the Defense
Department's costs over the next six years. They would also send a
powerful signal to the men and women of the Armed Forces about the
commitment of the administration and Congress to ensuring adequate
compensation, not only next year, but over the long term as well.
Perhaps the most problematic element of the administration's plan
is its proposed repeal of REDUX, the Military Retirement Reform Act of
1986. Under current law, personnel who joined the military on or before
July 31, 1986 can retire after 20 years of service at 50 percent of
their basic pay. Under REDUX, those who joined after that date will be
able to retire after 20 years at only 40 percent of basic pay. The
administration's proposal would raise retirement benefits back to 50
percent of pay after 20 years for all military personnel. This change
would cost about $6 billion over the next six years and some $1.5
billion a year thereafter.
However, according to recent studies by CBO and the General
Accounting Office (GAO), there is very little evidence that the
existence of REDUX has been responsible for the recent declines in
retention. We should also be cautious about repealing REDUX, in part,
because its provisions closely track the recommendations of seven
different commissions and study groups in its treatment of retirees
with 20 years of service. The recommendations of these groups, which
met between 1947 and 1986, differed in many respects. But every one of
the groups recommended that the immediate retirement benefits received
by personnel leaving after 20 years of service be reduced to less than
50 percent of basic pay. They made this recommendation because they
believed that providing this annuity was seriously harming the
Services' ability to retain individuals beyond their 20-year service
point.
It is possible that, nevertheless, REDUX should be repealed
(perhaps on equity grounds). But any change in the military retirement
system of this magnitude should be made only after the likely effect of
the change and other possible options for changing military retirement
have been thoughtfully, and deliberately, considered. This probably
means deferring any action on retirement benefits until next year.
The Senate bill would provide even more generous benefits for
military personnel who retire after 20 years. It would also create a
thrift savings plan for certain military personnel and increase funding
for veteran's readjustment benefits by nearly $5 billion over the next
six years and by some $2.5 billion a year over the longer term. As with
the administration's plans for changing military retirement, it would
be a mistake for Congress to act on the proposed changes in the Senate
bill before it has had time to thoughtfully review those proposals.
The other main flaw in the Senate bill is that it contains a
provision that would lock the Services into providing what may turn out
to be excessively large military pay raises in future years. It would
do so by requiring, by law, that future pay raises be set at one-half a
percentage point above the employment cost index (ECI), a measure of
salary changes within the overall civilian workforce. To be sure, pay
raises larger than those called for in the administration's proposal
may prove necessary in coming years. But it is also possible that the
Services' problems with recruitment and retention will be stemmed by
the raises included in the administration's plan, the use of improved
deployment patterns that reduce personnel tempo (such as the Air
Force's Air Expeditionary Force concept), and other non-pay related
changes, or by a downturn in the civilian economy. In any event, the
Services should not be legally locked into providing what could turn
out to be overly large pay raises for the indefinite future--especially
on the basis of a measure as suspect, in terms of its relevance to
military pay, as the ECI.
more for modernization
Third, the administration has decided to expand some acquisition
programs and, in particular, to more fully fund its national missile
defense (NMD) efforts. Acquisition funding accounts for the smallest
share (about 25 percent) of the administration's proposed $112 billion
increase for defense. As noted above, the administration's latest
defense plan provides substantially more for O&M than the previous
plan. However, if history is any guide, it is likely that future O&M
costs will prove at least somewhat higher than projected, even under
the latest plan. Military personnel costs may also prove higher if S. 4
is adopted or, even if it is not, if higher pay raises prove necessary
in the future in order to stem persistent declines in recruitment and
retention. As such, it is unlikely that the Defense Department will be
able to increase military procurement by 37 percent over the FYDP, as
projected in the administration's plan, unless the topline for defense
is further increased, or cuts in force structure or readiness are
accepted. Nevertheless, because of the substantial plus-ups provided in
the new plan for the O&M and military personnel accounts, there may be
less ``migration'' from procurement to these other accounts in the
future than there has been in the recent past.
other ways of tackling the funding shortfall
As noted above, if one assumes the QDR provides us with the optimal
blueprint, or strategy, for minimizing the overall risk (i.e., near-
and long-term risk) to our national security interests, then increased
funding for defense may be the appropriate response to the plans-
funding mismatch. However, in addition to increasing the budget, there
are also several other means for addressing the problem.
One is to increase the efficiency with which currently programmed
funding is used. Initiatives designed to squeeze greater efficiencies
out of the defense budget have been staples of DOD management,
particularly since the end of the Reagan defense buildup. While such
endeavors are laudable, they have typically only yielded a small
fraction of the savings projected for them. The QDR, for example,
called for two additional rounds of base closures to reduce excess
infrastructure. It also argued that greater efficiencies could be
realized by competing more of the work that has, in the past, been
reserved for government depots. Several such efficiency initiatives are
currently under way in the Pentagon, with Secretary Cohen's Defense
Reform Initiative at the forefront. Unfortunately, the current program-
funding mismatch is, in part, a product of the Defense Department's
``banking'' of hoped-for efficiency savings before they are realized.
Another means for reducing the program-funding mismatch is to
convince our allies to shoulder a greater share of the burden of
providing for our common security interests. Always a difficult
proposition, ally burdensharing does not seem to have been a
significant element in the QDR's funding strategy, or in more recent
efforts by the Defense Department, to redress its budget problems.
Still another way to shrink the Pentagon's program funding deficit
is through more innovative approaches to operating. This is different
from trying to meet existing requirements more efficiently. Rather, it
involves meeting existing requirements by operating in very different
ways. A good example is the opportunity the Navy currently has before
it to adopt innovative ways of conducting forward presence operations
by periodically substituting converted Trident SSBNs (SSGNs, or
conventional precision-missile carriers) for carrier battle groups.
Finally, we might agree to accept some increased risk in our
ability to execute the existing strategy. For example, we might accept
a higher level of risk in our ability to respond in the event that two
major theater wars (MTWs) erupt nearly simultaneously. Or we might
decide to be more selective in that part of the administration's
strategy of Engagement and Enlargement that pertains to U.S.
involvement in peacekeeping operations.
summary
The above discussion suggests that the administration's latest
budget proposal may go a significant way toward addressing near-term
readiness concerns and closing DOD's long-term plans/funding mismatch.
However, the fact that there is a significant funding gap in the
current defense plan does not necessarily mean that more money should
be provided for defense, even if the emergence of significant budget
surpluses make such increases appear more feasible than in the recent
past. Indeed, if one believes the QDR strategy is seriously flawed,
then the remedial courses of action described above may not increase
our security, or will do so in a very ineffective way. Indeed, a strong
case can be made that the long-term risks to U.S. security could be
better minimized with a revised defense strategy and plan that would
require little additional funding.
My principal concern here is that we are not implementing the
changes in our approach to modernization that these revolutionary times
demand. While there appears to be a consensus among senior national
security officials that transformational change is needed, it is not
yet adequately reflected in our modernization strategy or programs. For
example, the QDR yielded three future U.S. force ``options'' for
consideration. But these options did not represent different U.S.
modernization programs; rather, they essentially offered the choice of
executing essentially the same modernization program at three different
rates of change. It is a modernization program that emphasizes the pre-
transformation threat environment, while according insufficient
attention to what is likely to be a far more dangerous post-
transformation conflict environment.
Consequently, our modernization effort will produce a force that is
likely to depreciate rapidly over the next two decades, while its
principal value will be realized during a period of relatively low risk
to the national security. If this occurs, the consequences may be
severe. At best, we would probably be forced to recapitalize the force,
at great expense. At worst, we could see our vital security interests
placed in jeopardy. In short, while the current modernization program
likely suffers from a serious program-funding mismatch, the primary
problem with our approach to defense modernization is not, at its core,
budgetary in nature, it is strategic.
How Wisely Are We Investing?
why transformation?
There are two fundamental factors driving the need for
transformation. The first is that, over the next decade or two, our
military will likely confront very different challenges from those we
faced during the cold war, or during the Gulf war. Potential
adversaries have strong incentives to present us with different
military problems than did Saddam Hussein during the Gulf war, and
increasingly, with the diffusion of military technology, they will have
the capability to do so.
The need for a transformation strategy also is being stimulated by
a growing awareness on the part of a number of leading military
organizations, ours included, that the world is entering into a period
of military revolution. This century has witnessed two such periods of
military revolution. The most recent is the nuclear weapon-ballistic
missile revolution of the 1940s and 1950s. An earlier revolution
occurred in the 1920s and 1930s, and was characterized by the
transformation of warfare on land, which culminated in the blitzkrieg;
at sea, with the rise of naval aviation and carrier battle groups; and
in the air, with the emergence of strategic aerial bombardment. Such
periods are characterized by discontinuous leaps in military
effectiveness, the result of an integration of new military
capabilities, doctrine and organizations. With respect to
modernization, there are dramatic shifts in the military ``tools''
available to commanders: carriers displace battleships, tanks displace
horse cavalry, etc. Moreover, entirely new capabilities and
corresponding new military operations arrive on the scene: the
submarine and strategic submarine blockade; bombers and strategic
aerial bombardment; radar and integrated air defenses are but a few
examples.
We must ask ourselves: What are the emerging and declining systems
of this military revolution? How do we ensure that the emerging
dominant ``sunrise systems'' get into the hands of our commanders? How
do we avoid investing too early in promising new systems that may
quickly depreciate in effectiveness, as the technologies on which they
are based continue to advance rapidly, or as the challenges to our
security change? How do we divest ourselves of declining ``sunset''
systems, or at least avoid locking ourselves into large quantity
purchases of such systems, with their 30- or 40-year life spans? How do
we hedge against the uncertainty of not knowing which new systems will
prove decisive and which will decline in value?
These issues take on greater importance given that the Defense
Department confronts this era of transformational change with limited
resources. There is the risk that if the wrong transformation path is
chosen for modernization (or if no attempt is made at transformation),
it will prove difficult, if not impossible, for the Pentagon to buy its
way out of its mistakes.
Moreover, it is important to begin the transformation process soon.
It is no exaggeration to say that, given the time it takes to field new
military systems, develop new doctrine, and field test new combat
organizations, the U.S. military twenty years hence is already being
formed (and limited) by decisions being made today. Regrettably, the
Defense Department's modernization effort remains predominantly focused
on improving its capabilities to conduct power-projection operations
against a threat similar to that which was encountered during the
Persian Gulf war, both in terms of scale and character.
In summary, rather than undertaking a military transformation, we
continue to pursue a modernization strategy that was set principally by
the momentum developed over forty years of cold war with the Soviet
Union, and that severely discounts the revolutionary changes under way
in the geopolitical environment and in military-related technologies.
The result is that the current defense program will produce a slightly
smaller, but similar U.S. military as compared to the one called for by
the QDR's proximate ancestors, the Clinton administration Bottom-Up
Review (BUR) force, and the Bush administration Base Force.
modernization for what? identifying emerging threats
How should we think about modernization in a period of
transformational change? Of primary importance is a sense of the
emerging threats to our security, and the operational challenges it
will pose to the U.S. military. Only then is it possible to get a sense
of the optimal mix of military capabilities commanders will need in
order to be effective in the future. If the new operational challenges
are not identified, the Defense Department may persist in
``baselining'' its future requirements based on its Gulf war
experience. Indeed, much of the wargaming that supported both the 1993
Bottom-Up Review and the 1997 QDR were oriented on Desert Storm-like
contingencies in the Persian Gulf and on the Korean Peninsula.
new challenges: the case of power projection and the ``anti-access''
challenge
Take the case of power-projection operations. Joint Vision 2010
states that ``power projection * * * will likely remain the fundamental
strategic concept of our future force.'' However, relying on
experiences from an eight-year old conflict to determine forces for
future contingencies in a rapidly changing competitive environment
seems unlikely to provide the kind of insights needed for a
modernization program to support military transformation. The U.S.
military's traditional method of deploying air and ground forces at or
through ports and airfields is almost certain to be invalidated by the
growing proliferation of national and commercial satellite services and
missile technology. National and commercial satellite services will
allow even regional rogue states to monitor U.S. deployments into
forward bases, and (unless one makes heroic assumptions regarding
advances in missile defenses) hold them at risk through the deployment
of large numbers of ballistic and cruise missiles. Senior U.S. military
leaders have already voiced strong concern over our ability to deal
with such a contingency. General Ronald Fogleman, then Air Force Chief
of Staff, observed that
Saturation ballistic missile attacks against littoral forces,
ports, airfields, storage facilities, and staging areas could
make it extremely costly to project U.S. forces into a disputed
theater, much less carry out operations to defeat a well-armed
aggressor. Simply the threat of such enemy missile attacks
might deter U.S. and coalition partners form responding to
aggression in the first instance.
The Navy's Chief of Naval Operations, Admiral Jay Johnson,
expressed very similar concerns when he declared
Over the past ten years, it has become evident that
proliferating weapon and information technologies will enable
our foes to attack the ports and airfields needed for the
forward deployment of our land-based forces.
I anticipate that the next century will see those foes
striving to target concentrations of troops and materiel ashore
and attack our forces at sea and in the air. This is more than
a sea-denial threat or a Navy problem. It is an area-denial
threat whose defeat or negation will become the single most
crucial element in projecting and sustaining U.S. military
power where it is needed.
Perhaps most revealing, however, are the comments of a retired
Indian brigadier general, who observed that future access to forward
bases
[I]s, by far the trickiest part of the American operational
problem. This is the proverbial ``Achilles heel.'' India needs
to study the vulnerabilities and create covert bodies to
develop plans and execute operations to degrade these
facilities in the run up to and after commencement of
hostilities. Scope exists for low cost options to significantly
reduce the combat potential of forces operating from these
facilities.
According to a recent study by the Defense Science Board, a
regional power's development of this kind of anti-access capability by
2010 is certainly plausible, even given relatively severe resource
constraints. According to some senior U.S. military leaders, North
Korea already possesses a significant base denial capability. And Iran
seems far more interested in fielding anti-access systems, such as
ballistic and cruise missiles, anti-ship cruise missiles, submarines,
and advanced antiship mines, than military systems such as tanks and
combat aircraft that proved largely ineffective for the Iraqis during
the Gulf war. Indeed, what Third World regime today is looking to
create its version of the Republican Guard? Furthermore, a major power
like China may not choose to increase its military leverage in East
Asia by aping the U.S. Navy's affinity for carrier battle groups.
Rather, Beijing might follow an asymmetric competitive path, developing
an ability to isolate Taiwan through long-range blockade forces
comprising precision-guided ballistic and cruise missiles, and close-
range blockade forces centered on submarines and advanced anti-ship
mines.
other emerging challenges
In its report to the Congress, the National Defense Panel
identified several other new operational challenges the U.S. military
will likely encounter in a post-transformational world. These
challenges were derived from an examination of major geopolitical,
military-technical, demographic, and economic trends. They include:
Projecting power far inland;
Defending U.S. assets in space, and denying enemy access
to space;
Defending the U.S. homeland from nontraditional forms of
attack, to include irregular force use of weapons of mass destruction
(WMD), and attacks on the information infrastructure; and
Evicting enemy forces from, and controlling, urban
terrain.
Correspondingly, U.S. forces might seek to exploit the potential of
what may be new forms of military operations, to include precision and
electronic strike, information superiority, and space control.
elements of a modernization strategy
A modernization strategy that supports military transformation must
take into account the fact that transformations typically take several
decades to play out. Indeed, today even those military systems that are
placed on a ``fast track'' for development and fielding often take ten
years or more to reach forces in the field. Considerable additional
time is required to determine how best to employ new military systems,
and to make the appropriate force structure adjustments. Periods of
military revolution also are characterized by an increased risk of
strategic surprise, such as that which occurred, for instance, with
submarine warfare early in this century, and which might occur again
with the onset of anti-access capabilities and competition in space.
Given these considerations, senior Defense Department leaders must
begin now to develop and execute a transformation strategy if the U.S.
military is to be prepared for the very different kinds of challenges
they see confronting the Armed Forces over the long-term future.
Finally, military revolutions typically find the effectiveness of
certain military systems in rapid decline. The displacement of the
battleship by the aircraft carrier is but one example. However, it is
far from clear in advance which military systems, operational concepts,
or new force structures will work, and which will not. Put another way,
not only will a transformation strategy need to be initiated soon, it
also will have to take into account military-technical uncertainty. How
might a modernization strategy account for this?
For a start, the military services will have to tap into rapidly
advancing technologies to develop new military systems that can be
applied within the framework of new operational concepts (e.g., long-
range precision strike) executed by new kinds of military
organizations. It is this combination of technology, emerging military
systems, new operational concepts and force restructuring that often
produces the discontinuous leap in military effectiveness
characteristic of military revolutions. Thus greater emphasis should be
placed on our R&D efforts in support of ``wildcatting'': experimenting
with a limited (but operationally significant) number of a wide variety
of military systems, as well as operational concepts, and force
structures, with the goal of identifying those that are capable of
solving emerging strategic and operational problems, or exploiting
opportunities, and of eliminating those which are not.
Wildcatting has been a hallmark of successful modernization
transformation strategies. For example, the 19th century military
transformation at sea saw wooden ships powered by sail yield to ships
constructed with metal hulls and powered by turbine engines. During
that transformation, among the 30 vessels of the Royal Navy fit to take
a place in the line of battle in 1870, there were three types of steam
engines, four screw arrangements, 16 varieties of armor protection, 18
hull models, and no fewer than 20 scales of armament. Similarly, during
the rapid advances in aviation technology that occurred in the 1920s
and 1930s, the U.S. military developed and flight-tested 12 medium and
heavy bombers, and nearly 70 attack, fighter and trainer aircraft.
None, however, were produced in great numbers.
This reveals a second element of a successful modernization
strategy for transformation: to avoid being ``locked in.'' Lock-in
occurs when limited resources are spent to purchase a system in large
numbers. The result both narrows the range of options (as fewer types
of systems are procured) for dealing with emerging challenges, and
locks the force into the current state of technological advancement.
Resources that could have supported exploring a wider range of systems
and sustaining continued advances in technology are, instead, locked
into the existing force. This may work well if we ``guess right''
(i.e., if the fielded force serendipitously turns out to be the
``right'' force to meet the post-transformation challenges), and if the
rate of technological advance slows. If not, we will have committed
ourselves to a single-point solution in a very uncertain world. We will
have either bought the wrong systems, or the ``right'' systems
prematurely--before the rapidly advancing technologies that enable them
have matured.
The U.S. Navy understood this well in the 1920s and 30s, during the
transformation from a battle fleet centered around battleships to one
focussed on carrier battlegroups. It was unclear whether naval aviation
would be optimized by spreading it throughout the fleet (e.g., having a
few aircraft on every surface combatant), or concentrated on aircraft
carriers. Moreover, it was also unclear what kind of carrier would be
optimal. Consequently, the Navy created options for itself by
wildcatting. It invested in three classes of carriers, but only
produced four carriers in all. It also experimented with aircraft on
carriers and on surface ships, and even tried working with dirigibles.
On the other hand, Britain's Royal Navy, which emerged from World
War I with a dominant lead in carrier aviation, chose to lock itself in
to existing technology by keeping its carrier force. The result is that
the Royal Navy had to absorb operations, maintenance and personnel
costs, which limited funding for R&D on naval aviation (which was
progressing rapidly), and on new carriers that might have optimized the
potential of air power at sea. Moreover, Royal Navy carriers
depreciated rapidly in effectiveness as more powerful naval aircraft
(requiring bigger carriers) came on the scene. The Royal Navy also saw
U.S. Navy and Imperial Japanese Navy, who entered the competition in
naval aviation at a much later date, become dominant in this new form
of warfare.
Not only has wildcatting been an effective element of a
modernization transformation strategy within Services, but increasingly
among them as well. Thus the Army, Navy and Air Force each had
ballistic missile programs in the 1950s. The Air Force program led,
ultimately, to the Minuteman ICBM, a key element of the U.S. nuclear
strike mission force. The Army program was instrumental in the birth of
the space program, and the Navy program led to the Polaris submarine
and the nuclear ballistic missile submarine force, a cornerstone of
U.S. nuclear deterrence.
The end result of each of these wildcatting efforts was the
creation of strategic ``options'' on a range of military capabilities.
These options could be used both to dissuade prospective competitors
from resuming a high level of military competition and, in the event
dissuasion or deterrence failed, exercising those options to prevail in
the competition itself. It is important to note that creating such
options need not involve a defense budget ``train wreck.'' Recall that
the U.S. military developed the foundation for strategic aerial
bombardment, the carrier navy, modern amphibious warfare, and
mechanized air-land operations during the relatively lean budget years
of the 1920s and 1930s. What it does imply, however, is a different set
of strategic--and budget--priorities.
For example, it is not yet clear how the military will surmount the
``anti-access'' challenge to power-projection. A solution may be found
in Air Force long-range aerospace precision-strike operations. Or
strikes from a Navy task force comprising a ``distributed'' capital
ship (i.e., from carriers, arsenal ships and Trident ``stealth
battleships'' fitted with hundreds of vertical launch systems for long-
range PGMs, all linked by an expanded version of the Navy's Cooperative
Engagement Capability battle-management network and Marine Hunter
Warrior ``infestation'' forces) may be critical to defeating enemy
anti-access forces. Perhaps a critical role will be performed by highly
networked, distributed Army forces employing long-range missiles,
dispersed air and missile defenses, and unmanned combat aerial vehicles
(UCAVs). Or it may be that a combination of these capabilities is
needed to meet the challenge, or perhaps something quite different. Our
modernization strategy must provide for an opportunity for the Services
to experiment--alone and in combination--with a wide variety of systems
in an attempt to solve this problem before it emerges as a threat to
our interests.
Unfortunately, the administration's modernization effort seems to
be at odds with historical precedent. The Defense Department's FYDP
proposes ramping up serial production of a relatively few systems, thus
exacerbating the lock-in effect, while cutting RDT&E funding by roughly
17 percent in real terms over the FYDP, thereby reducing opportunities
to engage in wildcatting.
Wildcatting is often informed by a vigorous level of field
experimentation. Properly done, such experimentation can help reduce
uncertainty by determining what systems and forces are best able to
meet emerging operational challenges. Supporting experimentation and
innovation in a period of great change and uncertainty also implies a
heightened tolerance of honest failure. If a ``no mistakes'' approach
to transformation is adopted, the result will likely be a smaller, but
similar, U.S. military, as strong incentives will exist to deviate as
little as possible from what is ``proven'' to be effective in today's
military. In effect, the misplaced desire to maximize efficiency may
well crowd out the innovation that will enable transformation.
Having said this, what remains unclear is how several of the major
pillars of the Defense Department's current modernization program will
help the military meet emerging operational challenges. If forward
bases, ports and airfields are at high risk of destruction or pre-
emption early in a conflict, how will we forward deploy our relatively
short-range tactical air forces? Our heavy digitized divisions? Will we
be able to move our new class of carriers through choke points like the
Strait of Hormuz, or even the Taiwan Strait, at an acceptable risk? Yet
our modernization program calls for the military to spend tens--and in
some cases--hundreds of billions of dollars to deploy new tactical
aircraft, upgrade our tank fleet and launch a new class of carriers.
There is a profound disconnect here. As our military leaders have
said, future adversaries will almost certainly present us with a very
different set of problems than we saw over eight years ago in the
Persian Gulf. In pursuing the current modernization strategy, we may be
locking ourselves in to military capital stock that will depreciate
rapidly in value far in advance of its expected life cycle. At the same
time we are also crowding out investment in wildcatting opportunities,
such as going forward with the arsenal ship and Trident conversion,
fielding a dramatically different Army division, exploring more fully
the systems that could enable the Marine ``Hunter Warrior'' concept,
and facilitating the Air Force's transformation to a ``space and air
force.'' In short, our current modernization strategy risks locking us
in to single-point solutions that assume away uncertainty, instead of
investing in options that hedge against it.
A transformation modernization strategy should also take into
account the need to create incentives for industry to support the
military's efforts in this area. The recent consolidation of the
industry has actually reduced such incentives. Fewer competitors means
less competition, and hence less innovation. Today in the name of
efficiency the Defense Department has attempted to settle on a
relatively few number of systems and to produce them in fairly large
quantities, so as to minimize cost. Defense firms have strong
incentives to lock in long production runs on these relatively few
systems, thereby guaranteeing a steady stream of revenue, and little
incentive to experiment with their own R&D funds to develop new
military systems. A transformation modernization strategy would place a
higher priority on providing a wider range of systems to our
commanders. However, industry consolidation has made this a difficult
proposition, and it is not clear what approach to modernization might
undo its more pernicious effects.
Over the past two centuries the commercial sector has played an
important role in successful transformation modernization strategies.
Commercial advances in steam engines helped fuel the naval
transformation of the nineteenth century. The rapid rate of
technological growth in aviation, radio, and mechanization in the
commercial sector during the interwar years helped underwrite a
transformation in war. Joint Vision 2010 declares that ``the emerging
importance of information superiority will dramatically impact how well
our Armed Forces can perform its [sic] duties in 2010.'' Consequently,
a modernization strategy for transformation will have to exploit the
rapid advances that are being made in the commercial sector in
information technologies.
This should not be surprising. Each military transformation over
the last hundred years or so has seen a corresponding transformation of
the defense industrial base, as new firms with new skills have entered
the field (much as new military systems and organizations characterize
transformation).
Moreover, any transformation modernization strategy also should
explore how we might tap into the ``dual-use'' capabilities being
created in the commercial sector. For example, the armies of the mid-
nineteenth century exploited the commercial sector's construction of
railroad and telegraph networks to boost their effectiveness. So, too,
should we consider how we might best exploit the ``information
railroad'' being put into space, the fiber optic networks being created
on earth, and the ``armor plating'' being developed by the commercial
sector to defend its information assets, among other things.
A core competence of our transformation modernization strategy will
be our ability to dominate time-based competition. With the
technologies that underwrite transformation being far more broadly
available than those that supported the nuclear transformation (i.e.,
nuclear weapons and ballistic missiles), it will likely be increasingly
important to translate commercial technologies into military
capabilities more rapidly and effectively than our enemies. Moreover,
with geopolitical and military-technical uncertainty being so high, we
may have relatively little warning of the appearance of post-
transformational threats. The more our transformation modernization
strategy allows us to avoid ``lock in,'' the more wildcatting we do to
create an array of options, and the more innovative our defense
industrial sector, the greater will be our ability to meet the post-
transformation threats to our security. As noted above, however, our
defense modernization effort actually promotes lock-in, and discourages
wildcatting. Compounding the problem, the time elapsed from program
inception to initial operational capability often stretches beyond a
decade.
To be sure, a transformation modernization strategy will require
additional funding. The National Defense Panel, in advocating a
transformation strategy, called for $5-10 billion a year to begin the
process. Of course, some of this funding might be offset if the Defense
Department avoids premature lock-in to serial production of new systems
(save in those instances where such systems offer a true ``leap ahead''
improvement in military effectiveness), and as military system
divestiture candidates are identified. To date, however, promising new
capabilities are being put on the back burner or, worse yet, cancelled
in an attempt to sustain a modernization strategy that cannot likely be
maintained without a major increase in modernization funding. Even if
fully funded, however, such a strategy could fail precipitously when
confronted by post-transformation challenges.
Conclusion
It is likely that at least some funding will have to be added to
DOD's O&M and military personnel accounts in FY 2000 to address near-
term readiness problems. However, DOD's procurement plans should be
subjected to a rigorous strategic review. The purpose of such a review
should be to determine not only how well major new modernization
programs contribute to meeting today's challenges, but also how well
they will contribute to meeting the emerging threats that will
characterize the post-transformation security environment.
The administration's current modernization plan (which the Defense
Department would apparently like to accelerate) would see us purchasing
major new weapons platforms with life spans measured at 20-30 years or
longer, without having determined how effective they might be against
emerging threats. To be sure, we may continue to rely heavily on our
legacy forces--tanks, short-range tactical aircraft, and carriers--far
into the future. On the other hand, we will almost certainly need to
develop new kinds of systems and forces needed to sustain our military
effectiveness. What we do not need is to put the modernization budget
cart before the strategy horse. Rather than investing in modernization
along traditional lines, we need to take counsel of our own words: we
are living in revolutionary times, both in a geopolitical and in a
military-technical sense. We must take the change, the uncertainty, and
the opportunity that such times offer in crafting a budget strategy to
modernize the U.S. military.
What this means is that, before proceeding with its modernization
strategy, the Defense Department needs to explain to Congress and the
American people how it plans to meet tomorrow's challenges, as well as
today's. A collaborative effort by DOD and congressional leaders
provides one example of how to do just that. Last year Atlantic Command
was given the responsibility for joint experimentation. The goal of
such experimentation should be to determine how the U.S. military can
best organize, train, and equip itself to deal with the very different
challenges noted above before they emerge, and before we ramp up our
procurement spending. That will mean placing a wide range of military
systems in the hands of commanders. An accelerated program of joint and
Service experimentation focused on future challenges can best inform
how U.S. forces will need to operate, and what mix of forces will be
needed. This, in turn, can provide DOD and Congress with a far better
sense of those current programs that should be sustained, those that
should be terminated or put on the back burner, and those new military
systems whose development should be accelerated.
In summary, it is neither necessary, nor prudent, to accelerate the
modernization of U.S. forces as currently called for in the QDR, or in
the Joint Chiefs' proposal. The key is to fund a robust--but far from
``budget busting''--program of vigorous experimentation (to include
prototyping some systems not in the current plan) to ensure that both
today's and tomorrow's forces will be ready for the challenges that
will confront them.
Mr. Chambliss. Thank you, Dr. Krepinevich.
Mr. Zoellick.
STATEMENT OF ROBERT B. ZOELLICK
Mr. Zoellick. Thank you, Mr. Chairman. I am pleased to be
here with you. I appreciate the time you have taken personally.
I will summarize my written statement and ask that it be put in
the record.
Mr. Chairman, there has been a significant disconnect
between the Pentagon's security strategy and the defense
budgets that are supposed to fund that strategy, and frankly,
one or the other is going to need to change if plans and
resources are going to be aligned. Now, estimates of the size
of this gap vary, but all of the numbers are very significant.
Costs have been boosted by the increased pace and frequency
of so-called small-scale contingencies, another one of which
you are debating today. Over the fiscal year 1990 to '97
period, the U.S. military has deployed in 45 of these small-
scale contingencies, compared to only 16 in the cold war. That
averages out for the Clinton administration to about one every
9 weeks.
Now in the face of this gap, the Pentagon has made an
understandable but troublesome choice of trying to fund present
needs at the expense of future capabilities. We are not
investing in the weapons and defenses that the United States is
going to need for the future. The administration's proposal for
increased defense spending, while welcome, leaves many
questions about the availability and allocation of future funds
for modernization.
The procurement allocation in this year's budget actually
falls $1 billion below the amount that was projected in last
year's budget, and as others mentioned here, the numbers for
research and development have fallen. Mr. Collins, I believe,
asked the question about how much of the $12.6 billion goes to
modernization. The number is about $3 billion, but that $3
billion is primarily for spare parts and training munitions, so
you are not really buying modernization.
Now, a failure to modernize is especially risky because of
the aging of the military's current weapons. Frankly, we have
been living off the planes, helicopters, tanks and other assets
that we purchased in the buildup of the late 1970's and 1980's.
And wheels come off this equipment, all about the time around
2010, requiring sizable purchases of either replacement or
successor weapons.
As one Marine general said to me, if parents are
uncomfortable sending their sons and daughters to college in
25-year-old cars, what would they think about sending them into
battle with 25-year-old helicopters? The average age of all Air
Force aircraft will be 20 years in fiscal year 2000. That is up
from 13 years in 1990, and the average age in 2010 is projected
to be 28 years.
Old equipment costs more to maintain and is out of service
longer, pulling even more money from investment to fund current
operations, the nature of Ms. Baldwin's question. Last year,
Under Secretary of Defense Gansler called this downtrend a
death spiral. General Shelton referred to it as a nose dive.
Those are strong words.
The squeeze on modernization and procurement will make it
hard or perhaps impossible to invest in the so-called
Revolution in Military Affairs, the point that Dr. Krepinevich
was talking about here, an approach that would draw on a
combination of sophisticated sensors, information technology,
real-time communication and precision target weapons that could
assure U.S. military dominance into the future.
I just came from spending 5 years in the financial sector,
which I rejoined after leaving the Bush administration, and one
thing that was striking to me is that U.S. companies that did
not incorporate the revolutionary advances in information and
communications technology were swept away with surprising
rapidity. A possible winning strategy by potential enemies is
to invest asymmetrically. They don't have to win everywhere.
They have to focus on the development of new weapons, to
develop a particular location or type of conflict, even for a
limited purpose or point in time, and they only need to win
once.
The urgency of today's needs is also likely to drive out
investment in homeland defense to meet the increased threat
that more enemies of different types will have the capabilities
to wreak catastrophic destruction on the United States. The
failure in preparedness will come around the end of the next
decade, a period when the Pentagon forecasts stronger and more
regional adversaries. And as this committee knows well, that is
also the time that the baby boom generation starts to retire,
increasing the demand for entitlement expenditures.
So it is imperative that the United States take a longer
term view about its defense strategy and budgetary planning.
The United States has been living off depreciating assets and
taking from investments that are supposed to buy the means to
protect the country in the future. It is not only a question of
whether we spend as the consensus is building, but asking the
question about how we spend.
Now my statement offers eight suggestions. First, to assist
long-term planning, I suggest that the executive and the
Congress state a policy of devoting a minimum percentage of
GDP, at least 3 percent, for defense over the next decade.
Now, I recognize that any floor involves an element of
arbitrariness. Nevertheless, given the critical modernization
choices the country faces over the next 10 years, I think such
a figure would give important guidance for planning. And given
the fact that our current budget is about 3 percent of GDP, I
don't think this minimum is excessive. At some point, a policy
of doing more with less just becomes doing less with less.
Second, as a general matter, the U.S. defense strategy
should seek to align our military strength with our Nation's
strength, its technology and its people. The United States
should harness its skill at developing new technologies and,
equally important, applying these technologies.
Third, the United States should accelerate the acquisition
of a transformational RMR force, which will lead the way for a
gradual recapitalization of the defense base and force
structure that draws on these new capabilities. Now, in many
respects technology is the easy part. The challenge is learning
how to integrate it into operational concepts. In June 1940 the
French Army had more and better quality tanks than the
Wehrmacht, but the Panzer leaders knew how to use the
blitzkrieg to overwhelm France within weeks.
Fourth, the United States will need to complement its
ability to project power with the capability to defend America.
The country should be developing an end-to-end strategy to
counter weapons of mass destruction, missile, and information
technology threats both to the U.S. forces and to the homeland.
A comprehensive plan should include better intelligence
systems, covert and special operations capabilities, steps to
lower the likelihood of penetration, preemptive options,
counterforce capabilities, and an integrated theater missile
and national missile defense systems as well as nuclear
deterrent.
Fifth, to achieve integration and to use limited resources
effectively, U.S. defense planning is going to have to become
more joint, integrating all the services to the development of
strategy, plans, procurement and budget. Now, today the
military regional commands are committed to joint operations,
but joint budgeting is still an experiment at best.
Given the uncertainty and diversity of potential threats,
the U.S. military probably need fewer assets but ones which can
handle more missions. The strategic procurement goal should be
to develop a capability which could draw on any weapon from any
platform to support any unit, regardless of service or
location. Whether a target is artillery, a SAM or a SCUD site,
or a terrorist unit or a weapons of mass destruction facility,
and whether it is identified by satellite or airborne radar or
marine patrol, the United States should be able to destroy it
with precise, highly destructive weapons, whether from a
submarine an arsenal ship, unmanned or standoff aircraft, or a
more agile armored vehicle.
Sixth, the United States is going to need to draw more from
each person. To supplement and complement the regulars, the
United States will need to draw on the National Guard and
Reserve forces effectively, especially for homeland defense in
smaller scale operations. Pay should be targeted to officers,
the senior enlisted ranks and people with critical skills.
Career links, pension systems and health care provisions are
going to have to adjust as well.
But the administration also needs to recognize that the new
compact with the military will have to involve more than money.
Especially in a world of frequent but often long-lasting peace
operations, a voluntary military will need a balance of
opportunities, rewards and considerations for families along
with sacrifices.
Seventh, it is important that the executive and Congress
revisit the possibility of saving money by cutting
infrastructure.
Then, eighth, the Pentagon can still a learn a great deal
from the private sector about cutting costs. Like other
professional organizations, the Defense Department must focus
on its primary missions and outsource supporting activities.
America has the best military in the world. But it also has
the greatest number and the hardest missions. Moreover, its
unmatched power is based on equipment that has finite life
spans, and at some point the existing assets are going to have
to be replaced.
Now, at times in the past the United States and other great
powers have taken their security for granted. We, and they,
paid for hubris or complacency many times over. Some powers
never recover from their mistakes.
After the Vietnam war, a group of reforming officers trying
to learn from the past published a book entitled ``America's
First Battles.'' Each chapter described a defeat, America's
traditional way of starting wars.
Now, the nature of war and weaponry today, combined with
the present world of alliances, coalitions and partnerships,
all underpinned by the United States, no longer affords America
the leeway to bounce back from early defeats. Having learned
the lesson of America's first battles, the U.S. military was
prepared to win the Gulf war in its first campaign. But in the
past, great military victories have made it hard for countries
to shake off self-satisfied attitudes and to prepare for the
next challenge.
Today America's military is being run ragged in reactive
operations of all types in all quarters of the globe. If the
U.S. defense strategy and budget remains preoccupied with the
current environment, the country will be risking the world's
stability, our home territory and population, and the young men
and women who put their lives on the line to safeguard our
country. Most of all, it will be risking America's greatest
cause, the future.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Zoellick follows:]
Prepared Statement of Rober B. Zoellick, President and CEO, Center for
Strategic and International Studies
Chairman Kasich, Representative Spratt, and Members of the
Committee:
I am pleased to have the opportunity to appear before the Committee
today to comment on national security strategy and the defense budget.
After making initial summary points, my statement addresses three
topics:
The threats the United States security strategy needs to
address.
The risk of a ``defense budget train wreck''.
Suggestions for the Committee's consideration.
A. The Danger
The U.S. defense spending strategy will lead to a dangerous future.
There has been a significant disconnect between the
Pentagon's security strategy planning and the defense budgets that were
supposed to fund the strategy. One or the other needs to change if
plans and resources are going to be aligned.
Estimates of the size of the expected gap vary. By way of
illustration, the Center for Strategic and International Studies (CSIS)
has estimated that in FY2000 the Pentagon needs a budget of about 3.8
percent of GDP to fund the operations, maintenance of quality, and
modernization of the force associated with the Defense Department's
Quadrennial Defense Review strategy; in fact, the United States is
spending about 3.0 percent of GDP on defense, and the Pentagon's 1998
5-year budget plan proposed a reduction to about 2.6 percent by FY
2003. This mismatch produces shortfalls estimated in a range of $20
billion to $100 billion a year.
In the face of this gap, the Pentagon has made the
understandable but troublesome choice of trying to fund present needs
at the expense of future capabilities. The extra expenditures in the
administration's most recent proposal are focused primarily on just
keeping up with today's requirements. As a result, the United States is
creating a problem different from the hollow force of the 1970's; it is
a failure of preparedness. We are not investing in the weapons and
defenses the United States will need for the future.spending, while
welcome, leaves unanswered many questions about the availability and
allocation of future funds for modernization. Indeed, the optimistic
assumptions about ``savings'' and offsetting sources increase the risk
that R&D and procurement will continue to be crowded out. It is worth
noting that the procurement allocation in this year's budget actually
falls $1 billion short of the amount projected in last year's budget.
A failure of preparedness is especially risky because of
the aging of the military's current weapons. We have been living off
planes, helicopters, tanks, and other assets purchased in the buildup
of the late 1970s and 1980s. The wheels come off these weapons at about
the same time--around 2010--requiring sizable purchases of either
replacement or successor weapons. As one Marine general said to me,
``If parents are uncomfortable sending their sons and daughters to
college in 25-year old cars, what will they think about sending them
into conflict in 25-year old helicopters?'' Old equipment costs more to
maintain and is out of service longer, pulling even more money from
investment to fund current operations as time goes on.
The squeeze on modernization and procurement will make it
hard or perhaps impossible to invest in the so-called Revolution in
Military Affairs (RMA), a combination of sophisticated sensors,
information technology (IT), real-time communication, and precision-
targeted weapon systems that could assure U.S. military dominance into
the future. U.S. companies that did not incorporate the revolutionary
advances in information and communications technology were swept away
by their competition with surprising rapidity. A possible winning
strategy by potential enemies is to invest ``asymmetrically''--to focus
on the development of new capabilities to dominate a particular
location or type of conflict. They only need to win once.
The urgency of today's needs is also likely to drive out
investment in a ``homeland'' defense to meet the increased threat that
more enemies, of different types, will have capabilities to wreak
catastrophic destruction on the United States.
The failure in preparedness will come around the end of
the next decade, a period when the Pentagon forecasts stronger and more
threatening regional adversaries. It will also be the time when the
baby boom generation moves into retirement, increasing the demand for
entitlement expenditures.
Given the time it takes to develop, test, and procure new
weapons systems, the United States must be acting now to prevent a
``defense train wreck'' that would occur by 2010, or earlier. (CSIS has
produced an extensive briefing, which I would be pleased to make
available to the Committee, that explains the case behind these points
in detail.)
B. Threats and Defense Strategy
The U.S. defense strategy should begin with an assessment of the
threats that we must address. The amount the United States spends on
its security--and how it does so--must of course be related to the
risks the country faces.
We are operating in an era of flux, and there is considerable
uncertainty about the security challenges for which we must plan. There
is no doubt that the United States is by far the dominant power in the
world. There are concerns, however, about how that power translates
into capabilities to deal with current or potential threats to our
country and its allies. The Pentagon must prepare for a broad range of
possible missions in an environment that is more complex and less
predictable.
The U.S. defense strategy needs to account for three security
challenges.
First, shifting relations among large powers can generate fears or
challenges to peace. Thucydides ascribed the cause of the Peloponnesian
War to the rise of Athens and the fear it inspired in Sparta.
Throughout the subsequent centuries, including at the start of this
one, people were forced to relearn the lesson that the peace of the
moment can be shattered by the rivalries among powers; these
competitions have been and might be again fueled by the perceptions of
danger stimulated by shifts in relative influence. To take an example
from last year, India's nuclear test, which triggered Pakistan's
nuclear breakout, can be traced in part to India's perception of
China's ascendancy.
Second, nations might threaten or attack neighbors in order to
dominate a region of interest to the United States. Aggression in the
Persian Gulf, the Mideast, or Northeast Asia would trigger chain
reactions of destruction that would draw in America.
Third, the United States will have to determine the need--and its
capacity--to intervene when local killers incite large-scale violence,
whether within a society or against others. The violence might be
driven by ethnic or religious hatreds, a design to divide and conquer,
a scheme to control narcotics trafficking, or moves to dominate
organized criminal networks. The result in each case is a breakdown of
civil society and the intimidation of and assault on innocent people.
Chaos and anarchy may create spillover dangers to others, including the
United States. Some transnational groups even seek to take over
sovereign states as a base for operations. Fanatics and thugs may
target America--out of resentment, to make money, or to keep the United
States away from their home turf.
Over the FY 1990-97 period, the U.S. military deployed to cope with
45 so-called Small Scale Contingencies (SSCs), as compared to only 16
during the whole cold war. During the Clinton administration, the
United States has committed U.S. forces to a new deployment for these
contingencies, on average, once every nine weeks. Not only has the
number of SSCs increased but the durations were extended, often lasting
years. The unexpected and uncertain nature of these operations,
combined with the pace and frequency of operations (optempo), places
enormous stress on personnel.
The weaponry that can be used by or against the United States in
the context of all three of these challenges is changing rapidly.
One development is the so-called RMA, an effort to combine new
capabilities to radically change warfare in a fashion analogous to the
way IT transformed the business world. The proponents of these
capabilities foresee networked forces relying on real time intelligence
that will dominate battlefield awareness. The forces would have greater
range, speed, flexibility, and lethality; they also would be designed
to complement one another more effectively.
A second development is the increased availability of weapons of
mass destruction. In particular, nuclear and biological weapons supply
a strategic capability to cause enormous damage and paralyze opponents.
As recently reported by the Rumsfeld Commission established by the
Congress, the United States and its allies either are or will soon be
vulnerable to attack by ballistic missiles, which could be armed with
weapons of mass destruction. Even without missiles, small terrorist
cells--whether or not backed by states--can use these weapons to
frightening effect.
Third, opponents and even hackers may try to target America's
information infrastructure, which is increasingly central to the
provision of finance, power, communications, transportation, public
health, and indeed basic needs of our society. (Just consider the
effects on parts of local Maryland and Virginia after the recent ice
storm blacked out electricity services for a matter of days.)
Although the United States dominates all others in its capability
to use most of these weapons (except biological and chemical),
potential opponents might prevail with so-called asymmetric strategies:
achieving superiority in a particular locality or with particular
weapons systems, even if only for a limited purpose or time. This
superiority might place the United States in checkmate, preoccupy us,
or raise the stakes of conflict to a point that America is fearful of
action.
To cope with these security challenges, given these developments in
weaponry, the United States' defense strategy should concentrate on
three core capabilities.
First, the United States needs to be able to defend its homeland,
including from missiles and catastrophic terrorism. Except for nuclear
scenarios, the country has been fortunate not to have had to think
about this topic for many years. If the United States does not have
this defense, the fear of retaliation is likely to make the United
States increasingly unwilling to project power to prevent or counter
other threats. All potential enemies need to be reminded of the young
United States' resolve: ``Don't tread on me.'' There are steps the
country can take to limit the prospects of successful attack, which
when combined with enormous retaliatory capabilities, will help deter
potential opponents.
Second, the United States needs modern and well-trained forces, in
sufficient size, to project power rapidly to key regions of the world
in the face of possible countermoves of opponents. The very existence
of this capability will help America to deter challenges to vital and
important interests; the United States wants to maintain enough
superiority to dissuade potential rivals from even initiating a serious
competition.
Third, the United States should seek, over time, to transform its
key alliance relations into stronger partnerships. Both our NATO and
Pacific allies can be integrated to a much fuller degree to better
address problems of weapons of mass destruction, missiles, terrorists,
and other threats. In addition, the United States and its allies need a
combined effort to maintain peace and stability in regions of
traditional national interest.
America should also promote its NATO allies' capability and will to
handle local issues of conflict--for example in Bosnia and Kosovo. The
United States will need the ability to act in concert with others on
these and other contingencies--including operations providing
humanitarian assistance, disaster relief, and peacekeeping--but these
missions should not divert the country's preparations and resources
from primary threats. Our alliance strategy must lead our partners to
accept greater responsibility for these operations.
At times, unilateral tactics will seem much more appealing than
working and compromising in order to lead coalitions; indeed, in some
cases, the United States will have to act alone. Yet the United States
will not be able to deal with all--or even many--of tomorrow's
challenges by itself. The United States should aim to extend its
influence and strengthen its reach by drawing others to our standard.
C. The ``Defense Budget Train Wreck''
The United States is on its way to a ``defense budget train
wreck.'' One expert summarized the outlook as follows:
We are trapped in a ``death spiral.'' The requirement to
maintain our aging equipment is costing us more each year * * *
But we must keep the equipment in repair to maintain readiness.
It drains * * * resources we should be applying to
modernization * * * So, we stretch out our replacement
schedules to ridiculous lengths and reduce the quantities of
the new equipment we purchase--raising their costs and still
further delaying modernization. Compounding this problem is the
increased operations tempo * * * which more rapidly wears out
the old equipment. And, if this weren't bad enough, we must
deal with the uncertainty of unanticipated crises such as the
Y2K computer problem * * *
The rhetoric of ``death spiral'' is not from a hawkish critic of
the administration; these are the observations, from August of last
year, of Jacques Gansler, the Under Secretary of Defense for
Acquisition & Technology, to the administration's own Defense Science
Board.
Last September, General Shelton, the Chairman of the Joint Chiefs,
told the Congress:
In my view, we have ``nosed over'' and our readiness is
descending. [W]e should apply corrective action now. We must
``pull back on the stick'' and begin to climb before we find
ourselves in a nosedive that might cause irreparable damage * *
*
Death Spiral. Nosedive. These are strong words. What is going on?
After all, the administration's February 1998 budget request was
designed to ensure the implementation of the administration's 1997
Quadrennial Defense Review (QDR). The QDR plan and budget was supposed
to ensure security well into the future based on annual budgets of
about $260 billion (in constant FY99 dollars). The temperature of the
Pentagon appears to have risen intensely between last February and
August/September.
I suspect that two factors contributed to the administration's
recognition that its own QDR defense strategy was unsustainable under
its own budget. First, the Pentagon realized that its earlier forecasts
of costs for operations-maintenance and acquisition were unrealistic, a
conclusion supported by 50 years of historical data on costs. Second,
the administration had not been willing to make hard choices to limit
the overall budget, and relied instead on ``savings'' from factors such
as improved purchasing power because of falling inflation. The
administration's most recent proposal for increased spending appears to
repeat this technique by ``funding'' new expenditures through
assumptions about lower inflation and declining oil prices.
It is expensive to have large, ready, active, and deployed forces.
It is unrealistic not to budget for operations like Iraq and Bosnia. If
the U.S. security strategy is going to be viable, the funds need to
match the plans.
The point of these observations is not to criticize honorable
public servants seeking to balance multiple concerns. After all, the
Pentagon was willing to admit that the country faces a serious problem
that no one likes to hear about. In assessing future defense needs,
however, the lesson needs to be that we must examine budgetary
components carefully to analyze the assumptions and possible
disconnections among various interrelated items.
1. operations & support
The primary budget item for the Department of Defense is Operations
and Support (O&S). These funds pay for the salaries and benefits of all
military and civilian personnel as well as the operation and
maintenance of the Armed Forces and military installations. In FY 1998,
this category accounted for 65 percent of the Department's budget and
was expected to fall, under the Pentagon's 1998 plan, to 62% by FY
2003. In fact, the newest Pentagon proposal would increase this
percentage to 66% by FY 2004. Given the likelihood that O&S share will
increase, not decrease, we must expect that these expenditures will
crowd out investment, modernization, and procurement.
After cutting back the size of forces to accord with the Bush
administration's 1991 Base Force, the Clinton administration's two
planning reviews (1993, 1997) led to relatively modest cuts in
numbers--except for naval forces. Given the many demands on the U.S.
military around the world--including a heightened optempo and extended
deployments--the reluctance to cut personnel further is understandable.
But then the budget must fund them.
Moreover, for the past 40 years, the O&S costs have risen (on a per
capita active-duty person basis) at an annual rate of 1.3 percent. In
fact, the percentage growth rate increased slightly during the Clinton
administration. Pay hikes and readiness increases will push it up
further, as will the demands for maintaining older equipment, covering
health care costs for an aging beneficiary profile, and performing new
functions (e.g., drug interdiction, on-site nuclear inspection,
environmental tasks).
2. infrastructure
The reductions in the Pentagon's infrastructure--its base
capacity--did not keep pace with the force structure changes made at
the end of the cold war. In FY 1997, the Department's infrastructure
base occupied roughly 40,000 square miles, an area the size of
Virginia.
Last year, the Pentagon estimated that it had excess base capacity
of 23 percent at 259 major military installations. According to the
Defense Department, this extra capacity would correspond to about 55
additional military bases.
The Congress is well aware of the sensitivity of base closings. The
successful 1988 Base Realignment and Closure Commission spawned three
more rounds, which unfortunately floundered when the Congress sensed
that the administration's actions in 1995 and 1998 undermined the
integrity and shared political burden of the process.
Given the breakdown of this process, any new savings would be
delayed until later years. It requires on average seven years from the
time a decision is made to close a base until net savings are achieved.
And while helpful, further reductions will not provide a ``magic
bullet'' to save the other accounts.
3. pricing the defense budget
As this Committee knows well, when government accountants cannot
cut personnel and infrastructure, they will be especially inventive
with pricing. This has been the case during the Clinton administration.
Working from President Bush's January 1993 budget projections for FY
1994-99, the Clinton administration has been able to ``save'' $119
billion. It turns out that an estimated 92 percent ($109 billion) of
those savings can be attributed to lower inflation, smaller pay raises,
and positive economic and defense industry variables generally outside
the ``control'' of Pentagon planners and budgeteers. I applaud saving
money through lower costs. I question, however, whether we can
reasonably expect more such ``savings'' in the future.
If we cannot--if low inflation estimates ``straightlined'' into
future operations and procurement plans do not hold--the current
defense budget planning will be ``underpriced''. The Pentagon either
will need more money or will have to cut back its plans for forces,
operations, or procurement.
4. from green to gray: old & aging hardware
The last account in this budgetary summation is RDT&E (research,
development, testing and evaluation) and procurement--the account that
buys the equipment. It has not fared well.
The United States military has been living off the assets it bought
in the 1980s (or even earlier). The ``procurement holiday'' of the
1990s will leave America with a bad hangover.
Consider a few examples:
The Air Force recently reported that the average age of
all its aircraft will be 20 years in FY 2000, up from 13 years in FY
1990. The average age is projected to rise to 28 years in FY 2010. (The
QDR posited a ``steady-state'' average age of 15 years, an assumption
clearly in trouble.)
From FY 1990 to FY 2002, there will have been large
increases (5 or more years) in the average age of strategic bombers
(average age of 28 years in 2002), the Abrams main battle tank (15
years), the Bradley fighting vehicle (14 years), and Apache helicopters
(13 years).
Of the ten major Pentagon weapons classes, seven will be
near or well in excess of their estimated service half-lives in 2002.
Moreover, in categories where the average age is forecast to
increase, but less dramatically, the difference is usually due to
cutting assets by removing the older ones; few new ones are added.
At times in the past, other administrations also deferred defense
expenditures, piling up problems for their successors. But the
particular danger this time is that the vast majority of the existing
military hardware will reach the end of its ``useful'' life almost at
once--about 30 or more years after the start of the last modernization
and procurement phase.
The implications for this graying military are enormous. As Marine
Corps Commandant Krulak stated before the Senate Armed Services
Committee:
Each successive year this equipment, much of which has
exceeded its projected service life, breaks down more often,
and must spend more time awaiting and undergoing repair. It is
lost to the unit for training. The associated maintenance costs
continue to rise * * * [W]e must take money from our
procurement, research and development, military construction
and quality of life accounts * * * In many cases we have passed
the point where this equipment has consumed more dollars * * *
than would be spent in procuring new equipment. Even within our
O&M accounts * * * money which would normally be dedicated to
training * * * is currently being spent to maintain this aging
equipment. It is a vicious cycle, and one that becomes
increasingly expensive to stop with time.
One could add to this rueful account that the aging equipment has a
higher incidence of failure or accidents and leaves less flexibility
for operational planners who must prepare to adjust to unforeseen
events. For example, the 1997 report of the National Research Council
Committee on Aging of U.S. Air Force Aircraft expressed serious
concerns about aircraft structural safety in the future.
Those reports are based on real-life problems. Imagine that as you
check in at an airport the airline announces that for the past six
months your 27-year old plane has been flying at twice the FAA's
recommended use rate--but that new aircraft are expected in 8 to 13
years. That was what happened to a C-130 squadron in Germany in 1996-97
after it had been employed continually in Bosnia and the Gulf; it had
to be supplemented by a North Carolina squadron that was supposed to be
available in the United States and devoted to fly the 82nd Airborne
Division at a moment's notice.
This budget strategy is leaving a dreadful legacy. When future
defense officials are compelled to act to meet replacement or
modernization needs, they are likely to choose equipment that can meet
quick near-term necessities and be delivered quickly. They will have to
continue to mortgage the future.
Investment in new capabilities--for example those associated with
RMA, missile defense, or other anti-proliferation strategies--is likely
to be squeezed tightly.
5. in sum
In sum, the U.S. defense budget has lived off past investments in
equipment and borrowed from the future in a vain effort to keep up with
present needs. As it has become increasingly clear that even these
``future-is-now'' budgets could not fund present operations, the
procurement and modernization account has received more and more IOUs.
As these liabilities have grown, net worth has shrunk.
Furthermore, the defense budget strategy has had little left to
fund programs that the United States will need to remain the world's
leading-edge force and to counter the threats in this new environment.
The consequences of a persistent mismatch between plans and
funding, as well as between operations and funding, will be serious.
This path will compel America to choose between an obsolete force,
unable to modernize itself to meet new threats safely, or a smaller
military unable to meet U.S. obligations around the world. Even worse,
the U.S. military could turn out to be both overstretched and out-of-
date.
D. A Suggested Approach
It is imperative that the United States take a longer-term view
about its defense strategy and budgetary planning. I recognize that
this Committee faces many demands and is asked to treat numerous
problems as ``top priority.'' If the United States assumes a near-
sighted posture toward its security, however, the type of threats and
weapons we face today could overwhelm America's safety before the
country could rely on its traditional resilience to catch up.
Others may reasonably debate questions about the size of the
defense shortfall and forecasts of costs and savings. You will hear
different perspectives about whether the United States should invest in
the RMA, and if so, how it should do so. Experts will also have various
ideas about how to handle homeland defense under these new
circumstances.
The fundamental problem, however, cannot be avoided: The United
States military has been both living off depreciating assets and taking
from investments that are supposed to buy the means to protect the
country in future. This is a failure of preparedness.
I will close with eight suggestions to help remedy this troubling
situation.
First, to assist long-term planning, I suggest that the Executive
and the Congress state a policy of devoting a minimum percentage of
GDP--at least 3 percent--for defense over the next decade. I recognize
that any such floor involves an element of arbitrariness. Nevertheless,
given the critical modernization choices the country faces over the
next ten years, such a figure would give important guidance for
planning. This percentage would require the Pentagon to spend smarter,
not just proceed with more of the same. It might also compel the
Executive to weigh more carefully whether to commit the military to
more current operations that will squeeze out modernization; if an
administration wants more resources for smaller scale operations, it
should make the case for them to the Congress so the money for them
will be on top of the core security needs.
In return for this long-term funding commitment, the administration
should overhaul its QDR plan. The Pentagon's statements last year, and
the administration's FY2000 budget request, are acknowledgements that
the administration has been unable to fund its own defense plan.
Piecemeal increases in funding run the risk of failing to remedy
faulty, underlying assumptions. The mistaken assumptions are likely to
lead to a continuing underestimation of demands for current spending,
thereby creating an ongoing pressure to fund present needs out of
resources that should be allocated to the future.
Since the current defense budget is about 3 percent of GDP, my
proposed minimum certainly is not excessive. Indeed, this is the lowest
level since 1940, before we faced up to a different preparedness
challenge. At some point, a policy of doing more with less just becomes
doing less with less. We have reached that point.
Second, as a general matter, the U.S. defense strategy should seek
to align military strength with the nation's strengths: its technology
and people. The United States should harness its skill at developing
new technologies and, equally important, applying these technologies
through superior doctrines, operational methods, platforms, and weapons
systems. America must also draw on and sustain the high quality and
professionalism of the all-volunteer force with its heavy emphasis on
rigorous training and military education. The aim should be to have
more teeth and less tail.
Third, the United States should accelerate the acquisition of a
``transformational'' RMA force, which will lead the way for a gradual
recapitalization of the defense base and force structure that draws on
these new capabilities. The U.S. military needs to have the ability to
identify diverse types of targets with a variety of sophisticated
sensors and then to destroy them with extreme precision from any number
of platforms at long range. As a corollary, a fully integrated and
networked RMA force can be smaller, quicker, and should need fewer
sorties to destroy targets. It will not need the long time for building
up forces which a shrewd foe, after observing Desert Storm, will
prevent; it should be less dependent on distant bases that may not be
available if enemies have missiles and weapons of mass destruction and
terror.
This transformation will take time. In many respects, the
technology is the easy part. The challenge is its integration into new
operational concepts, doctrines, organizational structures, and
practice. In June 1940, the French army had more and better quality
tanks then the Wehrmacht, but the panzer leaders knew how to use the
blitzkrieg to overwhelm France within weeks.
It is likely to take 10 to 15 years for the United States to retool
its forces along these lines. (Consider that it took a decade or more
for U.S. businesses to figure out how to integrate IT into their
business processes effectively enough to really boost productivity.) In
the meantime, the U.S. military will need many of the ships, planes,
tanks, and other assets--plus trained troops--that have characterized
U.S. might in past decades.
Fourth, the United States will need to complement its ability to
project power with a capability to defend America. The country should
develop an end-to-end strategy to counter WMD-missile-IT threats, both
to U.S. forces and the homeland. The comprehensive planning should
include better intelligence systems, covert and special operations
capabilities, prevention steps to lower the likelihood of penetration,
preemptive options, counterforce capabilities, an integrated Theater
Missile and National Missile Defense system, and nuclear deterrence. It
needs to include a major research effort on WMD, especially related to
biotechnology, genetic design, and computer viruses. As a country, we
will also need to prepare to respond--psychologically and
operationally--once a biological or nuclear weapon is used.
Fifth, to achieve effective integration and to use limited
resources more effectively, U.S. defense planning will need to become
more ``joint''--throughout the development of strategy, plans,
procurement, and budgets. Today, the military's regional commands are
committed to joint operations, and there is an effort to match future
forces to a ``Joint Vision 2010.'' But ``joint budgeting'' is still an
experiment at best, and the services remain legally obligated and
authorized to spend over 85 percent of the defense budget as they see
fit.
Given the budgetary limitations, the Pentagon must avoid the path
of least resistance: letting each service develop large-ticket weapons
systems independently, then imposing an across-the-board percentage cut
when the Defense Department realizes that the systems are unaffordable.
This route will produce a future military that is both smaller and only
partly modernized.
Given the uncertainty of and diversity in potential threats, the
U.S. military will probably need fewer assets, but ones which can
handle more missions. The strategic procurement goal should be a
capability to draw on any weapon from any platform to support any
unit--regardless of service or location. Whether a target--say
artillery, a SAM or Scud site, or a terrorist unit or WMD facility--is
identified by a satellite, airborne radar, or a Marine patrol, the
United States should be able to destroy it with precise, highly
destructive weapons from a submarine, arsenal ship, unmanned or
standoff aircraft, or more agile armored vehicle.
Sixth, the United States will need to get the most from each
person. We need to recognize that a budget at a level of 3 percent of
GDP would probably require a cut in the size of the overall force. (It
would be more prudent, and in my view preferable, to devote more to
defense to maintain force levels until the benefits of the move to RMA
capabilities are clear, but if those expenditures cannot be made the
force levels will need to reflect a balance among competing demands.)
To support and complement the regulars, the United States will need
to draw on National Guard and Reserve forces effectively, especially
for homeland defense and smaller scale operations. (They will also need
to be integrated with local, state, and federal law enforcement and
civil disaster authorities to cope with the threat of catastrophic
terrorism.) The Executive branch will need to recognize that extensive,
frequent, and long deployments on peacekeeping, policing, and
humanitarian missions are wearing down equipment, training, and
ultimately people. Each mission may appear to be for a worthy cause,
but at these budgetary levels, the U.S. military cannot do all of them
and still be prepared for the future.
If U.S. forces are reduced in size, each soldier, sailor, airman,
and Marine will matter even more and deserves the proper pay and
support. Pay should be targeted on officers, the senior enlisted ranks,
and people with critical skills; career lengths, pension systems, and
health care provisions will need to adjust as well. The
administration's recent recommendations for compensation increases is
an effort to address some of these needs.
The administration needs to recognize, however, that the new
compact with the military will need to involve more than money. Civil-
military relations will become more complex as even less of America has
contact with its military. Especially in a world of frequent but often
long-lasting peace operations, a volunteer military will need a balance
of opportunities, rewards, and consideration for families along with
the sacrifices.
Seventh, it is important that the Executive and the Congress
revisit the possibility of saving money by cutting infrastructure. I
expect that to rebuild trust in a revived base closings process, the
administration will need to demonstrate that it is willing to pay a
fair share of the political costs of base closings and cuts in
personnel.
Eighth, the Pentagon will need to learn more from the private
sector about cutting costs. Although the cost of civilian IT systems
has fallen tremendously, the prices of analogous military IT systems
have not. Like other professional organizations, the Defense Department
must focus on its primary missions and outsource supporting activities.
Outsourcing of a host of activities is critical to efficiency. For
example, off-the-shelf software purchases may both save money and
prepare the way for more rapid upgrades. Even many repair and
maintenance tasks may be performed by contractors.
At least in the area of IT--and perhaps with other leading edge
technologies--the Pentagon should be able to leverage civilian
commercial R&D. This represents a major shift in thinking from the era
when the Pentagon's R&D led the civilian sector. The challenge, I
suspect, will be to develop hybrid efforts that draw on civilian work
while customizing for or focusing additional efforts on unique Pentagon
needs.
America has the best military in the world. It also has the
greatest number of and hardest missions. Moreover, its unmatched power
is based on equipment with finite life spans; at some point, the
existing assets will need to be replaced.
At times in the past, the United States, and other great powers,
have taken their security for granted. We, and they, paid for hubris or
complacency many times over. Some powers never recovered from their
mistakes.
After the Vietnam war, a group of reforming officers, trying to
learn from the past, published a book titled America's First Battles.
Each chapter describes a defeat, the American way of starting wars. The
nature of war and weaponry today--combined with the present world of
alliances, coalitions, and partnerships underpinned by the United
States--no longer affords America the leeway to bounce back from early
defeats.
Having learned the lesson of America's First Battles, the U.S.
military was prepared to win the Gulf war in its first campaign. But in
the past, great military victories have made it hard for countries to
shake self-satisfied attitudes and to prepare for the next challenge.
Today, American's military is being run ragged in reactive
operations of all types in all quarters of the globe. If the U.S.
defense strategy and budget remains preoccupied with the current
environment, the country will be risking the world's stability, its
home territory and population, other vital interests, and the young men
and women who put their lives on the line to safeguard their country.
Most of all, it will be risking America's greatest cause: the future.
I would be pleased to try to answer any questions.
Mr. Chambliss. Gentlemen, again I thank you, both of you,
for being here. And I am not going to keep you just to dialogue
with me, but just a comment or two and a question or two.
You know, General Electric Co. is one of the best-run
companies in the United States of America, and if they need a
new airplane they call up Cessna, they call up Gulfstream and
say, ``I need me a new airplane. Be here next week. Make me a
proposal.'' They come in, and they have an airplane with 90 to
120 days.
For us to get an airplane, it takes us 15 or 20 years, and
there is absolutely nothing efficient about that, and I think,
Dr. Krepinevich, you somewhat alluded to that in your comments
there. You know, we are trying to make some improvements in
acquisition that will hopefully help save some money down the
road.
Do either of you have any comment about what we are doing
from the standpoint of acquisition or forms, or anything that
we are not doing that you feel like we ought to be doing from
an acquisition standpoint?
Mr. Krepinevich. I would just say, Mr. Chairman, that
given, as you mentioned, the length of time it takes to get new
military systems into the inventory, and given what we know
from history, it really does place a premium on what people in
the business community call ``time-based competition.'' One way
to deal with uncertainty is to build options, and to be able to
execute them more quickly than your competitor, once the future
becomes clear. General Estes, who recently retired as
CINCSPACE, had a great way of putting it: ``It can't be that a
President will come to one of my successors in 2012 and tell
him or her that we need to be able to control space by 2016. If
we are going to control space in 2016, we need to begin to
think about and plan to develop the capability for that in
1998.''
Look at the transformation, for example, from a battleship
Navy to a carrier Navy. We were still very much a battleship
Navy going into World War II, but we had conducted 20 years of
experiments with different kinds of carriers. We had actually
built three different classes of carriers, but only four
carriers in all. The Navy continued to build naval aircraft,
but only in small numbers because the technology was moving so
fast.
And what they avoided doing was locking into rapidly
changing technology before the threat emerged. Therefore, when
the war began, our Navy had the industrial base in place to
provide them with the capability, both in terms of ships and
aircraft, they had a doctrine for how to fight, and they had an
officer corps and sailors trained in how to operate carriers,
how to launch aircraft off of carrier platforms, and how to
recover aircraft on board. These are things that took the Navy
20 years to develop.
The issue is how do you prepare for future challenges? When
I talk about our adversaries holding bases at risk, this is a
demonstrated capability. Our ability to defeat that threat
hasn't been demonstrated yet.
In meeting the challenge we are giving our commanders very
few tools to work with, when in fact we need to give them a
wide range of tools to work through the problem.
Take one option: Dr. Hamre has said that if we had a
converted Trident submarine that could carry 150 cruise
missiles, and launch all 150 within 6 minutes, we would not
have lost the element of surprise in the Desert Fox operation.
This is an option we didn't have. We have the option to convert
these boats now. If we fail, it is an option we may not have in
the future because people will say that it doesn't fit into the
Navy's procurement plans right now; that there just isn't
enough money to buy this sort of option.
I am not an expert on the details of acquisition reform and
what we can do to speed up the process. I will only observe
that, in the past, whether it was the arsenal ship prototyping
that was on a fast track, or the construction of the F-117
aircraft which proceeded from initial negotiations to a
prototype in about 4 years, we have demonstrated that we can
develop new systems quickly. I think it is a matter of
empowering the Defense Department to undertake, No. 1, this
kind of development and, No. 2, to do it in a way that allows
us to buy options.
Mr. Zoellick. Mr. Chairman, since I don't consider myself
an expert on procurement, I will just make a couple of brief
points on this. I have served in the government, a number of
departments, I have been in the private sector in a number of
different capacities, and what always strikes me is that the
Pentagon is basically a command form of economy that tries to
operate in a market economy, and the disconnect is always
striking.
Now, it might have made sense in an era of particularly
specialized purchases from a limited number of sellers, where
the Pentagon and the defense establishment was often the leader
in technology and had to be on the cutting edge. But I think
with some of the changes that we have talked about, where the
strength of the United States is to draw on the strength of the
country, the strength of our military in information
technology, I would strongly endorse the idea of trying to get
the Pentagon to focus on its core missions and trying to see
what could be outsourced and drawn from the private economy.
And here let me talk about information technology in
particular. Thirty years ago the Pentagon led the United States
in many aspects of information technology. That is no longer
true today, and I think there would be ample opportunities to
draw on what is happening in the private sector in different
types of information technology and to customize it as
appropriate and probably save a significant sum of money.
Now, to be fair to the Pentagon, they live in a world of
regulations that were also developed for a different age and
developed for a very important purpose, to save the taxpayers
money. But I suspect that if we are going to give the Pentagon
additional flexibility to not do pure specifications, allow the
bids, monitor the bids, but actually engage with the private
economy somewhat more, one might need to give them some
flexibility and then perhaps do it in an experimental fashion,
and where one might audit it in that degree.
So I think part of this will have to come from the side of
the Congress and those who justifiably want to be concerned
about how the Pentagon spends its money because, as you know
from your experience, if an institution just becomes defensive
and worried about the auditor, then it is less likely to be
flexible in changing methods, and I think it will have to
change methods to get the advantage of the full scope of
developments in the private economy.
Mr. Chambliss. With respect to base closure, I think you
all were probably sitting here when I asked Dr. Hamre about
whether or not that $5 billion he keeps referring to is
realistic, and I assume you all maybe have seen those numbers
also. I frankly am a little bit concerned about that. I don't
know whether we are really saving that money or not.
Do either of you have a thought on whether or not that
number is correct, if we really are saving any money, and
whether or not any kind of independent audit would be
advantageous to us to think in terms of?
Mr. Krepinevich. My understanding, Mr. Chairman, is that
the estimates are derived based on numerous assumptions about
what is included and how you cost out the various assumed
savings. Beyond that, I am not an expert in any great detail.
An outside audit would be helpful to at least give transparency
to the assumptions that were made, with respect to how the
savings are generated.
Mr. Zoellick. Mr. Chairman, in the course of preparing for
my testimony, I looked into some of these, and some of my facts
are in my full written statement. I was struck that the land
under Defense Department control is roughly the size of the
State of Virginia, my State where I now live, and that is a
healthy piece of territory. As you probably know, the Defense
Department estimates that they have about 23 percent
overcapacity in bases, works out to about 55 bases.
I think the important point here in the base closing area
is that--you would know this better than I would--that the
process broke down because the very important political
arrangement that had been struck between the executive and the
legislative, which we all know is critical to make this go
forward, eroded because the executive was seen as trying to
slant things in their own direction in the case of some
particular bases. I think that was a real tragedy.
And to come to your point, I think if the administration
would like to go forward with this again, people like Senator
McCain, who I worked with on things, wants to go forward with
it again, anything that gives the Congress some additional
confidence on the benefits of this, an extra form of audit, is
worth it, whether you have money to put into it, because I am
afraid the process broke down for political reasons. To get
that restarted, we are going to have to get all sides
comfortable there is a merit.
The problem, from again the analysis I have looked at, is
that the payoffs tend to be over 5 or 6 or 7 years and often
there is an initial cost, and so that also makes it harder for
anyone making the decision. I do feel that we are going to need
to cut infrastructure if we are going to be able to pay for
these other things that we are asking to pay, and I think it
will involve the executive and the legislative rebuilding that
confidence, and if that audit is a way to do it, you know, I
would highly recommend it.
Mr. Chambliss. Well, gentlemen, again I thank you for being
here. Thank you for your patience this morning, and we have
your full written statements in the record, and we appreciate
your comments. Thank you. Thank you very much for coming.
Mr. Zoellick. Thank you.
Mr. Krepinevich. Thank you, Mr. Chairman.
Mr. Chambliss. We will stand adjourned.
[Whereupon, at 2:03 p.m., the committee was adjourned.]