[excerpts] FY 98 DEFENSE BUDGET
FEBRUARY 12, 1997 SENATE ARMED SERVICES COMMITTEE
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COHEN: Thank you very much, Mr. Chairman.
I will try and be as brief as I can in the initial presentation of the budget. I will summarize it. I believe all of you have a copy of my prepared statement which is fairly lengthy which I will not repeat and ask that it be included as part of the record.
Mr. Chairman, if I could make a couple of observations before I begin. When you say we need to develop a coherent vision, a strategic policy concept, on a bipartisan basis, I couldn't agree with you more. I see it as one of my singular duties in this capacity to help develop such a bipartisan support for a strategic concept that will serve us not just for tomorrow but well into the next, part of the next century.
And we have to work together to try and define that particular concept. QDR has been mentioned here and I'll get to it in a moment. But I recall when Admiral Stockdale during the vice presidential debates -- he asked two very important questions -- he took the podium and he said who am I and why am I here? I think the same thing has to be said for the United States. We have to ask ourselves, who are we, and why are we here, or there, or wherever we think we ought to be.
We have to reconcile that before we can forward and decide which programs we're going to fund and at what levels. And as we are moving into the next century, those are questions that are very much on the minds of the American people. Should we remain the world's only superpower? What does it mean to be a superpower? What are the obligations we have as a superpower? What are the benefits we receive as being a superpower? And what does it take to remain a super power?
Bismark observed there are only two things in life that don't change, one is history and the other is geography. Geography hasn't changed appreciably over the centuries. And so we have to decide exactly what our commitment is going to be and what kind of a nation we intend to remain. So, that's all involved in this process of trying to define a strategic concept through the QDR process which has been mentioned, which we'll talk about more at a later time.
I've been cautioned by friends saying let's not make the QDR bigger than it can be. And this is something we have to worry about. Are we raising expectations so high that we can't possibly measure up to it?
That's a possibility. The time frame in which the building, the Pentagon, those who are charged with making this kind of analysis is fairly short.
We really haven't given very much time to make that kind of detailed analysis that is going to require a lot of scrutiny. Not only in each individual panel, but through the cross fertilization of those panels in deciding what this strategic concept needs to be.
But I am very serious about the QDR process. I've spend a great deal of time already meeting with the individual panels. And just this past week I spent a -- almost five to six hours meeting with the panels individually to make a presentation to them that I take this very serious. This is not just a repetition of the status quo. I really want each one to look at this from a -- not a budget driven point of view, but a strategic point of view.
What is the strategy that will help shape this particular environment for us to structure our forces for the future. So the message has gone down from me right through the chairmen and the CINCs. I met with them when they were here. This is something that they are going to play a big role in as well in terms of indicating what they requirements are, so I take the process very seriously.
In addition as you know the National Defense Panel has finally been completed to the satisfaction of some and not to the satisfaction of others. But nonetheless, it has been completed. And it will work in conjunction with the QDR. And we will produce a product and submit it to you. I still plan on the May 15th deadline, which is going to put considerable pressure on me to do that and on us to do that.
And that's not the end of it. The recommendations that come forward from the QDR may be just the beginning. You and I might find it unsatisfactory.
The National Defense Panel may find it unsatisfactory. In which case we still have to work together, we in this body, we in the other body, all of us have to work together to come up with a -- what the chairman has correctly identified as a bipartisan consensus on a national strategic vision.
And so I undertake this responsibility with that very in mind and that is a top priority of mine.
So let me begin my brief commentary without lead in and I will try to move as quickly as I can through these charts. But to indicate to you I laid out during my confirmation hearing, I had three priorities, people, readiness and modernization.
On the people I think we can all agree, it doesn't matter what kind of equipment we have. We can have the most sophisticated systems in the world. If we don't have the bright and capable people and dedicated people with high morale and great job satisfaction that the work they're doing, it really won't matter what kind of systems we develop. So getting the best people we can remains top priority.
And retaining them so that they don't come into the service then get dissatisfied and leave. And during the course of my presentation to the House earlier this morning, the question was raised, well this great dissatisfaction is settling in because there is concern about stability of program funding. Will they have a position five years from now? Can they make this a career that they can count on?
And that of course all has an impact if it starts to get deeply embedded into the system which will undercut our capability. So people is at the very top of this pyramid of ours.
Ensuring high levels of readiness. This was Secretary Perry's dedication and I intend to carry that out. Having highly ready forces that can go anywhere at any time really spells the difference between victory and defeat. And it also spells the difference between being a superpower and not being one.
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From Fiscal Year 1990 down to '97, procurement has dropped some 53 percent in real terms. And this decline was unavoidable by virtue of the end of the cold war. It was necessary for us to reduce the level of our procurement at that time. We were able to sustain this level of decrease by virtue of the fact that we could eliminate some of the older systems and rely upon some of the newer systems that we have. So we did so within acceptable limits of risk.
This, what has been labeled the procurement holiday, is over. We now have to start that very steep climb back up to an adequate procurement level of funding. And you will note in this particular chart that we are below the level, that red dotted line is the 1998 FYDP slope, and we are actually, I'm sorry, the red line is the FYDP for '97 but the green line shows that we are below what we projected we would be at this year. And this is due, in no small part, to the fact that we had to fund Bosnia and other contingency operations. And that's where the money went.
And that has been true historically. Whenever there is an unplanned contingency, the first place the Department will look to will be to procurement. And the procurement money will migrate from there to O&M, and not altogether to operation and maintenance. Many times you'll find even maintenance money migrating over to operations. So it goes to procurement to O&M, and from the maintenance part of it into operations. And that has been the history of what has taken place. And that is reflected here as well.
And the real test that we have is how do we now project in going up that slope. How do we get to $60 billion? I have sat on that side of the dias, and I have challenged this gentleman sitting to my right in the past, asking how do we get there from here?
And that is going to be the real challenge for all of us. How do we increase that modernization budget, in view of the fact that we are seeing a very strong move made for a balanced budget amendment to the Constitution, that obviously will put some constraints on future funding. How everyone looks at it, whether pro or con, it will in fact place us in a constrained financial environment.
So how do we achieve this kind of a modernization plan with a constrained budgetary situation? That's where the QDR process is going to play, I think, an important role. But we can't simply rely upon the QDR process. As some of you have indicated, it may not measure up to expectations. I hope that it will. I don't want it to be simply a status quo reiteration of we can't do anything differently because this is the way it has to be done. That won't work for me, and I know it won't work for you.
But the QDR process may not fulfill all of our expectations. And so the burden will be on each of us to work together to see how we can build upon the QDR process, the NDB (ph) panel and our own collective insights as to how we get from here to there.
It's been pointed out during the course of testimony this morning that after you get through the QDR process you may find that you don't have to climb that high on that scale, because you may not have the same systems. Conceivably you might come with a different strategy. You might have a different force structure. You might have different end strengths. You might have different readiness requirements. You might have different OPTEMPOS. You could have even more infrastructure reductions. Slash BRAC is one indication.
There are a variety of things that could take place as a result of this QDR process which could change the requirement for that $60 billion figure. I personally believe that whether we look at 60 as being a magic number, I don't think that General Shalikashvili intended it to be a fixed formula. But saying roughly, that's where we have to be if we're going to carry out our current strategy, which has worked for us to date.
But what we have to decide is, is this going to be sufficient for us in the future? Should we be looking at doing more with less capability over less systems with more capability? Should we be looking to stay where we are in terms of maintaining the status quo as far as our position in the world, and how do we do that, given the financial constraints we'll be under? Are we willing to appropriate a lot more money? That's another option. And we will have to decide whether that is the way in which we're going to proceed into the future.
But in terms of the modernization, I'm going to just highlight some of this. We're obviously looking to the so-called leap ahead systems. We're looking at the Comanche, the V-22, the new attack submarine, the F-22, the joint strike fighter and the F-18 E and F models. Those are the new leap ahead systems that we're currently looking at and providing for funding.
We're also sustaining the upgrades in existing systems, so that we can not only look ahead but also maintain what we have. And maintaining that base will help us get to where we need to be as far as modernization is concerned.
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I've talked already about the quadrennial defense review. I need not say any more about that other than indicating I think this is going to be a very important process for all of us. I expect to adhere to the timelines that are required and to put the pressure on to make sure that we come up with that report as nearly on time as conceivably possible to make sure that we don't sacrifice quality for timeliness. But I put a high premium on timeliness, and so I intend to present that to you at the appropriate time, and then work with the National Defense Panel to see if there are any additions, changes, revisions that need to be made, either on a piecemeal or targeted basis, or even a wholesale basis. I remain completely open to constructive suggestions coming from this panel and certainly from the National Security Committee in the House.
SHALIKASHVILI: The most challenging problem, however, remains the continuing underfunding of our acquisition accounts. In my last two reports to you, I have stressed the need to raise procurement funding to a steady state of approximately $60 billion per year.
This budget achieves this level of funding, but not until the year 2001. This is later than I think is optimal, but I'm at least encouraged that it is now accepted as a requirement.
But if we are to achieve this goal, as a minimum we will have to cut our excesses, and learn to work smarter. As difficult as it is politically, we will have to further reduce our infrastructure, and we must also change the way we do business, relying more on outsourcing, privatization and the procurement of off-the-shelf equipment and services.
Where possible, we will also have to trim personnel endstrength, especially where technological changes, such as improved weapon systems, afford us the possibility to consider fewer or smaller units.
Among the services and unified commands, out to the year 2010, we have established a guiding vision that should put us on a common direction towards future warfighting concepts and complementary and interoperable capabilities.
In tandem with the good work being done by the Joint Requirements Oversight Council, the JROC, Joint Vision 2010 will provide all the services and the unified commands the conceptual template that we need to achieve dominance across the full spectrum of any future operations.
The implementation plan for Joint Vision 2010, already well underway, will insure that our vision is turned into reality, and that it gives us a benchmark to use during the Quadrennial Defense Review and thereafter.
The Quadrennial Defense Review will help us to maintain a modern, ready force, tailored to the strategic environment of the 21st century. IF we are to remain, in the president's words,the world's indispensable nation," we will clearly need strong, balanced, ready forces capable of shaping the environment to prevent crises, strong enough and in the right places to deter possible conflicts and, if necessary, to fight and win our nation's wars.
Thus, in the final analysis, the secretary's budget priorities also nicely summarize the force that we will need in the future -- a force with high quality people, ready forces, and the modern equipment and technology that we need to insure our superiority out to the year 2010 and beyond.
If we do our job correctly, and if we receive your continued support, then years from now, the chairman of the Joint Chiefs of Staff will be able to say to you, as I have so often said in the past, that ours still is the best military force in the world, bar none.
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THURMOND: Thank you very much, General. We are very appreciative to have you here. We will now proceed to have questions. We will start seven minute rounds. First round, then five minutes after that.
Secretary Cohen, last year the Congress required the Department of Defense to conduct the Quadrennial Defense Review to include a comprehensive examination of a defense strategy, post structure, post modernization plans, infrastructure budget plan and other elements of a defense program and policies with a view toward preparing the armed forces of the United States for the security environment of the 21st century.
Could you please outline your views on the most pressing matters facing the Department of Defense and what you believe should be achieved by the QDR process?
COHEN: Mr. Chairman, as I indicated in my opening statement, I believe we have to have an across the board examination of everything. I know that it has stirred some considerable debate when I've said in the past that everything is on the table.
I've been reading various reports from around the globe and not to mention here at home that by virtue of everything being on the table there are assumptions made or conclusions drawn that I'm favoring sacrificing readiness for modernization. Sacrificing cutting back on strategy, sacrificing of forward deployments in the Pacific or those in the European theater.
And basically what I'm saying is, everything if we're going to be -- have an honest assessment of exactly where we expect to be or want to be in the future, every single facet has to be on the table. So it's been organized in the sense of looking at strategy and that has to be number one. We have to decide what our strategic vision for the future is going to be and then we have to look at the others, namely our force structure.
Is the force structure that we then determined to be -- is it consistent with that strategy? And then we look at the role of readiness. We have a report coming to you. Senator McCain was instrumental in asking for a tiered readiness report that will be made available by March 1 in which we'll talk about the tiered readiness concept.
But also the Quadrennial Defense Panel is also going to be looking at readiness. Can we sustain the level of readiness that we currently have? Can we do it a better way? As General Shali has just indicated to you, we have fewer people in the service conducting more operations. That no longer can be sustained. So we may have to look at different ways of maintaining our readiness consistent with that strategic vision.
Modernization: can we afford all of the systems that are currently in the pipeline? I think it's premature to make a judgment on that. But certainly it's something we have to look at and consider is, can we, in fact, forego any of the programs currently that are not only on the board but underways far as research and development and potential look at procurement. Can we, in fact, skip a generation? Can we make due with the things that are nearing their end cycle now in terms of service ability and upgrade them to get us to the new systems?
All of that, as well as infrastructure, as well as human resources, it all has to be examined and that's what I meant by all on the table. What I don't want to take place is a gaming of the system. That one panel will say, well we're infrastructure, we can get $15 billion out of three BRAC grounds. And therefore that's all we have to do is recommend that we just have three more BRAC proceedings.
COHEN: That to me will not suffice and I've indicated to all of the panels, I want a very thorough examination of each of those elements in this review process and then we will see how that can be matched to come up with what you want, Mr. Chairman. We all want a real strong consensus about a strategic vision for the future.
THURMOND: Thank you. General Shali. There's a proverb (ph) that maintains that out-year increases to modernization of funding will be possible with funds made available through savings in areas such as infrastructure reductions, privatization and acquisition reform. If savings are not realized through privatization, some believe we'll have to reduce fore structure in order to make the funds available for modernization. Do you agree with this philosophy?
SHALIKASHVILI: Mr. Chairman, I'm of the view that just to get at the short fall that we now know about, to get to the $60 billion that I mentioned which is a short fall probably anywhere between $15 and $20 billion. That you can't make that up through infrastructure reductions or more imaginative ways of managing the department. You can make some of it up.
You will have to look at other issues and one of the issues that you will have to look at is in strength. The other one are modernization programs and the strategy that you employ. But I -- in that respect, I fully agree with Secretary Cohen that everything has to be on a table so you can justify why you retain something and why you rejected something.
But let me just make two points, if I may and two cautions. We cannot through the QDR change the environment out there, nor our interest out there, nor the threats to our interest.
Secondly, we will not be measured how innovative we are but by how at the end how well we protect the security of the United States. And so we don't start with a clean sheet of paper. We have to have our feet firmly grounded in reality as we try to be bold and innovative to solve a very, very difficult problem. But to be able to solve that we have to be not afraid to look at everything as a possible, as a possible issue.
THURMOND: And General, can a reduced force structure adequately support the two MRC strategy and the various contingency operations to which this administration has committed U.S. forces?
SHALIKASHVILI: We are looking at that issue. So far I have not seen any results that would indicate that you could do so. But I'm not prepared yet to make final judgment on that because I've not yet seen all the data.
THURMOND: My time makes five. Senator Levin.
LEVIN: Thank you Mr. Chairman. Secretary Cohen and General Shali, is the budget that you are presenting today adequate to meet the national security requirements for the coming fiscal year? And is it adequate to protect our deployed forces and to defend the vital interests to the United States around the world?
COHEN: The answer is yes, but it's at the edge of adequacy.
SHALIKASHVILI: I agree with Secretary Cohen.
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COATS: Thank you, Mr. Chairman. And Mr. Secretary, congratulations to you again. And General Shali, thanks to you again -- and we'll say this again -- for your dedicated service as chairman of the joint chiefs. We appreciate your forthright testimony and working with you these years and look forward to the next several months.
Mr. Secretary, I think we all realize that fiscal year '98 is -- or at least this year, as we're preparing for fiscal year '98 -- is pretty much a holding pattern. A lot of critical decisions will have to be made that will affect next year's budget -- the '99 budget -- that will be decided next year.
You talked about the process that's underway. I think the process is critical. Really whatever questions we ask you now in terms of where we're going, if you're wise and I know you are, you'll defer most of those decisions until you are able to work through the process.
Are you satisfied that the current process that you have inherited is one that will give you the kind of information, the pros and cons of the decisions that you have to make, in sufficient form so that you can ultimately make decisions? These decisions are going to be absolutely critical in terms of our defense posture for the next several decades.
And so your decisions, and the department's decisions on the basis of this process, are going to be very, very critical.
COATS: It's a critical time in defense history, I think.
COHEN: Well, no one can be certain exactly what the outcome is going to be in terms of how thorough it's going to be. I can only convey to you that I've been on the job just about three weeks, and during that three-week period, I've had several meetings dealing with QDR -- one very extensive, actually two quite extensive -- one during the CINCs meeting when I spent two days during their conference and a good portion of one day was devoted to the QDR, and a second day last week in which I spent from about noon until 5 or 6 o'clock meeting with each of the groups in QDR, panels.
I've been impressed with their approach. I hope they've been impressed how serious I am about the process, how substantive I feel it has to be and that it has to be strategy-driven rather than budget driven.
One can only wait and see what the result's going to be, but I think the signal that I've sent is that I expect them to a very thorough job and to look at the pros and cons of each recommendation they might be making -- it could be a whole series -- and then to laminate on that process the National Defense Panel to integrate them into it to make sure that someone's looking over the shoulder to see whether the right kinds of questions and answers are coming forward.
And ultimately, when I get that product -- it comes very late in your cycle as well because you're going to be marking up, I'm told, as early as in April. My hope would be that you might not complete your mark-up quite so readily, that at least you might have some role to play in terms of this process and in terms of marking up the budget for the summer.
So you will play an equally important role. This committee and the committee in the other body will play very important roles because the QDR process itself is simply analysis, recommendations, a consensus that's coming out of the building itself.
And then, of course, we have to sit down with you, and we have to make a judgment as to whether or not -- is this something that you feel confident about? That you feel you can support? Because it's one thing for us to come up and say this is the way we think we should go, but if you don't agree with it, then it's not going to go very far.
So I see it as a real partnership operation as far as coming to a consensus and I'm encouraged by what I've seen so far, and I believe that a very thorough investigation is underway.
COATS: I'm pleased to hear you say that. I think there's been some misconceptions about the role of the National Defense Panel. I view it, and I know Senator Lieberman does, and others who have worked with us on structuring this, as simply a second opinion. You go to the doctor and you get an opinion and it requires maybe some serious -- serious surgery or some serious changes.
You think -- Well, OK, that's probably right. I have a great deal of faith in the process that you came to this conclusion on, but I think I'll get a second opinion. And maybe some of the questions raised in the second opinion are legitimate questions, and I'm pleased to hear you say that you would view it that way.
It doesn't indicate a lack of faith or trust on our part in terms of the process taking place in the department. It just simply is another way of -- without attempting to duplicate a structure or a process -- of getting that second opinion, which we feel is so critical at this time.
COATS: Let me ask you this question. You listened as one of the highlights of modernization the first priority of the leap-ahead systems. You mention Comanche, V-22, new attack submarine, F-22, Joint Strike Fighter, F-18 E and F -- are you confident that the budget-projected levels in this recommended budget are such that we are not biasing either overspending on any of these systems or biasing one over another or biasing this category over say readiness or modernization, national missile defense, in preceding the decisions on our whole -- on the direction we ought to go and in defining what our strategy ought to be?
COHEN: Well, I think that we're coming to that closure point where we have to make the decisions soon in order not to engage in that kind of a biased decision.
That's why the timeframe on the QDR is very important. On the one hand, it does -- by virtue of its immediacy -- present a problem for the panels to do the kind of thorough analysis in a very short time. On the other hand, time is of the essence because...
COATS: Are you saying that you can get us those answers before we do the FY 98 budget?
COHEN: No, I'm not saying that. I haven't quite finished yet.
COATS: I'm sorry.
COHEN: The reason that I think it's of importance to get this on time is so, in preparing us for the fiscal '99 budget, we can make those kinds of determinations.
There may be some modifications you can even make in this budget as we go forward. If we can perhaps try and coincide a little bit more, the presentation of the QDR in terms of the mark-up of your budget and the appropriations process have some impact on the fiscal '98 budget. But the QDR process obviously is geared toward 1999 and beyond.
COATS: One of the critical questions will be the whole TACAIR question. And in fact, it takes up a pretty significant percentage of the whole modernization package.
The reason I raise the question about process is that, obviously, there will be competing pressures on you within the department, and I just -- just to highlight that, I just take one article here called Air Fight --Aircraft Dogfight Awaits Cohen at Pentagon.
COHEN: It's already started.
COATS: Quoting a -- what's said a widely-circulated report by the Office of Naval Intelligence, quote, Worldwide challenges to the naval strike warfare concludes that potential adversaries present no big threat before about 2015 because of their small air forces, limited high tech aircraft and anti-aircraft missiles, and inferior pilots."
At the same time, another source says that The secretary of defense is going to have to make a choice,' said one Navy leader in discussing the futures of the F-18 E and F and the F-22. 'He's going to have to decide which one of us is right because we can't both be right. The Navy and Air Force will have to fly through the same defenses, so how can they say they need such a different airplane.
And then, a third source says The Navy is out of its mind building an airplane for the 21st century that will have bombs hanging off it, talking about the Stealth.
Well, I'm not asking you to comment on that necessarily. I just point that out in terms of the...
COHEN: Thank you.
COATS: ... incredible internal pressures that will be placed upon you as secretary, and...
COHEN: Well, you know, that's why I come back to strategy being the most important.
COHEN: I was testifying earlier today in the other body, the House. I can say that without retribution now that I'm on this side of the table.
But the question being, are we a maritime-based power with global interests? Or are we a continental-based power with a global reach? Each one -- how you answer that question will in large part really define what kind of systems you're going to build.
There are some who maintain that we can do everything from the continental United States. We won't need to depend upon having a Navy out there to have a forward presence. We can take out any target -- just fly off here from the United States. And it's one suggestion I've seen in the press.
There are others that come back and say: Wait a minute. You can't take it out by air. You've got to have the ground troops. You've got to have the Navy out there.
And by the way, what do you lose when you don't have ships sailing in various ports in terms of showing the flag and having a forward presence and shaping the environment in which we have to live in?
So there are so many ways of looking at us. Each has their own bias. It will, yes, be up to me in large measure to try to reconcile where we have to be in the future. So it's not -- this is not an easy job.
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