[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
DEFENSE DEPARTMENT BUDGET PRIORITIES FOR FISCAL YEAR 2002
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JULY 11, 2001
__________
Serial No. 107-13
__________
Printed for the use of the Committee on the Budget
Available on the Internet: http://www.access.gpo.gov/congress/house/
house04.html
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COMMITTEE ON THE BUDGET
JIM NUSSLE, Iowa, Chairman
JOHN E. SUNUNU, New Hampshire JOHN M. SPRATT, Jr., South
Vice Chairman Carolina,
PETER HOEKSTRA, Michigan Ranking Minority Member
Vice Chairman JIM McDERMOTT, Washington
CHARLES F. BASS, New Hampshire BENNIE G. THOMPSON, Mississippi
GIL GUTKNECHT, Minnesota KEN BENTSEN, Texas
VAN HILLEARY, Tennessee JIM DAVIS, Florida
MAC THORNBERRY, Texas EVA M. CLAYTON, North Carolina
JIM RYUN, Kansas DAVID E. PRICE, North Carolina
MAC COLLINS, Georgia GERALD D. KLECZKA, Wisconsin
ERNIE FLETCHER, Kentucky BOB CLEMENT, Tennessee
GARY G. MILLER, California JAMES P. MORAN, Virginia
PAT TOOMEY, Pennsylvania DARLENE HOOLEY, Oregon
WES WATKINS, Oklahoma TAMMY BALDWIN, Wisconsin
DOC HASTINGS, Washington CAROLYN McCARTHY, New York
JOHN T. DOOLITTLE, California DENNIS MOORE, Kansas
ROB PORTMAN, Ohio MICHAEL E. CAPUANO, Massachusetts
RAY LaHOOD, Illinois MICHAEL M. HONDA, California
KAY GRANGER, Texas JOSEPH M. HOEFFEL III,
EDWARD SCHROCK, Virginia Pennsylvania
JOHN CULBERSON, Texas RUSH D. HOLT, New Jersey
HENRY E. BROWN, Jr., South Carolina JIM MATHESON, Utah
ANDER CRENSHAW, Florida
ADAM PUTNAM, Florida
MARK KIRK, Illinois
Professional Staff
Rich Meade, Chief of Staff
Thomas S. Kahn, Minority Staff Director and Chief Counsel
C O N T E N T S
Page
Hearing held in Washington, DC, July 11, 2001.................... 1
Statement of:
Paul Wolfowitz, Deputy Secretary, U.S. Department of Defense. 7
Prepared statement of:
Chairman Nussle.............................................. 6
Hon. Jim Matheson, a Representative in Congress from the
State of Utah.............................................. 7
Mr. Wolfowitz................................................ 12
Hon. Darlene Hooley, a Representative in Congress from the
State of Oregon............................................ 30
Additional questions submitted for the record by Mr. Gutknecht... 45
Additional questions submitted for the record by Mr. Spratt...... 45
DEFENSE DEPARTMENT BUDGET PRIORITIES FOR FISCAL YEAR 2002
----------
WEDNESDAY, JULY 11, 2001
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10:04 a.m. in room
210, Cannon House Office Building, Hon. Jim Nussle (chairman of
the committee) presiding.
Members present: Representatives Nussle, Hoekstra,
Hilleary, Thornberry, Collins, Fletcher, Hastings, Portman,
LaHood, Granger, Schrock, Culberson, Crenshaw, Kirk, Spratt,
McDermott, Bentsen, Price, Clement, Moran, Hooley, McCarthy,
Moore, Honda, and Matheson.
Chairman Nussle. Good morning. The Budget Committee will
come to order.
Today we are continuing a series of hearings reviewing the
President's budget. Today is a hearing on the Pentagon budget
amendment, reviewing the administration's additional funding
request for fiscal year 2002. Today we are honored with the
presence of Paul Wolfowitz, Deputy Secretary of Defense,
accompanied by Under Secretary of Defense Zakheim.
Am I pronouncing that correctly?
Mr. Zakheim. Zakheim.
Chairman Nussle. Zakheim. I apologize.
Thank you very much, both of you, for coming today.
Today's hearing will help us understand how a very vital
component of the administration's agenda and a matter that is
the government's first constitutional duty and responsibility
fits into budget. After all, defense is half of all
discretionary spending. At this point, it is appropriate to
review what the budget resolution provided for defense and to
place in context this latest request from the Department of
Defense.
The budget resolution recognized that the United States
military has suffered from nearly a decade of over-deployments,
confused priorities and underfunding, that under the previous
administration increases were needed to correct some very
urgent problems. The resolution provided basically three things
with regard to defense.
First, it accommodated a $6.5 billion supplemental
appropriation for fiscal year 2002, nearly all of which is to
address the immediate defense readiness issues. The
supplemental recently passed the House and, of course, is now,
currently, under consideration in the Senate.
Secondly, it furnished a $14.5 billion defense increase for
fiscal year 2002, consistent with the President's request. As
described in the administration's initial budget submission,``A
Blueprint for New Beginnings,'' quote, ``This funding increase
will allow DOD to address its most pressing priorities. These
include relieving some of the housing problems our military
troops and their families are currently facing, addressing the
need for increased military pay and undertaking a thorough
review of research and development programs to determine the
most promising investments for the future,'' unquote.
Finally, the third provision in the budget accommodates the
long-term modernization, funding the defense of the future.
This would be based on the Pentagon's Strategic Review. Again,
``A Blueprint for a New Beginning'' said, quote, ``The nation's
defense strategy should drive decisions on defense resources,
not the other way around.'' Let me repeat that, ``the nation's
defense strategy should drive decisions on defense resources,
not the other way around.'' I believe the President in his
speech to the Congress suggested that the funding should follow
the strategy and not the other way around.
The budget resolution provided a reserve fund to
accommodate these needs, and in the House, the amount for use
for defense from that fund was to be determined by the chairman
of this committee.
Having supported two of the Pentagon's funding requests,
members of the Budget Committee might have expected the third
to consist of start-up financing for the long-range defense
modernization that was set as a goal and promised. But 75
percent of the administration's latest budget request for 2002,
this latest amendment of $18.4 billion defense needs, is not
for modernization but for security operations.
A substantial part of the amendment funds items such as
infrastructure, base operations support, depot maintenance,
things which ought to have been part of the original request
since they support ongoing operations rather than
transformation strategy. And the administration's division
review on which the modernization funding plan was to be based
is not complete and will not be complete until this summer at
the earliest, most likely this fall.
Even in isolation, the $18.4 billion is a very significant
sum. It is larger than the entire agricultural appropriations
bill, as an example; and, rightfully so, more than twice
Canada's entire annual defense budget--just this amendment
itself.
The need to review the request is clear. The budget
resolution for 2002 created the reserve funds. Accordingly, the
Budget Committee chairman, I believe, has a fiduciary
responsibility to provide oversight in this area. I cannot
simply open up reserve funds and disburse money without
rigorous justification and an orderly oversight process. Yet,
the Pentagon's request for new funds has come even before the
supplemental has finished, not to mention its own Strategic
Review.
Finally, it is a matter of future funding. Both the
administration and Congress agree that the days of deficit
financing are over. But fully understanding the needs of our
nation's servicemen and women and in complete agreement on the
requirement of a transformation strategy, we must also have the
assurance that our hard-won fiscal discipline will be
maintained into the future in the context of a long-range
budget plan. And today we look forward to that assurance from
our witnesses.
Let me say, finally, a couple of things about what I view
as some fairly harsh criticism on my part. Number one, I did it
because I was encouraged by the President's goal determining
that the strategy would come first, that a review of the
Pentagon and a review of our national defense needs would come
first, before additional funds would be requested or before an
additional budget request would be made, number one.
Number two, at the same time, I knew it was going to be a
very difficult--I was about to say almost impossible--task to
do it within the time frame set. The President suggested during
a speech to the Congress--he looked down, as I remember, at the
Secretary of Defense and suggested he needed to get that done
within 6 months, which at that time counted to about today. At
the time, I think everyone thought while it was a worthy goal,
a very difficult one.
The witnesses that we have here today have been doing that
work. One, as I understand, was not confirmed until March; the
other was not confirmed until May. Try and do a 6-month review
when you are not even on the job.
I am not suggesting the task, the goal was one that was
able to be completed within the time frame allotted, given the
circumstances that they found at the Pentagon, let alone given
the time frame after confirmation. But we need to know what the
new process is going to be. If, in fact, a new deadline has
been set, and if a new timetable is to be adhered to, we need
to know what that is.
There is a need, as I said in my opening statement, not
only to put defense as a priority but as our number one
priority. It is our first constitutional responsibility. We
don't have Medicare, we don't have Social Security, we don't
have tax cuts, we don't have anything if we can't defend our
nation, and we can't preserve freedom into the future. And so
this is probably one of the most important topics that we can
discuss.
I also understand why the Secretary of Defense would not be
here personally today to discuss this. Having watched the
hearing just yesterday over in the Senate where they were
discussing the 2002 budget request, it digressed into an almost
half-day hearing on Vieques and the shelling of Puerto Rico.
You can see that the macro decisions of our national defense
and national security are mired in special topics, special
projects, special district initiatives, State initiatives for
particular Senators and Representatives.
That having been said, Congress has a responsibility in
this as well. I am not suggesting that our national review--
Strategic Review is to be laid only at the feet of our
administration. We in Congress have the first and foremost
responsibility under Article 1 to make these decisions. And
while the Secretary is not prepared to come here today to
either propose or defend what that new strategy would be--and I
can understand that--I would suggest to you publicly for the
record today that before the 2003 request is made, before next
year's budget is going to be enacted, the Secretary needs to
come forward and needs to give us an update on what that
Strategic Review has accomplished and how that has been
incorporated into the administration's and the Department of
Defense's 2003 request.
That having been said, we have a lot of work to do today, a
lot of questions, I know, from members discussing, hopefully,
not Vieques, but hopefully talking about the macro issues of
our national defense. As I said, it is half our budget. It
deserves the oversight and attention of this committee. And
that is the reason for the hearing today.
At this time I would like to recognize a friend and
colleague, John Spratt, for any opening remarks he would make.
Mr. Spratt. Thank you, Mr. Chairman. Thank you for your
comments. I will readily stipulate, if you wish, that we won't
discuss Vieques today. I don't think we need to get into the
minutia of the defense budget or even the major programs. We
need to be talking mainly about the top line and how we fit it
into the overall budget.
What the defense department has done is split a request--
first of all, a placeholder request for, essentially, the
Clinton-Cohen budget. It is only about $100 million more than
what Clinton and Cohen had provided--$310 billion for DOD,
another $13 billion for the Department of Energy for the
nuclear program.
Now the Pentagon has come forward with another request,
which we anticipated at some point; we didn't know how much it
would be, but it turns out it is $18.4 billion. That means, if
it is provided--about a 7 percent real increase, about an 11
percent nominal increase--it is a substantial increase in the
budget for next year.
Part of the problem I think we have got, and I think you
have got, is that $18.4 billion is not really what you were
seeking. You were seeking more and you expect to get more in
the future. Every time, Mr. Wolfowitz, that we have met, I have
presented you with a chart. And each time it has been a
different chart, because the numbers won't sit still, but this
is the predicament we found ourselves in.
The budget for this year is what is done; thus, nuclear is
shown in the first upper half of this chart that I have before
you, and I have given you a copy of it so that you can see it.
I can barely see what we have got on this chart from where I
sit.
Basically, if you look across the bottom line, the so-
called ``contingency reserve,'' the money left over after you
account for all the puts and takes in the budget thus far--the
tax cut, backing out the Social Security surplus, backing out
the Medicare surplus, this year, next year, 2002--there will be
a $25 billion bottom line according to the current estimates of
revenues. If there is any deterioration in the bottom line,
along the lines of what Mr. Lindsey indicated just a couple of
weeks ago, then that number--it will evaporate. And the only
reason it is there, as we know, there is an artificial timing
shift, the corporate tax payment ordinarily due on September
15th will instead, under the Tax Act, be due on October 1st.
Therefore, it is shifted into 2002.
But once you get beyond that gimmick, that tax shift, the
bottom line is negative in 2003-04, it is a billion dollars in
2005, $11 billion in 2006, $21 billion in 2007. You've got to
get all the way out to 2008 before that bottom line, that so-
called ``contingency reserve,'' is adequate to absorb the
request that you have this year adjusted for inflation.
Now, we are taking your calculation of outlays. Frankly, we
suspect that CBO's will be a bit higher, but we are taking your
numbers for outlays. In every year, as you can see in the next
subsection, subsequent action in every year from 2003 through
$2007 there is a deficit, which means in those years, unless we
make major adjustments in the out-year budget, you are spending
Medicare Trust Fund money. And we have all agreed in the House,
I think, Democrats and Republicans, that we are not going to do
that.
The administration suggested that this would be permissible
for various reasons, and the chairman, after hearing them say
this repeatedly under our cross-examination, took our position
and said, no, we are not going to spend the Medicare Trust Fund
money. If not, to fit the $18.4 billion into this budget, we
have got to do some significant ``shimming,'' as we say in
South Carolina. That is just for the $18.4 billion.
When I first presented this chart to Mr. Rumsfeld over one
of our breakfast meetings, it had a bigger number for defense.
And we assumed, basically, that you would--initially would come
in for a request for $20 billion, and each year that would
staircase upwards by $5 billion until it reached $50 billion,
and then it would increase with the rate of inflation.
When I presented that to Mr. Rumsfeld, he shook his head
vigorously and said, No, no, no, you are way too low. So I
infer from that body language and inferential indications I
have got from you, the $18.4 is for starters; you are really
expecting something about twice that large.
Indeed, when Mr. Rumsfeld was asked,``How much more will
you be seeking in 2003--if your request for 2002 is the 18.4
addition you are seeking now, how much more will you ask for in
2003.'' He put the number at around $347 billion. You are 329
there; 347 would mean you need another $18 billion.
I don't know if these numbers are correct, where it is
coming from, and if the top line deteriorates along the lines
that Dr. Lindsey indicated recently, we have got a problem.
That is why we are here today, because we are supposed to fit
all of these big macro numbers into a budget that has a
positive bottom line that stays out of the Medicare Trust Fund
and stays out of the Social Security Trust Fund surplus as
well.
There is an important point I think, too, for you, if you
are not going to get, or are unlikely to get because of this
budget scenario, the increment that you expect in 2003. If the
$18 billion you are getting now, plus inflation, is about all
you can reasonably expect in the next few years, I think you
probably need to rethink your budget request for 2002, because
there are major efforts started. Spending $3 billion more on
ballistic missile defense, a nearly 60 percent increase, that
may not be sustainable in the outyears if that $18 billion
addition on top of the $18 billion you are seeking this year
can't be provided.
So this is a serious hearing. We come here in good faith. I
am a pro-defense Democrat. I want to see your $18 billion
funded this year. But I have to tell you it is going to be hard
to fit in this budget, and I don't know where the addition is
coming from in the future.
Chairman Nussle. I ask unanimous consent that all members
be allowed to place in the record an opening statement at this
point. Without objection, so ordered.
[The information referred to follows:]
Prepared Statement of Hon. Jim Nussle, a Representative in Congress
From the State of Iowa
The committee will come to order. Today's hearing will focus on the
President's Defense Review, the Department of Defense budget request
for fiscal year 2002, and the longer-term outlook for defense spending.
Our witness will be the Honorable Paul Wolfowitz, Deputy Secretary of
Defense. Appearing with Secretary Wolfowitz will be Dov Zakheim, the
Under Secretary of Defense and Chief Financial Officer. Good morning,
gentlemen.
Today's hearing will help us understand how a vital component of
the administration's agenda and a matter that is government's first
Constitutional responsibility fits into the budget--after all, defense
is half of all discretionary spending. At this point, it is appropriate
to review what the budget resolution provided for defense, and to place
in context the latest request from the Department of Defense.
The budget resolution recognized that the United States military
had suffered from nearly a decade of overdeployments, confused
priorities, and underfunding under the previous administration, and
that immediate funding increases were needed to correct the most urgent
problems. The resolution provided three things:
First, it provided room for a $6.5-billion supplemental
appropriation for fiscal year 2001, nearly all of which was to address
urgent defense readiness issues. The supplemental recently passed the
House and is under consideration in the Senate.
Second, it added a $14.5-billion defense increase for fiscal year
2002, consistent with the President's request. As described in the
administration's initial budget submission, ``A Blueprint for New
Beginnings'': ``This funding increase will allow DOD to address its
most pressing priorities. These include relieving some of the housing
problems our military troops and their families are currently facing,
addressing the need for increased military pay, and undertaking a
thorough review of research and development programs to determine the
most promising investments for the future.''
Finally, it saw to the need for long-term modernization. This
modernization would be built upon the Pentagon's strategic review. ``A
Blueprint for New Beginnings'' said, ``The nation's defense strategy
should drive decisions on defense resources, not the other way
around.'' The budget resolution provided a reserve fund to accommodate
these needs. In the House, the amount to be used for defense from that
fund is to be determined by the Chairman of this Committee.
Having supported two of the Pentagon's funding requests, members of
the Budget Committee might have expected the third to consist of
initial financing of the long-range defense modernization that was
promised. But 75 percent of the administration's latest $18.4-billion
defense proposal is not for modernization; it is for current
operations. A substantial part of the amendment funds items such as
infrastructure, base operations support, and depot maintenance, things
which ought to have been in the original request, since they support
ongoing operations rather than a transformation strategy. And the
administration's Defense Review, on which modernization funding plan
was to be based, is not yet complete and will not be until later this
summer at the earliest.
Even in isolation, $18.4 billion is a significant sum. It is larger
than the entire agriculture appropriations bill, and more than twice
Canada's entire annual defense budget. The need to review this request
is clear.
The budget resolution for 2002 created the reserve funds.
Accordingly, the Budget Committee Chairman has a fiduciary
responsibility. He cannot simply open up reserve funds and disburse
money without a rigorous justification and an orderly oversight
process. Yet the Pentagon's request for new funds has come even before
the supplemental is finished, not to mention its own Strategic Review.
Finally, there is the matter of future funding. Both the
administration and Congress agree that the days of deficit financing
are over. But fully understanding the needs of our nation's service men
and women, and in complete agreement on the requirement of a
transformation strategy, we must also have assurance that our hard-won
fiscal discipline will be maintained into the future in the context of
a long-range budget plan. Today, we will look for that assurance from
our witness.
Prepared Statement of Hon. Jim Matheson, a Representative in Congress
From the State of Utah
I would like to thank Chairman Nussle and Ranking Member Spratt for
holding this hearing today to gain further insight from the Department
of Defense regarding DOD budget priorities for Fiscal Year 2002. During
the debate on the budget resolution, many concerns were raised
regarding the ``placeholder'' that was used as a reference for
allocating funds for DOD in FY 20002. Members of this committee offered
amendments during consideration of the budget resolution to account for
known shortfalls in the DOD health program. Unfortunately, these
efforts failed in committee and the administration subsequently had to
submit a supplemental request to fund these needs.
During the Budget Committee mark-up, I said that there was little
room for error in the budget resolution this committee approved, and
now we are seeing the consequences. Along with my colleagues in the
Blue Dog Coalition, I offered a budget alternative that put additional
resources in the budget for defense rather than using a placeholder
that relied on the surplus projections continuing to hold. With recent
reports indicating that their budget surpluses are in jeopardy, we have
some tough choices to make in order to ensure that we do not dip into
the Social Security and Medicare surpluses in order to meet our
nation's defense needs. I stand ready to work with the Chairman, Mr.
Spratt and other members of this committee to find a way to meet our
defense needs without jeopardizing our committee to protect the Social
Security and Medicare trust funds.
Chairman Nussle. At this point, we welcome to the committee
Deputy Secretary of Defense Paul Wolfowitz, and we look forward
to your testimony. Your written testimony will be in the record
at this point, and you may proceed as you would like,
summarizing your testimony.
Again, as I said in my opening--my opening remarks, you
have been asked to do a huge task, maybe one that is close to
an impossible task, but I think we have the right person for
the job. I have had a chance to review some of your background,
had a chance to visit with you briefly yesterday. This is your
third tour of duty, and in a similar position, so you've been
there, done that. I think you have got two T-shirts; now you
are working on your third, as they say.
We welcome you before the committee to give us an update on
the President's request for the defense budget for 2002.
STATEMENT OF PAUL WOLFOWITZ, DEPUTY SECRETARY, U.S. DEPARTMENT
OF DEFENSE
Mr. Wolfowitz. Thank you, Mr. Chairman, Congressman Spratt,
members of this committee. I appreciate this opportunity to
come here to discuss the President's 2002 amended budget
request. I have with me the Under Secretary of Defense and
Comptroller, Mr. Dov Zakheim. It is very nice to have some
capable help, although I must say, we wish we had gotten him
confirmed earlier than May.
I will submit my testimony for the record and just try to
summarize it here briefly. But I do want to make a number of
points because I think it is important. You have raised some
very important questions, Mr. Chairman.
So have you, Mr. Spratt.
The U.S. Armed Forces today are the world's best-trained,
best-equipped, and most powerful in the world. However, we are
not in such great shape. We spent much of the 1990's living off
the investments of the 1980's. We allowed our military
capabilities to be slowly degraded as we overused a shrinking
and underfunded force.
If I could just show you this chart, Mr. Chairman, which
shows that over the decade of the 1990's, while the force came
down in size by 30 percent, the average number of operations we
sent them on on a monthly or yearly basis went up 105 percent.
Some of those operations have names we all know, like Haiti and
Kosovo and Bosnia and Iraq. Some of these will continue for a
long time. There are many smaller ones that we don't even read
about, maybe only temporary.
To their enormous credit, America's dedicated servicemen
and women dutifully did more with less. Many in Congress and
many on this committee worked hard to give those service people
more resources.
Notwithstanding those efforts, that policy of overusing and
underfunding the force has begun to take its toll. It has
harmed our readiness to meet current threats, and it is
undermining our ability to prepare for the threats of the
future.
As you said, Mr. Chairman, when President Bush took office,
he asked the Defense Department to undertake a comprehensive
review of the condition and direction of America's Armed
Forces. He asked us to engage our brains before we opened the
taxpayers' wallets. And so Secretary Rumsfeld initiated a broad
strategy review soon after taking office.
We have completed the first stage of that strategy review,
and that forms the basis for our 2002 budget request. We are
now starting the second stage, which we have merged into the
congressionally mandated Quadrennial Defense Review (QDR), and
that, Mr. Chairman, will form the basis for the 2003 budget in
the new 5-year defense plan.
Let me say just briefly a little bit about that second
stage, which we are in the middle of right now, before I come
back to the 2002 budget.
From the completion of the initial strategy review, we have
drawn two conclusions. The first is that the security
environment America will face in the decades ahead is likely to
be much more dangerous than the one we faced in the decade just
past. The other is that the condition of our force today is
even worse than we had previously expected.
On that chart that we have shown to you, Mr. Chairman,
there is just one example of the kinds of things that happen
when, year after year, you defer maintenance, you defer
replacement of things. On the left hand picture, you see a $500
grate that should have been fixed--would have cost us $500 to
fix it. Instead, because it was broken, a valuable airplane
crashed into it, and we ended up with costs of $165,000 to fix
the plane. That kind of example proliferates around our force.
[The chart referred to follows:]
We discussed with you yesterday, Mr. Chairman, the kinds of
problems we have with military housing. Some of the housing is
first-rate, but when you delay, year after year, repairing it,
you have paint peeling in places, you have curling floors. If I
might submit for the record--this is an example from just one
service on living and working conditions in the U.S. Army
today. It is not what our service people deserve.
Those preliminary conclusions have formed the basis of the
2002 budget and a starting point for preparing the Quadrennial
Defense Review and the 2003 budget. We have done that with a
rather extraordinary series of discussions among the Secretary,
the Chairman of the Joint Chiefs, the Chiefs of the services
and the service secretaries and under secretaries--in my
experience in three tours at the Pentagon, I have never seen
anything quite like that in terms of high-level discussions
without staff present--and that provided the guidance going
into this QDR and 2003 strategy review.
Of the issues that group has identified, the most
important, I think, is the need to assess what our forces can
do on the basis of a broad assessment of risk. In the past, we
have tended to evaluate risk exclusively on the basis of our
ability to execute existing war plans, and those war plans were
built around, by now familiar, two major regional
contingencies.
That focus, we concluded, while important, is much too
narrow; other aspects of the force posture must be taken into
account. And in particular, there are two additional dimensions
of risk that must be considered and will be considered in this
year's Quadrennial Defense Review which, as I say, is the
second stage and final stage of our strategy review.
These are, first, the risks imposed by the ongoing use of
our forces in peacetime, that 105 percent increase that we kind
of backed into without thinking about it; and secondly, the
risks of not being prepared for emerging threats in the future.
Because one of the problems when we use the force so heavily on
a day-to-day basis is that it is very hard either to find the
funds or, frankly, the intellectual resources to devote to
where we will be 10 years from now. Our intention is that, by
the end of the QDR, we will give more precise advice to the
President and Congress on how to balance those three different
needs and risks and present a new defense posture that is
better suited for ourselves and for future generations.
These final results of our strategy review, Mr. Chairman,
will be incorporated into the fiscal year 2003 budget and the
fiscal year 2003 to 2007 FYDP.
While the first stage of our review is focused on the
nature of threats and the condition of the existing forces we
have, this stage will help us decide the exact kinds of forces
we need to build; but it is clear already that we must urgently
begin to repair the damage inflicted by the complacency of the
1990's. The 2002 amended budget starts down a path toward
transformation by undertaking urgently needed repairs to our
existing force and by investing now in some the
transformational technologies and R&D that we will need for the
21st century force.
Let me just briefly touch on those two aspects, using the
2001 enacted budget of $296.3 billion as a baseline. The
President, earlier this year, issued a blueprint budget that
outlined a 2002 baseline of $310.5 billion. That included a
$4.4 billion real increase to cover presidential initiatives
for military pay, military housing, and research and
development including missile defense. The request before you,
proposes to raise that investment by $18.4 billion to a total
of $328.9 billion.
As I explained, the first stage of the strategy review has
defined where we are today and outlined in broad terms the
direction we must go to build a 21st century force. The QDR,
the next and final stage of the strategy review, will tell us
which mountain we need to climb and how high it stands, whether
it is 6,000 feet or 12,000 feet high or perhaps even higher.
But one thing is for certain, Mr. Chairman, we know from
our first stage of review that we are starting in a hole. What
the 2002 budget does for us is to begin the work of repairing
the present force and building the force of the 21st century.
Consider DOD's aging infrastructure, which the 2002 budget
begins to address. In the private sector--we have handed out
some slides indicating the condition of our infrastructure in a
number of places, including that specific example of the F-15s.
In the private sector, Mr. Chairman, the standard for
replacing facilities is to replace your whole infrastructure
every 57 years. If that sounds slow, well, we are a little
slower; our target is 67 years, but under last year's budget,
we were replacing facilities at an average rate of 192 years.
That is simply unacceptable. It is a sign of how we paid for a
high level of current operations without budgeting for them, we
paid out of maintenance. The 2002 budget proposes to increase
funding for facilities by $2 billion to $5.9 billion.
Even substantial increases only gets us to an average
replacement rate of about 98 years. In order to get down to
acceptable levels, we need not simply more money, but we are
going to need to come to the Congress for some way to get rid
of excess infrastructure that we don't need.
For example, if we could reduce our facilities by roughly
20, 25 percent, which are estimates of excess, we could get the
replacement rate with its current budget down to 76 years, much
closer to something that is acceptable.
Our people are the key to everything that we do, and this
budget will help put us on the path to recovery for them in key
areas including military pay, housing, readiness training, and
health care--quality-of-life investments that tell our men and
women in uniform that the nation truly values their service and
sacrifice.
But the 2002 budget, Mr. Chairman, does move beyond simply
repairing the present force. It takes a major step toward
transformation, with significant investment in new
technologies. It boosts RDT&E by 14 percent in real terms from
$41 billion in 2001 to $47.4 billion in 2002. It invests
heavily in efforts to deter and defend against emerging
threats, to dissuade potential adversaries from continuing to
invest in these dangerous capabilities. The budget advances the
President's commitment to build effective missile defenses for
our territories, for our allies and deployed forces, against
threats of all ranges, based on the best available technologies
deployed at the earliest possible date.
The chart, Mr. Chairman, that we have attached to the
testimony gives some indication of the wide range of programs
that we propose to invest in with this budget, some $13 billion
on top of missile defense, that we identify as
transformational. There are also a number of initiatives that
address streamlining operations and saving us money. Many of
these will require congressional support.
The Peacekeeper deactivation is one such example. In the
case of Peacekeeper, we will need the support of Congress to
remove current restrictions that will allow us to get rid of a
nuclear system that we no longer need that is a relic of the
cold war that we have been continuing to carry on our budget.
For many important reforms, reducing our excess
infrastructure, reallocating functions, and giving the
Department the ability to manage efficiently, we will need your
help.
One of the Secretary's top priorities is to transform the
system of financial management. We recognize that we need to
make fundamental changes that will save money, and we assure
you, the Members of Congress, and also the American people,
that we are allocating and using defense numbers properly and
wisely.
We are committed to operating more efficiently and thereby
saving money in our daily operations. Indeed, I might say that
is a major goal of our efforts now, not only in the Quadrennial
Defense Review, but in the new Business Initiatives Council
that the Secretary has formed, manned by our three outstanding
service secretaries, who, I am sorry to say, were not confirmed
until last month, but who are already hard at work, finding
ways that we can pay for some of what we need out of what we
have, instead of simply asking for more money.
Finally and very importantly, this 2002 budget seeks to
apply the principle of honest assessments of what it will take
to do the job, to do realistic costing of areas such as flying
hours, procurement and base operations, and to get away from
the dysfunctional process of deliberately underbudgeting in
anticipation of so-called ``emergency supplementals.'' It is
our firm intent that, with the 2001 supplemental, we will put
behind us the kind of supplemental budgeting that became a
dysfunctional process not based on true estimates of
anticipated needs.
The increase in the 2002 budget is a significant, historic
increase. It gets us started on the road to rehabilitation and
transformation. But as we think about the issues of
affordability that you raised, Mr. Chairman, and Congressman
Spratt raised, I am reminded of another point in our history
when there was a challenge to make a case for increased defense
spending.
In 1950, General Omar Bradley urged President Truman to
spend at least $18 billion on defense. That was after he had
scrubbed down the JCS estimate that we needed $23 billion, and
the services were even higher at $30 billion. But the President
said $18 billion was too much, $15 billion was all we could
afford. I might note that in 1950 that represented 5 percent of
the GDP. That was all we could afford.
Six months later we were suddenly in a war in Korea. Just
as suddenly, we found we had no choice but to budget some $48
billion, a 300 percent increase. How much better it would have
been to have made the investment earlier. Had we done so, Dean
Acheson might not have been forced to define Korea outside the
defense perimeter of the United States on the grounds that we
did not have the forces to defend it.
Historically, we have spent an average of about 8 percent
of our GDP on defense, in large part because we have not spent
enough in peacetime to prepare for and deter war. Today, we are
more in the range of 3 percent. But I believe it would be
reckless to press our luck or gamble with our children's
future.
To say that we can't afford an insurance policy of roughly
3.5 percent of GDP today to deter the adversaries of tomorrow,
underpin our prosperity, and, by extension, peace and stability
around the globe, just doesn't make sense to me. If history is
our guide, it suggests strongly that we are much wiser to pay
the premium now than to pay in blood and treasure later.
Much remains to be done, and we know that fixing and
transforming our force is a joint responsibility, one that will
require close partnership between Congress and the executive
branch.
We look forward to working with you, Mr. Chairman, with
your committee, with the entire Congress, to rehabilitate
today's force and to build the force of the future. We
earnestly seek your support in this important and noble
mission. Thank you.
[The prepared statement of Mr. Wolfowitz follows:]
Prepared Statement of Hon. Paul Wolfowitz, Deputy Secretary, U.S.
Department of Defense
Mr. Chairman, members of the Committee, thank you for this
opportunity to discuss the President's 2002 amended budget for the
Department of Defense.
The U.S. Armed Forces are the world's best-trained, best-equipped,
most powerful military force in the world. They provide the security
and stability that make peace and prosperity possible across the world.
Indeed, no force on earth can do what they do-from the speed with which
they can mobilize, to their effectiveness once they are in theater.
The preeminence of our military forces may lead some to ask, in
this moment of peace, why do we need such an increase in the U.S.
defense budget? The answer is simple, how long that peace lasts will
almost certainly depend on our ability to defeat any adversary and
maintain the unparalleled capabilities of the U.S. Armed Forces.
However, we spent much of the 1990's living off the investments of
the 1980's. We allowed our military capabilities to be slowly degraded
as we overused a shrinking and underfunded force. To their enormous
credit, America's dedicated servicemen and women dutifully did more
with less--putting off needed investment in training, infrastructure,
maintenance, and procurement to keep up with a proliferation of
missions.
Many in Congress--and on this Committee--worked hard to give them
more resources. But notwithstanding those efforts, an imprudent policy
of overworking and underfunding our troops continued--a policy that has
now, not surprisingly, begun to take its toll. It has harmed the morale
of our forces. It has harmed their readiness to meet current threats.
And it is undermining our ability to prepare for the threats of the
future-because defense decisions and investments can sometimes take 10
to 15 years to reach fruition, especially when it comes to developing
and fielding innovative new weapons systems.
With this situation in mind, when President Bush took office, he
asked the Defense Department to undertake a comprehensive review of the
condition of America's forces. He asked us to engage our brains before
we opened our wallets, and so Secretary Rumsfeld initiated a broad
strategy review soon after he took office. We have completed the first
stage of the strategy review and that forms the basis for the '02
budget request. We are now starting the second stage, the Quadrennial
Defense Review, which will form the basis for the '03 budget and the
new FYDP. I'd like to briefly explain the process for you before I go
into the specifics of the 2002 budget.
In the first months of the administration, Secretary Rumsfeld
commissioned a series of studies to look at a variety of issues,
touching on subjects from space to missile defense, to morale and the
quality of life of our troops. While these studies were wide-ranging,
they basically covered two broad areas: first, the strategic
environment and the challenges our forces will face in the future; and
second, the condition of the U.S. military today.
From the completion of those initial studies, we have drawn two
conclusions. The first is that the security environment America will
face in the decades ahead will be much more dangerous than the one we
faced in the decade just past. The other is that the condition of our
force today is even worse than we had previously expected.
This exposed a dilemma. To meet emerging dangers, we know we must
build a 21st Century force. But we are constrained in our ability to
build the 21st Century force we need--because the 20th Century force we
have is in such a serious state of disrepair.
These preliminary conclusions have formed the basis of the 2002
budget and a starting point for the second, more formal, round in the
review process, the Congressionally-mandated Quadrennial Defense
Review, which I'd like to address before I get into the budget.
This is only the second time the Defense Department has conducted a
QDR under the formal mandate of Congress. [However, it is not the first
time the Department has taken a broad look at the size and nature of
the force needed to meet national defense requirements.] Yet the
process this time is unprecedented for the amount of time the Secretary
of Defense and the senior military leaders of the Department have spent
in carefully establishing the parameters of such a review at the
beginning.
Over the past 2 months the most senior officials in the
Department--including Secretary Rumsfeld, the Chairman of the Joint
Chiefs, the Vice Chairman, the Service Secretaries and Chiefs and
myself have met for close to 35 hours, to discuss a possible new
defense strategy for the 21st Century-and to give detailed guidance and
parameters to the QDR. These carefully established parameters reflect
conclusions drawn from the preliminary strategy reviews as well as the
accumulated wisdom and years of experience in defense matters
represented by those civilian and military leaders.
The first stage brought to the surface a number of formal questions
that will be addressed over the next several months; broadly, they
target the size and character of the defense force structure. Of these
issues, the most important we've identified is the need to assess the
defense force posture on the basis of multiple dimensions of risk.
In the past, we have tended to evaluate exclusively on the basis of
our ability to execute existing war plans. That focus, we concluded,
while important, is much too narrow. Other aspects of the force posture
must be taken into account. For example, everyday we use our forces in
ways that are unplanned, unbudgeted and unaccounted for-the ongoing
operation in Bosnia is a prime example. It was supposed to last one
year and cost $1 billion, but is now a significant ongoing feature of
the Defense budget and should not continue to be managed with year to
year ``emergency'' supplemental appropriations.
Bosnia vividly illustrates the reality that our forces do more in
peacetime than simply prepare to fight the conflict scenarios we
anticipate in our war plans. At the same time, and in addition, we must
also prepare for a future that is hazy and indistinct. We can be less
certain of the specific scenarios we will face in the 21st Century.
Nevertheless, we can discern the emergence of new and more formidable
threats-threats we must begin to prepare for now. And to do that, we
need new capabilities. These represent two additional dimensions of
risk that must be considered along with the more commonly evaluated
risks associated with current war plans: the risks imposed by the
ongoing use of our forces in peacetime, and the risks of not being
prepared for emerging threats in the future.
Our intention is that by the end of the QDR, we may give more
precise advice to the President and to Congress on how to balance those
different needs and risks, and present a new defense posture that is
better suited for ourselves and for future generations.
While the first stage of our review has focused on the nature of
threats and the condition of the existing forces we have, the QDR will
help us decide the kinds of forces we need to build. But it is
sufficiently clear, however, we urgently must begin to repair the
damage inflicted by the complacency of the '90's.
The 2002 amended budget starts us on a path toward transformation
by undertaking urgently needed, immediate repairs to our existing
force, and by investing now in some of the transformational
technologies and R&D that we will need for the 21st Century force. That
is what the President has sought to do with the 2002 defense budget.
Getting started quickly is imperative because defense planning is a
long-term process. And we have lost precious time. We've been digging
ourselves into a hole for a decade, and we can't get out of that hole
in a single year, so we need to get started now. Allow me to describe
for you some of the key aspects of President Bush's 2002 budget--what
it does, and what it does not do.
The President has requested a historic increase to begin dealing
with some of the immediate problems I've mentioned. The budget we have
proposed is the largest peacetime increase in defense spending since
the 1985 Reagan defense budget. Using the 2001 enacted budget of $296.3
billion as a baseline, the President earlier this year issued a budget
blueprint that outlined a 2002 baseline budget of $310.5 billion. This
included a $4.4 billion real increase to cover presidential
initiatives, including:
$1.4 billion to increase military pay,
$400 million to improve military housing, and,
$2.6 billion for research and development.
The request before you proposes to raise that investment still
further to a total of $328.9 billion--$18.4 billion more than the
President's February budget blueprint. Taken together, these increases
amount to $22.8 billion real increase in defense expenditures for the
Department in 2002.
As I explained previously, the first stage of the strategy review
has defined where we are today and outlined in broad terms the
direction we must go in order to build a 21st Century force. The
precise specification of where we need to get to will emerge from the
second stage of the QDR. The QDR will tell us which mountain we need to
climb and how high it stands, whether it is 6,000 feet high, 12,000
feet high-or perhaps even higher. But, one thing is for certain, we
know we're starting in a hole, and a hole that is below sea level at
that. So, no matter how high the peak we must ultimately scale, we know
we better start climbing now. And that is what the 2002 budget does for
us-it begins our uphill journey.
Allow me to give you an example of one way the 2002 proposed budget
will begin to arrest some troubling declines. Consider DOD's aging
infrastructure, which the 2002 proposed budget begins to address. It
increases funding to meet current needs and begins a long-range plan to
streamline, restructure, and upgrade DOD facilities.
In the private sector, the standard for overall facility
replacement is 57 years. DOD's target is 67 years. Under the 2001
enacted budget, DOD was replacing facilities at an average rate of 192
years. The 2002 budget proposes to increase funding for facilities from
$3.9 billion to $5.9 billion. Even with this substantial increase, it
only gets us to an average replacement rate of about 98 years-still not
yet close to the 67-year target.
However, as Secretary Rumsfeld has said, with a round of base
closings and adjustments that would reduce unneeded facilities by, for
example, 20-25 percent, we could focus more funds on those facilities
we actually need and get the replacement rate down to 76 years at the
2002 budget level-a substantial improvement.
Our people are the key to everything we do. They are the foundation
on which today's force is built, and they will be the foundation on
which we will build the force of the future. Smart weapons require
smart soldiers, sailors, airmen and Marines. And unless we can attract
and retain the best people, no amount of technology can assure our
safety and security in the new century.
To ensure we are taking care of this most precious resource, this
budget will help put us on the path to recovery in some key areas
including military pay, housing allowances, readiness training, and
health care-overall quality of life investments that tell our men and
women in uniform we value their service and sacrifice.
The 2002 budget, for example, begins to address previous shortfalls
in the Defense Health Care program. We have anticipated a 12 percent
growth in the costs of medical care and a 15 percent growth in the cost
of pharmacy purchases. And so, by using for the first time realistic
budgeting of health care costs, the 2002 amended budget proposes $17.9
billion for defense health--to cover these costs, a $5.8 billion
increase from $12.1 billion in FY 2001. And it includes $3.9 billion
for prescription and medical care benefits for Medicare-eligible
military retirees and their families.
The 2002 budget moves beyond simply repairing the present force and
takes a major step toward transformation with significant investment in
new technologies-it begins to build the military of the 21st Century
and it begins to address some of the more urgent threats identified in
the first stage of the strategy review.
To advance technologies with the greatest promise for transforming
our forces to meet the threats of the 21st Century, the budget assigns
appropriate funding for Research, Development, Test, and Evaluation
(RDT&E) programs. These include, for example, technologies to protect
and enhance our communications and computer capabilities. Reflecting
the high priority of transformation, the FY 2002 budget boosts RDT&E by
14 percent in real terms, up to $47.4 billion from $41.0 billion.
Today's strategic environment is far different from that of the
cold war. We have an obligation to plan for the changing circumstances
we face today-to make sure that we are arranged to dissuade rash and
reckless aggressors from taking or threatening action. One of the most
disturbing areas of vulnerability, one frequently identified as an area
where our opponents might seek to exploit so-called ``asymmetric''
approaches against us, is threats from ballistic missiles, armed with
both conventional weapons and weapons of mass destruction.
This budget invests heavily in efforts to deter and defend against
existing and projected threats and to dissuade potential adversaries
from continuing to invest in these dangerous capabilities. The budget
advances the President's commitment to build effective missile defenses
for our territories, for our allies and deployed forces against threats
of all ranges, based on the best available technologies, deployed at
the earliest possible date. It includes a total of $7.0 billion for
Ballistic Missile Defense Organization (BMDO) programs and $1.3 billion
for lower tier systems. And it emphasizes an expanded and flexible
RDT&E program that is designed to pursue the most promising
developments.
In addition to this important initiative, the budget includes
another $13.3 billion dollars of investments in a wide range of
potentially transformational capabilities. The chart attached to this
testimony gives some indication of the wide-range of programs that we
propose this budget to invest in.
There are also a number of initiatives in this budget proposal that
are addressed at streamlining our operations and saving us money, many
of which require congressional support. The Peacekeeper deactivation is
one such example. As in so many other cases where we'll be looking for
savings or cutting unnecessary programs, we have to spend money up
front to realize those savings in the out years. In addition, in the
case of the Peacekeeper, we will need the support of Congress to remove
the current restrictions to get rid of a nuclear system that we no
longer need-the system many intelligent observers have been
recommending we get rid of for years.
We can and must continue to take other such innovative measures.
But, doing so will require congressional support. For many important
reforms-reducing our excess infrastructure, in reallocating functions,
and giving the department the ability to manage efficiently-we will
need your help.
One of Secretary Rumsfeld's top priorities is to transform the
Department's system of financial management. We recognize that we need
to make fundamental changes that will save money and assure you, the
Members of Congress, as well as the American people, that we are
allocating and using defense funds properly and wisely. One key
improvement we anticipate is the connection of major areas of financial
management, such as personnel, acquisition, logistics and financial
systems. Through this end-to-end system, we hope to be able to access
information ranging from readiness indicators and end strength numbers
to personnel records and tracking acquisition programs, more
accurately, sooner, and cheaper. And this system will allow the
Department to meet prevailing financial management requirements.
So this budget does a great deal. However, if we are to revitalize
America's Armed Forces and transform for the 21st Century, it is clear
that budget increases alone won't get us to where we need to be. We
need to find ways to use the American people's tax dollars more
efficiently. We can find savings with the management overhaul that
Secretary Rumsfeld has already begun. And, we are committed to
operating more efficiently, and thereby saving money, in our daily
operations.
Finally and very importantly, this 2002 budget seeks to apply the
principle of honest assessments of what it will take to do the job, or
what we call realistic costing, to other key areas such as flying
hours, transformation and management issues, procurement and base
operations. Realistic costing is designed to get us away from the
dysfunctional process of deliberately under-budgeting in anticipation
of ``emergency'' supplementals. It is our firm intent that with the '01
supplemental, we will put behind us supplemental budgeting-a process
that is, at times, wholly unconnected with true unanticipated needs.
The increase in the 2002 budget is thus a significant, historic
increase. It is devoted to beginning urgent rehabilitation of the 20th
Century force that we have and begins building the force of the 21st
Century. This 2002 budget gets us started on the road to
rehabilitation. The 2002 budget proposal before you is a bridge budget
to what we hope will be the transformation budget of 2003.
I'm reminded of another point in our history when it was a
challenge to make a case for increased defense spending. In 1950,
General Omar Bradley urged President Truman to spend at least $18
billion on defense. The Joint Chiefs gave an even higher estimate at
$23 billion, and the services' estimate was higher still at $30
billion. But the President said we couldn't afford that much--$15
billion was as much as we could afford.
Six months later, we were suddenly in a war in Korea. Just as
suddenly, we found we had no choice other than to budget some $48
billion-a 300 percent increase. How much better it would have been to
have made the investment earlier. Then, Dean Acheson might not have
been forced to define Korea as being outside the defense perimeter of
the United States-on the grounds that we did not have the forces to
defend it.
We have spent an historical average of about 8 percent of GDP on
defense, in part because we have not spent enough in peacetime to
prepare for, and deter, war. We can't know who may challenge us in the
future, or where, or when. Today, we are more in the range of 3 percent
of GDP. But it is reckless to press our luck or gamble with our
children's future. To think we can't afford an insurance policy of
roughly 3.5 percent of GDP today to deter the adversaries of tomorrow
and underpin our prosperity, and by extension, peace and stability
around the globe, is simply wrong. When compared with the cost in
dollars and human lives if we fail to do so, it is cheap at that price.
It's interesting here to consider once again the situation in 1950.
President Truman's bottom-line figure of $15 billion represented 32
percent of the Federal budget, or just 5 percent of the GDP. The jump
in spending to $48 billion the war necessitated represented more than
15 percent of the GDP. If history is our guide, it is suggesting quite
strongly that we are much wiser to make smaller investments now rather
than pay the premium rate later on.
Much remains to be done, and we know that fixing and transforming
our force is a joint responsibility, one that requires a close
partnership between Congress and the Executive Branch. It is a
responsibility we have to our nation's service members; it is a
responsibility we have to future generations. The force we build today
will benefit our successors-and help ensure peace and prosperity for
our children and grandchildren.
We look forward to working with you to rehabilitate today's force,
and build the force of the future. We earnestly seek your support in
this important and noble mission. Thank you.
Chairman Nussle. Thank you, Mr. Secretary. Let me begin by
emphasizing a couple of points that I think are important to
emphasize at this point in this budget discussion.
Number one, this Congress will protect 100 percent of the
Social Security and HI Trust Funds, period--no speculation, no
supposition, no projection. The Congress has voted unanimously,
or almost unanimously--there were a few that didn't see it this
way--for lockboxes and all sorts of different mechanisms to
make sure that this occurred. Both parties prepared budgets
that did so. We will protect 100 percent of Medicare and Social
Security.
We passed tax relief. And after passing tax relief, there
was plenty of room for our nation's priorities, including this
new request for defense. I repeat that we passed a tax cut;
there was plenty of room to fund our nation's priorities,
including this defense request--in fact, more than has been
requested here today.
Third, let me just say that in every budget discussion and
in every congressional cycle there are tough choices. Are there
going to be tough choices this year? You bet. Mr. Spratt has
outlined them, I have outlined them, the President has outlined
them. We can all give an outline of what those tough choices
will be.
Some of them have already been made. We have passed some
appropriations bills, some are yet to be made. But they are
tough choices, and they need to be made if in fact we are going
to continue to protect 100 percent of Social Security and
Medicare and make sure that there is plenty of room for our
priorities.
That having been said, defense is an important priority. It
is appropriate to question our defense needs for this country
and the amount of money that is requested without jeopardizing
our firm commitment. On every single one of our behalf's here
today--there is not one person in this room who questions
defense because we do not support defense, or questions defense
because we do not support the men and women in uniform who are
out there on the front line in a very tough position, defending
our freedom that we take for granted every single day. Not one
of us questions it because we take that for granted or because
we don't support it; we question it because we are responsible
to do so because of the job that we have been elected to do
within the Congress, the assignment on this committee to
balance those priorities with everything else. And it is in
that context that I asked the questions at the last hearing and
the one today.
We were told a review would be completed in 6 months.
Obviously, as you report today, the first part of that review
has been completed, but the entire review has not yet been
completed. Just for the record, would you state again when you
believe that review will be completed, when the final review
that the President requested of the Secretary will be
completed?
Mr. Wolfowitz. I believe the final review will be completed
in the same time frame as the congressionally mandated
Quadrennial Defense Review, which means at the end of this
fiscal year; and the results will be reflected in the 2003
budget, which will be submitted, I guess, in late January or
early February. So essentially in the last quarter of this year
we will be bringing in the final results.
Chairman Nussle. Would you also tell us for the record,
when did the timetable on this review change from ``6 months
from the President's inauguration'' to ``consistent with the
Quadrennial Defense Review?'' When did that priority or when
did that timetable change?
Mr. Wolfowitz. Mr. Chairman, I can't give you a precise
time. It was something that more or less happened as we moved
along. I think partly because the results of the studies--the
initial studies that we were doing indicated the magnitude of
the problem was a good deal bigger than we thought, and I think
also because, frankly, the long delays in confirming people
just kept a lot of work that needed to get done kept being
delayed.
Chairman Nussle. But at some point in time someone had to
whisper across the table to someone and say, this isn't going
to get done on time.
Mr. Wolfowitz. Well----
Chairman Nussle. I mean, are we misperceiving a deadline of
July as requested or suggested or commanded by the Commander in
Chief? Am I misperceiving that a deadline was given in July for
the completion of this review?
Mr. Wolfowitz. No. I think you are quoting him accurately.
I think what happened was, we started working about 2\1/2\
months ago on taking the preliminary results from the strategy
review to begin to develop a 2002 amended budget, which we knew
we had to get up here by July. I can't say, I know consciously.
I know when we said, we are now turning a 6-month review into
two stages and something more like 9 months.
Chairman Nussle. The concern I have, and I stated it to Mr.
Daniels, the OMB Director, is that it appears to me that the
time, what has been spent--and as I said in my opening
comments, I am not suggesting to you that the deadline was one
that was attainable, that it was a goal that was achievable.
But at some point in time, someone knew it wasn't achievable,
and that was not reported to the Congress, to the Budget
Committee, to the committees of jurisdiction, to the general
public. That was not reported.
It was only last week--or 2 weeks ago, excuse me--when Mr.
Daniels came forward to suggest that that defense review would
not be completed on time. All of us felt that it was probably
going to have a difficult time getting done, but no one
reported that, number one.
Second, it appears that during the period of time that has
been taken already for review, one could simply suggest that
instead of trying to look for the new needs of the defense of
the future, what the Defense Department did was, it went back
to its current culture, which has continued to play catch-up
and defend or function in the defense of the past, and that
basically the first 2 months were not spent in looking forward,
but looking backwards and trying to play catch-up.
What concerns me is not that that was done if that needs to
be done. You have shown us the pictures; they are in the
record. I am sure this isn't even the very tip of the iceberg.
This is an ice cube on the iceberg of what is out there and is
a problem.
I am sure that it was a mess. But we didn't hear about
that, and that needs to be discussed openly so that we can make
the kind of changes that need to be made and move forward to
the future. And what concerns me is that the next 6 months,
during the QDR, the completion of the QDR, that more of the
same will occur. And I think one example of that is what
happened with the B-1 bomber and the fact that when reforms are
reported and when reforms are suggested, they are shot down
almost immediately by Congress. And so this is going to be a
very difficult task to move forward with if, in fact, you don't
use the time that you have as judiciously as possible.
So my concern is that while the goal continues to be an
important one and a lofty one, I have a real concern based on
the track record that I have seen thus far--not suggesting that
you personally or that people working with you have not been
able to do a good job--but the task is even more enormous than
one might have first believed, and that we may digress even
against your statements today back to supplementals.
And part of the reason I suggest that is, I have a
difficult time believing that the health care needs of our
defense and that the housing needs of our defense and that the
material and spare parts needs of our defense and the
infrastructure repairs of our defense weren't known until, all
of a sudden, you walked in the front door or even, for that
matter, Mr. Rumsfeld walked in the front door.
These are things that are constantly under review by the
colonels and others throughout the ranks. It just seems if it
has taken this long to just find out what the problem is, it is
going to be very difficult to fix it in the so-called ``second
stage.''
The final point I guess I would make, and it is in the form
of a question, is there really a higher number? How realistic
is the number that we are dealing with? And the reason I say
this, we are not interested in just plugging in the number and
then finding out in 6 more months that it can't be done, or it
is bigger than we thought once again, or that the next budget
request requires a supplemental because we didn't get
everything that we needed in order to make the changes that
were needed to defend our country.
How are we going to know, based on what we have seen thus
far, that the next request for 2003 is, A, going to happen in a
timely fashion and, B, is accurate enough to fund the defense
of the future which is the President's mission in all of this?
Mr. Wolfowitz. Maybe the reason no one said we slipped the
deadline is the fact that we did, in fact, complete a strategy
review. What we didn't complete is a full look at exactly what
force structure we think we need to have for the next decade.
But we made extensive studies of the kinds of forces we
need to have, of the kinds of new technologies that we need to
have; one whole study on the subject of morale and quality of
life of the services, one whole study on the broad national
strategy. We have briefed these to many Members of Congress and
we would be happy to have the study directors brief them to any
members of your committee that are interested.
So there was a lot of review work that was done and
completed and completed on time. I think it is important to
make that clear. And that guided a lot of what we are asking
for in this 2002 budget.
You are absolutely right that some of these needs, like
health care, were known before. The problem was, they were
known before, but they weren't budgeted for before. And part of
the reason we have this increase here is because we are trying
to do our best job of honestly funding health care; it is a $5
billion increase just to do that.
You have raised the issue of whether there are going to be
more supplementals. We have tried to stop the practice of
saying, we are going to deliberately underfund things like
flying hours, because we know that if you get to the middle of
the year and you don't have enough money to fund flying hours,
Congress will consider that an emergency, and we will come up
and ask for emergency funding.
We have added how much? We have added roughly $2 billion to
the readiness and training account so that we won't be coming
up next year and asking for more in the middle of the year.
So, to the extent that we can figure these things out, we
have done honest budgeting for 2002. You have asked the
question, now, sort of beyond that, can we be sure that what
comes up next year won't ask for more. Until we finish this
next stage of the strategy review, I really can't tell what we
will need for next year.
We can tell you what it takes to sustain the path that we
are on. And the path that we are on only starts to get us,
well, at I would say, an acceptable but not a terrific rate.
If you take those numbers on repair facilities, for
example, we move from replacing our facilities at 192 years
to--which is absolutely unacceptable--to 98, which is really
not acceptable compared to the 67 that we need to be at. But,
hopefully, by the time we come up with a 2003 budget, instead
of asking for more money, we will also be asking for some kind
of process to get the base structure down so that we are not
spending enormous amounts of money on unnecessary basing.
Finally, I would say, too, Mr. Chairman, I would hope when
the 2003 budget comes up, we will have a good deal more
besides--in addition to the things that are there, like B-1 and
Peacekeeper, we are getting rid of some old systems in order to
invest the savings in modernization. When that happens, we are
going to be counting on this committee particularly to plead
the case with some of your colleagues, that these kinds of
painful decisions are the only way we are going to be able to
function as the kind of force we need for the 21st century.
Chairman Nussle. Thank you.
Mr. Spratt.
Mr. Spratt. Mr. Secretary, we thought the delay was, as the
chairman put it, to wait on the transformation study to be
completed. But, in truth, it is not going to be completed until
it has been through the digestive process of the QDR; and even
then you have got a lot more work to do before you bring it to
fruition and decide what the force structure is going to be.
So we are still in a pretty uncertain state, it seems to
me. Is that correct?
Mr. Wolfowitz. No, I don't think it is correct. The
transformation study was completed by the end of May, if I
remember the date. And it gives rather extensive and detailed
guidance as to what kinds of new capabilities we need to have,
some $13 billion of which, in addition to missile defense, are
proposed to be funded in this 2002 budget.
Mr. Spratt. I wouldn't call that transformation. We thought
the transformation was going to be digitization, use of stealth
technologies and leap-ahead technologies.
Mr. Wolfowitz. That is what that $13 billion, which I have
appended to my testimony, Mr. Spratt----
Mr. Spratt. I have looked at that. That is just reshuffling
the same deck, it seems to me. I read this budget; it is
basically a meat-and-potatoes budget, rather than a
transformation budget.
Mr. Wolfowitz. I think it is a mixture. We do need meat and
potatoes. You are not going to change the whole force
overnight.
Mr. Spratt. I agree. I would buy the meat and potatoes
before I bought the creme brulee.
Mr. Wolfowitz. We are trying to do both.
Mr. Spratt. When I think about transformation, I go
directly to the science and technology account. That is where
your leap-ahead technology gets funded. This year we are
spending $9 billion on the science and technology account. Your
budget asks for $8.8 billion; it actually cuts it $200 million.
Mr. Wolfowitz. Some of that $9 billion includes things that
have been added by the Congress, in its wisdom. I think they
are probably good investments, but I think, as I think you
know, they are targeted precisely at military needs. I think we
would like to do better on the science and technology budget;
there is no argument about that. Our research and development,
overall, is about $7 billion.
Mr. Spratt. $6.4 billion. That is a substantial increase.
The problem is, R&D doesn't put any weapons in the field.
You have to produce those weapons and buy them with procurement
dollars before you actually deploy them. While you increase the
R&D accounts by $6.4 billion, you cut the procurement account
by $500 million. If you don't have the money in the procurement
account proportional to the increase in the R&D account, you
can't tech out these new weapons that you are researching and
developing. And you have got some significant procurement
commitments coming down the pike: F-22, Joint Strike Fighter,
more C-17s.
Your Navy budget, your shipbuilding budget, you keep
repeating this replacement ratio for real estate. But if you
look at ships in the line, warships and submarines, we are only
buying enough to sustain a Navy in two-thirds of the seas. It
is the objective force, 313 major combatants. And everybody
acknowledges that you have to replace your 313-ship Navy at the
rate of eight, nine, ten ships a year, but we are only
providing here for five, six, seven ships a year. We are well
below the norm that is needed for replacement of a major
element of our force structure.
Even though this is so--I don't find a lot of frothy, leap-
ahead technology here. I looked for it and don't see it. There
is a little more money for digitization and a little more money
for high-energy directed-energy technologies, but I am
concerned about the fact that there is not enough provision,
barely enough provision here made for our meat-and-potatoes
basic defense.
And what happens if you don't get the $18 billion? I don't
see this budget, at this level, funding the kind of
transformation I think you have in mind. Am I correct?
Mr. Wolfowitz. Well, let me say a couple of things. First
of all, the crucial pieces of information that we hope to get
out of the QDR process are those that pertain particularly to
the exact size of the forces that we need and the mix and
makeup of those forces. And until you have done that work, it
is hard to develop intelligent procurement plans because you
don't know how big a force you are procuring for; and some of
the estimates that one sees about DOD's modernization
requirements simply calculate a fairly primitive one-for-one
replacement.
Mr. Spratt. I understand that. But what I am saying is, you
have got $330 billion, just shy of that in this particular
budget, and you are plussing up R&D by $5 or $6 billion. But
eventually, if R&D is going to prove useful, you have got to
plus up procurement too. I don't see where the plus-up is
coming from unless you get more money over and above the level
of this particular defense budget.
Mr. Wolfowitz. Or unless, Mr. Spratt, we are able to find
significant savings. We think that we should be able to find
significant savings.
Mr. Spratt. Well, look, I have been around here since the
first BRAC. I helped craft the language of it. I have watched
the results of it. The first BRAC, it took us 5 or 6 years
before you could see any positive cash flow from it. So I mean,
BRACs won't fund near-term budget increases. And you are not
talking about big bucks anyway--you are talking about
modification of Davis-Bacon. It is going to be politically
problematic to get that done.
You talk about implementing prospective payment rules,
military health care--be awfully difficult to get that
implemented. So I think some of these savings are illusory.
In any event, they are not big-dollar items, and my basic
question is, can you fund transformation at or near this level?
And are you telling me then that you can, but you are--next
year, 2003, you will take it out of your hide--you will pay for
it out of our own accounts by reducing one account in order to
fund the transformation account?
Mr. Wolfowitz. I think at this stage I can't tell you with
precision. I think we will probably have to find some ways to
pay for it. We need more; I think that is clear. We will have
to find some ways to pay for it.
Some of these need to come from efficiencies in what we are
doing. The fact is, if we can find 5 percent savings in our
overall budget, that would pay for a heck of a lot of
transformation.
Mr. Spratt. You said in your testimony that you thought 3.5
percent of GDP was not an unreasonable amount of money to
expect for defense.
Mr. Wolfowitz. Historically, it is not, sir.
Mr. Spratt. That would be $380 billion. And the Secretary
indicated in his testimony, as I recall it, that he would need
$347 billion in 2003 as a follow-up to the $330 billion he is
asking for 2002. Is that in the ball park of what you think you
will need in 2003 to sustain the basic budget and also to begin
transformation?
Mr. Wolfowitz. I think it is in the ball park. But we
really frankly do have ambitious hopes that with our new
management structure, our new service secretaries, with the
very searching look that is being taken in the QDR process,
that we will come up with some significant ways to pay for
transformation out of places where we are spending money today
that we don't need to.
Mr. Spratt. Let me underscore one thing that the chairman
said for my side of the aisle. We have come too far, worked too
hard to turn this budget around, then to take the first step
down the slippery slope and being dipping into the Medicare and
Social Security Trust Funds.
So we stand together in saying, however this budget is
finally put together, that is going to be the one cardinal
principle. We are not going to simply dip into those trust
funds. They are sacrosanct. We are not going to spend that
money. We are not going to regress, having worked so hard to
get to where we are. We are not going to step backwards into
those trust funds in order to fund it.
If that is true, you see my numbers, wouldn't you agree
that we have got a pretty tough problem here to fit your budget
this year and next year into this budget scenario?
Mr. Wolfowitz. I would certainly agree on that scenario,
Mr. Spratt. I mean, I also know--and I don't want to get too
far into this because I am--for better or for worse, I'm not an
economist, but I know those numbers sort of change with each
economic estimate, and we will probably--as you said yourself,
we will see new numbers.
Mr. Spratt. They could be worse.
Mr. Wolfowitz. I understand.
Mr. Spratt. Let's hope that they get better. But in the
near term, I think that they get worse before they get better.
I hope this top line is sustained and we have got enough
money to do all of these things. But we are the first people
who watch the punch bowl. And when things get a little too
excited, we take it away and say, let's stay realistic. The
reality of the situation is, now you are hearing Wall Street
and the White House say, it looks like there may be some
revenue shortfalls. If the top line deteriorates, the bottom
line gets tougher than ever and makes it harder than ever to
accommodate your budget.
I may have some further questions, but other members here
have some other questions as well. Let me yield.
Chairman Nussle. Thank you, Mr. Spratt.
Mr. Secretary, we have one vote now. We are told that there
is an additional vote that will come right after that. And so
what we will do is, we will recess, and we will come back as
soon as that second vote is completed.
So the hearing stands in recess subject to call of the
Chair.
[Recess.]
Chairman Nussle. This resumes the Budget Committee hearing
on the Defense Department budget request for fiscal year 2002.
Mr. Thornberry.
Mr. Thornberry. Thank you, Mr. Chairman.
Mr. Secretary, welcome. I think, as the chairman discussed
earlier, all of us have been struck by the difficult task which
is before you, because whatever we may think of existing
deployments and commitments, we can't just drop our rifles and
walk away from them unilaterally. We have certain
responsibilities as a world power, and we have been
underfunding these activities. But, at the same time, the world
is changing, and we can be attacked in more ways by different
actors faster than ever before.
And the thing that strikes me, Mr. Secretary, about the
analogy you used with Korea is that we may not have time to re-
gather ourselves and dust off our clothes and increase the
defense budget and prepare ourselves to meet the--to
counterattack. We may not have the opportunity we had after
Pearl Harbor. It may be over by then. So preparations
beforehand are even more important now at a time when
technology has taken warfare to new dimensions of speed.
And so, to prepare for the future, we have to make changes,
and there are costs to these changes. And yet, as the chairman
was talking, there is a reluctance for change in the services,
there a reluctance among the contractors, there is a reluctance
on the Hill to make those changes. And yet I don't think any of
us can stand by while, by some estimates, half of our defense
budget goes for infrastructure and support, less than half by
most estimates depending on what you include, goes for actual
warfighting. So I think it is entirely appropriate to take some
time out to study the situation.
There has been criticism on both sides of the aisle in the
past that we have had QDRs that are budget driven rather than
strategy driven. So this administration has taken some time to
think about strategy before we get into the QDR and the rest of
the--and how much it costs to implement.
I guess what I am most interested in is the--how you assess
and balance this need to make up for deficiencies of the past
and the demand that we prepare for the future. How do you make
these trade-offs? In some ways, we can spend all of our defense
or increased defense money fixing the problems, like you showed
us. We are throwing away the future if we do that.
On the other hand, we can't just ignore those problems and
focus only on the future, because then we are going to lose our
people.
How do you balance those commitments now--and making up for
the deficiencies versus preparing for the future?
Mr. Wolfowitz. That is an incredibly important question,
and I guess it goes to the heart of the problem. It is not one
for which there is any easy answer.
I think it is true, and the fundamental point that
Secretary Rumsfeld has made many times is that even if you
transform your forces at a fairly high rate, you are still
most--for a very long time will be operating with the old
force. This is not like turning some small vehicle on a dime.
It is like turning a very big supertanker that you begin to
make changes and they really turn up in their full
implementation maybe a decade later.
I do think that it is very hard to get the kinds of new
thinking and the kinds of changes that we need to have when
chiefs of services and commanders of divisions and air wings
are dealing with some of these very basic problems that are
driving their best people out of the service. So beginning to
fix them is not only an investment in the present, it is also
bringing out people who start thinking more ambitiously about
the future.
I guess I would say a final thing. That is, we need to find
ways to allow the services to have more incentives for making
these kinds of trade-offs themselves. Too often they are
confronted with situations where, if they try to take some
savings in order to make these kinds of investments in the
future, what they find is, the savings are taken away and the
investments don't happen. And the end result is they are in
terrible shape.
I know that happened in a dramatic way to the Navy about 5
years ago. We are still living with some of the psychological
wounds from that. So I think establishing, to a certain degree,
a stable baseline is an essential step toward getting people to
make these kind of trade-offs.
Mr. Thornberry. Thank you.
Chairman Nussle. Mr. Bentsen.
Mr. Bentsen. Thank you, Mr. Chairman.
And, Mr. Secretary, thank you for being here today. And I
talked to Mr. Spratt. I guess if we are not going to talk about
Vieques, then we won't talk about Kennedy County, Texas,
either. And I notice that there were at least three Texans on
the panel, at least two that are here now.
But, seriously, I do want to talk to you about your
testimony. Let me say at the outset that I agree with what the
administration is doing with quadrennial review and trying to
look at our force structure and how we plan for the next 20
years in trying to get away from how our defense posture has
been structured the previous 20 years, in getting away from the
cold war structure and even this interim post-cold war
structure. I think that is the right approach.
What I am concerned about, though, and what I think this
committee needs to be concerned about is the macro aspect of
that and the cost.
And it seems to me that at the same time the administration
is proposing a plus-up in defense funding, in the R&D account,
in the strategic defense or the ballistic defense missile
account, you also are proposing what you call the ``repair''--
or ``repairing the damage,'' if you will--as the administration
likes to characterize it from the previous 10 years. And it
seems to me, at this point, you are on two tracks.
You are on the track for rebuilding under the current force
structure and defense posture, and somewhere you are on a
track, although we don't have the exact numbers on this
Quadrennial Defense Review and Strategic Review that the
administration has undertaken. What concerns me is that rather
than coming up with a singular approach with which this
committee and Congress can determine what the appropriate
amount of tax dollars are to put to that, we are going to be
given a supplemental, or we are going to be given two
approaches that will have supplemental moneys; and we will be
paying for the old system and the new system, and we will see
those increases--which are at 11 percent, I guess, in real
terms this year--and seeing these types of increases over the
next 10-year period, far more than this country can possibly
afford, and we may be buying more than what we really need to
buy.
I guess the bottom line is, I am concerned, particularly
given the fact that these numbers are coming in late, that we
are going to be nickeled and dimed to death for what is a very
serious expenditure.
I think every member of this committee supports these
expenditures in varying degrees. But I am just worried that it
is, you know, $18.4 billion 2 weeks ago, later this summer or
in early fall when the Strategic Review is completed, we may
get--we know that, as you said, that will affect the 2003
budget. But I am worried, what is going to be, what you are
going to come back with for a 2002 supplemental in that regard.
I realize that you all are--have not gotten your team in
place yet, you are trying to do that. But it worries me that we
are not taking a very strategic approach to budgeting. At the
same time, you are trying to take a strategic approach to our
defense posture, and we are going to end up overcommitting; and
then we are going to find ourselves in some of the problems
that we have gotten ourselves in in the past. So I do hope that
as you come forward with the requests for more dollars--and I
truly believe you will--that you are sincere and serious about
the offsets that you are requesting.
As one of our colleagues mentioned regarding the B-1 issue,
you now have strong opposition because of parochial concerns of
certain members of this body and members of the other body. And
I think the administration has to be very serious that they are
going to--that they are going to pursue these offsets even
against strong political opposition.
The same is said for base closure. I have some questions
about your 192-year facilities replacement average, because
that would indicate to me that you have, at least on the back
end, properties that are in excess of 192 years, which I find--
you have some, but not too many, because we have only been
around for about 225 years.
But, on top of that, you have to--you are going to have to
fight very hard on this base closure. And so I just hope that
as the administration goes forward, it will stand up for the
offsets and not put in offsets that are unrealistic, that won't
see the light of day in Congress.
Mr. Wolfowitz. On the small point, on the 192 years, that
is not average age of facilities. That is the rate at which you
would ultimately replace your infrastructure if you proceeded
on the old budget level. Ninety-eight years is the rate at
which you would replace everything on the present budgeted
level; 67 years is replacement rate.
That is not going to be the average age; it is different.
In fact, because a lot of things were built in the build-ups of
the 1960's and 1980's. That is probably where the average age
is going to lie.
But what we have done for too long when we needed to pay
for things like current operations and flying hours and Bosnia
and Haiti was, well, let's put off some maintenance for a year.
We can find $1, $2, $3, $4 billion in these maintenance
accounts. You can get away with that for a year, for 2 years.
When you try to do it for 10 years, things start falling apart,
which shouldn't fall apart; and people live in housing that
they shouldn't have to live in.
On the more general point that you raised, to which I don't
have a lot to add because I think you put it very well, let me
just say that I think there are two ways that you can approach
the sort of situation that this country faces, which are, I
think, very real defense needs and lots of other needs; and as
big as our budget is and as big as our surplus is, we are
talking about very difficult decisions.
But clearly, to my way of thinking, the wrong way of doing
it is to say, ``Well, we know what we really need, but we're
going to, sort of, pretend that we can get by with less. We're
going to pretend that things don't cost what they do cost.
We're going to come up with supplementals that really aren't
supplementals because we really knew when we put in the
original budget that w'd need to come and get it. And we're
going to say we have a strategy, but gee, can't you find out a
way to. We know it really cost `X', but can't you find a way to
do it for `X' minus $150 billion so we can save money somewhere
else?''
So I think what we have to do, the best we can, is move
forward with honest assessments of what our real needs are and
honest assessments of what it takes to carry out a national
strategy. If the conclusions of the country collectively,
meaning most importantly the President and the Congress, is
more than we can afford because of all of the other things in
the budget, then let's not pretend we can carry out that
strategy with $150 billion less. Let's figure out what in the
strategy needs to change, what commitments need to change,
whether we can really manage with a smaller force.
But what Secretary Rumsfeld is trying to do with this QDR
process is to get those issues pushed up in a way that
decision-makers can make those kind of assets of risk versus
cost.
Mr. Bentsen. Thank you.
Chairman Nussle. Let me report to the committee that the
Secretary will be with us until 12:15, and so I would just ask
that we be as efficient as we can be.
We appreciate the fact that you are with us today.
Mr. Hoekstra.
Mr. Hoekstra. Thank you.
Welcome. It is good to have you here. We have done a lot of
work on another committee that I sit on, taking a look at the
Department of Education, which for the last 3 years hasn't been
able to get a clean audit. Then I understand that the
Department of Defense shares many of the same problems that we
have with the Department of Education.
I think the IG just notes that one of the audits that you
went through of the 1999 financial statements included
adjustments of $7.6 trillion--that is trillion--and accounting
adjustments in which $2.3 trillion were supported by reliable
doc--were unsupported by reliable documentations.
You know, we are talking about a lot of money here. We are
talking about a Department of Defense that spends $320 billion
a year, and we are talking about $18 billion or $14 billion or
$6 billion. But the bottom line is, I just find it amazing
that--I have got to believe that it has to be awfully
frustrating for you to be talking about those kinds of numbers,
that when you go back to the financial statements and the
financial records of the Department of Defense, it has to be
fairly difficult to actually calculate what something may cost
or what you are spending in different areas if you can't get
clean financial records.
I know, in the Department of Education, when you don't have
the tight management controls in place that would enable you to
get good financial records, you are also creating an
environment that is ripe for waste, fraud and abuse. We have
found a significant amount of waste and fraud within the
Department of Education.
Where is the Department of Defense on correcting a long-
standing problem and on an issue that we know is inherited from
previous administrations? But, you know, is this a priority,
and can we expect the Department of Defense at any time in the
near future to get clean financial records?
Mr. Wolfowitz. It is a horrendous problem. When Senator
Byrd asked Secretary Rumsfeld about this in his confirmation
hearing, Secretary Rumsfeld said, ``I'm beginning to think I
should decline the nomination.'' It is that bad.
It is a priority and we are trying to get our hands around
it. Let me ask our comptroller, who has got the principal
responsibility in this area, to tell you where we are and what
his hopes are.
Mr. Zakheim. First of all, I should say that very often,
although the numbers seem large, it is not because we really
don't know what happened with the transactions. The problem has
tended to be that we just did not record them properly. I'm not
making excuses at all.
I spent 14 years in the private sector; and that is an
inadequate response in the business I was in, and in any
business that anyone else might be in.
We are doing a number of things, because indeed it is a
very high----
Mr. Hoekstra. Let me just--I agree with your statement,
that is inappropriate. You couldn't get away with that in the
private sector saying, we know where we spent it, we just
didn't record it. Come on, give me a break. I hope that is not
the attitude of this administration.
Mr. Zakheim. I sure hope not. Certainly it is not mine. As
I said, anybody who would have told me that in my old business
wouldn't have been around very long.
Mr. Hoekstra. Thank you.
Mr. Zakheim. The question is, what do you do when there is
a situation where this has been ongoing for many years, where
the priority has been that to the extent one reported numbers
at all, they were budget-oriented as opposed to accounting and
financial management oriented. In addition, as you rightly say,
what might be called a management information system as you
might see in private business just doesn't exist in the Defense
Department that way.
What we have done, and, again, in light of what all has
been said about trade-offs, you can see how important it was to
do this--what we have done in this budget amendment is to
allocate $100 million toward fixing this problem.
Now, this is only a small down payment. I have heard
estimates of a billion, maybe $2 billion in terms of
structuring all of the various systems so that they can talk to
one another, so that you can track a voucher from one end of
the system to the other, so that can you account for
transactions. We have to find out exactly what that cost is. We
are talking about building an architecture that will allow us
to put together a system that does indeed come up with the
right numbers and allows management to make decisions.
Now, will that result in a clean audit immediately? No. In
fact, I would even argue that far more important than an
immediate clean audit. In this regard, the Comptroller General
of GAO agrees with me that it is far more important than that
is to get the system in place so that are indeed can make
decisions, and track numbers. There would be then the kind of
financial accountability that begins to resemble what we have
in the private sector. That is what we are trying to attain.
Mr. Hoekstra. That is the reason that they call them
management information systems. There are just too many
departments that don't have it. And I really believe that
handicaps you in your ability to make the appropriate kinds of
decisions, because you don't have the information.
Thank you very much, Mr. Chairman.
Chairman Nussle. Thank you.
Ms. Hooley.
Ms. Hooley. Thank you, Mr. Chair, and thank you for making
that opening statement about how we all support defense. I
appreciate that.
Thank you for being here this morning. I have actually
several questions. A couple of them have been asked. For
example, I too am concerned about, how do we close facilities
and close bases. So I hope you have a plan worked out so that
can happen.
I also had some questions about financial accounting which
were asked, but I want to finish up with that question and--
what are you doing with contracting out and when do you expect
to have your financial house in order?
Mr. Wolfowitz. We have a new senior executive council which
consists of myself, the Under Secretary of Defense for
Acquisition and the three service secretaries, who are given
the responsibility for looking at the various ways in which we
might find savings and efficiencies. And contracting out is
high on the list of these. In fact, you may have seen some
press commentary on the fact that Secretary of the Army, Tom
White, comes from a firm which had been in the business of
trying to provide contracted utility services for our bases;
and some people think that his experience there means that he
should recuse himself from that kind of activity.
My own very, very strong feeling from many conversations
with Mr. White is, having been on the other end, he understands
what we need to do in order to make this contracting-out
process work efficiently and effectively, because everyone
agrees a lot of taxpayer dollars that can be saved in that
manner.
On the question of getting our financial house in order, I
guess I would really just repeat what Comptroller Zakheim just
said.
Unless, Dov, you want to add any more on that score.
Mr. Zakheim. I think I made that reasonably clear. This is
a very, very high priority for us. It will be critical if we
are going to make the kinds of transformations in other areas
that we are talking about. And I am certainly prepared to
answer any detailed questions later or for the record.
And one other point, we want to work very closely with
those Members of Congress for whom this is a high priority. I
have offered that to people in the other chamber. And anyone
here who wants to work with us on that, we are glad for your
advice and your support. We will work with you.
Ms. Hooley. I am just trying to get a sense of whether it
is 2 years, 5 years, 10 years when you will expect--obviously,
I know you need some financial help to do that. This is--I
mean, you have a huge organization. You have a real mess.
I mean, how long do you think it might take just----
Mr. Zakheim. For a clean audit, you mean?
Ms. Hooley. Yes.
Mr. Zakheim. It is not going to be a year. We have already
some sections of the Department that have received clean
audits. The idea is to have the entire Department to get this.
All I want to do is be on a positive slope that every year at
least one other element of the Department gets a clean audit.
Ms. Hooley. So are you making progress continually?
Mr. Zakheim. Yes.
Ms. Hooley. I want to clarify on contracting out. My
concern, at least according to the testimony that we heard last
year in this committee, was that there are a lot of people not
trained in contracting out; that is where a lot of problems
have been in contracting out, so--that was as opposed to saving
money by contracting out.
I was trying to figure out, are we getting that whole
situation under control where people know what they are doing
when they are contracting out, we don't--we are not overpaying
contractors, which seemed to be a huge problem? That was more
the direction of my question, as opposed to using that as
saving money. I think right now it is costing us a lot of
money.
Mr. Zakheim. There are two ways to deal with that. One is
the A-76 process. In fact, there was just an A-76 competition
that was won by the contractor. The A-76 process is cumbersome
in many ways. But one thing it seems to do is to drive down the
cost no matter who is the winner.
A second element--you are quite right, in terms of
training, we are working on that. Indeed, it would be very nice
if the Department had more flexibility regarding what kind of
qualifications it demanded of its people. But we are limited in
a variety of ways in that regard. And I believe there will be
some action taken in that matter.
Ms. Hooley. Where do you see your biggest savings coming
from, what area? I mean, as you look at your priorities and you
look at those things that have now changed in this world that
you need to change with the Defense Department, where do you
see some of those savings coming from?
Mr. Wolfowitz. It is a range of things, I would say. It
includes the sort of better-business-practices kinds of things,
where we are doing things inefficiently in the military that,
if contracted out properly--and I take your point about if it
is done improperly, you will end up just overpaying for
something--but services that should be much more efficiently
provided by the private sector. That is one large category
where our new service secretaries believe strongly they can
find efficiencies in overhead.
Another area which we are looking hard at right now, sort
of an obvious cold war function, which is our offensive nuclear
forces. We built them up to deal with a country that no longer
exists. We have brought them down some. But in the President's
view and the Secretary's view, we can still bring them down a
lot more. In this budget, in fact, you will see not only the
Peacekeeper elimination, but four Tridents converted from
nuclear missions to conventional, two to be converted to
conventional missions, then two to be simply removed.
And the B-1 force changed from 90 bombers designed for the
nuclear era to a smaller force but that is conventionally
capable.
So that is an example of where you look for a function that
you really don't need, or need much less of, and try to find
savings by getting rid of things. And it is surprising that
there are a lot of those things around.
Where you would least like to take it is, take it in the
tooth. And when I answered Congressman Bentsen's question
earlier, I mean, that is when all--at the end of the day, you
have done your honest budgeting, you have done things as
efficiently as you can, you have made the investments you need;
if you are going to actually have to--in order to pay for
things, take it out of the fighting element of the force, then
we really need to lay out very clearly what the strategic
implications of that are.
That would be one's last preference, obviously.
Chairman Nussle. Thank you.
Ms. Hooley. OK.
[The prepared statement of Ms. Hooley follows:]
Prepared Statement of Hon. Darlene Hooley, a Representative in Congress
From the State of Oregon
Thank you Mr. Chairman. In the President's Budget Blueprint, he
stated that the strategic review currently being done by the Pentagon
would guide 2002 and the future budgets saying, ``The administration
will determine final 2002 and outyear funding levels only when the
review is complete.''
Today, the review is not finished and we are told that it will not
be ready until next year.
However, the Department of Defense stands before this committee
today and asks for an $18.4 billion increase when the review is not
complete, contradicting the statement made by the President earlier
this year.
In addition, Secretary Rumsfeld before the House Armed Services
Committee in June testified that the $18.4 billion increase will be
needed for the foreseeable future, and that unspecified amounts above
and beyond this increase would be necessary to implement the results of
the review.
Maintaining this $18.4 billion increase will put the Department of
Defense's budget at over $328 billion in 2002, an 11 percent increase.
In contrast, in the congressional budget resolution, domestic
programs increase by only 2 percent.
We are currently developing three new fighters, the F-22, which is
seeing cost overruns in the billions, and 2 additional joint-strike
fighters, not to mention a missile defense system whose merits are
questionable at best.
These programs are being developed at an extraordinary cost of
billions of dollars a year.
The estimates for the surplus have shrunk considerably over the
past few months, and if we want to fund these Defense increases, we're
going to have to dip into the Medicare surplus.
If the Department of Defense is in desperate need for additional
funds for pay increases, housing, infrastructure improvements and
readiness, then I'd like to see the Pentagon trim other areas to fund
these increases.
With domestic programs spending not keeping up with inflation and
defense being about one-half of discretionary spending, I fear our
priorities are focused on bloating the Department of Defense when we
should be dedicating more resources for education, healthcare, and long
term solvency of Medicare and Social Security.
I cannot, in good conscience go to my constituents and say we HAD
to give the Pentagon another $18.4 billion dollars when their schools
are in need of funds and our seniors cannot afford their prescriptions
drugs.
I look forward to today's hearing, and yield back the balance of my
time.
Chairman Nussle. Mr. Schrock.
Mr. Schrock. Thank you, Mr. Chairman.
Thank you, Mr. Secretary and Dr. Zakheim, for being here.
I was glad to hear the chairman say that defense is a
number one priority. In my life it is, and the people I
represent, I can assure you. And I am really glad the review is
being done. But I am as impatient as the last person, and I
want it done today. But it doesn't happen that way; it takes
time.
During my 24 years in the Navy, I spent several of those
years in what we affectionately called the Puzzle Palace. I
know that sounds like an odd thing to say, but that is what it
was then and that is what it is now. I was over there recently,
and I thought, my God, it hasn't changed since I was there a
long time ago.
So it is just going to take a long time to get this done
and get it done right. We just have to be very, very patient.
And frankly, I think the Defense Department has been
neglected for most of the last decade. And that certainly shows
up in the condition of our ships, our tanks, and our planes.
Because I see them every single day, and I talk to the
commanders, I know how badly they have been treated. We just
have to turn that around.
Readiness and maintenance has just been absolutely
deplorable, as you have shown by that little picture over there
and the resulting cost of that. A rust hole that big today
costs $10 to fix; twice as big tomorrow costs $10,000. That is
exactly what is happening. So we have to get maintenance money.
It is so important, because if we are going to get these things
operating, we have got to make sure that that stuff is in the
budget.
The quality-of-life issue is absolutely vital. That is
probably number one. If we don't have good housing, the troops
aren't going to stay in. That has been the case--that is the
number one reason for people leaving the military because of
that.
As an example, in the district I represent, an Army post
there, Fort Story, has 168 units. Every single one has been
condemned. The sergeant major for Fort Story lived in a set of
quarters that, the day after he moved out, they bulldozed, it
was that bad; and none of them meet congressional standards.
We have to make sure that we have proper housing, and that
is something that I have been screaming about down there.
The Navy is doing a pretty good job. We have to make sure
that same thing occurs with all of the services. And we have to
understand too over the last many years the last administration
had us deployed in more places around the world than all
Presidents since Franklin Delano Roosevelt combined. That costs
us a lot of money. Rightly or wrongly, that costs money. That
money came out of maintenance, that came out of housing and all
of these things. So we have to make sure that that doesn't
happen anymore, as well.
Retention, we have got to buy good quality things if we are
going to retain people. And of course I am concerned about the
Navy in particular.
I am concerned about all of the services; I am privileged
to represent every service. And with the new lines that we have
redrawn, I am going to have two more major bases, which means
that I will have 8 major bases and 195 small commands. So all
of the services are important.
But shipbuilding is real important, too. As we are going
now, we are fast approaching a 180-ship Navy. We can't do the
missions now that we have been tasked to do, let alone a 180-
ship Navy. So the more money that we can find to build more
ships, I think the better, as well.
And transformation, I understand what Mr. Spratt was
saying; it does look like a lot of it is just to maintain what
we are doing now. But if we are going to keep this system
afloat, we have to do that. I think that approach is correct.
But looking to the future, I think the President is right,
not to build for today and for tomorrow, but to build for the
next 20 or 30 years. But we have to keep the system going now,
and the people happy, that we have got in it now.
Your testimony discussed strategic environment and the
current condition of our armed forces. I appreciate that. And
what global responsibilities do you see that will be
jeopardized by a continued under-resourcing of our armed
forces, and what do you see as risks associated with that
under-resourcing as you go into the outyears?
Mr. Wolfowitz. I think the greatest risk that we face today
is that we see in many places around the world, countries
investing in--they realize that--they watched Desert Storm.
They realize the enormous technological capability of the
United States, enormous military capability of the United
States. But they look for weaknesses, and they look for ways to
engage in so-called ``asymmetric responses,'' so instead of
meeting us head on where we are strong, they find a place that
we are weak. One of these places is in fact in the area of
ballistic missiles.
It is not just national missile defense, it is theater as
well, it is at all ranges. In fact, the only Iraqi capability
that we underestimated during the Gulf War was Saddam Hussein's
Scud missile capability. We see heavy investments in that going
on in a number of countries.
Then I would say, more immediately, and particularly in
Asia, we see concerted efforts, but also by Iran in the Persian
Gulf, to develop the capabilities to deny the United States
access to exert our influence, the ability to keep our fleet
away from shores, the ability to threaten bases that we would
use for reinforcement.
So those are the kinds of threats that we see as
particularly dangerous, emerging in the future. And if we are
going to keep this powerful force of ours powerful, we have got
to be able to deal with these attempts to undermine it through
its weaknesses.
Mr. Schrock. Thank you. I agree with that.
I think the perception among the public is that we are at
peace in the world. Nothing could be further from the truth,
because you have these terrorists and rogue nations out there
getting ready to hit us.
You know, it was 60 years ago this December that a terrible
thing happened in Hawaii. I pray to God it doesn't happen
again. But if we are not careful it is going to. I think the
USS Cole should have been a wake-up call for us. It was for me,
and I think it was for a lot of Members of Congress. We just
have to do everything that we can to make sure that that
doesn't happen; and proper funding is going to solve a lot of
that.
Mr. Wolfowitz. I agree with you strongly. Thank you.
Chairman Nussle. Ms. McCarthy.
Ms. McCarthy. Thank you, Mr. Chairman.
And thank you, Mr. Secretary. I find the testimonies very
interesting. One of my colleagues talks of the Department of
Education. And when we talk about our bases, all I can think of
is a majority of my schools which are over 50 years old also
and in great need of repair. So we have a lot in common on that
issue.
My concern is, and I am sure it is a concern of everybody
here, when we started working on the budget, we had kind of a
rosy outlook on the moneys that were going to be taken in, and
so we were kind of looking at that. Now we know, or we are
going to know shortly, you know, how much money we are actually
going to have as far as for our future planning.
We here--and I think I can speak for almost every single
one on this committee--care about our defense very much. And we
care about those that serve our country. And I am a great
believer in those that have served our country, in trying to
find moneys to take care of them on the health care issues, and
concerned also for the health care issues of our men and women
that are in the service today.
What--the DOD additional funding requests, and I know you
are going under Strategic Review. What I am concerned about is,
will this review take into account the moneys that we might not
have coming in in the future?
But to follow that up, even, is the Department of Defense
going to highlight the things that they want and then let us
here in Congress determine how it fits in with a responsible
budget, and--because you have to understand where we are. We
have our budget that we hopefully will all stay within.
We have to convince our colleagues on all of the other
appropriations that we have to stay within these budget
guidelines. And it is going to be hard, I think, for an awful
lot of us, because so many of us do care for those in the
military. If we start to overspend here, are we going to take
it out of--I know Social Security and Medicare have been there,
and we are talking about that. I don't think anybody is going
to do that.
But is it going to come out of our health care system? Is
it going to come out of our education system? That is going to
be the tough part, I think, for all of us.
Your job, I think, is going to be extremely difficult, to
say the least. But on the other end of it, I think that if we
all try to work together and look at what is being done on all
of our bases, trying to do the maintenance and everything else
like that, I think that is really more accountability that has
to come into play with that also.
And I understand that our government, not just Defense but
almost every department, we are way behind, way behind in the
computer world and being able to track where money is going and
everything else like that. So hopefully--I mean, it is amazing
we get anything done; I will be honest with you.
But beside that, we have a long way to go. And hopefully we
can go forward with that for our accountability, for our
citizens that we have to represent every time that we take a
vote. That is our accountability. So hopefully that--we will
follow up on that.
But I am curious on that. When you come forward with your
budget and what you want to do, are you going to leave it to
all of us to make the decisions on where those moneys are going
to go, actually go; and how are we going to make these
decisions?
Mr. Wolfowitz. Well, first of all, let me say I very much
appreciate the sentiments you expressed and so many other
members of this committee have expressed of supporting national
defense and supporting the men and woman who serve. I think it
is something that we all have in common. And these are
difficult trade-offs.
I think our job in the Defense Department is to present the
President with what we think are the realistic choices, what he
can get for more money, what he will sacrifice if he has less
money. He is the one, in his own budget, who has got to make
the trade-offs among the different, very important, pressing
national needs. And then, of course, that is the dialogue that
we have with the Congress.
What we have got to get away from is basing that dialogue
on either dishonest budgeting, where we are kidding ourselves
and kidding you; or what is even worse, and it is almost an
inevitable outcome of the dishonest budgeting, essentially
doing it on the backs of servicemen and women.
I mean, if we can't afford to pay for 10 Army divisions and
12 aircraft carriers, but we want them because they meet our
strategic needs and they allow us to exert influence around the
world, so we end up having them, but underfunding them, and the
people that pay for that are the people that serve, and the
risks that are run are the people that serve.
So what we are trying to do with this budget process and
with this defense review is to make these choices consciously.
If it turns out that it is going to cost a lot of money to have
the capability that I think is important to deal with the
threats that I was addressing to Congressman Schrock, I would
argue strongly that that should be high on the priority list.
In 1950, as I said, Dean Acheson gave a speech. Many people
accused him, I think unfairly, of inviting the North Korean
attack by saying that South Korea wasn't within the defense
perimeter of the United States. But it was the Joint Chiefs who
said we don't have the forces to defend South Korea, we didn't
want to pay for them.
Well, at least that issue was surfaced. People decided with
some consciousness, OK, we are not going to pay for these
forces. I think we paid terribly later.
But what we can't do is fool ourselves and put it on the
backs of the people who serve this country so admirably.
Chairman Nussle. Ms. Granger.
Ms. Granger. Thank you. I have a couple of comments and
then a couple of questions.
First of all, I applaud the process that you have said that
you are taking. I think it is extremely important, first, that
you assess the situation honestly and see where we are. But I
would say to you--I would invite you, certainly, to keep us
informed about what you are finding, so that you will help--we
can be partners in assessing and also building our case for
correct and appropriate funding, and then as you draw your
plans for the future, see then what that future means and what
it is going to cost. That is going to be a very important part
of the QDR.
I would ask you, how you are going to report to the
Congress? Are you going to wait until the QDR is finalized,
then report in a situation like this; or are you going to tell
us along the way and give us some information, so we can keep
making our plans?
And then the last thing I would say, the Department has
been criticized in reports about financial management. I am
glad to hear you say that you are putting in the safeguards, or
the changes, to correct that situation.
But I would also say, as you are putting in processes and
equipment to report and to keep records, I would hope you would
also be looking for savings, because we have got to look at
what we are willing--how we appropriately fund.
But there are savings, and I would go back to the first
year that I was in the Congress when some of us came together
and said, we have got to find not only more money for defense,
but also we have got to see how we are spending that money. In
one of the meetings that occurred, we were told, primarily by
the defense contractors, that in putting some safeguards in to
see that we weren't having a $700 hammer, we were creating a
$700 hammer because we were spending as much in shopping, or in
buying the equipment.
Let's say a plane, we spend as much to buy the plane as we
do to build the plane. So what can we do about that?
Thank you.
Mr. Wolfowitz. On your last point, I think that there is no
question that we have some processes in the Defense Department
that seem to make it take as long as possible and be as
expensive as possible to produce things. To be fair to us, I
think some of those are responses to concerns the Congress has
expressed over the years. And, not infrequently, I sort of have
the feeling that if you excavate each layer of regulation or
process that adds some cost or adds some time--and time is
money--you will find that there was someone who misbehaved 15
years ago. This was designed to keep anyone from doing that
again.
We operate under a lot more restrictions and safeguards
than any private sector corporation does. And we certainly
should. But we need to take a hard look at whether some of
those are unnecessary, some of them have outlived their
usefulness. In a big bureaucracy it is very easy to accept
something, even--there must be. I mean, we know thousands of
servicemen and women who know of things that can be done more
efficiently, but we are told it has to be done that way because
there is Regulation X or Y; and in this big system of ours,
they don't know how to get these things fixed. Hopefully, we
will get some of those things fixed.
On the question of keeping the Congress informed, we are
trying to do that. It--in fact, I think there is--we have 17
hearings with the Defense Department witnesses up here this
week alone. It is a particularly rich week, this week alone.
The preliminary results of the QDR should be briefed to the
Secretary by the end of July, beginning of August. And I
presume that would open up the door for some conversations,
when you come back from Labor Day, on where we think it is
coming out before it is finally delivered.
And then there is still sort of the implementation stage,
taking those results and translating them into budget level
detail in the 2003 budget which will be coming up here. So,
hopefully, there will be a lot of opportunity during the fall
months to discuss these issues.
Chairman Nussle. Mr. Price.
Mr. Price. Thank you, Mr. Chairman.
Mr. Secretary, I would like to add my welcome. My
congratulations on your appointment and welcome to the
committee.
Mr. Chairman, Paul Wolfowitz and I were colleagues 30 years
ago, on a decidedly junior status, on the Yale University
political science faculty. I don't expect either one of us
would have anticipated that 30 years later we would be facing
each other across the hearing table. Certainly I wouldn't have
anticipated that. But, hey, it is a great country. Here we are.
And I certainly have followed Mr. Wolfowitz's career with
great interest and satisfaction and again want to congratulate
him and thank him for appearing here today.
I would like to return to some of the budget issues, some
of which have been touched on. But I want to give it a
particular slant in terms of the 2002 increase and how final
these numbers are, or may not be, in terms of what we can
anticipate.
As you know, Mr. Secretary, many independent analysts, for
example, William Dudley of Goldman Sachs and others believe
that the 2002 revenues are in fact likely to be revised
downward later this year which would make the 2002 surplus as
much as $50 to $75 billion less than is currently forecast.
In that case, then, this $18.4 billion increase that the
administration requested for Defense for 2002 would require
dipping into the Medicare surplus. None of us, of course, want
to do that. So this does raise the question, to what extent are
these budget requests being formulated, being shaped, by taking
into account the availability of resources?
So let me just ask three related questions along these
lines:
In the first place, what about the $18.4 billion request?
How does that compare with what DOD was initially seeking? Did
you request substantially more than that? As you know, there
have been reports to that effect. I wonder if you could comment
on that. Did you request substantially more than that from OMB?
How adequate is the request to start with? To what extent has
OMB already taken into account the availability of resources?
Secondly, assuming that the original request was more than
$18.4 billion, substantially more, can you give us assurances
that that will be adequate, or should we expect a supplemental
appropriations request down the road for 2002?
And then thirdly, in terms of the future of the Strategic
Review, what constraints in terms of available resources are
affecting that review as we speak? What kinds of constraints
are you anticipating? And how does that affect the proposals
that come from the Strategic Review?
Mr. Wolfowitz. Good questions. Good friend from a long time
ago. It is good to see you, Congressman Price--or, David, if I
may address you that way.
First of all, we certainly identified more needs than we
are coming up here asking for. The President ultimately has to
make the decision on what he thinks are the highest priorities;
and we would emphasize, we have gotten the largest real
increase in defense expenditures in 15 years. It goes a long
way toward starting to fix some of the serious problems that we
identified in the first phase of the Strategic Review, and it
has $13 billion plus another $7 for missile defense, some $20
billion toward addressing the needs of the next decade, the
needs of the future.
So it is a very healthy investment. It is a start on this
uphill path of rebuilding the present force, and I would
emphasize, 10 years from now; I mean, 85 percent of the forces
that we have today are going to be with us for 10 years or
more. That is the rate at which things change in the defense
business. So we think it is a good start on that path.
Could we use more? Yes, we could use more. I suppose every
department could tell you that. But you asked, then, a second
question, would this be adequate or do we need a supplemental
in 2002? We will not be asking for a supplemental in 2002,
barring a genuine unforeseen emergency. These things do happen.
But what seems to have begun as a kind of dysfunctional
process for the last 5 or 6 years, it became so easy to get
supplemental appropriations that people planned on them. They
weren't for emergencies; they created the emergencies so they
could get the funding.
We are not doing that. That is why we are fully funding the
defense health care program, and that is an extra $5 billion
over what it was last year, because we think that is what it is
really going to cost.
We are adding $2.4 billion for flying hours. I think I
incorrectly--earlier, Mr. Spratt, identified it as readiness as
a whole. So $2.4 million just for flying hours to realistically
reflect what those costs are.
So, no, this is a budget that is built on the assumption of
no supplementals, and the services understand that. They
understand that that is how it will be done. That is why maybe
there is more meat and potatoes in it than some people like.
But if you leave out the meat and potatoes and just serve
dessert, then people come back in the middle of the year,
asking for a supplemental.
Your final question had to do with, are we taking account
of those projections? And I could be little impertinent and
turn the question around and say how on earth can one take
account of these projections when they change every month, and
they go up and down; and the only thing you can say about this
is, they are almost invariably wrong. I don't mean to be flip
about it.
But we do leave that responsibility to OMB. What we are
trying to give to OMB and the President is a clear, honest,
realistic assessment of what they are going to get at different
levels of defense expenditure.
The question of what the country can afford--which is
partly a matter of doing this magic of divining what the
revenue will actually be and is even more a matter of balancing
many important domestic priorities against important defense
priorities--is something--our contribution can be made to the
President and the Congress by making the defense choices as
clear and honest as we can make them.
It is really, I hate to say it, up to you and to OMB to
manage the results.
Mr. Price. Thank you.
Chairman Nussle. Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman.
And thank you, Mr. Secretary, for being with us here this
morning.
You know, I heard you make the comment that the problem is
bigger than you thought. I recall something very similar to
that from the year 1993 when an administration took office and
said, ``The deficit is bigger than I thought,'' and the result
was a large tax increase. Folks in my district, instead of
having that tax increase wanted to cut spending first.
When this administration announced its cabinet, its
leadership, folks in that same district said, great to see the
adults back in charge.
Well, when Mr. Daniels appeared before us last week, or 2
weeks ago, and was talking about more spending, I am afraid we
are going to hear the same thing from home--cut spending first.
Now, Mr. Daniels is responsible for the entire budget, as I
understand it, for the White House. You are here representing
the Department of Defense--one segment of the budget, a very
important segment and a very large segment.
I understand that you have only been on board and confirmed
in May. The 6-month review was to be conducted by you and
others. You haven't had 6 months. I don't think that you can
sit before us today and give us a true, accurate statement that
says this is an honest assessment, that this is justifiable.
We know there are problems. We visit the bases within our
own districts. And we know, too, that we are having to do more
with less in other parts of the world. And, in fact, I am going
to one of these areas this weekend to visit the 48th Brigade in
Bosnia.
We know there has been delay in repairs to infrastructure
as well as equipment, delay in preparation for readiness.
We also know that there has been a 40 percent reduction in
our uniformed personnel with only a 20 percent reduction in the
base alignment. We also know that there is a lot of inside
politics in the Department of Defense. We hear the rumors. In
fact, some of them are not even rumors; they have actually been
put on the table, realignment of units. I think some of that is
inside politics and preparation for another possible round of
base closures.
Some of those people who are in party, in the leadership,
the four stars and whoever, have certain areas of interest that
they may want to protect rather than let the chips fall where
they may.
Mr. Secretary, I see a far greater risk to our Department
of Defense in the outyears--not to our nation as a defense
itself but the Department of Defense. And I go back to 1988
when we had a President--a candidate for President who stood in
New Orleans and said, ``Read my lips.'' 1990, he broke that
promise, even though in 1991 he led us through the Gulf War and
the display of a mighty Department of Defense, one that I think
helped bring down a lot of other things that are problems
around the world.
But I also heard this President, less than 3 hours ago,
talk about budget discipline. Budget discipline. And I believe
when he commented before the nation, he said 4 percent growth
is enough.
What does this do to the 4 percent growth? What does this
do to the budget discipline? Is this going to cause a reaction
from the people that is the same as it did with Bush 41 on
``read my lips,'' a one-term President?
I like this President. I like his ideas. I think he has
backbone. But I question the rationale of coming back and
asking for more money when we have made a promise that 4
percent growth is enough.
It is not your place, it is Mr. Daniels' place, the Budget
Director, to advise the President and come back here with
recisions that will give you the funds needed to prop up our
Department of Defense to make sure that we have adequate
equipment, infrastructure, personnel. And--I will end with
this--and I gave this same advice to the Speaker of the House 2
years ago.
There is a saying in Georgia and other parts of this
country, Mr. Secretary, ``Money talks, BS walks.'' don't let
the 4 percent growth be BS, sir. Pay attention to the words of
budget discipline and to the people of this country who say,
Cut spending first.
Chairman Nussle. Thank you. We are at the point where I
promised Mr. Wolfowitz that we would have you out of here. I
have two more people that would like to ask questions. Could
you--if we make them brief, would you be willing to----
Mr. Wolfowitz. I will try to answer them briefly.
Chairman Nussle. Mr. Moore.
Mr. Moore. Mr. Secretary, congratulations and thanks for
being here. I certainly agree with the Chairman's comments that
every member of this committee is concerned about a strong
national defense and frankly, if we don't have a strong
national defense for this country, almost nothing else matters.
So in that regard, I certainly support adequate pay and housing
and medical care and research and development for our defense
department, and for the people who serve in our defense.
I want to ask you some questions very briefly about the
submission that you made and the $7 billion for fiscal year
2002 for national missile defense system. Can you tell me, is
there anybody who knows right now what the estimated total cost
of this so-called national missile defense system will be?
Mr. Wolfowitz. We don't have a system yet. We have
essentially a program to develop technologies. So we can't do
the kind of thing that you might total up, and cost out as a
whole architecture. Let me say that covers a wide range of
capabilities, some of which are urgently needed in the theater
today to deal with threats that are sort of out in the horizon
that aren't there now.
Mr. Moore. Thank you. I have heard and read from other
defense experts that they have very real concerns about the
threat that a terrorist attack on this country with chemical or
biological weapons might represent. In that regard, how would
you assess that kind of threat relative to the threat of a
missile attack from a rogue nation?
Mr. Wolfowitz. Basically, I would say they are both very
serious. We spend a lot of money, some estimates are as much as
$11 billion in countering terrorist threats. And I would spend
more if I thought it could be spent usefully. I was in Israel
during the Gulf War. Former President Bush sent me and Deputy
Secretary of State Lawrence Eagleberger to persuade the
Israelis to stay out of that war. I have been in a country
under ballistic missile attack. It was 10 years ago, Mr.
Congressman, and 10 years later we still don't have an
effective defense against those primitive SCUD missiles that
were landing on Israel.
It is not what United States does when we are serious. We
didn't get to the moon that way. We didn't build Polaris
submarines that way. This is a real problem. It is not a future
problem. We have got to get serious about it in my view. We
have to be serious about both. You could even frame it this
way: We lost--I am sorry, I don't remember these terrible
numbers. I think we lost 19 people to a truck bomb in Khobar
Towers in Saudi Arabia. We lost 24 people to a scud missile in
Dahran in Saudi Arabia in the Gulf War. Those are both real
threats. We need to work on both of them.
Mr. Moore. You indicated to the chairman's request in
response to one of his questions that you expected that this
review that is being conducted at the Defense Department might
be completed now in 9 months instead of the 6 months which has
already come and gone. Is that realistic, say September,
October time frame? And might we, in this committee, expect a
report back in September, October about what this review, top
to bottom of the Defense Department, shows?
Mr. Wolfowitz. First of all, let me emphasize, we have
completed a substantial review in the 6-month period. But the
short answer to your question is yes. We think it is realistic.
We have people working incredibly hard, very, very hard and
long hours. But we think we can get it done.
Mr. Moore. If you find in September or October that you
can't get it done, are you going to let us know that and give
us a new time frame?
Mr. Wolfowitz. I take the chairman's point; if we find in
August that we aren't going to make it in September or October,
we will be up here and discussing with you what is realistic.
We won't leave it to the last minute.
Mr. Moore. One more question. And please take this as it is
intended. I have looked at your bio, very, very impressive
biography resume. But my question to you is, and this is not
intended as a slap at you at all, but my question to you is
would Secretary Rumsfeld come here and talk to us at some point
in the near future?
Mr. Wolfowitz. I will ask him. I would recommend that he do
so.
Mr. Moore. I know there are members of this committee who
like to have an opportunity to discuss some of these things
with him. Again, you may be perfectly qualified to be the
Secretary, but you are the Deputy. That is the only reason I
ask that question. So please take it that way. Thank you very
much, Mr. Secretary.
Chairman Nussle. Mr. Fletcher.
Mr. Fletcher. Thank you, Mr. Chairman. And Mr. Secretary,
thank you for coming. Certainly, I believe that the President
has put together, the Department of Defense, one of the most
experienced and best teams we have seen there in a number of
decades. So I thank you for your work and what you are doing.
And also, I believe you are doing an excellent job. You have
got a very difficult task. I laud you and the administration
for setting very aggressive goals and commend you for pushing
to meet those as much as possible. I know because of
circumstances outside your control, it was not entirely
possible, but I commend you for getting the ball rolling and
working very hard at looking at transforming our military and
our defense.
Mr. Wolfowitz. Thank you.
Mr. Fletcher. So those that say that trying to pit defense
spending against tax cuts and other things, it seems to be no
matter what happens up here, they sing the same tune. They seem
to be out of touch with the folks back home who are looking
forward to getting some tax relief. I think we can certainly
maintain a very strong national defense and get some tax relief
if we have fiscal discipline.
I served back and remember the Carter days. It was much
like the Clinton years when it comes to defense and support for
our troops and their equipment. I can remember a decrease in
flying time. I can remember taxiing out on the--to fly
Elmendorf and having all three struts go flat. I remember being
at Nellis in 1978 at Red Flag and having a 50 percent delivery
rate of F-15s at that time. We were cannibalizing aircraft.
Crews were not and pilots were not getting the flight time they
wanted, and we were bailing out going to civilian jobs. We got
a lot of friends that went to the airlines, some of which are
still flying.
And so I want to thank you for putting in the money for
more flying time. I think that is important. Nobody can
understand the importance of that unless you have been there
and know how important that is to keeping well-trained pilots.
So I commend you on that. And the spare part, I think it is
$2.6 billion for spares and other things. I saw three of my
colleagues killed because of equipment breakdown because we
weren't getting the spares. We were cannibalizing aircraft. We
had old aircraft. And it is very difficult to watch your
colleagues--there are going to be accidents. It is a very
dangerous profession. But to see losses that didn't need to be
there because Congress and the administration at that time
would not support the Department of Defense's need is very
troubling, and I trust we will not make that same mistake.
You know I just read also Colonel Sam Johnson, who happened
to be my wing commander in Homestead Air Force, ``Captive
Warriors,'' and I look at the things that happened during
Vietnam. How that differs from what happened in Desert Storm
and Bosnia. How technology has brought us to make sure that we
preserve the lives of our pilots. We are much more effective in
our strikes.
So again, I commend you for your effort in technology and
transforming military. It is not going to be easy. It is not
going to be cheap, but it will save lives and certainly improve
our national defense. With that said, let me ask a few
questions. I don't know if you all have right now what our
delivery rate is or mission-ready rate for our aircraft are at
that time for F-15s, F-16s.
Mr. Wolfowitz. Do you have those figures, Dov?
Mr. Zakheim. It may be more specific than we need. But I
read it was pretty low, at least a year or 2 ago, and I haven't
seen new update figures for that. If you wouldn't mind, I will
get them for the record, but I certainly have a very clear
picture of those charts that the Air Force is briefing us on,
and there has been a very dangerous dip on the order of 20
percentage point reduction in readiness rate.
Mr. Fletcher. If we don't get the kind of support and
equipment and flying time, we are going to lose very skilled
pilots. I was down in Langley a year and a half, together with
the first tactical fighter wing there, and we have got some of
the best trained pilots, some of the most skilled individuals
in the world. And we are not going to be able to keep those if
we continue to provide them equipment that we can't deliver,
cannibalizing aircraft and not offering the flight time. So I
commend you again on your request to support those troops. That
is very important.
What are some of the impediments that you foresee to impair
your ability to really modernize and transform our defense that
you can immediately see that really there are major impediments
to doing that?
Mr. Wolfowitz. Well, I think, first of all, the
difficulties of operating efficiently in a variety of ways, I
alluded to this earlier, the fact that there are so many things
that you know ought to be more cheaply provided through
civilian sectors that specialize in those capabilities and you
can't do it. I think another thing, which is sort of endemic to
the way government does business, is that people have
inadequate incentives to save money. I mean, you have, and I am
not going to--every government official I know confronts at the
end of the fiscal year if they have saved money, some budget
officer will come in and say you have got to spend it because
if you don't spend it now, they will cut our budget next year.
We ought to find ways for people to do the opposite, for people
to say I have got the savings, it is going to make me better
next year than worse off.
Mr. Fletcher. Is there a way of rewarding folks in that
situation of turning over, having surplus that could----
Mr. Wolfowitz. I think there is. I think if I can make a
pitch here for what we have tried to do with the B1, I think we
are taking 90 aircraft that have a 54 percent availability
rate, that is a number I do remember, which is shockingly low,
that are so vulnerable to air defenses that we didn't fly them
in the Gulf War, and we only flew about three Sorties in Kosovo
before we decided that even there they were vulnerable. They
were basically built to fly a nuclear mission against the
Soviet Union.
We are getting rid of 30 of those 90. We are using the
savings, the Air Force is going to use the savings to upgrade
the 60, so they not only have advanced avionics and higher
availability rates--respectable availability rates--but also
have stand-off attack capability so they can stay 160 miles
outside of air defenses. That is, in my view, a real way to
find some of the money to do some of the things that we need.
And we are taking eight aircraft out of Kansas and eight
aircraft out of Georgia and eight aircraft out of Idaho. I
understand the discomfort, to put it mildly, from the
delegations from those States. But I hate to say it, I think
there is going to have to be more of that in more states before
we are finished.
The only thing I can say is those savings are being put
into much move productive uses. The 60 aircraft crews that are
left and the people that are supporting them will feel like
they are doing a meaningful mission instead of a 54 percent
availability rate for an aircraft that doesn't go into combat.
That is the kind of thing--there are a lot of opportunities
around the Department, and we are going to be looking for them.
We are going to be looking for help from you and your
colleagues in making those painful choices, which they are
painful at first, but I think, like so many adjustments that
this country makes, we do understand that we are an incredibly
adaptable country. And the pain you take up front really does
pay off in the long run.
Chairman Nussle. Mr. Spratt.
Mr. Spratt. Dr. Wolfowitz, we don't do 1-year budgets
anymore, we do 10-year budgets, precarious as that is. You do
sort of a 6-year budget, a FYDP. I wonder if we could have a
copy of your latest FYDP, which incorporates the $18.4 billion
request.
Mr. Zakheim. This year, as you know, Congressman Spratt, we
simply have the 2002 budget proposal. There is no 5-year
additional plan that goes with it. This is very similar to what
happened in 1993. The same thing exactly occurred with the 2003
budget--there will be the follow on outyears, as is normally
the case.
Mr. Spratt. When can we expect a FYDP, a truly updated,
properly stated, future year defense plan?
Mr. Zakheim. Well, as I just said, sir, when we submit the
2003 budget, which is normally January, February time frame, as
Dr. Wolfowitz said, there will be the outyears as well, the
FYDP in its entirety. This year we have only submitted for
2002. Again, that is not unusual. That is very, very common
with a first year of a new administration.
Chairman Nussle. Thank you to our witnesses. There are, I
am sure, additional questions from members. We are far over the
time that has been allotted, and apologize to members who came
late and are interested in asking questions. There will be, I
am sure, additional opportunities. If you would agree to
possibly answer some of those questions in writing, that would
be helpful, number one. Number two, we will take you up on the
offer--I am sure members would appreciate a briefing, some have
taken advantage of that, others may want to. We appreciate
that. And then just in closing, I think you obviously got the
point because I would suggest rule number 1 is plan your work
and work your plan; and rule number 2 is if the plan changes,
let us know. And we appreciate that. And we also appreciate the
work that your staff does. We have a former graduate of the
Budget Committee, Mary Beth and she has done an excellent job
here, and we welcome here--Becky. Oh, yes OK. And Becky Schmidt
is a former Budget Committee graduate. You have got some good
folks working with you. We welcome them back.
Mr. Wolfowitz. You run a good school up here.
Chairman Nussle. We run it so well they go on to bigger and
better things.
Mr. Wolfowitz. I would be happy to take any questions in
writing, or if people want to do an oral question, I will be
happy to take a phone call. I am sorry, I have to leave now.
[The information referred to follows:]
Questions for the Record Submitted by Mr. Gutknecht
I have been working with the Minnesota Air National Guard on a plan
to modernize the Air Reserve Forces in Minnesota. The Air Force Reserve
Command has not cooperated with the plan claiming they have their own
plan to modernize the 934th Airlift Wing. In an attempt to support the
administration's plan to reform the military to an effective and
efficient force, does the Department have a plan for the 934th Airlift
Wing? If not, can I get Department of Defense assistance to get the Air
Force Reserve to cooperate with the Minnesota Air National Guard on the
modernization plan? We look forward to an opportunity to present this
plan to the Department of Defense.
Response to Questions Submitted by Mr. Gutknecht
Resourcing of Guard and Reserve units and fleet
modernization is the responsibility of the Service Secretary.
Active, Guard and Reserve tactical airlift units are
addressed in the Total Air Force plan for tactical airlift called the
``C-130 Roadmap''--with the 934th on top for the C-130J in the out
years.
The Guard and Reserve will continue to be full partners
with their active counterparts, and their missions (current and future)
will reflect that.
DOD's oversight assures that unit resourcing will
commensurate with missioning, given overall DOD fiscal constraints.
Transforming our force is a joint responsibility and one
that will require close partnership between Congress and the executive
branch. By the end of the QDR, we will be able to give more precise
advice on how we intend to balance our needs and present a new defense
posture that is better suited for ourselves and for future generations.
Questions for the Record Submitted by Mr. Spratt
At a hearing before the House Armed Services Committee on June 28,
Secretary Rumsfeld stated that just to maintain the $18.4 billion
increase for 2002 into 2003 would require a Department of Defense
budget of approximately $347 billion for 2003 (compared to $328.9 for
2002). This appears to be more than the 2002 level adjusted for
inflation. Please explain in detail why the 2003 level would be $347
billion.
Response to Questions Submitted by Mr. Gutknecht
Using as a baseline the President's $328.9 billion request for FY
2002, DOD would need $347.2 billion in FY 2003 just to cover the costs
of inflation and realistic budgeting. This $18.3 billion increase is
indeed more than inflation. Besides inflation, this increase includes
added FY 2003 funding to:
Fully account for in FY 2003 the pay proposals in the FY
2002 budget request
Realistically fund the Defense Health Program, whose costs
in FY 2003 will be substantially higher than in FY 2002
Realistically fund the currently planned acquisition
program, which was estimated to have significant underfunding in FY
2003.
Chairman Nussle. We appreciate the time you have spent
today. With that, the hearing is adjourned.
[Whereupon, at 12:35 p.m., the committee was adjourned.]