[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
        DEPARTMENT OF DEFENSE BUDGET PRIORITIES FISCAL YEAR 2007

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, MARCH 1, 2006

                               __________

                           Serial No. 109-16

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
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                        COMMITTEE ON THE BUDGET

                       JIM NUSSLE, Iowa, Chairman
JIM RYUN, Kansas                     JOHN M. SPRATT, Jr., South 
ANDER CRENSHAW, Florida                  Carolina,
ADAM H. PUTNAM, Florida                Ranking Minority Member
ROGER F. WICKER, Mississippi         DENNIS MOORE, Kansas
KENNY C. HULSHOF, Missouri           RICHARD E. NEAL, Massachusetts
JO BONNER, Alabama                   ROSA L. DeLAURO, Connecticut
SCOTT GARRETT, New Jersey            CHET EDWARDS, Texas
J. GRESHAM BARRETT, South Carolina   HAROLD E. FORD, Jr., Tennessee
THADDEUS G. McCOTTER, Michigan       LOIS CAPPS, California
MARIO DIAZ-BALART, Florida           BRIAN BAIRD, Washington
JEB HENSARLING, Texas                JIM COOPER, Tennessee
DANIEL E. LUNGREN, California        ARTUR DAVIS, Alabama
PETE SESSIONS, Texas                 WILLIAM J. JEFFERSON, Louisiana
PAUL RYAN, Wisconsin                 THOMAS H. ALLEN, Maine
MICHAEL K. SIMPSON, Idaho            ED CASE, Hawaii
JEB BRADLEY, New Hampshire           CYNTHIA McKINNEY, Georgia
PATRICK T. McHENRY, North Carolina   HENRY CUELLAR, Texas
CONNIE MACK, Florida                 ALLYSON Y. SCHWARTZ, Pennsylvania
K. MICHAEL CONAWAY, Texas            RON KIND, Wisconsin
CHRIS CHOCOLA, Indiana
JOHN CAMPBELL, California

                           Professional Staff

                     James T. Bates, 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, March 1, 2006....................     1
Statement of Hon. Gordon England, Deputy Secretary of Defense; 
  Admiral Edmund P. Giambastiani, Jr., Vice Chairman, Joint 
  Chiefs of Staff; and Hon. Tina W. Jonas, Under Secretary of 
  Defense, Comptroller...........................................     5
Prepared statement of Steven M. Kosiak, Director of Budgets 
  Studies, Center for Strategic and Budgetary Assessments........    16
Prepared statement of Mr. England................................    26
Question for the record submitted by Congressman Crenshaw........    27


        DEPARTMENT OF DEFENSE BUDGET PRIORITIES FISCAL YEAR 2007

                              ----------                              


                        WEDNESDAY, MARCH 1, 2006

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 9:30 a.m., in room 
210, Cannon House Office Building, Hon. Jim Ryun presiding.
    Members present: Representatives Ryun, Crenshaw, Wicker, 
Barrett, Hensarling, Campbell, Conaway, Bradley, Lungren, Ryan, 
Garrett, Hulshof, Spratt, Edwards, Capps, Baird, Cuellar, 
Cooper, Schwartz, and Allen.
    Mr. Ryun [presiding]. Good morning and welcome to today's 
Budget Committee hearing. Pleased to have with us The Honorable 
Gordon England, Deputy Secretary of Defense, The Honorable Tina 
Jonas, Under Secretary of Defense, and Admiral Edumund 
Giambastiani, Vice Chairman of the Joint Chiefs of Staff.
    I will note that with the very tight schedule of today's 
witnesses, we have had to begin today's hearing during the 
regular Republican Conference Meeting, and as we learned just 
last week, sandwiched in just prior to the joint session of 
Congress to meet with the Italian Prime Minister.
    Unfortunately, we are not going to have as much time as we 
would like, but, again, we certainly appreciate your joining 
us, and I will do my best to keep my remarks brief so that 
other members can get in their questions as well.
    Today we are here to review the administration's fiscal 
year 2007 budget request for the U.S. Department of Defense 
(DOD). To put this year's request in perspective, take a quick 
look at the budgeting of DOD for these past few years.
    Since September 11, and issuing war against terror, this 
Nation and this Congress have shown to be more than willing to 
provide whatever is needed to defend our country and support 
the need of our troops. Starting 12 September 2001, this 
Congress went fast and furious to rebuild New York, our 
Pentagon, shore up our Nation's defenses, and assure that 
further terrorism attacks were not at hand.
    From the charts you will get a bit of an idea of our 
spending. Over the past little over 4 years, DOD budget, 
excluding any of the costs of fighting the wars in the Persian 
Gulf has grown by an average of $22 billion or about 6.3 
percent per year.
    This year the President's request for the DOD military base 
budget is $439.3 billion which is an increase of about $28 
billion or roughly 6.9 percent from last year's enacted level. 
But I think few would argue that these numbers alone represent 
an accurate picture of our defense spending.
    Could I have the next chart. Since 2001, our Nation has 
spent more than $383 billion to fund DOD to fight the wars in 
Iraq and Afghanistan, and assuming the President's most recent 
supplemental request of $68 billion for DOD passes Congress, we 
will have obligated ourselves to over $451 billion for these 
conflicts. And all of this is money we have spent outside of 
the Federal budget, via regular, 2-year, two per year, 
supplemental or emergency request.
    Now let me be clear. I am not arguing that this wasn't 
right or the needed amount to spend, but I have made no secret 
in my past disappointment with the administration's ad hoc 
funding request for these wars. This committee is charged with 
crafting a credible and responsible budget for this Nation, and 
in order to do that, we have got to have the best possible 
information, as to the likely future costs of the Department of 
Defense, which is one of the largest components of our budget.
    I believe we have not had that in the past and that is why 
for the past two budgets, we have included in our budget on the 
House side, a $50 billion placeholder for providing for war 
costs.
    I am particularly pleased to note that this year, for the 
first time since the war began, the administration included a 
war-funding placeholder of $50 billion in their budget 
proposal. We know that it is probably not going to be the right 
number, but it is a lot closer than zero, and so I certainly 
think that it is a big step in the right direction and I 
commend the administration for their decision to do this.
    As we look back to the past few budgets, there has been, 
and I think rightly so, no greater priority than providing for 
the defense of our country and the needs or our troops. I can 
tell you now that there will be no greater priority in this 
year's budget.
    That said, providing for our defense needs isn't our only 
priority. Even with our enormous entitlement programs such as 
Medicare, Medicaid, and Social Security taken out of the 
equation, we have a limited pie from which we must fund our 
only--not only defense--but homeland security and every other 
domestic program area such as education, science, environment 
and agricultural--and we have a deficit we have got to deal 
with as well and to reduce that.
    So when we decided that defense is our highest priority, 
that meant that every other domestic program had to be the 
peril of that decision, or in other words, everything else had 
to do with less, so defense could do with more.
    Now let us take a look at what we have since 11 September 
2001. The national defense budget, which we have included 
supplementals, have increased about 70 percent or by an average 
of 11 percent per year, for the past 2 years.
    I would say we have had generous growth for the past 
previous 5 years, we have also realized that we have had to put 
the spending breaks on somewhere. To achieve this we have held 
non-defense, nondiscretionary spending to 1.3 percent growth in 
2004, to near freeze last year, and this year the 
administration has asked for actual cut of roughly a half 
percent to all non-defense, non-security spending, and I would 
guess that this Congress will likely follow in that direction.
    Again my purpose in noting this isn't to say that those 
decisions weren't the right ones to make, but to recognize that 
particularly when our Nation's budget is being stressed as it 
is, every dollar we increase in one area, we have got to 
balance that spending with a decrease somewhere else. I think 
that this puts tremendous pressure on not only the 
administration and DOD, but also on this Congress to ensure 
that the money we spend is being wisely spent, judiciously, 
effectively and with proper planning and oversight.
    I am sure our witnesses today who have asked--will ask--the 
American taxpayers for roughly $1.2 billion per day for base or 
non-war fighting operations will agree that it is certainly 
important to monitor both the funding and the spending of those 
funds to ensure we are doing the best job possible to ensure 
every dollar is hitting its intended target, and fewer and 
fewer of these dollars are being lost to waste, fraud, and 
abuse.
    So I would appreciate our witnesses today to briefly 
include in their remarks what steps they have taken in the past 
few years to make sure that this is the case. I welcome our 
witnesses and we look forward to your testimony. Mr. Spratt, I 
turn to you for any comments you would like to make.
    Mr. Spratt. Thank you very much, Mr. Chairman, and let me, 
too, welcome our witnesses. We very much appreciate your coming 
because this is a discussion we need to have.
    For the most part for the last several years, defense has 
been more or less immunized from budget pressures; there has 
been overriding national interests that had to be protected and 
supported, and you have had support from both sides of the 
aisle.
    This morning, however, the Senate counterpart to this 
committee, Senator Judd Gregg is quoted at length in the 
Congressional Daily as saying that ``to start with massive 
increases for defense, augmented by emergency funds that do not 
have to fit under budget caps, are becoming too much of a 
practice.''
    On page 12, he said, ``it is a very strange approach to 
budgeting that they have taken, the DOD, because essentially 
what they are saying is everything else in Government is going 
to be subject to severe limitations and spending. But the area 
we are most interested in is going to have no budget process at 
all. It is simply going to be done outside the budget process 
through emergencies.''
    One of the points that he makes is that most Americans 
would agree that the greatest threat we face, the one that is 
the hear and now, closest to us, is the homeland security 
threat, the threat of security to our homeland by terrorists.
    To date, some time ago, the Coast Guard took a look, to 
take one slice of that particular problem, at seaport security 
and looking at very mundane things like lighting and fences and 
new technology to surveil the premises of seaports. They came 
up with a budget of $5.4 billion to be implemented over a 
period of 10 years, specifically for seaport security, outside 
their regular budget.
    To date, only $700 million of the $5.4 billion has been 
provided to the best of my information. This is, I think, what 
the Dubai ports controversy is all about. It is not about 
whether Dubai, as Arab and Muslim, and therefore friendly to 
us, so maybe might engage in some kind of clandestine activity 
or cooperation with our enemies.
    It is about whether or not we are really taking seaport 
security as seriously as we should. What we have done for our 
seaports pales in comparison to what we have done for our 
airports, and that is what the Dubai controversy is all about.
    As we look through this budget, we don't find any new 
emphasis on homeland security. There is about $40, $50 billion, 
depending on what you want to put in there. About half of that 
was already being incurred before 9/11. There have been 
increases, obviously, but are the increases commensurate to the 
risks that we are facing? That is the question we would like to 
explore with you this morning.
    The one thing we have consensus on, bipartisan consensus, 
is that homeland security needs more attention. There is also 
some consensus on something else. When Senator Kerry and 
President Bush had their Presidential debate, they were asked 
what do you consider the gravest threat facing the United 
States today. Both of them had the same answer. Both of them 
said it is nuclear terrorism. They both agreed that terrorists 
armed with nuclear weapons or nuclear devices or logical dirty 
weapons pose the gravest threat.
    But if you look through this budget and previous budgets 
since 2001, you will find precious little increases for what we 
call cooperative threat reduction (CTR), Nunn-Luger, or the 
other associated programs in Energy and State and elsewhere 
that come to a little over a billion dollars.
    The question we have for you this morning is: given our 
fixation on conventional defense and given our commitment in 
the Middle East, are we ignoring the tiger in our very room, 
the elephant in our room, homeland security and its needs and 
port security in particular, and are we ignoring or not doing 
as much as we might to mitigate what may be the gravest threat 
facing us--nuclear terrorism?
    Let me just show you two charts, and then I will end my 
opening statement. This chart indicates the defense increases 
during the Bush administration, run out over the initial 10 
years of the Bush administration from 2002 through 2011.
    As you can see if you take the fit-up and run it out 
through its period and then you adjust defense spending per CBO 
for inflation thereafter, there has been an increase from $3.6 
trillion in January of 2001, to $5.3 trillion today. That is an 
increase of $1.6, $1.7 trillion, a pretty big increase.
    And the question that I have for you is does this budget 
table right here, and almost as it is, capture all the costs 
that we are truly confronting, for example, the costs, the 
looming liability for repair, reconstitution, and replacement 
of equipment that are either wearing out at a faster rate than 
typical for ops tempo or equipment that we are simply leaving 
behind because it is not worth bringing back to the United 
States of America? That is the question, one of the questions I 
have for you, and let me show you the next chart.
    Just to give you the magnitude of the increases in defense, 
and raise the question, can we get from here to there, can we 
truly follow the upper edge of this curve and fund the budget 
that you have more or less planned in your fit up?
    As you can see, from 2000 to 2011, if you add and layer all 
of these costs together, they come to about $600 billion in the 
year 2011. We will increase what we are spending on defense by 
a hundred percent over that period of time.
    My question to you is, is this attainable, and if it is not 
attainable, what has to give? Is this representative of the 
kind of budget thinking you have got, and if so, do you 
honestly think, given the problems with the deficit of the 
budge, that we can get there?
    I was here in the 80s. I was here in the 90s, and I'm here 
again. Lord knows what will happen next year, but I saw the 
budget preferences and priorities shift completely from 
precedence given to Defense for the first half of the 80s to 
the precedence given to the deficit in the second half of the 
80s, and I can see that happening again on the distant horizon, 
not this year, but in the foreseeable future.
    And when it happens, I want to know do we have programs 
underway and transformation of things. Do we have the 
wherewithal to do what you think we need to do for 
transformation, for repairing equipment, for personnel and 
increasing costs of personnel? Can we capture all of this and 
afford it in a budget that also is moving the balance?
    Thank you for coming. We look forward to your testimony and 
to the questions we put to you afterwards. Thank you, Mr. 
Chairman.
    Mr. Ryun. Thank you, Mr. Spratt. Now we would like to go to 
our panel and I would like our first testimony to come from The 
Honorable Gordon England, Deputy Secretary of Defense.

STATEMENTS OF HON. GORDON ENGLAND, DEPUTY SECRETARY OF DEFENSE; 
 ADM. EDMUND P. GIAMBASTIANI, JR., VICE CHAIRMAN, JOINT CHIEFS 
   OF STAFF; HON. TINA W. JONAS, UNDER SECRETARY OF DEFENSE, 
                          COMPTROLLER

    Mr. England. Representative Ryun, thank you. Representative 
Spratt, thank you, and thanks for your comments, and members of 
the committee, good morning. It is a pleasure to be here, and I 
thank you for the opportunity. This is the first time I have 
testified before this committee, and I do look forward to a 
constructive dialogue and interchange, so I thank you very much 
for the opportunity for this interchange this morning.
    I have two of my very close colleagues and friends with me 
today, Comptroller Tina Jonas and also the Vice Chairman of 
Joint Chiefs of Staff, ADM Ed Giambastiani. The three of us 
have been deeply involved personally in this process of setting 
the Department's priorities and working this budget request. So 
hopefully we can inform you, and, also answer your questions 
about any issue dealing with the budget. We will certainly try 
to do that today.
    As you know, this is a very critical time for our country. 
We are a Nation at war, and this war is indeed a daily reality 
for our men and women in uniform who are stationed around the 
world or serving here at home, defending freedom and liberty 
along with our friends and allies.
    Now America is fighting against a dispersed network of 
terrorist extremists. This enemy is adaptable, relentless and 
will continue the attack whenever and wherever he finds the 
opportunity. We did not choose this fight, but we also do not 
have the option of walking away.
    Now the long war is only part of our current national 
security challenge. Hostile states or non-state actors, as you 
discuss, could acquire and use weapons of mass destruction, and 
they could do that to devastating effect.
    Guarding against this threat and preparing for the possible 
consequences of a WMD event require new technologies, new 
skills as well as enhanced counter-proliferation efforts.
    The Nation also faces a possibility that major or emerging 
power could choose a hostile course. Accordingly, it is 
important that we shape the force to discourage a peer military 
competitor and be able to defeat such a military if necessary.
    Now meeting these potential challenges requires fostering 
cooperation with emerging powers while hedging against possible 
surprise by maintaining our military superiority.
    Traditional state-based threats are still a concern and 
they have been kept at bay precisely because our Nation has 
been so well prepared, and I thank the Budget Committee for 
letting us do that.
    Now, of course, all of these challenges, again as you 
mention, have a bearing on the security of our homeland. 
Detecting, deterring, and defeating threats far from our shores 
is the best and likely the only way to keep America safe, but 
the Department of Defense is also prepared to defend America 
closer to home as the Department continues to provide support 
to other agencies of the U.S. Government for homeland security 
missions.
    In short, our Nation faces far more diverse challenges and 
far greater uncertainty about the future global security 
environment than perhaps ever before. And I urge this committee 
to fully support the President's national defense budget, 
including the $50 billion allowance for the fiscal year 2007 
war costs.
    The Department is asking you for $439.3 billion this year 
in the President's budget, and this is, as you have mentioned, 
almost 7 percent over the budget that was enacted in 2006, and 
this is, indeed, a lot of money. However, I would like to put 
this in perspective.
    We are spending a much smaller percentage of our GDP on 
defense now than we have in the past. This year's requesting, 
including supplementals, is projected to be about 3.7 percent 
of GDP, but it was about 4.6 percent in 1991, during the Gulf 
War. It was almost 9 percent in 1968, during the Vietnam War, 
and it was between 11 and 12 percent in 1953 at the height of 
our involvement in Korea.
    So it is a lot of money, but frankly, it is important for 
the Nation's defense and it is now about 4 percent, which, in 
my view, is an insurance policy to protect freedom of liberty 
for our society.
    Now a critical initiative that we do seek and need your 
help with, we need explicit Budget Committee support in our 
proposed change to TRICARE fees, and that is essential if we 
are to sustain the outstanding military healthcare program we 
have today.
    I do want you to know that you have my personal commitment 
and the personal commitment of all my colleagues in the 
Department of Defense that with the budget you entrust to us, 
we will be diligent in ensuring that we spend these funds 
wisely.
    We owe it to our men and women in uniform to provide them 
with the resources and the support they need to get the job 
done, and we owe it to our Nation to correctly assess the 
security challenges we face and to prepare appropriately to 
meet them, and the budget before you responds to these needs.
    Now I do want to comment that meeting these goals will 
require a strong bipartisan consensus on national security of 
the kind that defeated the communist threat which we faced for 
40 years across many administrations and many congresses. We 
had a strong bipartisan support for our national security.
    As we go forward, it will also require that unity of effort 
and a sustained will of the Congress and the American people, 
so this is a war of commitment and will, and it is very 
important that we have the resolve, commitment and will over a 
sustained period of time, to prevail in this war.
    With that united will and the hard work and sacrifices of 
our men and women in uniform, the Department of Defense will be 
able to provide the security so inseparable from the freedom we 
all enjoy.
    So I thank you for your commitment to this very, very 
profound endeavor to protect and defend the security and 
freedom of the United States and we do look forward to your 
questions and your dialogue and I would like to now turn it 
over, if I could, to my colleague, ADM Ed Giambastiani.
    Admiral Giambastiani. Good morning, Congressman Ryun, 
Congressman Spratt, Members of the Budget Committee, to all of 
you, I thank you for the opportunity to appear with the Vice 
Chairman for my first time in front of the Budget Committee.
    I am also pleased to be here with my Pentagon shipmates, as 
I will call them, Gordon England and the Comptroller, Tina 
Jonas. We, as a group, with many other senior civilian and 
military leaders have worked over the last 7 months, since I 
have returned to the Pentagon as a combatant commander, on the 
many issues that bring forward the President's budget request 
for the Department of Defense for the next fiscal year.
    I would like to make three brief points this morning, and 
then I look forward to answering your questions. First, I would 
like to thank each and every one of you in Congress for your 
strong support of our men and women in uniform and your 
continued support in the midst of a long war against extremists 
and terrorists, one where the enemy is trying to destroy the 
resolve of the American people.
    We have carefully examined our requirements against 
available resources. We believe that the President's budget 
allocation of the $439.3 billion maintains a support at the 
right level.
    I look forward to discussing in more detail the 
capabilities this budget will deliver to our troops. While this 
is a considerable sum of money and we recognize it is a 
considerable sum of money, it is less than we have historically 
spent during any previous wartime period that I am aware of as 
a percentage of our national wealth. I, too, along with the 
Deputy Secretary, am fully committed to ensuring the taxpayers' 
money is well spent.
    Second point. We come to you here today, having completed 
several year-long processes of fundamental importance to the 
Department. The first one is the Quadrennial Defense Review. 
The second one is something that happens on the military side 
which is the Chairman of the Joint Chiefs' assessment of our 
ability to execute the National Military Strategy.
    And, finally, of course, the President's fiscal year 2006 
budget development. In all these processes, there has been in 
my view, unprecedented collaboration and dialogue, not only 
amongst the senior military, but amongst the senior military 
and civilian leadership of the Department and not just inside 
the Pentagon, but from our commanders in the field and their 
staffs, represented by the combatant commanders around the 
world.
    We have spent literally thousands and thousands of hours--I 
have gone through and had my staff calculate this--questioning, 
analyzing and learning together as we work together to 
recommend the way ahead in the Department. In my experience, I 
have never seen this level of collaboration go on, and I have 
been through a lot of these processes and budget developments.
    Based on this, I can tell you categorically that your Armed 
Forces are fully capable of executing every part of your 
National Military Strategy and that this budget supports 
prosecuting the war on terror, accelerating transformation, 
enhancing joint war fighting, and improving the quality of life 
of our troops and our families.
    The final point I would like to make, as we fight this long 
war against a ruthless enemy, is that we are doing so with an 
all volunteer force, 2.4 million Americans, active and reserve, 
protecting 300 million of their fellow citizens. This is 
significant and we need to ensure this commitment is fully 
recognized, rewarded and valued. I know that all of you value 
this, as I do, and we thank you for your support of these men 
and women in uniform.
    Because this is the first war we have fought with an all 
volunteer force, attraction and retention of quality people are 
more important than they have ever been in our history. The 
fact that it will be a long war amplifies this very 
consideration.
    Although we are on new ground in some respects, experience 
has taught us that we recruit individuals but we retain entire 
families inside the military. The keystone of recruiting and 
retaining the best America has to offer is maintaining the 
superb healthcare system that Congress authorized for service 
members and families back in 1995.
    As you know, the cost of that benefit has increased 
substantially since it was authorized in 1995. Let me give you 
some figures here. In the last 5 years, from 2001 to 2006, the 
cost of this has doubled from $19 billion to $37 billion, and 
is projected to increase in 2015 to $64 billion total.
    Despite this increase, there have been no premium changes 
in this program since 1995, when you instituted it. At that 
time, the cost to the individual was about 27 percent of the 
actual medical cost. Today the cost is about 12 percent.
    All of us in the Joint Chiefs of Staff have discussed this 
in length and in great detail. We believe the legislation you 
passed in 1995 was superb then, and we believe it is superb 
today, and we want to see this program sustained and going 
forward.
    Because of that, and our belief that the cost to the 
individual was reasonable in 1995, we recommend that you renorm 
in 2006 the cost shares that we had in 1995, when you 
instituted this program.
    This will allow us to maintain this superb benefit for not 
only our members, families and retirees, but ensure that it is 
with us 20 years from now.
    Some very important points to underscore about this 
recommendation that are included in the President's budget. 
Number one, active duty troops are not affected by this 
request. Number two, it only applies to retirees under the age 
of 65. And number three, it maintains the catastrophic cap of 
$1000 for active duty families and $3,000 for retirees.
    So fundamentally our recommendation is to take the benefit, 
enacted by you in 1995, and update it in fiscal sense to 2006.
    Thank you again for the opportunity to testify here today 
and to represent our men and women in uniform and the civilians 
and families that support them around the world. I look forward 
to answering your questions, sir.
    Mr. Ryun. Thank you very much. We will go to questions at 
this point. I would like to begin by just saying first of all, 
I agree with the President's policy that he doesn't really want 
to have a time certain that we continue to wait as we train up 
the troops.
    The Iraqi forces, the evidence of that, you know, I have 
actually seen in my district, where at Fort Riley we had a 
brigade that was supposed to rotate out the end of December, 
but did not because it is becoming more clear that the Iraqi 
forces are becoming more ready.
    Now having said that, recently there was a great deal of 
violence at which the Iraqi forces responded to, do you feel 
that they were well enough prepared and are prepared for what 
might lie ahead, and I leave that question to anyone on the 
panel who would like to respond.
    Admiral Giambastiani. Just about an hour-and-a-half before 
this hearing started, I came off a video teleconference that 
the Secretary of Defense, the Chairman and I were attending 
with General Casey, and General Chiarelli, who is the new 
multi-national corps commander, and let me just tell you a 
little bit about what General Chiarelli said to us, and I think 
it is important to recognize this.
    He served in Iraq for a year and was essentially the 
Baghdad U.S. Commander and left Iraq about 13 months ago. So he 
has been gone for a year. He came back and has been now in 
command for about 6 weeks of the multi-national corps. He 
relieved Lieutenant General John Vines, who is the head of the 
18th Airborne Corps.
    And what General Chiarelli told us this morning is he was 
incredibly pleased, No. 1, with the performance of the Iraqi 
Army and the fact that the Iraqi security forces took the lead 
after this latest round of violence caused by the destruction 
of the Golden Dome mosque in Samara and that they were leading 
this security effort inside Iraq, not coalition forces.
    And No. 2, the fact that the Iraqi security forces not only 
were taking the lead, but that they had done it in an 
exceptional manner. Frankly, he gave a number of quotes, one 
from an Iraqi commander--it was very impressive--on what he was 
doing to protect certain folks as they were marching in a 
demonstration.
    Actually the number of attacks that are going on from 
improvised explosive devices today, are less than they were a 
number of months ago. There is a downward trend here. And the 
fact that the Iraqi security forces are performing well, in 
particular, the Iraqi Army, I think is significant.
    The final point I would make to you is when he left Iraq 13 
months ago, there were only two battalions of the Iraqi Army 
that were in charge of battle space. Today that number has 
grown by somewhere up in the forties. I will have to take a 
look at the exact number, but it is substantial, and this is a 
big deal, because the American forces, coalition forces, were 
not in the lead here.
    It is a long answer, but I hope that was helpful.
    Mr. Ryun. Well, that helps. I would also insert as a follow 
up, I mean we are seeing improvements. Did he offer any 
suggestions as to how those improvements might be--how you can 
improve on those areas with regard to what the Iraqi security 
forces could do for the future?
    Admiral Giambastiani. Well, let me just say to you, the 
strategy that we have, we have embedded training teams across 
the entire Iraqi Army. We have got them established. In the 
fall, the Defense Department took over the responsibility for 
training up the Iraqi police force, and now we are bringing in 
additional folks to embed in the Iraqi police forces.
    So this is significant because when we say Iraqi security 
forces, we mean army and police. So we are making a concerted 
effort to bolster, help train up, and work with the Iraqi 
police forces today.
    The final thing I would say to you along this point is 
today, 60 percent of the instructors of the Iraqi Army and 
Iraqi security forces are Iraqis. They are not Americans. And 
by the end of this year, that number will be somewhere around 
90 percent. That is a pretty significant change, in fact, to 
make sure that this type of training expertise is turned over 
to the Iraqis, because obviously it is their country and it is 
important they do it right.
    Mr. Ryun. Well, I think I share the President's view on 
this, too. When the Iraqis take greater ownership, they will 
have even greater success. And I want to thank you for your 
answer. At this point, I would like to turn to Mr. Spratt for 
any questions he might have.
    Mr. Spratt. Thank you and thank you once again for your 
testimony and for being here today.
    Let me go back to the theme of seaport security, because I 
really think this is at the bottom of all the reaction to the 
Dubai ports issue. It is not that the ownership country will be 
an Arabian and Muslim firm, but that we have sat through 
briefings, closed and open, where the deficiencies and 
vulnerability in our ports have been outlined.
    And there is a widespread suspicion here that we haven't 
done nearly enough to secure the seaports of this country and 
that raises a question as to whether or not we will aggravate 
these deficiencies if we delegate the operation of our ports to 
a foreign firm.
    Am I correct in reading the Coast Guard's proposal that 
they proposed $5.4 billion about 3 years ago for upgrades in 
our seaports, surveillance and fences and very basic stuff, of 
which only $700 million has been funded today?
    Mr. England. Mr. Spratt, I mean you are going to have to 
ask that question to Department of Homeland Security. I mean 
that is not in our budget, and I am not in the position to 
comment on that.
    Mr. Spratt. Were you a member of the Farm and Investment 
Review Committee?
    Mr. England. Yes, sir. As a deputy, I am part of that 
committee, yes, sir.
    Mr. Spratt. Did that issue get discussed in your committee?
    Mr. England. It was not discussed as part of this review, 
no, sir.
    Mr. Spratt. Whether or not designated, perceived 
deficiencies have been addressed since 2001 and since the Coast 
Guard rendered its report? That didn't get addressed at all?
    Mr. England. Mr. Spratt, we look specifically--CIFUS looks 
at each specific case. So each case we look at, we don't look 
at what the funding is on any given--if you look at a specific 
company, I mean your comment--I do want to correct you in one 
area. We already have a foreign firm. You know, it is a UK firm 
being replaced by the firm from UAE. So this is one foreign 
firm replacing another firm.
    We looked at that specific firm and in the Department of 
Defense, we had it looked at by 17 departments and agencies 
within the Department of Defense and we had no adverse comments 
regarding that firm. So we did look at it in great detail, 
regarding the security of the ports for this firm.
    We did not go back and examine the whole approach in terms 
of security. I do know, however, that Homeland Security has an 
in-depth approach, that is, security is not just at a given 
port, it is in depth.
    They actually start at foreign ports and UAE, as you know, 
was one of the very first countries--I believe the first 
country to join us in this initiative to inspect cargo at 
foreign ports, as opposed to waiting for them to get to 
America. So it is, I think, a much larger issue than just this 
one particular acquisition.
    Mr. Spratt. Under the law if there are significant national 
security questions, there is a mandatory 45-day period. It's a 
Byrd amendment, adopted in 1993. Does this issue then become a 
DOD issue when the 45-day period kicks in and that analysis 
begins?
    Mr. England. Mr. Spratt, how it has worked since the 
1990's, I believe about 1996--don't hold me exactly to that 
date--but the way that has happened at the meetings of the 
CIFUS committee, if there was any comment made, that is, any 
objection by anybody for any reason, it automatically went into 
the 45 days.
    In this case there were no comments at all that would have 
triggered the 45 days. Now my understanding is is that the----
    Mr. Spratt. Well, DOD is on the committee. You sit in 
behalf of the Department of Defense.
    Mr. England. Yes.
    Mr. Spratt. You had the opportunity to raise national 
security concerns if you had any, and you apparently had none?
    Mr. England. No, we had none. Neither did anyone else. Now 
Mr.--so it didn't go into the 45 days, but Mr. Spratt, 
understand that what will happen is the company has agreed to 
come back for a 45-day review. They will be providing 
additional information.
    So the committees, when that is refiled by the companies, 
my understanding is that the committee will rejoin, and we will 
then start another 45-day review to look at new data or any 
concerns raised by the Congress. So this will be an opportunity 
to a more in-depth review to look at new data provided by the 
company and to address any concerns of the Congress.
    So I would suggest--I mean this is a national security 
issue, not a political issue. I mean our obligation is the 
security of the United States of America, as is yours, and with 
that obligation and that from your oversight and us from an 
action point of view, we would be pleased, any concerns any 
member of the Congress has, to look at these, because we do 
want to make sure----
    Mr. Spratt. Well, one of our concerns is that nearly 10 
million containers move through our ports every year and that 
number increases every year. And a minute fraction of those 
containers is actually cracked open and inspected.
    I have seen the number of 5, 6 percent, but as I understand 
it, that includes dog sniffings as opposed to actually taking a 
container, opening it up and finding out if the contents 
correspond to the bill of lading and the manifest.
    Mr. England. Well, Mr. Spratt, though in reality, we 
actually don't want to inspect any container in the United 
States. What you want to do is verify what is in a container in 
a distance port. You actually don't want cargo coming to 
America you are unsure of. So the approach--and now I am going 
to say this from my own knowledge in helping to put the program 
together when in Homeland Security--was to inspect ports so the 
security initiative is to inspect ports outside the United 
States, verify what is in containers and on ships, so that we 
know when they come to the United States' ports, that they are 
safe.
    What you would like to do is only physically inspect 
suspect. You would like to inspect 100 percent of the suspect 
containers, but not 100 percent of the containers that have 
already been verified.
    So the 5 percent number, frankly, is a little bit 
misleading because the 5 percent is hopefully 100 percent of 
the containers that cause you concern as opposed to the 95 
percent that have already been inspected and have a high degree 
of confidence.
    Mr. Spratt. My time is up, but if we have further time, I 
would like to come----
    Mr. England. No, I would be happy to come meet with you on 
this, but I frankly believe that obviously the most 
knowledgeable person here and the most knowledgeable people are 
the Coast Guard, because the Coast Guard is responsible for the 
port security, and they are obviously the most knowledgeable to 
discuss this subject or the folks from Homeland Security. But 
hopefully this discussion has clarified this issues somewhat.
    Mr. Spratt. If I could just have one 30 seconds to share 
something with you. Years ago, when we were concerned about 
textile fraud, shipments coming into this country, we 
appropriated $3 million and gave money to New York, Miami, and 
L.A., to intensify the inspection of incoming cargo containers 
and to open up quite a few more than they had been accustomed 
to.
    They came back in a year's time with $21 million dollars in 
fines, fees and penalties because of the discrepancies between 
the manifests, the bills of lading, and the actual contents of 
the goods coming in, quota evasion, tariff evasion, 
misdeclaration, and everything else.
    And I went up to the New York and met with the customs 
people up there, the room was full of them. They said we have 
been telling our superiors this for years, that fraud is 
rampant in this business, and here is the proof of it.
    And that is my concern. I know you have got 36 different 
ports abroad where you can check everything, but surely you 
want to have the potential shipper of a nuclear device, where 
it will be caught, if not in the foreign port, in the United 
States when it comes here. I would think we would want that 
second line of defense.
    And particularly given the widespread suspicion that these 
contents don't always correspond to the external documents that 
come with the container.
    Mr. England. Mr. Spratt, there is a layer of defense, and, 
again, I mean it is a combination of a lot of checks and 
balances in the system, so it is the ports of the United States 
but it is also the ports, the shippers, the personnel, and 
there is a whole layer of defense system that is in place and 
not just the ports.
    But, again, I think it would be very appropriate to have 
this discussion with the folks from Homeland Security.
    Mr. Ryun. And I will encourage you to maybe continue the 
discussion a little bit later when we perhaps have some more 
time. I will remind members that we have a limited schedule 
this morning and I know others would like to ask questions, so 
I would appreciate it if you could stay the clock.
    At this time, I would like to recognize Mr. Crenshaw.
    Mr. Crenshaw. Thank you, Mr. Chairman, and thank you, Mr. 
Deputy Secretary. Thank you for your work as Secretary of the 
Navy and I assume that is a promotion now that you are the 
Deputy Secretary, but we welcome you here.
    Mr. England. Thank you.
    Mr. Crenshaw. And I have got kind of a broad question. It 
is not unlike the issues that we face as Members of Congress or 
on the Budget Committee. You know, we are going to appropriate 
about a third of our overall budget in the discretionary 
spending, and we are trying to get a handle on that.
    And we hear a lot of testimony in this committee from folks 
talking about entitlements, Social Security, Medicare, 
Medicaid, those kind of issues that seem to grow faster than 
the discretionary spending grows.
    And it seems to me that you all face kind of a similar 
problem in the Department of Defense. The request is an awful 
lot of money, as you point out, $439 billion, and you kind of 
have the same situation, where on one hand, you have got the 
quality of life issues, healthcare, pay raises, housing, and I 
think that was one of the President's priorities, and I think 
we have taken some giant steps toward dealing at that.
    On the other hand, one of the priorities is to make sure 
that the men and women have the best equipment there is, 
modernized, procured, all those kind of things.
    So I guess when I hear you talk about healthcare doubling 
in the last 5 years from $17 to $39 billion, and it is going to 
be $64 billion by 2015, then that is kind of startling trend, 
because it seems to me you are going to have to balance those 
qualify of life issues with the modernization and procurement 
aspect, because you can have a great quality of life, but if 
you don't have the kind of equipment you need to fight in a 
modern world, there is a real problem.
    And so we had a hearing, I think, in military quality of 
life and the entire military budget of Germany is $39 billion 
and we will spend more than that on healthcare. We only spent 
$11 billion to build new ships, I think, this year.
    So if you look out in the future, I mean, I know in this 
budget you talk about some additional fees, enrollment fees and 
deductibles, and that is probably a place to start and have a 
discussion.
    But how do you plan on dealing because we can't sustain, 
just like we can't keep spending money, you know, as a country 
on some of these entitlement programs. And I am not sure we can 
continue to just automatically fund every Defense request. So 
can you tell us kind of what you are doing other than this good 
start to really deal with this long-range problem of balancing, 
you know, the modernization aspect with the quality of life.
    Mr. England. Mr. Crenshaw, you are right, and thanks for 
the opportunity to discuss this. Look, this is a start. I mean 
frankly we, quote, get a lot of help on this subject. I mean we 
have a lot of laws enacted by the Congress that increase 
benefits. Not always do we ask for them.
    So first if you would ask the Congress to help us in this 
regard and moderate your own desires in terms of improving the 
benefits. We have we believe an excellent salary and benefit 
package for our men and women and their families who wear the 
cloth of our Nation, and but it is important that we not just 
have this trend that just goes up and up.
    Again, as ADM Giambastiani commented, just to reset the 
cost bases back to 1995 or 1996, I believe across our FYDP, 
that saves up $11.2 billion, just in the FYDP for this one 
relatively small step, which is to reset the fees to the 
original baseline. And then I believe there is another $1.5 
billion that accrue savings to the Treasury. So this is close 
to $13 billion just to reset the fees back to the 95, 96 
baseline when that was first enacted by the Congress.
    So this is a step. And I will tell you this is a large 
step, that is, we now have the support of all of the Joint 
Chiefs, all of our Service Chiefs, the Chairman and the Vice 
Chairman, and the civilian leadership. So this is, you know, 
has wide support in the Department of Defense.
    It is very important that the Congress and specifically 
this Budget Committee, support us in this regard, because if we 
cannot take this step, I mean if we can't take this step, which 
is just to reset and adjust for the inflation of fees, then 
there is frankly nothing else we are going to be able to do 
except come back to this committee and ask for more money every 
year.
    So we need your help this year, specifically, in this one 
small step that does indeed save us a lot of money to try to 
break these trend lines.
    The all-volunteer force is an expensive force, but it is 
also the most effective force we have ever had in the country 
in terms of the quality of our men and women who wear the 
uniform. So this is a magnificent force we have. It is a 
volunteer force; and, therefore, it is important that we pay 
and reward our people appropriately.
    Mr. Crenshaw. I think he wanted to add something if he 
could. My time is----
    Mr. Ryun. A brief comment, yes.
    Admiral Giambastiani. If I could very quickly, just to add 
to what the Deputy has mentioned. In the acquisition area, we 
are looking very carefully at life cycle costs of systems, and 
when we look at building aircraft, bombers, ships, we take a 
look at the life cycle and the amount of crews that these take, 
and if we can reduce crews and get the job done, be as 
effective, efficient, militarily sound as a force, then in the 
long term, getting the number of personnel costs down is 
substantial. So I just wanted to tell you in addition to the 
healthcare and others, these are some areas we are focusing on.
    Another very important one is the use of our reserve 
forces. This is both Reserve and National Guard. They are a 
very effective force for us. Clearly we can keep a large number 
of them around, and obviously you get them for a certain amount 
of time and you don't have to pay the full salaries and the 
rest while they are doing just regular reserve support.
    But what we have done is we are making them an operational 
reserve at the same time they are a strategic reserve. And by 
combining them on a military side and making them more 
effective when we use them on active duty, that saves us 
substantial money. So there is a significant portion of what we 
call a total force in how you use them.
    I guess the last thing I would say to you is, is that as we 
look at performing functions around the Department, we look at 
what we already have and how we can rebalance it underneath 
that top line as opposed to just asking for more, and we try to 
use that as a last resort if you will. If we need them, we will 
come up to you and we will talk to you about it, but our point 
is how can we redistribute under that top line to use them more 
effectively and efficiently. That is all I have, sir.
    Mr. Crenshaw. Thank you.
    Mr. Ryun. Mr. Spratt, for a brief comment.
    Mr. Spratt. Mr. Chairman, we were to have Steve Kosiak 
testify today, but then in light of the schedule, we are--would 
ask simply to have unanimous consent for the testimony of 
Steven Kosiak to be entered into the record.
    Mr. Ryun. Without objection, so ordered.
    [The prepared statement of Steven Kosiak follows:]

 Prepared Statement of Steven M. Kosiak, Director of Budgets Studies, 
             Center for Strategic and Budgetary Assessments

    Mr. Chairman and members of the committee, it is a great honor to 
have the opportunity to appear before you today to discuss the 
administration's fiscal year (FY) 2007 defense budget request, the 2006 
Quadrennial Defense Review (QDR) and related issues.
    Today we face a remarkable range of challenges to our national 
security. There is the terrorist threat, which was demonstrated so 
cruelly and tragically on September 11, 2001; the ongoing wars in Iraq 
and Afghanistan; the threat posed by the proliferation of weapons of 
mass destruction (WMD); and the possibility that, over time, the United 
States will face a major power competitor.
    Meeting and managing these challenges effectively while also 
addressing competing demands on our national resources, such as 
preparing for the retirement of the baby boomer generation toward the 
end of this decade, is a complex and difficult task. But it is a task 
that falls very much within the purview of this committee. It is my 
hope that I might be able to help you, in some small way, with this 
task through my testimony today.
    My remarks highlight a handful of observations, questions and 
conclusions concerning US funding for defense and the latest Department 
of Defense (DOD) plans, as reflected in the QDR and the FY 2007 defense 
budget request. Specifically, I would like to emphasize the following:
     Funding levels for defense are, today, very high by 
historical standards, and are projected to continue to grow under the 
administration's latest plan.
     The level of funding provided through special war-related 
appropriations has grown enormously in recent years and now accounts 
for a major portion of DOD's overall budget.
     The true cost of ongoing military operations is unclear, 
and there is a danger that DOD is coming to rely on special war-related 
appropriations to cover some of the military's peacetime modernization, 
readiness and force structure costs.
     Notwithstanding today's high defense budget levels, due to 
cost growth in many weapons programs, deficit concerns and other 
factors, the administration's defense plan is probably not affordable 
over the long run.
     The 2006 QDR includes a substantially revised, and 
improved, diagnosis of the challenges facing the United States, as well 
as some positive programmatic adjustments.
     Unfortunately, taken together, the 2006 QDR and FY 2007 
defense budget request would do little to improve the affordability of 
DOD's long-term plans.
     The administration has deferred most of the hard choices 
that will eventually have to be made to ensure that DOD's plans, 
including many of the new initiatives outlined in the QDR, are 
affordable over the long run.
    For the remainder of my time, I would like to discuss and expand 
upon these points.

      TODAY'S DEFENSE BUDGET IS VERY HIGH BY HISTORICAL STANDARDS

    The Bush administration has requested some $441 billion to cover 
DOD's peacetime modernization, readiness and force structure costs in 
FY 2007. In addition, the administration plans to amend its request to 
include $50 billion as a down payment to cover the cost of military 
operations next year. Thus, altogether, under the latest plan DOD is 
projected to receive some $491 billion in FY 2007. It is likely that at 
some point in FY 2007, the administration will submit a supplemental 
request for additional war-related funding as well. The 
administration's FY 2007 request also includes $22 billion for 
Department of Energy (DoE) and other defense-related programs, bringing 
the total projected for national defense to $463 billion, exclusive of 
war-related funding, or $513 billion including such funding.
    The administration also recently submitted a $70 billion request 
for supplemental appropriations to pay for military operations in Iraq 
and Afghanistan in FY 2006. Since Congress already provided $50 billion 
for war costs in the recently enacted FY 2006 defense appropriations 
act, this would bring total funding for military operations this year 
to $120 billion, and total funding for national defense to some $562 
billion. In real (inflation-adjusted) terms, this would mark the 
highest level of funding for defense since the height of the Korean War 
(FY 1952). If the administration were to request a similar size 
supplemental in FY 2007, the defense budget would be even higher next 
year.
    Nor are today's high defense budget levels solely the result of 
wartime spending. Exclusive of war-related funding, the FY 2007 budget 
request represents about a 7 percent nominal and a 4.4 percent real 
(inflation-adjusted) increase from this year's level. Including the 
projected $50 billion in war-related funding, the FY 2007 budget for 
national defense would mark roughly a 50 percent real increase from FY 
1998 (the budgetary low-point of the 1990's).
    Moreover, under the administration's new plan, the peacetime 
defense budget (i.e., the defense budget exclusive of funding 
designated as war-related) would increase in nominal terms by 7 percent 
in FY 2007 and by an average of 2-4 percent annually over the FY 2008-
11 period. This is a much slower rate of increase than has occurred 
over the past 5 years. Nevertheless, as a result of this continued 
growth, by FY 2011, funding for defense would, in real terms, be 
comparable to the levels reached during the years of the Reagan 
administration-historically, the peacetime peak for the defense budget.

   SPECIAL WAR-RELATED APPROPRIATIONS ACCOUNT FOR A GROWING SHARE OF 
                            DEFENSE SPENDING

    Since 2001, the administration and Congress have provided DOD a 
total of about $331 billion for military operations. This includes 
about $226 billion for Iraq, $76 billion for Afghanistan and $29 
billion for homeland security-related and other activities. As noted 
above, the administration recently submitted a supplemental request for 
an additional $70 billion to help cover the cost of military operations 
in FY 2006, and plans to amend its FY 2007 defense budget request to 
include $50 billion as a down payment on FY 2007 costs related to 
military operations. This would bring the total amount received by DOD 
for military operations to some $451 billion.
    The vast majority of this funding has been provided through special 
appropriations. Until FY 2004, the funding was provided almost solely 
through emergency supplemental appropriations. However, in FY 2005, to 
its credit, Congress insisted on funding military operations, at least 
partially, through the annual defense appropriations act. And this 
committee, of course, played a key role in forcing this change. 
Supplemental appropriations are an appropriate vehicle for covering the 
cost of unanticipated emergencies, such as natural disasters or the 
initial phases of combat operations. However, when major military 
operations become long-term deployments likely to be sustained over a 
period of years, the use of supplemental appropriations is no longer 
appropriate. And it is a positive development that the administration 
is also finally showing a willingness to embrace the use of the annual 
defense appropriations act to cover at least some of the costs of 
ongoing military operations.
    During the 1990's, the US military was involved in a variety of 
different operations, including deployments in Somalia, Haiti, Bosnia, 
Kosovo and southwest Asia (e.g., enforcing no-fly zones against Saddam 
Hussein's Iraq). However, in terms of troop levels and costs, these 
were relatively small operations. As a result, on average, during that 
decade funding for military operations accounted for well under 1 
percent of annual funding for defense. By contrast, since the invasions 
of Afghanistan and, especially, Iraq, funding for military operations 
has come to account for a major share of DOD's annual budget. For FY 
2006, funding for military operations is projected to account for about 
20 percent DOD's overall budget.

  DOD MAY BE USING WAR-RELATED APPROPRIATIONS TO COVER SOME PEACETIME 
                                 COSTS

    Although most of the funding included in war-related special 
appropriations is clearly needed to cover costs directly related to 
military operations (e.g., costs associated with activating reserve 
personnel, sustaining combat operations, overhauling equipment, and 
replacing destroyed or worn-out equipment), some of these funds are 
being used to cover essentially peacetime programs and activities of 
the Department of Defense.
    Just how much of the funding designated for military operations is 
actually being used to cover normal peacetime force structure, 
readiness and modernization costs is difficult to estimate. However, 
the amount may be substantial. In early 2005, the Congressional Budget 
Office (CBO) projected that sustaining US forces in Iraq and 
Afghanistan at essentially today's level would require about $85 
billion in FY 2006. Even excluding $6 billion in DOD funding included 
in the administration's latest supplemental request to help train and 
equip Iraqi and Afghan security forces, this suggests that the 
administration's projected funding total of $120 billion for military 
operations in FY 2006 may be too high by as much as nearly $30 billion.
    Some of this extra funding may be needed to cover costs associated 
with repairing or replacing military equipment worn out or destroyed in 
Iraq and Afghanistan. But it seems unlikely that these costs would 
absorb all of this additional funding (in a March 2005 report, CBO 
estimated that DOD might have a $13-18 billion backlog of equipment 
needing replacement or repair).
    An example of one program that is currently being funded through 
supplemental appropriations but is clearly not directly related to the 
war is the Army's modularity initiative. This initiative involves 
increasing the number of deployable combat brigades by reorganizing the 
Army's current force structure. Since the modularity initiative is 
central to the Army's current plans to transform its forces, and would 
presumably be carried out whether or not US forces were currently 
engaged in military operations, these costs should, rightly, be funded 
through the regular annual DOD appropriations act, not emergency war-
related appropriations. DOD has, implicitly at least, conceded this 
point by stating that, in future years, funding for Army modularity 
will, indeed, be included in DOD's annual (i.e., peacetime) budget 
request.
    The fact that some costs unrelated to the wars in Iraq and 
Afghanistan are being covered by funds designated as war-related should 
be a cause for concern. Among other things, it difficult to discern how 
seriously to take the topline projections for DOD's peacetime budget 
included in the latest Future Years Defense Program (FYDP). In 
particular it raises the possibility that the Services, if they believe 
they can rely on supplemental appropriations to cover such costs, will 
develop long-term plans that are far less realistic than they might 
otherwise be.
              dod faces substantial plans/funding mismatch
    Over the past 4 year years, the long-term fiscal picture for the 
Federal Government has dramatically deteriorated. In January 2001, the 
Congressional Budget Office projected Federal budget surpluses totaling 
about $5.6 trillion over the FY 2002-11 period. By comparison, in its 
January 2006 report, CBO projects that the Federal Government will run 
deficits totaling some $832 billion over the coming decade. Moreover, 
as CBO acknowledges, its ``baseline'' projection makes a number of 
assumptions that may be unrealistic; for example, that tax cuts 
currently set to expire over the coming decade will not be extended. 
Projections based on more realistic assumptions about tax cuts and 
other factors suggest that total deficits could total some $3-4 
trillion over the next 10 years.
    It seems unlikely that Congress will cut the administration's 
defense budget request for FY 2007. However, over the longer term, once 
a decision is made to address seriously the ballooning Federal deficit, 
history strongly suggests that cuts in defense spending-or at a minimum 
slower rates of growth in defense spending-will be part of the solution 
adopted. The 12 percent real reduction in defense spending that 
occurred between FY 1985 and FY 1990, before the end of the Cold War, 
in large part reflected a bipartisan effort to begin reducing deficits.
    Moreover, even if DOD were able to achieve the funding levels 
projected in the administration's new plan over the next 6 years and 
could sustain those funding levels in the face of growing Federal 
deficits, DOD would probably not be able to execute its very broad and 
costly modernization and other plans. If history is any guide, DOD's 
major weapons acquisition programs are unlikely to meet projected cost 
goals. Similarly, operations and support activities (e.g., military 
pay, health care, and a wide variety of operations and maintenance 
functions) are likely to cost more than anticipated.
    Under the administration's new plan, funding for national defense 
is projected to reach $526 billion in FY 2011, exclusive of war costs. 
However, estimates by CBO, CSBA and others suggest that executing 
existing plans could require substantially higher defense budget 
levels, perhaps an additional $75 billion or more a year over the long 
term. DOD's plans are likely to become affordable only if and when 
decisions are made not only to invest in new forces and technologies, 
but to divest from more traditional forces and programs-decisions which 
the QDR and the FY 2007 defense budget request have largely deferred.

   THE 2006 QDR INCLUDES AN IMPROVED DIAGNOSIS AND SOME WELCOME NEW 
                              INITIATIVES

    In conjunction with the administration's submission of its FY 2007 
defense budget request, it has also released the results of the 2006 
QDR. The QDR includes a substantially revised diagnosis of the 
challenges facing the United States, and the US military in particular 
(compared to the 2001 QDR and earlier reviews). Among other things, it 
argues for placing a greater emphasis on irregular warfare and the 
dissuasion of major power competitors.
    Consistent with these new priorities, the QDR also proposes a 
number of potentially important programmatic changes, including 
increasing the number of active duty Special Operations Forces (SOF) 
battalions by one-third and accelerating the fielding of a new long-
range strike aircraft from 2037 to 2018. These are welcome changes. 
Given recent experience in Afghanistan and Iraq, and the suitability of 
SOF units for certain critical counter-terrorism and other missions, 
the need to expand our SOF units seems clear. Likewise, the 
administration's recommendation that the acquisition and fielding of a 
new deep strike aircraft be moved up nearly 20 years appears to be 
appropriate. In both of our recent wars in the Middle East access to 
forward bases from which short-range fighters can operate effectively 
has been limited. And it is possible that in a future conflict, for 
political or military reasons (e.g., the proliferation of cruise and 
ballistic missiles), such access will be even more constrained. 
Nevertheless, the Services have, for too long, been focused on 
strengthening our short-range fighter capabilities-an area where we 
currently enjoy enormous superiority-and have neglected the need to 
improve and expand our long-rang strike capabilities.
    Unfortunately, there is good reason to question whether the funding 
required to implement these changes will be found, and thus, over the 
long run, whether these new initiatives will ever move from paper 
recommendations to reality.

    2006 QDR AND FY 2007 BUDGET REQUEST WOULD DO LITTLE TO IMPROVE 
                     AFFORDABILITY OF DEFENSE PLANS

    It seems, at best, questionable that many of the new initiatives 
proposed by the administration will ever reach fruition, because the 
QDR did very little to address DOD's long-standing plans/funding 
mismatch. It was especially disappointing in this regard in terms of 
major acquisition programs.
    The QDR recommended scaling back or terminating a number of weapons 
programs, including the J-UCAS unmanned combat aircraft, the E-10 
surveillance aircraft and the B-52H standoff jammer. But these are 
relatively small programs. The largest weapons programs, such as the F-
22 and F-35 fighter programs, the Army's Future Combat System (FCS), 
and the Navy's DD(X) destroyer survived essentially untouched. 
Moreover, as noted earlier, under the latest plan some new acquisition 
programs would be started, including the development of a new (manned 
or unmanned) deep-strike aircraft nearly two decades earlier than 
previously projected.
    Overall, under the new budget plan funding both for procurement and 
R&D would increase in FY 2007. Funding for procurement would rise from 
$76 billion in FY 2006 to $84 billion in FY 2007, while R&D funding 
would grow from $71 billion to $73.2 billion. Under the 
administration's latest plan, funding for procurement is projected to 
grow substantially over the FY 2008-11 period, while funding for R&D 
would begin to decline in real terms toward the end of the FYDP. In 
practice, however, it may be difficult for DOD to sustain a substantial 
increase in funding for procurement, given cost growth in military 
personnel, operations and maintenance, R&D and other areas of the 
defense budget.
    The QDR has proposed some potentially significant reductions in end 
strength and force structure. In particular, the QDR recommends cutting 
about 40,000 full-time equivalent military personnel from the Air 
Force, reducing the number of B-52H bombers from 95 to 56, retiring 50 
Minuteman ICBMs, and accelerating the retirement of the F-117 fighter 
and the U-2 reconnaissance aircraft. Whether these are the right areas 
of force structure to cut is debatable, but some such reductions are 
probably appropriate.
    Historically, the US military has frequently cut end strength and 
force structure in order to find sufficient funding to pay for its 
modernization efforts. In many cases, the acquisition of new, much more 
capable (and typically far more costly) weapons systems mean that less 
than one-for-one replacement is necessary. This approach probably makes 
sense for the Air Force, as well as the Navy.
    However, the personnel and force structure cuts included in the QDR 
are, by themselves, too modest to both substantially alleviate DOD's 
existing plans-funding mismatch and offset the additional costs 
associated with the new programs and initiatives included in the QDR.

        CONCLUSION: HARD CHOICES ARE LEFT TO NEXT ADMINISTRATION

    As noted at the outset of this testimony, the United States faces a 
variety of serious security challenges, as well as growing fiscal 
constraints. Effectively addressing both these security concerns and 
fiscal constraints will, among other things, require transforming the 
US military to make it both more capable and more cost-effective. Doing 
this will, in turn, require making some hard choices.
    The good news is that the latest QDR and the FY 2007 defense budget 
request include some potentially significant and positive new programs 
and initiatives. The bad news is that they fail to recommend the level 
of divestment in more traditional areas that is likely to be necessary 
to make these new initiatives affordable over the long run.
    In other words, transforming the US military to meet irregular, 
catastrophic and disruptive challenges to US security, as recommended 
in the QDR, is as much about divesting from traditional weapons 
programs and force structure as it is about investing in new 
technologies and forces. And unfortunately, the latest plan is largely 
silent on the question of divestment. As a result the hard decisions 
that should have been central to this QDR have been largely kicked down 
the road, where they will have to be made by a future administration.

    Mr. Ryun. At this time, I would like to turn to Mr. Edwards 
for any questions he might have.
    Mr. Edwards. Thank you, Mr. Chairman. Secretary, welcome to 
our committee. Few have said it is an enjoyable experience, but 
welcome here, and as someone who has known you and watched you 
for over two decades, I do want to personally thank you for 
your service to country, in the private sector, the Homeland 
Security Agency, as Secretary of the Navy and as Deputy 
Secretary of Defense. You truly have been a model of service to 
country and we should all be deeply grateful to you for that.
    Admiral, thank you for being here, and Ms. Jonas, for your 
leadership as well.
    Mr. Secretary, I am the ranking Democrat on the 
Appropriations Subcommittee that funds the DOD healthcare 
system and the VA healthcare system. So I will be somewhat 
involved in this debate about TRICARE Costs.
    I would like to just put on the table honestly and openly 
for the purpose of letting us know what the challenges are 
going to be, and perhaps at the end of the day, we can find 
some solution, because I do think we have to deal with the 
serious question of highly, quickly escalating defense 
healthcare costs.
    But so you know the debate, and some of this goes beyond 
your pay grade and my pay grade, but I think for many 
Democrats' perspectives, we will recognize the need to address 
the issue of Defense healthcare costs. I think where we are 
going to have a problem, at least many members in Congress, 
will be on the principle of shared sacrifice during time of 
war.
    And in effect what the administration is asking for this 
year is for military retirees, men and women who have served 
our country over the last, well, over a period of 20 years or 
30 years, to spend, I guess, close $11.2 billion. That is the 
number that the Admiral quoted, $11.2 billion more in the next 
5 years, to help pay for Defense healthcare costs.
    At the same time, Members of Congress are going to vote to 
continue tax cuts and extend tax cuts that give us tax breaks 
while, you know, 40,000 soldiers I used to represent at Fort 
Hood, have put their lives on the line in Iraq.
    And I think the public debate has to address the issue of 
are we being fair to ask a thousand military retirees--I'm 
sorry--to ask 222 military retirees to pay 2 years from now an 
additional thousand dollars extra out-of-pocket expense to 
cover healthcare costs, when those 222 retirees' contribution 
will be necessary to pay for the tax cut for one American 
making a million dollars this year in dividend income.
    I am not sure most Americans would think it passes the 
fairness test or the principle of shared sacrifice during time 
of war, an important American principle. Say 222 military 
retirees should pay an extra thousand dollars a year for their 
healthcare and that will, in effect, fund one person's tax 
cuts, person making million dollars a year in dividend income.
    I realize your job isn't to handle tax policy, but I think 
as we try to seriously and honestly and openly debate this very 
important issue that you brought up, I think the administration 
needs to be aware. That's a genuine concern of not just many 
Democrats in Congress, but many military retirees and veterans 
and the American people as well.
    Let me ask you on the issue of healthcare costs----
    Mr. England. Mr. Edwards, could----
    Mr. Edwards. As long as it doesn't take from my time.
    Mr. England. No, that is all right. Go ahead. Sorry.
    Mr. Edwards. Let me ask you this question, Mr. Secretary. 
Do we have an estimate of how many military retirees will drop 
their healthcare coverage because of the increased premiums?
    And, secondly, is a bipartisan effort to try to look at 
reigning in costs. Has the Department of Defense looked at the 
public/private partnership in the housing program that has 
worked so well that I have strongly supported for over a decade 
now, and try to see whether we could replicate that public/
private partnership in building new military hospitals to save 
taxpayers' money and provide even better quality here at a 
lower cost for our military servicemen and women and retirees?
    Mr. England. Mr. Edwards, if I could first maybe change the 
character of the debate on this TRICARE issue. Let me tell you 
the statement we are in. When people leave the military and 
before they are 65, so that category of people only, not 
active, and under 65, they typically go out and get other jobs.
    What happens is if you take a job with some major employer 
in the United States, it turns out that major employer, some of 
them today will pay you not to take their health insurance, but 
rather to stay the DOD health insurance.
    So and there are municipalities, there are cities that do 
not allow those retired people to take their health insurance 
or States to take their health insurance. They require them to 
take the DOD. So basically we find ourselves subsidizing 
American industry. We find ourselves subsidizing States and 
localities because our coverage is so good and our rates are so 
low.
    So if we just had a rate compatible at an industry group or 
a State or a city, then people would indeed take other 
healthcare that is already offered to them, rather than coming 
and staying on DOD rolls. So this is not a question in most 
cases of people paying more. It is a question of who makes the 
payment. Do we do it in DOD, or does a State, a municipality or 
a company make the payment as they should do when the person 
works for them as opposed to coming back to DOD.
    So if we could equalize this, it is a question of fairness 
and equity, except it is fairness and equity among DOD versus 
private industry, States and local. Otherwise, we are taking 
money away from, as Mr. Crenshaw said, in proving, you know, 
the effectiveness of our force in terms of other investments we 
need to make.
    Now the specific question I think Tina Jonas can answer in 
terms of the number of people.
    Ms. Jonas. Mr. Edwards, with respect to the number of 
people that might leave the rolls, I am told that it is about 
144,000 in FY 2011. What the bulk of the savings, about $4.7 
billion of that, would be associated with not attracting those 
in, as Secretary England has just said.
    Mr. Ryun. The gentleman's time has expired. I need to move 
on to the next member and give them a----
    Mr. Edwards. We want to talk about the public/private 
partnership at a later time. I will call you.
    Mr. England. Absolutely. We will meet on that. Thank you, 
sir.
    Mr. Ryun. I want to encourage members if they have comments 
to keep them brief so they can get to their questions, give the 
panel an opportunity to respond. Mr. Wicker.
    Mr. Wicker. Thank you, Mr. Chairman. It is unfortunate that 
we have the joint meeting, and our questions are going to have 
to be shortened. But I will just follow up on the last two 
questioners, Mr. Secretary and Admiral.
    This is not the first time the Department has made such a 
suggestion with regard to additional fees in the last 11 years, 
is it?
    Mr. England. Tina, perhaps you can answer.
    Ms. Jonas. I am not aware that we have proposed these type 
of fee structures for healthcare. I may be--we can correct that 
for the record if I am wrong.
    Mr. Wicker. OK. Well, I do know that there has been a 
reluctance and probably will be a reluctance this year on a 
bipartisan basis to these fee increases.
    Admiral, you graduated from the Naval Academy 36 years ago. 
What was your understanding then with regard to your medical 
benefits at the time? What is the understanding of active duty 
personnel now who make a decision to make this a career as 
compared to the information and the promise that the United 
States of America made to those people who are now currently 
retired and made that decision decades ago?
    And if some of you could give us a full example of how 
these fees will work, and it just seems to me--I will make this 
brief comment and it will come out of my time--but I think the 
measure shouldn't so much be that the retiree was asked to pay 
25 percent when the program first began. To me the more 
important figure that I don't know is: ``What percentage of 
that person's income was he or she having to pay when the 
program first began as compared to what we are asking them to 
pay now?'' I just would say I think it is going to a tough 
sell.
    Admiral Giambastiani. To get to the first question, Mr. 
Wicker, 36 years ago, I would like to tell you that I was smart 
enough to think about what my lifetime healthcare was, but I 
was 18 going into Annapolis and, frankly, I never gave it a 
thought.
    And to be honest with you, a number of our young people who 
come in, don't think about it at 18, 19, or 20. You start 
thinking----
    Mr. Wicker. But assurances are made.
    Admiral Giambastiani. But assurances are made, and you know 
you have superb healthcare and you know you have a superb 
healthcare system to take care of you.
    I had a sailor once who left the Navy, went back to New 
Mexico. He was a nuclear electronics technician, and I can 
still remember him telling me this 20 years ago. He wrote me a 
letter about 2 or 3 months after he got out, and he said, you 
know--I was a captain at the time--and he said, you know, 
Captain, I have to tell you that nobody out here takes care of 
me like you guys took care of me inside the service.
    He said nobody worries about when I am going to get a 
dental exam. Nobody worries about when I am getting my physical 
and the rest of it. So there is an expectation that we will 
take care of our retirees, and I think that is important.
    Now we Chiefs took a look at this, and when we looked at 
some of the premiums, we tried to make a program split out 
between officers, senior enlisted, and junior enlisted retirees 
under 65. And we said there has got to be a gradation just 
based on salary. So we tried to take some of that into 
consideration.
    And finally when we looked at the overall premiums compared 
to what a healthcare program would cost on the outside, the 
State, local government or something else, this is still 
substantially and significantly lower than the average that you 
would pay almost anywhere else. So I just wanted to let you 
know.
    Mr. Wicker. But that wasn't what I was told, and I speak to 
you as a retiree of the U.S. Air Force and Air Force Reserve 
myself. But that is not what I was told, that if I went the 
full 20 years and became eligible for retirement, that I would 
have a healthcare program as good as the private sector. 
Frankly, we were assured that we would have a better healthcare 
program.
    Mr. England. The program is a better program, we think, 
than literally any healthcare program in America, and we think 
it will retain it being the best program. That is what I would 
tell you.
    I don't think you would see the Chiefs line up for this. 
You know if you think about it, heck, I could be retired 
tomorrow. I could be retired in the next couple of years and 
fall into the same category again. And what I would say to you 
is, is that, you know, if I wanted to just look at and focus on 
myself and what type of benefit, why would I think this would 
be a reasonable thing?
    All of us Chiefs looked at this, frankly, from the long-
term benefit for our members. My son just transitioned from the 
active force to the reserve. I think about him. I think about 
all of those children out there who are in service whose folks 
were in there. I think about widows, children, and the rest on 
this benefit, and it is important for us to continue to 
structure this to be the best healthcare program around, and I 
think it will be.
    Mr. Ryun. Gentlemen, time has expired. Mrs. Capps.
    Mrs. Capps. Thank you, Mr. Chairman, and thank you all for 
being here with us today. Secretary and Admiral, thank you for 
your testimony.
    Secretary England, the administration requests only $50 
billion for the wars we are engaged in for 2007. Given the 
current rate of spending, this amount is clearly insufficient 
to finance war operations for the entire year. Is this amount 
the administration's best estimate of how much will be needed 
next year?
    Mr. England. My understanding this is an agreement between 
the OMB and the Appropriations Committee. And I believe it was 
based on the Congress's initiative last year to put $50 billion 
in. So I believe it was a follow on to the Congressional 
initiative, put the $50 billion in at the beginning of next 
year. We will not know--we do not know what the cost will be 
next year to run the war. I mean that is something we----
    Mrs. Capps. I understand.
    Mr. England. We still don't know today.
    Mrs. Capps. But we are involved here in this committee in a 
budget process. Because the administration has not provided any 
estimates of the cost of our efforts in Iraq and Afghanistan, 
CBO has provided its own estimate for projecting the war's 
bottom line over 10 years so that we can do our work.
    CBO assumes the total force level in support of war 
operations will remain at current levels through 2006, and 
beyond that CBO assumes the forces will reduce to 50,000 troops 
deployed in support of both Iraq and Afghanistan by 2010 and 
remain at that level throughout the remainder of the 10-year 
budget window. CBO estimates this scenario will cost an 
additional $391 billion over 2007 through 2016.
    Now are these force level assumptions at all plausible?
    Mr. England. I don't know, Ms. Capps. Again, it depends on 
the circumstances on the ground. I mean the report you heard 
today was very encouraging from Admiral Giambastiani, but, of 
course, the situation changes. So, again, it is as the 
situation develops on the ground will determine the force 
levels and the efforts and the expenditures. So I just can't 
comment on it. I mean it is very speculative to say what is 
going to be out in 10 years from now.
    Mrs. Capps. I know.
    Mr. England. I mean that is really a stretch.
    Mrs. Capps. I understand, but on the other hand, we are 
making 10-year predictions all the time here, and we have also 
funded this war through supplementals which is highly unusual, 
given our past history in Congress.
    But let me address, because I want to stick to my time, the 
other side of our perhaps force reductions--it depends on the 
Iraqi Army. And you spoke about improvements in the Iraqi Army 
and security forces. I assume you are saying that the overall 
situation in Iraq is improving?
    Mr. England. Yes. We are getting more and more security, 
both army and I will let Admiral Giambastiani----
    Mrs. Capps. Why don't--I am sorry--I should have directed 
that to----
    Mr. England. Yeah. OK.
    Mrs. Capps [continuing]. The Admiral who is closer to this 
on the ground.
    Mr. England. Yes, thank you.
    Admiral Giambastiani. The way I would describe it is this. 
We are very interested in building Iraqi security forces.
    Mrs. Capps. I understand.
    Admiral Giambastiani. We, the United States, because as 
they become more capable and their numbers increase, which is 
why we keep focusing on these number of battalions that can 
take over battle space----
    Mrs. Capps. Right.
    Admiral Giambastiani [continuing]. It is very important. 
And also the police side of this, and then we can slowly draw 
down. I think it is significant that we have reduced the number 
of brigade combat teams from 17 down to 15, which is 
substantial.
    We have a force with a prepare to deploy order, for 
example. It is in Kuwait. It is not in Iraq. These are 
significant changes, because the Iraqis are building up their 
forces, so what I would tell you is it is not the Chairman, I, 
or Secretary Rumsfeld, but the commanders on the field, who are 
the ones who are making these calls, which is why I thought it 
was important to let you know what the commanders in the field 
are saying.
    Mrs. Capps. Well, yes, thank you. But then when do we see--
expect to see--our troop presence in Iraq substantially 
diminish?
    Admiral Giambastiani. What I would tell you is, again, it 
is condition-based, and we feel that we are making good 
progress with the Iraqi security forces, and you will see 
adjustments as the commanders make the calls and recommend them 
periodically to the Secretary of Defense and then up to the 
President.
    Mrs. Capps. Well, let me ask of your comment on this. I 
believe it was Secretary Rumsfeld who said in December 04, that 
we would be out in 4 years. Is that still the schedule? And if 
so, will we see troop numbers going down this year, and to what 
degree? This is a part of our budget process.
    Admiral Giambastiani. I can't tell you. I don't know what 
Secretary Rumsfeld said and in what context he said it with 
regard to 4 years or whatever number of years. I just know that 
we in the Armed Forces don't want to stay in Iraq forever. The 
United States does not want to stay in Iraq forever.
    And the bottom line is, is that we would like to come down 
as quickly as we can come down. And that is why we are so 
focused on training these security forces and why we are now 
training the police and why we are embedding folks in that.
    The important thing that you ought to watch is when we keep 
reporting all of the battle space that the Iraqis have the lead 
in, and it is substantial now across the country.
    Just a month ago, we turned over an area the size of 
Kentucky to the Iraqi security forces, just a month ago. And we 
are doing this constantly. We are turning over bases. We used 
to have somewhere upwards of around 80 or so bases inside Iraq 
just a short time ago, and actually it was up to a hundred or 
so.
    And it is now coming down substantially and probably at the 
end of this year, it is going to be at about half of what we 
started out at the beginning of the year. So this is all 
turnover to the Iraqi security forces. And you will see 
commensurate reductions, not only in Iraq, but in Afghanistan 
as we do these turnovers.
    Mrs. Capps. And finally then, we should be able to base our 
budgeting on what you are saying.
    Admiral Giambastiani. But remember again, from day-to-day, 
you know, one day we have got folks telling us we are in a 
civil war. Our folks on the ground tell us, look, it is a tense 
situation. We just had----
    Mrs. Capps. Do you think we are?
    Admiral Giambastiani. No, I don't.
    Mr. Ryun. The lady's time has expired. At this point, as 
the Chair, I am going to make a ruling that the hearing is 
adjourned so that members may proceed to the House chamber to 
receive the Prime Minister of Italy.
    I also ask unanimous consent that members who are not 
allowed the opportunity to ask questions of the witnesses, will 
be allowed 7 days to submit questions for the record. Without 
objection, so ordered.
    [Prepared statement of Mr. England follows:]

     Statement of Hon. Gordon England, Deputy Secretary of Defense

    Mr. Chairman, members of the committee, good morning.
    Thank you for the invitation to meet with you to discuss the 
Department of Defense's 2007 budget request. This is the first time 
I've met with this committee, so I'm particularly pleased to have this 
opportunity, and I look forward to a constructive exchange.
    With me today are with two of my close colleagues, Comptroller Tina 
Jonas and the Vice Chairman of the Joint Chiefs of Staff, Admiral Ed 
Giambastiani. The three of us have been deeply involved in the process 
of setting the Department's priorities for this budget request. 
Hopefully, we can fully inform you about the defense budget and answer 
your questions.
    As you know, this is a critical time for America. We're a nation at 
war. This war is a daily reality for our men and women in uniform, who 
are stationed around the world or serving here at home, defending 
freedom and liberty along with our friends and allies.
    America is fighting against dispersed networks of terrorist 
extremists. They know they can't succeed with conventional methods, so 
they use asymmetric means to challenge us and our allies. Their goal is 
to break our resolve and shatter our way of life. This struggle is not 
likely to end any time soon. The Cold War lasted for 40 years.
    One of al-Qaeda's ringleaders, Ayman al-Zawahiri, said in 2001, 
``The need is to inflict the maximum casualties against the 
opponent...for this is the language understood by the west, no matter 
how much time and effort such operations take.'' This enemy is 
adaptable and relentless, and will continue the attack wherever he 
finds the opportunity. Though we didn't choose this fight, we don't 
have the option of walking away.
    Victory in this Long War requires that our military continue to 
adopt unconventional, irregular, and indirect approaches to eliminate 
the enemy's ability to strike.
    But the Long War is only part of the Nation's security challenge.
    Hostile states or non-state actors could acquire and use weapons of 
mass destruction, to devastating effect. Guarding against this threat, 
and preparing for the possible consequences of a WMD event, require new 
technologies and skills, as well as enhanced counter-proliferation 
efforts.
    The Nation also faces the possibility that a major or emerging 
power could choose a hostile course. China is the country with the 
greatest potential to compete with us militarily, and they are also on 
the rise as a scientific, technological and economic competitor.
    Meeting these potential challenges requires fostering cooperation 
with China and other emerging powers, while hedging against possible 
surprise by maintaining our military superiority. Traditional, state-
based threats are still a concern. They have been kept at bay precisely 
because our Nation has been so well prepared.
    Of course, all of these challenges have a bearing on the security 
of our homeland. Detecting, deterring, and defeating threats far from 
our shores is the best and, likely, the only way, to keep America safe. 
But the Department of Defense is also prepared to defend America closer 
to home, and the Department continues to provide support to other 
agencies of the US Government for homeland security missions.
    In short, our Nation faces far more diverse challenges, and far 
greater uncertainty about the future global security environment, than 
ever before. The only sure way to protect the American people is to 
make sure that the President has at his disposal as wide a range of 
options as possible.
    The Department's portion of the President's 2007 budget request 
reflects the Nation's priorities and the Department's best responses to 
the security context I've just described. It provides essential 
resources to defend the American people, our homeland, and our way of 
life. This budget request lets our commanders prepare to meet both 
traditional and asymmetric threats. It maintains conventional military 
superiority while enhancing irregular warfare capabilities. It 
positions the Department to work closely with partner nations and to 
help them develop needed capabilities to address the global threats we 
face together. This budget reflects the Nation's firm commitment to 
provide the proper quality of life for our service members and their 
families. Soldiers, sailors, airmen, and Marines who serve so 
selflessly are the heart and soul of our warfighting capacity and 
capability, and we owe it to them to take care of them and their 
families.
    This budget request is the product of a year's hard work by our 
senior civilian and military leaders. It reflects the basic tenets of 
the long-term strategic vision in the 2006 Quadrennial Defense Review, 
which was submitted to Congress a few weeks ago. The full effects of 
the QDR will appear in future budget cycles, but this budget request 
does include some ``leading edge'' investments, that support the QDR's 
vision for the future.
    I urge this committee to fully support the President's national 
defense request, including the $50 billion allowance for FY 2007 war 
costs. The Department of Defense is asking you for $439.3 billion this 
year. This is nearly a 7 percent increase over the budget that was 
enacted for 2006. Now, this may seem like a lot of money--and it is. 
But America is spending a much smaller percentage of GDP on defense now 
than it did in the past. This year's request is projected to be about 
3.7 percent of GDP, but it was up to around 4.6 percent in 1991 during 
the Gulf War; 8.9 percent in 1968 during Vietnam; and 11.7 percent in 
1953 at the height of our involvement in Korea. You have my personal 
commitment that with the budget you entrust us with, the Department 
will be diligent in ensuring that the funds are wisely spent.
    The initiatives that are reflected in the '07 budget are part of a 
longer-term continuum of change and adaptation. The President charged 
the Department of Defense, in the wake of 9/11, to make the changes 
necessary to adapt to a more dynamic and less certain world. During the 
beginning of the long war these past 5 years, our military has been 
continually learning and adapting, and this budget request is an 
important milestone in that process of ongoing transformation.
    You may wonder how the Department of Defense plans to meet a much 
broader array of challenges without doubling or even tripling the size 
of our force. The answer is that we have worked very hard to improve 
the flexibility of the force, by reorienting existing capabilities, 
eliminating unnecessary redundancy and improving our expeditionary 
capabilities to allow us to revise our global force posture. An 
important initiative has been helping partners and allies improve their 
own capacities and capabilities so they can better share the burden. 
The Department has also spent a substantial amount of time making 
organizations, structures and processes more efficient to better 
realize our strategic vision and to support our warfighters. Finally, a 
critical initiative for which we need explicit Budget Committee support 
is our proposed change to TRICARE fees--essential to sustaining our 
outstanding military health care program.
    At his Inauguration in 1961, President Kennedy told the Nation, 
``In the long history of the world, only a few generations have been 
granted the role of defending freedom in its hour of maximum danger.'' 
In his own short life, he helped to lead one such generation. Our 
generation has been handed that mantle of responsibility.
    We owe it to our men and women in uniform, to provide them with the 
resources and support they need, to get the job done. And we owe it to 
our Nation, to correctly assess the security challenges we face and to 
prepare appropriately to meet them. The proposed budget responds to 
these needs.
    Meeting these goals will also require a strong, bipartisan 
consensus on national security, of the kind that defeated the communist 
threat. It will require unity of effort, and the sustained will of the 
American Congress and the American people. With that united will, and 
the hard work and sacrifices of our men and women in uniform, the 
Department of Defense will be able to provide the security so 
inseparable from the freedom we all enjoy.
    Thank you for your commitment to this most profound endeavor.

    [Question submitted by Mr. Crenshaw follows:]

 Question for the Record From Congressman Crenshaw to Deputy Secretary 
                                English

    As a member very interested in the defense community, I have been 
following our need to have an electronic attack aircraft in the future. 
Recently, funding for the Air Forces future standoff jammer was 
eliminated in the budget request, and yet another Electronic Attack 
Study was directed.
    The EA-6B remains the only electronic attack aircraft in the 
inventory, and it is being used by the Navy, the Air Force, and the 
Marine Corps in theater at this time. We could not operate in Iraq and 
Afghanistan today without our inventory of EA-6B's. The newest jamming 
suite (ICAP-III) for the EA-6B would ensure we have the electronic 
attack capability in the future, but the Navy has not requested enough 
ICAP III kits in the budget to meet current requirements.
    Would you support increasing the inventory of ICAP-III capable EA-
6B's with the $108 million that had been appropriated in FY06 for the 
B-52 standoff jammer while the future of Electronic Attack in the 
Services continues to be debated?
    Answer: The Navy is planning to award a full-rate production 
contract in FY 2006 and has approximately $52M available for 4 Improved 
Capability (ICAP) III kits. The cancellation of the B-52 SOJ program 
has made additional FY 2006 funding available for other purposes, and 
the Department will consider providing additional ICAP III kits for the 
EA-6B. However, there is no commitment at this time to do so, as other 
DoD priorities may require attention. The Department will keep Congress 
informed regarding the outcome of deliberations in this matter.

    [Whereupon, at 10:56 a.m., the committee was adjourned.]

                                  
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