[Congressional Record Volume 140, Number 36 (Friday, March 25, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 25, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                   THE $20 BILLION INFLATION PROBLEM

  Mr. GRASSLEY. Mr. President, on the morning of March 22, I made some 
remarks during the opening debate on the budget resolution about the 
so-called $20 billion inflation problem in the outyears of the 
Department of Defense's Future Years Defense Program or FYDP.
  After I made those remarks, the March 17, 1994, issue of Inside the 
Pentagon was brought to my attention. It contains a story about the 
inflation shortfall in the outyears. It suggests that Defense Secretary 
Perry will find a way to live with the 4-year $20 billion cut.
  This assessment is based on information presented at the confirmation 
hearings of John Deutch on March 10.
  Mr. Deutch has been nominated to be the new Deputy Secretary of 
Defense.
  Well, that's fine and dandy, Mr. President, but learning to live with 
the law doesn't quite cut it in my book.
  Those outyear inflation costs do not fit in the President's budget, 
and they do not belong in the fiscal year 1995 FYDP or 5-year program.
  President Clinton told Secretary Aspin in December that he would not 
raise the overall DOD budget numbers to cover the higher inflation 
estimates.
  The money is just not there. If it's not in the fiscal year 1995 
budget, how could it be in the FYDP?
  Section 221 of title 10 of the United States Code requires that the 
Secretary of Defense bring the 5-year program into line with the 
President's budget. That means he must cut or eliminate programs that 
are over budget--above the President's topline.
  Secretary Perry has not done that.
  The $20.2 billion in mandatory cuts should have been made during the 
Pentagon's annual program and budget review last year.
  So, as a result, Secretary Perry has at least $20.2 billion of 
overprogramming in the outyears.
  Now, if Inside the Pentagon is right and if DOD is really ready to 
give up the $20.2 billion of overprogramming, then Mr. Perry is trying 
hard to fulfill his promise to make the FYDP honest.
  Mr. President, I would like to warn my colleagues about one thing.
  The $20 billion in overprogramming cannot be eliminated by waving the 
magic wand. Programs have to be reviewed, scrubbed, and cut, and that's 
a painful process--that's the very process the Pentagon bureaucrats are 
trying so hard to avoid.
  Mr. President, I ask unanimous consent to place a copy of the article 
from Inside the Pentagon along Mr. Deutch's written response to a 
question on inflation protection.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

Suggesting DOD Will Live With $20 Billion Shortfall--Deutch: Bottom-up 
            Review Force Is Affordable Under Current Budget

       The Pentagon's new deputy secretary, John Deutch, last week 
     suggested that the Defense Department will be able to realize 
     the force structure called for in the bottom-up review 
     without having to ask the White House for more money to cover 
     a potential $20 billion shortfall in the future years defense 
     budget. Former Defense Secretary Les Aspin, in one of his 
     last moves before leaving the Pentagon, had engaged in a 
     highly-publicized battle with Office of Management and Budget 
     Director Leon Panetta over additional funds for DOD to 
     execute the bottom-up review. The White House offered DOD 
     some relief, but still left Aspin $20 billion short of what 
     he had said was needed to carry out the review's mandates.
       Deutch's statement last week, during his Senate 
     confirmation hearings to be deputy secretary, was the first 
     indication that Defense Secretary William Perry would find a 
     way to live with the four-year $20 billion cut. Just last 
     month, in a background briefing on the FY-95 defense budget, 
     a senior Pentagon official said it was unclear how DOD would 
     handle the $20 billion shortfall. The official suggested 
     Perry would ask President Clinton for more money if he 
     determined the bottom-up review couldn't be executed without 
     it.
       A decision by Perry not to ask for more money likely will 
     be criticized privately by military officials, who have 
     consistently questioned the Defense Department's ability to 
     fulfill the bottom-up review's mandate to fight two nearly-
     simultaneous major regional conflicts (MRCs) within current 
     budget constraints.
       Deutch told Congress last week the Pentagon's $20 billion 
     budget shortfall, which he said could be reduced by revised 
     inflation figures, will not stop the Defense Department from 
     buying the force structure to fight two nearly simultaneous 
     MRCs.
       ``At this time, I do not think this shortfall seriously 
     threatens our ability to implement the decisions in the 
     bottom-up review,'' Deutch stated in a written response to 
     questions submitted by the Senate Armed Services Committee in 
     advance of his March 10 confirmation hearing.
       Deutch was confirmed as deputy secretary March 10. Until 
     then he held the Clinton Pentagon's top acquisition job as 
     under secretary of defense for acquisition and technology.
       Deutch stated that the $20 billion administration shortfall 
     estimate may be too high. ``Based on the administration's 
     current inflation projections, the funding shortfall is about 
     $20 billion, spread over four years--FY 1996-99. If we use 
     the Congressional Budget Office's inflation projections, the 
     funding shortfall is about $11 billion over the same four 
     years.''
       Whether the shortfall is $11 billion or $20 billion, many 
     sources say Deutch's optimism is unfounded. Some members of 
     Congress and the administration already have argued that the 
     proposed bottom-up review force structure may not be 
     affordable even if fully funded. Said a Pentagon planner: 
     ``The savings just aren't there. We're already stretched to 
     the limit to buy the bottom-up review force, and if Congress 
     doesn't give us the money to keep up with inflation, 
     something is going to have to slip.''
       Deutch said the deputy defense secretary has traditionally 
     taken the lead role in managing resource allocation in the 
     Pentagon, and he promised to apply himself vigorously to that 
     task. He lists three primary actions that are pivotal to the 
     pentagon's effort to implement the bottom-up review:
       ``First, we need the support of the Congress for the 
     bottom-up review and the funding levels requested by the 
     president in the Fiscal Year 1995 budget request.
       ``Second, we must draw down and restructure the defense 
     infrastructure, and introduce acquisition reform.
       ``Third, we need to proceed with the force enhancements and 
     modernization program identified in the bottom-up review.''
       Excerpts from Deutch's response to advance confirmation 
     questions accompany this article.


                 deutch's responses to senate questions

                          Inflation protection

       If the Defense topline is not increased for higher 
     inflation in the same way it was lowered when inflation was 
     assumed to be lower, what management problems would that 
     present in terms of the responsibilities traditionally 
     performed by the Deputy Secretary of Defense?
       Based on the Administration's current inflation 
     projections, the funding shortfall is about $20 billion, 
     spread over four years--FY 1996-99. If we use the 
     Congressional Budget Office's inflation projections, the 
     funding shortfall is about $11 billion over the same four 
     years. At this time, I do not think this shortfall seriously 
     threatens our ability to implement the decisions in the 
     Bottom-Up Review.
       It traditionally has been the role of the Deputy Secretary 
     of Defense to take the lead in managing resource allocation 
     to defense requirements, and I expect to continue that role 
     if confirmed. The inflation shortfall is an example of the 
     management problems that I will have to address.

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