[Congressional Record Volume 141, Number 15 (Wednesday, January 25, 1995)]
[House]
[Pages H658-H659]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


CONGRESS NEEDS TO CAREFULLY CONSIDER CONSEQUENCES TO NATIONAL SECURITY 
               ON ENACTMENT OF BALANCED BUDGET AMENDMENT

  (Mr. DICKS asked and was given permission to address the House for 1 
minute and to revise and extend his remarks and include extraneous 
matter.)
  Mr. DICKS. Mr. Speaker, a few days ago the comptroller of the 
Department of Defense testified before the Committee on the Budget 
about the consequences of a balanced budget amendment on our country's 
national security. Let me tell the Members what he said.
  He said:

       This is one of the major reasons for the administration's 
     opposition to the Balanced Budget Amendment. Unless 
     legislatively exempted from reductions, defense spending 
     could end up being the primary bill-payer to make Federal 
     budgets balance. That would fundamentally undermine the 
     security of our Nation. If the Balanced Budget Amendment were 
     adopted, America's defense posture would be vulnerable to two 
     different problems: the impact on defense to reach a zero 
     deficit, and the effect on defense of the annual budget 
     process under the budget amendment.
       Depending on the final provisions of the Balanced Budget 
     Amendment, Department of Defense budget cuts from FY 1996 to 
     FY 2002 could range from $110 billion to $520 billion, or 
     about 30 cents on the dollar. For national defense the best 
     case scenario would have a serious effect on national 
     security. The worst case would be a disaster.

  I hope we will take a careful look to the consequences of our 
national security of a balanced budget amendment.
  Mr. Speaker, I include for the Record the complete statement of Under 
Secretary of Defense John Hamre before the Committee on the Judiciary:
  Statement of Under Secretary of Defense (Comptroller) John J. Hamre

       Mr. Chairman, members of the Committee, thank you for the 
     opportunity to appear before you today to discuss the 
     Balanced Budget Amendment, and the likely impact that it 
     would have on America's defense posture.
       The Balanced Budget Amendment (BBA) could severely 
     jeopardize America's national security, and that is one of 
     the major reasons for the Administration's opposition to it. 
     Unless legislatively exempted from reductions, defense 
     spending could end up being the primary billpayer to make 
     federal budgets balance, and that would fundamentally 
     undermine the security of our nation.
       If the Balanced Budget Amendment were adopted, America's 
     defense posture would be vulnerable to two different 
     problems: the impact on defense to reach a zero deficit and 
     the effect on defense of the annual budget process under the 
     BBA.


               IMPACT ON DEFENSE TO GET TO A ZERO DEFICIT

       To illustrate the impact of getting to a zero deficit, 
     several assumptions have to be made about the final date and 
     provisions of the BBA. Let us assume that the year of BBA 
     implementation is 2002, and make calculations based on the 
     most recent deficit projections by the Congressional Budget 
     Office. Balancing the budget on a phased basis--14 percent 
     per year in 1996 through 2002--would require a total of 
     $1,040 billion in spending cuts and/or revenue increases.
       [[Page H659]] Exactly how much the Department of Defense 
     (DoD) would have to contribute to achieving a zero deficit 
     would depend on how much revenue would be increased and 
     whether entitlements would be cut. Under the worst case 
     scenario, there would be no increase in revenue and no cuts 
     in the entitlement programs. This means the budget would have 
     to be balanced by cuts in discretionary spending, of which 
     national defense represents about one half. The best case 
     scenario assumes half of the deficit would be offset by 
     increases in revenue and the other half proportionately to 
     spending for entitlements and domestic and defense 
     discretionary programs.
       Depending on the final provisions of the Balanced Budget 
     Amendment, DoD budget cuts from FY 1996 to FY 2002 could 
     range from $110 billion to $520 billion.
       For national defense, the best case scenario would have a 
     serious impact on national security. The worst case would be 
     a disaster. Achieving these totals would entail
      substantial reductions to defense people and programs, which 
     are already downsized to the minimum acceptable level 
     deemed necessary in the Bottom-Up Review. Our forces would 
     become hollow and we would have to give up our quality of 
     life initiatives such as adequate compensation for 
     military personnel, child care programs, decent barracks 
     and family housing and other programs that provide a sense 
     of community and support for military families. We would 
     have to stop the modernization and recapitalization, which 
     is needed and planned in our current five-year budget. We 
     would have to cut back our emphasis on science and 
     technology and technology reinvestment programs, and 
     thereby risk the technological edge that has always given 
     our forces an advantage over our adversaries.
       Reductions such as these would fundamentally change the 
     character of America's military posture, make our new 
     strategy unsupportable, call into question our ability to 
     fulfill U.S. commitments to our allies and to protect our 
     interests worldwide, and undermine America's global 
     leadership.


                THE ANNUAL BUDGET PROCESS UNDER THE BBA

       Let me now turn to the second problem: Life under a 
     balanced budget amendment.
       What about the affect on defense of the annual budget 
     process under the Balanced Budget Amendment? The BBA annual 
     budget process could routinely end up removing from our 
     elected political leaders the decision about what level of 
     defense spending is prudent. America's defense preparedness 
     could get determined by economic shifts, cost growth in 
     entitlements, and other non-defense factors. Even if threats 
     to America's global interests were increasing or our forces 
     deteriorating, the BBA could lead to deep defense cuts.
       The fact that these consequences could be avoided with 3/5 
     approval of each house of Congress is scant reassurance. 
     Preservation of an adequate defense posture would become 
     dependent on exceptional political efforts. The BBA process 
     would be heavily skewed in favor of cutting defense to 
     compensate for whatever was escalating elsewhere in the 
     budget. Even when a 3/5 majority minus one in either house 
     believed that BBA cuts were unjustified, the minority view 
     would prevail. Not exactly ideal for the world's most 
     powerful democracy and best hope for future peace and 
     stability.
       The BBA would threaten frequent interruptions to the many 
     long-term processes that are essential to maintaining a 
     prudent defense posture. The quality and morale of our people 
     must be continually nurtured, and would be devastated by 
     rapid and deep cuts in end strength. Our military and 
     civilian professionals require extensive training and 
     experience. We cannot recruit and retain top-notch military 
     and civilian professionals, if they are vulnerable to summary 
     dismissal.
       Repair parts must be ordered three years ahead of 
     anticipated use, in order to ensure the readiness of U.S. 
     forces. Many years of research and development are needed to 
     ensure that our forces are never outgunned or outmaneuvered. 
     The average major weapons procurement program requires 8 
     years of development and testing. Production lines are 
     necessarily set up anticipating stable procurement rates; 
     they cannot be stopped and started, in order to offset a 
     downturn in revenues or surge in entitlements. Because of the 
     long-lead times needed for our weapons systems, DoD is unique 
     among executive departments in that we must have detailed 
     five-year plans incorporating them. It would be extremely 
     costly, and essentially unworkable, to turn on and off 
     defense programs, when the BBA forced deep budget cuts.
       In sum, budgeting under BBA would inject great uncertainty 
     and chaos into defense planning, which needs to have 
     stability and a long-term perspective.
       Small changes in the U.S. economy would mean even bigger 
     budget problems. Using the CBO rule of thumb, a one percent 
     rise per year in interest rates would increase the federal 
     budget deficit $5 billion in the first year and $108 billion 
     over five years. A one percent fall per year in real growth 
     in the economy would increase the deficit $9 billion in the 
     first year and $289 billion over five years. Thus under the 
     BBA, even modest changes in the economy could trigger 
     sweeping cuts to federal programs.


                                closing

       The Balanced Budget Amendment addresses a very important 
     issue, but it would dramatically complicate our ability to 
     plan for and manage a strong Department of Defense.
       Defense programs would be especially vulnerable under the 
     BBA, because DoD accounts for about half of all discretionary 
     spending. And that is critical because the BBA had no 
     implementation details. Unless the BBA becomes a vehicle by 
     which revenues are increased or entitlements cut, DoD could 
     well have to pay for half of every dollar of deficit 
     reduction.
       DoD budget authority, in real terms, has been in decline 
     since FY 1985. We have finally reached the end of our 
     builddown. It would be dangerous to continue to downsize our 
     forces at this time. The Balanced Budget Amendment would cut 
     defense spending to whatever level its arbitrary formula 
     dictated, and thereby displace the carefully considered 
     judgments of Members of Congress, Presidents, and civilian 
     and military leaders as to what spending is necessary and 
     wise. I do not believe such an approach to questions of 
     national security would serve America well.
               impact on defense to get to a zero deficit

       In order to assess the impact on DOD, assumptions have to 
     be made about final date and provisions of the Balanced 
     Budget Amendment:

                                                                        
------------------------------------------------------------------------
                                                  Assumption            
------------------------------------------------------------------------
Year of implementation.............  2002.                              
Projected deficit at implementation  Current budget projection.         
Will revenue be increased?.........  If yes, 50%/50% revenue/spending.  
Will entitlements be cut?..........  If yes, in proportion to outlays.  
------------------------------------------------------------------------

            small economic changes mean big budget problems

       Modest changes in the economy would necessitate sweeping 
     program cuts.

                            CBO RULE OF THUMB                           
------------------------------------------------------------------------
                                                     Deficit impact     
                                               -------------------------
                                                 First year    5-years  
------------------------------------------------------------------------
1% rise in interest rates.....................          $5B        $108B
1% fall in real growth........................           9B         289B
------------------------------------------------------------------------

                                                             

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