Chairman Levin, Senator McCain, members of the committee.
I appreciate the opportunity to appear before you to discuss the president’s budget request for Fiscal Year 2012. I first want to thank the members of this committee for your support of the men and women in uniform serving in a time of war. I know you will join me in doing everything to ensure they have all they need to accomplish their mission and come home safely.
The budget request for the Department of Defense being presented today includes a base budget request of $553 billion and an Overseas Contingency Operations request of $117.8 billion. These budget decisions took place in the context of a nearly two year effort by this Department to reduce overhead, cull troubled and excess programs, and rein in personnel and contractor costs – all for the purpose of preserving the global reach and fighting strength of America’s military at a time of fiscal stress for our country.
In all, these budget requests, if enacted by the Congress, will:
Continue our efforts to reform the way the department does business;
Fund modernization programs needed to prepare for future conflicts;
Reaffirm and strengthen the nation’s commitment to care for the all-volunteer force; and
Ensure that our troops and commanders on the front lines have the resources and support they need to accomplish their mission.
My submitted statement includes more details of this request. Now, I want to take this opportunity to address several issues that I know have been a subject of debate and concern since I announced the outlines of our budget proposal last month.
First, the serious damage our military will suffer by operating under a continuing resolution or receiving a significant funding cut during fiscal year 2011;
Second, the projected slowing and eventual flattening of growth of the defense budget over the next five years;
Third, the planned future reductions in the size of the ground forces; and
Fourth, the proposed reforms and savings to the TRICARE program for working-age retirees.
I also want to express the hope that the Senate will continue to reject the unnecessary extra engine for the F-35 as it did the last time the Senate spoke to this issue in 2009.
I want to start by making it clear that the Department of Defense will face a crisis if we end up with a year-long continuing resolution or a significant funding cut for FY 2011. The President’s defense budget request for FY 2011 was $549 billion. A full-year continuing resolution would fund the department at about $526 billion. That’s a cut of $23 billion. The damage done across the force from such reductions would be further magnified as they would come halfway through the fiscal year.
Let me be clear: Operating under a year-long continuing resolution or significantly reduced funding – with the severe shortfalls that entails – would damage procurement and research programs causing delays, rising costs, no new program starts and serious disruptions in the production of some our most high demand assets, such as UAVs. Cuts in maintenance could force parts of our aircraft fleet to be grounded and delay needed facilities improvements. Cuts in operations would mean fewer flying hours, fewer steaming days, and cutbacks in training for home-stationed forces – all of which directly impacts readiness.
Similarly, some of the appropriations proposals under debate in Congress contemplate reductions of up to $15 billion from the President’s original FY 11 request. I recognize that given the current fiscal and political environment, it is unlikely that the defense department will receive the full FY 11 amount. Based on a number of factors – including policy changes that led to lower personnel costs and reduced activity forced by the continuing resolution – I believe the department can get by with a lower number. However, it is my judgment that the Department of Defense needs an appropriation of at least $540 billion for Fiscal Year 2011 for the U.S. military to properly carry out its mission, maintain readiness, and prepare for the future.
Which brings me to the proposed $78 billion reduction in the defense budget topline over the next five years. To begin with, this so-called “cut” is to the rate of predicted growth. The size of the base defense budget is still projected to increase in real, inflation-adjusted dollars, before eventually flattening out over this time period.
More significantly, as a result of the efficiencies and reforms undertaken over the past year, we have protected programs that support military people, readiness, and modernization. These efforts have made it possible for the department to absorb lower projected growth in the defense budget without sacrificing real military capabilities. In fact, the savings identified by the services have allowed our military to add some $70 billion towards priority needs and new capabilities.
And, of the $78 billion in proposed reductions to the five year defense budget plan, about $68 billion comes from a combination of shedding excess overhead, improving business practices, reducing personnel costs, and from changes to economic assumptions. Only $10 billion of that five-year total is related directly to military combat capability. $4 billion comes from restructuring the Joint Strike Fighter program, a step driven by the program’s development and testing schedule that would have taken place irrespective of the budget top-line.
The rest, about $6 billion, results from the proposed decrease in end strength of the Army and Marine Corps starting in FY 2015, a decision that I will address now. Just over four years ago, one of my first acts as defense secretary was to increase the permanent end strength of our ground forces – the Army by 65,000 to a total of 547,000 and the Marine Corps by 27,000 to 202,000. At the time, the increase was needed to relieve the severe stress on the force from the Iraq war as the surge was getting underway. To support the later plus up of troops in Afghanistan, I subsequently authorized a temporary further increase in the Army of some 22,000 – an increase always planned to end in FY 2013. The objective was to reduce stress on the force, limit and eventually end the practice of stop-loss, and to increase troop’s home station dwell time.
As we end the U.S. troop presence in Iraq this year, according to our agreement with the Iraqi government, the overall deployment demands on our force are decreasing significantly. Just three years ago, we had some 190,000 troops combined in Iraq and Afghanistan. By the end of this calendar year, we expect there to be less than 100,000 troops deployed in both of the major post-9/11 combat theaters, virtually all of those forces in Afghanistan.
That is why we believe that, beginning in FY 2015, the U.S. can, with minimal risk, begin reducing Army active duty end strength by 27,000 and the Marine Corps by somewhere between 15,000 and 20,000. These projections assume that the number of troops in Afghanistan will be significantly reduced by the end of 2014, in accordance with the President’s and NATO’s strategy. If our assumptions prove incorrect, there’s plenty of time to adjust the size and schedule of this change.
It is important to remember that even after the planned reductions, the active Army end strength would continue to be larger, by nearly 40,000 soldiers, than it was when I became defense secretary four years ago. I should also note that these reductions are supported by both the Army and Marine Corps leadership.
Finally, as you know, sharply rising health care costs are consuming an ever larger share of this Department’s budget – growing from $19 billion in 2001 to $52.5 billion in this request.
Among other reforms, this FY 12 budget includes modest increases to TRICARE enrollment fees – later indexed to Medicare premium increases – for working age retirees, most of whom are employed while receiving full pensions. All six members of the Joint Chiefs of Staff have strongly endorsed these and other cost-saving TRICARE reforms in a letter to Congress.
I understand that any change to these kinds of benefits prompts vigorous political opposition. But let us be clear. The current TRICARE arrangement – one in which fees have not increased for 15 years – is simply unsustainable. And, if allowed to continue, the defense department risks the fate of other corporate and government bureaucracies that were ultimately crippled by personnel costs, in particular, their retiree benefit packages.
All told, the cumulative effect of the department’s savings and reforms, combined with a host of new investments, will make it possible to protect the U.S. military’s combat power despite the declining rate of growth, and eventual flattening, of the defense budget over the next five years. As a result of the savings identified and reinvested by the services, our military will be able to meet unforeseen expenses, refurbish war-worn equipment, buy new ships and fighters, begin development of a new long-range bomber, boost our cyber-warfare capability, strengthen missile defense, and buy more of the most advanced UAVs. But, I should note, this will only be possible if the efficiencies reforms and savings are followed through to completion.
In closing, I want to address the calls from some quarters for deeper cuts in defense spending to address this country’s fiscal challenges. I would remind them that over the last two defense budgets submitted by President Obama, we have curtailed or cancelled troubled or excess programs that would have cost more than $300 billion if seen through to completion. Additionally, total defense spending – including war costs – will decline further as the U.S. military withdraws from Iraq.
We still live in a very dangerous and often unstable world. Our military must remain strong and agile enough to face a diverse range of threats – from non-state actors attempting to acquire and use weapons of mass destruction and sophisticated missiles, to the more traditional threats of other states both building up their conventional forces and developing new capabilities that target our traditional strengths. We shrink from our global security responsibilities at our peril. Retrenchment brought about by short-sighted cuts could well lead to costlier and more tragic consequences later – indeed, as they always have in the past. Surely we should learn from our national experience since World War I, that drastic reductions in the size and strength of the U.S. military make armed conflict all the more likely – with an unacceptably high cost in American blood and treasure.
Mr. Chairman, I look forward to working through this next phase of the President’s defense reform effort with you in the weeks and months ahead – to do what’s right for our Armed Forces and what’s right for our country.