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Testimony Before the House Armed Services Committee: Fiscal Year 2002 National Defense Authorization Budget Request
As Delivered by Secretary of Defense Donald H. Rumsfeld, Chairman of the Joint Chiefs of Staff General Hugh Shelton,, Rayburn House Office Building, Washington, DC , Thursday, June 28, 2001

REP. STUMP: The meeting will please come to order.

Before we get started, let me remind the members that have the extra mike on the House mike that that mike is live at all times, so you'll be careful what you say.

Good morning, Mr. Secretary.

SEC. RUMSFELD: Good morning.

REP. STUMP: Today the committee is pleased to welcome back the secretary of Defense and the chairman of the Joint Chiefs of Staff to testify on the administration's defense budget request for fiscal year 2002.

Mr. Secretary, it's taken a long time to arrive at this point. We are finally here. Unfortunately, there are only three months left in the fiscal year. I support your efforts to conduct a comprehensive strategy review before proceeding with any fundamental changes in current strategy, force structure and programs of the department. I believe this approach is long overdue. Resources must flow from strategy, not the other way around. And I commend you and the president for recognizing that fact. Unfortunately, I think the prior administration too often put the cart before the horse.

Let me also thank you for sharing with the committee the results of the numerous defense studies that you have initiated on your part on strategy review. We've been briefed on most of these and look forward to learning about the rest, and in particular about your decisions regarding their conclusions. We also are eager to learn how they are factored in to the QDR.

That said, several points must be made. First, we're holding today's hearing in a very late process. The months-long delay in getting a budget proposal from the administration will force the committee and the Congress to work at a greatly accelerated pace if we're to complete our work by October 1st, the fiscal year.

Second, I commend the administration for acting on its conviction that increases defense spending. The president and secretary of Defense have both been clear on this point. The administration's proposed level of defense spending represents the largest increase since the mid-1980s. In real terms, it reflects an increase of approximately 7 percent over this year's level. I believe this increase is long overdue. However, I'm concerned about the level of resources being proposed for defense will not sufficiently address all the readiness, modernization and quality-of-life shortfalls that currently exist. And particularly I note that the procurement request represents a slight decrease over enacted levels for 2001.

And General Shelton, I would be interested in hearing your most recent views regarding the level of annual procurement funding required to maintain existing capabilities. Last year the committee heard from a variety of administration officials and outside experts who testified that the defense budget was very severely underfunded, by as much as $100 billion, according to some estimates.

Third, while the administration's proposed amendment deals solely with fiscal year 2002, it is important for the committee to understand how this request relates to the department's long-term plans to restructure America's armed forces. As I understand it, this proposed approach will not address out-year spending and program priorities until after the completion of the QDR, and not until fiscal 2003. For this reason, the budget request before us seems to represent more of a

place-holder budget than a significant change of direction or movement toward defense transformation.

In sum, I would reiterate the administration budget is a welcome step in the right direction; however, additional resources sustained over time will be required to fully restore the health of our armed services.

Mr. Secretary, I look forward to today's presentation and to working with you in the weeks ahead to move this process forward as rapidly as possible. Before we begin, I'd like to yield to the ranking member for any remarks he may choose to make.

REP. IKE SKELTON (D-MO): Thank you, Mr. Chairman. Mr. Secretary and General Shelton, we thank you and welcome you to be with us today. I look forward to your testimony.

I'd like to thank you for finally presenting a budget amendment to us. The net increase of $18.4 billion will help us address some of the problems that the services are facing, and in our heart of hearts, Mr. Secretary, we know you wanted more. You have budgeted more realistically for health care costs. You've proposed a targeted pay raise of at least 5 percent for all military personnel. And I've suggested to you in a letter signed by many of my colleagues here that this figure should be 7.3 percent, but your proposal is a step in the right direction. You've added much-needed funds for operation and maintenance, and I also agree with the increased funds you recommend for military facilities and family housing.

And yet I must say that I'm disappointed by the overall content of this budget, given the extreme delays in producing it. The committee was told that the delays in submitting the budget amendment were because of a need to undertake strategic reviews before developing budgetary proposals. We've waited patiently for this amendment and now find one little change in its priorities. If all the changes effected by the reviews will occur in the fiscal year 2003, why have we had to wait so long for this one? Also, why have we not already been furnished with the department's legislative proposals that do not depend on the budget or strategic reviews?

There are also several aspects of the budget proposal I find troubling. First of all, it holds the number of Army divisions constant at 10 active and 8 Reserve. I believe these numbers are already inadequate for our missions and strategy. Even decreasing some of the Army's commitments, I believe we need a minimum overall end-strength of 520,000 active-duty Army personnel.

Second, I'm concerned with the proposed size of the Navy at close to merely 300 ships. Given the mission of forward presence and engagement and the increasing importance of the Pacific Rim, I believe we must commit ourselves to rebuilding the Navy to at least 400 ships.

Third, some faulty assumptions underlie your proposed management reforms, particularly the changes to the Davis-Bacon Act. Now, Mr. Secretary, that ain't going to happen. (Scattered laughter.) And lastly, I'm disturbed to see overall procurement numbers as well as specific funds for the Army, Navy and Marines are dropping. We need to maintain U.S. strength by investing in necessary systems and platforms. The more we short-change the investment accounts now, the more it's going to cost in the long run and the longer it will take to modernize our forces.

The positive elements of this budget are extremely important, but we need more like them. We must balance our fiscal responsibility with our responsibility for U.S. national security and for those who serve in the military, and I look forward to working with you on that.

Mr. Secretary and General, we really appreciate you being with us today. We want to work together. And it's a major challenge, and I hope we can do just that, at the end of the day be proud of the work product that we have. Thank you so much.

REP. STUMP: Thank you, Ike.

Let me also welcome this morning Dr. Zakheim, the DOD comptroller. Glad to have you with us.

MR. ZAKHEIM: Thank you.

REP. STUMP: A couple of announcements. And I've spoken to Mr. Skelton. So that everyone on the lower level gets an opportunity again, the secretary has graciously agreed to extend his time till 12:45. We're going to try a four-minute, and please observe that four-minute limitation to avoid the gavel. But we're going to maintain a strict four-minute time limit on everybody. If you would kindly not just speak until the last minute and ask a slew of questions, we'd appreciate it.

Mr. Secretary, your remarks, your chief's remarks will all be, of course, inserted in the record in their entirety, and you may proceed in any way you see fit, sir.

SEC. RUMSFELD: Thank you very much, Mr. Chairman, Mr. Skelton, members of the committee. I'm pleased to be here to present the president's 2002 amended budget for the Department of Defense. In discussing the budget, it is necessary to begin by confronting some less than pleasant facts; they're important.

The U.S. armed forces have been underfunded in a number of respects over a sustained period of years. We have been living off the substantial investments of the 1970s and the 1980s. Today shortfalls exist in a number of vital areas, shortfalls, I must say, that are considerably worse than I had previously understood prior to coming to the department.

As you and the members know well, Mr. Chairman, the U.S. armed forces are the best-trained, the best-equipped, the most powerful military force on the face of the earth, and the members of this committee have certainly contributed greatly to that fact. Peace, prosperity and freedom across the world are underpinned by the stability and the security that these men and women provide. I recently visited our troops in Kosovo and Turkey; they are dedicated men and women ready to take on any mission their government may ask of them.

Our country has many strengths; indeed, in some ways it's because our forces are so capable that we face the challenges that we do. Over much of the 1990s, the U.S. has simultaneously underfunded and overused the force, and it has taken a toll. Asked to do more with less, they have saluted and done their best, but it has been at the cost of investment in infrastructure, in maintenance and in procurement.

At the end of the Cold War, there was an appropriate drawdown, a peace dividend, so to speak, but it went too far, overshooting the mark by a good margin, in my view. We're well past the time to take steps to arrest those declines and put the armed forces on a path to better health. Many facilities are dilapidated and in urgent need of repair and replacement.

Due to shortfalls in spare parts, flying hours, training, and personnel, Navy non-deployed force readiness is 43 percent, which is down from 63 percent in 1991. Only 69 percent of the Air Force's total combat units are mission-ready, down from 91 percent in 1996. And 75 percent of the Army's major air and ground combat systems are beyond their half life, and Army aviation safety of flight messages have increased 222 percent in the past four years. And I'm told that some 60 percent of military housing is characterized as sub-standard.

While DOD was using its equipment at increased tempos, procurement of new equipment fell significantly below the levels necessary to sustain existing forces, leading to steady increases in the average age of our equipment. It was called a "procurement holiday." I know you'll agree that we have an obligation to make sure that these men and women in the armed forces have the proper equipment, training, facilities, and the most advanced technology available to them.

The president's 2002 defense budget adds needed funds to begin stabilizing that force. Using the 2001 enacted budget of $296 billion as a baseline, the president earlier this year issued a budget blueprint that outlined a 2002 baseline budget of 310 billion-point- five. This included $4.4 billion in new money for presidential initiatives involving military pay, housing, and research and development. The request before you proposes to raise that to a total of $328.9 billion, an $18.4 billion increase over the president's February budget blueprint. Taken together, these amount to $22.8 billion in proposed new money for the Department of Defense for

2002.

As the chairman indicated, it apparently is the largest peacetime increase in defense spending since the mid-1980s. It does represent a significant investment of the taxpayers' money; but let's be clear, this increase, while significant -- and we certainly need every cent of it -- does not get us well. The underinvestment went on far too long, the gap is too great and there's no way it can be fixed in a year or, in my view, even in six.

I want to be very straightforward about what this budget does and doesn't do. This budget will put us on the path to recovery in some categories, such as military pay, housing allowances, readiness training and health care. It will start an improvement but leave us short of our goals in other areas, such as maintenance of weapon systems, and reaching best standards for facilities replacement. And in still other categories, unfortunately there will be continued shortfalls, such as backlogs in property maintenance requirements.

Consider in the private sector the standard for overall facility replacement is 57 years. DOD's target is 67 years for the mix of our facilities and infrastructure. Under the 2001 enacted budget, DOD was replacing facilities at an unbelievably poor average rate of 192 years, not the target of 67. The 2002 budget gets is closer; it would allow us to replace facilities at an average rate of 101 years, an improvement, but still well off the acceptable target of 67 years. We could do better.

With a round of base closings and adjustments that reduced unneeded facilities, we could focus the funds on facilities we actually need and get the replacement rate down to something like 76 years at the 2002 budget level. Without base closing, to achieve the target 67 replacement would require an additional $7 billion a year for nine years, or a total of $63 billion.

Let me say a word about 2003. Today we are proposing a $328.9 billion defense budget for 2002. But just to keep the department going next year on a straight line with no improvements, just covering the cost of inflation and realistic budgeting numbers, which were not in the forward-year plan as it existed, we would need a budget of $347.2 billion. That's an $18.3 billion increase, and that would not make a significant contribution to transformation, it would just be holding where we are by adding in the additional healthcare costs that have been legislated, inflation, and fixing the numbers so that the forward numbers on acquisitions of equipment are

actually realistic, as opposed to unrealistic as they are in there.

So where do we find the money for the rest of our needs? We simply have got to find cost savings. We have an obligation to the taxpayers to spend the money wisely. DOD overhead has clearly grown to a point where it's estimated that as little as 14 percent of manpower may be directly related to combat operations. Now, there's lots of ways to calculate that, and you need to include logistics, which are a very important part. But the important point is not the statistic, the important point is the fact that we have got a lot of overhead.

Despite 128 acquisition reform studies, DOD has a system that doubled the time to acquire equipment while new generations of technology have shortened from -- down to a year to 18 months. DOD has processes and regulations so onerous that a number of commercial businesses developing needed military technologies simply refuse to do business with the department.

The department needs greater freedom to manage.

If we have it, I believe we can use the taxpayers' money more wisely. For one example, I think we ought to consider contracting out commissaries, housing, some mess halls and other services -- it's already being done to some extent -- that are not core military competencies and that can be performed more efficiently in the private sector. In 2002, the department proposes a pilot program with the Army and Marine Corps to contract out certain commissaries and another pilot program with the Navy to contract out refueling support, including tanker aircraft.

Mr. Chairman, I can't promise it, but I've never seen an organization, in the private sector or the public sector, that could not, by better management, operate at least 5 percent more efficiently, but only if management has the ability to do that. It is not possible today, given the host of restrictions and prohibitions that exist on the Department of Defense.

With those savings, we could increase ship procurement from six to nine ships a year, maintaining a steady state of 310-ship Navy, and protecting needed jobs at Navy shipyards. We could procure several hundred additional aircraft annually, rather than the 189, to help meet and reach and the steady-state requirement of the Navy, the Air Force and the Army aircraft.

We have a big task ahead. I understand that. Since the Cold War, we have a 30 percent smaller force doing 165 percent more missions. This budget of the president's proposes a large increase, by any standard. It will allow us to make significant improvements in the readiness, morale and the condition of the military, but there are things it does not do. The taxpayers, I believe, have a right to demand that we spend their money more wisely. Today we can't tell the people – the American people that we're doing that. I cannot tell them we're doing that.

Fixing the problem is a joint responsibility. It will require a new partnership between Congress and the executive branch.

It is a responsibility we have not only to the men and women who serve the armed forces today, but to future generations of Americans as well. Because of the long lead times, the capability that any president and any Congress invest in don't benefit that generation. It creates capabilities that will be available for all of our successors. One generation bequeaths to the next generation the capabilities to ensure its security. Today we have the security of future generations of Americans in our hands. We have a responsibility to get it right. I am anxious to work with this committee and each of you to try to achieve that goal. It will certainly take the best of all of us.

Thank you very much.

REP. STUMP: Thank you, sir.

General Shelton, of course your statement will be in the record, if you care to make a summary statement.

GEN. SHELTON: Well, thank you, Chairman Stump, Congressman Skelton and distinguished members of the committee. It is an honor to be with you again here today and to report to you on the state of our armed forces. I'd also like to highlight some of the key priorities and concerns from my written statement, which has been provided for the record, and then we'll move right into your questions.

But before I begin, Mr. Chairman, I would like to take a moment to salute the memory of the distinguished gentleman from Virginia, the late-Congressman Norm Sisisky, a dear friend of our men and women in uniform, and, of course, a great American. Congressman Sisisky, along with his fellow colleague and Virginia Herb Bateman, have both left behind a very proud legacy of achievement with this committee, a legacy which I might add will help sustain our armed services well into the future. They will both be sorely missed.

Now, let me thank the Congress and this committee in particular for your significant and sustained support of our armed forces. With your help, we've made considerable progress in areas that directly impact the overall health and welfare of our troops: increased pay and allowances; pay table reforms; Tricare reform and expanded health care coverage; additional funding to provide adequate housing for our military families, and finally, budget plus-ups to help arrest the decline in readiness for many of our front-line and first-to-fight units.

But let me also say that we need to sustain this momentum if we are to preserve the long-term health and readiness of the force for years to come. Today, as we consider new budgets, new national security strategies and new ideas of transforming the force, it's important that we always remember that the quality of our military are the critical enablers for all that we hope to accomplish.

Since my last testimony, we have been reminded of the human element of national security in several profound ways. Last October, the U.S.S. Cole was savagely attacked in the Port of Aden. Seventeen of our sailors died. Some asked, Why would we put a ship in harm's way in such a dangerous part of the world? Well, that's what we do. We go into harm's way to protect America's interests around the world. And the soldiers of the U.S.S. Cole were en route to the Gulf, establishing presence and protecting America's vital national interests.

Last December, two U.S. Army helicopters crashed during a nighttime training mission in Hawaii. Nine soldiers died in that tragic accident. Some asked, Why would we put soldiers from the Army in harm's way during a dangerous training mission in the black of the night? Well, that's what we do. We train for the most difficult missions that we must face. And we know that when America's interests are threatened, that we will be ready to go, day or night, because failure is not an option. We minimize the risk to our great men and women, but we train like we anticipate having to fight.

A few months ago, an unarmed EP-3 reconnaissance aircraft flying in international airspace over the South China Sea was struck by a Chinese fighter, as we're all aware. It was force to make an emergency landing, and 24 of our people were detained. Some observers asked, Why are we conducting surveillance of another nation? My answer is, Well, that's what we do. We are vigilant; we are watchful, because we know that when our interests and those of our allies in the region are challenged, we must be ready.

I'm very proud of the performance of these men and women and the many thousands of others who proudly wear the uniform of our country. They have been and will always be our decisive edge. Indeed, they're so good at what they do, unless there is in incident or an accident, we rarely take notice of their daily contributions to our national security. They sail their ships; they fly their aircraft; they go on their patrols quietly and professionally. And America is safe and enjoying great prosperity in part because of them.

However, today, our people and our forces are experiencing some significant challenges, a number of which I'd like to bring to your attention today. To begin with, although our first-to-fight forces are trained and ready to meet any emergent requirement, we find that many other operational units are not as ready. These include our strategic airlift fleet; our intelligence, surveillance and reconnaissance aircraft; combat service support units, and training bases, all of which provide critical capabilities to our war-fighting forces.

These units, in some cases, are suffering from the consequences of a high op tempo and the diversion of resources to sustain the near- term readiness of the first-to-fight forces. In fact, since 1995, the department has experienced a 133 percent increase in the number of military personnel committed to joint operations. These are real world events, not exercises, and we are doing it with 9 percent fewer people. This high operational tempo on segments of our force has placed an

increased strain on our people, and I believe that the fundamental cause of this situation is the imbalance between our national security strategy and the post-1997 QDR force structure. Fixing this imbalance during this year's QDR is one of the top priorities for Secretary Rumsfeld and all the Joint Chiefs because the challenge will only increase over time, and we owe it to our people to get it right.

In fact, today we are struggling to reconcile a multitude of competing demands, including near-term readiness imperatives, long- term modernization and recapitalization of aging systems, and infrastructure investments that are essential to preserving the world's best war-fighting force.

And as I have mentioned in my previous testimony, and as Secretary Rumsfeld commented on this morning, we made a conscious decision in the 1980s to live off of the investments that we had made during that period of time and to start drawing down the force. This marked reduction in procurement means that the average age of most of our weapons platforms, our major weapons platforms, continues to increase, as was highlighted by the secretary. Many have already exceeded their planned service life, or are fast approaching it. Let me give you just a few examples.

Our front-line air superiority aircraft, the F-15, averages 17 years of age, only three years away from the end of its original design service life. Our airborne tanker fleet and our B-52s are nearly 40 years old. Our intelligence, surveillance, reconnaissance and our electronic warfare aircraft platforms, like the RC-135, the EP-3s, the P-3s and our EA-6Bs electronic warfare aircraft all average between 19 and 38 years of age. The main battle tank, the M-1, and the amphibious assault vehicle used by the Marines are powered by engines designed, and in some cases built in the 1960s. Finally, we've got numerous helicopter platforms in all of our

services that have passed or are approaching the end of their original design service lives. In fact, most of the warfighting platforms that I've just mentioned meet the 25-year rule required by the great state of Virginia to qualify for an "antique" license plate.

Our forces are not aging gracefully. In fact, we're having to spend significantly more in each year to maintain our aging equipment in repair parts, in maintenance downtime, and in maintenance support. The operational environment and the current pace of operations requires us to keep this equipment ready, but to do that, we're having to drain resources from the very modernization accounts that we should be using to buy replacement systems.

And if we don't replace these systems soon, either the force structure will shrink further or we'll have to continue to maintain the old systems, which results in spiraling operations and maintenance costs and reduced combat capability. In my view, these options are unacceptable.

The bottom line is I do not believe that we'll be able to sustain our long-term readiness under these conditions. So what do we do? I think there are two things that are critical.

First, we must bring into balance our strategy and our force structure. And we must significantly increase our efforts in procurement to modernize and recapitalize the force. The QDR should produce the strategic blueprint and the investment profile that will be necessary to shape our force and to carry out the new strategy.

Another related concern is that our vital infrastructure is decaying at an alarming rate. Budget constraints have forced us to make some hard choices. We've had to redirect funds from military facilities and infrastructure accounts to support current readiness requirements. For example, in our real property maintenance accounts we currently have a growing backlog of over $11 billion. Secretary Rumsfeld mentioned our replacement rates of our facilities is running right now at over

100 years as compared to the 50-60 year -- 67 years I believe is the right answer for the civilian industry standard. I think that a quality force deserves quality facilities, and therefore I think it's essential that we start providing the resources to reverse the deterioration of our posts, camps, stations and bases.

One way that Congress could help us in this regard is to authorize additional BRAC rounds. According to an April 1998 DOD BRAC report we currently have 23 percent excess base structure. By removing that excess capacity we could potentially save an estimated $3 billion per year, which is money that could be used to -- directed to help fix the remaining infrastructure.

Now, Mr. Chairman, I'd like to focus for just a second on what I referred to earlier as the decisive edge: our men and women in uniform.

President Bush stated that a volunteer military only has two paths: it can lower its standards to fill its ranks, or it can inspire the best and the brightest to join and stay. This starts with better pay, better treatment, and better training. I think President Bush had it exactly right. We must continue to close the significant pay gap that still exists between the military and the private sector. And we must make continued investments in health care, in housing, and in other quality of life programs that are essential to maintain our force.

One of the most valued recruiting and retention tools any corporation can offer potential employees or current work force is a comprehensive medical package. We are no different. For that reason the chiefs and I strongly urge Congress to fully fund the Defense Health Program and all health care costs are a strong signal that we are truly committed to providing quality health care for our troops. I can't think of a better way to renew the bond of trust between Uncle Sam and our service members and retirees than this commitment to quality health care.

Additionally, I ask for your support to help ensure that all our men and women in uniform -- single, married, and unaccompanied -- are provided with adequate housing. Unfortunately, as Secretary Rumsfeld mentioned, we currently have 62 percent of our family housing is classified as inadequate. Correcting this situation is essential if we are to improve the quality of life for our service members and their families. And, of course, we've learned over the years that while we recruit the member, we retain the family.

To sum up, I believe that our military remains the best in the world. But having said this, let me point out that our military advantage will erode over time if we ignore or if we fail to prepare for the evolving strategic landscape of this 21st century.

Our greatest adversary, as I've said so many times in the past, is complacency. It is imperative that we take action today to ensure that our men and women in uniform are properly equipped, trained and led. If we do so, I'm confident that we'll prevail in any challenge that we face in the future.

Mr. Chairman, today I'm struck by the fact that we have an opportunity, an opportunity to build a foundation for another long era of U.S. military supremacy, and in so doing, we will help underwrite the peace and prosperity that our nation currently enjoys well into the future.

Mr. Chairman, I thank you again for the opportunity to appear before this distinguished committee, and we look forward to your questions.

REP. STUMP: Thank you, General.

You mentioned our friend Mr. Sisisky. Let me take a moment to introduce his successor down here, to my far right on the end of the aisle, while not officially named, will be named before the day is over as the newest member of our committee, Randy Forbes down on the end of the aisle there. Welcome to the committee, Randy.

Mr. Secretary, let me -- (interrupted by applause). One more comment, if I may. We all know the time constraints that we're having to work under. We'd like to get a commitment from you and your department, if you would, sir, to furnish us with the necessary information that we're going to have to request to complete our job on time. If we could get that from you, we would appreciate it very much, sir.

SEC. RUMSFELD: We will do everything humanly possible, sir.

REP. STUMP: Thank you, sir.

The chair recognizes the ranking member, Mr. Skelton.

REP. SKELTON: In the interest of time, Mr. Secretary -- let me welcome again you and the general. In the interest of time, I will ask just one question, if I may submit several others, however, for the record to be answered within a reasonable time.

Let me ask you this, Mr. Secretary. We all know that the $18 billion that's thus far been recommended isn't going to cover the waterfront. In your opinion, what are the major requirements that are left unfunded by your recommendations?

SEC. RUMSFELD: Dr. Zakheim may want to comment on this, but it is clear that what we've done within the resources available is to focus on the people part of it, which are so critical to the success of the armed forces. The area that has been put off is the transformation portion, and we'll have to address that in the '03 budget.

REP. SKELTON: Thank you so much. And I will submit several questions for the record, Mr. Chairman. Thanks so much.

REP. STUMP: I'll remind members who came in late that we are operating under a strict four-minute rule.

The chair recognizes the gentleman from Pennsylvania, Mr. Weldon.

REP. CURT WELDON (R-PA): Thank you, Mr. Chairman.

Gentlemen, thank you for being here. And Mr. Secretary, we had confidence in you all along that you would come through, and you did; $38.4 billion is exactly what we knew that you'd come in with, which was a significant increase. It's not as much as some of us would like, but in this political environment, where defense remains last in every major national poll, you've done a good job in giving us a good start.

I do have questions about the $1 billion savings anticipated. I raised those at a readiness hearing earlier this week because I think some of the assumptions are certainly going to be questionable.

And one of the areas you've talked about is Davis-Bacon reform. As the original author of the Davis-Bacon reform bill in the last session, that was supported by all the building trades and 30 members of the Republican Party, as well as most of my Democrat colleagues, I would say to you, Dr. Zakheim, that we ought to workmtogether on that. I don't know if we can get to a million dollars, but we certainly can make an improvement over the current threshold of 2,000, but we've got to do it with the labor movement, as opposed to bucking heads with them.

In the case of what needs to be done, Mr. Secretary, your priorities are right on. But the most important thing, most important thing, is the update of financial management systems. You can't expect this Congress to have confidence in what General Shelton talked about, savings in base closings, or savings in the A-76 process, or savings in acquisition reform, until we have confidence in the financial process that we're using to asses our savings.

I chaired a hearing on A-76 earlier this year, and the secretary's representative was totally off base by a billion dollars in what the services estimated were their savings.

You can't expect us to have confidence to give you the kinds of things that you want, which I will probably support in the end, until we have confidence that the financial process you have in place is in fact legitimate. So that is your -- I think your number one priority. And the $100 million you've asked for, Mr. Secretary, I support fully. In fact, if you wanted more, I'd give you more, because that's really the number one priority before we can move the other issues that you've identified.

But there's one thing you didn't include, and I would ask you to include this because it's becoming a bigger and bigger item; the service chiefs have testified to this, the vice chiefs testified to this in a hearing on the issue of encroachment. More and more our training is being impacted -- General Shelton, you're aware of this – by issues that are being forced upon the military from non-military efforts. And, Mr. Secretary, I would ask you to consider support for a piece of legislation I'm going to be dropping, with bipartisan support, that's going to raise this issue to a national level that we've never seen before.

We currently have an environmental impact statement process which says that before any state, any governor of any state or territory can build a bridge or a road, they must complete an environmental impact statement to assess the damage being done to a snail darter or to a spotted owl. Well I want the same process for national security. I want to establish a national security impact statement process so that before any governor, whether it's the governor of Puerto Rico, or whether it's the governor of one of our states here or local jurisdiction, decides they want to take action that may adversely affect our military, we must require them to complete the same assessment process that we do for the spotted owl or that we do for the snail darter.

And I say that as a "Green Republican" who supports the Endangered Species Bill, voted for the Clean Air Act, the Clean Water Act. It's time to bring the balance back. And so I would say to you that in terms of your priorities, please put the encroachment issue at the top of your agenda, because if you talk to your service chiefs, it is in fact costing us money and proper preparation and training for our troops.

Thank you.

SEC. RUMSFELD: Mr. Congressman, on the financial management systems, you're exactly right, the process is broken. The best estimates are that it will take years to refashion the financial management systems so that they function in a way that managers can in a reasonable period of time have any sense of how the money is flowing through that institution. We've got to get them fixed. It's a -- well, I won't add any adjectives.

With respect to encroachment, you're quite right, it's just an enormously important issue, and certainly all of us, including governors and mayors and private citizens, have to recognize that we all have an obligation to see that we put the proper balance in. And I'll certainly be interested in looking at your legislation.

REP. STUMP: The gentleman from Mississippi, Mr. Taylor, is recognized for four minutes.

REP. CHARLES TAYLOR (R-MS): Thank you, Mr. Chairman. Mr. Chairman, Mr. Shelton, Secretary Rumsfeld, thanks for coming. I deeply regret that you were not given the opportunity to tell this committee and all of Congress of the hundreds of billions, if not trillions of dollars that our Department of Defense is going to need in the next 10 years, prior to the tax vote. Having said that, Mr. Secretary, I am pleased that you are asking for more money for defense, and I want to commend you on that.

But I've got to note that I was underwhelmed by what you have done for ship-building. In the past six years, the fleet has shrunk by a net loss of 15 ships per year. We're now down to 313; we were at 389 just six years ago. Under the best-case scenario, if we funded 21 ships this year, then we would stop the free-fall of the Navy fleet in the year '05 at 268. Anything less than that, the fleet continues to free-fall at at least 15 ships per year.

You've only asked for five ships this year, Mr. Secretary. The LHD had been funded two years ago, and we've been incrementally funding it ever since. And I was a bit distressed to hear our secretary of the Navy just yesterday say he didn't know what number the fleet should be. I would hope in the very near future someone at the Department of Defense would give us some guidance as to what our target should be for the size of the United States fleet, and I would hope that you would redirect some funds and work with us to redirect some funds to start rebuilding the American fleet.

SEC. RUMSFELD: Mr. Congressman, you are right. The ship- building budget is not improved in this. It has been going down steadily. It is on a track that's going to take this country to something like 230 ships at steady state if we continue, roughly, building at the rate we are, which is about what –

REP. TAYLOR: You asked for five this year, Mr. Chairman -- Mr. Secretary.

SEC. RUMSFELD: It's about five to --

(Cross talk, off mike.)

SEC. RUMSFELD: It takes about six and a half? It is.

MR. : Right now we're at six.

MR. : The right number is nine.

SEC. RUMSFELD: And the right number is nine, and it's been going on for year after year after year, and it's about ready to fall off a cliff in about four or five years, and it really will drop fast. Now, the situation with respect to this year is, I am told, a problem with -- that's unique to the shipyards. We were ready to allocate a higher amount, but there's a certain aspect of the contracting situation and the shipyards that we weren't able to do it. And -- but you're absolutely right. Anyone knows that 230 ships, which is the trendline we're headed towards, is not enough.

Do you want to comment, Dov?

MR. ZAKHEIM: Yes, sir, certainly. Congressman, it will drop off a cliff, there's no question about that. Just to maintain roughly 310 ships would be nine. That, of course, presupposes a strategy that doesn't change, and we're still going through a review.

This year there were, as you know, some both design and contractual issues which in practice made it difficult to go above six. The plan originally had five, or, if you wish, four plus one if you count the LHD as a kind of separate category because it's been incrementally funded, and we added another ship, a DDG-51 Aegis guided missile destroyer, to bring it up to six. That is nowhere near what we should do.

REP. TAYLOR: Mr. Secretary, with all due respect, I don't buy the argument that the shipyards can't or don't want the work. They are desperate for work. And I simply fail to believe that the Engels (sp), and Nascoes (sp), the Newport Newses, the Bath Iron Works of the world wouldn't welcome the opportunity to maintain their work force and their supplier base and to up the shipbuilding budget this year rather than later.

SEC. RUMSFELD: I can do nothing other than agree with you that the shipbuilding budget is low, it has to be increased, or we're going to have a navy that will be too small.

If you could put that chart up -- is there one there? The shipbuilding chart? It gives you a sense of the problem.

The red line is what it takes to maintain about 310. And that would be about $3 billion more a year. The lowest line is where we're -- the trajectory we're on, which is about six and a half ships. And as you can see, every year you go out, the gap that you need to fill between the top line and the lower line gets bigger. So every year that the Congress and the administration over the past decade have not met that gap, the gap has grown. And we're now faced with a sizable gap that will take billions of dollars to close.

REP. STUMP: The gentleman from Colorado, Mr. Hefley, is recognized.

REP. JOEL HEFLEY (R-CO): Thank you very much.

You know, the phrase that you had on that other chart and that we've heard so much, "The military force is doing more with less," Mr. Secretary, that has worn a little thin, hasn't it? We're a little tired of doing more with less. And if "more with less" means that you still have the hangar queen situation and if "more with less" means that you still have sailors when they're in their home port living on the ship instead of in decent quarters, and if "more with less" means that we still house our troops in third world conditions in many places here in the United States, and if "more with less" means that we don't keep our health care promises, then we've got

something very, very wrong. And you've spoken to every one of these areas, I think, in the budget you present, and I appreciate that. It's not what most of us on this committee would like, it's probably not what you would like, but at least it's going in the right direction, and I think we're all appreciative of that.

The other -- the last administration kept coming to us constantly saying "We need more rounds of base closure," and you're doing the same thing, and our response to them was that "You're not getting any more rounds of base closure because your president destroyed the integrity of the system for base closure." Now we have a different situation. And I think most of us do understand that you have excess inventory in certain areas, and I think there's some more convincing to be done. But I think we do understand that. But I have serious concern about going through the same routine that served us up until the president interfered, served us pretty well the last time around for those three rounds of base closure, I have serious concern about us going through that, putting every community in America that has any kind of a military installation into an absolute froth of anxiety and wonder if you've thought of any innovative approaches to dealing with it. My suggestion has been that we -- there are some things you're not going to give up.

You're not going to give up West Point. You absolutely are not. Take it off the table. You're not going to give up the space center. Take it off the table. Take off -- the things off the table that you absolutely are not going to give up, and then let's deal with what is in question.

Have you thought of that, or have you thought of any innovative approaches that would not do the typical commission way that we did it the last round?

SEC. RUMSFELD: We have people looking at that right now, Mr. Congressman, and that suggestion that you've just made is one that has some attraction and is being considered.

REP. HEFLEY: Thank you.

How much excess inventory do you think you have at a -- do you have a percentage?

SEC. RUMSFELD: I do not. I'm -- the services are unanimous that we have excess inventory. General Shelton used the number 23 percent. That seems to be what -- the range, 20 to 25 percent, that comes up when the question is asked. But what the actual number is I don't know.

REP. HEFLEY: Okay. Thanks very much.

SEC. RUMSFELD: Yes, sir.

REP. STUMP: The gentleman from Maine, Mr. Allen, is recognized.

REP. THOMAS ALLEN (D-ME): Thank you, Mr. Chairman. And thank you, Mr. Secretary, for being here again.

I want to associate my remarks with those of Mr. Taylor and simply point out that as you say, shipbuilding has not improved, and it will drop off a cliff, and you need $3 billion. I would point out that the increase for BMDO and the related programs currently in the Air Force is exactly $3 billion. There's no question in my mind but money that the Navy needs for shipbuilding is being diverted directly to national missile defense.

There are some things I like about this budget, Mr. Secretary, but we have such limited time, I have to talk about the one piece which is profoundly disturbing to me, profoundly disturbing because, in my opinion, it threatens our national security in the name of protecting it. And I am speaking about the rush to deploy a national missile defense that is untested, hugely expensive, and may never work, and second, the rush to abrogate the ABM Treaty, which, in my opinion, has helped keep -- has been part of an arms control regime that has helped keep the peace for decades.

A couple of comments:

I am worried about your talk about responding to capabilities instead of threats. You know, we're now in a realm where we're talking about some sort of threat that we can't define from countries we cannot name.

The last time you were here, you testified that 28 nations have ballistic missiles. But besides the four other nuclear powers, not one today has an operational long-range missile that can hit U.S. territory -- in five years, maybe North Korea, but your administration is now finally picking up an effort to negotiate away that threat. Iran -- you know, maybe, but that's doubtful. I think it's misleading to create the impression that this country is on the brink of being attacked by rogue state missiles.

Now you also testified that the number of ballistic missiles on the face of the Earth is growing. Well, that's technically true, but most of them are short-range missiles. The number of ICBMs that threaten our national territory has declined over the last 15 years, from 2,318 in 1985 to 1,100 in 2000.

And I think our policy ought to be based on realistic threat assessments and not sort of vague, uncertain scare tactics.

My last comment here. The ABM Treaty does not apply to theater missile defenses, which address the more urgent threat, yet the thrust of this budget in money and policy is to intentionally rig a test as early as possible to violate the ABM Treaty. NMD tests will only be non-treaty-compliant if you select them to be non-compliant. For example, the airborne laser technologies could be tested in 2003 against a short-range target, which would be treaty compliant, but you apparently have chosen to arbitrarily test it against an ICBM, which would not be treaty compliant.

So, my two questions. Why does your budget precipitously force a confrontation over the ABM Treaty issue before it has to, thus limiting the time we have to renegotiate the treaty with the Russians? Number one. And with respect to the threat, is there even one other country that you believe represents a realistic threat of having both the capability and the inclination to fire a long-range missile at the United States in the next five years?

And I thank you for your time.

SEC. RUMSFELD: (Laughs.)

REP. ALLEN: Though I've taken most of it.

SEC. RUMSFELD: Well, goodness gracious. First of all, on the subject of rush to deploy, there is no such thing. We are, in fact -- we've actually delayed the Clinton administration's plan to begin with Shemya in Alaska, and we have been undertaking a series of research and development activities that are not deployments at all. So that comment is without any basis.

REP. ALLEN: So 2004 is not a target for deployment?

SEC. RUMSFELD: We have not -- I have not set deployment targets because we're engaged in research and development, which means we don't know what the answers will be, and therefore, one can't project as to when some could -- to deploy. So I want to clarify that so that's very clear in your mind.

Second, untested also is without merit. The reality is that that is exactly what we're doing. No one is deploying something that has not been tested.

Third, hugely expensive. Money is money, and, you know, $100 is a lot of money. But the reality is that we're spending something like 11-plus billion dollars on terrorism issues for the United States government, and we're spending a much smaller amount on missile defense. So it is difficult to say what's too much or what's too little, but the loss of a major city or the loss of -- or an attack on one of our allies or deployed forces -- you keep using the phrase "attack on U.S. territory." We have interests besides the continental limits of the United States. We have deployed forces overseas, we have allies in NATO, we have allies in Asia; and the ability

to threaten them affects us quite directly.

Next, may never work. That's probably -- that's what Wilbur and Orville Wright faced. There are always people who say it's not going to work. That's what they said about President Kennedy going to the Moon and returning safely in the decade: "It won't work."

Well, my golly it's amazing, things tend to work. And there isn't a doubt in my mind that if the United States decides it wants to develop that capability that we can develop that capability. And we've already tested and demonstrated the ability to do important elements of what is required to achieve an effective ballistic missile defense capability.

Next, the rush to change the ABM Treaty, because it's a centerpiece in arms control and strategy stability -- that's what the Soviets have said in decades past, that's what the Russians are saying today. The ABM Treaty was not and is not and, to my knowledge, never was the centerpiece or cornerstone of strategic stability. It was one agreement between two countries, the Soviet Union and the United States, and given our overwhelming capabilities, it had a value and it created a more stable situation between those two countries for a period, and it still does today. The problem is the Soviet Union isn't there today, and Russia is not our enemy and we do not go to bed worrying about the problem of a strategic nuclear exchange with Russia. The Cold War is over. We need to get over it, it seems to me.

The issue of vague scare tactics, I think you said, with respect to the threat. Hardly, I would say, Mr. Congressman. The intelligence community of the United States of America has a process which they use, they engage in it, they consult with the Defense Intelligence Agency, the Central Intelligence Agency; they use all sources of intelligence, and then they come out with a national intelligence estimate, and that is what is there. You can read it; everyone knows what it says. And it talks about the problems of ballistic missile threats to the United States in a time frame that is not certain and from a country that may not be certain.

We do know that countries that do not wish us well have an enormous appetite for weapons of mass destruction and the ability to deliver them. We know North Korea does, and we know they've launched a two-stage with a kick motor for the third. With an ounce of luck, it could have been in orbit and would have ICBM range. Everyone said they couldn't do it; how could those people who were starving, how could they possibly develop the kinds of system integration capabilities that would enable them to do that? They did it. They're very close. And we know they have nuclear materials capable of developing some handful of nuclear weapons.

REP. ALLEN: But you would agree, Mr. Secretary, they've agreed to a moratorium voluntarily on their own testing through 2003?

SEC. RUMSFELD: That agreed framework that has been established is something that we have not been able as a country to fully inspect and determine exactly whether or not they are agreeing.

We also know that countries like Iran have very active germ warfare programs and that they're working with the Russians today to develop their nuclear capabilities.

So I think that it -- with the wave of a hand, to suggest that those are scare tactics, they're not. There are real threats out there. And if you think back to Pearl Harbor, nobody ran around saying, "Oh my goodness, the Japanese are going to bomb Pearl Harbor." It didn't seem probable. And I don't deny for a second that it's possible for someone to look at the threats from countries like Iran and North Korea and Iraq, if they had the freedom to do it, and say, "Ah, not to worry."

The reality is those weapons are enormously powerfully, they are spreading through the world, and we would make an enormous mistake to not be attentive to the spread of weapons of mass destruction and the ability to deliver them. And I would add one thing. A ballistic missile can be put into a boat, a ship, on a transport erector launcher, peel of the top, erect it and fire it. And it has been done by one of the countries that have those capabilities today. They do not have to be ICBM range; they can be shorter and just as deadly.

REP. STUMP: Mr. Bartlett of Maryland is recognized.

Let me remind members that we've been notified there's probably going to be a vote in 45 minutes. Please be as brief as possible. Thank you.

REP. ROSCOE BARTLETT (R-MD): Thank you very much. I'd like to add my welcome to Randy Forbes and note that he joins Congresswoman Davis and Congressman Schrock to form the "Tidewater Trio." (Laughter.) They're going to make sure that we do it right here. I want to welcome these new members to our committee.

Mr. Secretary, your QDR reminds me a bit of our omnibus appropriations bill, enormously large and just too difficult to get your arms around. Can you provide us with the equivalent of executive summary so that we'll have some better idea as to how you reached your conclusions?

SEC. RUMSFELD: I'm sure we can, Mr. Congressman. There's only been one QDR prior to this. As you know, it's not my idea, it's mandated by Congress. There was one in 1997. It seemed not to be impressive in its outcome when one asks the various people who are participated. Whether or not this one will be, I don't know. I know that General Shelton and the chiefs and the undersecretaries and I are working our heads off trying to do what the Congress has asked us to do in a very short period of time, and when we're through, we'll try to get an executive summary.

REP. BARTLETT: Thank you very much. I'd just like to make a comment or two about the suggestion that we privatize the commissaries and PXs. Just a word of caution that we have a lot of these facilities overseas; they're operated at a loss because we want to bring a bit of America there so that they have a higher quality of life. I'd also like to note that I think that probably one of the biggest benefits of our commissaries and PXs is not so much the money that's saved there -- and they do save money there -- but the sense of community that it brings to our military people. And I would suggest that the few dollars that we might save, and might not save by privatizing it, would be small compensation for that loss of sense of community. I think it's very important for our military people to know that we think they're special, and they have these special shopping facilities that they can go to that's just theirs. And I think that the few dollars we might save would not be worth the harm that we would do to morale and sense of community on our military.

And I want to thank you all very much for your hard work, but just this one word of caution.

SEC. RUMSFELD: Thank you very much. Mr. Congressman, there's no reason if you did have a private operator operate commissaries that they couldn't stay exactly where they are and still provide that same sense of community.

REP. STUMP: The gentleman from Arkansas, Dr. Snyder, is recognized.

REP. VIC SNYDER (D-AR): Thank you, Mr. Chairman.

Good morning, Mr. Secretary, good morning, General Shelton.

SEC. RUMSFELD: Good morning.

REP. SNYDER: I appreciated your reluctance a little bit earlier, Mr. Secretary, to state an exact number for excess base capacity. Three or four years ago, three and a half years ago, I think, I asked a question on the record about, well, how -- you know, what is the exact number and how did you determine it. And basically it was a list of the bases that have been closed compared to the total number of bases that we've had in the past. I mean, there was no reference to acreage, no reference to, you know, amount of space on the tarmacs, it was a very unscientific way of determining it.

Let me ask you, it seems like the only voices that I've heard in my four and a half years in Congress that have been opposed to base closures have been, you know, some members in Congress. In your discussions in the last seven months, eight months since you've had this job, have you run into any minority views within the military, within the DOD that thinks we do not need another round of base closure?

SEC. RUMSFELD: I have not -- I have not met a military person who has ever said that we should not close bases. They all feel that they would rather have those resources into people and transformation and the important operations capabilities of the force.

REP. SNYDER: I notice in your statement that you're counting on some savings in the fiscal year '03 budget coming from dealing with excess facilities and that you also say you're going to send up suggested legislation towards -- later on this year. We don't have a lot of time, if we want to try to get a bill passed and underway. And next year is an election year, which has got its own dynamic.

I think I mentioned to you before, I have a bill that's filed out there that I think tries to take a different look at things. It deals with -- it has a threshold question, Does there need to be another round of base closure?, to help some of the members on the committee that think that perhaps we don't need another round. It requires you to send to the Base Closure Commission a list of those bases, as Mr. Hefley mentioned, that "we want these off the table" and the commission can add

to that, so that early in the process a lot of communities would be taken off the anxiety list. And then it also keeps the commission functioning as a potential appeals board to deal with some of the problems we had over, I don't know, Sacramento or something in the past, so that if some community thinks they're getting messed up, that this is not what was supposed to occur, the community can take it to the commission. And if they choose to, the commission can issue a binding opinion that can only be overturned by you, by the secretary of Defense, by written notification to the community and to the committee. It's trying to deal with some of the

problems in the last round of base closure.

But I would encourage you, if you're interested to do this, it's not going to be an easy process. And the sooner you can get up your suggested legislation the better.

SEC. RUMSFELD: Thank you very much. Undersecretary Aldrich is the one who is working on this, and we will see that he takes a look at the legislation you've mentioned.

I would not want anyone to believe we could get savings out of base closures in '03. I just don't believe you can. I think it costs money. The first year or two or three it probably costs you more money to do it, but it's the saving thereafter that it benefits.

REP. SNYDER: Right. And if I might, one of the disadvantages of not having had the budget numbers -- we've not had a whole lot of hearings or opportunities to have General Shelton here.

General Shelton, if I might ask you, specifically, off the budget and talking about Macedonia, what do you see as potential scenarios; how that potentially may play out, the good, the bad, and the ugly; what our role is in trying to shape that; what we could or should be doing; what we are doing; what we might need to be doing down the line?

GEN. SHELTON: Well, Congressman Snyder, as you know, we have been -- we have had a force in Macedonia since about 1995, as a part of a -- at that time, a border surveillance/border observation mission, with roughly a thousand troops, part of the U.N. mission at that time.

And in February of '99, the U.N. mandate expired, and the only thing that we retained in Macedonia was the -- was a camp, Able Sentry, to support our operation in Kosovo. It's primarily a com-z logistics type of operation. We do have some infantry there today, have a colonel in charge, have about -- a battalion of 101st Airborne there to secure that base, and we use it to support the Kosovo operations. It's where our supplies flow into. Many of you have probably flown into the capital in Macedonia, where we're based.

The -- we're there as part of a NATO -- there are 18 nations that operate bases there to support the Kosovo operation. We have been concerned, as a part of NATO and unilaterally, I might add, about the current situation on the ground with the government. We have supported trying to -- the efforts to reach an agreement between the Macedonian government and the NLA or the Albanian element.

We basically have continued to make sure we have proper force protection and use the base, and then the rest of it is being worked in the policy arena right now, in terms of the way ahead.

That's where we are.

REP. STUMP: The gentleman from Georgia, Mr. Chambliss.

REP. SAXBY CHAMBLISS (R-GA): Thank you, Mr. Chairman.

And gentleman, thank y'all for being here this morning. Mr. Secretary, I want to commend you on a very important decision in having my good friend and fellow Georgian Mr. Powell Moore as one of your key staff members -- obviously a very smart move.

SEC. RUMSFELD: (Chuckles.)

REP. CHAMBLISS: I'll have to tell you, though, Mr. Secretary, I'm very much disturbed about a pattern that has developed in your office to consider and make major policy decisions regarding weapons systems and personnel without consulting those of us who not just are directly affected by this but are the folks that you're asking to support your budget and to write the paychecks for that budget.

And I have been very supportive of the administration's position on the strategic review. I think it's necessary. You and I have had some brief conversations on that. But yet there has not been any dialogue that's been ongoing between members of Congress and your office with respect to these decisions.

The one that I'm particularly concerned about and am very much bothered about is one that was made in recent days, that I was made aware of two days ago, regarding the transfer of the B-1 bombers from the Air National Guard to the active force. I can appreciate your position that that was done for the purpose of saving money. We need to look everywhere we can to try to save money.

But the figures just simply don't bear that out. It's my understanding that the B-1 costs 25 percent less to operate in the Air National Guard than it does in the active force, that the Guard has a 15 percent higher mission-capable rate than the active-duty Air Force with respect to the B-1.

The air crews at the 116th B-1 Wing at Robins Air Force Base have an average of 2,500 flying hours and 1,000 hours in the B-1, which, again, is higher than the active-duty force. All the B-1s at Robins, as well as at Kansas, have already been upgraded. They've been modified so that we can carry PGMs. We just spent about $75 million in mil con work at Robins to bed down these B-1s. We spent about $100 million at Ellsworth to bed down the B-1s there.

Our 116th is an outstanding unit. It's been recognized time and again by the Air Force for its efficient operation, and I really want to know what has changed to warrant the sudden decision to move the B- 1s out of the National Guard into the active force?

SEC. RUMSFELD: Do you want to -- this is a decision that is in the hands of the United States Air Force, and the decision as I understand it was to reduce the number of B-1s from something like 93 down to 60 and to use the savings to modernize the remaining 60 and to go from probably something like five locations down to two locations and, through the consolidation, to save some funds.

Dov, do you want to comment?

MR. ZAKHEIM: Certainly, yeah. That was exactly the logic behind what the Air Force did and, in fact, we're talking about savings of about $165 million that were immediately plowed back into the B-1 program. Now, at the same time, the Air Force recognized and is working on right now what they are calling a mitigation program, so that there should be no effect either on the bases or on virtually all -- I can't say all, because I don't know down to the last individual – but virtually all the National Guardsmen that are effected.

The Air Force has told me that they are going to incorporate them into the future total force program, which I'm sure you're familiar with. There are several ideas that they have as to how to do that. They have not finalized exactly which one, but what they are looking for is indeed meaningful military activity for the Air National Guardsmen that have been affected. So there's no effect on bases, virtually no effect on people.

On the other hand, what you do is you take this money and you make these B-1s that are remaining both survivable and you've given them significant -- and I mean significant -- communications upgrades. So from an efficiency point of view, a management point of view, a military effectiveness point of view, this was the right way to go, and we supported the Air Force decision.

REP. STUMP: The gentlelady from California, Mrs. Tauscher, and then Mr. Ryun.

REP. ELLEN TAUSCHER (D-CA): Thank you, Mr. Chairman. Mr. Secretary, gentlemen, how are you? Mr. Secretary, last week when you were here I asked you what you believed to be the appropriate number of nuclear weapons we should maintain on high alert status, and you responded that you were still getting your Saturday morning tutorials on these things and working hard to get all this stuff ramped up. But today I read that you're proposing to eliminate the Peacekeeper Missile.

It must have been a busy Saturday last week.

I support efforts to reduce nuclear weapons responsibly. And in fact, John Spratt and I yesterday introduced the Nuclear Threat Reduction Act, which would actually provide the president with the ability, that is now banned by law, to unilaterally move down our weapons. And maybe you can take a look at that legislation when you get a chance.

But I'd like to know now what this proposed cut means and what it does to fit into an overall strategy of potentially reducing our weapons.

SEC. RUMSFELD: Yes, indeed. The situation I was left with when I arrived was that the budget for the Peacekeeper Missile had no money to continue it provided by the Congress, and no money to terminate it. It was just there, and not a happy situation.

The Air Force reviewed the situation and concluded that our some- 50 Peacekeeper Missiles were not needed. And the work I've done with respect to the total nuclear offensive forces persuaded me it was not needed. And since we had no money to do anything with it, it seemed appropriate to deal with it out of regular order, and that is what the Air Force announced.

REP. TAUSCHER: So, Mr. Secretary, essentially what you're saying, this is a budget-driven situation, not part of the context of your review of the size and the alert status of our nuclear forces?

SEC. RUMSFELD: No, it is part of that. And I am far enough along in that process that there's no doubt in mind but that this is the correct thing to do. As a matter of fact, this Saturday I'm going to be at STRATCOM again out in Omaha, and continuing that process, and we're moving along. We have a congressionally mandated Nuclear Posture Review, which -- the work we've been doing will feed into it. We have some 7,500 offensive nuclear weapons. We don't need that many. The Peacekeeper will not make even the beginning of a dent in that total figure.

REP. TAUSCHER: Will the warheads be retired?

SEC. RUMSFELD: What will be done with the warheads is yet to be determined.

REP. TAUSCHER: Thank you, Mr. Chairman.

REP. STUMP: The gentleman from Kansas, Mr. Ryun.

REP. JIM RYUN (R-KS): Thank you, Mr. Chairman.

Mr. Secretary, I appreciate you coming today. I know you have a very difficult task, and yet I think you will see a lot of support from the members that are here.

I'd like to associate my comments with the gentleman from Georgia. Being from Kansas, you know, we were a little bit short on being able to find out about the decision with regard to the B-2 bombers and are concerned about some of the decision-making processes that were involved in that. For example, in Kansas we will build over 100 engines, saving $575,000 per engine this year, that will result in a $60 million savings for the B-1 fleet, and there will be a full savings of roughly $70 billion. It appears to me that that's not a real good business sense to move everything out.

Could you give us a little bit more of an economic justification for what you have done and how you have arrived at your decision?

SEC. RUMSFELD: Do you want to --

MR. ZAKHEIM: Sure. Again, the basic notion was as follows. You had -- the Air Force concluded that we had more B-1s in the fleet than we needed. So -- and that's the major change, of course; you've gone done from 93 to 60. In addition, you have a situation where the B-1s were spread over five bases. And I believe in McConnell, for example, there are nine B-1s. So you're talking about smatterings of B-1s around the country, and that meant a relatively inefficient way to deal with a force of that size.

Again, as I mentioned a moment ago to Congressman Chambliss, the Air Force is fully cognizant of the fact that this has an impact on the bases and on the personnel. And "mitigating strategy" sounds like Pentagon-ese, but basically what they're saying, in plain old English, is that the bases will not be affected and virtually all the people will not be affected. And it could be argued that they will have a more meaningful military operational role in this future total force that the Air Force is conceiving of.

REP. RYUN: Well, if I could, I'd like to see some hard numbers, rather than the verbal numbers you're supplying, please.

MR. ZAKHEIM: Absolutely.

REP. RYUN: I know our delegation is very interested.

You also said that it really wouldn't affect the personnel. Could you explain how if you're taking the aircraft out that it would not really affect the personnel?

MR. ZAKHEIM: The Air Force is looking at options for employing those personnel in military operations that are, obviously, not related to the B-1, but that are central to what the Air Force calls its future total force. And I can't give you those in detail because the Air Force is still looking at options. But they have assured us that they have some very viable options, and we will get you more detail on that, sir.

REP. RYUN: Okay, thank you.

Mr. Secretary, if I may ask you one other question. In your testimony you mentioned the need to address force structure shortfalls in Fiscal Year '03 for the Navy and the Air Force, but you didn't address the Army. Can you give any comment on that with regard to force structure?

SEC. RUMSFELD: The work that the chairman and the chiefs and I have been doing is now in, as we've discussed, the Quadrennial Defense Review process that Congress requires. And the force sizing questions, if you're talking about people, are addressed in that context. And if you're talking about capabilities, that will flow from the Quadrennial Defense Review.

REP. RYUN: All right, thank you.

Thank you very much, Mr. Chairman.

SEC. RUMSFELD: I should add, we have not made decisions at this point with respect to force sizes, in direct response to your question.

REP. RYUN: Thank you.

REP. STUMP: The gentleman from New Jersey, Mr. Andrews, is recognized.

REP. ROBERT ANDREWS (D-NJ): Thank you, Mr. Chairman.

Thank you, Mr. Secretary, General, Mr. Comptroller. First question, I noticed that the FY '02 allocation for the Army PAC-3 and MEADS program is $857 million is the proposal. What are the plans for the MEADS side of this, and what benchmarks should we be looking for a year from now in terms of achievements for that money? What are we trying to accomplish in the MEADS program?

SEC. RUMSFELD: Do you want to comment?

MR. ZAKHEIM: As I understand it, and as you well know, Congressman, the MEADS program -- and MEADS, of course, is an international program; we have several European partners. It's an extended Air Defense System -- the "M" is for "medium." That program is not as far along as PAC-3.

There has been considerable debate over MEADS over the last few years. But the program seems -- we are told is moving along well. I do not have at my fingertips the actual benchmarks, but I could certainly ask the Army to get that to you.

REP. ANDREWS: I would appreciate that. I think the program has great promise. I think it is a diplomatic and political bridge between some of the objectors to our national missile defense plans and our valid national security purposes. And I think it's a very promising endeavor that could lead to greater levels of cooperation for other systems. I would actively encourage you to do that.

The second question I have is about DD-21 in the Navy. I know that there is a pause that has taken place in making the DD-21 decision. I wanted to know when we can anticipate the decision coming forward and what criteria we're using to decide when to pick that date.

SEC. RUMSFELD: Well, there's two pieces to that. One is that Undersecretary Aldrich with Dr. Zakheim are conducting a shipbuilding review, if you will, on the size of the Navy and the mix of the Navy. That process is taking place. The second process that's taking place is the Quadrennial Defense Review, where the Navy will be addressing weapons system decisions in the course of that review, which should be ended in eight weeks.

REP. ANDREWS: Do we anticipate the DD-21 decision then to be incorporated into the QDR? Or will it be made independent of that?

SEC. RUMSFELD: (Confers off mike with staff.) "Probably" is the answer. The Aldrich study, I don't know -- he had not set a deadline. I'm trying to think when he's planning to finish. But they'll be in close proximity. And I would guess we would wait for both, and the decision would flow out of whichever one is later.

REP. ANDREWS: The third question I have is I'm aware of the fact that there is a strong need to increase our -- and improve upon our stock of algorithms in our encryption area. I know that there's a lot of concern that there be a step-up of that effort. What are we looking for in this budget proposal with respect to that, in terms of replenishing our algorithm supply? In the encryption area.

SEC. RUMSFELD: (To Gen. Shelton) Do you want to comment on that?

GEN. SHELTON: We'll have to furnish one for the record.

SEC. RUMSFELD: Yeah, we'll have to respond for the record on that.

REP. ANDREWS: I would appreciate that.

Finally, as a comment, I applaud and support your substantial compensation structure increase. I think it's something that has bipartisan support. The administration's to be commended for stepping forward with this. I would hope that as we consider the particulars of it, that you would give all due consideration to the legislation Mr. Murtha and Mr. Skelton have put forward this week. I don't believe this should be a contentious issue. It's one that we ought to cooperate on and try to increase this compensation for as many people as we can as quickly as we can, and I wanted to let you know I'm quite willing to cooperate in that effort with you.

REP. STUMP: The gentle lady from Virginia, Ms. Davis.

REP. JO ANN DAVIS (R-VA): Thank you, Mr. Chairman, and thank you, Mr. Secretary and General Shelton and Dr. Zakheim. I want to tell you I appreciate all the hard work you've put into the budget, and I thank you all for it.

SEC. RUMSFELD: Thank you.

REP. DAVIS: And I guess you can guess where I'm going to go next: to shipbuilding.

You know, you said that right now we're on a course to drop off the cliff and that Congress over the years has not met the gap. But even this budget request for '02 that we're putting in I think probably even creates a larger gap. And I guess my concern goes to the shipbuilding industrial base.

You know, where are we going to be in future out-years with our industrial shipbuilding base if we're not continuing to put the number of ships we need in the budget? And you stated that you would like to have put more in the budget, but the contracts and so forth, if you will, with our private shipbuilding base wouldn't allow you to do that, and I wonder if you could expand on that a little bit.

SEC. RUMSFELD: First, as I indicated in my remarks, there's no question but that this shipbuilding budget is not what any of us would like to be presenting to the Congress; however, it does not make the situation worse, it makes it slightly better, but still on a downward trend. The industrial base is important, and the goal has to -- we do not have the shipbuilding study completed, but there is no one that I've dealt with in the Pentagon who thinks that 230 ships is the right number. It's got to be more. So we will know much more about what the mix ought to be, and that needless to say, ought to be healthy; if we can find the support to increase the

budget and put ourselves back on a proper trajectory, that would be a healthy thing for the shipbuilding industrial base.

MR. ZAKHEIM: Congressman Davis, the plan that we inherited actually provided for four plus one, if you count the LHD as a plus one, for this year, this upcoming fiscal year '02. In the $18.4 billion amended budget, we added, specifically because of our concern over both the size of the Navy and the industrial base, an $850 million DDG-51 Aegis guided missile destroyer, and it was precisely for the reasons you've just raised.

Now, all this does is prevent us from falling further back.

REP. J.A. DAVIS: But what about the comment that you couldn't add more because of something you had to do with the contracts with the shipbuilders? I had not heard that before.

SEC. RUMSFELD: There were some design problems on some of the other ships, and what we've done is pause on them to get those resolved. And the hope is that they will be appearing in future budges. I say "hope" because until a problem is resolved, it hasn't yet been resolved.

REP. DAVIS: Do you anticipate an aircraft carrier in '03? I notice there is obviously not one in '02.

SEC. RUMSFELD: I'm going to wait till the shipbuilding study is completed.

REP. DAVIS: I'm going to call you in eight weeks.

SEC. RUMSFELD: (Laughs.) Okay.

REP. DAVIS: Thank you, Mr Chairman.

REP. STUMP: Mrs. Davis of California is recognized.

REP. SUSAN DAVIS (D-CA): Thank you. Thank you, Mr Chairman.

Mr. Secretary, General, Dr. Zakheim, thank you for being here.

I think a number of the questions regarding shipbuilding have been asked, but one of the issues that we hear particularly is around multi-year procurements. And I hope that you'll be taking a look at any possibilities in that area that you have that would help address the needs of so many of our contractors in our communities, where in fact they face, if we don't get the supplemental, laying people off, taking the best-skilled people and saying goodbye to them, essentially, because they're not guaranteed good work.

Have you looked at that issue, and are there some things that we actually could be doing to assist in that area?

SEC. RUMSFELD: There's no question but that the pattern, the rhythm, that's developed between the executive and legislative branches to be dependent upon supplementals has been a difficult and been jerking around contractors and people who have the need to be able to look forward and plan a workforce. And it's been very, very difficult.

This budget is designed to not require a supplemental, and I -- absent a war or an act of God, why, let's hope we don't need one.

The -- there was another piece of this --

MR. : Yeah. There was multi-year procurement.

SEC. RUMSFELD: Oh, yes, we did look at it. We are looking at it. It has some advantages. I guess there are some in the Congress and in the Office of Management and Budget who have questions about it. But it does offer some distinctive advantages, and we are looking very carefully at it and discussing it with the Office of Management and Budget now.

REP. S. DAVIS: Thank you. That might be one area that we can look at together.

And if I may, Mr. Chairman, just continue very briefly on personnel issues -- and I appreciate the focus on that -- out of the $4.1 billion -- let's see, that's the budget for personnel and housing -- how much of that will be allocated to reduce the out-of-pocket costs associated with the BAH?

MR. : With the what?

MR. : Well, with the --

REP. S. DAVIS: Basic allowance for housing. I'm sorry.

MR. : (Off mike) -- housing.

SEC. RUMSFELD: Go ahead.

MR. ZAKHEIM: I don't have the number. I can give you the percentage. Okay, the -- basically, the idea is to get down to zero in terms of out-of-pocket costs by fiscal year '05, so that, in effect, you increase the basic allowance for housing -- I guess that's what you meant by "BAH," B-A-H -- to the point where you get to zero in '05.

We are now on a trend line. In fiscal year '01, the out-of- pocket costs were 15 percent. This year they go down to 11.3 percent -- that is to say, fiscal '02. So we're on a glide path to zero, and we will get you the dollar figures if you need them.

REP. S. DAVIS: I know that in some communities, including San Diego, it's more like 22 percent, something around that range. And I would certainly encourage us to try and get there a lot faster. I have actually put in some legislation to do that. I think the quality of life is a critical issue in communities where many of our servicemen and -women are traveling very long distances. And in fact, in San Diego, of course, we have a number of servicemen and -women living in Tijuana or in areas that -- you know, we really prefer that they have greater access to bases and a better quality of life.

MR. ZAKHEIM: I just found the number for you -- (chuckling) -- I guess that's pretty responsive -- $147 million to get down from 15 percent to 11.3 percent.

REP. S. DAVIS: So that we would need to increase that, we would need to find -- to make that a higher priority, to do it faster.

Thank you.

REP. STUMP: The gentleman from Virginia, Mr. Schrock, is recognized.

REP. EDWARD SCHROCK (R-VA): Thank you, Mr. Chairman.

Mr. Secretary, General Shelton, Dr. Zakheim, thanks again for visiting with us and for enduring the slings and arrows that you've had to endure. But I think the process is working, and we're getting there.

I'm delighted with the increase, the 38.2 billion. Sure, I'd like to see more, but I think this is heading in the right direction.

I share the concerns of Mr. Taylor and Mrs. Davis, too, about the shipbuilding, because I too would like to see that six to nine ships are being built every to keep us from falling. And it is a free fall, as far as I'm concerned. Of course, it does save jobs at the shipyards. And I'm not aware of any shipyards that couldn't handle the extra business as well, unless there's something I just don't understand.

I'm really delighted about the quality-of-life issues; closing the pay gap to keep young folks in who might otherwise go to better- paying jobs in the civilian sector, and housing, which is a huge issue. It is in the area I represent. The Navy is doing a great job. As an example, I shared with you a couple of weeks, or a week or so ago, Fort Story, an Army post in Virginia Beach has 168 set of quarters. Two have been condemned, 166 meet no standards at all, and I think the Army people deserve a little better than that. The Navy is getting it, and I think the Army deserves the same. And health care. Believe me, right now I understand health care real well, and I think that's a good issue, especially for the active duty and the retired people.

The base closures, I'd be curious to know if they did come up with -- General, you mentioned there is 23 percent excess. It'd be kind of fun to know where that might be. I don't know if you've pinpointed it to different locations, but for selfish reasons, I guess, I'd like to know where that might be.

And let me make a comment on the ballistic missile defense. We can do anything we want to do. You know, we didn't get everything right when we were doing the space program. Mr. Kennedy said we'd be on the Moon by the end of the '60s, but a lot of missiles collapsed in the silos before we got that right. And I think we need a ballistic missile defense. We need it, and we need it now, and sure we're going to have some failures, but nothing ever gets achieved without some failures, unfortunately. That's just a fact of life. So I, you know, I fully support that and will support you in that as well.

And Mr. Bartlett mentioned the commissaries and exchanges. That's real important to the area I represent and I hope we're real careful how we do that, because that is a very important benefit that those folks deserve and need, and if privatizing it will make it better and we still have the same control we had before, then I'd be for that, but I'd like to be careful about that, again.

I thank the three of you very much for being here.

REP. STUMP: Thank you very much. Before recognizing Mr. Spratt, let me say that we're probably going to have a vote in five minutes. In fact, three votes; a 15-minute vote and a five-minute vote and final passage. That still should leave us about 30 minutes on the other side, so -- and those that do not or did not get a chance or do not get a chance to ask a question, we're working to reschedule. But in any event, if you want to submit the question to the committee, we'll see that it's in the proper hands and we'll get you an answer.

The gentleman from South Carolina, Mr. Spratt.

REP. JOHN SPRATT (D-SC): Thank you, Mr. Chairman. Mr. Secretary, thank you for your testimony. And I recognize the need for more defense spending and I've supportive of missile defense, particularly the ground-based system which is closest to completion.

But I have to tell you, as I read through the budget and recognize the cuts that are being made in the face of increases in some programs in order to make room for this enormous increase in ballistic missile defense, I have to question the prioritization in the budget. Fighter wings are going from 20 to 19. I understand you'll have still as many planes; you're cutting the B-1B bomber force by a wing. The Army's O&M money is up, but ops tempo, tank miles and stick time is still the same.

You've got a big increase in R&D, but when you look in your science and techs program you said you wanted to increase it by 3 percent; actually, it goes down by $200 million. Despite the big increase in R&D, the procurement program goes down by 600, 500 million dollars. That chart that stood there for the whole of the hearing is a kind of a stark reminder that for the amount of the increase in the BMD program, we could fully fund the recapitalization of the Navy, $3 billion a year. Instead, we're funding 5-1/7th ships, which won't sustain a 300-ship Navy, there's no question about it.

Yesterday, General Gordon was here from the NNSA and I asked him to describe his facilities needs and whether or not his budget was adequate for that purpose, for the nuclear weapons production complex. He said, "Congressman, my facility situation is in a crisis." His word, "crisis." And in fact, he told me, "This budget leaves me with a lot of unmet needs."

Sitting next to him was Assistant Secretary Huntoon. Her budget for cleaning up the nuclear waste legacy, which is a $200 billion obligati on over the next 30 or 40 years, has been cut by $400 million. In every state where she does business, she's got a compliance agreement and, frankly, she's not going to be able to keep up with that compliance agreement.

In light of that, increasing BMD by $3 billion seems to me to be lopsided and is proportionate. How do you -- in light of those unmet needs, how do you justify it?

And secondly, I read this budget and have to assume that all of these unmet needs are being laid off until next year, until the 2003 budget, which means that in order to meet these needs that aren't met in this budget, you're going to have to get a much bigger increase than this year's increment in future year budgets; is that correct?

SEC. RUMSFELD: The numbers are going to be roughly what I indicated in my testimony; that if you start with today's budget, assuming it passes like it is, and add inflation and add the sizable billions of dollars needed to take care of health care, and simply straighten out the funny numbers that were in the forward year defense budget, that you're up to something like 300 and -- what? -- 48 -- 46 , I said, just to stay even. All it does is fund the health and straighten the numbers out and deal with inflation without any transformation, without any improvement in shipbuilding for '03.

REP. SPRATT: Well I'm talking about the total defense budget in future years, '03 and onward.

SEC. RUMSFELD: I'm talking about just '03.

REP. SPRATT: Okay. Won't they have to be substantially more than this year's budget to meet the needs that aren't met by this budget?

SEC. RUMSFELD: Absolutely. That was my testimony.

REP. SPRATT: Three hundred and forty-three, though. I would have guessed that you're thinking in the future about a $35 billion to $40 billion a year increase instead of an $18 billion increase.

SEC. RUMSFELD: Well, what I was characterizing in my remarks was that if you start with today's budget and you add inflation, and you add the incremental costs that the actuaries tell us will be the healthcare burden that we'll have to carry forward, and third, if you straighten the numbers out for various types of procurement items that were underbudgeted in the existing base budget, you end up at $347.2 billion without even addressing the subject of modernization and

transformation. So you're quite right.

REP. SPRATT: Substantial increase.

Would you just comment on the proportion of allocation -- given all these other cuts, giving $3 billion --

SEC. RUMSFELD: Yes, sir.

REP. SPRATT: -- a 57 percent increase, to BMD?

SEC. RUMSFELD: Well, the way I look at it is the number is for missile defense investment, that is for theater and national missile defense, is something like 2 to 2-1/2 percent of the defense budget. It does not sound to me that if you recognize the power of weapons of mass destruction and the pervasiveness of proliferation, that investing something like 2 percent of the defense budget in defense against those kinds of threats is excessive.

REP. STUMP: The gentleman from Texas, Mr. Thornberry is recognized, then Mr. Simmons.

REP. MAC THORNBERRY (R-TX): Thank you, Mr. Chairman.

Mr. Secretary, I appreciate your candor when you said earlier that what has been put off is transformation in this budget. I know that you are concerned, as I am, that what's happening is what we've been doing for too many years in the past and that is meeting immediate needs and immediate problems at the expense of the future. And, obviously, what we have to try to do is figure out some wedge that we can get into this crisis that you're facing that will pay out in the future.

One of the things the president talked about in the campaign was taking some of the acquisition dollars and putting them under your office so that you could allocate some money in ways that maybe the service culture would not permit. I understand there is some consideration even of creating an Office of Transformation within the Office of the Secretary of Defense, maybe with some money to do that. Where is that? Because it seems to me you can't just create a policy office without the money; you have to have some weight behind it.

SEC. RUMSFELD: You're quite right, there is enormous pressure to fund immediate needs and to put off future needs. And one of the things we have done is to increase the request year to year for S&T, for research and development, and there is some transformation in there.

Another thing that has been done is there is an office or an entity where we are putting a modest amount of money, something like $5 million, to start it.

There also are important transformation steps being taken within the services, and we ought not to ignore them. The Army has been working hard on transformation, and there's no question but that there is a portion of the Air Force and Navy budgets which could be characterized as transformational.

Do you want to comment on that, General Shelton?

REP. THORNBERRY: Well, if I could just right quick. And I see on one of the charts we've been given, for example, Global Hawk and some other things, some significant increases.

I'm concerned, though, that $5 million is not going to get very far, and for --

SEC. RUMSFELD: That's not the totality of it.

REP. THORNBERRY: No, I understand. But I'm talking about in an office of -- which you can -- or under you, which can allocate some resources. You know, if we could even go -- we're not talking about huge money, but $20 million, $30 million could make a -- I think, a significant difference, just as doubling joint experimentation, as one of these charts shows, make a significant difference. I'm worried that $5 million is so small, though, that it can't even get the wedge in there.

SEC. RUMSFELD: Well, as I say, the five (million dollars) is one modest piece of -- that you would have to look across the budgets and aggregate it to come up with a number that we could characterize as transformational, and it's substantially larger than that. It still is what gets put off; you're exactly right.

REP. THORNBERRY: I didn't know if you had anything else, General.

REP. STUMP: Mr. Simmons, if you have a very short question, or we'll go to you when we come back. It's up to you.

REP. ROB SIMMONS (R-CT): I'll come back, Mr. Chairman.

REP. STUMP: All right.

Mr. Secretary, it's going to be necessary for us -- (to Representative Simmons) -- You said wait; right?

It's going to be necessary for us to recess for about 20 minutes. I apologize.

SEC. RUMSFELD: Yes, Mr. Chairman.

(Recess.)

REP. STUMP: The meeting will please come to order.

The gentleman from South Carolina, Mr. Spence.

REP. FLOYD SPENCE (R-SC): Thank you, Mr. Chairman.

And thank you, gentlemen, all of you, for coming down today and holding up under all these questions and comments and all the rest.

Mr. Secretary, we're pleased to have you here especially, and to see that we are having more for defense in the budget. And as you said, and I've been saying, too, but it's still not enough. I said that last year and I've been saying it for a good while; we need to do more. As you know, Mr. Secretary, this committee has taken advantage of your expertise on numerous occasions, the Rumsfeld Commission and others, and we appreciate what you've done in all these areas.

I have just a comment about base closing. Everybody else seems to be talking about it. And paraphrasing what some famous American has said, here we go again. We went through all this last year, and I remember very well we always asked the secretary, "Look, you need money to do all these things, and you're going to" -- just like you said this morning -- "you're going to buy more ships and aircraft and everybody's going to be happy, if we could just close these bases; that solves all of our problems."

And I always ask the question, how can you get money to do all these things right now, when, as you admitted this morning, Mr. Secretary, it will take, you said, two or three years? It will probably take more than that, based on past experience. The next administration might take advantage of it sometime later on down the line.

And so my observation would be that it's going to be difficult to do all these things about building more aircraft and ships and all these kind of things with the money that won't come -- If it ever does come, without cooking the books on environmental cleanup costs, for instance, it's going to be way down the down somewhere. And so I've never had the question answered by a former secretary, and I don't intend to really get an answer from you on that one, because nobody

knows how long it will take. And we have all these problems in the meantime to deal with.

And also about the military people being in favor of closing bases. That was always a -- they bought in last time on that, too.

They were told, "If you don't buy in on this, you know, you won't get any money," and so they had to buy in on it. And I think if you want to close bases, the first people you ought to ask about closing bases are the base commanders all over the country. Go out and ask them if they think their base should be closed. And if you find anybody that says yes, start off with them, and close those bases and see where you go from there. That would be real interesting to see how many people you'd get that thinks they ought to close that base. I don't mean people in the community, I mean the base commander themselves.

Another observation, too, along those lines, if my time hasn't run out, is the fact that after you close a base, a Navy base, for instance, you never get it back. They start building apartments and all these kinds of things and you never get it back when you need it if you need it in the future. The space dedicated to military air use has gone forever. You don't get that back when you close that airbase somewhere. The bases for -- we were talking about Vieques, the ranges and all those kind of things. You don't get it back after you close them because they go in and take advantage of it, all the civilian people do, with all the things they've got in mind.

One last thing about excess inventory before my time's up.

That might be excess facilities on a base, not necessarily a base. My time's up, and so I don't expect you to --

REP. STUMP: I thank the gentleman.

The gentleman from Connecticut, Mr. Simmons.

REP. ROB SIMMONS (R-CT): Thank you, Mr. Chairman. Thank you, gentlemen.

In the news release yesterday, on page four, I believe it was, it refers to strategic forces and precision strike. And it says, "The budget advances the president's initiative to re-shape U.S. strategic and tactical nuclear forces by funding design studies to convert two Trident submarines to cruise missile-carrying submarines." And I just want to say what a brilliant idea that is, and whoever came up with it, I commend them. I think that's a marvelous idea. I think it's cost effective, and I think it provides us with a significant strategic capability now and into the future.

I did have some questions for the record on the budgetary numbers, or the dollars attached to that recommendation. I could not find them in the hand-out. So --

SEC. RUMSFELD: I think it's $100 million has been set aside for that purpose.

REP. SIMMONS: And that would be in '02.

SEC. RUMSFELD: In the '02 budget amendment, yes, sir.

REP. SIMMONS: Okay.

My second comment follows your testimony, Mr. Secretary, page six. You refer to closing unneeded bases -- unneeded bases. I only have one base, and I do need it. (Laughter.) I just want to make that clear. (Laughs.) I see the admiral behind you smiling. I think he needs it, too. I hope he does.

SEC. RUMSFELD: (Laughs.)

REP. SIMMONS: But let me just say this. I have heard -- we've gone through the base closing procedure before. And I have heard that a substantial number of bases that were previously identified for realignment and closure are still on the inventory -- over 50 percent. I wonder if you had a figure on that, and I wonder if you could answer me this, that if, in fact, we have a high number that have been slated for realignment and closure that are still on the inventory, for whatever reason, wouldn't it wiser to proceed with closing all of those before we get into another somewhat tumultuous base closing process?

SEC. RUMSFELD: Mr. Congressman, I have never been through a base closing process, I can say with some pleasure. It can't be a happy event.

The only reason I can imagine that there are still bases that have been designated for closure that are not closed would probably be something involving environmental clean-up, which I would think has a long tail. And I'm guessing that, I don't know that of my own knowledge.

I would prefer not to have a Base Closing Round, needless to say. It is not pleasant.

But you look at the things we need -- and the chairman is exactly right; it takes some years, however many I don't know, to get any benefit from it. But the shortfalls that the armed forces face need to be addressed. And if you think of the comments of this committee today, almost every comment of concern has been about an area that needs more money: shipbuilding, airplanes, maintenance, infrastructure -- you name it. Where's it going to come from? I mean, where is it going to come from? It can't constantly be more. There has to be some way to manage this thing so that we can effectively be sensitive and respectful of the taxpayers' dollars.

And if -- and I must say, the suggestion that the military have asked to be -- to get in line and support base closure isn't the case. I have never asked any military person to get in line on something like that. I ask them for their honest, best opinion and they give it. And the military I talk to all believe they'd rather see the money go to something that benefits our national security rather than something that is clearly, in their view, excess.

Mr. Spence -- Congressman Spence's comment is, of course, also valid. You've got to be darn sure you know what you're doing so you don't give away something you're going to need later because you can't get it back. That's exactly right. So you have to be careful, and you can't do some sort of a macro percentage and say, "Well, we don't need this" because some day you may need some of that. And so you have to be very careful, I recognize that.

But together, we're going to have to find ways to save money. And there are too many urgent things that need money, and unless we find ways that we can get ourselves arranged so that the department has some flexibility to take the kind of steps that clearly need to be taken, we're not going to have the money we're going to need for our armed forces.

REP. SIMMONS: Thank you, Mr. Chairman.

REP. STUMP: Mr. Secretary, I know your departed time has arrived -- or departure time. Do you want to field one more or --

SEC. RUMSFELD: Sure. I can stay till 1:00, Mr. Chairman.

REP. STUMP: I think we have only two that have not been heard from.

SEC. RUMSFELD: Fair enough.

REP. STUMP: The gentleman from California, Mr. Hunter, then Mr. Kirk.

REP. DUNCAN HUNTER (R-CA): Thank you, Mr. Chairman.

Mr. Secretary, thank you for being with us today; General Shelton, Dr. Zakheim.

You know, I think that if you're going to be intellectually honest about this process, and we've been criticizing the Clinton administration the last six years for a shortfall in defense spending and analyzing, using your figures, General, the figures developed, and CBO's and OMB's and everybody else's figures with respect to ammunition shortages, equipment shortages, training shortages, pilots getting enough flying hours, munition shortages, everything from M-16s to our precision-guided systems, and the people shortages, that is the delta between the pay gap between our military and the civilian sector, you easily arrive at, without additional force

structure or transformation elements, you easily arrive at a $50 billion annual shortfall. And the budget that you're giving us here makes up $18 billion of that.

Even if you closed every single base that is on the prospective -- under these analyses of prospective savings for base closures, you come up with $3 billion. So base closure is not going to make up for these shortfalls, even if you did everything that the base-closing folks wanted to do, notwithstanding any valid questions about what do you have to do if you have to surge again and all of a sudden you need new airspace and you need new land space, you need new ocean space.

So this is for me, this is kind of a disappointing era. It's an era in which we came in to rebuild national security with an administration that I think wants to rebuild national security, at a time when you have a relative prosperity and a budgetary surplus; and all of a sudden we find ourselves making tortured statements to each other and deploring on both sides of this table today the shortfall in important military resources. That's sad, I think.

Nonetheless, I think we're going to have to wade through this thing. And Mr. Secretary, you're going to have to be really going to bat because I think, rather than having gone through the battle and succeeded maybe with not a full loaf but a couple of slices, you may have to fight hard to keep those slices. And so we're going to be with you in that effort. I think we've got to make a real effort, working in the administration, with the other body and with the American people, to try to keep the expected or the recommended resources that you've added to the budget here.

With respect to missile defense, let me just say this. If we don't meet the national missile defense challenge and the theater missile defense challenge, this will be the first time this nation has faced an era of new deadly military equipment on the other side in which we failed to respond. And if you look across the array of systems that we face today around the world, the only one where we have absolutely no capability of stopping the adversary's weapon is with respect to an incoming ICBM.

The question we asked the last six years of the Clinton administration was -- first question to SECDEF was, can you stop a single missile coming into a U.S. city or a troop concentration? The answer was always no. And added to that now you have the fact that there's no law that compels the North Koreans, if they should want to kill some of our 30,000 troops in theater in Korea, there's no law that says they have to shoot them with a slow missile; they could use one of the fast missiles they're now developing, which, under the demarcation agreements that the last administration attempted to ram through, we're unable to meet.

So let me just say that from my perspective, I want to see this administration test vigorously and test a lot, even if it means fail a lot, and get as much in the field as quickly as we can while continuing to try to develop a robust system with respect to missile defense.

Thank you.

SEC. RUMSFELD: Thank you.

REP. STUMP: Last gentleman today, Mr. Kirk from Missouri. Oh, pardon me; Mr. Akin. Mr. Kirk. I beg your pardon.

REP. MARK STEVEN KIRK (R-IL): Thank you.

Well, Mr. Secretary, good to see you. So glad you're here, and glad you've been finally unleashed to sell this budget. I'm going to be your strongest supporter to get this budget.

SEC. RUMSFELD: Thank you.

REP. KIRK: And the key priority that you have, on missile defense, is one that I personally felt. In '94, I was on duty in the NMJC (ph), spit out my Cup O'Soup when all the bells and warnings went off. We had a no-notice Nodong launch. And as the DEFSMAC computer reported the track, the impact zone was the entire United States in the early burn.

I saw the DDI advising the White House that we did not know if we were going to be advising the president 22 minutes from now that we had lost a city. We had two options: take it, see 4 million Americans incinerated, or deliver our counter-strike and kill as many people as Hitler did in an hour and a half. There were no moral options that day in '94. And I am so happy that you focused on this priority, to give this moral option to the president. I think this is not only essential to our own security, but key allies like Israel.

I just had a couple of small points. Hope you focus with Secretary Principi on DOD/VA medical sharing? It's very important in my district to combine our naval hospital and VA center, and I think there are several opportunities there.

Over the skies of Kosovo I saw the fruits of a classic bureaucratic mistake on behalf of the Air Force, who had surrendered all of her electronic warfare assets, and then fall on the mercy of the Navy to provide that electronic support, which was critical. It turned out to be the go/no go item of the war. We were not tanker-limited, as we though; we were EW-limited. And the Prowler fleet supported that. But it would have been nice if the Air Force had kept its capability. It did not, but hopefully we'll address those EW needs in the coming years and do that.

Lastly, I'm just very pleased to see your changes proposed, especially Admiral Jeremiah, on the personnel system, getting rid of (Up and Out ?). Charlie Moskos (sp), who was one of our next door neighbors, pointed out to me that 20 years ago a senior chief made seven times what an E-1 made, and now only makes two and a half times. And being able to keep and retain people and widen that disparity so that you're really rewarding people who are staying with the force, especially -- as an ensign, I learned very early senior enlisted men run the military. Keeping those people is key.

So I throw all that out for your comments, or -- just want to make sure you're successful. And I'll be fighting for your budget not just on this committee, but in a more difficult committee, the Budget Committee, where we'll get you the resources you need.

SEC. RUMSFELD: Very good. Thank you very much, Congressman Kirk. I have talked to the secretary of the Veterans Administration about the hospital issue that you have raised, and there's no question but that we do have to work closely with VA and make sure we make sense and have a rational program with respect to it.

Admiral Jeremiah's study has been very helpful, and there's no question but that we've got to find ways to target so that we can keep the people we need in the military and attract and retain them. And it is not an easy thing. Most companies have a great deal more flexibility as to how they're going to arrange their total compensation so that it's appealing to the various segments of the population that they need to attract and keep. And we have kind of a one-size-fits-all, for the most part, which is -- I mean, if you think about it, the new health program is very nice for people 65 and older; it does not do much for a young person who is coming in and is not thinking about ever being 65. (Laughs.) That's the last thing from their mind when they're 18 years old.

And we don't have very much flexibility in how we fashion that total compensation set of elements together, so that we can do a better job. But thank you.

REP. STUMP: I apologize to the gentleman for misidentifying his state. (Soft laughter.)

REP. KIRK: Oh, that's right.

REP. STUMP: Mr. Skelton, any closing remarks?

REP. SKELTON: Just a word of thanks for coming over, and we appreciate it. We look forward to working with you. Thank you.

SEC. RUMSFELD: Thank you, sir.

REP. STUMP: Mr. Secretary, thanks for the extra time. We appreciate it. Everybody had an opportunity to get in their questions.

We do have some that will be submitted for the record, if you'd be so kind as to respond.

SEC. RUMSFELD: We'll do that, Mr. Chairman. Thank you very much.

REP. STUMP: With nothing else, the meeting is adjourned. Thank you all. (Strikes gavel.)

MR. : Thank you.

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