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Testimony Before the Senate 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,, Dirksen Senate Office Building, Washington, DC, Thursday, June 28, 2001

SEN. LEVIN: (Sounds gavel.) The committee will come to order. The committee meets this afternoon to receive the testimony from Secretary of Defense Don Rumsfeld, Chairman of the Joint Chiefs of Staff Hugh Shelton, and also we see Dr. Zakheim is here -- we welcome you, Dr. Zakheim. They will be testifying this afternoon on the fiscal year 2002 budget amendment. We welcome you all back.

This may be actually the final time that General Shelton will be appearing before this committee to present his views on a defense budget before his term ends this fall. General Shelton, you have always put one cause above all others, and that's the well-being of America's armed forces and their families. History will record you as an outstanding chairman of the Joint Chiefs who left the U.S. military more capable than you found it. And on behalf of all of us, I want to take this opportunity to express our gratitude for the tremendous service that you have given to this nation.

Mr. Secretary, we all know that there's lots of reasons why the administration is late in submitting the amended budget request. But, as I mentioned at our hearing last week, the administration's delay is forcing the Congress to attempt in eight weeks of session what typically takes five months, and it will be an incredibly difficult task.

The men and women of our armed forces have a lot at stake in the FY 2002 national defense authorization bill, and every member of this committee is committed to working hard to complete action on this bill before the start of the new fiscal year. To do that the committee needs an actual budget proposal from the Department of Defense. So far we have received but a budget outline. We need details on specific budget line items. We need the justification books explaining these line items. This morning we received some of the legislative proposals that the secretary is asking this committee to consider. And, Mr. Secretary, given the extremely

compressed schedule that I mentioned, we just have to ask again for all of that information that I have outlined -- specific line items, the justification books and your legislative proposals, the balance of them, by next week.

While we have only had but 24 hours to review your budget request, certain aspects are beginning to emerge. The fog is still heavy, but it is beginning to lift. There are some positive aspects to the request -- efforts to build on the improvements in quality of life over the last few years with pay raises, reducing service members out-of-pocket housing costs, and increasing funds for military health care and family housing. But there are some puzzling aspects of your request as well.

For instance, despite a proposed $33 billion increase in defense spending over the current fiscal year, spending on procurement would actually decrease next year by half a billion dollars. And despite this science and technology also would decrease next year. And despite a $17.8 billion increase in spending for operations and maintenance, Army flying hours and tank training miles also would decrease.

At the same time, funding for missile defense would increase by $3 billion, from $5.3 billion to $8.3 billion, a 57 percent jump over this year's level. Every line item in the budget involves real choices. It's clear that this budget places a huge increase for missile defense ahead of important programs in modernization, basic research and training time for Army units.

Earlier this year many of us in the Senate expressed our concern that the large tax cut sought by the administration would leave little if any room for some essential investments, including defense. In fact, during the debate on the budget resolution, Senators Landrieu, Carnahan and others introduced an amendment to redirect $100 billion of the tax cut over 10 years to defense, only to have that amendment defeated. My ranking member, Senator Warner, offered an amendment, which was adopted in the Senate, which was then later dropped in conference, which also would have added funds for defense.

Under the terms of the budget resolution, the chairman of the Budget Committees in the House and Senate will decide if the current level of funding for national defense in the budget resolution should be increased to accommodate your proposed budget amendment. As the chairman of the Senate Budget Committee mentioned in a letter to the president earlier this week, with a new economic estimate from the Congressional Budget Office due in about a month, it would appear

that the $18.4 billion increase that the administration is requesting for the Defense Department in FY 2002 could lead into dipping into the Medicare surplus.

Moreover, the request before us is limited to fiscal year 2002. The secretary will testify today that an additional $18 billion increase to $347 billion will be required in fiscal year 2003, just to sustain the proposed 2002 budget level on a straight-line basis. This could take as much as $30 billion of Medicare funds next year alone, even without paying for any improvements or providing funding for the transformation of our military to meet new threats which the secretary will be proposing in the fiscal year 2003 budget following the completion of his defense strategy review and the Quadrennial Defense Review.

Our men and women in uniform depend on defense budgets that are sustainable. Yet it is increasingly apparent that the funding for any future transformation of our armed forces cannot be initiated or sustained without cutting existing defense programs or using the Medicare surplus or returning to budget deficits or cutting important domestic programs such as education, health care and law enforcement, none of which are acceptable alternatives.

The bottom line is this: the administration strategy of first laying out a banquet of tax cuts leaves other programs, including our national security programs, in an extremely and unnecessarily precarious position. In order to avoid dangerous instability in the defense budget in the future, the administration needs to address this situation and provide a clear plan for meeting and sustaining our defense needs.

Senator Warner.

SEN. JOHN WARNER (R-VA): Thank you, Mr. Chairman. I join you in welcoming our witnesses. Mr. Chairman, the Republicans are going to caucus today at 3:00, so I am going to forgo my opening statement, placing it in the record, thereby giving my colleagues who will be attending that conference -- I will stay here, I say to my colleagues -- the opportunity hopefully to have some questions before they depart at the hour of 3:00.

But I certainly join you in the recognition of our distinguished chairman of the Joint Chiefs in his lifetime contribution to freedom and to service in this country. I thank you and your family.

SEN. LEVIN: Thank you, Senator Warner.

Secretary Rumsfeld.

SEC. RUMSFELD: Mr. Chairman, I had planned to make about a 10 or 11 or 12 minutes of remarks, and ask that my statement be put in the record. I can do that. Or, if the senators have to leave, I could delay it until they have a chance --

SEN. LEVIN: I would suggest this --

SEC. RUMSFELD: I could do whatever you want.

SEN. LEVIN: With leave of my colleagues on this side, that because of that caucus that we -- instead of alternating, that we have, say, three or four on the Republican side ask their questions first and then come to us -- would that be agreeable? And I'm willing to also forgo my first line of questions as well. I don't want to do that -- we didn't have a chance to talk about that without consensus on this thing. Why don't we start out then in that direction, in any event.

Secretary Rumsfeld, why don't you start with your 10-minute opening, and then we'll call on our Republican colleagues, at least for a few minutes each while they're here to give them a chance to ask at least a few questions, and then we'll take the same number on this side.

SEN. WARNER: I thank you, Mr. Chairman, for that very special commendation.

SEN. LEVIN: Secretary Rumsfeld --

SEC. RUMSFELD: So you want me to go ahead --

SEN. LEVIN: Why don't you proceed for your opening, and then we'll call on our Republican colleagues.

SEC. RUMSFELD: Thank you, Mr. Chairman, and members of the committee. In discussing the budget, it seems to me it's useful to begin by confronting some less than pleasant facts but important facts: that 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 made in the 1970s and the 1980s. Shortfalls exist today in a number of areas -- shortfalls that I must say are considerably worse than I had anticipated when I arrived.

Mr. Chairman, as you and members of the committee know well, the U.S. armed forces are the best trained, the best equipped, the most powerful military force on the face of the earth. And certainly the members of this committee have contributed greatly to that strength. Peace, prosperity and freedom across the world are underpinned by the stability and security that the men and women of the armed forces provide.

I was recently in Kosovo and Turkey to visit our troops. They are dedicated men and women who are ready, willing and able to take on any mission the 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 '90s the U.S. has simultaneously underfunded and overused the force, and it has taken its toll. Asked to do more with less, they have saluted, done their best -- but it has been at the cost of needed investment in infrastructure, in maintenance and in procurement.

With an end of the Cold War, there was an appropriate drawdown, a peace dividend, a well earned peace dividend. But it went too far in my view, overshooting the mark by a good margin, and we are certainly well past the time to take steps to arrest the decline and put the armed forces on a path to better health. For example, many of our facilities are dilapidated and need repair and replacement. There are shortfalls in spare parts, flying hours, training and personnel. Navy

nondeployed force readiness is down some 40 -- down to 43 percent -- correction: down from 63 to 43 percent in 1991. Only 69 percent of the Air Force total combat units are mission ready, down from 91 percent in 1996. Seventy-five percent of the Army's major air and ground combat systems are beyond their half life. And some 60 percent of all military housing is characterized as substandard.

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 the equipment. It was called a "procurement holiday."

I know you agree that we have got an obligation to make certain that the men and women in the armed services have the proper equipment, training, facilities and the most advanced technologies available to them. The president's 2002 defense budget adds needed funds to begin stabilizing that force. Using the 2001 enacted budget of $296.3 billion as a base line, the president earlier this year issued a budget blueprint that outlined a 2002 base line budget of $310.5 billion. This included some $4.4 billion in proposed new money for presidential initiatives in pay, housing and R&D. The request before you proposes to raise that investment, as the chairman said, to a total of $328.9 billion, or an $18.4 billion increase.

Taken together these increases amount to some $22.8 billion. I am told that that represents the largest peacetime increase in defense spending since the mid 1980s, and it certainly would represent a significant investment of the taxpayer's money.

But let's be clear that 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 is no way it can be fixed in a year -- or even six.

I want to be very straightforward about what this budget will do and won't do. This budget will put us on a path to recovery in some categories, such as military pay, housing, readiness training and health care. It will start an improvement but leave us short of our goal in others, such as maintenance of weapons systems and reaching best standards with respect to facilities replacement. And in still other categories there will be continued shortfalls and modest, if any, improvements.

Consider in the private sector the standard for overall facility replacement is 57 years. DOD's target is 67 years. Under the 2001 enacted budget, DOD was replacing facilities at an unbelievably poor average rate of 192 years. The 2002 budget gets us closer. It would allow us to replace facilities at an average of 101 years. That's an improvement, but it's still a long way from the acceptable target of 67 years.

In my view, we could do better. With a round of base closings and adjustments that reduced unneeded facilities, we could focus the funds on facilities that we actually need, and get the replacement rate down to some lower level. Without base closings, to achieve the target it would require an additional $7 billion a year for nine years, for a total of $63 billion.

Mr. Chairman, let me just say a word about the 2003 budget. Today we are proposing $328.9 billion defense budget for 2002. But to keep the department going next year on a straight-line basis, with no substantial improvements, just covering the cost of inflation and honest budgeting for outyears in major weapons systems, and funding the health care, which is going to be another four-plus-billion dollars according to the actuaries, we would need a budget of about $347 billion. That's another $18 billion increase. And that would be before addressing important transformation issues.

So where do we find the money? We simply have to achieve some cost savings. We have an obligation to the taxpayers to spend their money wisely. Today DOD has substantial overhead, despite 128 acquisition reform studies, we have an acquisitions system that is antiquated, that takes twice as long as it did in 1975 to produce a weapons system. And this is at a time when technologies generations are shortened to something like a year or two or 18 months.

We have processes and regulations so onerous that a number of commercial businesses developing military technologies simply don't want to do business with the department.

The department needs greater freedom to manage, so that we can use the taxpayer's money more wisely. For example, I think we ought to consider contracting out commissaries, housing and some other services that are not considered core military competencies, and that can be performed more efficiently in the private sector. For fiscal 2002, the department proposes a pilot program to see if this is a good idea, 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 have never seen an organization that couldn't operate at something like 5 percent more efficiency if it had the freedom to do so. It's not possible today, given all the restrictions on the way the department must function.

With those savings we could increase the ship-building budget, which certainly needs it. We are on a six-ship basis now. It needs nine ships to maintain the 310-ship navy. If we keep going in the direction we are going we are going to end on down at 230 ships at a steady state, and that is simply not enough.

We could procure an additional several hundred aircraft annually rather than the 189 to help meet and reach a steady state requirement for the Army, the Navy and the Air Force, at enormous savings in maintenance and repairs.

We have a big task ahead. Since the Cold War, we have a 30 percent smaller force doing 165 percent more missions. This president's budget proposes a large increase by any standard. It will allow us to make some improvements to the readiness, morale and condition of our military. The taxpayers have a right to demand that we spend the money more wisely in my view. Today we can't tell the American people that we are spending it in the best possible manner. I know I can't. Fixing the problem is a joint responsibility. It will require a new partnership between Congress and the executive. We certainly owe it to the men and women in the armed forces.

I would point out that one generation bequeaths to the next generation the capabilities to ensure peace and stability and security. Today we have the security of future generations of Americans in our hands. We have certainly an obligation to get it right. I am anxious to work with you to achieve that goal, and it certainly will take the best of all of us. Thank you very much.

SEN. LEVIN: Thank you, Secretary Rumsfeld. General Shelton, do you want to -- I know you have got a longer statement, but perhaps just in a few minutes summarize the highlights, and we'll call on our colleagues who have to leave. I hate to do that to you -- we could call on you later in the afternoon to supplement or amplify it.

GEN. SHELTON: Thank you, Mr. Chairman. And I can either -- I can also submit it for t he record, if you'd like. I would like to thank you, Mr. Chairman, and Senator Warner, for your very kind words a few minutes ago about my tenure as chairman. It's been my great honor to serve the men and women of our armed forces. And I want to once again thank this committee -- each and every one -- for your very strong and staunch support of our men and women in uniform.

I can highlight a few areas if you'd like right now, Mr. Chairman. First of all, let me say with your help I believe we have made considerable progress in many areas that have impacted the overall health and welfare of our troops in recent months. Increases in pay and allowance, pay table reform, tri-care reform and extended health care coverage, additional funding to provide adequate housing for our military families, and the budget plus-ups to arrest a decline in our first-to-fight units have been critical and have been provided.

But let me also say that I believe we need to sustain this momentum if we are to preserve the long-term health as well as the readiness of our force in the 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 people in our military are the critical enablers that allow us to accomplish the things that we are asked to do.

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. In that incident 17 sailors died. Some asked why 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. The sailors of the U.S.S. Cole were en route to the Gulf, establishing presence and protecting our nation's vital interests.

And last December we had two U.S. Army helicopter that crashed during a very difficult night-time training mission in Hawaii. In that crash, nine U.S. soldiers died. Some ask, why would the U.S. Army put soldiers 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 we may face because we know that when America's interests are threatened, we've got to be ready to go, day or night, and failure is not an option. We try to minimize the risks to our great men and women, but we train like we anticipate having to fight.

And then, as we all know, just a few weeks ago we had an EP-3 that was a reconnaissance aircraft flying in international air space over the South China Sea, struck by a Chinese fighter, forced to make an emergency landing, and 24 of our personnel were detained. Some ask why we were conducting surveillance of another nation. Well, my answer is, that's what we do. We are vigilant. We are watchful, because we know that our interests and those of our allies in the region may be challenged. And if and when they are, we must be ready.

I'm very proud of the performance of these great 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 that unless there is an accident or an incident, then we rarely take notice of their daily contributions to our national security. They sail their ships, they fly their aircraft and they go on their patrols quietly and professionally. And America is safe and enjoying great prosperity in part because of them.

However, today our forces and our people are experiencing some significant challenges, a number of which I'd like to bring to your attention. Our first-to-fight forces are, in fact, prepared, trained and ready to meet emergent requirements. But some of our other forces are not as ready as they should be. These include our strategic airlift fleet, our intelligence, surveillance and reconnaissance assets, our combat service support units, and our training bases, all of which provide critical capabilities to our war-fighting forces.

These units are in some cases suffering in 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, DOD has experienced a 133 percent increase in the number of military personnel committed to join operations. These are real-world events, not exercises, and we're doing it with 9 percent fewer people. That has, in fact, caused a high operational op-tempo on some segments of our force, and that, of course, puts a strain on our people.

I believe the fundamental cause of this situation has, in fact, been an imbalance between the demands of our national security strategy and the post-1997 QDR force structure. Fixing this imbalance, of course, will be one of the top priorities for this year's QDR 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 -- near-term readiness imperatives, long-term modernization and recapitalization of aging systems, and infrastructure investments essential to preserve the world's best war- fighting capability. And as I've mentioned in previous testimony and as the secretary just commented on, we did, in fact, live off of some of our procurement in the 1980s throughout the 1990s. Now we've had a marked reduction in procurement, and that means the average age of most of our systems and our key war-fighting systems have been increasing, as was highlighted, to some extent, by the secretary.

Let me provide you with just a few examples. Our front-line air superiority fighter, the F-15, averages 17 years of age. It's only three years away from the end of its original design service. Our airborne tanker fleet, as well as our B-52 bombers, are nearly 40 years old. Our ISR, intelligence, surveillance and reconnaissance, along with our electronic warfare aircraft, such as the RC-135s, the EP-3s, the P-3s and our EA-6Bs, all average between 19 and 38 years of service.

And our main battle tank, the M-1 and the Marine amphibious assault vehicle, are powered by engines that were designed and in some cases built in the 1960s. And finally, numerous helicopter platforms from all of our services have passed or are approaching the end of their original design service lives. In fact, most of the war- fighting platforms that I just mentioned meet the 25-year rule required by the great state of Virginia to qualify for antique license plates.

Our force is not aging gracefully. In fact, we're having to spend significantly more each year to maintain our aging equipment in repair parts, in maintenance down time and in maintenance support. And, of course, that also increases the operational tempo of those great soldiers, sailors, airmen and Marines that have to maintain them.

If we don't replace some of these systems soon, either the force structure will shrink or we'll have to continue to maintain the old systems, resulting in spiraling operations and maintenance costs and reduced combat capability. In my opinion, these are unacceptable alternatives, which begs the question: What should we do?

I believe there are two things. First, we must bring into balance our strategy and our force structure, and we must significantly increase our efforts in procurement to modernize and to recapitalize the force. The QDR should produce the strategic blueprint and the investment profile necessary to shape our force to carry out the new strategy.

Another related concern is the fact that our vital infrastructure is decaying at an alarming rate. As Secretary Rumsfeld has commented, budget constraints have forced us to make some hard choices. And the fact is that in the real-property maintenance accounts today, we currently have a backlog that is growing that today totals over $11 billion. I think that a quality force deserves quality facilities, and therefore it's essential that we start providing the resources to reverse the

deterioration of our posts, bases, camps and stations.

Now, Mr. Chairman, I'd like to focus for just a second on the decisive edge of our force, the men and women in uniform. President Bush stated that a voluntary military has only two paths. It can lower its standards to fill its ranks or it can inspire the best and the brightest to join and to stay. This starts with better pay, better treatment and better training.

The president, I believe, 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, housing and other quality-of-life programs that are essential to sustain our force.

One of the most valued recruiting and retention tools that any corporation can offer potential employees or its current workforce is a comprehensive medical package. DOD is no different. For that reason, the chiefs and I strongly urge Congress to continue to fully fund the defense health program and all health care costs as a strong signal that we are truly committed to providing quality health care to our troops. I don't think there's 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 would ask for your support to help ensure that all of our men and women in uniform, single, married or unaccompanied, are provided with adequate housing. Unfortunately, this is not the case today. About 62 percent of our family housing units are classified as inadequate, and correcting this situation is essential if we are to improve the quality of life for our service members and their families. We've learned over the years that we recruit the member but we retain the family.

To sum up, Mr. Chairman, I believe that we have the best military, the best armed forces in the world today. But having said this, I believe that we will continue to enjoy our military advantage or that it will erode over time if we fail to prepare for the evolving strategic landscape for the 21st century. And our greatest adversary today, as I've said so many times, in my opinion, 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 challenges that we face in the future.

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

Mr. Chairman, thank you for the opportunity to make this statement, and we now stand ready to take your questions.

SEN. LEVIN: General Shelton, thank you. We're going to modify my announcement before on the order here. I'm going to first call on Senator Warner, who's going to allocate his six minutes. And then we will pursue the usual rotation after that.

SEN. WARNER: I thank the chairman. Two of my colleagues are going to be speakers at 3:00. So the senator from Alabama and the senator from Maine, if you'd each take my time, three minutes each.

SEN. JEFF SESSIONS (R-AL): Thank you, Mr. Chairman. And perhaps I won't use that. I would just like to thank Secretary Rumsfeld for challenging the system, for asking tough questions, to not, I believe -- (inaudible) -- anything's a sacred cow. The president indicated he was going to do that. I think it's your responsibility to do so. And I know you're just now beginning to get your staff approved and confirmed and on board. We're behind in that. But I know it's difficult to prepare a detailed budget during a time that you are giving fundamental review to the priorities of the Department of Defense.

So I, for one, am going to be as supportive as I possibly can, because when you testify you need this program or that program, I want you to have had the time to study it and make that recommendation with confidence and with the backing that you need. We are indeed increasing spending around this body an awful lot. Cutting social programs, Mr. Secretary, means that the projected increases can't be reduced. That's what cutting means in a social program. But on defense, we don't seem to be as determined to protect it.

I think it is a core function of our government to provide for the national defense, the national security. It ought to be given the highest priority in the tough budget-making issues that we face. I will support you on that. And I hope also, at the same time, that you will follow through, as you've indicated, on commitments to efficiency and productivity and research that can perhaps save us a lot of money in the years to come.

Thank you very much.

SEC. RUMSFELD: Thank you, sir.

SEN. SUSAN COLLINS (R-ME): Thank you, Mr. Chairman. First, I want to thank Senator Warner for his graciousness in letting me proceed and use his time so that I can participate in the conference.

Secretary Rumsfeld, General Shelton, you've certainly painted a very grim picture, which obviously indicates that these problems did not occur overnight. They've obviously been building for a long time, which raises questions of why the alarm bells weren't sounded in the previous administration. But leaving that issue aside, Secretary Rumsfeld, you've emphasized the difficulty in getting well in one year with this budget. And you've mentioned, with regard

to ship-building, that to meet the QDR target of 310 ships would require building at least nine ships each year at a cost of about $12 billion. Has the Pentagon considered recommending to Congress that we use advanced appropriations as a way to be able to step up the ship-building budget in a way that might be more affordable in the short term? I mean, ultimately we're still going to have the same costs. But is there consideration underway at the Pentagon to looking at advanced appropriations?

SEC. RUMSFELD: Senator Collins, that is an important question. And I am not an expert on it, and Dov Zakheim has been working with the Office of Management & Budget on it. I don't see any other way we're going to get that ship-building budget up and going in the right direction without doing forward-funding.

Whether or not the balancing of the pros and cons of it will be sufficiently persuasive with OMB is, I guess, a question. But it is clearly a way for us to increase the number of ships per year, which we need to do. We need to do it because we need the ships. We also need to do it because the industrial base and the shipyards need the work. And I'm certainly hopeful that we will be able to do that in addition to increasing funds in the ship-building budget in the coming year.

SEN. COLLINS: Thank you, Mr. Chairman. Thank you, Senator Warner.

SEN. WARNER: Thank you, Mr. Chairman. If I might just comment on that. Senator Levin and I and others met with you yesterday, and this was central to our discussions. And we want to join with you on this. I think that hopefully within the Congress there's a majority view that this is a way to aid ship-building and maybe other procurement accounts. So let's work together. If it requires some legislation, let's roll on with it.

SEC. RUMSFELD: Very good. Thank you, sir.

SEN. LEVIN: Secretary Rumsfeld, just on that last point, I think that this committee is more than happy to look at the pros and cons of these various approaches. But we've had these considerations before. There are some definite advantages, but there are some definite disadvantages to that kind of funding. And the committee will be happy to look at all of those advantages and disadvantages when you're ready to submit them to us.

I was struck, Secretary Rumsfeld, by your comment that the United States armed forces are the best-trained, best-equipped, most powerful military force on the face of the earth. I can assure you that this committee will continue to do everything in our power to keep it that way, just as we have in the past. This committee has acted consistently on a bipartisan basis to make sure that we are the best- trained, best-equipped force on the face of the earth. We've worked with our secretaries of Defense, with our uniformed leaders. We're going to continue to carry on that role.

Secretary Rumsfeld, the chairman of the Senate Budget Committee, Senator Conrad, sent a letter to President Bush with copies to you this week, outlining the fiscal challenges we face, particularly that relate to your budget amendment for the Defense Department. The chairman of the Budget Committee looked at the possibility that the impending summer revisions to our economic forecast could show that the small remaining surplus that was left for 2002 would evaporate because of a slowdown in the economy. Does the administration believe that your Defense budget amendment can be paid for in Fiscal Year 2002 without using the Medicare or Social Security trust funds?

SEC. RUMSFELD: Absolutely.

SEN. LEVIN: Last week the deputy secretary of Defense announced the creation of a senior executive council that would make key decisions on defense matters. This council does not include or does not appear to include, at least, the Joint Chiefs of Staff or other senior military leaders. Can you explain why they're not included in that council?

SEC. RUMSFELD: The group you're referring to is the deputy secretary and the undersecretary for acquisition, and, as I recall, the three service secretaries. They deal continuously with the chairman and with the chiefs of staff of the services. The issues they will address will be issues that are at their level and of the nature that are appropriate to them. Needless to say -- I mean, just for example, that group, plus Dov and I, have been involved with the chairman and the chiefs practically every day now for the last four weeks. And the interaction is continuous.

SEN. LEVIN: Thank you. At your hearing last week, Mr. Secretary, I asked you if you agreed with General Kadish's assessment that if you adopted and implemented the recommendations on missile defense from the missile defense strategy review that he has just completed, that those recommendations would not lead to a violation of the ABM Treaty in Fiscal Year 2002. You said that you would give us your answer relative to that after reviewing General Kadish's assessment.

Now that you're presenting the Fiscal 2002 budget, let me ask you this. In this budget request for Fiscal Year 2002, are you incorporating recommendations from the national missile defense strategy review, which General Kadish briefed us on June 13th?

SEC. RUMSFELD: It turns out that in our eagerness to consult with the Congress, General Kadish briefed you and the Congress prior to briefing me on that program. The program has not been briefed to me. It is in a state of some adjustment because of changes in the budget plan. Yesterday I met with General Kadish, my goodness, for I'm sure an hour and a half or two hours, and some of the people, to discuss the treaty aspect of it. And I'm prepared to speak to that. But the actual details of the R&D budget, not deployment budget but the R&D budget that General Kadish is working on, as I say, are still in a state of some flux.

SEN. LEVIN: Well, in the budget that you're presenting to us today, is there anything in that budget which would cause a violation of the ABM Treaty in Fiscal Year 2002?

SEC. RUMSFELD: We don't know for sure. That is to say, as you engage in a research-and-development activity, it is not clear how it's going to evolve. And General Kadish can't answer the question, nor can I. What we can say --

SEN. LEVIN: Well, let me interrupt you there. General Kadish did answer the question. He said it did not.

SEC. RUMSFELD: And that was a perfectly honest answer from his standpoint at that stage of his knowledge. As I say, he has --

SEN. LEVIN: You were briefed by him. How can you disagree, then, with his conclusion?

SEC. RUMSFELD: May I finish the sentence here on this so that we can get it completely clarified? General Kadish's program is still being adjusted. And therefore, we can't say that the program is final and therefore we know. Second, we can't know because it's a research- and-development budget, and it's impossible to be able to say exactly which R&D program is going to evolve or progress faster or slower than another.

What I can say is that the law is the law, and we will comply with it. I can also say there's a compliance requirement in the Pentagon that as things do evolve, it has to go through a compliance review. So the chances of anything happening that would be contrary to U.S. law or contrary to the treaty are zero.

Now, let me go to the next step. The president has said that he wants to pursue promising technologies and he wants to be able to, at some point, deploy a missile defense capability. The ABM Treaty doesn't permit that. That means that they're in conflict. That's why the president has said he wants to enter into discussions with the Russians and see if we can find a way to establish a new framework to move beyond the ABM Treaty.

And those discussions and talks began with my visit with the defense minister of Russia, Mr. Ivanov, and the president's meeting with Mr. Putin and Secretary Powell's meeting with his counterpart. And they will be starting up again soon. And the president's full intention is to find ways that the ABM Treaty will not inhibit his goal of providing missile defense for the American people and for deployed forces and friends and allies.

SEN. LEVIN: Senator Inhofe.

SEN. JAMES INHOFE (R-OK): Thank you, Mr. Chairman.

First of all, the -- we have -- we have a similar pilot crisis. I think we all agree with that. And one of the issues we talked about last year was the contract, the individually contracting out to retired military personnel some of the flying functions of non-combat vehicles. We had asked in our defense authorization bill last year that the DOD study this and report back to us by April as to what their recommendation would be. So I would like to ask the first question, we don't have – when are we going to get the report back? And secondly, what thoughts do you have on this -- this contracting out provision for retired military personnel?

SEC. RUMSFELD: I have -- are you familiar with it?

GEN. SHELTON: Sure. Senator Inhofe, we -- we, in fact, in the joint staff, completed a -- based on the requirement in the authorization act -- completed that study and have forwarded that up to OSD for review. It has not reached the secretary yet. We did examine all facets of it. To be candid, and not to go into too much detail here, but it doesn't look like that it will -- it doesn't look very promising at this point. There are -- there are numerous things tied into it, to include the combat readiness of the pilots that we train in those aircraft who end up being commanders of the larger aircraft in strategic -- in our strategic lift. But all that has gone up to OSD. You should be receiving the report, the complete report shortly.

SEN. INHOFE: Shortly?

GEN. SHELTON: Yes sir.

SEN. INHOFE: In a month?

GEN. SHELTON: Sir, I can't speak for the secretary. The report is --

SEN. INHOFE: Okay. Why don't you, just for the record, advise us when you think we'll get that, because that -- I think it certainly does have merit, and I'd like to kind of be -- bring it up for discussion at some point.

Secretary Rumsfeld, one of your management reforms -- you had talked about outsourcing depot maintenance workloads beyond a depot's capacity. Now, it's my understanding that you measure capacity by a 40-hour work week -- in other words, one shift, when there's capability in all of our three remaining air logistics centers, for example, have, at one time or another, operated with three shifts. My question would be, is -- wouldn't it be smarter to go ahead and change the definition of capacity and maybe have that capacity at two shifts as opposed to wasting that infrastructure and outsourcing when it's not really necessary.

SEC. RUMSFELD: Dov Zakheim's been working on this. My understanding is that the proposal relates just to backlog that is not being met. So, if a depot is not able to meet the backlog, that that -- that then would be freed up for different outsourcing.

SEN. INHOFE: But if the depot is not able to meet that because they're using the current definition of full capacity, wouldn't it be advisable at least to explore expanding that capacity by increasing shifts from one to three, or from one to two shifts?

SEC. RUMSFELD: I'd be happy to take a look at it.

SEN. INHOFE: Okay. Why don't you -- yeah, do that, and let us -- maybe answer it for the record.

I was very pleased to see that the Crusader is going to receive the funding that would put it on line, I believe in '06, I'm not sure, General Shelton. But I think you're in agreement, as most of the Army people are, as to where we are right now with the old Paladin, the fact that it's an out-dated system. And many of our prospective adversaries have a lot more capacity than we have. Is there any chance that you would be able to move that up from '06 to like '05 in terms of having

one deployed and operating?

GEN. SHELTON: Senator Inhofe, I think that as part of the QDR process, part of the examination of our strategy and our force structure, that that system, like all of the other systems that we've got, will undergo a review. And as part of that, certainly we -- in the Army's overall plan for transformation, where they would need that to dovetail in with their objective force, or with their interim force even, is what will have to be examined. And, of course, in that become the priority issues, of where they would prioritize that. And I can't speak for the Army right now. I'll have to take that one and get back to you.

SEN. INHOFE: Well, I am pleased that they made the evaluation that they did and the commitment that they did, and the funding that they did. But I – Senator Warner and I both had the opportunity to go out and see the reason that it is necessary for us to update our old, 40-year-old Paladin system so it can at least be competitive.

GEN. SHELTON: Yes sir. It represents a quantum leap in capability.

SEN. INHOFE: The modernization cuts proposed at the B-2 include insulation of the new satellite communication system, link 16. We've been talking about this for quite some time. And I understand that in this budget that you're proposing to cancel the 123 -- 123 million in the B-2 modernization funding. And, I was – I was surprised when I saw this after the performance that we witnessed with this, and the criticism that -- of not being able to change missions en route, during the Kosovo operation, for example. Am I accurate in what the budget has on this, Secretary, Rumsfeld? And can you tell me what the thinking was behind it in terms of the cutting of that updating of the B-2?

SEC. RUMSFELD: I would have to look back into that and get back to you on that. Unless, Dov, do you have that?

MR. ZAKHEIM: No. This is -- we need to look into it.

SEN. INHOFE: Well, perhaps it's not true then, because -- and I would certainly, again, like to have that answer for the record. Thank you, Mr. Chairman.

SEN. LEVIN: Thank you very much. Senator Lieberman.

SEN. JOSEPH LIEBERMAN (D-CT): Thanks, Mr. Chairman. Secretary Rumsfeld, thanks for your testimony. Let me say first that I'm pleased to see that the budget that you and the president are offering us today, despite the fact that it is a place holder, does build on the bipartisan efforts in this committee and Congress over the last years to regain real growth in defense spending, which we've done for the first time since the mid-'80s, and that this budget does include an increase over last year.

Although we've not seen the details and therefore it's pretty hard to endorse them, nonetheless, I applaud the increase that you are recommending, and I will support it. In fact, in looking over the material we have so far, I think the increase in defense spending, which the president and you are recommending, is actually too small to meet our national security needs. While it does make much needed progress in quality of life and compensation, and in restoring deteriorating infrastructure, I don't think it meets the goals of bolstering readiness and transforming military capabilities. In fact, resources to support op tempo are flat or down in the categories you have shown us so far, such as flying hours and tank training miles. I think it was General Patton who once said, quote, "First class training is the best form of welfare for the troops" end quote -- another aspect of quality of life. And I think the budget so far falls short there.

Also, after factoring in increases for the ballistic missile defense, spending for research, development, testing and evaluation appears to be no better than flat. Basic research and advanced research, the source of the technology we will need to transform the entire military, is flat, and is well below the goal of three percent of the budget, which itself I think is too low. And that is not consistent with your transformation goals.

I'm also very concerned that procurement spending in this budget is not what it should be, even after accounting for additions from transferring missile programs from the Ballistic Missile Defense Office to the services. Even if the QDR concludes that we will not transform our force -- which I hope it does not – we nonetheless must modernize. And one independent analysis -- and it's only one of many that have suggested this, this one done by the Center for Strategic and

Budgetary Analysis, headed by Dr. Krepinevich, concluded that modernizing the existing force on the current schedule would require between 65 and 85 billion per year, or five to 20 billion more than is in this year's procurement budget. Accelerating the schedule would require 75 to 95 billion per year, or between 15 and 35 billion more than is in this year's budget. And even cutting the current force and cutting modernization programs could cost 65 billion per year, which is five billion more than you have in this year's budget. The fact is that bold transformation such as I think you are hoping for, and I agree with you, will add substantially to those estimated cost increases.

So, as I said at the outset, I endorse the defense increases you propose, and I would personally support a larger increase, because I believe that's necessary to keep the American military dominant into this century, this new century.

Let me -- let me just ask you on two of those points that I've just made -- the first on procurement. Don't you agree that in fact we need more, whether for a transformed or modernized force, than the amount you've requested for procurement?

SEC. RUMSFELD: Yes sir. The goal for procurement, as you will recall in recent years, has been to get up to $60 billion. It -- last year it was -- '01 with the supplemental will be 62, and for '02 we're proposing 61.6. So it's quite close, but it is not at a level of increase that would modernize the force, and I quite agree with you.

The op tempo -- it's a matter of choices. The -- the Air Force, for example, has an increase, whereas the Navy and Marine Corps took a slight decrease, as they chose between the things that, with finite resources, they have to choose between.

With respect to RDT&E, the number actually is up from 41 billion to 47 billion, with some focus on transformational R&D -- countering unconventional threats to national security, improving RDT test range infrastructure, and reducing costs of weapons and intelligence systems.

On op tempo, it's uneven. The Army, you're quite right, their tank hours went down from 14.5 to 14. The Navy, on the other hand, went up from 17.8 for their tactical forces to 22.6. And the Air Force held level at 17.1 in terms of flight hours. And on ground op tempo -- that was Army air, I apologize. It was the 14.5 to 14 was for Army air. The tank miles is different. They actually did go down, as you suggested, from 800 to 730. The Army made those kinds of choices. The

National Training Center stayed level at 97. And ship operations stayed exactly level at 50.5. So it's a mixed bag -- some up, some down, a number staying right where they were on op tempo.

SEN. LIEBERMAN: Let me go to the first part of your answer, if I may, Mr. Secretary. If, as I gather, you agree that we, in the best of all worlds, should be spending more on procurement now, did you request that through the budget process of OMB?

SEC. RUMSFELD: We -- I guess it's not -- I don't think -- we certainly presented to the Office of Management and Budget and the president the budget that we felt would be desirable for the department. The process then is, as you well know, to look at all their needs, in Social Security and various other things that are going on in the government and come to a conclusion, and this is where we came out. The largest increase since 1986, seven percent in real terms, as I understand it, and yet not sufficient to dig us out of the hole that we've been digging ourselves for the past five, or six, seven years.

SEN. LIEBERMAN: So, I sort of presume in the normal course of the budgetary exercise that you didn't get everything you wanted.

SEC. RUMSFELD: You seldom do.

SEN. LIEBERMAN: And therefore there's some room for this committee hopefully to make some independent judgments about the budget for the Pentagon.

I would just say very briefly, in response to, Mr. Chairman, on the RDT&E, it's true that there's been a substantial increase, although as I look at it, most of it -- not all of it, is in the defense wide area, which is mostly missile defense, and the increase to the services, except for the Navy and Marine Corps is not -- not great. And I just -- the one part I do want to focus on, and I hope the committee can take a separate look at, is the science and technology budget, because there the total for this year is nine billion, and you're recommending 8.8. And I just think we're not going to be able to do what we need to do unless we're investing in the technologies of the future.

I've gone over my time. Thanks, Mr. Chairman.

SEN. LEVIN: Thank you very much.

MR. : Senator Lieberman, the -- actually, on RDT&E, the Army is up from 6.3 to 6.7. The Navy and Marines up from 9.4 to 11.1. Air Force is up from 14 to 14.3, and defense wide is 11.3 to 15.3. The transformational R&D, there are any number of items, including Global Hawk, future combat system digitization, joint tactical radio systems, and several others.

SEN. LEVIN: Thank you. Senator Roberts.

SEN. PAT ROBERTS (R-KS): General Shelton, well done, sir. Thank you.

GEN. SHELTON: Thank you, sir.

SEN. ROBERTS: At about 3:30, Mr. Chairman, I thought I had arranged a B1-B flyover from McConnell Air Force Base -- (laughter) -- to fly about 30 feet over the Senate office building, and perhaps -- and perhaps over the Pentagon. That's a poor attempt at humor, that perhaps Senator Cleland would enjoy, a little black humor.

I am discouraged. I am frustrated. And I am angry, Mr. Secretary. More to the point, the men and women of the 184th Bomber Wing, in Wichita, Kansas, at McConnell Air Force Base share my discouragement, my frustration. I don't know if they're angry. They should be. And I'll tell you why.

At our last hearing, I asked you to include the Congress as you go forward with your transformation. I believed your stated resolute position to review transformation recommendations carefully before decisions were made. I was very disappointed -- that's not strong enough. I won't tell you how strong I felt on Tuesday when, and without discussion from the Congress of any kind, no consultation, and from my view, with little close review by senior leaders in the DOD, the decision to significantly reduce the B-1 bomber fleet was announced, and also the decision to take the B-1 bombers from Georgia, Idaho and Kansas and put them

in South Dakota and Texas.

Dr. Zakheim, your able assistant there, told staffers the -- that evening, the way this was handled by the services was a model of what DOD is trying to do to cut excess. I sure as heck hope that that is not a model on how you're going to consult with the Congress.

Now, I've been quoted as stating that I thought that politics may have played in the decision to place the B-1s in South Dakota. Why would I say that? I don't think that this secretary is going to do that. I didn't think anybody in the Air Force would do that. Well, I said it because I have here a political impact statement from the United States Air Force. And it says here in regards to Texas, the home state of POTUS I don't know of any senator named POTUS -- (laughter) -- I do know of a president by the name of Bush whose home state is Texas. And then it says Senate majority leader, home state of South Dakota, for the political impact. Now it gets to Georgia, and it gets to Idaho, and it gets to Kansas, you don't find any mention of Senator Cleland, or Senator Roberts, or Senator Craig, or Senator Crapo. I don't know what doofus over at the Air Force put this out, but if there is a political impact, why he put it on a piece of paper is beyond me.

Now, I'm angry because of the apparent piecemeal approach to transformation that this appears to represent -- any lack of any coordination with members of Congress. Will other programs receive the same consideration? Will the senators from affected states and on this committee find out one morning of the Navy's decision to reduce or cut the DD-21 or the Army decides to cut the Crusader? Maybe we're moving from 10 army divisions to eight. We cannot have a piecemeal approach to our transformation. These actions to cut or reshape major weapons systems must be part of an overall plan, and Congress must be included.

Now, I'm going to make every effort -- and you know this, we've talked about it -- to stop any movement of the B-1-B aircraft until I am confident, and Senator Cleland is also confident, that this decision fits into our national defense strategy, has had the proper review in every aspect of such a decision has been considered. I will do the same for any decision on any major weapons system if the proper reviews have not been made.

So, I would appreciate your comments, sir, on this recently announced decision on the B-1 platform, including the time line for such action, the choice for the locations of the remaining B-1-Bs, and please include how future weapons systems -- pardon me -- please include how future weapon system decisions will be coordinated with the members of the Congress. Now, you don't have to answer that right now. You have in your possession somewhere in the Pentagon a letter sent to you by myself, Senator Cleland, Senator Miller, Senator Brownback, Senator Craig, Senator Crapo, and about eight or nine congressmen over on the House side. We point out you've indicated the global environment will likely include limited access to overseas bases -- that's correct -- and require a strategy dependent more on long-range precision strike, and that's correct.

This is the primary mission of the B-1 bomber. It's being plussed up in terms of offensive capability, so that can't be a consideration. In terms of the strategic portion of this, I don't understand it. In terms of the cost-benefit, I really don't understand it. The Kansas Air National Guard has made a historic mission-capable rate of an average 15 percent higher than active duty, 25 percent less cost per flying hour. They do it better than any other outfit in this United States from a cost-benefit standpoint.

And that's not all. We have a GAO report, if I can separate it from the other reports. It's about a year old and it says basically that we made a good decision in turning over the B-1 to the Reserve and the Guard. And it goes on down to the exercises in Kosovo, Operation Desert Fox. "These operations also prove the value of the B-1 is a solid long-range performer validated to CINC's option to provide combat punch without the arduous basing problems that other short-range weapons endure." That's the GAO report.

I have a CRS report saying the same thing, comparing the B-52. General Shelton just said we have aging aircraft -- don't come around to that damn note -- (laughter) -- has aging aircraft under the B-52 and the B-1 and the B-2. And we compare very favorably, if not more favorably, compared to the B-52 and the B-2. Let me quote General Lowe, General John Michael Lowe, at a Pentagon press briefing. I'll just sum it up. "Throughout this test, we proved the B-1 can pack up, go anywhere in the world, put bombs on target at the combat readiness rates we need and expect. It remains and is the backbone of our bomber fleet."

Now, in response to our letter, you indicated that McConnell Air Force Base loses all nine B-1s -- no, you didn't indicate that; that was your original statement -- and opens up 832 manpower authorizations. I think there's 1300, but if you say there's 832, that's better. And then, the day after, after we raised a fuss, and then we say that we lose all the nine B-1s, but actually we're going to find a new mission. Well, these people have 15, 20 years' experience. They've flown in every aircraft imaginable. I don't know what kind of a new mission they're going to find in Wichita. I'm for that. God, don't take that away.

We want some answers. We want some answers on the strategic side, on the cost-benefit side. Mr. Secretary, if this is the way we're going to consult in regards to transformation -- I thought we were going to have a situation here where we got well first, then we're going to consult with the Congress with transformation, then we're going to go to the QDR. And I think, on a bipartisan basis, everybody here would support that. This is not the way that this should happen.

Now, I'm way over time. If you'd like to say something, I'd like to invite your comment.

SEC. RUMSFELD: Well, Senator, I would begin with a very, very sincere apology to you and Senator Cleland. There is no question but that it was not handled well. The Air Force made this recommendation and it was executed, and unfortunately the secretary of the Air Force was out of the country and the handling of it was not well-done. And I apologize for it, and I don't know what else I can say.

With respect to the details as to the specific questions you've raised, we will certainly take the time and sit down and get the specific answers and look at it in the context that you requested.

Third, your general comment about how the weapon systems were going to be handled is exactly correct. It is exactly what I said when I was last before this committee. It is exactly how it's happened. And the normal order of things is that these issues are being addressed in the quadrennial defense review. They will be addressed in an orderly way, in context with each other.

And finally, with respect to how it is possible to consult, what we, I suppose, could do -- I haven't really thought it through as to exactly how we can consult with the House and the Senate Armed Services Committee and the Appropriations Committees that have the particular interest in these subjects, but there isn't any reason at all that we can't find periodic break points in the QDR process and offer opportunities for senators and members of the House to become aware of how the progression is going.

Now, at some point someone is going to make a recommendation on all of these weapon systems that are coming down the road. And at the point that a recommendation is made, one would hope that they would be looked at together, as you properly suggest is the desirable way to do it.

Ultimately, a decision will get made, and someone's going to like it and someone isn't going to like it. And all I can do is express the hope that when those decisions are made, we will have looked at them in a manner that is satisfactory to the members in terms of the quality of the process, and that we will have made particularly members of this committee and the House committee knowledgeable about how that decision is evolving and what the arguments are so people are not blindsided badly, the way you and Senator Cleland have been. And again, I apologize.

SEN. ROBERTS: I appreciate that. Thank you, Mr. Chairman.

SEN. LEVIN: Thank you, Senator Roberts. Senator Cleland.

SEN. MAX CLELAND (D-GA): Mr. Secretary, I'm just here to say that the emotion, the feelings, the rage expressed by my dear friend from Kansas, is bipartisan. It's deep. It's profound. This decision on the B-1 bomber and the way it was handled looks like to me a mackerel in the moonlight. It both shines and stinks at the same time. After all, it was the Reagan-Bush administration that cranked up production of the B-1 bomber in the first place. And after the Cold War was over, the country no longer relied on the triad of missiles and submarines and bombers to retaliate in the case of nuclear attack.

Then President Bush, Secretary of Defense Cheney and Chairman of the Joint Chiefs of Staff Colin Powell found a new role for the B-1. It is as the senator from Kansas suggested. It would no longer be massed in the center of the country to protect it from enemy attack and preserve precious minutes in response time for takeoff under a nuclear-strike scenario. It would be dispersed and given a conventional role of supporting forces deployed around the globe.

It would be dispersed west to Kansas and Idaho for quick response to the Pacific and Asian theaters. It'd be deployed east to Warner- Robins Air Force Base in Georgia for quick response to action in Europe, the Middle East and the Balkans. Its dispersion meant quicker response to a changing global environment and a lesser chance of terrorist or sabotage attack knocking out the force centered in one or two sites. Although the B-1 bomber saw limited action in both Desert Storm and the Balkan war, it still today serves the purpose as the nation's only supersonic bomber capable of conventional and unconventional machines.

Additionally, the decision by the Bush administration in those days committed the Air Force to build up extensive infrastructure to support the B-1 bomber in its new dispersion plan. This was offset in one way by letting the Air Guard maintain and operate the bombers in two states, Kansas and Georgia. This became a very effective means of accomplishing the B-1 bomber task.

The two most cost-effective B-1 bomber wings in the world are the two run by the Air Guards of Kansas and Georgia. As a matter of fact, the GAO report to which the distinguished senator from Kansas referred to, in 1998, says, "Whether the Air Force chooses among our options or develops options of its own, we believe millions of dollars could be saved without reducing mission capability by placing more B-1s in the Reserve component. Therefore, we recommend that the secretary of Defense direct the secretary of the Air Force to prepare a plan to place more B-1s in the Reserve component and seek congressional support for the

plan."

As the senator from Kansas states, the National Guard B-1s have a mission-capable rate higher than that of the active-duty Air Force. The Air National Guard B-1 units have a lower flying-hour cost than the active-duty Air Force B-1s. At Warner-Robins in particular, $100 million was committed over a period of 10 years to bed down a B-1 bomber wing. Some $70 million has already been spent in that effort. Recently a $40 million brand-new hangar was just completed a couple of months ago. And ironically, the two newest facilities for the B-1 bomber and the two most cost-effective facilities for operating a B-1 bomber wing are the very ones

you want to shut down.

I think this puts us back in the Cold War mode, puts us back where we were before President Bush, Dick Cheney and Colin Powell made the decision to embark on the policy we've lived with for a decade. Now, walking away from $100 million in brand-new infrastructure and cost-effective operations does not seem to me to be like a formula for saving money. I would like to know, and I'd like it explained to this panel, why did you go against the GAO recommendation and why did you make this decision?

SEC. RUMSFELD: Senator, the decision was made by the Air Force, and the logic of it is that they wanted to go from 93 B-1 bombers down to 60 B-1 bombers and to change the basing mode from five down to two to save funds and to use those savings in funds from going from five to two bases and reducing from 93 to 60 B-1 bombers. They wanted to use the funds to upgrade the remaining B-1 bombers.

There's an interesting footnote in history. I was the secretary of Defense in 1976 that first approved the B-1 bomber. It was later canceled by the Carter administration, as I recall, and then reinitiated in the Reagan period.

SEN. CLELAND: Well, I will ask the GAO to take a new independent look at this decision, to give this senator and this committee an objective analysis of where we are on the B-1 bomber program and suggestions as to where we should go. Any decision regarding the B-1 bomber program should strengthen the security of the nation, not weaken it. And I'll be going to Warner-Robins tomorrow to see for myself what the facts are.

Thank you very much, Mr. Chairman.

SEN. LEVIN: Thank you, Senator Cleland.

SEN. WARNER: I'll wait till your people --

SEN. LEVIN: Senator Warner is yielding very graciously. Senator Reed.

SEN. JACK REED (D-RI): Thank you very much, Mr. Chairman. Let me first add my commendation to Senator Levin and Senator Warner to General Shelton for his great service to the nation.

GEN. SHELTON: Thank you, Senator.

SEN. REED: One would expect nothing less from a former brigade commander in the 82nd Airborne Division.

GEN. SHELTON: Thank you, sir. Airborne.

SEN. REED: Let me, if I may, Mr. Secretary, follow up a line of questions about national missile defense that Senator Levin began. My understanding of your response is that, as we look forward in this budget cycle, the Ballistic Missile Defense Office will be involved in intensive, aggressive research activities that, if those activities present opportunities, those opportunities will be exploited even if they violate the ABM Treaty.

SEC. RUMSFELD: Let me clarify that. The president has said that he does not want to simply give notice under the treaty, which is permitted, a six-month notice, and then go on his way apart from Russia. He has said he would much prefer, and told President Putin this, that he would much prefer work with the Russians and see if they can't come to some understanding of a new framework with respect to the relationship that goes beyond missile defense, that includes reductions in strategic offensive forces, that looks at proliferation and counter-proliferation. And that is his hope. That is his intention.

He has also said that he intends to have a ballistic missile defense capability for this country and for our deployed forces overseas. And to the extent friends and allies want to participate, fine. The treaty is inconsistent with his goal of having the ability to protect population centers and deploy forces. Therefore, he has said he wants to set it aside or get beyond it and establish some other framework. That process is underway. It was started, as I said, with the president's meeting with Mr. Putin. The two of them have agreed that the ministers of foreign affairs and of defense will meet. We are supposed to begin that process of discussions at some point in the period immediately ahead.

The president has also said that he does not intend to give a veto to Russia over whether or not the United States has the capability of defending its populations from ballistic missiles. So I think the way to think of it is that the R&D program is going forward. There is a compliance -- the law exists. The treaty exists. The president does not intend to violate the treaty. The president intends to set a process in motion to discuss with the Russians how we get beyond it.

Now, clearly, if they are unwilling to do anything to get beyond it, the president has indicated that therefore he would very likely give notice to the Russians and allow the six-month period and go ahead and do the research and development that is inhibited by the current treaty. But that's not his intention. That's not his hope. And I must add, it's not his expectation.

SEN. REED: Thank you, Mr. Secretary. Let me turn to a more specific issue with respect to this area of national missile defense. There was a story today in the Wall Street Journal that a contract has been prepared for the construction of an interceptor site nearly Fort Greeley, Alaska. Has this contract, in fact, been prepared? And are you entering into discussions with the contractor to construct a facility at Fort Greeley?

SEC. RUMSFELD: I saw the article and I asked about that. And my understanding of that situation is that there is a contract that is in the process of being prepared, and it does involve Alaska and it involves site preparation. And it has not been let, to my knowledge. And it would not violate the treaty. Correction: It would not constitute an act that would be beyond the permitted acts under the treaty, I am advised.

SEN. REED: This approach sounds similar to an option that General Kadish briefed the committee earlier this month to have up to 10 "test," closed quote, missiles available for operational deployment using an upgraded existing radar on Shemya Island in Alaska. Does this budget contain funds to upgrade that radar or to build the interceptor silos in Alaska beyond the issue of the contract preparations?

SEC. RUMSFELD: As I indicated to Senator Levin, General Kadish, which was perfectly proper, briefed the committee on his thinking prior to the time that he had firmed up his research-and-development plans. Those plans have not been firmed up as of this moment, nor have I been briefed on them.

You're exactly right. In his set of options, one of them involved the possibility of upgrading an existing radar in Alaska and putting certain number of interceptors in silos in Alaska. I'm told by the lawyers -- to go back to Senator Levin's question, I'm told by the lawyers that there is a debate among the lawyers as to whether, if you actually did those things, as opposed to just site clearing, if you actually did those things, whether that would constitute going beyond what the treaty permits or whether it wouldn't. And there are lawyers on both sides.

And apparently part of the issue involves intent. If it is intended that it be a test bed, apparently more lawyers than not believe, therefore, that would not exceed the treaty. If it is intended not to be a test bed but possibly a prototype of some sort, then some more lawyers would switch over and say, "Well, maybe that might be."

The problem is, I'm not inclined to get into that business. I'm not a lawyer. I think that why does the United States want to put itself in a position where someone can say, "Well, you violated the treaty or didn't violate the treaty," and one lawyer argues with another lawyer? We want to get into the discussions with the Russians, get the treaty straightened out, get a new framework that gets beyond that so this country can go forward and do what the president has indicated he would like to do.

SEN. REED: My time has expired. Thank you, Mr. Secretary.

SEC. RUMSFELD: Thank you, sir.

SEN. LEVIN: Ready?

SEN. WARNER: Let all your guys go.

SEN. LEVIN: Senator Akaka.

SEN. DANIEL AKAKA (D-HI): Thank you, Mr. Chairman. Mr. Secretary, I'm particularly interested in your request to raise the threshold for contracts subject to Davis-Bacon wage requirements from $2,000 to $1 million. Your request states this policy would lead to a savings of $190 million in FY '02. I'm concerned about the impact that your proposal would have on local economies, businesses.

The question is, what assurances can you provide to mitigate the negative impact this would have on federal workers and local economies? And what steps would the department take to avoid the problems experienced by states, who have prevailing wage laws which include cost overruns and (expense?) change orders, to correct mistakes and poor workmanship?

SEC. RUMSFELD: Senator, I'd like to ask Dr. Zakheim, who's been working on this specific issue, to respond to your question. Thank you.

MR. ZAKHEIM: Senator, as you know, the Davis-Bacon Act has been around for quite some time. At the time it was enacted, a million dollars was an awful lot for a contract, I believe. We're now talking about contracts much, much larger. And so a million-dollar contract today is really a relatively small contract. That's one point.

Secondly, the questions you raise are extremely to the point and there would certainly be efforts to mitigate the kinds of impacts you're talking about. But clearly, at the present, a $2,000 contract is not terribly much. Most contracts are well above that. And effectively it means that in no circumstances, barring very, very minimal ones, can the situation take place where one pays non-union wages to non-union workers.

We are trying our best to find a variety of management reforms. One hundred ninety million dollars is a significant amount. And at the same time, we take your concerns under advisement and people are looking at those.

SEN. AKAKA: General Shelton, I agree with your goals for sustaining a quality force. I believe we need to address the quality of life for our service members and their families through increased pay, improved housing, reducing out-of-pocket expenses and improved health care for our military retirees. And I share your concerns regarding the deteriorating infrastructure and its impact on readiness, and the quality of life for service members and their families. So I support your efforts to address this situation.

Given your identification of modernization as your biggest priority, my question to you is do you believe that the FY02 budget adequately addresses this issue?

GEN. SHELTON: Well, thank you, Senator, and thank you for your support on those very key issues for our men and women in uniform.

I believe that the FY02 budget is a very prudent and an interim budget. It puts people first. It makes sure that our -- that we have fully funded our current readiness, which is very important. As I have said so many times before, when our armed forces are needed, we don't have time to ask "Are you ready?" It's time -- normally time to go.

The modernization and the recapitalization, as I indicated, are still an issue. However, we have the QDR process, right now, is addressing where we go in terms of recapitalizing, modernizing, and transforming. And so out of that process, now, we should come out with a blueprint, a road map for the way ahead, and see where we want to -- where we're going to need the significant plus-ups in the modernization and in the transformation accounts. As -- as indicated earlier by one of your distinguished colleagues, the estimates on how much that would be are still to be determined. I thought out of the QDR we should have a better figure for what

that total amount is going to be, where it should be applied. The estimates, of course, have ranged from $50 to $100 billion. It's a wide range. I think the QDR will help us to start focusing that effort and have it ready to go in the '03 budget.

SEN. AKAKA: Thank you, Mr. Chairman.

SEN. LEVIN: Thank you very much, Senator Akaka. Senator Carnahan.

SEN. JEAN CARNAHAN (D-MO): I thank you, Mr. Chairman. First of all, I would like to note that General Shelton will be retiring in September, as I understand, and I'd like to certainly express my gratefulness for your -- the patriotism that you have shown, and for all you have done in the interest of peace around the world. Certainly the American people owe you a great debt of gratitude. And I thank you very much for that.

GEN. SHELTON: Thank you very much, Senator. It's been my honor.

SEN. CARNAHAN: I would like to address a question to you as well. In your remarks, you emphasized key advancements in our military health care system. And I agree with your statement that our committee -- our commitment to health care must extend to personnel's families and retirees, and I support last year's initiative and hope we can continue developing these programs. In addition, I hope that this committee, as well as the Pentagon, will also evaluate our commitment to this component of our armed services.

Indeed, we have increasingly come to depend on our Reserve components in almost every major deployment abroad. As a result of the post-Cold War downsizing, we have now maintained fewer active forces in our military, while we continue to expand our commitments around the world. Would you describe the expansion of our Reserve component's role in the total force since the Gulf War ended in 1991?

GEN. SHELTON: Senator, our use of our Reserve components, and I might say great Reserve components because they do yeoman's work for us day in and day out around the world -- both the National Guard as well as the Reserve forces -- has become quite extensive. In fact, the exact figures -- I was just in the Balkans this last month, and every time I go I'm reminded -- whether it's in Operation Southern Watch in the Prince Sultan Air Base, or Northern Watch in Incirlik,

wherever I go, the Reserve components are a key part of the force. I want to say roughly a third of those at any given point in the Balkans come out of the Reserve components.

And so we have been demanding a lot of them. In some cases, in our civil affairs, the percentage of our force that's actually in the reserve components, which we use civil affairs an awful lot, is 96 percent. In psychological operations, it's about 67 percent. And so, we are forced to go to the Reserves a lot, given the types of operations, and particularly the long-term commitments that we have, like in Bosnia and Kosovo, and the Sinai, to a great degree. That has been a concern.

I have discussed that with the chiefs of our reserves and the National Guard. They have some concerns about it, although they don't think that we're at a point that we need to be -- that we're in a crisis yet -- but certainly as a part of the Quadrennial Defense Review, that has got to be something that we do address and we plan to address as a part of the look at the total force, and whether or not we've got the mix right in the Guard and the Reserve.

SEN. CARNAHAN: Well, do you -- does the Department of Defense plan to address health care and other benefits for reservists, in recognition of their increased contribution to the defense of our nation?

GEN. SHELTON: Senator, we will have to -- I'll have to take a look at that. I don't recall specifically if that was a part of our terms of reference for the QDR or not, but we will look at that and get back to you.

I might add, if I could, on the health care -- and once again, I want to thank the members of this committee for the great support that you gave our men and women in uniform, as well as our retirees, you made it happen, and it is reflected in everything that I see now in terms of morale, in terms of attitude, in terms of a recognition of the appreciation of their great efforts. There is a -- still a concern as we look at health care, and that is it is an entitlement basically that still competes with ammunition, with planes and ships, et cetera. We need to try to figure out a way to get that out of the O&M account and get that into a category of funding that recognizes it for what it is, a must pay that we pay up front, and not put it in the same category that we have precision munitions.

SEN. CARNAHAN: And one of the questions in you last appearance before this committee, you and the secretary emphasized emerging threats posed by chemical, and biological, and nuclear weapons around the globe. I believe, as you do, that these threats remain imminent, and even as we plan a long-term strategy for dealing with weapons of mass destruction it's essential that our troops remain sufficiently protected from chemical and biological agents. I hope that the FY 2002 defense budget will sufficiently equip our troops with adequate protection to deploy in a contaminated environment. Has the Pentagon sought to modernize its defense against chemical and biological agents in the short term?

GEN. SHELTON: Senator, the answer is yes, in the short term, and certainly as part of our long term, that is a growing threat which we know we have to deal with, and we have programs and plans in place to do exactly that. We have made some, I think, relatively quantum leaps in the area of our -- of detection, our ability to determine what type of agent it is, et cetera, at greater distances than when you're actually exposed to it. But that is an area that we need to continue to press because obviously it's one of those asymmetric threats that we have to be very concerned about, and that will be reflected in the priorities of our programs.

SEN. CARNAHAN: You've also testified before this committee to illustrate the fact that chemical and biological agents pose a more imminent threat than most other types of WMD attacks. Do you anticipate substantial increases in long-term investments in chemical and biological defenses equivalent to other investments and WMD defense?

GEN. SHELTON: I will respond for the record for that, because I need to go back and look at it in terms of the nature of your question. We certainly – those are programs that we have to have funded. They are very important programs. In terms of the percentage of increase relative to the others, I'll have to go back and check the figures on that. And I'll respond to you in writing.

SEN. CARNAHAN: Thank you very much.

GEN. SHELTON: Thank you.

SEN. LEVIN: Senator Bill Nelson. According to the list that I have, Senator Bill Nelson is ahead of Senator Ben Nelson. So --

SEN. BEN NELSON (D-NE): Missed by an -- (inaudible) -- (laughter.)

SEN. BILL NELSON (D-FL): I will hold my tongue. It is kind of interesting that two Nelsons, both freshmen, both Democrats, both former insurance commissioners. He likes to think he's from the state with the football team, but I reminded him that Florida has six professional football teams. (Laughter.)

SEN. LEVIN: I think we're not going to go there.

SEN. BILL NELSON: Not only in the NFL, but also the Gators, the Seminoles, and the Hurricanes.

Mr. Secretary, I said to you a couple of days ago that you've got a tough job. I think you're doing a good job. Notwithstanding the anger of Senator Roberts and Cleland, which is quite understandable, I think you are trying to get your arms around a behemoth and bring some rationality to it and redirect our force structure to meet the challenges for the future. And I -- I want to commend you for that. And I said that a few days ago.

Now, I'd like to explore what we explored the other day, but with a little bit of a different angle. I noticed that Senator Stevens has inserted in the supplemental appropriation, which we will be voting on probably tomorrow, quote, "Notwithstanding any other provision of law, the secretary of defense may retain all or a portion of Fort Greeley, Alaska, as the secretary deems necessary, to meet military operational, logistics and personnel support requirements for missile defense."

Now, my question, picking up on what we had discussed the other day, how can you start to deploy something that hasn't been developed? You and I discussed that we want to continue in robust R&D, and then you go about testing. But you can't deploy something that isn't developed. Now, there are certain lead times that you need, obviously, in preparation of ground and so forth, but then you get to a point that you've got to start building silos. And I'd like your comment, in light of the fact that it's a generally accepted principle in the nation's defense that you can't deploy something that's not developed.

SEC. RUMSFELD: Yes sir. First, let me say that I happen not to be familiar with the language that you've mentioned that may be in the supplemental. I can comment on the remainder of your question.

As you know, you can -- you -- to test something, you frequently need to do something in the ground. And the single missile defense activity that was the furthest along was the one that the Clinton administration had planned to go forward with in Alaska. And that concept was to have a radar and have some interceptors in the ground, in silos, in Alaska. That particular model was the one they were working on, to the exclusion of things that might at some point lead to a breach with respect to the treaty. The -- you're correct that lead times become quite important. Apparently, in that part of Alaska, there are two, three months at the most when you can

do any kind of construction. It is not a friendly, hospitable environment for construction. And the site preparation, the shipment of materials that have to go up, have to go up and be there during that brief period when the weather permits it.

Second, they have to go up there, I think a year in advance, so that they are there when the actual time when you can do something is permitted. And --

SEN. BILL NELSON: All right. Now, all of that's understandable, Mr. Secretary. But let's -- let's get on to the question. Are the interceptors in fact developed?

SEC. RUMSFELD: The decision to do what you're describing has not been made. There has not been a decision made to deploy in Alaska. Indeed, the decision -- I don't even know if it had been made in the previous administration, although it might have been. And someone here can correct me on this. But the intention in the previous administration, or the track they were on, would have been to have, this March or April, I believe, ship up to Alaska the materials they would need for the radar, and possibly also for some of the interceptor silos. They would not have done that had they not believed that by the time they were able to do that the interceptors and the radar would be available.

The purpose of doing it in the prior administration, I can't speak to, whether it was a deployment or not. The purpose of doing what they're doing now is something that General Kadish is currently considering; that is to say, whether or not it would be a test-bed or a prototype.

SEN. BILL NELSON: Well, let's talk about those interceptors being developed. The theory, you said, is that they would be developed and, therefore, be able to be deployed. Do we have any evidence in any of our R&D and testing now that that kind of interceptor would in fact work?

SEC. RUMSFELD: The purpose of, of course, a test-bed would be to experiment to see to what extent it would work. And my recollection of that particular interceptor is that they do in fact have something that is in track that could be used, although there is also, as I recall, an intention to upgrade it.

(To General Shelton) Do you recall, General?

GEN. SHELTON: Sir, you've described it exactly right. It is still being tested. It has worked. However, it still needs additional testing, additional work, and there are more tests scheduled in the next few years.

SEN. BILL NELSON: Where is it being tested, General?

GEN. SHELTON: It's part of the BMDO test program. Specifically where the test sites are, we'll have to provide for the record.

SEN. BILL NELSON: This is not part of the test on the kinetic energy? (Pause.) The one that is launched from California to Kwajalein?

GEN. SHELTON: We'll provide you with an answer for the record, Senator.

SEN. BILL NELSON: Well, Mr. Chairman, you obviously see where I'm going again, to the basic theory of -- we've got all of this discussion going on and wringing of hands, of breaking the ABM Treaty, and then maybe not breaking it because it's a test, and so forth. But I think it gets back to a basic question of physics, and that is you've got to develop something first before you can deploy it. And this senator has not seen that we're at that point which ought to justify

Senator Stevens inserting this language in the supplemental appropriations bill. And so, Mr. Chairman, I'm going to continue to poke and probe.

And, General, I would appreciate it if you will furnish that information to me, not only about this specific test that might be applicable to a site in Alaska, but all other tests as well.

SEC. RUMSFELD: Senator, just very -- excuse me, were you going to --

GEN. SHELTON: No --

SEC. RUMSFELD: Just very briefly, I think you made the comment that you're concerned about deployment. There is not a plan to deploy ballistic missiles defense at the present time. And so I don't know quite where you are going with respect to that, because what -- there will have to be testing done, there is being -- testing being done, and there will prospectively on -- depending on which of the R&D programs are involved. But there has not been a decision made to deploy for the purposes of putting in place a system under the theory that it's developed and ready to go.

SEN. BILL NELSON: Mr. Secretary, when I start reading language like this, that I'm going to vote on tomorrow, I start getting concerned about if we're not going down the road in somebody's mind in your shop about deployment. And then, if it is only testing, my question would be why is it being considered in that location for the testing?

SEC. RUMSFELD: That is the location that has been considered for -- from the very beginning of that particular R&D and development project that began back in the prior administration. And --

SEN. BILL NELSON: And my response to that would be why there, why not continuing in the testing at the present location?

SEC. RUMSFELD: Well, the reason there is because of the decision that was made with respect to where a potential threat from North Korea might be.

SEN. BILL NELSON: And that starts to sound like deployment to me.

SEC. RUMSFELD: Well, I -- all I can say is what I've said. We -- General Kadish nor I nor anyone I know in the Pentagon thinks they know enough at this time to deploy. I will say that the technology is -- has been tested and, in some instances, proven very effective. The Arrow system that the Israelis have been working on suggests that the physics are workable, and that they are able to do the things that the Ballistic Missile Defense Office has been working on and believes

is possible.

SEN. BILL NELSON: Thank you, Mr. Chairman. I look forward to continuing this.

SEN. LEVIN: Thank you. And thank you for pressing these points. They're very significant ones.

Senator Ben Nelson.

SEN. BEN NELSON (D-NE): Thank you, Mr. Chairman.

First, I want to thank and congratulate General Shelton on a job well done. I appreciate all the courtesies and the opportunities we've had to get together and your support for our national defense. You're certainly to be thanked and congratulated.

GEN. SHELTON: Thank you very much, Senator Nelson.

SEN. BEN NELSON: Mr. Secretary, I haven't seen my colleague from Kansas so angry since Nebraska beat Kansas State in football. But I'd like to continue the discussion that my colleague from Florida has raised about the difference between development and deployment.

Obviously, there is some difference. And I think everybody -- at least I hope there is some difference. The question I have is, is there some bright line between development and deployment? At what point will a decision be made on deployment away from development? Will we be surprised as the trimming of the B-1 bombers surprised us? Or is this something that's going to happen incrementally, or will it happen suddenly?

I think that gets to the heart of what my colleague is trying to probe and explore here, and I feel the same way. I don't want to suddenly realize that I voted on something in an appropriations bill that constitutes deployment and not be aware that that's the decision that I made.

SEC. RUMSFELD: Senator, I just can't imagine something happening suddenly in government. (Laughter.)

SEN. BEN NELSON: Well, I would agree with you on that, but --

SEC. RUMSFELD: The situation is that the members of the committee can get briefed on the progress in the ballistic missile defense activities anytime they want. They have been being briefed on a regular basis, as interested. It is impossible to know how any R&D program is going to evolve at any given time. You can't know it in pharmaceutical research, you can't know it in ballistic missile defense research. That is why you do the research, is because you do not know exactly how it's going to evolve.

There are technical -- within the Department of Defense, they are technical meanings for the words and there are definitions of what each stage of a process is supposed to mean. The problem with them is that -- I'm trying to think of a case that could concern you, and let me see if I can fashion one. Well, General Shelton can tell you one from the Gulf War, where a project and activity that was purely in the development stage, was R&D and it was being tested, but it had not been fully developed, it was not ready to go, it had not been deployed, and suddenly we were in a conflict, and because we had this testing capability, it was heaved into the war, used, and used very effectively.

GEN. SHELTON: A couple of them that come to mind. The Patriot missile system, which still had testing ongoing, and actually improved the capabilities while we were in the six-month pre-deployment phase, or pre-Desert Storm phase. And the other one was JSTARS, which was sill being tested and developed and proved to be very effective.

SEC. RUMSFELD: The reason I mention that is because I wouldn't want someone to come back to me and say, "Goodness, back in June of 2001, you said we wouldn't be surprised," because it is conceivable that something like that could happen and a system that was under development could be heaved into a conflict because the need was there and the value was there and it might or might not work because it had not been fully developed. So I don't want to get nailed down too tight on it. But certainly anything that anyone could conceive of that would be considered deployment would be something that would be rather well-understood by this committee and by us.

SEN. BEN. NELSON: So there will be a -- most likely a difference between deployment and a decision to deploy, and we'll know the difference.

SEC. RUMSFELD: Absent some unusual event like this.

SEN. BEN NELSON: (Inaudible) -- I can understand, whereas the missile defense system generally probably wouldn't fit into the same -- if we're talking about, except for theater-type weapons, although that line blurred on us recently as well. So --

SEC. RUMSFELD: It does.

SEN. BEN NELSON: But generally what you're saying is we will not end up being surprised that we made a decision to deploy in a budgetary context that we didn't have the opportunity to visit with you about?

SEC. RUMSFELD: That is for sure.

SEN. BILL NELSON: Mr. Chairman, I'd like to ask consent that I be allowed to proceed for one additional minute?

SEN. LEVIN: No objection.

SEN. BILL NELSON: Joint STARS was developed in my home town of Melbourne, Florida. It continues to be there and located there, and this senator, when a member of the House, helped get the initial appropriations for Joint STARS, and it indeed was one of the stars of the Gulf War. And it deployed to the Gulf War from my home town with a bunch of civilians, because we were in the middle. But that is not an equal comparison to what Senator Nelson was speaking about.

There, we were in the midst of a conflict. Here, we are talking about a whole new system of strategic importance that involves applicable treaties, and I think that we need to make that distinction, Mr. Chairman.

Thank you.

SEC. RUMSFELD: Oh, I quite agree. I was not suggesting it was on all fours with that. As General Shelton just reminds me here that Alaska was supposed to be the first deployment site by the Clinton administration, because of the North Korea issue, but the construction had to start this year in March -- the shipments had to start this year in March to meet the, he thinks, an '05 date for actual effectiveness and deployment, because of short construction periods.

SEN. LEVIN: Both Senator Nelsons done? Okay, Senator Warner.

SEN. JOHN WARNER (R-VA): Thank you. Mr. Chairman, I want to thank you again for accommodating our side in the course of the afternoon here. I appreciate your courtesies.

I'd just say to my two new partners, who are scattering here, I can assure you that we will not as a nation get to the point of deploying anything before such time as our president has resolved one way or another these treaty issues with Russia, so sleep well. We're going to be all right. But I also say, if someone were to have an accidental firing or rogue firing of a missile, I don't know who might be president, but I hope he'd cobble together everything we've got to stop -- blunt the next one that might come this way. We've got a good system of government, and it'll respond well in time of need.

Gentlemen, I'm going to go to some more -- some broad questions here that we normally reserve for our hearing on posture, and it is a great credit to you, Mr. Secretary, to the chairman and Dr. Zakheim that three-quarters of the members of this committee attended this hearing today. It's a day when we've got some of the most intense activity going on on the floor, and party caucuses, and the like.

And I want to go back, Mr. Secretary, in the years when I was privileged to be chairman, and we were endeavoring -- in a bipartisan way, I might say -- to try and address readiness in particular -- and this is not to be construed as a political observation -- but simply we turned to the chiefs. And they came before this committee, as General Shelton well knows, for two successive fiscal years, and told us of their professional opinion, which, as you know, is clearly established by this committee as a duty owing to the committee and indeed the Congress at the time they're confirmed -- it is part of the record -- professional opinion that we, as the United States, should be spending greater sums on our defense.

And largely it's the initiative of this committee, and joined by the balance of the Congress, we were able the last two fiscal years to turn around, in some respects, the declining defense budgets.

And General Shelton, I want to pay a special tribute to you, because you led that effort in many respects, and your other chiefs joined in that effort.

And I happen to know, Mr. Secretary, that you strenuously tried to get dollars for the '01, '02 budgets in excess of what has been announced by our president. And I do not expect you today -- because you value the consultation and the confidence of sharing your views with your president, so I will not ask you to comment on that. But I know as a fact -- and this record should reflect it -- that you worked arduously with the Office of Management and Budget to get a higher figure for '01 and '02.

But we're where we are. We're going to have to our best. But I'm going to recommend to our chairman -- and he probably is going to do it on his own initiative -- that in due course we have the chiefs up to address what Senator Lieberman said. It was his judgment -- this is a bipartisan thing, not partisan in any way – that we're still short. And we will ask the chiefs for what are their marginal differences between what appears to be coming along in '01.

In '02, there's some certainty as to how these budget committees are going to deal with that 18 and a fraction billion. I'm optimistic, but until such time as that hammer falls in those committees and the floor acts, there's going to be a question of doubt.

But I come back, General -- my record shows that last year the military services indicated they want a 48 to 58 billion funding increase per year over the FYDP, as it existed then, if the department is to restore readiness and modernize for the future.

I think we've got to recognize that readiness is a crisis across the board in our military, and I don't use that word ill-advisedly.

So I'd like to ask you, Mr. Secretary -- you cannot comment, nor should you, on higher figures that you have requested -- but clearly, if the chiefs were correct last year -- and I'll pass this question momentarily to the general -- there is a shortfall. And how is that going to impact on your prime responsibility to deploy our troops when necessary?

I know that there's some expectation that we're going to reduce the level of deployments, but I think you should address what clearly is a shortfall in the '01 and '02 budgets, and how that is going to impact on your ability, as the adviser to the president of the United States with regard to our deployments, and other things of the first priority of our military.

SEC. RUMSFELD: Senator Warner, first let me say that the military leadership has been deeply involved in the budget preparation and where we are, not in the total amount; that's for the president and the Office of Management and Budget, but certainly with respect to the allocation. And I would say that readiness did get a priority and people did get a priority. And where the balancing come out somewhat shorter was with respect to procurement and investing for the future.

Second, I know that the chiefs will speak their mind, and I want them to. I would say this, however. The readiness issue has to be disaggregated. There is readiness with respect to various types of training; there's readiness with respect to the facilities, and they get ratings as well; and there's readiness for the forces that are on the leading edge and have to be ready to go, and there's readiness levels for the forces that have just returned from being on the leading edge and are in a

down period.

And the other way I think we have to disaggregate it is this: Readiness for what? If the 3rd Infantry Division is told by the president and the Congress, "Go to Bosnia" and they're doing a great job and they're ready for that, but their other job is to be ready for a major regional conflict, because they're in Bosnia doing what they've been asked to do and they're ready to do they end up with 28 days training instead of 29 days training and, therefore, their readiness level drops. So if you're asking organizations to do several things and your readiness standards don't reflect that, they reflect only the one major assignment, then it leaves an impression, it seems to me, that is imperfect.

And I have asked, and I think it will be done in the Quadrennial Review Process, that we give consideration to that issue that I've just raised.

SEN. WARNER: Well then let's turn to modernization because that impinges on readiness. And I recognize that you've been under a battering ram today on shipbuilding. And I join in that battering of you for reasons that are clear.

But let's recognize that we need to modernize and we're, in my judgment, right up at the top level of what we can obtain by way of military spending in '01 and '02. Where are we going to give in this system? Should we diminish the size of our end-strength? Should we make a decision that we're doing to have less deployments? Where are we going to develop the cash that is necessary to go to modernization?

SEC. RUMSFELD: The risks that we, the chiefs and the chairman and I and the undersecretaries and the secretaries of the services considered in the terms of reference for the Quadrennial Defense Review were really four.

One was the risk about the people. If you don't invest in the people, the heart, the total capability of the U.S. Armed Forces decays.

SEN. WARNER: I agree.

SEC. RUMSFELD: And that is a risk that tended not to get elevated with the risks of not being able to meet your strategy, for example, the operations risks of meeting a war plan: can you meet the requirement -- do you have the requirements -- are the requirements right, and do you have the capabilities to fulfill those requirements so that you can fulfill your war plan?

A third risk that was not really -- it's difficult, because it's apples and oranges, that you have to get up on the table and balance, is the question of modernization. And what do you do about your legacy force, your current force? How do you keep bringing in additional capabilities, somewhat better, but of a kind, as you're going along, so that your aircraft age doesn't get up to the point where you're just getting destroyed with repair costs, so that your shipbuilding budget doesn't go -- shipbuilding number doesn't go all the way down?

And the fourth risk was the risk of not taking account of the fact that we are in a period of time when technologies are changing, the world is changed, and we do need to not just modernize, we need to transform, we need to invest sufficiently in research and development, in S&T and new capabilities that are -- new systems, in intelligence and in space capability, so that we've got the ability to deal with the kinds of threats we're likely to face in the period ahead.

Now, when you take all those risks and try to compare them against each other and weigh them against each other, it is an enormously difficult, complex task. And you're right, something has to give. We need savings out of this department. And at the present time, the department is wrapped around its anchor chain: we simply are so tied up in rules and requirements and stipulations and prohibitions that it is very difficult to manage. There are not many incentives to save any money in that department. A captain of a base goes out there, and at the end the quarter he knows if he doesn't spend that money, he isn't going to get it the next year. And so

the incentive is -- it's not intuitive, but that's what's happening. We have to find ways to fix it: the financial systems we talked about, the acquisition system isn't working right. The -- it is perfectly possible to save money in that department if we could be freed up to do it.

SEN. WARNER: All right. Well, I'm going to let you a little bit off the hook now. But you've sort of just beautifully restated my whole question. And I'm not sure I got clear the answer where the money's coming from. You may be able to bring in some savings through incentives and a few other things, but I'm talking about major dollars for shipbuilding, aircraft, the transformation of the Army new equipment. Those are significant dollars. And somewhere, somehow your department and this committee and that in the House have got to work to solve that problem.

SEC. RUMSFELD: Yes, sir. Let me just go directly to it.

There's two ways -- three ways the money's going to come. And probably it'll take, I'm afraid to say, most of them. One is savings. And we've got to do a better job. And I believe we can.

A second is that something has to give among those four risks. We have to make trade-offs. Just like any business does, just like any family does, we have to look at it and say How much are we willing to give up today in exchange for investing in the future? Are we willing to give up on the people in exchange for operational capabilities? And I think not.

SEN. WARNER: No.

SEC. RUMSFELD: I think we have to keep the people.

SEN. WARNER: I think not. So that's not on the table.

SEC. RUMSFELD: The third way that it normally happens in our country, let's be honest, is there's a crisis. A major new threat is suddenly on us, there's a conflict, North Korea invades South Korea. And what did we do? We said we couldn't afford an $18 billion budget when it was a $15 billion budget; that Omar Bradley was asking for $18 billion, they said they couldn't afford it; and the next you knew, we had $48 billion and we could afford it just fine because we were in a war.

Unfortunately, there is a natural tendency on the part of people to not recognize how critically important to prosperity and to peace in this world the United States armed forces are. They underpin that prosperity and that peace. And we're down to 3 percent of gross national product going to defense. If there were a crisis, we'd be right up to 8 or 10 (percent) in a minute, and we could afford it just fine. And the key is to invest what we need to invest, and management with a sufficiently sensible, cost-effective way that we don't get in a crisis; that the deterrent is sufficiently strong and healthy that we can dissuade people from doing things that upset

that stability.

SEN. WARNER: All right.

Now General Shelton, let's pick up -- I thank you, Mr. Secretary. We're getting there.

General Shelton, again, last year the chiefs testified that there were $48 (billion) to $58 billion additional dollars needed in the FYDP if the department is to restore readiness and modernization for the future. You recognize there is a shortfall, no matter how valiant the secretary's efforts were to get the '01 established and a very significant figure, in a way, for '02. But we're still short, are we not?

GEN. SHELTON: Senator Warner, I don't think there's any question. It is a budget that does put people first. It keeps the emphasis on the quality of the great force we've got. It fully funds the current readiness for this year, something that we're concerned about. If we get called on today, we want to be ready to go. And it has an $18 billion plus-up in the current readiness account. Of course, it also takes into consideration the fact that we've got older equipment, it's costing more to operate, the cost of -- the cost of fuel, et cetera. So that eats up a lot of that. But it ensures that we don't have to come back for a supplemental in the middle of the year in '02, assuming that we don't have some other type of disaster or have to use force.

The challenge remains, as I said earlier, with the recapitalization and the modernization. There again, we have the QDR. It's a chance to take a look at our force structure, decide where we need to recapitalize, where we need to really put the money into it to modernize. But I don't think there's any question that when you come out on the other end it's going to require additional funds in the out years, starting in the '03 budget and beyond. And we've all seen the figures that have come from various studies. That's, of course, based on today's national security strategy, it's based on today's force structure. But it is said basically somewhere between

50 and 100 million dollars would be -- billion dollars would be required. So --

SEN. WARNER: So in your judgment, over and above the current FYDP levels?

GEN. SHELTON: Over and above the current -- the '02 FYDP level as we look out to the future for recapitalization and modernization.

SEN. WARNER: So that's a hundred over the five-year program?

GEN. SHELTON: Sir, the estimates have ranged from 50 to a hundred. I think when we come out of the QDR, we, the secretary and I, would have a better feel then for what the exact number would be --

SEN. WARNER: I don't doubt that.

GEN. SHELTON: -- based on the strategy and based on the force structure to support that strategy.

But I would like to underscore something the secretary said.

We are a global power, the only one in the world, and sometimes that gets to be lonely also. But we have worldwide responsibilities and it is the great strength of America and the men and women in uniform that are out there daily carrying out, protecting our national interests, that I think certainly help provide for the peace and prosperity that we have today. And it's quite an investment -- 3 cents on the dollar; that's what our armed forces provide for us today.

Ultimately, I think we have to make sure that if we want to continue to enjoy that peace and prosperity, that if we want to continue to be recognized as a leading power in the world and to provide for the peace and stability for the rest of the world that also helps our own prosperity, we have to make an investment in that force. And that may mean that 3 cents on the dollar will not be sufficient in order to modernize this great force we've got and to keep us with the leading technology in the hands of the greatest force in the world.

SEN. WARNER: I thank the chairman.

Thank you.

SEN. LEVIN: Thank you, Senator Warner.

I want to return to the subject that I started with relative to the ballistic missile defense. Two of our colleagues here today, from Kansas and Georgia, expressed very appropriately their frustration in terms of consultation. And as far as I'm concerned, your response was appropriate as well as their feelings.

General Kadish came before us and said that he had completed his review, that his recommendations had not yet been reviewed by you, but nonetheless, his completed review was briefed to us. In that completed review, he said that all the R&D programs which he had laid out for the year 2002 in no case bumped up against the ABM Treaty.

I asked you today, do you disagree with his brief in that regard? Your answer was, it seems to me you hadn't been briefed yet by General Kadish, which is fair enough, if that's accurate. I mean, I don't have any problem with that. If that's the situation, that's the situation. But you don't have any basis, then, to disagree with his conclusion, which we, it seemed to me, we have a right to rely on, at least in terms of the head of the BMDO saying that his conclusion and his review, that none of the research and development in his plan for the year 2002 would violate the ABM Treaty.

So, do you have any basis to disagree with his conclusion? I'm not talking about what it evolves into in future years. You used the word "evolve." I'm talking about 2002 budget dollars that you're asking us for.

Now, you may want to keep the Russians guessing as to whether or not you'll pull out of the ABM Treaty, but we can't -- we have a greater responsibility than that in terms of our dollars, and we just have to know: Are there any dollars that you are requesting in this budget request for research and development that violate the ABM Treaty for any of these projected programs?

SEC. RUMSFELD: Mr. Chairman, General Kadish is a fine officer. He was requested to come up and brief, and he did.

SEN. LEVIN: By whom?

SEN. WARNER: I think I was responsible for that.

SEC. RUMSFELD: I don't recall who --

SEN. LEVIN: I think it was that you offered him --

SEC. RUMSFELD: By the way --

SEN. LEVIN: Yeah.

SEC. RUMSFELD: And it's fine. And I'm delighted he did. And he knows what he's talking about.

At the moment he came up here, he had a budget figure in mind, and he briefed a presentation which, he tells me now, the budget has been reduced on. I could be wrong on this, but I don't know that it --

SEN. LEVIN: There was no budget figures that he briefed us on, Mr.. Secretary.

SEC. RUMSFELD: I didn't say he did brief you on budget figures. I said his program was based on a budget, in his thinking, that he was planning his program on. And that budget, he tells me yesterday, has been adjusted in --

SEN. LEVIN: Which way?

SEC. RUMSFELD: Down.

SEN. LEVIN: Which means there's even less money than he presumably thought he had for 2002.

SEC. RUMSFELD: Yeah, it is -- I was correct.

SEN. LEVIN: There's even less money.

SEC. RUMSFELD: It is less money. Exactly.

Now the next thing I would say is, I would repeat, he's a very fine officer. He is not a lawyer, and he is not the compliance officer. So he is not the person, in my personal view, to be advising the committee as to whether or not he thinks something he's doing conceivably could end up violating the treaty.

SEN. LEVIN: End up in 2002? This is very important. You're asking us for budget dollars in 2002.

SEC. RUMSFELD: I understand.

SEN. LEVIN: We have to know, are any of those budget dollars going to violate the treaty? It's a fairly direct question. Are they or not?

SEC. RUMSFELD: And I have said: Not to my knowledge. I am a conservative person.

SEN. LEVIN: Okay.

SEC. RUMSFELD: It is conceivable that there are lawyers -- indeed, there was one in the room yesterday who has different views from others.

So it is -- first of all, a treaty depends on historic practice. It depends on interpretations. It depends on debatable legal concepts. And for me to sit here and tell a committee of the United States Senate that I, Don Rumsfeld, a non-lawyer, am telling you that I understand every conceivable thing that an R&D program could conceivably do and that I can assure you that no lawyers are going to tell you that it might be in violation of something -- I'm not going to do it. I'm --

SEN. LEVIN: You haven't been asked to do it.

SEC. RUMSFELD: I won't do it.

SEN. LEVIN: You haven't been asked to.

SEC. RUMSFELD: Good, because I can't.

SEN. LEVIN: By the way, General Kadish did consult with lawyers. He's not a lawyer. He got legal advice.

SEC. RUMSFELD: Of course he did. Of course he did.

SEN. LEVIN: And he gave us his conclusion, not based on his legal advice, but on the advice of his compliance office and his lawyers.

Your words that you just gave us, however, "not to your knowledge," are the clearest indication that in your judgment, there is nothing in the 2002 R&D budget for ballistic missile defense, in your judgment, that violates the ABM Treaty. Do I read you correctly? Have you reached a judgment or not?

SEC. RUMSFELD: I have. Let me respond and see if I can do it in a way that will add clarity to this.

The first thing I would say is that the administration has no plans to do anything to violate the treaty. Now I don't know how I could be any clearer on that.

SEN. LEVIN: That's fine. That's clear.

SEC. RUMSFELD: What the president intends to do is to have General Kadish proceed with a research and development program. One or more of the activities may -- eventually will, the good Lord willing -- run up against the treaty and be a violation.

SEN. LEVIN: But not in 2002?

SEC. RUMSFELD: Before that happens, we would be told, and we would have been in discussions with the Russians, and we fully intend that we would have fashioned some sort of a framework to move beyond the treaty.

Now the reason I'm being very careful in what I say is because I'm a conservative person.

If you went ahead in Alaska, is there money for that in Alaska in this budget?

SEC. RUMSFELD: The budget has not been finalized because I have not been briefed on the R&D program under the new numbers of dollars.

SEN. LEVIN: It's been submitted to it.

SEC. RUMSFELD: I know, but you're talking about money for a program. There is money in the 2002 budget amendment for a R&D program for missile defense. The missile defense program itself that General Kadish is working on has not been finalized because we just got the number from the budget bureau, the Office of Management and Budget, and he just got a reduced number. He will then fashion that specific program and make a recommendation to you.

SEN. LEVIN: To me?

SEC. RUMSFELD: Exactly.

SEN. LEVIN: And then when will we get it from you?

SEC. RUMSFELD: When I get it.

SEN. LEVIN: How many days? I mean, we're trying to mark up a budget here, and this is an important issue --

SEC. RUMSFELD: But I can tell you, we have no intention of breaking the treaty, if that's the question. Now, is it possible someone could say, Oh, if you went into Alaska and shipped the stuff there and cleared the site and started to do any kind of an upgrade on that radar that's there, I, some lawyer, could say that that is not a test bed; it's a prototype, and therefore it would be in violation of the treaty. Could that happen? You bet.

SEN. LEVIN: That a lawyer would say that. But it's not your judgment. You've got -- look, you have the responsibility as secretary of Defense. We have a responsibility as people who authorize expenditures. We have to make a judgment the best we can. You have to make a judgment. There's a lot riding on this judgment. A lot riding on it. We've got to make an assessment, and you need to make an assessment, frankly. You need to make an assessment. If it is not your intention that any 2002 money violate the treaty in any of your R&D programs, your statement to that effect is very meaningful. We will reach our own judgment.

SEC. RUMSFELD: All right. Let me try it this way. The administration has no plans to violate the treaty or to break the law in 2002, 2003, 2010. What we intend to do is to have an R&D program and begin discussions with the Russians and establish a framework to move beyond the treaty, because the treaty inhibits the deployment and the testing of ballistic missile defense, and the president wants to have ballistic missile defense.

SEN. LEVIN: Senator Allard.

SEC. RUMSFELD: Therefore, we don't intend to break it at any time. Break the treaty. Break the law.

SEN. LEVIN: You're hoping to amend the treaty so you don't break it. My question is --

SEC. RUMSFELD: Well, wait. No --

SEN. LEVIN: We're going to keep asking. I see your point. Let me keep asking the question, because we need an answer, the country needs an answer, the world needs an answer. Is there any money in the 2002 budget request which, for R&D programs on missile defense would, in your judgment, violate the ABM Treaty? I'm going to keep asking it. We need an answer. In your judgment.

SEC. RUMSFELD: Let me try it -- let me finish the thought and maybe this will answer it. Violating the treaty means that the treaty still exists, as I understand the question, and what I have said is that the president fully intends to work with the Russians and fashion something that does not allow the constraints of the treaty to inhibit the development of missile defense. And if he is not able to, he has indicated he will give six months' notice. I mean, that -- that -- and then he would not be breaking the treaty or violating the treaty. He would be using the treaty provision that allows a country to give six months' notice and step away from the treaty. And

the hope is not to do that.

The hope, obviously, is to fashion an arrangement with the Russians that is something that is acceptable to move beyond it.

SEN. LEVIN: Thank you.

Senator Allard. Senator Allard.

SEN. WAYNE ALLARD (R-CO): Mr. Chairman, thank you very much. And I apologize I wasn't here earlier, but busy schedules dictated my having to miss the first round of questioning. I appreciate the fact you give me a shot here.

I'd like to move to the airborne laser, Mr. Secretary. According to my understanding, the supplemental includes about $153 million for the airborne laser. And there's full funding in the FY'02 budget. How high a priority is the airborne laser program for you in the department -- for the department in regards to the missile defense program?

SEC. RUMSFELD: I wish these answers were easy.

I don't -- I can't characterize how high a priority it is. It is one of eight or 10 or 12 programs that General Kadish and the Ballistic Missile Defense Office has briefed us on a preliminary basis that are a part of the things he would like to move forward on. He is now adjusting that program to fit his new budget mark. It is something that has been underway for some time. It is something that is, if I'm not mistaken, is some way down the road. And whether or not it's going to be accelerated or not is, I think, something that has yet to be decided in the department.

SEN. ALLARD: Well, as you know, I want to be supportive in your missile defense efforts. And overall -- we move to this direction -- overall the ballistic missile defense budget will increase about $3 billion compared to last year, and we appreciated that step. Some BMD critics will no doubt argue that the increase is too large, and -- meeting other shortfalls in the department they'll claim deserves priority other than missile defense. Can you give me on what basis did you accord missile defense the priority it received in your budget proposal?

SEC. RUMSFELD: I suppose it's safe to say that if one started out with your first choice, that most of the budgets and elements of the budget would be higher than they are. They end up -- as in any organization and any budgeting process, you end up with making judgments and trade-offs. At the present time that budget is at 8.2 total, and that includes the theater missile defense as well as the national missile defense, including the airborne laser dollars. It is about 2.0 or 2.5 percent of the total budget. It compares, for example, with something like $11 billion in the terrorism -- aggregated terrorism number. It's higher than it was; it does not fund all

the things that General Kadish had hoped to be able to fund, but it -- and it funds some of them on a somewhat slower basis.

SEN. ALLARD: Let me ask you this: Do you think the threat in this area is growing greater than in other areas of threat?

SEC. RUMSFELD: I think that the threat of a major land conflict in Europe is very low.

I think the threat of a major strategic nuclear exchange with Russia is very low.

I think that the problem of proliferation and the advancement of technologies and the relaxed tension in the world has led to the availability of weapons of mass destruction and the ability to deliver them in a variety of ways. And because it is so difficult to cope with Western armies, navies and air forces, the nations that have an interest in dissuading us from doing things and have an interest in imposing their will on their neighbors, have looked for these asymmetric threats, from terrorism, cruise missiles, ballistic missiles, I would guess down the road cyber-warfare as well, because we have vulnerabilities in those areas that distinctive compared to the

vulnerabilities we have with respect to typical warfare, I would rank all of those as risks.

The proliferation of cruise missiles is taking place. I worry a great deal about germ warfare and what we read in the intelligence reports about what's taking place in the world. There's no question but that the number of nations that are getting ballistic missiles is growing, and I certainly rank ballistic missile threat up among those asymmetric threats very high.

SEN. ALLARD: The ballistic missile defense program -- maybe General Shelton or maybe somebody else on the panel would like to answer this question. But the ballistic missile defense program, the budget structure has been substantially changed from last year from the one that focused on specific systems; for example, National Missile Defense, THAAD, Navy Theater-Wide, and so on, to one that focuses on phases of the ballistic missile during flight at which our forces might, you know, bring in an intercept.

And could you talk a little bit about the advantages of this restructuring? Or perhaps maybe General Shelton or your assistant over there.

SEC. RUMSFELD: Dov Zakheim. Actually, what happened was General Kadish and various others have decided that reorganizing how that program should go forward led to the kinds of adjustments that you're talking about, and Dr. Zakheim can comment on them.

MR. ZAKHEIM: Yes, sir. You're correct, Senator, that the general focus now is on the phases of flight, as it were: the initial phase, mid-course, and terminal. There are several things that were done.

Programs that are mature, and those are the Army PAC-3 and the Navy Area-Wide, which used to be known as Navy Lower Tier -- PAC-3, of course, is the Patriot upgrade, as well as the international program we have with the Europeans, to which they attach high importance, MEADS, the Extended Air Defense -- Medium-range Extended Air Defense System, those have been devolved to the services because they are mature systems.

On the other hand, systems that were not as mature, and I include among those the airborne laser, which the secretary mentioned, space- based laser and space-based infrared system, those have devolved to the management of General Kadish at the Ballistic Missile Defense Office. So that if you then aggregate what General Kadish now essentially is dealing with in his R&D program, it's slightly over $7 billion.

And you mentioned THAADs. There is some program visibility for that. Those are being carried as projects within the overarching structure that I outlined.

SEN. ALLARD: Thank you.

I see my time's expired.

SEN. LEVIN: Senator McCain.

SEN. JOHN MCCAIN (R-AZ): Thank you, Mr. Chairman.

Mr. Secretary, it's been a long afternoon for you and I'll try not to impose on your time too much longer.

General Shelton, last September 27th -- I have your testimony -- you said, "It's a real success story, from $43 billion in procurement three years to $60 billion in the 2001 budget, a significant achievement that has been led by Secretary Cohen." And then you go on to say, "But the simple reality is that after three years of demanding and unanticipated military and humanitarian operations, we know that the $60 billion projected by the QDR will not be sufficient to sustain the force."

Now I look at the procurement budget: FY '01, 62.1; FY '02, 61.6, an actual decrease in procurement. How does your statement of September 27th that $60 billion projected will not be sufficient to sustain the force, and then you come to us and tell us that 62.1 and 61.6 is sufficient?

GEN. SHELTON: Senator McCain, what I said was, is that in the '02 budget, the emphasis, of course, is how to sustain the quality-of- life issues for the force. It has funded current readiness. In fact, it added $18 billion between '01 and '02.

SEN. MCCAIN: I'm talking about $60 billion projected for procurement.

GEN. SHELTON: And what I said also was, is that obviously the shortfall, if there is one, in the '02 budget, or the place that needs the most work, is in recapitalization and modernization, which maintains slightly over the $60 billion that is necessary, but not anywhere near what will be necessary to really recapitalize and modernize and transform the force for the future.

That is going to be have to be the answer, how much more is required over the $60 billion, should be the answer that comes out of the QDR; what our strategy is going to be, what the force structure to support that strategy will be, and consequently, how much additional money is going to be required to support the modernization and in the numbers of things and types of units that will be required to support the strategy. It obviously will be a lot more than $60 billion.

SEN. MCCAIN: I won't belabor the point.

Mr. Secretary, I was not here for your opening statement, but I read it. I think it's a very powerful and important statement and I think it lays out our requirements and our needs in a very -- as strong as possible. One of your statements -- one part of your statement is, "We could do better with a round of base closing and adjustments that reduced unneeded facilities, by example, 25 percent. We could focus the funds on facilities," et cetera. "Without base closings, to achieve the 67-year replacement rate would require an additional $7 billion annually."

I take that to mean that you are proposing a BRAC.

SEC. RUMSFELD: We will be proposing something that people will call a BRAC. Whether it will fit the previous model or not, I don't know. We've got people working on it right now, talking with people on the Hill. They'll certainly be visiting with the leadership on this committee and with you and on the House side. It's not something that I personally am delighted to be doing. It causes a lot of heartburn and pain and concern and anger and apprehension and fear.

But we simply have got to manage the money in this department better than we're doing it. BRAC is only one piece of it. There are a host of other things that we're prevented from doing that we need to be freed up to do.

SEN. MCCAIN: Well, I agree with you that it's one of many things. But I would assume that $7 billion a year is a fairly good chunk of some of the things we need to do. So --

SEC. RUMSFELD: The problem with it is, I'm told -- and I don't know this, because I've never been around for a BRAC, but I'm told that the money doesn't start coming in until the fourth or fifth year after --

GEN. SHELTON: It's about the fifth year.

SEN. MCCAIN: And every year you wait, it's another year delay --

SEC. RUMSFELD: Exactly.

SEN. MCCAIN: -- from the time that it does come in.

But my point is, I don't care whether you call it BRAC or not, but it has to be -- we have learned from bitter experience, it has to be a deal where there's an up or down vote on the part of Congress.

SEC. RUMSFELD: Yes, sir.

SEN. MCCAIN: I mean, that has to be an integral part. But I would also argue that we have to make sure that it's not politicized, as is the view of this member -- I don't speak for other members of the Senate -- as happened in a BRAC closing round concerning McClellan Air Force Base and Kelly in San Antonio. There cannot be a taint of politicization. So we're going to have to tighten up that language.

I just want to say, Mr. Secretary, I want to support you in that. I've been fighting for it a long time. And it's absolutely necessary. And I've never been able to find any military expert who disagrees with the fact that we need a BRAC.

SEC. RUMSFELD: I don't, either.

SEN. MCCAIN: I have not met a single one. And as we all know, they come in all sizes and shapes.

But the fact is also, we need to look at depot maintenance, because a lot of depot maintenance today is being done that could be contracted out by civilian and competitive sources. If you have to close down a -- for example, the B-1. If you, as I read in the media, feel that some B-1s need to be taken out of commission or any other weapons system in order to modernize the force and you come and make that argument here, I want to support you. The history of this Congress in recent years has been protection of depots, bases, weapons systems. And unfortunately, while men and women in the military are living in conditions that in many cases are unacceptable, and under deployment and operational requirements that has made it extremely difficult for us to recruit and retain quality young men and women. So I want to help you in this effort in any possible way that I can.

And now I'd just like to add one additional comment, if I could. I don't believe that you're asking for enough money. I believe it's directly related, as you stated in print, that there was so money taken up in the tax cut there's not money available. I'm sure that you may have regretted the words, or maybe I misinterpreted --

SEC. RUMSFELD: I didn't say that.

SEN. MCCAIN: Well, I'll get you the quote. It's a pretty good quote --

SEC. RUMSFELD: Great.

SEN. MCCAIN: -- saying -- (laughter) -- I almost --

SEC. RUMSFELD: It doesn't sound like a good one to me! (Laughter.)

SEN. MCCAIN: Well, the fact is -- the fact is there's not enough money for defense, there's not -- and Medicare and Social Security. And when you go over, as I've been told, and ask for 32 billion and get 18 billion or -- as media reports, then I think it's very unfortunate. And I think as is not new -- in fact, as long as I've been around here it's been the custom it's driven by budgets rather than requirements. And when there's not money available, somehow that seems to be the case.

I thank you, Mr. Secretary. And Mr. --

SEC. RUMSFELD: May we just make one comment?

SEN. MCCAIN: Could you respond? Yes, I'd love to hear your comments in response. Thank you.

SEC. RUMSFELD: On the depot issue, Dov Zakheim would like to comment on that.

MR. ZAKHEIM: Well, Senator, we do have an initiative specifically on the depot issue. It's one that essentially says if a depot has back orders -- which means, by definition, they can't deal with it now, and that's by their own definition, because it's a back order -- then we would propose to contract out that work. That results in a savings of nearly $200 million, which we could then apply to other departmental activities. So that's a step in the direction that you're talking about, sir.

SEN. LEVIN: Want another minute?

MR. ZAKHEIM: No, thank you.

SEN. MCCAIN: Did you want to respond to my --

SEC. RUMSFELD: Well, I'd like to say thank you for your offer of assistance and we will certainly appreciate that and it's going to take a lot of assistance.

SEN. MCCAIN: Thank you, Mr. Secretary.

SEN. LEVIN: Do you want another minute?

SEN. MCCAIN: No.

SEN. WARNER: Well, I want to say with regard to the BRAC that I was an author, a co-author with others, on these bills. I, matter of fact, joined you, I remember, one year on the BRAC before this politicization issue came along. Senator McCain is correct. We've got infrastructure, and I think it is a unanimous view among the professional military and others that we've got to reduce that infrastructure, and I would hope that legislation would be brought up here in due course, and I want to support it.

I would suggest, however, that we not get the depot issue tagged onto that one. If it's to be addressed, let's have them separate. Guess I've been around long enough to know how trains run in this station, and -- (laughter) -- you can catch one and get to where you want to go, but if you load too many cars on it, you'll get down. With all due respect to my friend, if there's a depot question out there, maybe we ought to address it, but let's address it in a separate.

Mr. Secretary, the subject of Vieques. We have had some hearings in the House on that. I asked the chairman to withhold hearings of this committee on that important issue, and the fact that we haven't held a hearing should in no means indicate that I and Senator Inhofe and a number of others, and I think it's bipartisan here, we're not gravely concerned about the need to properly train our men and women of the armed forces for combat activities with live ammunition and under every circumstance possible that parallels that that they face in a combat situation. Many of our troops deploying to the Gulf, it's essential for them, because

regrettably, in due course, they are often faced with hostile fire and they're constantly under a threat situation, regrettably.

So I hope that we can work our way through that. I haven't had a chance to study your responses to the House today, but I will do so. I didn't know whether you wished to have this opportunity to tell our committee what you feel procedurally we should do to work on that. I presume it's a steady concentration on trying to look at alternative means to train our troops; but then again, this question of the referendum, I want to be supportive of our president, but at the moment I think it's uncertain just how that legislation would move or not move, should it be brought to the Congress.

So I have a suggestion. One that you do represent today, that you will press hard as you can on finding alternative means to train our men and women of the armed forces, particularly those that are faced with deployments to the Gulf Region. And secondly, that perhaps we can sit down quietly and work out, in a bipartisan way, some solutions to this problem.

Is that a general summary of where you are on it?

SEC. RUMSFELD: Yes, sir. There is no question but that we have to redouble the efforts to find alternative location or locations, plural, so that the men and women who go to the Gulf and deploy to the East have the kind of training they need. And we are hard at that task. And we look forward to working with you on the subject.

SEN. WARNER: Let me say -- you say "redouble the efforts." I've spent a good deal of time, together with Senator Inhofe certainly has spent an enormous amount of time on this issue, conscientious effort has been made. I'm sure General Shelton is ready to testify to that point. We had two groups, independent groups, that went out and looked at it.

Am I not correct on that, General?

GEN. SHELTON: Sir, you are correct, and that work continues today, as a matter of fact.

SEN. WARNER: Yeah. So more emphasis, yes. But I want to certainly say the Navy Department, in my judgment, conscientiously and certainly in the last year has looked at those options very carefully.

To another subject, and that is I certainly commend our president when he was a candidate and indeed now that he's president, has recognized that we have a situation here at home where perhaps only in the times of World War II did we consider "homeland defense." And this committee, I'm proud, under the leadership of our former Chairman Roberts, and now our new Chairman Landrieu, the committee that looks at the future, the threats to this nation, are bearing down again on homeland defense. And I'll be scrutinizing your budget submissions to make sure that it's adequate, because we've got to prepare for an attack here at home of a terrorist nature in some form right in the cities here in the United States, and how best this nation responds.

We had, a group of us, the chairman and ranking members of the Intelligence Committee, Armed Services Committee, Foreign Relations Committee, the Appropriations Committee, who for two days sat down -- you came before that committee and gave us your thoughts on how you could marshal the resources of your department to address this problem. Clearly, the lines of authority, the lines of responsibility and how we would respond I think can be improved. And I hope this administration, and that you will take a leadership role in doing that so that we've got that better understood and who's got what responsibility, should this crisis hit us.

SEC. RUMSFELD: Well, Senator Warner, as you know as well as any, the problem is serious. It is not some distant thought; it is something that this country simply must address. It is also enormously complex.

The Department of Defense, in people's mind, has the task of defending our country. And yet under the law, as we all know, the responsibilities are elsewhere and the Department of Defense is not a first responder, if you will, with respect to the kinds of attacks you're talking about here at the homeland.

SEN. WARNER: Well, the Posse Comitatus Act, which goes way back in our history, and it's a well thought-out concept -- I think that stands as a barrier, and I think it's going to remain. I doubt if we'd modify that.

But somehow we've got to make certain, because the department has the enormous resources to bring to bear on a crisis. I mean, if we had 5,000 casualties, we've got to turn to the supplies within the department to -- and the transportation to help that community instantly.

SEC. RUMSFELD: You're exactly right. If something happened in the United States of America, notwithstanding the law, notwithstanding the way we're organized, the phone call would be right to the Pentagon.

SEN. WARNER: Right.

SEC. RUMSFELD: The Pentagon is the organization that has the capabilities to deal with a major disruption of a weapon of mass destruction -- chemical, biological, nuclear -- in the United States of America. And yet we're -- our society is not organized so that the Pentagon has that responsibility. It does not.

And as you said, the president has asked Vice President Cheney to address the issue and to help put some order and structure into it, which he is the process of doing.

General Shelton, you had a comment --

SEN. WARNER: General Shelton?

GEN. SHELTON: Senator Warner, as you know, I believe, about two years ago, we gave a tasking to our Joint Forces commander, General Kernan – before that, Admiral Gehman -- down at Norfolk, to stand up joint task force civil support. And his primary purpose here was to make sure that within the department that we knew where all of these resources we've got that could assist whoever the lead federal agency was, whether it was FEMA or some other organization -- but we would know that they were organized, they had the right training, they had the equipment, and we'd be able to move very rapidly in the event if we had multiple locations that were hit simultaneously, not to take the lead, but to be ready to support whoever was in the lead, realizing that they would look to us to provide this type of support, as they normally do.

Of course, in the counterterrorism business, we have a world- class capability there, but always in support of the Department of Justice and again with a waiver of Posse Comitatus by the --

SEN. WARNER: More needs to be done.

I'll pick up on two other points, Mr. Secretary.

First, the Stockpile Stewardship program. While it's not under direct control of your department, the readiness, to some extent, of the stockpile itself impacts on your men and women of the armed forces that have to deal with nuclear weapons every day.

I'm just going to suggest to you that you find the time to begin to review that, because it concerns me as to the -- not only the men and women of the armed forces and the civilians that have to deal with this arsenal, but also the communities in the environs where they're housed. We've got to make certain of the safety, and from a credibility standpoint that directly bears on our credibility as it relates to deterrence. You have a potential weapon. An enemy feels that our things are of little value anymore, and that goes.

SEC. RUMSFELD: You're exactly right. There's no question but that the safely -- safety and reliability of that stockpile is enormously important to the Department of Defense, as well as to the country.

It is part of the Department of Energy, as you well know. And General Gordon has the responsibility specifically within the department. He has a program. I've been briefed on it. In my view, it's a sensible program, a rational program. The problem that exists, of course, is like others, is at what pace are you able to fund that program so that in fact you have a confidence level that you're dealing properly with safety and reliability?

SEN. WARNER: Well, I think you should fund it at the pace that technology can accept and judiciously and efficiently expend those dollars, because we're coming down on a curve where that stockpile, by the very nature of its age, is beginning to raise potential questions of safety, potential questions of credibility, and we're going to have to make the decision as a nation whether we can go into production on some new weapons.

SEC. RUMSFELD: Senator, that program has been underfunded for a series of years. It's just a brutal fact.

SEN. WARNER: Well, all right. I'll address that.

Lastly, could you bring us up to date on Macedonia, the policy that our president has established for the moment, together with that of NATO, as to the utilization of NATO forces? And I believe our president has indicated that our forces would salute and march off as the NATO makes its decision. Is that generally correct?

SEC. RUMSFELD: The circumstance is that the United States has in the country of the Former Yugoslavian Republic of Macedonia somewhere between 400 and 700 U.S. military at any given time, depending on rotation. And they have a variety of functions, but most of the functions relate to supporting the forces in Kosovo, which is, of course, just a short distance away. They've been there for a number of years now. They do some UAV work. They do some logistics. They do some transportation. There's a very small unit that was there to assist the government of Macedonia for period, and I think that group left? Hugh?

GEN. SHELTON: Yes, sir.

SEC. RUMSFELD: And the situation in the country is very difficult. There's been decades of hostility between the Albanians and the rest of the population, as you know well.

At the moment, the Albanian representatives are still part of the government. At the moment, most of the Albanian -- ethnic Albanians are still a part of the military, although some non-trivial number left within the last seven days, departed the military, which was unfortunate. There are physical threats from Albanian extremists who are using force and violence against the parliament a short distance away, against the airport in Skopje, where our troops are located and where our UAVs are located. So they're at risk. There have been a lot of so-called "envoys." Secretary-General Robertson has been in and out several times. Solana has been in and out several times. Now the French have appointed some man named Leotard who is going to be going in there.

The government is young. It is facing a very difficult situation.

They are not all in agreement. As anyone who reads the press can tell, there are some tensions between various members of the Macedonian government. There is no way in the world to predict what the outcome will be, whether or not a deal will finally be arranged for a cease-fire. I will say that there recently has been something very good that's happened in the area, and that was when the ground safety zone actually was turned back over to the Serbs and a great many weapons were turned in voluntarily; it was done peacefully, there was no violence, and it was exceedingly well done. So it is possible that some good things can happen there.

It is also possible that it can deteriorate rather rapidly. We had some buses that were assisting in moving some Albanians within the last 48 hours that were surrounded, and it could have deteriorated into a very difficult situation very rapidly.

SEN. WARNER: Well, I hope that you will consult with the Congress, should it require putting our troops into greater risk than they are now in in that assignment.

Lastly, Mr. Secretary, this committee took several initiatives last year with regard to unmanned, and we call them uninhabited vehicles. I note that your proposed fiscal year 2002 budget has increased funding for several of these programs for the potential to transform the military. We commend you, and I hope it moves forward.

I note the presence of my distinguished colleague, his return, from Alabama. We're about to wrap here. Do you wish to ask or --

SEN. JEFF SESSIONS (R-AL): I have one brief series to ask.

SEN. WARNER: Yes.

SEN. SESSIONS: Mr. Secretary, we are in such a new era, it seems to me, with Russia. I spent two weeks there as a private citizen in '93. And the people are wonderful. They're our friends now, they're not our enemies. And we need to build on that. And I applaud the president for doing so.

And it strikes me quite plain that the ABM Treaty, that has been in effect since 1972, is not appropriate for today's world. We have threats from other nations that endanger American lives from a missile attack. And I just hope that the Russians -- first of all, our negotiations and our efforts to work with them will succeed in getting them to agree to allow us to construct a national missile defense system. First of all, it's important to our national security. I know you believe that. Your commission so found, bipartisan commission unanimously found that we were facing a threat to our nation from ballistic missile attack. So I hope we can proceed with that.

But the treaty itself does provide that the United States, with notice, can get out of it. It's not something that binds us forever. Certainly the Russia that exists today is not the Soviet Union that we signed the treaty with. And the problem is this. As I understand it, President Clinton had instructed that the development of national missile defense be done treaty compliant, and there's so me ways to do that. But I've heard expert testimony -- and I would ask if you or General Shelton would comment; agree or disagree -- that if we continue with that treaty-compliant approach, it will delay the implementation of a good system, it will make it more expensive, and at the conclusion, we would probably be less secure than if we proceeded outside the treaty.

SEC. RUMSFELD: Senator, it's certainly my view that the way to develop the most effective and most cost-efficient ballistic missile defense is not to try to design something that fits in a treaty that prohibits you from having ballistic missile defense.

SEN. SESSIONS: Well said. And what's troubling me, I'll have to tell you, Senator Warner, is that we're having members of this Senate tying the hands of the president of the United States. They are saying basically to Russia, "Don't agree to this thing. If you don't agree to the president's request, we may not deploy this system." And I think that's tying the president's hands. I think that is not a bipartisan foreign policy that we are a part of. The president ran on this issue. It was something that he took his case to the American people on and we voted on it, Mr. Secretary. We voted to deploy this. Maybe there is some disagreement about

how fast we ought to deploy it, but there shouldn't be a disagreement in the Congress, because we voted to deploy a system as soon as it was technologically feasible to do so.

So I remain troubled that members of this body make statements that suggest that unless the Russians were to -- if they hold out and fail to work out an agreement with the president, we are prohibited from protecting ourselves from missile attack from rogue nations. Maybe you would want to comment or not on that.

SEC. RUMSFELD: Well, Senator, I thank you for your comment. As one of the individuals that has been asked to begin the process of meeting with the Russians to attempt to fashion some sort of a framework that would take us beyond the ABM Treaty, I have to admit that entering a negotiation where the Russian, the other side that you're dealing with, may have come to a conclusion that they have a veto over whether or not the United States of America should have a missile defense capability, would be a terrible way to enter a negotiation.

So anything that would contribute to the impression on the part of the Russians that the United States would like to have a ballistic missile defense capability, but we wouldn't want to have one if they didn't want us to have it, would clearly mean that you would not be in a negotiation. The odds are you would simply be stonewalled, and that is not how one wants to spend one's time.

The NATO countries have properly told the Russians that they will not have a veto with respect to NATO enlargement, for example. There's no reason that Russia should have a veto over NATO enlargement, and the president told Mr. Putin that. I mentioned that to Mr. Ivanov, the defense minister of Russia, and NATO itself has spoken on that subject.

If they're not having a veto on NATO enlargement, I can't imagine why anyone would want to hand them a veto with respect to missile defense to protect the population of the United States of America and our deployed forces and our friends and allies.

SEN. SESSIONS: Thank you, and thank you for having the courage to discuss this issue. I think as American people become more aware of it, they will be supportive, and you'll find the Congress supportive. I'm sure they will be; we voted on it previously.

General Shelton, let me express my appreciation for your service. You've testified so many times here, and it is an honor to have known you. It's an honor to have worked with you. You have been truly committed to your nation's strength and welfare, and we appreciate it very, very much.

GEN. SHELTON: Thank you very much, Senator Sessions.

SEC. RUMSFELD: Mr. Chairman, may I --

SEN. WARNER: Yes.

SEC. RUMSFELD: May I make a comment? I'm a little concerned about all this praise for General Shelton. I expect to get three and a half more months' work out of him. (Laughter.) And I -- I hope and pray that that's the case, and I wouldn't want him to start mentally leaving, because we need this fine officer. He's doing a superb job for us.

SEN. WARNER: We know --

GEN. SHELTON: (Inaudible) -- you can count on it.

SEN. WARNER: We know him and know him well, and that'll not occur.

We've had an excellent hearing, Mr. Secretary, General Shelton, Dr. Zakheim. Thank you, Senator, for your observations. I think I would observe, though, that we had a good, constructive dialogue on missile defense here today, and I hope that no comments would be construed by any of our colleagues along the lines that it would be undermining of the president's ability to continue to consult with our allies and eventually to sit down and work out a new framework with Russia. I think we're all supportive of our president and his endeavors to do that. Certainly I am.

I thank you, Mr. Secretary. (Strikes gavel.) The hearing's adjourned.

STAFF (?): (Off mike.)

SEN. WARNER: Well, we'll put Senator Thurmond's statement in the record, without objection.

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