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Balanced Budget Amendment's Possible Impact on DoD
Prepared statement of John J. Hamre, undersecretary of defense (comptroller), the House Judiciary Committee, Tuesday, January 10, 1995

Mr. Chairman, members of the committee: Thank you for the

opportunity to appear before you today to discuss the balanced budget amendment and the likely impact that it would have on America's defense posture.

The balanced budget amendment could severely jeopardize America's national security, and that is one of the major reasons for the administration's opposition to it. Unless legislatively exempted from reductions, defense spending could end up being the primary billpayer to make federal budgets balance, and that would fundamentally undermine the security of our nation.

If the balanced budget amendment were adopted, America's defense posture would be vulnerable to two different problems: the impact on defense to reach a zero deficit and the effect on defense of the annual budget process under the BBA.

To illustrate the impact of getting to a zero deficit, several assumptions have to be made about the final date and provisions of the BBA. Let us assume that the year of BBA implementation is 2002 and make calculations based on the most recent deficit projections by the Congressional Budget Office. Balancing the budget on a phased basis -- 14 percent per year in 1996 through 2002 -- would require a total of $1,040 billion in spending cuts and/or revenue increases.

Exactly how much the Department of Defense would have to contribute to achieving a zero deficit would depend on how much revenue would be increased and whether entitlements would be cut. Under the worst-case scenario, there would be no increase in revenue and no cuts in the entitlement programs. This means the budget would have to be balanced by cuts in discretionary spending, of which national defense represents about one-half. The best-case scenario assumes half of the deficit would be offset by increases in revenue and the other half proportionately to spending for entitlements and domestic and defense discretionary programs.

Depending on the final provisions of the balanced budget amendment, DoD budget cuts from FY [fiscal year] 1996 to FY 2002 could range from $110 billion to $520 billion.

For national defense the best-case scenario would have a serious impact on national security. The worst case would be a disaster. Achieving these totals would entail substantial reductions to defense people and programs, which are already downsized to the minimum acceptable level deemed necessary in the Bottom-up Review.

Our forces would become hollow, and we would have to give up our quality of life initiatives such as adequate compensation for military personnel, child care programs, decent barracks and family housing and other programs that provide a sense of community and support for military families. We would have to stop the modernization and recapitalization, which is needed and planned in our current five-year budget. We would have to cut back our emphasis on science and technology and technology reinvestment programs and thereby risk the technological edge that has always given our forces an advantage over our adversaries.

Reductions such as these would fundamentally change the character of America's military posture, make our new strategy unsupportable, call into question our ability to fulfill U.S. commitments to our allies and to protect our interests worldwide, and undermine America's global leadership.

Let me now turn to the second problem: life under a balanced budget amendment.

What about the effect on defense of the annual budget process under the balanced budget amendment? The BBA annual budget process could routinely end up removing from our elected political leaders the decision about what level of defense spending is prudent. America's defense preparedness could get determined by economic shifts, cost growth in entitlements and other non-defense factors. Even if threats to America's global interests were increasing or our forces deteriorating, the BBA could lead to deep defense cuts.

The fact that these consequences could be avoided with three-fifths approval of each house of Congress is scant reassurance. Preservation of an adequate defense posture would become dependent on exceptional political efforts. The BBA process would be heavily skewed in favor of cutting defense to compensate for whatever was escalating elsewhere in the budget. Even when a three-fifths majority minus one in either house believed that BBA cuts were unjustified, the minority view would prevail. Not exactly ideal for the world's most powerful democracy and best hope for future peace and stability.

The BBA would threaten frequent interruptions to the many long-term processes that are essential to maintaining a prudent defense posture. The quality and morale of our people must be continually nurtured and would be devastated by rapid and deep cuts in end strength. Our military and civilian professionals require extensive training and experience. We cannot recruit and retain top-notch military and civilian professionals if they are vulnerable to summary dismissal.

Repair parts must be ordered three years ahead of anticipated use in order to ensure the readiness of U.S. forces. Many years of research and development are needed to ensure that our forces are never outgunned or outmaneuvered. The average major weapons procurement program requires eight years of development and testing. Production lines are necessarily set up anticipating stable procurement rates; they cannot be stopped and started in order to offset a downturn in revenues or surge in entitlements. Because of the long lead times needed for our weapons systems, DoD is unique among executive departments in that we must have detailed five-year plans incorporating them. It would be extremely costly and essentially unworkable to turn on and off defense programs when the BBA forced deep budget cuts.

In sum, budgeting under BBA would inject great uncertainty and chaos into defense planning, which needs to have stability and a long-term perspective.

Small changes in the U.S. economy would mean even bigger budget problems. Using the CBO rule of thumb, a 1 percent rise per year in interest rates would increase the federal budget deficit $5 billion in the first year and $108 billion over five years. A 1 percent fall per year in real growth in the economy would increase the deficit $9 billion in the first year and $289 billion over five years. Thus under the BBA even modest changes in the economy could trigger sweeping cuts to federal programs.

The balanced budget amendment addresses a very important issue, but it would dramatically complicate our ability to plan for and manage a strong Department of Defense.

Defense programs would be especially vulnerable under the BBA because DoD accounts for about half of all discretionary spending. And that is critical because the BBA has no implementation details. Unless the BBA becomes a vehicle by which revenues are increased or entitlements cut, DoD could well have to pay for half of every dollar of deficit reduction.

DoD budget authority, in real terms, has been in decline since FY 1985. We have finally reached the end of our builddown. It would be dangerous to continue to downsize our forces at this time. The balanced budget amendment would cut defense spending to whatever level its arbitrary formula dictated and thereby displace the carefully considered judgments of members of Congress, presidents, and civilian and military leaders as to what spending is necessary and wise. I do not believe such an approach to questions of national security would serve America well.

 

Published for internal information use by the American Forces Information Service, a field activity of the Office of the Assistant to the Secretary of Defense (Public Affairs), Washington, D.C. Parenthetical entries are speaker/author notes; bracketed entries are editorial notes. This material is in the public domain and may be reprinted without permission.