Friday, June 22, 2001 - 5:15 p.m. EDT
(Background briefing on the fiscal year 2002 budget amendment.)
Staff: Okay, good afternoon. This briefing is a Senior Defense Official. Without further ado, sir.
Senior Defense Official: As you know, in his campaign and his February budget submission, the president committed the administration, his administration, to the priorities of education, tax relief, and protecting Social Security and national defense. And national defense is what this 2002 budget amendment is about, and it fulfills the last of what we call his "core commitments."
The president's budget amendment is going to raise Department of Defense spending to $329 billion. That represents an increase of $33 billion over the 2001-enacted level, fiscal year 2001, and $18 billion more than the president's budget blueprint that was submitted in February. And that amount, in turn, is in addition to the $6 billion supplemental request for defense that is being considered by the Congress to arrest the decline in readiness and to improve the quality of life for our service men and women.
The administration has inherited severe shortfalls in readiness, in health care, in operations, maintenance and infrastructure, far worse than was originally understood. This amendment takes steps to begin to deal with these funding deficiencies and to establish fiscal certainty and discipline.
The president's budget amendment reflects honest budgeting. Nearly 50 percent of the amendment is specifically directed at remedying previously under-funded programs, notably the defense health program; reducing critical shortfalls; and providing funds to reflect realistic re-estimates of previously understated costs.
Taking these essential steps in fiscal year 2002 lays the foundation on which the Department of Defense can build in fiscal 2003, following the results of the secretary's strategic review and the Quadrennial Defense Review.
Over to you.
Q: Can you break down the increase?
Senior Defense Official: Yes, I can.
Quality of life. For pay and housing, $4.1 billion.
For the defense health program, $2 billion.
In what you might call the category of readiness and operations and maintenance, base operation support, $1.6 billion.
Flying hours, $1.3 billion.
Other readiness, things like depot maintenance, spares, range and training center modernization, force protection, $2.6 billion.
Infrastructure, $2.6 billion.
What other ones? Missile defense, $600 million. And that, by the way, is above the blueprint which already allocated $1.6 billion. And in fiscal '01, $5.3 billion was enacted. We're talking about a total for fiscal '02 of $7-1/2 billion for missile defense.
Q: I'm sorry. I don't understand that.
Senior Defense Official: Fiscal -- excuse me, the budget blueprint increased what was anticipated by the previous budget. As you recall, there was --
Q: Can you put years on that?
Senior Defense Official: Yes.
Q: The 2002 budget --
Senior Defense Official: The 2002 total will be $7-1/2 billion. The baseline of what was submitted initially, prior to the blueprint, had a level of 5.3 billion, as you may recall. The blueprint adds 1.6 billion.
The amendment adds 600 million. Add those together, you have $7.5 billion for missile defense.
Q: The blueprint that you're talking about --
Senior Defense Official: Is the president's budget blueprint document, and that was submitted in February --
Q: But that wasn't -- that wasn't new money, right? That was moved around within the scope of the 310?
Senior Defense Official: No, no, no. That was new money. If you recall, the president put in -- had $4.1 billion of initiatives.
Q: Right, but he then took out 4.1 billion, right?
Senior Defense Official: Well, no. The --
Q: I mean, the Clinton budget was going to be 310 point --
Senior Defense Official: No. It was not at all clear the Clinton budget was 310. It was never submitted as 310. The submitted (sic) [enacted] budget was 296, as you recall.
Q: In '01.
Senior Defense Official: That's right. And all they had for '02 that was formally submitted (sic) [enacted] was 296, and the 310 was never formally submitted to the Congress, as you'll recall.
Q: No, I understand that, because you had said -- I think what I'm questioning is we've never seen the detailed budget for how much was in there prior to this amendment --
Senior Defense Official: Well, what we're telling you is that prior to the blueprint there was 5.3 billion in missile defense. The blueprint added the 1.6 billion. We then added another 600 million in the budget amendment, so the administration's number is $7.5 billion.
Q: Right. I've got that. I think I just don't understand what you're talking about with the blueprint.
Senior Defense Official: Well, do you recall that there was a submission of the president's initiatives? It was a blueprint. It was a pretty thick document. [See http://www.whitehouse.gov/news/usbudget/blueprint/budtoc.html ]
Q: Mm-hm. (Affirmation.)
Senior Defense Official: And it had a section on defense, national defense. And as you recall, that made it clear that that was only the beginning and that included a pay increase, for instance.
Q: And what was the level of the defense budget in that blueprint -- (inaudible word) -- for 2002?
Senior Defense Official: That one was 310.5.
Q: So that was like a placeholder against -- (cross talk). (Laughter.)
Q: So is this 18 on top of 310?
Senior Defense Official: Yes.
Q: Okay. I just want to --
Senior Defense Official: Yes. That's for defense.
Q: That's what I wanted to make sure, I'm not just seeing --
Q: Where did the 325 figure come from?
Senior Defense Official: That should be three -- I'm sorry, I --
Q: I mean, as a base --
Senior Defense Official: I said 329.
Q: (Inaudible) -- if that was -- I'm sorry if I'm just adding another element of confusion here.
Senior Defense Official: Well, it's -- (inaudible).
Q: Some people have said that you're starting from 325 and adding 18 billion --
Senior Defense Official: Oh, I'm talking only what's called Function 051, which is Department of Defense.
And I think you're thinking about 050, which includes other functions, like Energy and so on.
Q: Just talking about defense.
Q: Okay, now I'm really confused. And what do you --
Q: I understand, okay.
Senior Defense Official: Does everybody understand --
Q: What you're proposing is $329 billion, which is -- approximately, which is about $18.4 billion more than what we were talking about in February when you handed us the blueprint?
Senior Defense Official: Right. If you add 310.5 (billion dollars) and 18.4 (billion dollars), you come awfully close to 329 (billion dollars).
Q: And your contention is that the 310 (billion dollars) does not represent the funding that would have been proposed by the Clinton administration because your contention is that was never actually proposed.
Senior Defense Official: That's correct.
Q: And how can you help us understand the differential here, because it was very clear this building had gone to OMB with a figure substantially higher than 18 (billion dollars).
Senior Defense Official: Well, the differential in what sense?
Q: Well, I mean, we have been led to understand that the secretary had gone to OMB with a number somewhere in the mid-30s, and he comes back with 18. Did he go -- was that his serious number? Some people say --
Senior Defense Official: I won't -- I mean, I can't comment on, you know, negotiations -- or discussions, is probably the more appropriate word -- discussions that took place in formulating this number. But obviously, the number was formulated in consultation with OMB, and I think that anything that -- beyond that is probably, to a great extent, speculation.
Q: Are you perfectly happy with this number? Are you disappointed a little bit?
Senior Defense Official: Well, I think a $33 billion increase over 2001 is not exactly insignificant; wouldn't you agree?
Q: Well, I guess the number I was referring to was 18.
Senior Defense Official: Well, 18 is pretty significant too -- $18 billion, after we got $4.1 billion in the blueprint, and after six.
Q: Of course, the one thing you don't mention here is any money for modernization, with all --
Senior Defense Official: Oh, there's money for modernization.
Senior Defense Official: There's 3.6 billion for modernization.
Q: It would be helpful if we had an actual breakdown of all of the money.
Senior Defense Official: Well, eventually we will get that to you.
Q: What do you mean by modernization? I mean, which --
Senior Defense Official: Modernization? All kinds of systems. Command and control, information operation, airlift, spares and aircraft ships, experimentation, elements of what you might call transformation.
Q: What does that bring that top line of procurement to, then?
Senior Defense Official: The procurement number -- the actual procurement number, top line, we're still working. If you're going to go into subcategories, we're still, obviously, putting all that together. But we have the overall top line and we have these categories, and the various procurement accounts by service and by appropriation and so on, we'll have that shortly.
Q: This is going to be submitted on Wednesday, is that right?
Senior Defense Official: Well, they're hoping to get it submitted by the end of next week. That's the target. But, you know, we'll see.
Q: A lot of your dollar figures is driven by what the on-budget surplus available excluding Social Security and Medicare is. There are three sets of numbers. The House Democrats say you've got about 23 billion in '02. The Senate Republicans on Budget say it's about 38. Conrad's people say it's about 24. Somewhat confusing. But what's your going-in assumption on the on-budget surplus you'll have to compete with?
Senior Defense Official: Well, I assume and it really is only an assumption on my part because this is beyond the scope of DoD, that OMB felt that this increase was consistent with the president's other commitments and with the economic forecasts of the administration. Beyond that, I'd have to refer you to OMB.
Q: Okay. Could I ask one follow-up on the 3.6 billion? I think everybody in the room wants to know, were there any big platform dollars added, not the puts and takes on command and control and electronics?
Senior Defense Official: Most of the adds were of the smaller aggregative variety. The budget amendment, to my knowledge, was not really addressing those kinds of major platform changes. There are some -- there is some acquisition in there, but probably not what -- the kinds of major system decisions you're thinking about. I believe that that is going to -- major system decisions generally are going to be part of the Quadrennial Defense Review and its outcome.
Q: What kind of a real increase in defense spending, based on your assumptions of inflation, whatever, does this represent, compared to recent years?
Senior Defense Official: We're talking about overall -- and this is a rough guess; I don't have the number in front of me -- we're talking in excess of 7 percent real growth.
Q: Compared to in recent years?
Senior Defense Official: Compared to the last submission. You see, again, it's very difficult to compare prior year behavior, because of congressional add-ons. So you really have to look at what was submitted. And if you look at that, if you look at the 296 baseline, then you're talking in the region of 7 percent. After that, you know, there are all kinds of perturbations -- that is to say, relative to the 296, because there's just this -- all this other action.
Q: The previous administration made a big deal about getting $60 billion for modernization. You can't tell us what your top line is there?
Senior Defense Official: I believe that -- well, right now, in the modernization account, as I said, I mean, we've got to aggregate that all up.
Q: Is it more than 60 billion?
Senior Defense Official: I just told you we've got to aggregate it, so I can't tell you more or less --
Q: Well, but sir, the blueprint has 59.5 billion for procurement in '02.
Senior Defense Official: Right. Well, I mean --
Q: Is it 3 billion on top of that? I mean --
Senior Defense Official: Yes. Everything that I've given you is on top of the blueprints. So you're okay there.
Q: Okay. So it's like 62-ish.
Senior Defense Official: Whatever.
Q: What is the 600 million in missile defense -- (off mike)? What's it for?
Q: It's actually there --
Senior Defense Official: Actually, there's something else there.
Q: The problem is -- (off mike).
Q: (Off mike) -- well, I'm sorry. (Off mike) --
Senior Defense Official: What are your questions --
Q: What's your name?
Senior Defense Official: The 600 million is going to be for research and development. It's various projects that -- you probably ought to address yourself to General Kadish. It's showing up in the R&D account, and it's obviously a major plus-up, as is the 1.6 billion.
Q: How is it distributed among -- I know you've dropped the whole nomenclature of "national" or something -- but what we had been calling "theater" versus things that we hadn't been calling theater?
Senior Defense Official: I would, at this stage, leave that to General Kadish to work out. I mean, we're working that out. We made the general aggregated allocations, and there was, obviously, a commitment to do as much as we could for missile defense, and this does represent a significant increase.
Q: Of the 18.4 -- I came in a little late -- but is the broad category for O&M and personnel and pay? If you could repeat that.
Senior Defense Official: Yeah. In terms of operations and maintenance, I would say you've got better than $8 billion for operations and maintenance, slightly better than that. Pay and housing and health, just over $6 billion. And I include infrastructure in operations and maintenance, by the way -- readiness, as it were.
Q: Thank you.
Q: And the 3.6, then, makes up the rest of it?
Senior Defense Official: I've got some other things there too; 3.6 plus missile defense. We've also got some savings, and I don't want to gloss over those because that's really quite important. We have -- and you'll get the detail -- a series of management reforms and savings that are, we believe, quite reasonable, and those are in the region of about a billion dollars as well. So in a sense, the 18.4 is a net number. And those savings are sort of the first manifestation of the secretary's -- Secretary Rumsfeld's commitment to improving the efficiency of the Defense Department.
Q: What years do those one billion dollars -- does the one billion dollar play out, though?
Senior Defense Official: No, no, no. These are savings for '02.
Q: Savings in '02?
Senior Defense Official: Yes.
Q: So if the numbers don't add up, we're coming over a billion, then it's because there were a billion dollars being taken off the other side?
Senior Defense Official: That's correct. There's a billion offset. That's correct.
Q: What's the biggest category?
Senior Defense Official: I'd have to look that up. I don't have that right now. I mean, there is a whole group of them.
Q: So you're booking what you're going to save this year instead of booking what you will save over the next five years?
Senior Defense Official: No, we're booking things that can really be saved in '02. This is not betting on the come, or something, this is real '02 savings. But there's just a whole raft of them so, you know, I don't think there are any that really stand out sharply.
Q: I'm sorry, could you go through the base operations? You had base ops, $1.6 billion; flying hours, $1.3 billion.
Senior Defense Official: 2.6 (billion) for other readiness, and $2.6 billion for infrastructure, and I believe that comes to $8.1 billion. It's slightly over eight, that's slightly over eight.
Q: Thank you.
Senior Defense Official: All right, thanks, folks.
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