Mr. Bacon: Welcome to the Pentagon on this gray day.
Let me start with two announcements. The first is that starting tomorrow and continuing for about two weeks the Department of Defense will conduct an aerial survey over the hurricane harmed parts of Honduras, Nicaragua, El Salvador, Guatemala and Belize to collect data for assessing environmental damage. This will be done with an OC-130, an Open Skies aircraft, that will be taking pictures and making them available to the countries and to environmental groups and others who can use this information to provide help and to work for long term environmental remediation.
There are some press seats available on these planes if anybody wants to spend some time flying over Central America.
Second, tomorrow afternoon Secretary Cohen will participate in a ceremony at the White House to honorarily promote retired Lieutenant General Benjamin O. Davis to the rank of General. This is being done following an act of Congress recognizing his long military career including service with the Tuskegee Airmen during World War II. That's tomorrow at the White House at 2:20.
And with that, I'll take your questions.
Q: Can you give us anything on the report out of Japan, Tokyo, that the North Koreans are building three missile launch sites in the northern part of the country? Japanese government officials are saying...
A: I understand that.
Q:...the United States.
A: Somebody in the Japanese government has allegedly been commenting on intelligence reports, but I won't do that. All I can tell you is that we are obviously concerned about North Korea's missile program. We've made that clear publicly and privately to the North Koreans. We've discussed this with our allies. As you know from time to time we've had talks with the North Koreans specifically about missile proliferation.
Q: There's also quite a bit of speculation in the press that the pact between North Korea, the nuclear pact between north Korea and the other KEDO nations is about to break down. Can you give us any insight into that speculation? Or is it just speculation?
A: Let me just talk about that briefly. I think there are at the outset two elements to discuss. The first is our obligations under the KEDO agreement, and second are the North Korean obligations under the KEDO agreement.
Our obligations in the short term are to provide 500,000 tons of heavy fuel oil. We are in the process of doing that. We have the money to provide virtually all of that, or will soon have the money to provide virtually all of that. So I'm confident that soon we will be able to meet that obligation for this year.
The longer term part of our obligation is to mobilize money and manpower and machinery to build the light water reactors in North Korea and that is well underway.
The North Korean part of the agreement is to stop work -- fuel reprocessing -- which they have done at their reactor site. That has been well monitored by IAEA inspectors.
Now the question is whether there are acts within North Korea to perhaps carry out parts of a nuclear program elsewhere.
As you know, there has been some speculation that an underground facility, they're in the process of an underground facility they appear to be building might have something to do with their nuclear program. We have demanded an inspection of that facility. Even as we speak today Charles Kartman of the State Department is carrying on talks with the North Koreans over access to that facility. Those talks continue. I can't comment on them.
I think everybody agrees that we are better off because of the framework agreement than we would have been without it. It has, in fact, stalled or stopped their nuclear program. It has had an important impact on stability in the Korean Peninsula. We will vigilantly monitor their activities, and we are doing that.
Q: Can you tell us, is the fuel oil, the 500,000 tons of fuel oil -- even though it may be tardy, the money is in the bank, so to speak. Are the North Koreans continuing to complain about tardy deliveries of oil or is that now a moot point?
A: My understanding is that we've delivered 391,000 tons out of the 500,000 tons. We are working diligently to provide the other 109,000 tons, and I believe we will do that in a relatively short period of time.
I think they clearly can complain as long as we have failed to meet that obligation, but I'm confident that we will meet that obligation and meet it relatively soon.
Q: South Korea has called for offering the North Koreans diplomatic and financial incentives, from what I can tell, economic aid of a kind, in return for access to that suspect site. What's your position on that?
A: We've made it very clear in public and private statements that we're not going to pay for access or pay to have IAEA inspectors gain access to sites. I think that's clear.
Q: What about other forms of incentives...
A: There is a relationship with North Korea by the West and other countries that involves food aid. This is a country that is unable to feed its population and has been unable to feed its population for several years. And in order to head off massive starvation the community of nations, of more prosperous nations than North Korea, has contributed quite a lot of food aid over the years and the United States has been part of that. We have always said that food aid is not a political statement, that it's a humanitarian act. But, that food aid I anticipate will continue as necessary.
As you know, there is a new policy between President Kim Dae Jung, a policy of openness, a policy of reconciliation with North Korea to try to bring about a reunification over time. We support that policy. But that does not mean that we will get into the business of paying for access to a site that we believe should be openly monitored by the IAEA.
Q: Would you consider increasing food aid or providing economic aid if the South [North] Koreans show their good faith by allowing inspections...
A: We currently have economic sanctions imposed against North Korea. There has been some economic commerce between the two Koreas. As you know, some cattle were delivered and there's talk of a large investment project, maybe several investment projects in North Korea financed by South Koreans, private South Korean individuals. But right now we have made food assistance available on a humanitarian basis, and I would anticipate that's what our policy will remain.
Q: Regarding Dr. Perry, is his job, his portfolio, whatever you want to call it, simply to investigate and look at the situation? Or is he empowered in any way to deal with the North Koreans, perhaps to go and talk to them, or would that be stepping into Kartman's territory?
A: First of all, his job is to review our policy towards North Korea, and that's what he's doing now in South Korea. He's been in Japan, and of course he's had conversations with people in this government. My understanding is he does not plan to go to North Korea on this trip and he's not negotiating with the North Koreans, but he's reviewing our policy.
Q: What happens if the inspections of the underground site cannot be arranged? What happens to the framework agreement? What is your position on that?
A: We're right in the middle of talks now between Mr. Kartman and the North Koreans, and I don't think it's appropriate to speculate about what happens next. Those talks could continue, I believe will continue for at least another day, maybe longer.
As you know, conversations with the North Koreans frequently take a long while, so there could be another round of talks. I wouldn't rule that out. But I think it's probably inappropriate to speculate on what will happen until those talks are over.
Q: You've indicated concern about Korea's missile program, and in the past there's been quite a bit of very heated rhetoric that's been going on. The rhetoric seems to be getting more heated and more frequent. Is that also a cause for increased concern?
A: I think the rhetorical rheostat goes up and down over time. Sometimes it's turned up and sometimes it's turned down. We have not seen any particular moves by their military backing up this increase in rhetoric.
I think that they are in the process of trying to create some diplomatic pressure on us and other parties to the KEDO agreement and I would regard their rhetoric as part of that. But we're not unused to this type of excited rhetoric out of North Korea.
Q: How about UN forces in Korea? Are they on any heightened state of readiness?
A: I'm not aware that they are. They're on a generally high state of readiness, as you know, but I'm not aware that there's a new state of readiness there.
Q: There are reports that the North Koreans are planning for a possible test of its Taepo Dong, a second test of its Taipo Dong sometime this month. Would there be any consequences for North Korea if they did proceed to a second test?
A: I know there have been reports on such tests. So far we haven't seen a second test. I guess we have to answer that question if there were a second test.
Clearly the first test has had I think a chilling impact in the Asia Pacific region. It certainly increased the level of fear and uncertainty in the region, and this is not good for stability in the region. Ultimately, I'm not sure that it helps North Korea reach its goals of trying to establish trade and diplomatic relationships with a wider range of countries.
Q: Different subject?
Q: A question on the F-18. The U.S. yesterday awarded the contract for the third lot. Was there ever a response to Senator Feingold...
A: I think the response date is next week sometime, and I don't believe that letter's been sent yet.
Q: A different program, the F-22. Has there been any response to Representative Obey on the C-130J/F-22 linkage that came up?
A: I read those comments and no, I don't have any response to that.
Q: Are women less physically fit to serve in the military because they have weaker knees, according to a naval study?
A: There have been many studies over the last few years. One reported on the front page of a major newspaper -- at least one reported on the front page of a major newspaper -- pointing out that women athletes sustain more knee injuries than male athletes on a percentage basis. The Naval Academy study reached the same conclusion about women at Annapolis compared to men at Annapolis.
Now the question is what happens because of that? The Naval Academy is looking into that. There certainly may be exercises or other remedial actions that could be taken to deal with what appears to be a greater propensity to knee injury among women than among men.
There are many jobs in the military that don't require strong knees, and there are many jobs in the military performed by men and women who have physical vulnerabilities of one sort or another, and I assume that women will continue to serve as they do today with great distinction and skill in the military.
Q:...one study that in fact women athletes do sustain a higher rate of knee injuries, but when you move it from the basic athletic to the kind of field exercises that are required of a soldier, the disparity is even wider. The number of injuries grows even greater.
A: As I understand it that's the case, but that doesn't mean that this can't be addressed.
Look, you don't need a study at the Naval Academy to make the point that men and women are physically different. And there are a number of physical differences. The Navy and every other service --
Maybe you're being called out by Annapolis right now. (Laughter)
Q: It was your last line about men and women are different.
A: It was a headline-making line, for sure. I try to make news in all these briefings, and I thought that was the best I could do today.
Q: Can you comment on the top line for FY00? Can you sort of bring us up to date on the process, the progress of their meetings, OMB? I'm just wondering from the Pentagon's perspective how confident are you that you will in fact gain the $17 billion that the Joint Chiefs testified in September that they needed for readiness concerns.
A: Without getting into specific numbers because the budget process is still continuing, I think that Secretary Cohen and the Chiefs are very confident about several things. First, that the President is fully aware of the needs of the military, that he has spoken out publicly on a number of occasions about his determination to keep the military strong, to keep readiness high, and to deal with important personnel and quality of life issues.
He said, for instance, in his Veterans Day address that we enlist soldiers, but we reenlist families. He has expressed on a number of occasions his determination to deal with readiness, pay, and modernization problems. How that will be approached or done in the next couple of weeks has not been worked out yet and that's in the process of being worked out.
Q:...OMB is looking in the next, by December 15th...
A: I think it would be more appropriate to ask OMB to answer that question.
Q: On that subject, there's obviously two sides to everything. In this town there are critics of the attempt to increase the defense budget that's going out, there's one that we're still spending like 80 percent of Cold War levels, and two, that Congress keeps adding money to things that the Pentagon doesn't ask for so the money is not necessarily being spent in the best way.
How do you respond to those two criticisms?
A: First of all, the defense budget has come down very sharply from its Cold War peak. It's come down I think about $100 billion from its peak. Some economists have made the point, I just cite this, I wouldn't make it myself necessarily, but some economists have made the point that the surplus the nation is facing today is largely a surplus created by reductions in defense spending.
But it's clear that we don't live in a static world. While the Cold War is over and while we have realized a substantial dividend from the end of the Cold War -- and that dividend is not only in lower defense spending, it's in a military that's 36 percent smaller, it's in a procurement budget that's declined by 70 percent in real terms from its peak -- we have been able to cut back infrastructure but not enough. Infrastructure has only declined about 21 percent while the size of the military has declined by 36 percent, so we face a challenge there. That's called BRAC. One that we'll address in the future.
But we're in a different world. After realizing this dividend, I think it's important that our military adjust to the challenges we face today. You see those challenges in Bosnia, you see them in the Gulf, you see them in Korea, you see them in Central America. There are no shortage of challenges that our military are dealing with today. They're fully engaged all around the world.
We have realized, I think, in the last year that there is one other issue we have to take very seriously. The first one I referred to is we have to be ready, obviously, to deal with the challenges we face and we've begun to realize that the high operational tempo has caused some strains in readiness. While we can do the jobs we need to do, while the front line forces are ready, some of the back forces, the stay-behind forces, are less ready. The President is determined to deal with that. Secretary Cohen has been dealing with that aggressively for the last year.
Beyond that, we realize that there are some problems in the pay and benefits area which have to be dealt with. They are necessary fixes, but they are somewhat costly fixes. One is fixing a perceived inequity in the retirement plan. Another is dealing with some pay problems that have become obvious in the last year or so. These bear fundamentally on recruiting and on retention which are very important issues, particularly at a time when our economy is steaming ahead as energetically as it is now.
There's a third issue as well, and that's modernization. This is one of the first issues that Secretary Cohen focused on when he came here. When he went through the Quadrennial Defense Review he made a pledge to increase modernization spending and he did that. In this year's budget he showed the first increase after a long string of decreases. He wants to increase it further. I'm confident that he'll increase it again by a significant amount in the year 2000 budget. But we need to do more.
One of the consequences of having a decline in procurement spending at the end of the Cold War -- as we drew down our forces that decline was totally appropriate. But now that our forces have leveled out, we have to begin replacing some of the older planes and ships that remain in the military and that requires more money.
So those three things -- readiness, personnel, and modernization have all... the bills for those three accounts are coming due and the President has expressed his concern about those; Secretary Cohen has had a number of conversations with him. He's brought in the CINCs and the Chiefs on one occasion. Just yesterday the Chiefs again met with the President to talk about their concerns.
So what I'm saying is we have realized the significant peace dividend from the end of the Cold War, but that dividend is over and now it's time to begin to meet the modernization, personnel, and readiness costs necessary to keep our fighting force the best in the world in the 21st Century.
Q: Would you comment about the congressional add-ons and the obligatory C-130 adds? How big of a problem do you consider that?
A: Well, it's a... There are congressional monies put into the budget every year for projects that we did not request. That's a fact of life. We realize that happens. In the last couple of years there have been some large amounts put in for some projects that we haven't requested. The President has said that we would be better off if that money was focused into the neediest areas, the areas that the Chiefs themselves have identified as their top priority spending candidates. To the extent that money is diverted from top priority projects to lower priority projects, the strength of the military isn't as great as it should be.
Q: You decline to discuss figures, obviously you're not going to do that. But is it safe to say that the Administration and this building are moving toward asking Congress for a substantial, major increase in defense spending? Yes or no?
A: I think it's very clear that we need more money for readiness. The President has already recognized that and he's begun to address that problem by plussing up money for '99. It's very clear that we need to address some pay and benefit issues. We're on the way to doing that. The President has also spoken about that.
It's also clear, as Secretary Cohen has made plain and the President as well, that we have to maintain and increase the pace of modernization. That does add up to additional money and the President has made it clear that he plans to do what he can to keep the military strong and ready. The exact amounts have not been worked out yet.
Q: Would you call it major, or...
A: You know what the Chiefs said. The Chiefs testified on the Hill and they all came up with a list of their needs and it was a fairly substantial amount of money.
Q: What you're saying is that the Chiefs and the Secretary have not come off that request then for a very substantial increase? It's not less than that.
A: I think Secretary Cohen has been making it clear for many months that we need more money to finance the operations and the modernization and the personnel of the military. He's made it very clear in congressional testimony that when he became Secretary of Defense he realized that he had to work within the confines of the balanced budget agreement. He came to realize that we cannot meet all our needs if we remain at a steady state of funding that goes up only with the rate of inflation.
So yes, there is need for additional defense spending. The amount of that spending and the pace of those additions have to be worked out. The President has to balance a number of different priorities, one of which is Social Security, obviously. He will work this out in the way that he thinks is appropriate.
Q: The Chiefs were addressing pretty much the readiness issue when they were talking about that $17 to $20 billion. What about the estimates that are being looked at for pay and retirement, for adjusting that situation? How far out do the studies go that that as a separate problem would need to be addressed?
A: We tend to think in six year blocks. The Future Year Defense Plan is six years. So that's how we would approach all these problems, that's the time horizon we would apply to all these issues.
The President has already included in future planning a 4.4 percent pay increase for the military in the year 2000 and then 3.9 percent increases for the balance of the Future Year Defense Plan. That, right now, is significantly higher than the rate of inflation which is about 1.5 percent.
One of the fundamental changes is that in the '80s, and up until just recently, military pay increases were running at less than the rate of inflation, so every year soldiers, sailors, airmen and marines were falling behind at a faster rate. If they got a pay increase but it didn't go to the amount, to the rate of inflation, they were falling behind. The last couple of years they've been running ahead of the rate of inflation.
This is the product of two trends. The first is, inflation has been very low. We've returned to more traditional rates of inflation that we had before the late '60s, through the '70s and into the '80s. America has traditionally been in the 20th Century, a low inflation country. We've returned to that happier state.
The second is that military pay increases have been somewhat higher in the last couple of years than they have previously. This started under Secretary Perry and it's accelerated under Secretary Cohen. I think it reflects the realization that you cannot maintain the best qualified, best trained military in the world without paying them decently. And this is a change that has been taking place over the last couple of years and will continue.
Q: What about any idea of what it would take to fix the REDUX [Military Retirement Reform Act] problem on retirement? Are they talking hundreds of billions of dollars there?
A: No. They're not talking hundreds of billions of dollars. I don't want to get into the numbers right now, but it is an affordable fix.
Q: Just in terms of the procurement for a second, to get to the $60 billion procurement goal, (inaudible) Jack Danforth has testified on the Hill that he really thought that if you looked at acquisition reform, you could look at a lot of things internally to the Pentagon to reach that goal rather than needing additional money. I just wondered what the Secretary's opinion of that... It sounds like in fact he does think there's more money necessary for modernization rather than internal reform...
A: No. That's a very profound point. There are two ways of funding needs. One is to fund them internally by realizing savings; and the other is to fund them externally by getting more money added to the budget.
Clearly the Defense Reform Initiative that Secretary Cohen launched about a year ago was designed to help generate internal savings that we could use to fund modernization or readiness or other decided military strength issues.
Another way to do it is, to the extent that oil prices are lower than anticipated when the budget was drafted, if you draft a six year budget, you have to make assumptions about oil prices... you have to make assumptions about inflation. To the extent that oil prices and inflation are much less than we anticipated, there are some savings from them that could be redirected into procurement or readiness.
To the extent we're able to realize significant savings through BRAC... we did in the past... we have to do it again in the future. To the extent we can realize those savings, we will be able to take that money from fat and put it into muscle. That's the goal, to try to put as much money into muscle as possible.
So we will continue to work aggressively. Secretary Cohen has made it one of his primary goals, to reform defense management, to reach out for the best business practices available to the government, and to try to consolidate and shrink the staff as much as possible, again trying to turn as much fat into muscle as we can, and we'll continue to work on that.
Having said all of that, it may be that the savings will pay for a lot of what has to be done, but not everything that has to be done in the future.
Q: Where does DoD stand in correcting or fixing systems that are vulnerable to the Y2K bug? Also, what's the status of cooperation with the Russians on this?
A: We have a very aggressive program to address the Y2K problem. Secretary Cohen declared a couple of months ago that this is a readiness issue first and foremost. Solving this problem is fundamental to guaranteeing that our forces will be able to operate effectively on the first day of the Year 2000. He has tasked all of the Chiefs, the Service Chiefs, as well as the CINCs of the area [unified] commands and functional commands to make this a top priority item.
We started out our analysis focusing in approximately 3,500, 3,600 so-called mission critical systems in the Defense Department. [The Department of Defense has approximately 10,000 computer systems, of which about 2,500 are designated as mission critical. About 53 percent of those required systems were Y2K compliant as of early November 1998; four percent are being replaced; four percent are being terminated and approximately 39 percent are currently in some stage of repair.] These range from warfighting systems such as command and control systems, intelligence systems, communication systems, to systems for paying soldiers, sailors, airmen, and marines, and systems for making sure that logistics, that goods and services reach their destinations on time to support missions.
We are in the process of whittling down that number. I think we're down now below 2,500 mission critical systems that still need to be tested. I think we're well below that now, but we're in the process of testing those systems. I think we may be much lower than that right now, but we've tested a lot of these systems. It's a five part process of figuring out what the problem is. So you assess the process, you fix the process, then you test it to make sure that the process is fixed. The Secretary has instructed all of the Services and all of the area commands to hold a rigorous series of exercises to make sure that these fixes are in place and they're in fact working.
When you think about this, it's a very complex problem because we're talking about systems that have to be integrated. We're not just talking about checking out one system, we're talking about making sure that that system works in concert with all the other systems it's attached to. So we are spending billions of dollars on this process, and we're making fast progress. But early next year will be a crucial period because that's the period when many of these tests will take place to make sure that the fixes work.
Q: Are all the systems then fixed but not tested?
A: They are not all fixed yet. They should, we hope they will all be done in the first or second quarter of next year.
Q: What's the estimated cost now of this whole thing?
A: I'll take that question. I don't have... The figure $2 or $3 billion sticks in my mind, but we'll get you the exact figure.
Q: And the Russian side...
A: Well, the Russians have a lot of other problems to focus on right now. We have discussed Y2K with them. We had a group in Moscow last week that was there to discuss the shared early warning proposals that President Clinton and President Yeltsin announced I guess in the fall, September or so. We are going to set up a shared early warning center, a joint early warning center in Moscow that will be run by both Russian and American military officials. The idea of this is to help eliminate uncertainty or confusion about the possibility of missile launches or other types of military action that could, as I say, generate fears that shouldn't be there. We think that working together is a very good way to do that.
In the course of these talks we have talked to them about Y2K problems, and we're continuing those talks.
Q: When is that shared early warning center going to be established?
A: We're hoping to have it done by late '99. It could be early 2000. It's a complex process, obviously. We will be building it in a facility provided by the Russians, and it will use American and some Russian equipment as well.
Q: Am I confused on the point? I thought the point of that was to, in case there was some sort of Y2K glitch in the early warning...
A: That is one of the issues.
Q: Then it's sort of pointless to have it in early 2000 then isn't it?
A: We're aiming to try to have this done in late '99. Realistically, it might be done before that. But the fact that the system is not... If it is not done by the end of 1999, it doesn't mean that this work is useless because we will be sitting down with the Russians, working very closely with them, designing systems, designing sort of exercising on shared early warning tasks. So I think there's plenty of time for sharing and for addressing the Y2K problem as we approach that.
Q: How confident are you that the Russian strategic systems are safe or secured from the effects of Y2K bugs?
A: Well, I think that's one of the things we have to learn more about. We'll be working with the Russians to do that. I think the Russians are aware of the problem, I think they've been working on the problem. We'll work with them further to help them if they need help.
The Russians have very considerable computing expertise. They are very good at software. So they have it within their capability to deal with this problem. For all I know, they didn't design their computers the same way we designed ours. They my have had a longer time horizon in mind than our computer programmers did.
Q: About Russia, it is reportedly said commonly now in Russia, the Russian people are sick and tired of a sick and tired President. I would ask, Ken, what is the take of this Department and this government on the behavior of Mr. Yeltsin yesterday, who has been bedridden so long? Was his behavior abhorrent? Was it... He shuffled some of his military as well. Is there a concern?
A: You keep trying to treat me as a psychologist or a psychiatrist. I'm a spokesman. (Laughter) I can't get involved in things like that.
Let me just tell you one thing. Right now we estimate that it will cost $2.55 billion to correct the Y2K problem.
Q: I think there is a NATO meeting in Brussels. Can you tell us about the idea which the United States has already presented there in terms of the new concept there?
A: Yeah. You're talking about the strategic concept?
A: First of all, you can get off the Internet a copy of the communique from the meeting today, and I commend it to your attention. It's a meaty document and well worth a review. I know, Charlie, you'll want to download it as soon as possible and fit this into your dispatches.
This meeting, and one that Secretary Cohen will attend next week in Brussels, is part of the preparations for the Washington Summit that will be held here in April next year on the 50th Anniversary of NATO. That's also the time we'll admit three new members -- the Czech Republic, Hungary, and Poland.
One of the things that we are working on, that NATO members are working on in the course of preparation for that meeting, is the strategic concept that will describe the goals of NATO and the operations of NATO into the 21st Century. We're continuing to work on that, but basically as this communique makes it very clear, this concept has to take into account not only the challenges that the Alliance faces today, but the challenges it's likely to face in the future, and these are challenges that can affect the stability and security and peace in Europe.
We're continuing to work that out. It will be a very important document, but it's not complete yet.
Q: Another subject. Intel's expected to announce that they've developed a new chip that would make satellites in space virtually invulnerable to nuclear blasts in space. Do you have any reaction to that?
A: I have not been briefed on that, so I think until I know more about it it would be better not to comment on it. I can tell you that we're always looking for ways to make all our systems more survivable in a number of threat environments.
Q: Yesterday General Shalikashvili's portrait went up on the wall in the Hall of Chiefs, and I would just ask, perhaps you have some commentary on that ceremony. But specifically, is General Shalikashvili going to be more involved? Does he have a role now in advising the DoD?
A: He certainly comes by and talks to General Shelton from time to time and talks to Secretary Cohen from time to time. He's a good friend of many people in the building. I know he's been doing some work with Secretary Perry on some geostrategic challenges that they're both wrestling with. He stays in close touch with people in this building.
Secretary Cohen reaches out from time to time to former military leaders and civilian leaders for advice, and as appropriate he talks to General Shalikashvili and others.
Press: Thank you very much.