(Interview with Tony Capaccio, Bloomberg News)
Capaccio: In the time we have, I have to ask you some of the least favorite question issue, and then a little bit about Iraq, then get into the whole issue of managing the bow wave of transformation and weapons programs. For the last six minutes I'd like to do a formal radio interview with the Bloomberg Forum. It goes out to several hundred radio stations including our flagship up in New York, the Bloomberg Radio Station.
Rumsfeld: Okay. We started two minutes early so we'll end at --
Capaccio: Okay. You are captain.
Rumsfeld: You use the time any way you want.
Capaccio: This isn't radio quality right now. We'll go back and forth.
Capaccio: Your least favorite question is where is bin Laden. You haven't been asked that for a while because it hasn't been a buzz in the news. The buzz is out there again today in terms of the tape. What's your best sense of where he is? Is the working something that he is alive until you see otherwise?
Rumsfeld: Sure. You have to assume that he could be alive and so you continue the process of looking in Afghanistan and elsewhere.
Capaccio: Is your thought on it during the last month or so was that he probably is alive given the lack of --
Rumsfeld: I haven't changed my view about it.
Capaccio: And this notion of the tape, [tape] more attacks. Should Americans be surprised that these tapes are [going on]?
Rumsfeld: No, wouldn't think it should surprise anybody. They clearly are putting out things and trying to generate interest and sustain support. But they've not run him out where people are.
Capaccio: Have you seen any intelligence in the last three or four months that would indicate confirmed contacts one way or the other?
Rumsfeld: I have not seen anything that is convincing either way.
Capaccio: On Iraq, you've been asked a number of questions on are we going to attack with war planes. I want to get away from that.
The point being the goal of regime change has been addressed by Congress and the Administration. How far along is this building in the conceptual thinking in terms of the use of military force as an instrument of regime change? Is it fairly [emblematic] or somewhat advanced? Can you give a sense of that?
Rumsfeld: Well it's been a year since the Congress and the President have indicated the conviction that a regime change would be desirable for the region. You have a person who's clearly developing a weapons of mass destruction regime that has already used chemical weapons against their own people; that have invaded a neighbor. The world would be a better place without that regime. The region knows that and the world knows that.
As a result there are a variety of diplomatic and economic as well as military things that have been going on for some time. We have operations going on in Southern Watch, sanctions, and diplomatic efforts through the UN and elsewhere. What will eventually happen remains to be seen.
Capaccio: In this building, have you been given at least a notional idea of what the military could or could not have accomplished and the resources involved with that? Vis-a-vis Desert Storm.
Rumsfeld: Oh, yeah. I don't want to get into that kind of thing.
Capaccio: Are you satisfied that the signature is somewhat advanced or --
Rumsfeld: I would prefer not to get into it.
On the notion of regime change itself, do you have any sense if that can be accomplished somehow internally within Iraq or will it necessarily mean international community involvement?
Rumsfeld: I think if you took the three countries in the so-called axis of evil and you ranked them as to where an internal change is the most likely, Iraq would be at the bottom of the list.
Capaccio: And the top of the list of those three?
Rumsfeld: Probably Iran.
Capaccio: And North Korea in the middle.
Rumsfeld: Uh huh.
Capaccio: One final one on preemptive strike. That implies the U.S. going it alone, unilateral action in an increasingly complex interconnected world, almost going against the trend of globalization. Is that a proper way to look at preemptive strength, as a concept that we would normally always go alone if in fact we executed preemptive strikes any time soon?
Rumsfeld: No, I don't see any connection between the need of defending yourself by actions which is another way of saying preemption, as we did in Afghanistan, for example, which is a perfect case of it.
I don't see any connection between that and whether or not you do it alone or with other countries. Obviously we're involved with other countries in almost everything we do. Operation Northern and Southern Watch is a coalition activity. With respect to Operation Enduring Freedom in Afghanistan, dozens of countries are involved.
Capaccio: That should be the model, looking at the international cooperation with Afghanistan as the model for globalization, a multilateral action as opposed to the U.S. going it alone, preemptive strike wise. We should, the focus should be on that.
Rumsfeld: You keep connecting go it alone with preemptive strike. As I said, I see no connection between the two.
Rumsfeld: Second, it seems to me that the mission determines what countries ought to be involved in it and the coalition ought not to determine what missions ought to be undertaken. The missions ought to be decided on the basis of what's in the best interest of the United States and the world, being able to contribute to peace and stability, and then whatever countries make sense in that context. Frequently it's NATO. Other times it's, in the case of Northern Watch and Southern Watch, it's several countries as opposed to 20, 30. So it seems to me that there isn't a single formula, a single template that gets dropped down.
Let's shift to the acquisition world and the bow wave issues. You articulated last month in the May 16th hearings for the first time there's a bow wave problem out there beyond '07 through '08 and '09, you've got to deal with it now.
Many Administrations have given lip service to that concept of [the notion] controlling. What are you doing differently here? What's raised your alarm?
Rumsfeld: If anyone looks at the projections what you see is your immediate year and then the next four or five going out.
When we finished our Defense Department guidance this year and began the studies and work that need to be completed prior to the budget bills coming up, the budget period is going to be from '04 to '09, but at present it's '03 to '07. We're adding two years. So you begin to take two years of the bow wave into your immediate areas of visibility.
If you look beyond that period, the bow wave of course goes much higher. The reason that happens is because the way life works, all of these things are in the current budget in very small amounts so it's easy to have them there. As they then mature and grow and become not research programs or developmental programs but acquisition programs and production programs, you end up with an amount of money being projected that grows geometrically.
Now in a certain sense it's a little misleading because along the way things don't happen. Things get stretched out, they take longer than you thought. Some systems fail completely and drop away. But the reality is that the bow wave that exists out there is of sufficient magnitude that reasonable people would say the time to fix that, the time to correct it, the time to affect it, is now. The reason for that is if you're walking towards a wall and you decide you want to go to the opposite wall, the sooner you make the correction the easier it is. If you wait until you're right face up against the wall then you've got to make a sharp turn and get out of there. So it's the same thing here. Now, today, you can make relatively modest corrections that will have very favorable effects on the bow wave and will allow you to approach it in a much more rational and sensible way. Every year you wait until you're closer to it requires a much more severe change. When I say severe, severe can mean wrenching. It can also mean harmful to people, because the longer you allow things to go on that aren't ultimately going to happen, the more people's lives are affected by it.
Capaccio: Contractors, employees and things like that.
Capaccio: In '08 and '09, according to your projections many programs now in development are kind of coalescing towards production. Is that a bigger problem than in past year? Is that --
Rumsfeld: I can't speak for all the past years. I spent a few years away in between. But certainly the chart that we showed up at the Senate hearing on Crusader showed that the bow wave is gigantic. A few model changes early on can affect that very favorably. We wait one, two, three, four, five years out there, then you're facing a wall that's 50 feet high.
Capaccio: The programs that get a lot of attention are the TacAir programs, F-22, F-18 and Joint Strike Fighter. Given your logic here, is it fair to assume you're looking at trying to come up with a modest adjustment in the next two or three years to avoid possibly wholesale cancellation?
Rumsfeld: We're looking at lots of things of every type. We look at the whole picture.
We do know that the things that have tended to be slighted in previous years have in some cases been pay and benefits and housing. We've got a lot of substandard housing. Facilities, infrastructure. And my attitude about that is that's penny wise and pound foolish. The longer you underfund your infrastructure and your housing and things like that you hurt morale, you affect your force, and you just add to the amount of money you're going to have to spend in a later year.
The other thing that's happened that people have done in prior periods is to simply let, for example, the aircraft fleet age and let the age go up.
Well, every year you do that you end up costing yourself more spare parts, more maintenance parts, and you're, again, you're penny wise and pound foolish. You're better off in not doing that type of thing.
So it's a relatively easy thing to skim on research and development funds because there's no constituency for it, there's no jobs affected by it, and my attitude about that is that if you fail to do that you're going to rob your future, you're not going to have the kind of transformation, transforming capabilities, that make such an enormous difference. Therefore we must not do that. We've got to find a way to balance those risks against each other.
Capaccio: At Camp [Doah] a couple of weeks ago you made the point that we can't fund all the major programs currently in the budget that were started 10 to 15 years ago, and it's a different national security environment. Before the Hill back on May 16th you noted tough choices have to be made on major acquisition programs. That does imply cuts to the programs as a way to deal with the dilemmas you just talked about.
Rumsfeld: Unfortunately doing this is never easy. On the other hand, it's a lot easier to do it with a budget that's growing rather than one that's shrinking and we have the benefit of a budget that properly is going up because of the circumstances that our country finds itself in.
For me it's perfectly rational to be doing what we're doing and that is to be recognizing that we are in a new national security environment, that the bow wave is such that we're going to have to manage it in an orderly, sensible way, and that means we're going to be addressing the full spectrum of issues and we're not going to be reaching in and skimping on the obvious things, the easy things, simply because they're easier than making tough decisions. We're going to make tough decisions and we're going to work with the Congress and get it through.
Capaccio: Is Crusader an example of one of these tough decisions? You made the point if we can't cancel this program now when can we cancel anything? Is this a test case basically?
Rumsfeld: Oh, I think everything's a test case. Once you act like a doormat people wipe their feet on you.
Capaccio: [Laughter] Is it fair to look at the Crusader as your opening sale on trying to manage the bow wave?
Rumsfeld: Oh, I don't know. We've done a number of things already in the last 17 months. A whole series of things. Six, eight different programmatic changes that have been significant. Some received more attention in the press than others. But --
Capaccio: What's a low profile one? I usually keep on top of this. Navy Theater Wide was canceled, excuse me, Area Wide.
Rumsfeld: Crusader is one; the DB-21 to DBX is one; the SSBN to the SSGN; the B-1 modernization; the Navy Area Wide cancellation; the SBIRS restructuring; two or three others that are not [inaudible].
Capaccio: Okay. Is that something prepared for you by PA&E?
Rumsfeld: No, it's something I prepared.
Capaccio: Well you threw it away, so --
Rumsfeld: It's an old copy. [Laughter]
Capaccio: So there was this whole series --
Rumsfeld: Now you know it's in my files.
Capaccio: The wrap on you is that you're a tough taskmaster but you're well organized. [Laughter]
This is a list of Crusader being most visible. At this point are you winning that battle? Are you happy with the Senate's reaction for example from last week?
Rumsfeld: Well, there are so many actions going on up there, we've got the '02 supplemental, we have the '03 authorization, we've got the '03 appropriation, we've got the House and Senate each working on it. Obviously each one's doing something slightly different so until you kind of get it all together and look at it you won't know how you feel, but so far I think we're making good headway.
Capaccio: The Senate pretty much endorsed taking the money out, but endorsed funding alternate programs. I think there was a cannon issue involved. The House Appropriations Committee doing something along those lines. But at this point do you feel you're going to win the day?
Rumsfeld: If not, the President would make a veto.
Capaccio: Your recommendation to him on that would be veto over Crusader?
Rumsfeld: Absolutely. He's already announced that.
Capaccio: I didn't think --
Rumsfeld: He announced that on Crusader.
Capaccio: Is it [inaudible] on Crusader that if you can't cancel the system that you've only spent a certain amount of money, $2 billion of $11 billion, it doesn't have a lot of jobs yet throughout the country, and it's not even in full scale development. If you can't cancel it at this early stage, it's going to be much more difficult for a more mature program.
Rumsfeld: I don't look at it that way. I look at it as what's the right thing to do. The world's changed since September 11th. Different security environment. We've got a responsibility to the taxpayers that I care a great deal about. I think we have an obligation to tell the -- I have an obligation to tell the President and the President has an obligation to tell the country and the Congress what we think is the right way to do as to our national security, and that's what we have been doing and that's what we're going to keep doing.
Capaccio: People are looking at this, and maybe they've made it something more than it is then, in terms of this is your battle with the services, this is your fight on transformation, your open and shut -- You don't seem to see it in those sweeping, broad, cataclysmic terms --
Rumsfeld: No, I'm less dramatic about life.
Capaccio: Okay. Can I draw you out on the TacAir issue a little bit? In terms of money involved in the future, that is a much bigger bill to pay. On the F-22, for example. The case has been made to keep the program. Now the question is how many. What's your latest thinking on that?
Rumsfeld: We've got work going on on that in anticipation of the budget bill, and there are people doing studies as to what's appropriate and what numbers are appropriate, all those types of things that are [inaudible]. Helicopters, fighter aircraft, TacAir. Lots of things.
Capaccio: So you haven't made your mind up one way or the other on it?
Capaccio: On Joint Strike Fighter, that's another huge one. Right down the hall today the Italians ponied up a $1 billion for the development phase. What's your assessment of that program at this point?
Rumsfeld: Technically they made a commitment.
Capaccio: Made a commitment. Not signed the lyrics yet, right.
Rumsfeld: And that is important around the world, and interesting for Europe. Pete Aldridge has done a very good job. The Secretary of the Air Force's folks are doing a good job.
Capaccio: What does that tell us one, about the footing of the program. It's not going to get canceled, it has strong internal support here. What focus should it take?
Rumsfeld: It's coordinated. All the services are encouraged and the international support [inaudible].
Capaccio: What's your personal view of the program at this point, given --
Rumsfeld: Oh, I'm at a level where I would have to look at the totality of everything. I have to look at how everything fits together. That's what I do. And I do it in kind of an orderly, timely way. As long as pieces are available, the information comes out.
Capaccio: But Joint Strike Fighter, has it come to that level that you can see how it fits in a network centric warfare world of transformation?
Rumsfeld: You know, because of the studies we've got going on I think it's unuseful for me to opine on individual pieces as we go along. What I do is I'll look at the totality of it as the studies get done and as we start working towards the final stages of the '04-'09 budget.
Capaccio: There was one thing you opined a bit on in testimony, a clear message, the Pentagon needs to increase the build rate. How do you do that, where do you find the money for increasing needs and shift over while all these other issues are swirling around? The quality of life and how --
Rumsfeld: Like any families, they get up in the morning, they look at all the things they want to do and then they make choices. That's all you can do. Clearly we've got a deep blue water Navy, as the saying goes; it's important to us, to our ability to deter forward. To do that requires a certain capability, ships. The average age of the ships of the fleet is pretty good, but the total numbers being purchased are not sufficient to keep the fleet at its current level. What we need to do is two things. Find funds to maintain the fleet at an appropriate level, and also to make judgments about what kind of ships [inaudible].
Capaccio: Like the DDX decision that came down recently. That's an example of it. Okay.
Capaccio: I'm going to start off, "Welcome to the Bloomberg Forum," Cheshire cat smile. Welcome to the Bloomberg Forum, Defense Secretary Donald Rumsfeld. I'll ask you about the bow wave issue again. In layman's language what does it mean, what are you trying to do to manage that largescale pricing shift.
Welcome to the Bloomberg Forum. Today's guest is Defense Secretary Donald Rumsfeld.
Mr. Rumsfeld, thank you for your time.
One of the interesting budget issues you're dealing with is stemming a looming problem called the bow wave in future years. Can you give us a sense of what the bow wave is you're dealing with, and how are you going to manage either cutting major programs or husbanding others into procurement
Rumsfeld: Well the task of course for the Department of Defense is to look out over a period of years, and in this case we're looking out at 2004 to 2009. And anticipate how those budgets might evolve. To the extent one looks out there today, it's pretty clear that there are an awful lot of programs in the incubation stage that as they mature and develop and grow and move from research and development into production, that the cost would be significant, and that's, in the aggregation of those costs for all of those programs is what he referred to as the bow wave, and what the department has to do is what any business would have to do or any family would have to do and that is to make plans early as to how you want those programs to interact and how you're going to be able to manage the cost that you're currently beginning the process of generating. So a correction made early saves a big problem in three or four or five years.
Capaccio: In layman's language could it be, you don't have to cancel the program outright, early on, but makes adjustments to it that could prevent a cancellation in two or three years?
Rumsfeld: Well, it could be a cancellation; it could be a shifting something to a farther year out so that the cost is not hit at exactly the time of other costs. It could be skipping a generation of technology. It could be moderating the size of something. There are a whole host of things one has to do and of course there are always going to be competing priorities and they involve making sure that we do what we need to do for the men and women in uniform in terms of their pay and their housing and things like that, as well as research and development for the future.
Capaccio: The stock market has been very bullish about defense companies lately on the assumption that money, the budget keeps going up and up. The other message here though is some discipline is going to have to be imposed on the weapons-buying process in terms of stop extending the bow wave a bit. Are those contradictory messages at all?
Rumsfeld: Well if you think about what's going on, the defense budget is going up quite a bit. A substantial increase. A big chunk of it is for conducting the global war on terrorism. That's our first priority.
There's also enormous growth in the health care costs in the budget which don't have anything to do with the war on terrorism and they also don't have anything to do with weapon systems.
Third, we have been increasing funds properly for the men and women in uniform because their salaries have to be competitive. We're competing in the civilian manpower market.
Fourth, the infrastructure in the department, housing for the families and the buildings and roads and sewers and all of those things were things that were slighted on during the so-called procurement holiday of the 1990s. So we have to see that we make those investments.
So there are a lot of calls on the funds that are being authorized and appropriated for the Department of Defense that are really away from the weapon system side of the house.
Capaccio: Is there any talk of putting health care costs off budget?
Rumsfeld: Well, hope springs eternal.
Capaccio: Does that mean you're pushing that concept?
Rumsfeld: That means that it's under consideration, I suppose, in the executive branch and the legislative branch. Exactly what do we do about this explosion in health care costs lifetime health care in the case of the military as well as current health care costs.
Capaccio: I want to ask you about one technology that hasn't gotten a lot of publicity but you highlighted it in your nomination hearing that's useful. A space-based radar. What would that technology allow the U.S. to do militarily that you can't really do today? Are you in favor of boosting that program?
Rumsfeld: Well, it's a subject that gets looked at and obviously there are any number of sensors that one can deploy, whether in space or in the air or on the ground. There are talented people in the department asking those questions as to how we can best arrange ourselves so that we can serve the country and improve our intelligence capabilities and improve the precision of our weapons. It seems to me that those are the kinds of things that get sorted out in a budget process because it has to compete against other ways of performing the same types of capabilities.
Capaccio: Given your background on space, though. This is a system you would endorse fairly strongly?
Rumsfeld: My problem with answering on a specific question like that is because it tends to have business implications and my goal in life is not to have business implications. I don't want to mislead people. What I want to do is tell the truth and the truth is my job is not to favor one system over another in isolation. My job is to look at all of them together, aggregate them, and then make judgments as to how we develop a coherent program overall, and that means equally good things are going to be competing against each other for a position in the budget and it's my job to participate in that process, and I can mislead people by commenting favorably on one system or another or unfavorably on one system or another. So I don't.
Capaccio: I have one final question that doesn't have to do with the military, but on July 9th of this year there's a major milestone for Donald Rumsfeld. It has nothing to do with the ABM, missile defense or the F-22. How are you going to spend the big seven-oh?
Rumsfeld: I'll probably work all day.
Capaccio: Here or in Taos?
Rumsfeld: Here. Right here.
Capaccio: You've been listening to the Bloomberg Forum. Today's guest has been Defense Secretary Donald Rumsfeld. I'm Tony Capaccio in Washington.
Capaccio: You're not going to be out in Taos chopping wood?
Rumsfeld: I don't think so. I'm going to try to go out sometime, but I think I'll be right back here at work. That's a week day, isn't it?
Capaccio: Yeah, I think it is.
Thanks a lot.