[Also participating: Mr. Kenneth H. Bacon, Assistant Secretary of Defense (Public Affairs)]
Mr. Bacon: Welcome to our annual budget briefing. Secretary Cohen, obviously, has Defense Department charts here. We hope that you will keep your questions to the budget. Obviously, if there are other questions we understand and we'll take one or two, but this is a briefing on the budget.
Secretary Cohen: Let me begin initially with a discussion of what I talked to you about last week, and just a few brief comments about my own priorities, what I see as the priorities of the Department for the foreseeable future.
These are the three items that I talked about when I was here last Thursday. That is, I see my three priorities as being continuing to attract the high quality of personnel that we have in the military. We need to continue to attract the best and the brightest. We know the levels of technology that are now entering into the stream of commerce, and we know how that battlefield can change so rapidly, so we have to have people of the best quality we can attract. So, we want to continue to attract and retain high quality personnel, so that will be top priority number one for me.
We also want to ensure high levels of readiness, and that's something that I will focus on very intensely in the coming years.
The third key element for me is the implementation of the modernization of the force.
With respect to the highlights of this budget, my understanding is you've been briefed on some of the details of the FY98 budget, but let me talk quickly about the highlights of it.
The funding is sustained over the FYDP with near-term increases. Readiness, again, remains as a very high priority item. We have our ongoing military operations fully funded, and that's something of a departure because there's always the problem where these operations aren't fully funded. There's a need to come up on the Hill for a rescission, I'm sorry, a supplemental appropriation; there will be a rescission coming up on the Hill later. But we want to eliminate that if we can. That is, to fully fund what we anticipate will be ongoing operations -- that is included in this budget.
Quality of life is improved, and I'll talk about that as we go through. And the modernization of real growth is protected, but the ramp-up is delayed, and I'll address that in a moment.
This chart simply reflects the difference between last year's FYDP and this year's FYDP. This star here represents the amount that was appropriated by Congress. This line -- the green line, so-called here -- is the funding stream that we had for the fiscal '97 FYDP, and you can see from this chart that while we are slightly below what Congress appropriated last year, nonetheless, there is a significant increase over this period of time. About $7 billion have been added to the top line by the President. That represents, I think, the fifth increase in a four year period on the part of the President in terms of increasing the defense budget. So, you can see that the decline here is significant and is above where we were just last year.
Quality of life initiatives. If you talk to the troops, the first issue they'll raise, of course, will be pay. That is included here. The full amount we can have through the FYDP for '98, FY98. It will be roughly 2.8 percent, and each and every year thereafter it's calculated at three percent.
We are expanding the use of the Family Housing Improvement Fund, and we're finding that in the private sector they're able to squeeze about 30 percent more than we can achieve currently, so we're going to call upon that fund and utilize the leverage we can get out of turning to the private sector to create more housing.
Under health care, we are moving to a managed care system under the Tri-Care program. We will have roughly 95 percent of the beneficiaries covered at the end of the fiscal year. We project there will be out-of-pocket savings average of those E-4 and below, of about $170 a year, and for those E-5 and above, to roughly $240 a year savings to them.
The commissary itself is going to be sustained through some private management techniques which will, hopefully, introduce some real efficiencies into the operation itself.
With respect to readiness, these are some of the typical indicators that one would turn to. As far as the Army, we're looking at tank miles per year, and you can see that those are roughly consistent. The tactical hours per crew are down somewhat, but that would be due to the use of some simulators. The Navy, again, steaming days, deployed fleet/non-deployed fleet, roughly consistent. The Air Force, of course, is down a little bit, but that also is due to the use of some simulators. But I've been assured by all the forces that they maintain very high levels of readiness, and are satisfied with the readiness of the force.
This chart is the one that, I think, is the one that has proved to be the most, not controversial, but at least somewhat disappointing in terms of what has happened over the years. As you can see from 1990, all the way down to '96, we've seen a real significant drop as far as procurement is concerned -- roughly about a 53 percent drop in procurement funding in real terms. And that is the so-called holiday that we have taken over this period of time. It's been brought about by the end of the Cold War. It allowed us time to either cancel systems, defer systems -- and we are able to do that with an acceptable risk. We were able to modernize some of our systems and to weed out some of the older systems. We have now reached the point where we can no longer continue that particular process. We have to start modernizing for the future.
As you can see from this chart, this red line is where, from last year's FYDP, the projected increase in procurement funding was going to go. Here is FY98, and it is somewhat below that. Obviously, that has come about by, once again, taking monies from the procurement funding and putting it over into O&M. That has been a continuous process over the years and it's one that we have to come to grips with -- we can no longer afford to continue to raid procurement funding, and putting it into O&M. It's one of the major challenges that we face for the future. Also, obviously, the steep climb in procurement is something that we have to contend with, and that's one of the reasons why we're going to focus so intensely on the QDR, the Quadrennial Defense Review, to find out ways in which we can, in fact, achieve savings in order to modernize the force for the future.
As we look into the future, the battlefield, obviously, is going to become much more complicated, it's going to require the best systems we can possibly take advantage of as far as technology is concerned. So, we can't afford to defer any longer the ramp-up as far as modernization is concerned.
I won't go through all of these systems, but these are some of the highlights of the modernization that we have. We've got Comanche, the Osprey, the new attack submarine, the F-22, Joint Strike Fighter, and so forth. You can read these for yourself. We've tried to look at the leap-ahead systems, but also sustain improvements in current systems. The purpose is to integrate these two to make sure that we maintain the substantial margin of superiority we currently have, and to expand battlefield situational awareness actually, eventually, into battlefield knowledge, the complete knowledge of the battlefield. That is our goal as far as the future is concerned.
We're increasing a number of funds for various systems that will give us that capability in, hopefully, the foreseeable future. We're also going to accelerate the introduction of state of the art technology. That's something that I have worked on with my former colleagues on the Hill for some time now -- and, that is, it ordinarily takes too long to get systems that are available in the commercial market into the Department itself. So, we are going to try to take advantage, and we believe we will take advantage of accelerating the introduction of state of the art technology into DoD, and to merge those two so that we have shorter procurement acquisition rates, and take advantage of what the private sector is doing at such a dramatic pace.
And we're going to have a stronger ballistic missile defense program. We'll have some significant increases in the airborne laser program and the so-called THAAD program -- Theater High Altitude Area Defense, and the Navy theater-wide, and I'll talk about that in just a moment.
In this budget, we are going to accelerate the first unit equipped for THAAD from FY2006 to 2004. That is a significant improvement as far as getting that into the field itself. The budget figure is roughly $722 million that's been included for the THAAD program. Another $252 million will go for the Navy upper tier or Navy theater-wide. We're also going to accelerate the space missile tracking system, the first launch going from FY2006 to 2004. We have funding that will allow for former Secretary Perry's three-plus-three solution as far as the National Missile Defense system. Essentially, we are going to include funding in this budget that will allow the research and development to go forward as far as a National Missile Defense system, to conduct that research and development and come to the year 2000. At that time, we will call upon our Intelligence Community to give us the best analysis that we have of the nature of the threat that we will face at that time, and then make a determination as to whether or not we should go forward with an actual deployment of a ballistic missile defense system, a National Missile Defense system. This puts us, I think, on track as far as what Congress was seeking to do in the past, namely by mandating a deployment date in the year 2003. This would put us in a position to do that if the threat at that time would warrant us going forward.
I think we will satisfy those who are interested in this particular matter -- as I am and was while I was a member of the Senate -- and I think this is a sound, responsible approach to it.
Out of the roughly $3.5 billion that will be included in the program -- out of that $3.5, you have roughly $2.7 will go for the Theater Missile Defense system, the balance going into the National Missile Defense system. We think that's a proper allocation of funding.
We have the Quadrennial Defense Review underway. It is a serious effort. We now have a steering group that's conducting a comprehensive review. We have the military departments, OSD, Chairman of the Joint Chiefs involved. We have a National Defense Panel, which was announced I guess this morning in terms of its composition. That panel will also integrate into the QDR process so that we have not only the building, the institution, the services working to look at each facet of our defense capability; looking at strategy, force structure, end strength, readiness, modernization, infrastructure. All of those are being looked at. As I said to you before, everything is on the table for consideration.
The NDP, the National Defense Panel, will serve as a check, as such, as to whether or not we are really doing a thorough, substantive analysis on what we need to have for the future security of this country. That panel will now be integrated rather quickly into the QDR process because we have a very tight timeframe on that. As far as the QDR process itself, I will report, May 15th, to Congress, but in the meantime, the National Defense Panel will continue to work, and I'll be filing a final report the end of December of this year with the National Defense Panel.
Obviously, the QDR process will not be timely enough in order to alter the fiscal budget for '98, but there may be some factors that could come to the committees' attention as they go through their authorization and appropriation process that would be beneficial. But the QDR process is really looking forward to FY99 and beyond, as well as the NDP.
With that, I will now entertain your questions.
Q: Mr. Secretary, despite what you call "increases" that the President made in defense spending, Republicans are already attacking this budget, as a kind of "tread-water" budget -- it doesn't begin to make the hard choices between the tradeoffs in force structure and modernization that need to be made. In fact, Floyd Spence issued a statement calling this budget a "tightrope without a safety net." How do you answer that?
A: Well, I suppose we have to look at it in the context ... We also have a very strong movement on Capitol Hill for a balanced budget. I think there are some fairly significant increases in this budget, in view of the environment in which we're now going to have to operate, and that is a strong sentiment for a balanced budget, and at the time when the President of the United States is calling for increases here, providing for increases, providing a top line increase over the FYDP for some $7 billion, I would call that a real contribution to the national security.
Is it enough? We'll have to wait and see in terms of whether or not there will be additions on the part of the Hill. As far as our goals right now, as far as our mission is concerned today, we can satisfy that. We can carry out the mission that is required as of today. Will that mission change? Will we have a different strategy? Will we have a different force structure? That's the entire purpose of the QDR, is to examine whether or not for future years we have to change, in any substantial way, the way in which we're doing business to protect the country's interests.
So, I think that if this gets us to the point of the QDR, and that's the purpose of the QDR, saying, Now that we're here, do we fundamentally change the way in which we provide for the security of the country? We won't know that until, obviously, we come up with a report, analyze it, make changes if necessary, work with the National Defense Panel. But this is all looking forward now. We can afford to do this at this point, given the fact that we've seen a reduced threat from the former Soviet Union. There are other types of threats emerging, but this budget will get us to that process.
Bill Perry has indicated that we're at the edge of the envelope, and I believe we are. That was the whole purpose of coming up with a real thorough analysis of where we need to go in the future.
Q: What are the Republicans proposing in terms of dollars for modernization? How does that compare to the $7 billion from the White House?
A: I don't know, it's too early. In fact, I just came from a briefing with some of the key leaders from both the House and Senate, outlining the budget proposal. It's much too early to know exactly where, or if ... Again, we're going through a process now which we didn't have last year, as such, but we're going through a serious effort to pass a balanced budget amendment this year. So, it may be that there will not be as much ability, or enthusiasm, in terms of increasing the budget in the coming years. So, I don't know. It's too early to tell. I think we have to go through the presentation of the budget on Capitol Hill. That will be done next week. Then to start serious consultations, something that I indicated last week that I intend to do, and that is to start bringing members into the process, seeing how we can build a bipartisan consensus for a budget that we can sustain over a long period of time.
One of the things that contributes so much to the kind of problems that we saw on that one chart, where procurement goes down, is what Dr. Kaminski has called "program instability." Every time we reach into the procurement budget to fund Operation and Maintenance requirements, the cost of those programs go up dramatically. They keep being pushed out into the future years and the cost goes up dramatically. So, one thing we're going to try to do, by building a consensus on what programs we need, how much we can afford to pay, that we get some stability in the funding of these programs and we'll see, I think, a much better result. That's something we'll have to wait and see how we come out.
Q: What kind of reaction have you been receiving privately from your former colleagues on the Hill to the budget?
A: I've just had my first meeting with key members of the House and Senate, and they reacted, I think, quite positively to the presentation. Obviously, they're going to want much more detail and much more examination of the details of the budget. Part of the process is that, as we send the process up, we start the process of explaining what we think is necessary, and we encounter members who have a different viewpoint in terms of what they think is necessary; and we, hopefully, are able to reach some kind of a consensus on it. So, it's a good give-and- take process that's been going on for years now. I hope to improve it by bringing members in at the very front end so we can start a serious effort to reach a consensus from the beginning.
Q: As people here will tell you, I occasionally ask a one- or two-part question. And speaking of the budget, sir, the takeover of Boeing and McDonnell- Douglas, do you have any problem with that? And, secondly, there are reports that Saddam Hussein has been building up his SCUD missile arsenal. What do you and the President intend to do about it, if true?
A: I don't have any comment about the Boeing/McDonnell- Douglas matter. I have not focused on that in the last few days, so in light of what I said last week, obviously, there are consolidations taking place. They may be in the best interest of the country in terms of allowing our industries to produce products at a much more efficient rate, which is a benefit to the taxpayers of the country in addition to our national security, but I still want to examine those issues at the subcontractor- level, vertical integration, to see whether or not we're eliminating competition to the point where the taxpayer is not going to be well served.
I really don't have any comment about Saddam Hussein having acquired more SCUD missiles. I can assure you that we are fully prepared to deal with Saddam Hussein should he make any aggressive move toward Kuwait or anywhere else.
Q: Mr. Secretary, yesterday a senior Pentagon official expressed some reservations about the proposals of funding for the Bosnia operations. How do you intend to seek the funding to keep that mission going? What arguments are you going to make?
A: Well, we have a mission underway. The President has indicated that he will extend that mission and has called for its extension for a period of 18 months, which would end in June of 1998. It's something that I will support and have articulated I will support. We will be out of Bosnia at the end of June of '98.
In the meantime, to impress upon Capitol Hill the need for this appropriation, as such, because a failure to achieve it will mean that we will compromise readiness. What we will have to do is to ask those training programs, for example, in the third and fourth quarters of the year, be put on hold in order to pay for the ongoing mission. That means you will see a degradation of readiness virtually across the board in various services. Be it the Army, the Air Force, the Navy, you will see programs that will -- either buildings or equipment that will go at reduced rates of maintenance, they will face those kind of reduced rates; you will see that training will not be able to be carried out, so you will see a degradation in the readiness of various forces. It's something I think that none of us want to see. So, I will try and do my best to persuade my former colleagues that this is in our interest to fund the program and to continue it until next year.
Q: Did you get any indication this morning about how folks on the Hill felt about it?
A: No, I did not.
Q: On missile defense, why are you speeding up the THAAD and the sensor program? Are you going to oppose the Republican's National Missile Defense Bill, which they've reintroduced in a different form, calling for defense against a limited missile strike?
A: I favor defense against a limited missile strike. I've been in the forefront with Senator Nunn and others calling for a national missile defense capability against accidental launches, or a limited type of strike, in order to protect the people of this country, so, I don't disagree with that.
I think the program that we have -- the so-called three-plus- three -- will provide that kind of protection, and we're going to go forward with the research and development, and then make a decision at the end of that three-year period as to whether we go forward with a deployment, depending upon the intelligence; depending upon cost factors; the level of technology that we have; what type of dynamic might be set in motion should we decide to, number one, to have to renegotiate the ABM Treaty. All those factors will be considered at that time. So, I don't see us as being at odds on that question.
Q: How about the THAAD?
A: I think the near-term threat is going to be in the proliferation of ballistic missile technology. More and more nations are acquiring short-term missile technology and putting our troops and those of our allies at greater and greater risk. So, what we want to do is to develop these theater systems and accelerating the scheduled introduction of this system from FY2006 to 2004, I think, will help meet that type of threat. So, that's the most immediate thing that we face, and that's why we put the money in for the acceleration of that.
Q: A question on manpower. As you adjust the active duty force up and down, do you philosophically favor trying to maintain a racial balance within the active duty force that reflects the racial balance in society as a whole? The Navy has come up with a goal of 12 percent black, 12 percent hispanic, 5 percent Native Americans to kind of keep it in balance; or is it your view that you should just let it come out as it comes out?
A: I don't believe that there are quota systems in the Defense Department. I believe there, obviously, has been an effort in the past to attract minorities into the military.
A: Whatever they're called, but there are no quota systems. I'd be surprised if they have any kind of quota system for any group. I think, we look for quality. But, obviously, the military does reflect the face of America, and it's been to our great advantage that it does so.
Q: What is your reaction to the latest Army situation involving the Sergeant Major of the Army and the suggestion that has surfaced that, perhaps, the Army and maybe the other services look at mixed-gender training and the possibility of some changes there?
A: Obviously, I'm concerned about the allegation, and I'm also in a position that I can't comment on the specific allegations without having undue influence on the process itself. But any time you have a charge of this type it should be of concern to all of us.
It's going to be thoroughly investigated, and I know, by virtue of the testimony that was given on Capitol Hill just yesterday or the day before, that General Reimer and others are looking at this particular issue.
I think it's a matter that needs to be studied. I certainly am open to considering whether or not this is the right course of action to have joint training, or to have some sort of separate training operations as they do in the Marine Corps. So, I have an open mind on that. I will look at it very closely, and I think we all should take a look at it.
What I don't want to see take place is [for] this be an opening wedge to try and say that women are not capable of fulfilling the missions and trying to push that back. I think women are indispensable to our military. They now comprise some 13.5 percent of our force. They're doing outstanding work, and we, frankly, need them and want them. So, we're not going to see any roll-back there.
We'll look at it to see whether or not you can get more positive results out of a different type of training operation, but that's something I'm going to be going around visiting various training centers, as a matter of fact, as soon as I can complete some of the missions I have on the Hill as far as the presentation of the budget and other things. But to get out and look at that very closely to see whether or not that's something that has to be examined on a service-wide basis.
Q: On procurement, you're asking this year for $42.6 billion. You hope that ramps up to $60 billion by the year 2000. What are some of the major questions in your mind, right now, as to how realistic that ramp-up of $18 billion is?
A: It's going to be a very hard climb. This is something, the $60 billion figure is the figure that was mentioned by General Shalikashvili. Now, there's nothing magical about that figure of $60 billion, but I think it's a realistic one in terms of what we have to have in order to fund the systems that are currently contemplated and in the pipeline. So, it can be adjusted up, it can be adjusted down, but that roughly is where we have to get to.
In order to get there, however, we've got to make changes elsewhere. We've got to make savings elsewhere. The one thing I'm not looking at are any sort of hollow types of savings where you project that you're going to have "X" billions of dollars from future BRAC processes or future infrastructure reductions. They've got to be real. What I'm insisting on -- to all of the various groups who are now analyzing each element of our force structure as such, and from the strategy all the way through to readiness -- is I want real analysis being done here. Where can we save money? How can we save money? Because we need to get up that ramp, and it's not going to be easy, particularly in a constrained environment. But I don't have any predisposition as to exactly where it's going to come out of. What I will insist upon, however, is real figures so that we don't have, Well, you can get probably $8 to $10 billion out of infrastructure, and that will take care of the problem. We're not going to do that unless you can really validate what those savings are going to be. So, I want to present something real to the Hill as such, and I believe we'll be in a position to do that after we finish this process.
Q: Given the cries of pain after the last BRAC round, is it your judgment as a congressional veteran that they will vote for another BRAC round?
A: At this point, I think it would be very difficult to get another BRAC round, but it's not impossible. I think, once you lay out all the facts, and say, Here's where we are, it may be necessary, if we have too much infrastructure. If, for example, we can show that we've had a reduction in force structure, let's say, of 30 percent, but we've had a reduction in infrastructure of 20 percent, that there might be a 10 percent margin of difference here. Well, you can point to that, and say, Where else will you get the money before you turn to a BRAC process? That's part of the problem.
Secondly, I think we have to demonstrate that we have taken measures under the existing BRAC process to satisfy the communities that they are able to reestablish themselves, they're able to revive their communities, and to flourish. That is being done in a number of key places where installations were closed.
To the extent you can take a factual demonstration -- [that] there has actually been an improvement in that community, you can then take the case to other communities [and] say, It needs to be done, it should be done, and this is the end result -- you'll actually be better off. If you can prove that, you make it that much easier. But, politically, it's a very hard sell right now because we've just gone through some very traumatic moments as far as BRAC is concerned. I can speak from personal experience what that has meant to my own state of Maine, so I know how tough it is.
But I also believe that we have reached the point where we can sit down with members and lay out the full panoply of facts in terms of how do we get from here to there. If we can agree on where we need to get to and then lay out what needs to be done, and then, obviously, have a give-and-take. What I might recommend isn't necessarily going to be accepted en toto by those on Capitol Hill. They may have some solutions that I might have missed. This is part of the negotiation to reach that kind of a general consensus. But, I believe, as long as we have open dialogue, frequent consultations, that they will feel better about the process and work with me on a close basis.
I have found that so far. I have made an effort to visit many of my former colleagues on both the House and the Senate side. I did this today in bringing the key people in for a luncheon briefing. I believe a continuation of that will help make it easier to build that kind of consensus for the future.
Q: If I could just follow-up on that, do you have a time frame in mind, even in your imagination, of when another BRAC would be appropriate?
A: That has to await the QDR analysis. We have to go through the process, and we'll be finished, because I have to report to Capitol Hill by May 15th, so, it's a short time frame. Also, working with the National Defense Panel to really come to some kind of a solid analysis of what has to be done. So, I would anticipate before the year is out, I will certainly be making recommendations.
Again, don't just look to infrastructure, and don't just think about BRAC because of the political difficulties involved. I'm well aware of what I need to do is to understand basically, to grab the entire spectrum of changes that need to be made, to look at all the tradeoffs that we might have to make. We're doing that and we will have an analysis done, and then I will present that to the Congress, and it will help me formulate the next budget. Obviously, it's not going to impact very much on this budget. There may be some elements that we can plug into this, but the process is geared in such a fashion, it's difficult to do that. But by the next budget, I'll be working on that almost immediately, and so putting that QDR process -- the National Defense Panel -- together, I hope to be in a position to make a whole series of recommendations in order to achieve the goal that we need to reach.
Press: Thank you.