PETER COOK, BLOOMBERG NEWS: Mr. Secretary thank you for joining us to talk about defense spending, other issues as well, we appreciate very much.
ROBERT GATES, DEFENSE SECRETARY, U.S. GOVERNMENT: My pleasure, happy to be here.
COOK: I want to get to Afghanistan, Iraq, some of those areas, but I do want to start with the defense budget and the future for the defense budget. You have made a very public push to overhaul how the defense department does business going forward. You spent about $6 billion last year in the United States on defense spending, by some estimates, more than all the other nations of the word [world] combined. Are American taxpayers getting their money's worth?
GATES: I think for the most part they are. They certainly are getting more than their money's worth in terms of their men and women in uniform and the performance that they turn in. And I think the key, as we look ahead, beginning with this kind of effort, is how do we deliver weapons systems and equipment to those men and women in uniform to be able to deal with today's threats as well as future threats, and do so in a way that the nation can afford and where we can afford to buy as many of these things as we need. We need to get passed an ear where the platforms become so expensive that we can only buy a small number of them. For example, the B-2 Bomber is almost $2 billion apiece. And so we have - we built 19 of them. We were going to buy 32 DDG-1000 destroyers. We're now going to build three. That's no way to spend the public's money. And it also doesn't help our military capabilities. So the key is getting control of this acquisition process. Making sure that programs are being executed according to the budgets that have been established for them, and on the timelines established.
COOK: Other secretaries of defense have tried to make these changes like this in the past. You've talked about perhaps who's to blame for the current situation and there's plenty of blame to go around, Congress, the Pentagon itself, defense contractors.
GATES: Absolutely. Everybody has had a piece of this action. And I think that what matters now is that in a time of economic stringency there is a, I think, a consensus on the part of the people in the Department of Defense, people in Congress and in the Executive Branch with the President's leadership, to try to address some of these acquisition issues that have built up cumulatively over a large number of years.
COOK: Some of your high-profile programs within the Defense Department. Your latest budget does call for some significant cuts and curtailments. You also are boosting for commitments to other programs, one of them is the plane behind you, the F-35, close to $300 billion projected of the life of this contract going forward. Tell me why this plan roughly - this plane at roughly $85 million a piece makes sense for American taxpayers going forward and makes sense for the military?
GATES: Well, I think one of the basic things that makes sense is its capabilities. It has extraordinary capabilities as a weapons platform. Another thing that makes sense is that we are developing a fundamental airplane that will be shared by all three services. There will obviously be variants but significant elements of the aircraft, the different variants will have a lot in common. This will help keep the cost down. The cost per airplane, once under production is less than half than that of an F-22. So I think we have created a system here - i think Lockheed Martin and all of their industry partners and the Defense Department, and one of the things I have talked with their leadership today is the importance of staying on schedule, having that initial training squadron at Eglin in 2011, having the Marine Corps get their first aircraft in 2012 and also just executing the program within the budget.
COOK: How confident are due at this moment in time that this program will be on budget and on time?
GATES: Based on what I've been briefed on before I came here, and here, I think that a lot of the highest risk elements of the program are behind us at this point. I think there are still management and execution issues that have to be dealt with. I think they are dealing with those. And I think it's fair to say that are confident that they will meet the timetable set I just described.
COOK: All right, let me talk about some of the other programs that perhaps weren't as successful in the Robert Gates defense budget that were sent up to Congress set to be voted on again shortly in the Senate. The F- 22, you mentioned that, another Lockheed Martin plane. Why doesn't it make sense for the U.S. Military to continue producing more F-22s as some members of Congress have pushed for?
GATES: Well, I think basically, for the last two administrations beginning in 2005, the judgment of two different presidents, two different secretaries of defense, two different chairman of the joint chiefs of staffs has been that 183 F-22s are enough for the missions that the F-22 is being given or is likely to encounter in the future. The question is how many as enough? That's the judgment that has been made. The F-22 is a great airplane. Pilots love it, they think it has tremendous capabilities. It does have tremendous capabilities. The question is, though, in a time of finite defense resources, how many do you need, and is that money better applied to other programs? The judgment, first under President Bush, now under Present [President] Obama is 183, now 187 thanks to the supplemental, is enough. And I think that Congress I think ultimately will agree.
COOK: Well, I was going to say, you have essentially - have you won that fight already? It looks like both spending bills in the House and Senate will not have F-22 funding. Is this fight over?
GATES: I never count my eggs before they hatch. We'll see. Right now it is looking promising.
COOK: All right. Let me ask you about a couple other controversial programs, again, programs that members of Congress keep pushing for, you're pushing against. An alternative engine for this plane, does it make sense to build a second engine for this plane? You say no.
GATES: Well, we've done the business case, we've looked at it a number of times. It would be an additional cost of several billion dollars. It would start three to four years behind in terms of where we are with the F- 135 engine and there's no reason to believe that that prototype engine, or that that new engine would not encounter the same kinds of challenges and issues that other developmental engines on this aircraft as well as others have encountered in the past. At this point, based on the business case, we don't think it's necessary.
COOK: Will the President veto a spending bill that comes to his desk that includes a second engine?
GATES: Well, the Congress has been told that the president's advisers will take a dim view of the second engine.
COOK: What about more funding for the Presidential helicopter fleet that's gotten so much attention.
GATES: Very much against that.
COOK: Veto that?
GATES: Yes, yes. Even to finish the first five helicopters would mean that you would require first of all another $2 billion for an aircraft this President and no future President will ever ride in. It will be about $1 billion per helicopter. It has les [less] range than the helicopters the President flies today. We are already on track in terms of beginning to work with the White House, the Navy, acquisition folks, to begin talking about how to restart this program and build a helicopter that the nation can afford and that will protect the President and give him the communications he needs. Vh-71 is the poster child for an acquisition program gone seriously wrong. And there's no reason to throw good money after bad bad.
COOK: Let me get you to give me your perspective on defense spending beyond this fiscal year. You've made some tough choices here. But the reality is this is a bigger defense budget than the year before. What about the out years? We see a deficit right now $1.5 trillion next year, expected to grow as well. Do you expect this President to come to you and say Robert Gates, I need you to cut defense spending in the future?
GATES: Well, you know, we've done this before. We've been down this road. We did in the early 1990s. We did it probably four or five times in the 20th century. And the result with significant cuts in defense, is that you always end up having to go back up because the world hasn't changed, the threats out there haven't changed. If anything, it's gotten more complex and more dangerous. And my view is what we need is a steady defense budget that we can plan for and that provides modest, real growth each year that allows us to sustain the programs that we have. It's the stability that we need. And I don't think that the rates of growth need to be significantly significant or very high but they need to be predictable and they need to be sustained. I think that's the key and that's the argument that I will make to the President and to the Congress going forward is that to sustain the programs we have, the Defense Department needs real growth, but I believe it can be modest, but it needs to be sustained over the long term.
COOK: Let me switch to Afghanistan if I could. News today General McChrystal, top U.S. NATO commander in Afghanistan, that he has submitted his latest assessment of the situation both to his higher ups, General Patraeus, ultimately it's going to land on your desk. Have you seen it yet?
GATES: I saw an early draft weeks ago. My impression is that it's changed quite a bit. I asked a number of questions when I met general McChrystal in Belgium, some additional issues that I asked him to look at. So I have not seen the finished assessment. I am in Fort Worth today but I expect to in the next day or two.
COOK: There are reports out there that General McChrystal, even though it's not in this report, that he's going to come back to you and to the President ultimately and say we need more troops beyond the 68,000 that will be in place as of December. How are you going to consider that request if indeed it comes?
GATES: Well, I think first we all need to look at the assessment and see how he thinks things are going, what things are need and then we will turn our attention to whatever resource requirements he's put forward.
COOK: You've been skeptical about the notion of committing more U.S. troops?
GATES: I - one of the questions I asked him to address in the assessment when I was in Belgium with him was the implications of significant additional forces in terms of the foreign footprint in Afghanistan, whether the Afghans will see this as us becoming more of an occupier or their partner and how do you differentiate those and how do you make sure you don't lose their confidence in us as their partner. And also, what are the implications with respect to Americanization of the war. I am confident he's going to address both of those in the assessment and we'll take a look at it.
COOK: Are we winning in Afghanistan?
GATES: I think it's a mixed picture in Afghanistan. I think that there aren't too many people with too rosy a view of what's going on in Afghanistan. I think there are many challenges. But I think some of the gloom and doom is somewhat overdrawn as well. We have a significant Afghan army that is being grown, about 95,000. We're going to grow it to 134,000 and maybe larger than that depending on General McChrystal's recommendations. Our allies have 37,000 troops in Afghanistan now in addition to the troops we have. I think we've got our strategy is moving into the right place. The Afghans have had an election, however difficult that was in conditions of war. So I think there that are some positive developments but there is no question our casualties are up and there's no question we have a very tough fight in front of us, a lot of challenges.
COOK: How much longer are you going to be in this job, sir?
GATES: That would be a mystery.
COOK: That would be a mystery. We'll end on that note. Mr. Secretary, thank you very much for joining us here in Bloomberg, we appreciate it.
GATES: Thanks a lot.
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