unresolved differences with Moscow over the CFE agreement. There is still, at this time, no resolution on START.

Even though the Soviet military will remain, by a significant margin, the largest armed force on the continent, the threat of a short-warning, global war starting in Europe remains less likely than at any time in the last 45 years. The USSR will, very likely, continue withdrawing forces from Eastern Europe. The withdrawals from Hungary and Czechoslovakia are well on the way to completion, and despite some recent difficulties we anticipate that withdrawal from Germany and Poland will be completed some time thereafter. The Warsaw Pact--as an effective military organization--is dead. moment, there does not appear to be a constituency for a revanchist policy in Europe or a forward policy in the Third World, and this is also likely to limit the USSR's ability to project power beyond its borders.

For the

There will remain, however, a number of significant threats to stability and security. As former Foreign Minister Shevardnadze said not long ago:

[N]o one can calculate the consequences of a social explosion capable of igniting not only befogged minds but also the giant stockpiles of nuclear and chemical weapons and nuclear power stations and the zones already weakened by environmental and natural disasters and regions shaken by interethnic strife.

The plan we are submitting today continues to be based on assumptions about the continuation of positive trends in the Soviet Union and the Third World. Concerns about recent trends may someday lead us to question the levels outlined in the budget. I will be watching these trends very closely and will keep you informed.

ELEMENTS OF U.S. DEFENSE STRATEGY

While the threats to U.S. security are changing, the central goal of U.S. defense strategy should not change. Our goal remains--as it has for decades--to deter aggression against our nation, its allies, and its interests. To do that, we must retain a military posture designed to convince potential adversaries that we are capable of denying their hostile aims and that the cost to them of aggression would exceed any possible gain. Should deterrence fail, our strategy seeks to defeat aggression on terms favorable to U.S. interests.

What has changed in U.S. defense strategy is how we plan to

The major elements of the new U.S. defense strategy are:

• Strategic deterrence and defense. Given ongoing Soviet strategic nuclear modernization, America must continue to maintain a diverse mix of survivable and highly capable offensive nuclear forces. But we also should pursue a defensive system for global protection against limited ballistic missile strikes--whatever their source.

• Forward presence. Although the changing global environment allows us to reduce our permanent foreign deployments, some U.S. forces must remain deployed overseas in areas of U.S. interest. The forward presence of U.S. forces makes for more credible deterrence, promotes regional stability, and provides us an initial capability for crisis response and escalation control.

• Crisis response. U.S. conventional forces must be able to respond rapidly to short-notice regional crises and

contingencies that threaten U.S. interests. That requirement will guide the stationing, size, and capabilities of U.S. conventional forces.

• Force reconstitution. Even though a global war against Soviet and Soviet-backed forces has become far less likely, we must maintain the ability to reconstitute a larger force structure if a resurgent threat of massive conflict returns. This requires us to retain those features of force capability that are most difficult to reconstitute (e.g., quality personnel and a capable U.S. industrial and technology base.)

Collective security remains central to U.S. strategy as well. Alliances and other partnerships with friendly nations are critical to the security of the interests and values we share with many peoples around the world. America also must sustain its support for constructive roles for the United Nations and other international institutions that contribute to a cooperative world order.

U.S. strategy continues to stress arms control, not as an end in itself, but as a means to reduce military threats, inject greater predictability into international relationships, and channel force postures in more stabilizing directions. Arms agreements must be equitable and effectively verifiable, and must preserve our latitude to carry out adequate political, economic, and military responses to future security challenges.

To help deter low-intensity conflicts and promote stability in the Third World, we must have innovative strategies that support representative government, integrate security assistance, and promote economic development. Our approach for doing this is "peacetime engagement"--a coordinated combination

of political, economic, and military actions, aimed primarily at counteracting local violence and promoting nation-building.

U.S. strategy still seeks to prevent the transfer of technologies with military applications to potential

adversaries. We also are working to sustain and improve our intelligence collection and processing capabilities worldwide.

America's defense strategy will continue to evolve as we monitor the many fast-paced sources of change in this new, but still emerging global security environment. Certain to endure, however, are the fundamental principles that have guided America's successful post-war defense strategy. The most important of these principles is steadfast American leadership. As the Gulf crisis shows, U.S. leadership remains essential for the community of nations to marshal its collective strength on behalf of shared concerns. While we will retain the ability to act alone--if necessary--to secure our vital interests, our goal must be to lead the way toward a new world order in which the security of all nations is preserved by their collective resolve, and unilateral action would rarely be necessary. Our aim should be nothing less than a world that fully supports the principles of the United Nations Charter and thereby secures the shared values of America and its allies. While many factors will determine the effectiveness of America's global leadership, military strengt.. certainly will remain essential.

OPERATION DESERT SHIELD/DESERT STORM

The 1990 budget summit agreement specified that incremental costs associated with Operation DESERT SHIELD are to be treated as emergency funding requirements, not subject to the defense caps in the agreement. The President's FY 1992-93 defense request and its projected long-term outlays do not reflect those costs, including DoD's eventual requirements as a result of DESERT SHIELD and DESERT STORM. It is possible that some of the program decisions in the FY 1992-93 request will have to be adjusted in the aftermath of the Gulf crisis.

FY 1990 incremental costs associated with DESERT SHIELD and increased fuel prices were covered by shifts in previously appropriated DoD funds ($800 million) and by a supplemental appropriation ($2.1 billion). For FY 1991, estimated DESERT SHIELD/DESERT STORM incremental costs that are not expected to be covered by contributions from allies or offsets from other defense accounts will be addressed by a supplemental appropriations request to be submitted shortly.

DEFENSE BUDGET OVERVIEW AND PRIORITIES

The Administration's FY 1992-93 budget request is the first installment of the Defense Department's comprehensive FY 1992-97 multiyear defense program. That program is the result of the

Department's rigorous analysis of the capabilities needed to support the new U.S. defense strategy. The overall goal is to streamline and restructure America's armed forces, in order to provide those needed capabilities within projected fiscal constraints. In essence, U.S. forces are becoming smaller, but still fully capable of securing our nation and its global interests.

The FY 1992-93 DOD budget reflects priorities that flow directly from our new strategy. Rapid response to global crises requires sustainment of the current high quality and superior capabilities of U.S. forces, especially as their total size is reduced. This in turn requires continued support for the high quality of U.S. military personnel, vigorous defense research and development, the fielding of advanced military systems as soon as necessary, and the preservation of critical elements of America's defense industrial and technology base. These priorities also enable DoD to reconstitute a larger military posture, if needed.

Other priorities include the ability to project military power rapidly to areas of U.S. strategic interest. The new strategy also requires that U.S. forces sustain their traditional high readiness. To ensure credible nuclear deterrence, DOĎ will maintain strong offensive nuclear forces. We will also pursue strategic and theater defenses to provide global protection against limited ballistic missile strikes-regardless of their source.

DOD budget proposals also reflect my commitment to continue to strengthen defense management and streamline the U.S. defense infrastructure, to extract the greatest security value from increasingly scarce resources. Special attention is going toward efficient acquisition. The goals include funding sustainable production rates for essential programs and terminating lower priority programs.

FY 1992-93 DEFENSE BUDGET REQUEST

Budget Topline and Trends

The FY 1992 DOD request is $278.3 billion in budget authority and $283.0 billion in outlays. Adjusting for inflation, this means a real decline in budget authority of 1 percent below FY 1991, 12 percent below FY 1990, and 24 percent below FY 1985. The FY 1993 request is $277.9 billion in budget authority and $279.1 billion in outlays. In FY 1996, the cumulative real decline since FY 1985 will reach 34 percent.

DOD budget authority levels for FY 1991 through FY 1995 are consistent with the discretionary caps for national defense in last fall's budget summit agreement. These topline numbers

represent a nominal freeze in DOD budget authority at about $278 billion, starting in FY 1992. Total DoD budget authority for FY 1991 through FY 1995 will be $131 billion less than estimated in the President's January 1990 request. After an 11.3 percent real decline in FY 1991, DoD budget authority will decline, in real terms, an average 3 percent per year through FY 1996.

DOD outlays as a share of America's Gross National Product (GNP) are expected to fall to 3.6 percent in FY 1996, the lowest level since before World War II and well below the 4.7 percent reached during the defense decline of the 1970s.

The Administration's FY 1992-93 budget request is the result of many months of vigorous scrutiny. We have come down to the budget summit's lower defense levels through a combination of cuts in force structure and major procurement programs, management initiatives, and numerous reductions made during my staff's scrutiny of the proposed budgets of the military services and defense agencies.

Force Structure

Reflecting the reduced chance of global conflict, the FY 1992-93 request includes reductions in the U.S. force structure that continue a prudently phased plan for reaching the force targets established for the new strategy and threat projections. By the end of FY 1995, U.S. forces will approximate those targets and be well below FY 1990 levels. FY 1995 forces also will be substantially restructured so as to support the new strategy most effectively and efficiently.

U.S. strategic forces are programmed to be scaled back in accordance with expectations regarding arms reductions agreements and to enable DOD to maintain credible strategic deterrence at the least cost. Retirement of the Minuteman II force will begin in FY 1992. Retirements of submarines with the aging Poseidon missile are to be accelerated. During the 1990s, the current mix of 34 Poseidon and Trident boats will be reduced to a force of 18 Trident submarines carrying Trident I (C-4) and Trident II (D-5) missiles. Strategic bombers will decrease from 268 in FY 1990 to 171 in FY 1993, as older B-52s are retired and FB-111s are transferred to tactical use.

U.S. conventional forces will be restructured so that they best support the new strategy. For crisis response, we must be able to deploy to regions of U.S. interest sufficient forces with the capabilities needed to counter a wide variety of contingencies. Thus the restructured force will include a high airlift and sealift capacity, substantial and highly effective maritime and amphibious forces, a full and sophisticated array of combat aircraft, both heavy and light Army divisions, and