cruiser are examples of relevant procurement programs. We must also look ahead with research and development programs to further enhance our capability to conduct a flexible conventional response. We are developing tactical reconnaissance RPVs and highly accurate conventional cruise missiles capable of being launched from air and sea platforms to locate and strike critical targets deep in Warsaw Pact territory. Additionally, we plan to enter production in FY 1989 with Tacit Rainbow, a defense suppression missile, which will greatly increase our effectiveness against enemy air defenses. To ensure an effective conventional capability, we must also support programs such as POMCUS, airlift, and sealift to enable us to achieve our goal of ten divisions in Europe ten days after mobilization. We must continue to develop and procure modern munitions such as AMRAAM, Phoenix, and third-generation antitank weapons. Our ability to attack second-echelon Warsaw Pact forces must be further developed with systems such as MLRS, ATACMS, JSTARS, and new standoff air-to-ground missiles, and the Joint Tactical Fusion Program. In the area of advanced cruise missile guidance, we are exploring several innovative technologies that we hope to incorporate in weapons production as soon as feasible. Το control our air space and protect our aircraft we are continuing to improve, develop, and field modern air defense systems such as FAADS and Patriot. Our contributions to NATO Infrastructure are providing hardened aircraft shelters and essential facilities at collocated operating bases in Europe. In addition, we are working with our NATO allies to develop a common system for aircraft identification. We will continue to devote special attention to such programs as we seek to strengthen our conventional posture in Europe.

We are also pursuing our competitive strategies initiative with an initial focus on the European theater. The task force on Europe developed proposals to improve NATO's defense posture in areas involving Soviet command and control, and continuing Soviet air and ground operations. The proposals exploit the Soviet requirement for strict time management and maintenance of a highoperations tempo. NATO advantages in data automation and processing, target acquisition, and intelligence fusion and dissemination can take advantage of this dependence, providing for more effective use of NATO's conventional capabilities.

These competitive-strategy proposals to improve NATO's defense posture center on new and improved military capabilities that share a number of common characteristics; for example: various unmanned systems (e.g., surface to surface, precision stand-off, air-tosurface, and cruise missiles, drones, and RPVs), area munitions, various extended-range tube-launched projectiles, rapidly emplacable barriers, precision-penetrator warheads, and smart submunitions. The task force recommendations take advantage of advances in automatic data processing, intelligence fusion, and electronic miniaturization. Each of the recommendations can be enhanced through extensive use of low-observable technologies and an integrated command, control, and communications system. The greatest effect would be gained by synergistic employment of these capabilities in combination with a robust NATO-wide command and control system.

In addition to our commitment to NATO, our conventional forces are actively and visibly protecting our interests on a day-to-day basis elsewhere throughout the world. From our forces in the Persian Gulf to our forward-deployed forces in the Republic of Korea, U.S. general purpose forces, under the umbrella of a secure nuclear deterrent, are essential to the deterrence of war on the

middle and high end of the conflict spectrum. Although structured primarily to counter the Soviet threat, conventional forces must also be prepared to deter or combat aggression at the lower end of the spectrum. It is in the low-intensity conflict environment that our general purpose forces have found themselves most actively engaged over the past thirty-five years.

Low-intensity conflict (LIC), in the form of terrorism, subversion, and insurgency, is and will continue to be a major threat to our security and interests around the world. Therefore, we are committed to the revitalization and reorganization of our Special Operations Forces (SOF) within the Department of Defense. FY 1989 is a critical year in our revitalization efforts, both in terms of the delivery of previously funded systems and new initiatives. We have institutionalized SOF within the Department through the creation of the U.S. Special Operations Command (USSOCOM), the establishment of an Assistant Secretary of Defense for Special Operations and Low-Intensity Conflict, and the creation of a Major Force Program for SOF.

Amended FY 1989 Budget

We are determined to continue modernization and development efforts so critical to our strategy. However, the resources provided in the summit agreement for FY 1989 do not adequately finance our requirements for national defense programs, given the commitments and threats we face. This gap between available resources and program requirements represents the level of risk we must assume in our defense strategy. It is clear that continuing limited resources for defense in the foreseeable future will make it more difficult to keep this risk at the absolute minimum. Therefore, it is of the utmost importance that the forces we have provide a convincing and effective deterrence, capable of carrying out credible responses. Otherwise, we would have "hollow" forces, leaving us with a "hollow" strategy. In the face of current and future constraints on defense resources, we have made decisions that we hope will avoid this dangerous situation. As a consequence, the amended FY 1989 DoD budget will support forces that are leaner, but not "hollow."

The amended Department of Defense budget request for FY 1989 conforms with the budget summit agreement allocations for national defense of $299.5 billion in budget authority and $294 billion in outlays. The Pentagon's portion of budget authority is $290.8 billion; $32.5 billion lower than the funds requested for FY 1989 in last year's submission. The balance of the $299.5 billion is allocated to the Department of Energy's nuclear weapon activities and other related national security activities. The FY 1988 budget of $283.2 billion enacted by the Congress was $20.1 billion lower than the President's request.

This two-year reduction of over $52 billion to the planned defense program forced difficult choices among defense priorities. The only way to accommodate such large reductions and still maintain momentum in our efforts to modernize our military establishment was to eliminate force structure, terminate or defer uneconomical or marginal programs, and delay proposed new starts. Until we can reverse the downward spiral in defense appropriations, we must take every possible step to assure that the choices do not damage our military preparedness.

FY 1989 AMENDED BUDGET

BUDGET AUTHORITY BY MILITARY COMPONENT
(Current $ Billions)

The amended budget continues to reflect a balanced program among the Military Departments with the relative shares of the budget remaining relatively constant. The Navy reflects a lower level of budget authority in FY 1989 than in FY 1988 principally because the approved FY 1988 program fully-funded two aircraft carriers. Severe cuts in FY 1988 led to the Air Force increase in FY 1989 budget authority.

The

The amended FY 1989 budget by title reflects the Department's priorities in accommodating these large reductions. In the Military Personnel accounts, we have sought to preserve the significant gains experienced in recruiting and retention. Operations and Maintenance and Military Construction titles are the only areas with real increases over FY 1988, which underscores the Department's concern about readiness. Procurement accounts have incurred the largest reductions since 1985. Eighteen existing development and procurement programs will be terminated in the amended budget. Also, this budget cannot afford to fund some previously planned new starts in research and development. This concerns us because the United States in the past has been able to counter the numerical superiority of Soviet weapons with more sophisticated technology. We cannot afford a trend that neglects the development of weapons for tomorrow's force.

The distribution of FY 1989 budget authority reflects the historical balance between people, readiness, and modernization. Of the $290.8 billion requested for the Department of Defense, roughly 12 percent represents costs associated with day-to-day operations, nearly 42 percent represents investment in research, development, and procurement of weapons and equipment, and over 46 percent is associated with civilian and military pay and related military personnel expenses.

DoD outlays in FY 1989 are projected to be $285.5 billion, $18.2 billion lower than that projected last year. New investment represents only 10 percent of projected FY 1989 outlays, compared to 42 percent of total requested budget authority. The nature of defense investment is such that production or construction occurs over a period of years with dollars disbursed as work is accomplished. As a result, 40 percent of projected FY 1989 outlays are associated with prior year commitments ships, weapons, missiles, aircraft that are in the pipeline. It is this very fact that makes tailoring the defense budget to meet reduced outlay targets, as the budget summit requires, so difficult.