the President's Commission on Defense Management and required by the FY 1986 Defense Authorization Act, represents a serious effort to promote stability and consistency in our defense program. Had our two-year request been enacted, it could have afforded the Department significant opportunities to realize savings and other benefits from assured procurement quantities and approved levels of effort. However, that integrated two-year program was deemed not affordable by the Congress and ultimately rejected. Nevertheless, we intend to continue biennial budgeting and will submit an FY 1990/FY 1991 budget next year. After deliberating on our request for nearly nine months, the Congress joined the Administration in a "budget summit" to end the budget gridlock. In late December, the Congress enacted and the President signed defense appropriations for FY 1988 consistent with the budget summit agreement, which provided budget authority of $283.2 billion. This level is $20 billion lower than we recommended, but was preferable to sequestration. The budget summit also provided for budget authority of $290.8 billion for FY 1989. The Administration has honored the budget summit agreement in the amended FY 1989 Defense Budget request, even though it provides $32.5 billion less than we requested in last year's two-year budget and represents a 0.7 percent real decline from FY 1988. We cannot ignore that the summit figures for defense continue the downward trend, in real terms, of the last 3 years. The ultimate consequence of this decline, should it continue, will be the erosion of the improved capability we have achieved and the probability that we will be forced to rebuild our defenses again, but at a much higher cost. COMPARISON OF FY 1986 - 90 DoD PLAN vs. CURRENT STATUS The impact of this downward trend is seen clearly when considered in terms of the total reductions to our defense plan made since 1986. Since first proposed in our FY 1986 budget request, we have had to cut $543.4 billion from our FY 1986-90 five-year program. Even after adjusting for the benefits defense gained from lower inflation, we lost, or had to defer beyond 1990, $429.6 billion in planned defense programs. Revitalizing Defense It is important to understand the resources and effort that were required to overcome defense underfunding during much of the 1970s to appreciate fully the difficult challenges we faced in adjusting our current budget. Then, annual double-digit price increases were driving up the cost of government, especially in entitlement programs, and fiscal restraint was decreed for all areas of federal spending. Unfortunately, reducing the defense budget became the primary means of lowering federal expenditures and, consequently, real defense spending declined by over 20 percent from 1970 to 1980. The failure to provide adequate defense resources left us with a force structure insufficient to meet the requirements of our military strategy. In addition, these defense reductions did not contribute appreciably to keeping overall federal expenditures in line since non-defense spending kept rising. Furthermore, while America was cutting back on the resources it devoted to defense, the Soviet Union was engaged in an ambitious and sustained program to expand and modernize its military forces. Thus, paring America's defense resources proved not only an ineffective economic policy, but also an unsound national security policy. - In 1981, President Reagan initiated a commitment to preserve peace, protect freedom, and guarantee security for the free world by increasing defense budgets and restoring our forces. It has taken seven years and nearly $2 trillion to restore the defense capability our security requires a well-manned, well-equipped, balanced structure of strategic, general purpose, and special operations forces capable of deterring aggression across the entire spectrum of conflict. Our more robust military posture promotes our leadership among allied and friendly nations and is fostering arms reductions agreements. Now it appears that we have come full circle as once again domestic economic considerations are dictating the level of defense spending. This time reducing the federal deficit is the primary objective in setting the level and allocation of federal resources. Congressionally-approved levels of defense funding have decreased in real terms for the past three years, for a cumulative reduction of 10 percent from 1985 levels. As a result, we are again witnessing the consequences of defense underfunding through the reemergence of problems in our force readiness and modernization. Of greater concern is that we may be moving toward another "decade of neglect" of our military capabilities. The absence of prompt and decisive congressional review of defense budget requests has complicated our difficulties. Delay and vacillation have become the norm as issues other than national security have dominated the defense budget deliberations. Appropriation committees often ignored mandated budget resolution levels and did not appropriate at either authorization or resolution levels. Further, authorization and appropriation legislation has become burdened with restrictions on subjects ranging from contracting procedures to arms control. Such budgetary disorder is not conducive to making sound defense budget and program decisions affecting the nation's security. - This combination of unstable, inconsistent defense funding and budgetary disarray, has underscored the reality that improvements in defense capabilities are perishable -- they cannot be preserved without sufficient resources and insufficient support for defense increases the risk to our security. We must be able to acknowledge the important lessons from the past to make the right decisions for the future. We must ensure that we have the military capabilities necessary to support our deterrent strategy and keep risks to our security at a prudent level. Our current economic considerations are serious, but so are our nation's requirements for a strong defense. I hope we have learned the lesson that, even in the most troubling of economic times, we must have a strong defense; we cannot afford not to. Defense Strategy Our defense strategy seeks to deter aggression by making the penalties of such action exceed expected gains. Integral to deterrence is the assurance that the United States possesses both the means and the will to respond effectively to aggression regardless of its form. While we emphasize our resolve and ability to respond to aggression against our interests, we also avoid specifying the nature of our response. This is the essence of the doctrine of "flexible response" that serves as the foundation of U.S. and NATO strategy. Since the beginning of the nuclear era, our deterrence has been based on the threat of nuclear retaliation against those who would employ nuclear forces against us or our allies. At the same time, efforts to develop a defense against nuclear attack played an important role in our strategy until the late 1960s when interest in this concept was dampened by the rapid buildup of Soviet nuclear forces and the lack of progress on technologies for strategic defenses in the United States. In the early 1980s, the Reagan Administration placed a priority on strategic defenses. In 1983, President Reagan announced the Strategic Defense Initiative (SDI) intended to determine the feasibility of deploying an effective defense against nuclear ballistic missiles. The progress being made in this area may provide the option to begin deploying the first phase as early as the mid- to late-1990s. In spite of our optimism for the successful development of an effective strategic defense system and the possibility of deep reductions in offensive strategic nuclear forces, it is still critical that we maintain our nuclear deterrent and strong conventional forces. Nowhere is this more important than in our support for and participation in the NATO alliance. The recent successful intermediate-range nuclear forces (INF) negotiations demonstrate the importance of our continuing effort to modernize and strengthen NATO's nuclear and conventional forces. In 1983 NATO Defense Ministers agreed at Montebello to modernize theater nuclear forces. Major programs stemming from the Montebello Decision that have a direct bearing on the United States include: Modernization of NATO's dual-capable aircraft and their nuclear bombs; Development of a tactical air-to-surface missile to Development of a follow-on system to replace the aging Production of efficient modern nuclear artillery rounds. Most of these systems are included in our FY 1989 Amended Budget. All will be given high priority as the Department reviews its defense plans and consults with other NATO governments. We are proposing that Congress lift the current limitation on nuclear artillery rounds. We also need removal of the restrictions on further development of ATACMs as a follow-on to LANCE. Another important part of our NATO Defense Program is the U.S. contribution to the Conventional Defense Improvements initiative launched by NATO in 1984. We must continue to modernize our conventional forces with new equipment to retain our technological edge on the battlefield. The M1A1 tank, F-15 fighter, and Aegis |