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DEPARTMENT OF DEFENSE APPROPRIATIONS

FOR FISCAL YEAR 1992

MONDAY, MARCH 4, 1991

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:03 a.m., in room SD-192, Dirksen Senate Office Building, Hon. Daniel K. Inouye (chairman) presiding.

Present: Senators Inouye, Cochran, and Domenici.

DEPARTMENT OF DEFENSE

OFFICE OF THE DEPUTY SECRETARY OF DEFENSE

STATEMENT OF DONALD ATWOOD, JR., DEPUTY SECRETARY OF DEFENSE

ACCOMPANIED BY SEAN O'KEEFE, COMPTROLLER, DEPARTMENT OF DEFENSE

OPENING STATEMENT OF SENATOR INOUYE

Senator INOUYE. Today marks the first of the subcommittee's hearings to review the President's defense budget request for fiscal year 1992.

The budget proposed by the President would provide $271.4 billion for the programs under the jurisdiction of this subcommittee. The amount represents a $3.2 billion increase above the level funded in fiscal year 1991. Associated outlays, as estimated by CBO, amount to $278.4 billion, while OMB calculates outlays at $275.6 billion.

On the current congressional rules, the subcommittee has to comply with CBO's scorekeeping. If this difference of $2.8 billion cannot be resolved, Congress will have to make significant adjustment to the President's budget to comply with a lower outlay level.

These disputes over technical reestimates, many of which have occurred during the past decade, limit Congress' ability to provide a meaningful defense budget review. After the historical 5-year budget agreement reached last October, this continuing disagreement makes a mockery of the herculean efforts involved in achieving that goal. I sincerely hope that this matter will be resolved prior to deliberations of the fiscal year 1992 budget resolution.

This morning we are pleased to welcome the Honorable Donald J. Atwood, the Deputy Secretary of Defense, to help us in our review of the defense budget request for fiscal year 1992.

The budget presented for our review is the second in which the Defense Department plans for smaller force structure. The dissolution of the Warsaw Pact, coupled with the political transformation of Eastern Europe, has led to an historical consensus between the administration and the Congress that defense spending can be gradually reduced in the years ahead.

As the subcommittee responsible for recommending the level of annual defense expenditures, we must be certain that the approach taken is well conceived and will meet the national security requirements of the country.

Mr. Secretary, I am certainly aware there is a growing anxiety among members of this subcommittee with the direction taken in this budget.

I, for one, am concerned that following the completion of the Desert Storm operation there may be a shortfall in the funding required to transition away from wartime footing to peacetime operations. My greatest fear is that this will adversely impact the readiness and quality of life of our brave service men and women who have performed so magnificently in the gulf.

I am certain you will agree that we cannot stand by idly and let our soldiers, sailors, airmen, marines, and Coast Guardsmen become victims in a defense budget dispute.

So, too, there is concern with the long-term impact on the country's military strength and the industrial base, as many military weapons programs have terminated with few concrete plans for future systems.

Mr. Secretary, these are just a few of the issues that appear to face the subcommittee as we begin our review of your budget request. We are most thankful that you have come this morning to discuss the President's request with the subcommittee.

Senator Domenici?

STATEMENT OF SENATOR DOMENICI

Senator DOMENICI. Mr. Chairman, I have a very brief statement. First, let me say to you that I am pleased to be on this subcommittee. I have not had that privilege heretofore and I hope to be able to be of assistance where I can and, obviously, to be supportive of the Defense Department where I can.

Let me just comment, I have not yet, until 4 minutes ago, heard the description of the difference between CBO's estimate of this budget and OMB's estimate of this budget. I just did not find it anywhere.

I watched the two witnesses as you made the statement and while I have not had a chance to ask them yet, I saw that they seemed rather amazed. And so I assume they were unaware, also. And I note without questioning that they are nodding that they

were.

But I would suggest that it is very, very difficult for me to understand why we would be bound, regardless of our past precedent, by a CBO estimate of outlays that was in excess of OMB's. I will tell you why.

We are now living at least for 2 years more, 1992 and 1993, with a sequester process that is called a minisequester that governs our compliance with the summit agreement. And my recollection is,

one, the numbers are solely within the discretion of OMB. They decide whether you are within the limit or not.

And second, if you underspend, according to OMB, you do not get to spend the money anywhere else. It does not go over to domestic, it goes to the deficit.

It seems to me that unless we clearly had an intention to reduce defense beyond the summit agreement, that we might, if we follow this path of making this budget comply with CBO and then turning right around and find that OMB does it differently, we might be reducing defense for no reason. We would not be complying with the cap, we would be substantially below it, as I understand it.

And I would ask that question. And if the Secretary is not familiar, we could get the OMB Director to tell us that.

Having said that, let me suggest to you, if, and for the record, if the Defense Department feels comfortable with the new budget, consistent with the summit, in the midst of Desert Shield and Desert Storm, that I have the greatest praise for them. I think it must be very difficult to develop this budget in the midst of Desert Storm and Desert Shield.

But I am interested in how they have done that and what they learned from Desert Shield and Desert Storm, if anything. Thank you very much, Mr. Chairman.

Senator INOUYE. Thank you very much, Senator.

Unfortunately, we have to comply with the Senate rules, which would call for CBO's scorekeeping. The CBO's estimate was released to us last Friday, and coincidentally at that time, the chief scorekeeper for the U.S. Department of Defense just had a child that same morning. So we cannot expect too many numbers to be floating around. I am certain we all appreciate that.

I would like to, on behalf of the subcommittee, wish father Sean the very best.

Mr. Secretary, we are always happy to have you, sir.

Mr. ATWOOD. Thank you, Mr. Chairman.

The distinguished Senator was correct when he said the scorekeeping and the evaluation as given by the CBO has not reached us as yet.

STATEMENT SUMMARIZED

Mr. Chairman, I would like to summarize some of the opening points in the text which I submitted for the record.

Senator INOUYE. Without objection your full statement is made a part of the record.

Mr. ATWOOD. Then I am going to ask Mr. O'Keefe to highlight our actual budget request, some of the details on it.

STRATEGIC OVERVIEW

As you know, during the past 2 years the global security environment has changed rather dramatically. Many of the positive changes were made possible by the West's postwar strategy of containment, deterrence, and support for democracy around the world, while keeping a watchful eye on Soviet military power.

The new U.S. defense strategy sizes our Active and Reserve forces principally against major regional contingencies that could

threaten American interests. These threats have not diminished, as recent events in the Middle East have proven.

The defense budget the administration is now presenting charts a path to virtually the smallest U.S. force levels since World War II. We are confident that the capabilities these forces possess are prudently matched to the threat we have been projecting.

Recent times have made us all keenly aware of how unpredictable the world can be. Should the security environment look less promising than we are now projecting, we may need to reassess our current plans for reductions through the mid-1990's.

The major elements of the new U.S. defense strategy are: first, strategic deterrence and defense. Given ongoing Soviet nuclear modernization, America must continue to maintain a diverse mix of survivable and highly capable offensive nuclear forces.

Second, 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. It promotes regional stability. And it provides us the initial capability for crisis response and escalation control.

Third, crisis response: U.S. conventional forces must be able to respond rapidly to short-notice regional crises and contingencies that threaten U.S. interests.

Fourth, 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 resurgence threat of a massive conflict should return.

I want, next, to return to Operation Desert Shield. 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 fiscal year 1992 and 1993 defense request and its projected long-term outlays do not reflect these costs, including DOD's eventual requirements as a result of Desert Shield and Desert Storm.

Moreover, some of the program decisions in the 1992 and 1993 request may have to be adjusted in the aftermath of the gulf crisis.

BUDGET HIGHLIGHTS

For fiscal year 1991, the President is requesting a supplemental appropriation, which, when added to contributions from our allies, could cover the Desert Shield/Desert Storm costs that we project for the foreseeable future. We urge timely passage of this supplemental request.

DOD's budget authority levels for 1991 through 1995 are consistent with the discretionary caps for defense. And from last fall's budget summit agreement, these top-line numbers represent a nominal freeze in DOD budget authority at about $278 billion starting in fiscal year 1992.

Total DOD budget authority for 1991 through 1995 will be $131 billion less than that estimated in the President's January 1990 request.

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