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DEPARTMENT OF DEFENSE BUDGET PRIORITIES

FOR FISCAL YEAR 2004

HEARING

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

HEARING HELD IN WASHINGTON, DC, FEBRUARY 27, 2003

Serial No. 108–6

Printed for the use of the Committee on the Budget

(

Available on the Internet: http://www.access.gpo.gov/congress/house/house04.html 

(II)

COMMITTEE ON THE BUDGET 

JIM NUSSLE, Iowa, Chairman 

CHRISTOPHER SHAYS, Connecticut, 

Vice Chairman 

GIL GUTKNECHT, Minnesota 

MAC THORNBERRY, Texas 

JIM RYUN, Kansas 

PAT TOOMEY, Pennsylvania 

DOC HASTINGS, Washington 

ROB PORTMAN, Ohio 

EDWARD SCHROCK, Virginia 

HENRY E. BROWN, JR., South Carolina 

ANDER CRENSHAW, Florida 

ADAM PUTNAM, Florida 

ROGER WICKER, Mississippi 

KENNY HULSHOF, Missouri 

THOMAS G. TANCREDO, Colorado 

DAVID VITTER, Louisiana 

JO BONNER, Alabama 

TRENT FRANKS, Arizona 

SCOTT GARRETT, New Jersey 

GRESHAM BARRETT, South Carolina 

THADDEUS MCCOTTER, Michigan 

MARIO DIAZ–BALART, Florida 

JEB HENSARLING, Texas 

GINNY BROWN–WAITE, Florida 

JOHN M. SPRATT, JR., South Carolina, 

Ranking Minority Member 

JAMES P. MORAN, Virginia 

DARLENE HOOLEY, Oregon 

TAMMY BALDWIN, Wisconsin 

DENNIS MOORE, Kansas 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

ROSA DELAURO, Connecticut 

CHET EDWARDS, Texas 

ROBERT C. SCOTT, Virginia 

HAROLD FORD, Tennessee 

LOIS CAPPS, California 

MIKE THOMPSON, California 

BRIAN BAIRD, Washington 

JIM COOPER, Tennessee 

RAHM EMANUEL, Illinois 

ARTUR DAVIS, Alabama 

DENISE L. MAJETTE, Georgia 

RON KIND, Wisconsin 

PROFESSIONAL STAFF

RICH MEADE, Chief of Staff 

THOMAS S. KAHN, Minority Staff Director and Chief Counsel 

(III)

C O N T E N T S

Page 

Hearing held in Washington, DC, February 27, 2003 .......................................... 1

Statement of: 

Hon. Paul D. Wolfowitz, Deputy Secretary, U.S. Department of Defense ... 6

Steven Kosiak, Director of Budget Studies, Center for Strategic and 

Budgetary Assessments ................................................................................ 46

Prepared statements and additional submissions of: 

Hon. John M. Spratt, Jr., a Representative in Congress from the State 

of South Carolina: 

Prepared statement for Mr. Wolfowitz .................................................... 4

Prepared statement for Mr. Kosiak ......................................................... 46

Hon. Adam H. Putnam, a Representative in Congress from the State 

of Florida ....................................................................................................... 5

Deputy Secretary Wolfowitz ............................................................................ 12

Mr. Kosiak: 

Prepared statement ................................................................................... 51

Potential cost of a war with Iraq and its post-war occupation .............. 56

(1)

DEPARTMENT OF DEFENSE BUDGET 

PRIORITIES FOR FISCAL YEAR 2004

THURSDAY, FEBRUARY 27, 2003

HOUSE OF REPRESENTATIVES, COMMITTEE ON THE BUDGET, Washington, DC. 

The committee met, pursuant to call, at 2:05 p.m. in room 210, 

Cannon House Office Building, Hon. Christopher Shays (vice chairman of the committee) presiding. 

Members present: Representatives Shays, Gutknecht, Thornberry, Ryun, Hastings, Schrock, Crenshaw, Putnam, Wicker, 

Tancredo, Bonner, Garrett, Barrett, McCotter, Diaz-Balart, 

Hensarling, Brown-Waite, Spratt, Moran, Hooley, Moore, Edwards, 

Scott, Ford, Capps, Thompson, Baird, Cooper, Emanuel, Davis, 

Majette, and Kind. 

Mr. SHAYS [presiding]. The committee will come to order. 

Today’s hearing will examine the Department of Defense budget 

request for fiscal year 2004. Our witness will be the Honorable 

Paul D. Wolfowitz, Deputy Secretary of Defense. Appearing with 

Secretary Wolfowitz will be Dov Zakheim, the Under Secretary of 

Defense, and Chief Financial Officer. 

Also appearing will be Steven Kosiak, Director of Budget Studies 

at the Center for Strategic and Budgetary Assessments. 

In the face of unprecedented threats to our domestic and international security, the defense budget must advance three overarching goals: to win the global war on terrorism, to invest in the 

procurements and people needed to sustain that effort, and to 

transform the cold war military structure to meet the 21st century 

demands. 

The President said his aim was, ‘‘to move beyond marginal improvements, to replace existing programs with new technologies 

and strategies.’’ He said, ‘‘Securing our common defense will require spending more and spending more wisely.’’ 

The fiscal year 2004 defense budget requests more. This committee and others will have to decide if the Department is capable 

of moving beyond marginal, often glacial reforms to the wiser 

spending the President demands. We are at war. Terrorism is 

being uprooted in Afghanistan. It appears more likely, with each 

passing day, Saddam Hussein will persist in refusing to comply 

with the United Nations and that the United States will be required to lead a coalition of willing nations to disarm him. 

This budget reflects this committee’s commitment and the commitment of every American that the brave men and women of our 

military will have every resource they need in the difficult months 

2

and years to come. One specific area raises concerns in that regard: 

individual protective equipment against chemical and biological 

weapons. 

The Government Reform Subcommittee on National Security, 

which I chair, was told last year of significant procurement shortfalls in key CB defense items. The Department’s own 2002 report 

on the CB defense program pointed to high risks now and the outyears due to a lag in procurements of modern protective garments—boots, gloves, and collective protection shelters. 

I am concerned this budget does little, too little, to close the gap 

between what it will take to protect U.S. forces on the contaminated battlefield of the future and the equipment we will be able 

to give them. Nor does this budget appear to take any bold, new 

steps toward solving the long-festering dilemma of how to pay for 

all of the tactical aircraft procurements now under way. 

More money for fewer planes is not a wise fiscal policy, nor will 

it address the problem of an aging air fleet. This committee has 

consistently provided the resources our Armed Forces have needed 

to do their job, including the $10 billion war reserve that was not 

appropriated until this month. 

Despite the controversy surrounding the appropriation of an undefined request, this committee was willing to step up to the plate 

and provide the Department of Defense with the flexibility it asked 

for, and to do it in a timely fashion. 

It is noteworthy and perhaps paradoxical that DOD officials have 

described the fiscal year 2004 budget request as a peacetime budget. The reason, of course, is that the administration’s budget does 

not include the cost of potential conflict with Iraq. We all know 

there are great uncertainties about the cost of disarming Saddam 

Hussein, uncertainties that make it difficult to put a precise number on the cost of possible military operations. But this committee 

still needs to learn all it can about those costs. 

Just yesterday, the White House released Pentagon estimates 

that the war and its immediate aftermath will cost between $60 

[billion] and $95 billion. Today, the Washington Post reports that 

some internal administration estimates show the cost growing 

above $100 billion. 

It is worth noting that the 1991 Persian Gulf war cost $82.5 billion in current dollars, which brings me to another critical subject, 

burden sharing. In the gulf war, the United States received financial contributions of over $48 billion from our allies. This time we 

are being presented with a bill in advance from countries, I would 

argue, that will greatly and directly benefit from a regime change 

in Iraq. We have already agreed to a $15-billion aid package to 

Turkey in exchange for rights to base American troops there; and 

we may also be increasing our aid to Jordan, Israel, Egypt, and 

others. 

The bottom line is, we need a better and fuller understanding of 

the financial commitments we are undertaking, and how much of 

these costs our allies are willing to bear. 

Finally, there is the big picture. Is the Pentagon’s budget plan 

the right one for a long-term operation? Will it achieve the bold 

transformation progress that the President envisions, or will servVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
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ice rivalries and entrenched inefficiencies soak up any additional 

spending to feed a sluggish but voracious status quo? 

That said, I want to repeat our assurance that this committee 

will do everything in its power to assure that the men and women 

of our Armed Forces will receive the tools and the training they 

need to defeat terrorism and assure the safety of this Nation. 

We look forward to your testimony, Mr. Secretary. 

At this time, I would like to recognize Mr. Spratt, and announce 

to our members that the Under Secretary needs to leave here at 

4 o’clock. I will be very strong on the 5-minute rule, which doesn’t 

mean you ask a question for 5 minutes and then give him 5 minutes to answer, alright? 

Mr. SPRATT. Thank you. 

Secretary Wolfowitz, welcome to our committee. I usually see you 

in my other capacity as a member of the House Armed Services 

Committee, and since today I am wearing my budget hat, I want 

to express some budget and fiscal concerns. 

The Department of Defense is now in the middle of the largest 

sustained buildup in 20 years. Your 6-year plan—we call it the 

FYDP—associated with this 2004 budget would leave the defense 

budget one-third larger in real terms at the end of that plan in 

2009, than it was when the administration took office. 

We haven’t seen an increase of this size since the cold war, during President Reagan’s first term. Much of that increase has already taken place. It is committed since the budget for national defense has increased from $300 billion in fiscal 2000 to at least $400 

billion by the time we finish fiscal 2003, or 3 short years. This 

budget proposal, therefore, proposes to increase that to $500 billion 

by the year 2009. 

Let me make clear, all of us support a strong national defense. 

We certainly are going to put forward the funds necessary for the 

United States to work its policies in the world. And, most of all, 

we are going to support our men and women in uniform, and say, 

thank God there are such men and women who will go in an hour 

like this in harm’s way and defend the United States of America. 

They are being asked to do Herculean feats around the world, 

night and day, and we will not let them down; we will support 

them. 

Unfortunately, the increases in defense that you are requesting 

are being financed by deficit spending. And the bills for national 

defense, ultimately, when you charge it to the deficit, get charged 

to our children and grandchildren. The fiscal year 2004 budget proposes the largest deficit in American history, $307 billion. That 

projects a deficit of over $300 billion in 2003 as well. 

The 10-year surplus of $5.6 trillion, which was projected back in 

2001, has been wiped out. That is a message that CBO gave us just 

a few weeks ago, and then OMB confirmed it. Between now and 

2011, the administration’s policies and, particularly the new tax 

cuts, would add an additional $2 trillion to that public debt. 

As bad as that sounds, it is likely to get worse. Data from the 

Treasury Department indicates that during the first few months of 

fiscal 2003, revenues are off 8 percent. 

You have sent us a budget that has nothing in it for the war in 

Iraq to which—I understand why you wouldn’t make that parVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
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ticular request, but you also included nothing for the global war 

against terrorism and, in particular, Afghanistan. I am at a loss to 

understand why that was not included in this particular budget request. 

Yesterday’s Wall Street Journal contains this news, that the 

Bush administration is preparing to submit supplemental spending 

requests totaling as much as $95 billion for a war with Iraq, its 

aftermath, and new expenses to fight terrorism. Today, the New 

York Times reported that Pentagon officials said yesterday that the 

military’s part of the cost over the next several months, through 

fiscal year, this fiscal year at least, would be $60 billion. And, of 

course, these are just a portion of the costs. 

We are reading about deals that are being cut with Turkey and 

other allies that we have no way of scoring or keeping a tab on. 

We don’t really know what the cumulative cost of this effort is likely to be. 

I hope that today’s hearing will give us better insight into the 

real costs that we are facing because it is this committee’s responsibility to put things in the stark light of fiscal reality. Today, we are 

not in position to do that, because there are so many significant 

things we just don’t know about this budget. 

If the estimated cost of additional spending for Iraq of $95 billion 

turns out to be correct, that would push the deficit for 2003 up to 

$400 billion, by far the largest ever recorded. Even if the lower figure of $60 billion is more accurate, that will still give us the largest 

deficit, in constant dollars, since World War II was over. 

Finally, as bad as the situation is today, we have to think about 

the long term; and really, the retirement of the baby boomers is not 

long term, it begins in 2008. They draw Social Security then. In 

2011, they start drawing Medicare. And we are going to see a demographic change in this budget that is going to be phenomenal. 

The question is, can we sustain this buildup in the face of the 

retiring baby boomers? I put these hard questions to you because 

these are questions we should be asking you, asking ourselves, and 

trying to resolve in the budgets that we will be preparing in the 

weeks ahead. 

Thank you for coming. We look forward to your answers to our 

questions. 

[The prepared statement of Mr. Spratt follows:]

PREPARED STATEMENT OF HON. JOHN M. SPRATT, JR., A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF SOUTH CAROLINA

Thank you, Mr. Chairman. I join you in welcoming Deputy Secretary Wolfowitz 

and Dr. Zakheim. I usually see you in my other committee, Armed Services. Today, 

wearing my budget cap, I want to express some serious concerns. 

The Department of Defense is in the middle of the largest sustained buildup in 

20 years. The Department’s 6-year plan associated with this 2004 budget request 

would leave the defense budget one-third larger, in real terms, at the end of that 

plan in 2009 than it was when this administration took office. We have not seen 

an increase of this size since the cold war, during President Reagan’s first term. 

Much of this increase has already taken place, since the budget for national defense 

will have increased from $300 billion in fiscal year 2000, to at least $400 billion by 

the time we finish fiscal year 2003, in just three short years. This budget request 

then proposes to increase that to $500 billion by fiscal year 2009. 

All of us support a strong national defense and a strong U.S. military that remains second to none. We all support our men and women in uniform. They are 

5

being asked to do Herculean feats around the world night and day, and we will not 

let them down. 

Unfortunately, these increases are being financed by deficit spending, and the 

bills for our national defense are being sent to our children. The fiscal year 2004 

budget proposes the largest deficit in American history, $307 billion, and now 

projects a deficit over $300 billion in 2003 as well. The 10-year surplus of $5.6 trillion projected in 2001 has been wiped out. Between now and 2011, the Bush administration’s policies, in particular the new tax cuts, would add an additional $2 trillion to the public debt. This would represent an astounding turnaround, reducing 

the unified budget surplus by $7.8 trillion over 10 years. 

And as bad as this sounds, the reality is, it’s going to get worse, because this 

budget understates how big the deficits are likely to get: 

Data from the Treasury Department shows that revenues are coming in well 

below the levels assumed in this budget. For the first 4 months of fiscal year 2003, 

revenues are down 8 percent from the same period in the previous fiscal year. 

There is no money in this budget for the cost of our ongoing global war on terrorism in Afghanistan and other locations around the world. 

There is no money in the budget for the cost of a war in Iraq, nor any money 

for the costs associated with such a conflict, including post-war occupation and reconstruction, and aid to Turkey and other key allies. 

Yesterday’s Wall Street Journal reports that, ‘‘The Bush administration is preparing supplemental spending requests totaling as much as $95 billion for a war 

with Iraq, its aftermath, and new expenses to fight terrorism, officials said.’’ Today’s 

New York Times reports that, ‘‘Pentagon officials said today that the military’s part 

of the cost over the next 7 months, through the fiscal year, would be at least $60 

billion.’’ And of course the military’s costs are only a portion, and perhaps not ultimately the largest portion, of these costs. So it appears the administration is aware 

of these costs, but they do not appear in the budget. 

I hope today’s hearing will give us some greater insight into the real costs we are 

facing, because it is this committee’s responsibility to put things in the stark light 

of fiscal reality. Today, we are not in a position to do that, because there are these 

significant hidden costs out there. And there is no plan, that I am aware of, for how 

to pay for all of this. If the administration has a plan for where all the money would 

come from to pay for all of this, I would like to hear it. 

If the estimated cost of additional spending for Iraq of $95 billion turns out to 

be correct, that would push the deficit for 2003 up to $400 billion, by far the largest 

ever recorded. Even if the lower figure of $60 billion is more accurate, that would 

still give us the largest deficit, in constant dollars, since World War II. 

Finally, as bad as the situation is today, we also have to think about the long 

term. Pretty soon we will not be able to call the retirement of the baby boomers 

a ‘‘long term’’ issue. That day is fast approaching. A few weeks ago the Congressional Budget Office released a study on the long-term implications of current defense spending plans. This study shows that, in order to carry out all the long-range 

plans DOD has to modernize its weapons systems: defense spending, in real terms, 

will probably have to be even higher 10 years from now, when the baby boomers 

are retiring, than it is today. 

This will put defense spending on a collision course with the rapidly rising costs 

of Social Security and Medicare. But even if we did not have that fiscal squeeze 

coming, to carry out these plans would require a period of sustained increases in 

defense spending that, if you look at your history books, just doesn’t happen. 

I invite my colleagues, and our witnesses, to look over that study, because we all 

need to think seriously about whether we are on a path we can afford to sustain. 

I look forward to your testimony, Secretary Wolfowitz.

[The prepared statement of Mr. Putnam follows:]

PREPARED STATEMENT OF HON. ADAM H. PUTNAM, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF FLORIDA

Mr. Chairman, I am pleased that we have convened today to receive the fiscal 

year 2004 budget priorities for the U.S. Department of Defense from Deputy Secretary Paul D. Wolfowitz. I am honored to be here with you, Ranking Member 

Spratt, and the rest of the committee, to exchange views on the Department of Defense budget for the coming year. Thank you, Mr. Secretary, for appearing before 

this committee to present the priorities and plans of your Department. The Department of Defense is essential in this time of global uncertainty and I would like to 

commend DOD’s commitment to keeping Americans safe in an era of evolving 

threats. 

6

Knowing the current and emerging threats to America, it is imperative that we 

continue to strive to reach the goals of the 21st century transformation of the U.S. 

Armed Forces outlined by Secretary of Defense, Donald Rumsfeld. We must prepare 

for new forms of terrorism, such as cyber attacks on our network infrastructure. At 

the same time, we must work to increase our own areas of advantages, such as the 

ability to project military power over long distances, precision-strike weapons, and 

our space, intelligence, and under-sea warfare capabilities. As it is difficult to predict every conceivable type of attack, we are required to prepare for new and unexpected challenges in order to continue to defend against terrorism and other emerging threats of the 21st century. 

Being prepared also includes the transformation of the military toward more efficient internal systems and weapons driven by information technology. Secretary 

Rumsfeld has said the transformation process will ‘‘require a longstanding commitment’’ but concurrently ‘‘must be embraced in earnest today’’ because the Nation is 

under immediate threat. 

Military IT transformation is necessary to keep the U.S. military ahead of its adversaries. As stated in the Quadrennial Defense Review, the technological revolution 

in military affairs holds the potential to confer enormous advantages and to extend 

the current period of U.S. military superiority. 

Transforming the military largely involves changing its ‘‘state of mind’’ to one that 

is more business-like. It also involves using advanced technologies to gather intelligence and manage information. A secure, global information backbone of unlimited 

depth and global reach will be essential. 

A strong emphasis should be placed on the efficient use of technology. The services must protect critical infrastructure so that it is available to only our troops and 

not infiltrated. The transformation of the U.S. military is not just about weapons, 

but the unification of what were once isolated components into one technologically 

unified battlefield scheme. 

Mr. Secretary, I look forward to your testimony and I am sure you will provide 

all of us with a clear picture of the Department of Defense’s strategy to lead our 

forces militarily and technologically into the 21st century.

Mr. SHAYS. Mr. Secretary, we are going to hear from you. If we 

finish your statement in some time—we have an hour and a half 

for questions, we could potentially get everyone in this room being 

able to ask a question. But if you don’t need to use the 5 minutes, 

please don’t, OK? 

Mr. Wolfowitz, thank you so much for being here. 

STATEMENT OF PAUL D. WOLFOWITZ, DEPUTY SECRETARY, 

U.S. DEPARTMENT OF DEFENSE 

Mr. WOLFOWITZ. Thank you, Mr. Chairman. I will just read portions of my testimony and submit the entire testimony for the 

record. 

Mr. SHAYS. Without objection, that will happen. 

Mr. WOLFOWITZ. Mr. Chairman, this is a large budget that we 

are requesting, $379.9 billion. But I would like to begin by pointing 

out that by historical standards, this budget is a sustainable defense burden, one that is significantly less than the burden we sustained throughout the cold war. 

Moreover, this is a wartime defense budget, although it is fair to 

point out that some possible war costs are not included, particularly those that would be associated if we have a conflict in Iraq. 

But if I could have—and I think we have rearranged the charts 

in the wrong order. Could I have the chart that shows the percent 

of GDP that goes to defense historically? You will see that in fiscal 

year 2004, DOD outlays are projected, even with the unfortunate 

economic situation, to be at 3.4 percent of our gross domestic product. That is well below its level at any time during the cold war, 

much less the peak during the cold war. Similarly, if you compare 

7

it to total Federal outlays, it is 16.6 percent, again, well below its 

level at any time—I underscore, ‘‘any time’’—during the cold war. 

Another fact to remember, when one thinks about whether these 

are controllable costs, is that about 45 percent of the defense budget goes to cover the personnel costs for our magnificent men and 

women in uniform and for the civilians who support them. Despite 

great efforts to try to limit increases in personnel, we have had to 

activate a significant number of Reservists and National Guardsmen to meet our warfighting tasks. It is hard to imagine at this 

time how we could reduce costs by cutting force structure and people. The proposed $15.3-billion increase over last year is sizeable. But 

each year, much of any Defense Department increase is consumed 

by what we call, ‘‘fact-of-life’’ increases, specifically pay raises, and 

nonpay inflation. In the fiscal year 2004 request, over $8.5 billion 

of the $15-billion increase goes to inflation and non—to nonpay inflation and the increases in military and civilian pay, $4.2 billion 

in pay increases and $4.3 billion in nonpay inflation. 

Some critics I read say the U.S. Defense budget is higher than 

it needs to be because it exceeds that of all our possible adversaries 

combined. But it is our task to defend against real threats, Mr. 

Chairman, not against budget accounts. 

The defense budget of the Taliban was an insignificant fraction 

of ours, yet that regime proved to be a major threat to the United 

States. And it was thanks to the overwhelming superiority of our 

forces that we were able to achieve our objectives in that country 

in miraculously short order, and with miraculously low casualties. 

Indeed, when we send our forces into combat, we want them to 

have that kind of overwhelming advantage that minimizes casualties and provides for decisive victories, not just the bare margin 

necessary for a close win. The only reasonable evaluation, the only 

reasonable evaluation of a U.S. Defense budget is its ability to 

cover the full range of uncertain risks that threaten America’s vital 

interests. 

Besides the horrific toll, let’s remember that the attacks of September 11 cost our Nation billions of dollars in both physical destruction and damage to our economy. The direct costs of September 11 are already estimated to exceed $100 billion. Another 

such catastrophe could cost far more, especially if attackers use 

weapons of mass terror. 

The President’s defense budget is sustainable because, first, we 

have insisted on realistic budgeting, especially for acquisition programs and readiness requirements; and secondly, because we have 

made many hard choices in this budget to ensure that our programs are executable within their projected top lines. 

For the FYDP of 2004–09, the Department has shifted over $80 

billion from previous budget plans into acquisition programs that 

support a strategy of transforming our military. 

These hard choices will reduce the cost risk to the DOD top line 

that were highlighted in a recent Congressional Budget Office report. That report was done before it could reflect the work that we 

did in preparing this budget request. 

Our commitment to realistic budgeting includes properly funding 

investment programs based on independent cost estimates. This 

8

practice not only protects our future readiness, it also protects our 

near-term readiness, because training and operations funds are no 

longer a bill payer for underfunded investment programs, as they 

were throughout much of the last decade. 

Let me say a little bit about funding the cost of war. The same 

rigorous planning and tough decision-making used in our budget 

preparation are being applied to our execution of the war on terrorism and to plans and preparations for the possibility of a war 

in Iraq. Our military and civilian planners are working hard to ensure that our scarce personnel and budgetary resources are directed to the highest priorities and that all alternatives are exhaustively assessed. 

Nevertheless, any war is fraught with uncertainty, and that 

makes all projections of future war costs extremely uncertain. The 

President’s proposed budget does not estimate the incremental cost 

of a possible war with Iraq, nor does it request contingency funding 

to cover them. Such estimates are so dependent on future, unpredictable circumstances as to be of little value. We are, however, 

doing everything possible in our planning now to make postwar recovery smoother and less expensive should the use of force become 

necessary. As in Afghanistan, we would seek and expect to get allied contributions, both in cash and in kind, particularly for the reconstruction effort in a post-Saddam Iraq. 

If I might digress for a moment, Mr. Chairman, from my prepared testimony, because there has been a good deal of comment—

some of it quite outlandish—about what our postwar requirements 

might be in Iraq. That great Yankee catcher and occasional philosopher, Yogi Berra, once observed that it is dangerous to make predictions, especially about the future. 

That piece of wise advice certainly applies to predictions about 

wars and their aftermath, and I am reluctant to try to predict anything about what the cost of a possible conflict in Iraq would be—

what the possible cost of reconstructing and stabilizing that country afterwards might be. But some of the higher-end predictions 

that we have been hearing recently, such as the notion that it will 

take several hundred thousand U.S. troops to provide stability in 

post-Saddam Iraq, are wildly off the mark. 

First, it is hard to conceive that it would take more forces to provide stability in a post-Saddam Iraq than it would take to conduct 

the war itself and to secure the surrender of Saddam’s security 

forces and his army—hard to imagine. 

Second, in making predictions, one should at least pay attention 

to past experience. And in the case of Iraq, we have some recent 

experience to look to. The northern third of Iraq has been liberated 

from Saddam Hussein’s grasp since Operation Provide Comfort, 

which we undertook just 1 month after the cease-fire of the Persian 

Gulf war in 1991. 

By the way, our current Supreme Allied Commander in Europe, 

Gen. Jim Jones, was a colonel commanding a Marine battalion in 

that operation. 

After that operation, we withdrew our ground forces from northern Iraq completely in the fall of 1991, and in the 12 years since 

then, we have not had any forces—emphasize, ‘‘any forces’’—on the 

ground there. And yet the northern third of Iraq has remained reaVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
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sonably stable even though, sadly, it is subjected to the same economic sanctions that have been applied to the rest of the country, 

and even though the people there live under daily threat from 

Saddam’s military, from Saddam’s security forces, and for the last 

year and a half, from an al Qaeda cell that operates in northeastern Iraq called Ansar al-Islam. 

In fact, even the U.S. air presence, which we have maintained 

over northern Iraq, is not necessary to keep peace among the people of northern Iraq, but to keep Saddam Hussein out. 

There are other differences that suggest that peacekeeping requirements in Iraq might be much lower than our historical experience in the Balkans suggest. There has been none of the record in 

Iraq of ethnic militias fighting one another that produced so much 

bloodshed and permanent scars in Bosnia, along with a continuing 

requirement for large peacekeeping forces to separate those militias. And the horrors of Iraq are very different from the horrific 

ethnic cleansing of Kosovars by Serbs that took place in Kosovo 

and left scars that continue to require peacekeeping forces today in 

Kosovo. 

The slaughter in Iraq, and it is has been substantial, has unfortunately been the slaughter of people of all ethnic and religious 

groups by the regime. It is equal-opportunity terror. 

Third, whatever numbers are required—and I emphasize I am 

not trying to make a prediction, but I will say, there is no reason, 

there is simply no reason to assume that the United States will or 

should supply all of those forces. 

Many countries have already indicated to us, some of them privately, a desire to help in reconstruction of post-Saddam Iraq, even 

though they may not want to be associated with Saddam’s forcible 

removal. 

Indeed, remember that we are talking about one of the most important countries in the Arab world, with not only enormous natural resources that we keep hearing about, but equally importantly, I would say more importantly, extraordinary human resources. 

I would expect that even countries like France will have a strong 

interest in assisting Iraq’s reconstruction. 

Moreover, the Iraqis themselves can provide a good deal of whatever manpower is necessary. We are training free Iraqi forces to 

perform functions of that kind, including command of Iraqi units, 

once those units have been purged of their Baathist leadership. 

But the fourth and most fundamental point is that we go back 

to Yogi Berra. We simply cannot predict. We have no idea whether 

weapons of mass terror will be used. We have no idea what kind 

of ethnic strife might appear in the future, although as I have 

noted, it has not been the history of Iraq’s past. We do not know 

what kind of damage Saddam Hussein will wreak on Iraq’s oil 

fields or its other infrastructure. 

On the other side, we can’t be sure that the Iraqi people will welcome us as liberators, although based on what Iraqi-Americans told 

me in Detroit a week ago, many of them, most of them with families in Iraq, I am reasonably certain that they will greet us as liberators, and that will help us to keep requirements down. 

10

In short, we don’t know what the requirements will be. But we 

can say with reasonable confidence that the notion of hundreds of 

thousands of American troops is way off the mark. 

I would like to add also, there is a danger in making single point 

estimates. It is not just an intellectual and analytical danger that 

you can’t predict the future; this is a particularly bad time to be 

publishing specific numbers, because official numbers become part 

of our declaratory policy. 

And single point estimates right now about the possible costs of 

the conflict, or about the possible length and size of a postwar reconstruction effort, could be misinterpreted. Think about that 

issue. The best estimate of what we will need, post-Saddam Hussein, is what the President and Secretary Powell and Secretary 

Rumsfeld have been saying: we will stay as long as necessary and 

leave as soon as possible. 

I understand that that is a frustrating estimate for people who 

want a single point estimate of the future. But, it is the truth. 

Moreover, stop and think about it from an Iraqi point of view. They 

want to know that they won’t be abandoned, that we will do what 

is needed for postwar reconstruction. 

For that purpose, large numbers for long periods of time have a 

reassuring quality. On the other hand, they also want to know that 

we are coming as liberators and not as occupiers. From that point 

of view, they would prefer to hear that we won’t be there in large 

numbers for very long. 

Fundamentally, we have no idea what is needed unless and until 

we get there on the ground. There will be appropriate times for 

making public estimates, along with a range of assumptions that 

lead to them. But this delicate moment, when we are assembling 

a coalition, when we are mobilizing people inside Iraq and throughout the region to help us in the event of war, and when we are still 

trying through the United Nations and by other means to achieve 

a peaceful solution without war, is not a good time to publish highly suspect numerical estimates and have them drive our declaratory policy. 

Let my say something else, if I may, Mr. Chairman, to put the 

costs of war into some context; and then I will wrap up with one 

other comment. The possible cost of war in Iraq ought to be considered in the context of America’s other international undertakings 

of recent years. We must remember that there is a cost of containment in both dollars as well as risk to our national security. We 

have been doing some preliminary estimates—I emphasize they are 

preliminary, and until I am confident of the assumptions I wouldn’t 

want to swear by them. But our preliminary estimate is that it has 

cost us slightly over $30 billion to maintain the containment of 

Saddam Hussein for the last 12 years. And it has cost us far more 

than money, because as I think many of you know, it is that American presence in the holy land of Saudi Arabia and the sustained 

American bombing of Iraq as part of that containment policy that 

have been Osama bin Laden’s principal recruiting device, even 

more than the other grievances he cites. I can’t imagine anyone 

here wanting to spend another $30 billion to be there for another 

12 years to continue helping recruit terrorists. 

11

Furthermore, it is worthwhile to consider what we might spend 

on reconstruction in Iraq against what we have already spent in 

Bosnia and Kosovo. 

Again, these are very preliminary estimates, but the estimates 

already, so far, in Bosnia and Kosovo are that we have spent somewhere between $12 [billion] and $15 billion. I think that is a worthwhile expenditure, but our purposes in those two places are largely 

humanitarian. Iraq presents a case of direct threat to the security 

of the United States and our allies, and a key to the future of one 

of the most important regions in the world. 

Indeed, I believe the most significant cost associated with Iraq, 

which is very, very difficult to estimate, is the cost of doing nothing. The simple truth is, disarming Iraq and fighting the war on 

terror are not merely related; disarming Iraq’s arsenal of terror is 

a crucial part of winning the war on terror. If we can disarm or 

defeat Saddam’s brutal regime in Baghdad, it will be a defeat for 

terrorists globally, and the value of such a victory against a terrorist regime will be of incalculable value in the continuing war on 

terrorism. 

Mr. Chairman, let me spare a good deal of the rest, you can read 

it, but I would like to just have a minute on this business of transforming the business on defense. We are working hard not only to 

spend more, as we are doing, but to spend more wisely. 

Much has happened as the President directed us to do. Much has 

happened in the last 2 years within our department to realize the 

President’s mandate. But we also have a challenge that we share 

with you. In consultation with Members of Congress, including 

members on this committee, and many more that we hope to talk 

to in coming weeks, we are trying to develop an agenda for change 

that both the executive branch and the Congress can agree on that 

will streamline and modernize how the Department of Defense 

manages people, buys weapons, uses training ranges and manages 

money. 

In an age when terrorists move information at the speed of an 

e-mail and money at the speed of a wire transfer, the Defense Department is bogged down in micromanagement and bureaucratic 

processes of the industrial age. We have created a culture that too 

often stifles innovation. The major obstacles faced by us all in making the broad transition that is necessary, include reforming an antiquated personnel structure, both civilian and military, increasing 

flexibility in managing money and managing the Department, reforming broken acquisition processes, and requirements and resource processes. 

Mr. Chairman, we are fighting the first wars of the 21st century 

with a Defense Department that was fashioned to meet the challenges of the mid 20th century. We have an industrial age organization, but we are living in an information age world, where new 

threats emerge suddenly, often without warning, to surprise us. 

Last year, Congress and the administration faced up to the fact 

that our government was not organized to deal with the new 

threats to the American homeland and created a new Department 

of Homeland Security. We must now address the Department of 

Defense. 

12

Many of the obstacles we face today are self-imposed. Where we 

have the authority to fix those problems, we are working hard to 

do so. For example, we are modernizing our financial management 

structures to replace some 1,900 information systems. We are doing 

many things, and even more than I have mentioned in my testimony. But to get the kind of agility and flexibility required in the 

21st century security environment, we also need some legislative 

relief, and for that we need your help. 

We must work together, Congress and the administration, to 

transform not only the U.S. Armed Forces, but the Defense Department that serves them and prepares them for battle. The lives of 

the servicemen and -women in the field, and of our friends and 

families here at home, depend on our ability to do so. 

Mr. Chairman, let me conclude with that, I think you want to get 

to your questions. 

[The prepared statement of Deputy Secretary Wolfowitz follows:]

PREPARED STATEMENT OF HON. PAUL D. WOLFOWITZ, DEPUTY SECRETARY, U.S. 

DEPARTMENT OF DEFENSE

Mr. Chairman and members of the committee, I welcome this opportunity to return this year to give you a brief overview of the fiscal year fiscal year 2004 defense 

budget request and address your questions at this critical time for America and the 

world. 

DEFENSE BUDGET TOPLINE

The President’s budget requests $379.9 billion for the Department of Defense for fiscal year 2004, a $15.3-billion increase over last year’s enacted level. The budget 

projects that the DOD topline will, in real terms, grow about 2.5 percent per year 

through 2008. 

This fiscal year 2004 defense budget is indeed large and it will grow larger, even 

without factoring in likely costs for continuing the war on terrorism. But by historical standards, this budget is a sustainable defense burden—one that is significantly 

less than the burden we sustained throughout the cold war. Moreover, this is a wartime defense budget needed to help us wage the global war against terror. Fiscal 

year 2004 DOD outlays will be 3.4 percent of our gross domestic product (GDP) and 

16.6 percent of total Federal outlays—both well below their levels at any time during the cold war. Another fact to remember is that about 45 percent of the defense 

budget goes to cover the personnel costs for our magnificent men and women in uniform—many of whom are now in harm’s way as they fight the war against terror—

and the civilians who support them. Despite great efforts to try to limit increases 

in personnel, we have had to activate a significant number of the reserve component 

to meet our warfighting tasks. It is hard to imagine how we could reduce costs by 

cutting force structure at this time. 

This proposed $15.3-billion increase is sizable. But each year much of any DOD 

topline hike is consumed by what could be termed ‘‘fact of life’’ increases—most significantly, pay raises and nonpay inflation. In the fiscal year 2004 request, over $8.5 

billion of the $15-billion increase is for such increases: $4.2 billion for military and 

civilian pay raises and $4.3 billion to cover non-pay inflation. 

Some critics say the U.S. defense budget is higher than necessary because it exceeds that of all our possible adversaries combined. But we must defend against real 

threats, not budget accounts. The defense budget of the Taliban was an insignificant 

fraction of ours, yet that regime proved to be a major threat to America. Indeed, 

in an era of proliferation and asymmetric threats, we must have the ability to confront a potentially wide range of threats. Moreover, when we send our forces into 

combat, we want them to have the kind of overwhelming advantage that minimizes 

casualties and provides for decisive victories, not the bare margin necessary for a 

close win. Thus, comparative national defense budgets are an inappropriate standard for measuring whether our defense capabilities are adequate to confront a 21st 

century security environment of uncertain and asymmetric threats. 

The only reasonable evaluation of a U.S. defense budget is its ability to cover the 

range of uncertain risks that threaten America’s vital interests. Besides their horrific human toll, the September 11 attacks cost our Nation billions, in both physical 

destruction and damage to our economy. Direct costs of September 11 already exVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
13

ceed $100 billion. Another such catastrophe could cost much more—especially if 

attackers use weapons of mass destruction. 

The President’s defense budget is sustainable. Within its topline, the proposed 

budget funds a strong, strategy-driven program that supports both short-term and 

long-term requirements. Our multi-year program is sustainable first because we 

have insisted on realistic budgeting—especially for acquisition programs and readiness requirements. Second, we made hard choices—most notably, by restructuring 

acquisition programs—to ensure that they are executable within our projected 

topline. For fiscal year 2004–09 the Department shifted over $80 billion from previous budget plans into acquisition programs that support a strategy of transforming our military. These hard choices in the fiscal year 2004 budget request will 

reduce the cost risks to the DOD topline that were highlighted in a recent Congressional Budget Office report, which does not reflect the work we did preparing this 

budget request. 

Our commitment to realistic budgeting includes properly funding investment programs based on independent cost estimates. 

This practice not only protects our future readiness, it also protects our near-term 

readiness because training and operations funds are no longer a billpayer for underfunded investment programs. 

FUNDING THE COSTS OF WAR

The same rigorous planning and tough decision making used in our budget preparation are being applied to our execution of the war on terrorism and to preparations for a possible war in Iraq. Our military and civilian planners are working exceedingly hard to ensure that our scarce personnel and budgetary resources are directed to the highest priorities and that all alternatives are exhaustively assessed. 

Still, war is fraught with uncertainty and that makes all predictions of future war 

costs highly uncertain. 

The President’s proposed budget does not estimate the incremental costs of a possible war with Iraq, nor does it request contingency funding to cover them. Such 

estimates are so dependent on future, unpredictable circumstances as to be of little 

value. However, we are doing everything possible in our planning now to make postconflict recovery smoother and less expensive should the use of force become necessary. As in Afghanistan, we would seek and expect to get allied contributions, 

both in cash and in kind, particularly for the reconstruction effort in a post-Saddam 

Iraq. 

The possible cost of war in Iraq should be considered in the context of America’s 

other international undertakings of recent years. We must remember that there is 

a cost of containment in both dollars as well as risk to our national security. 

While the United States has judged it worthwhile to expend some very significant 

amounts on the efforts in Bosnia and Kosovo where our purposes are largely humanitarian, Iraq presents a case of direct threat to the security of the United States 

and our allies. Indeed, I believe the most significant cost associated with Iraq is the 

cost of doing nothing. The simple truth is, disarming Iraq and fighting the war on 

terror are not merely related; disarming Iraq’s arsenal of terror is a crucial part of 

winning the war on terror. If we can disarm or defeat Saddam’s brutal regime in 

Baghdad, it will be a defeat for terrorists globally. The value of such a victory 

against a terrorist regime will be of incalculable value in the continuing war on terrorism. 

BALANCING NEAR-TERM REQUIREMENTS AND LONG-TERM TRANSFORMATION

The President’s budget is designed to do two very important things at the same 

time. First, it funds the readiness and capabilities needed to fight the war on terrorism and meet other near-term requirements. Second, it advances the long-term 

transformation of the U.S. military and defense establishment, both critical to enabling us to counter 21st century threats most effectively. Thus our challenge is to 

fight the war on terrorism at the same time we are transforming. We have to do 

both. Although facing near-term funding pressures, we nevertheless must invest for 

the future—otherwise we undoubtedly will have to pay more later—in dollars, in 

economic losses, and perhaps even in lives. 

Transformation overview: Transformation is a process that DOD is using to overhaul the U.S. military and defense establishment. Transformation is about new 

ways of thinking, fighting, and managing the Department’s scarce resources. 

The fiscal year 2004 budget reflects the Department’s new way of thinking, first 

articulated in our 2001 Quadrennial Defense Review and intensively developed since 

then. That new way of thinking is now being implemented in visionary warfighting 

operational concepts, a restructured unified command plan, and transformational 

14

military capabilities such as unmanned aerial vehicles and new generations of satellite communications. 

Transforming U.S. military capabilities: Transformation is more about changing 

the way people think, the way they do things, and what is commonly called ‘‘culture’’ than it is about budgets. But, of course, budgets matter. In DOD budgets, military transformation is reflected primarily in our investment programs—i.e., in programs funded in the appropriations titles of Research, Development, Test, and Evaluation (RDT&E) and Procurement. Through such funding, new military systems are 

being developed and fielded—to achieve a new portfolio of military capabilities to 

decisively combat the full spectrum of threats to U.S. security. 

To appreciate the impact of the Department’s investment on transforming our 

military capabilities, one must look at programs, not simply funding levels. The key 

is not simply how much we are investing, but whether we are investing in the right 

areas. Given the immediate risk of terrorism and other non-traditional or asymmetric 

threats, we must be able to develop new capabilities while selectively modernizing 

current ones. The war on terrorism demonstrates that we need to be prepared to 

face both traditional and non-traditional threats. 

We must be able to fight against conventional weapons systems as well as be prepared for the use of weapons of mass destruction against our troops or here at 

home. Countering such threats will require a carefully planned mix of capabilities. 

Indicative of the Department’s strong emphasis on transformation, the military 

services have shifted billions of dollars from their older multi-year budget plans to 

new ones—as they have terminated and restructured programs and identified important efficiencies. For fiscal year 2004–09, the military services estimate that they 

have shifted over $80 billion to help them transform their warfighting capabilities 

and support activities. 

Some examples of cancellations, slow-downs or restructured programs include the 

following: • The Army came up with savings of some $22 billion over the 6-year FYDP, by 

terminating 24 systems, including Crusader, the Bradley A–3 and Abrams upgrades, and reducing or restructuring another 24 including Medium Tactical Vehicles. The Army used these savings to help pay for new transformational capabilities, 

such as the Future Combat Systems. • The Navy reallocated nearly $39 billion over the FYDP, by retiring 26 ships and 

259 aircraft, and integrating the Navy and Marine air forces. They invested these 

savings in new ship designs and aircraft. • The Air Force shifted funds and changed its business practices to account for nearly $21 billion over the FYDP. It will retire 114 fighter and 115 mobility/tanker 

aircraft. The savings will be invested in readiness, people, modernization and new 

system starts and cutting edge systems like unmanned aerial vehicles (UAVs) and 

unmanned combat aerial vehicles (UCAVs). 

Transforming the Business of Defense: We know we must become more efficient 

in our business practices and get more out of our defense budget by transforming 

the way we operate in the Department of Defense. President Bush gave the Department of Defense ‘‘a broad mandate to challenge the status quo and envision a new 

architecture of American defense for decades to come.’’ The goal, he said, is ‘‘to move 

beyond marginal improvements—to replace existing programs with new technologies 

and strategies.’’ Doing this, he said, ‘‘will require spending more—and spending 

more wisely.’’ Much has happened in the last 2 years to begin realizing that mandate. 

In response to this challenge, the Department of Defense is developing an agenda 

for change that—once approved by the President—will require the concerted effort 

of many—both inside the Department and in Congress. The agenda advances the 

process of streamlining and modernizing how the Department of Defense manages 

people, buys weapons, uses training ranges and manages money. 

Most agree that to win the global war on terror, our Armed Forces need to be 

flexible, light and agile—so they can respond quickly to sudden changes. The same 

is true of the men and women who support them in the Department of Defense. 

They also need to be flexible and agile so they can move money, shift people, and 

design and buy new weapons quickly, and respond to sudden changes in our security environment. 

In an age when terrorists move information at the speed of an email, money at 

the speed of a wire transfer, and people at the speed of a commercial jetliner, the 

Defense Department is bogged down in the micromanagement and bureaucratic 

processes of the industrial age. Some of our difficulties are self-imposed, to be sure. 

Some are the result of law and regulation. Together they have created a culture that 

too often stifles innovation. 

15

We are working, instead, to promote a culture in the Defense Department that: 

• Rewards unconventional thinking; 

• Gives people the freedom and flexibility to take risks and try new things; 

• Fosters a more entrepreneurial approach to developing military capabilities; 

and 

• Does not wait for threats to emerge and be ‘‘validated,’’ but anticipates them 

before they emerge, and develops and deploys new capabilities quickly. 

The major obstacles faced by us all in making that broad a transition include: 

• Antiquated personnel structure—both civilian and military; 

• Lack of flexibility in managing money and managing the department; 

• Support structures that are outdated, slow and inflexible; and 

• Broken acquisition, requirements and resource processes. 

We are fighting the first wars of the 21st century with a Defense Department that 

was fashioned to meet the challenges of the mid-20th century. We have an industrial age organization, yet we are living in an information age world, where new 

threats emerge suddenly, often without warning, to surprise us. 

Last year, Congress and the administration faced up to the fact that our government was not organized to deal with the new threats to the American homeland. 

Congress enacted historic legislation to create a new Department of Homeland Security and rearrange our government to be better prepared for potential attacks 

against our homes and schools and places of work. 

We must now address the Department of Defense. Many of the obstacles we face 

today are self-imposed. Where we have authority to fix those problems, we are working hard to do so. For example, we are modernizing our financial management 

structures, to replace some 1,900 information systems so we can produce timely and 

accurate management information. We are modernizing our internal acquisition 

structures to reduce the length of time it takes to field new systems and drive innovation. We are working to push joint operational concepts throughout the Department, so we train and prepare for war the way we will fight it, jointly. And we are 

taking steps to better measure and track performance. 

We are doing all these things, and more. But to get the kind of agility and flexibility that are required in the 21st century security environment, we also need some 

legislative relief. For that, we need your help. We must work together—Congress 

and the administration—to transform not only the U.S. Armed Forces, but the Defense Department that serves them and prepares them for battle. The lives of the 

service men and women in the field—and of our friends and families here at home—

depend on our ability to do so. 

Getting more out of defense dollars: In summary, there is much we can and must 

do to get the most out of our defense dollars. Especially with budget pressures from 

the war on terrorism, we must be able to focus resources on the most critical priorities. The Department cannot do this without strong support from the Congress. 

Yes, we will need additional funds in order to prevail in the war on terrorism and 

transform our military to meet the challenges of the 21st century. But we also confront a historic challenge to make the maximum use of those funds by transforming 

how we carry out the business of defense. Now is an historic opportunity to ensure 

that we make the best possible use of taxpayers’ money by transforming how we 

carry out the business of defense. We look forward to working closely with the Congress to meet this important and pressing challenge. 

CONCLUSION

The President’s fiscal year 2004 budget addresses our country’s need to fight the 

war on terror, to support our men and women in uniform, and prepare to meet the 

threats of the 21st Century. It reflects hard choices to ensure sufficient funding for 

our most pressing requirements and to advance defense transformation. Those hard 

choices and our proposed transformation of the business of defense underscores our 

resolve to be exemplary stewards of taxpayer dollars. 

This committee has provided our country strong leadership in providing for the 

national defense and ensuring taxpayers’ dollars are wisely spent. We look forward 

to continuing our work with you to achieve both of these critical goals.

Mr. SHAYS. I do. 

Mr. Secretary, first, in my desire to be efficient, I didn’t truly 

welcome you here. It is an honor to have you here. We thank you 

for your service to your country over so many years. I want to put 

that on the record. 

16

Given that I had an opening statement, I am going to pass on 

questions to give other members time. And I am going to go to Mr. 

Gutknecht, then Mr. Spratt, and then Mr. Thornberry. I will be 

strict with the 5 minutes, gentlemen and ladies. 

Mr. GUTKNECHT. Thank you. 

I think I speak on behalf of the entire committee, Mr. Wolfowitz. 

We appreciate your service to the country, and frankly, in your 

statement, I think you expressed as clearly, or probably far more 

clearly than any of us could, how important it is to do what needs 

to be done with the regime in Baghdad. 

And I think most Americans now believe that something has to 

happen, and unfortunately, I think it is left to us, the Americans, 

to do it. 

The chairman in his opening statement referred to two frustrating factors that I hope you will comment on. One is some of the 

other commitments. I realize that that has more to do with your 

colleagues down at the State Department, but we have all witnessed what I think is a rather unseemly auction with some of our 

allies, particularly with Turkey. And the concern we have is that 

there may be people inside the administration that are writing 

checks that the Congress may not be too eager to cash. 

Can you talk a little bit about some of those other commitments, 

and whether you and the people down at the Pentagon have had 

something to say about that? 

Mr. WOLFOWITZ. We have had a great deal to say about it. And 

let me say, I know some of what you read in the press sounds unseemly and some of what some other people say is unseemly. I 

think the notion that somehow we owe Turkey $92 billion for the 

last 12 years of what they have been through is just way off the 

mark, way off the mark. 

But a great deal of what we are talking about is very seemly and 

quite appropriate in the context of fighting a war on terrorism with 

countries that really are standing up to the challenges, and sometimes countries that are not in a great position to do so. 

Think of Pakistan. Pakistan has done a great deal for us. We 

could not possibly have accomplished our objectives in Pakistan—

at the moment, to be honest, we are behind in paying our bills to 

the Pakistanis for the support they are giving to our forces. We are 

working hard to get that done, and we are hoping, actually in this 

year’s program to get a little more flexibility so that we don’t fall 

behind in paying absolutely legitimate bills. 

The issue with Turkey, and I want to be cautious here because 

we are in an absolutely critical stage in our negotiations with 

them, and there is a tendency to take anything I say and use it 

for whatever purpose anyone wants to. 

But it isn’t a question of how valuable Turkey is in bidding and 

auction and so forth. It is a fact that Turkey has great reason to 

be concerned, that if there is a conflict in Iraq, they are going to 

sustain some significant short-term economic costs and burdens. It 

is also a fact that they were promised some things in 1991, some 

by us and some by Arab countries, and only some of those promises 

were delivered. There has been a tendency to mythologize those 

afterwards, and they become much bigger. But there is some 

grounds for concern on their part. 

17

It does seem to me that we need to get out of the bargaining 

stage and get on with this, because the fact is that whatever shortterm costs Turkey suffers, and there will be short-term costs, the 

long-term benefits to Turkey of ending the economic sanctions on 

Iraq—and let me emphasize that is another great benefit that will 

come to the whole region and the people of Iraq—is that there will 

no longer be economic sanctions with Saddam gone. 

The long-term benefits to Turkey’s economy are enormous. And 

if Turkey helps us, they are not only helping us, they are helping 

themselves. 

We can achieve our objectives with or without Turkey, but we 

will achieve them much faster, with much less economic cost to the 

region, with much less political disturbance in the region and, most 

importantly, with less risk to American and other lives, if we can 

confront Saddam Hussein with a two-front war rather than just a 

one-front. That is why it is important to have Turkey with us. 

I think the Turks are close to understanding that. But it is, at 

the end of the day, about our mutual security and not about a bazaar. 

Mr. GUTKNECHT. Let me also mention something else the chairman mentioned. That is the burden sharing. That is something 

that I think we have been awfully slow to negotiate with many of 

our allies. 

I would remind you that in the last exchange we had with Saddam Hussein, we were able to get our allies to pick up, under some 

accounting, literally 100 percent of our direct costs. 

Have we had any luck to this point getting any of our allies to 

step forward and say they would be willing to help share some of 

the burden this time? 

Mr. WOLFOWITZ. We definitely had quite a bit of luck in Afghanistan, and Dr. Zakheim can go into more detail. He has been all 

around the world soliciting cash and assistance in kind. 

As you know, the international peacekeeping force in Kabul is 

entirely non-American, except for a few officers. It was led first by 

the British, then by the Turks, now by the Dutch and Germans. I 

played a very big role in the fund-raising effort the last time 

around. 

Mr. SHAYS. I am going to cut you off there, if you don’t mind. Let 

me just say, if you can incorporate it in an answer, the burden 

sharing is out there. But the bottom line is a yes to him, and you 

will give us more details, hopefully fill it in to other questions. 

We are going to go to Mr. Spratt, then Thornberry and then 

Moran. 

Mr. SPRATT. Mr. Secretary, yesterday the Washington Post said 

administration officials said the Pentagon’s estimate of $60 [billion] 

to $95 billion for a war and its immediate aftermath was certain 

to be eclipsed when the long-term cost of occupation, reconstruction, foreign aid, and humanitarian relief were figured in. 

President Bush was briefed on the war cost Tuesday and is 

scheduled to receive detailed budget scenarios in the next week or 

two, officials said. Is that an accurate account? 

Mr. WOLFOWITZ. It may be an accurate account of what some 

anonymous administration official said. 

Mr. SPRATT. Are we looking at the administration official? 

18

Mr. WOLFOWITZ. I don’t think he or she knows what he is talking 

about. The idea that it is going to be eclipsed by those monstrous 

future costs ignores the nature of the country we are dealing with. 

It has got already, I believe, on the order of $15 [billion] to $20 

billion a year in oil exports, which can finally—might finally be 

turned to a good use instead of building Saddam’s palaces. It has 

one of the most valuable undeveloped sources of natural resources 

in the world. And let me emphasize, if we liberate Iraq, those resources will belong to the Iraqi people. But they will be able to develop them and borrow against them. 

It is a country that has somewhere, I believe, over $10 billion—

let me not put a number on it—in an escrow account run by the 

United Nations. It is a country that has $10 [billion] to $20 billion 

in frozen assets from the gulf war, and I don’t know how many billions that are closeted away by Saddam Hussein and his henchmen. 

There is a lot of money there. To assume that we are going to 

pay for it is just wrong. 

Mr. SPRATT. The $60 [billion] to $90-billion cost estimate is consistent with what staff on this committee have developed in the 

past year. It is just a bit above what the Congressional Budget Office projected would be the cost of such a war, based on the costs 

in 1990. 

Is it in your ball park also? 

Mr. WOLFOWITZ. Congressman Spratt, I would go back to what 

I said at greater length in my opening statement. The ball bark is 

so wide that it fits almost any number that you want to pick out 

of the air. It depends on the assumptions. 

It depends on how long the war lasts. It depends on whether 

weapons of mass destruction are used. It depends, very importantly, on whether the Iraqi army turns on Saddam Hussein, which 

I think is a distinct possibility, whether some important pieces of 

it decide to fight. It is so dependent on assumptions that picking 

a number, or even a range of numbers, is precarious. 

Furthermore, in answer to Congressman Gutknecht’s question, 

before the gulf war in 1991, we had the whole world asking us to 

get—to do the job of liberating Kuwait, because the political situation at the time was such, my office initially proposed, let’s get 

some help from our allies. We organized what became known as 

‘‘Operation Tin Cup.’’

We got, as I remember, $12 billion from the Japanese, a comparable number from the Germans. Huge amounts from the 

Saudis, from the Kuwaitis, from the United Arab Emirates. You 

know the Germans would be difficult people to approach today, but 

frankly, in the context of the reconstruction of one of the most important countries of the Arab world, I think we will approach the 

Germans and most other countries. 

Mr. SPRATT. Well, what happened to the Germans before was, 

they got caught in a very, very embarrassing situation. They had 

exported some goods to Iraq that included machinery necessary for 

the production of unconventional weapons. They were very embarrassed by it, and part of the expiation for what they had done was 

about $8 billion. 

19

That raised the ante for everybody else, the Japanese, for exam- ple; and as a consequence, we were able to raise $60 billion of the 

$64 billion out-of-pocket cost of that war. 

It looks like now we are in the reverse situation, whereas before 

the coalition members were paying us money, this time we are having to pay the coalition money, substantially. 

Mr. WOLFOWITZ. Congressman Spratt, 12 years ago, the weaker 

members of the coalition, such as Turkey, were getting assistance 

from outside. The difference, as you point out, the German position 

is different, but believe me, when Iraq is liberated, I think we are 

going to find a lot more of what you are referring to. 

In fact, Germany is one of the largest exporters to Iraq in the 

world today. Maybe that has something to do with their current position, but it will certainly lead to a lot of opportunity for expiation 

later. 

Believe me, from what I heard from Iraqi-Americans in Dearborn, the Iraqi people are going to demand it. 

Mr. SPRATT. Well, let me ask you this: Was the President briefed 

on Tuesday on the war cost, in detail? 

Mr. WOLFOWITZ. I wasn’t in the meeting, Congressman. 

Mr. SPRATT. Do you know if he was? I mean——

Mr. WOLFOWITZ. I know there was a meeting and I know they 

talked about——

Mr. SPRATT. You must have formulated some kind of cost. 

The reason I am pressing this issue is that we are getting ready 

to move a budget here, and the dollar amounts we are talking 

about for the likely cost of this war are pretty significant. 

That budget will probably contain reconciliation authority for two tax cuts, with total revenue reduction totals of $1.3 trillion. It 

might be pertinent to everybody, both sides, to know what the likely cost is going to be before we pass a budget resolution, and certainly before we undertake tax cuts of that magnitude. 

Mr. SHAYS. Thank you. I am going to recognize Mr. Thornberry. 

Then we are going to go to Mr. Moran, and Mr. Hastings. 

Mr. SPRATT. Normally I get—I am the ranking member, I get 

to——

Mr. SHAYS. You are the ranking member. And I would——

Mr. SPRATT. I have got one last question. 

Mr. SHAYS. Do you want to take advantage of that? 

Mr. SPRATT. I do. 

Mr. SHAYS. You want to deprive one of these—fair enough. The 

gentleman may continue. 

Mr. SPRATT. Is anybody contributing money to us this time? Do 

we expect to get any mitigation in the way of money from our coalition allies? 

Mr. WOLFOWITZ. I expect we will get a lot of mitigation, but it 

will be easier after the fact than before the fact, unlike the last 

time. 

And let me underscore, too, what I said in that earlier intervention. Obviously, the Congress will need to know some numbers 

even though they are going to be estimates, because they are going 

to be dependent on assumptions, and whatever we send up here 

will be based on assumptions that will probably turn out within a 

couple of weeks not to be correct. 

20

But all of that is if we go to war. There is still some small chance 

that we won’t go to war. We are at an extremely delicate point in 

everything that we are doing. 

And let me underscore it again: It is not just at the United Nations, we are working hard to try to get the U.N. to stand up to 

its responsibilities; it is also in putting together a coalition and getting a number of countries that are quite frightened of their own 

shadows, to put it mildly, and they are stepping up, though quietly, 

in a very bold way. 

And in some ways most important of all we are sending messages and signals to the people inside Iraq. This is part of our public diplomacy. And if you will forgive us for a few weeks, I think 

it is necessary to preserve what the diplomats call ambiguity about 

exactly where the numbers are. But obviously, the Congress is 

going to have to know sooner rather than later. 

Mr. SPRATT. Thank you. 

Mr. SHAYS. Thank you. 

Mr. Thornberry, then Mr. Moran and then Doc Hastings. 

Mr. THORNBERRY. Mr. Secretary, I think that most people on this 

committee and most people in the country are willing to spend 

whatever is required to have a successful conclusion to Iraq, continuing to prosecute the war on terrorism, but I think we all also 

want to make sure that money is spent well. 

You were a little kinder than Secretary Rumsfeld has been. He 

said the Pentagon bureaucracy is like the old Soviet system, and 

he has promised to liberate DOD from institutional inertia. 

I guess I want to ask about some of these kind of little less sensational, but very important management-type reforms. One of the 

issues that affects this committee is the fact that you folks have 

to start working on a budget request to come before Congress about 

a year before it comes. Then it takes us about a year to pass it. 

And then, by the time you are spending the money, it is 2 to 3 

years after you started putting that budget request together. And 

yet there are restrictions on how you can move money among accounts and spend it, and sometimes the world changes in 2 or 3 

years. 

I guess I would like for you to elaborate somewhat on some of 

those management issues that you all are working on; and perhaps 

Mr. Zakheim can talk specifically about this, moving money around 

and the challenges that poses in a world that changes very quickly. 

Mr. WOLFOWITZ. I appreciate your asking that. It was a very important part of my testimony, and maybe if Congressman Shays 

had given me a little more time, I could have been as unkind as 

my boss. I mean, I have commented at times that we run the most 

efficient Stalinist system in the world. It is efficient by the standards of such centralized systems. 

But we need ability—for example, a budget in any business is a 

set of targets. It is a plan. No plan, as they say in the military, 

survives first contact with the enemy, and budgets don’t survive 

contact with reality. 

When a business encounters changes, it moves money around. 

When we need to move money around, we are still living within antiquated limits currently in the procurement accounts. We need to 

go to eight different committees to get approval to move anything 

21

more than $20 million out of a $379 billion defense budget. That 

is just an invitation for the worst kind of micromanagement, not 

only up here, but among our proliferating staffs, to deal with 

things that none of you, none of us, are really going to have to look 

at. 

Congress has made enormous contributions to the management 

of the Defense Department, and I think it should be recognized. Go 

back—you can probably go back further—my memory goes back to 

the Polaris submarine, which I think would have died in its cradle 

if it had been up to DOD. It was forced through by this branch of 

the government. 

More recently, I think the success we have had with global positioning systems and with JDAMS is due in part to pressure from 

Congress insisting that these were programs that needed to be 

funded better than we were doing. 

I am not saying that all of the wisdom lies on one side of Pennsylvania Avenue, but it doesn’t lie down in the capillaries, down in 

the weeds, where none of us, none of you, none of us are really 

going to have the time to look. At that level, we have got to get 

the right managers, empower them to run programs. When they 

are not running them right, as happened in a major DOD program 

recently, you fire them and you get new managers. But you don’t 

try to have staffs run things. It just doesn’t work. 

Dov, would you like to add to that? 

Mr. ZAKHEIM. Yes, sir. 

Congressman, one of the difficulties we have, quite frankly, is 

that we have a budget that spends about $1 billion a day right 

now. We have the authority to move funds that would total 2 days’ 

worth, $2 billion. 

Now, no business could survive that way. As the Deputy Secretary just said, budgets are simply estimates. We cannot manage 

cash that way. 

I know, for instance, that Congressman Shays has been very concerned about how we manage our cash. We have done a lot. We 

have brought down problem disbursements and we have addressed 

many other issues in a more direct way than in many years. But 

the fundamental problem of managing cash is that we simply cannot move funds around, and it creates all sorts of inefficiencies. 

I won’t take up too much time, I will just give you one example. 

We are asking for 2 years to spend our operations and maintenance 

funds. Why? Because if you only have 1 year, as we do today, and 

there is an imbalance in the accounts, everybody wants to spend 

that money to get rid of it by the end the fiscal year. Now, that 

is nuts. We shouldn’t be doing that. 

Mr. SHAYS. We are going to Mr. Moran, then Doc Hastings, then 

Ms. Hooley. 

Mr. MORAN. Well, Mr. Under Secretary, you and the Comptroller 

are professionals. You know what you are doing, and we both know 

that you would not be proceeding with this war without having 

some estimate of the cost. But I think you are deliberately keeping 

us in the dark. We are finding out far more in the newspapers than 

we are from you in testimony. 

22

If you want to go into top secret, fine, do it. But we are the Budget Committee. We need to know what is going to be requested of 

us. 

There was, in fact, a meeting yesterday between the OMB Director and Secretary Rumsfeld and the President. We all know that. 

We don’t know what was discussed. But the Turkish ambassador 

told me yesterday that there has been agreement on $14.5 billion—

$6 billion directly, about $1-billion down payment, another $8.5 billion to come later. You could at least tell us what you are discussing. 

We talked with the Jordanian people. They have figures in mind. The Israelis have figures in mind; $12 billion has been cited for 

months—$4 billion directly and $8 billion in loans. Egypt is going 

to get money. 

We have to provide the money. We are being told now that there 

is no way that we are going to be told what it is going to cost until 

after you have begun military action. If you were on this side of 

the podium, you would be asking the same questions, and you 

would know that the Under Secretary and the Comptroller know 

far more than they are revealing. 

Now, you can respond to that if you want. I have got two other 

questions. But you know, we are not so naive as to think that you 

don’t know more than you are revealing. 

With regard to Turkey, let me just make a point. You know the 

background in Turkey. I agree with you that Turkey is a terribly 

important ally, not just for its strategic location, but for all of the 

progress that they made there, their determination to stay secular, 

et cetera. 

But they think they are going to go into the northern part of 

Iraq, into the Kurdish zone. They say it is for humanitarian reasons; the Kurds feel it is anything but. And if we turn our backs 

on the Kurds, if we sell out the Kurds for the third or fourth time, 

it is wrong. And I trust that you are aware of that. I would like 

some assurance that we are not going to do that to the Kurds 

again. 

Now that is Turkey. I have got to speak up on two other quick 

questions too. If you don’t want to address them now, we need 

them addressed for the record. 

We have been told by Secretary Rumsfeld that he is going to submit legislation calling for a brand new personnel system for DOD 

civilians. It is going to be basically the same personnel system that 

caused the Department of Homeland Security authorization to be 

held up for almost a year. 

You are going to take away the collective bargaining rights, et 

cetera, for civilian employees. I want to get some sense of what you 

have in mind for that new personnel system that is going to affect 

600,000 civilian employees. 

And, secondly, you are in a unique position. You have people 

working side-by-side performing the exact same function, but under 

different forms of compensation. 

You are giving twice as much pay raise to uniformed personnel. 

You did that last year, you are proposing to do that again this year, 

as you are for civilian employees. I can’t imagine that you are able 

to retain morale when you are doing that, when you are compenVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
23

sating one group twice as much as the other group who are performing exactly the same function. 

You have more civilian employees at DOD than in any other 

agency, and you are the one who is directly responsible for them. 

DOD already took the biggest hit under the reforming government initiative, over 100,000 jobs were eliminated; and we need to 

have some idea of what you plan in terms of not only retaining and 

recruiting the caliber of people that we need, instead of just castigating them publicly, because they are committed and they are 

doing a good job. 

And I would like to get some commitment from you that you are 

going to reward them properly, as though you were a CEO of a terribly important, well-functioning organization. 

Mr. SHAYS. Let me just step in. That was a 5-minute question 

with no time to answer. I am going to say that we have to decide 

whether we want all of the members to be able to participate. 

So, Mr. Secretary, I am going to ask you to answer one or two 

of those, and just leave those other charges unanswered, which a 

member can do. But you don’t have 5 minutes to answer a 5-

minute question. 

So, you know, just please—I am sorry, but I hope members will 

give a question and time to answer. 

Mr. MORAN. Mr. Shays, let me just say, this is terribly important. It is the biggest element in the entire budget resolution. And, 

you know, we have—to be limited to 5 minutes, I know that is at 

the Under Secretary’s discretion, but it is not inappropriate to want 

answers to these questions. 

Mr. SHAYS. These are all extraordinarily important questions. 

But we have decided as a group, rather than just having five people or six people ask questions, that we will allow others to as well. 

I am going to, with all respect, just go to the next member. And 

the next member is——

Mr. WOLFOWITZ. I will see if there is some duplication, I can try 

to work answers in. 

Mr. SHAYS [continuing]. Doc Hastings, and then Ms. Hooley and 

then Mr. Schrock. 

Mr. HASTINGS. Mr. Secretary, I am not going to take all of the 

time with my questions. So if you want to use some of my time to 

respond, I would be more happy. 

But I have to say, as one member, that certain budgetary issues 

are very important when we are in war. You mentioned that in 

your earlier statement, that we are in war. And I have to think 

back, what George Washington went through and what the Continental Congress had to do, wondering about the budget of the Revolutionary War that went on longer than they wanted. 

I have to think back to what Lincoln must have thought when 

the country divided. That war went on longer than what he had 

anticipated. 

But in the end, the support was there to fund both of those endeavors, thank goodness. 

And we are somewhat in that similar situation. So I wanted to 

just say that, because we are in a wartime situation, while budgetary issues are important, there certainly has to be some sort of 

flexibility if we are going to win. I think we intend to win. 

24

So with that, let me change—kind of change where I want to go 

or what I was talking about here. 

And, first of all, thank you for your efforts on the completion of 

the 767 effort as far as tankers for our Air Force. I know that is 

being worked on. I just urge you to continue to work to bring that 

to a final conclusion. I appreciate your efforts. 

You spent some time in your opening testimony talking about reorganizing the Defense Department in a variety of ways. And I 

want to focus on the new technology and perhaps newer players 

that could come in with new technology. 

You said you are going to reform the procurement. You said that 

several times in responses to questions of my colleagues. I would 

just like to simply say, can you give me a time line on that? 

And, first of all, are you going to have a process for new technologies, maybe perhaps smaller firms? It seems like all good ideas 

come from new ideas, new firms. Is there a time line on the reforms and specifically the procurement process as you go forward? 

Mr. WOLFOWITZ. I suppose like any process it is a continuing one. 

In fact, we have done a lot of reforms already. 

There was recently a major reform of just our acquisition regulations. I wish I could remember the numbers. But they cut it from 

a volume of about that thick down to about 54 pages, roughly. I 

will get that. 

But it was Pete Aldrich’s work; it was impressive. 

I assume also that probably helps small contractors, because if 

you have got to bid on something and the price of entry is reading 

2,000 pages of legal gobbledygook, you may go and do your business somewhere else. 

One of our big targets is, we are hoping, though, we are really 

still in the process of consulting not only with the Congress, but 

elsewhere, in the executive branch and with the President, to put 

together a package of major legislative initiatives. 

If I can answer you and Congressman Moran at the same time 

on at least one of his questions, one of the things we are looking 

at—and there has been no decision yet and we will be happy to 

brief any member of this committee that is interested on what 

things we are thinking about—is to get more flexibility, first of all, 

in how we hire civilians. Right now, it is such a burdensome and, 

in many ways, ludicrous process. No private company would do it 

the way that we do it through the civil service. It takes so long that 

good candidates are gone by the time you are able to make an offer 

to them, especially in a more competitive economy. 

One of the results of that is that we still have people in uniform 

doing jobs that civilians ought to do. Another result of it, I think, 

is, we probably use contractors a lot more than would be rational 

if you could actually get people on your professional payroll. 

And I want to emphasize too, as I said in my testimony, the civilians in the Department do magnificent work also. That is another 

reform we would like to work on, something that gives managers 

the flexibility to pay for good performance. We have had freedom 

from the Congress in a couple of places, the China Lake experiment notably, where I think some 30,000 people have been operating for quite a few years under a much more flexible pay system, 

and it has worked well. It not only gives people extra pay, but it 

25

also means that those people who don’t perform and don’t get the 

same increases often leave, and that boosts morale all around. 

These are things we are looking at. I think they can greatly improve our efficiency, greatly improve the way we spend the taxpayers’ money, but they are not changes that we can make on our 

own. They obviously require agreement with the Congress, and we 

are in the process right now of consulting about them. 

Mr. SHAYS. Thank you. 

We will go to Ms. Hooley, then Mr. Schrock and then Mr. Moore. 

Ms. HOOLEY. Thank you, Mr. Chairman. Deputy Secretary 

Wolfowitz, thank you for joining us today about this budget. And 

let me tell you, before I get to my question, one of the things that 

I heard: that you actually know, or have a range of numbers for 

what the war is going to cost and reconstruction is going to cost. 

You are just not willing to tell us at this time? 

Mr. WOLFOWITZ. No. Can I correct that? 

What I am saying is, we can make many estimates. They are different, depending on what you assume about how long the war 

might last, how many munitions you are going to use, what the reconstruction requirements are afterwards. 

There is not a single number; that was my basic point. We don’t 

know. 

Ms. HOOLEY. Now, wait a minute. If the President has been 

briefed on the numbers, you have indicated that you really don’t 

want to—you want to keep it ambiguous until after there is some—

the war starts. Then you will be able to tell us the numbers. 

I know there are really good people in the Department of Defense 

who have had lots of experience, and to not be able to give us a 

range—everybody understands circumstances are different, and 

when something happens you can say we didn’t count on this happening; it is going to cost us this much more. But to not be able 

to give us, this is sort of a minimum and this is the top, you know, 

with everything going wrong, this is one that is going to cost us. 

To give us a range—I just think you can do better than that. 

Let me get on to the question that I have. We have—I have been 

going to a lot of mobilization ceremonies in Oregon for the National 

Guard and Reserves, and we have got them spread all over the 

Middle East. I am always amazed at how eager these people are 

to protect our freedom; and I, you know, appreciate their willingness to go into war and their families that are sending them off. 

I am very close to the Guard. 

I am deeply troubled by the administration’s budget request. 

Based on what I have read, it appears that DOD is borrowing $1.5 

billion a month from its active duty operations and personnel accounts to pay for the cost of the Reserves and National Guard in 

2003. It is my understanding that Secretary of Defense Rumsfeld 

has testified that a supplemental appropriations will be required to 

pay for the activation and deployment of our Guard and Reserve 

units. Could you please explain to me why we are being forced to 

borrow $1.5 billion per month from a separate account to pay for 

the Guard and Reserve deployment and why don’t we budget for 

these expenses when we know they are occurring? 

Also, I have a personal interest in many of these young soldiers. 

Can you assure me that the Guard and Reserve units will receive 

26

adequate funding for 2004? Can you identify where the funding 

will come from in the budget? 

Then the last question, very quickly, when are you going to be 

ready to go through an audit and get a clean financial statement? 

Mr. WOLFOWITZ. I will do the best I can in the time available. 

We have very good people who do cost estimates, and they depend on the assumptions you give them. There are even very legitimate issues about whether, for example, if you want to measure 

the cost of combat, whether the number of days, which is an old 

way of doing calculations, is in fact the appropriate measure in an 

era of precision guided munitions. It gets complicated, and some of 

it in fact gets classified. I think if I gave you a truly—a range that 

truly covered the range of possible numbers you would say, well, 

that is so wide a range it is not very helpful. 

Let me emphasize there will be an appropriate point when we 

will give you numbers and assumptions that go with the numbers, 

and the assumptions may probably prove not to be correct. We are 

not in a position to do that right now. On this issue about the $1.5 billion, I think what you are hearing 

is the estimate—I emphasize it is only an estimate—of what the 

ongoing operations in Afghanistan and elsewhere in the world are 

costing us in terms of operating expenses and extra people; and 

some chunk of that in fact is the money that we spend for the 

Guard and Reserve officers that we mobilize. We were able to stop 

borrowing, to use that phrase—we don’t borrow, we call it cash 

flowing—when we got the extra $6 billion out of the war reserve 

in the closing hours of the Appropriations Committee conference. 

At some point we—depending on how those numbers go—we may 

be back into having to cash flow and, therefore, coming back for 

more money. But this is one of those huge uncertainties. Even in 

an operation that has been ongoing now for 18 months and where 

would you think there is some predictability, we keep trying to find 

ways to push down the numbers of Guards and Reserve so that we 

don’t have to mobilize people and pull them away from their families. We have had some success in doing that; and, as a result, 

some of our early estimates have proven to be too high. 

There is adequate funding for the Guard and the Reserve in the 

budget, and there will be adequate funding for—one way or another—for people we call up that are serving their country enormously well, and they certainly shouldn’t have to pay for it any 

way out of their pocket. 

Mr. SHAYS. You did pretty well answering about 12 questions. 

Excuse me. It wasn’t 12, but a number. 

We are going to go to Mr. Schrock and then Mr. Moore if he is 

here. If not, it will be Mr. Edwards and Mr. Wicker. 

Mr. SCHROCK. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary, Dr. Zakheim, for being here. I will be 

very quick. 

Of all the things you said in here I think the most poignant was 

we need legislative relief probably in more ways than we realized 

before we came in here. But you need relief, and that is something 

we need to focus on. 

No. 1, the budget puts $98.6 billion in paying the benefits, which 

is an increase of a little more than 5.5 percent; and it funds a raise. 

27

The pay raise is anywhere from 2 percent to 6.5. The budget also 

reduces out-of-pocket expenses for moving from 75 to 35 percent for 

private housing, dropping to 0 pecent in 2005. This is a huge investment for the taxpayer. 

No. 1, is it accomplishing what you want? No. 2, are we keeping 

the best and brightest? And No. 3, do you think we need a draft? 

Let me add another thing here that I was asked to ask, and it 

is a good one because I am interested in this. This budget increase 

of Special Operation Forces by 47 percent—don’t we wish—47 percent for a total of $4.52 billion. Can you give us what your vision 

would be for an enhanced role for the Special Operation Forces? 

Mr. WOLFOWITZ. Let me try quickly. 

First of all, I think the improvements we are making in covering 

base allowance for housing adequately and getting people out of inadequate housing are having hugely positive effects on morale. I 

hear about that from pretty much every commander I visit, and 

you probably hear it down in your district a lot. I think some of 

those things that indicate how you care about people and how you 

are treating people have a value that exceeds what a straight cash 

payment might have done. 

The—I am sorry. I should have taken a note. 

Mr. SCHROCK. Are we keeping the best and brightest? 

Mr. WOLFOWITZ. Oh, yes. I am sorry. I think we have made some 

great advances in the last few years with a lot of support from the 

Congress in being able to correct some of the gap that existed between those absolutely key middle enlisted officer ranks where 

some of our most valuable people are and where the private sector 

was bidding them away fiercely. Those are people who, by most 

measures I have seen of employment compensation equivalents, 

were hurting and the kinds of targeted pay raises the Congress has 

allowed us to apply have made a very big difference. 

Mr. SCHROCK. Do we need a draft? 

Mr. WOLFOWITZ. Right. You know, the short answer is, no, we 

don’t. We have wonderful people who are volunteering. If we drafted everybody, we wouldn’t know what to do with them, frankly. 

The numbers would just be beyond belief. 

You know, I will say one thing, and I think I am speaking for 

everyone in uniform in saying this. I am not in uniform, but anytime anybody makes the mistake of thanking me for working for 

the Defense Department I say that it goes the other way. At this 

time of national emergency to be able to feel that you are working 

on the problems that matter most to the country is of enormous 

satisfaction, and I think the men and women in uniform are volunteering because they feel good to be able to do something for the 

country. The more we can find ways for people not in uniform to 

help the country the better. But we don’t need several million people under arms. 

Mr. SCHROCK. Special Operations Forces. 

Mr. WOLFOWITZ. And Special Operations Forces. We have taken 

a very broad look at thinking—a snapshot history. We had the disaster of so-called ‘‘Desert One’’ in 1980, the failed hostage rescue 

mission in Iraq—in Iran, excuse me. We learned a lot of lessons 

from that. We developed a Joint Special Operations Command. We 

28

developed the Delta Force. We developed the incredible ability to 

go to a specific place and rescue people. 

The war on terrorism has demonstrated that we need a different—an additional kind of capability that—not to go to just one 

place where you have a lot of time to prepare and plan with one 

specific force that is just trained to the edge for that, but the ability 

to respond on a global scale, to respond not within even a few days 

but sometimes within 30 minutes, to be able to go after those most 

critical terrorist targets if and when they pop up. I would say that 

is the short summary of how we are organizing. There are a lot of 

political and diplomatic and other considerations that go with that 

as well, but we definitely need our special operators in a way we 

have never imagined them before September 11. 

Mr. SHAYS. I think we are going to go to Mr. Edwards and then 

Mr. Wicker. Then if Mr. Scott isn’t here, it will be Ms. Capps. 

Mr. EDWARDS. Secretary Wolfowitz, I have twice supported authorization of force against Iraq, and I applaud this Bush administration, and you, for fighting to increase defense spending that I 

think is necessary for our national security. But I was appalled at 

the recent administration proposal to cut $141 million from the important Impact Aid military education program. 

In my district, which includes Fort Hood, as you know, an installation where 12,500 troops have already been given orders to ship 

out any day now to the Iraqi theater, and which might have 30,000 

soldiers leaving if 1st Cav Division is deploying that area, $31 million of funds would be cut from two public schools that educate the 

large majority of those soldiers’ children. 

Frankly, last week, as I spent 3 to 4 days there at Fort Hood 

talking to the soldiers about to be deployed, the wives, the spouses, 

husband or wife, the children, frankly, I had a hard time explaining to the children that, as your mom or dad is getting on that airplane to go fight for our country, perhaps putting their life on the 

line, the administration is saying it is OK to be cutting the children’s education funds back at home. And these cuts would be dramatic. Massive teacher layoffs, many educational programs would 

have to be reduced. 

Now, in fairness, you were not part of putting together that Impact Aid request. It came, I assume, either out of the Department 

of Education or OMB or collusion between the two of them. But 

while you didn’t create the problem, I know you understand as 

much or more than anyone in this room that in a time of war we 

need high military morale. And our soldiers will have enough to 

worry about if they are fighting in Iraq. They shouldn’t have to 

be—it would be immoral to have them worrying about their children’s education back at home. 

My question to you, sir, would you be willing to use your influence to try to put this proposed cut—dramatic cut in Impact Aid 

to rest before we commence a possible war with Iraq, not after? We 

don’t need to let this morale problem fester for the next 6 to 9 

months. I think it could be devastating to morale. In fact, I think 

this just would cause a lot of our soilders to think that our country 

has a lot of gall to ask them to fight for us while we are not willing 

to educate their children back home. 

Any thoughts on that? Can you help us on that? 

29

Mr. WOLFOWITZ. As you correctly pointed out, Congressman, it is 

in a different department. I guess my first reaction is to say, absolutely, the morale of our families is a critical thing, and we need 

to think about it as we go to war. My second thought is, I know 

how hard it is balancing the priorities in the Defense Department 

with what some people think is a large but we don’t think a large 

increase. The other departments are facing that challenge with 

more or less flat funding levels. So I don’t know what the Department of Education had to balance. 

I think it is fair, and I don’t want to go any further than that, 

for me to at least undertake to talk to them and see if they did 

think about that. 

Mr. EDWARDS. Well, I hope you would; and I hope you will do so 

aggressively. Because, while the Department of Education isn’t 

under your direct jurisdiction, you are part of the leadership of this 

administration that the American people are entrusting to carry 

out this possible military conflict in Iraq. I think it has a direct impact on the morale of our soldiers. 

I can tell you that, having met with many of them, I think it is 

morally wrong to send soldiers and servicemen and women to war 

while we are cutting their education funds back home. I certainly 

couldn’t look them in the face and say we could propose a $700-

billion tax cut for people sitting here safely at home over the next 

year or two, while they are being asked to fight for our country, 

but yet we can’t afford to educate their children. I would urge you 

to take whatever time you could to, during a very busy time for 

you, to pursue that. 

My final question would be this, if we have time to answer it. Given this administrations request for a $700-billion tax cut, does 

the Bush administration still oppose full funding of concurrent receipt for military retirees? 

Mr. WOLFOWITZ. The short answer is yes, and it is a long and 

difficult issue. 

Mr. SHAYS. We will have you give him the long answer later, 

OK? 

Mr. WOLFOWITZ. OK. 

Mr. SHAYS. I am sorry. We are going to go——

Mr. WOLFOWITZ. Can I just say because at the end of the day it 

comes out of things that we need for our active duty people. 

Mr. SHAYS. Mr. Wicker, then Ms. Capps and then Mr. Putnam, 

if Mr. Barrett isn’t here. 

Mr. WICKER. Thank you, Mr. Chairman. 

Dr. Wolfowitz, I want to try to squeeze in two questions. 

First of all, there is no question we are making significant increases in the defense budget as a result of our security needs. Indeed, out of the discretionary spending, defense is well over half of 

that figure. You testified in your prepared statement that 45 percent of the defense budget goes to cover personnel costs for our men 

and women, and I am sure that that is a proper amount. 

My first question is this. As larger increases go to personnel and 

operations, there is a concern that the percentage of the defense 

spending year after year for research and for procurement appears 

to be shrinking. Would you comment on the long-term implications 

of this pattern? 

30

Mr. WOLFOWITZ. I don’t think—I think we are in fact bringing up 

overall our investment accounts. There is some debate about the 

S&T portion of that. But when we say investments accounts, we 

mean science and technology, research and development and procurement; and we have been bringing up those numbers not as fast 

as we would like because of the considerations you mention about 

the cost of people and the cost of readiness. But we have been 

bringing them up; and I think, by making some hard decisions, we 

have been able to move some of that money in the places where 

it is better needed. 

The Navy, for example, this year is retiring several quite usable 

surface ships early in order to save operating costs to invest in the 

Navy in the future. I think that was absolutely sound judgment. 

But we have to make some of those kinds of choices. Some of these 

numbers shift around because quite a few of our programs, especially tactical aircraft programs, were in—have been in R&D for a 

long time. The F–22 is just entering the procurement phase. The 

Joint Strike Fighter is still in the R&D phase, but it will soon be 

in the procurement phase. So you would expect money to shift between those accounts. 

But I would say overall we are increasing the investment accounts. Would we look to increase them faster? Yes. But I think we 

made the right set of decisions in balancing them among priorities. 

Mr. WICKER. Alright. Well, let me then shift to a question about 

Reserves. I know we have already talked about this in this hearing, 

but my concern is the overdeployment or the overuse of our Reserve forces. You and I have had a conversation earlier about this. 

And I agree with Mrs. Hooley. It is just amazing the enthusiasm 

that we see at these deployment ceremonies. But when you see 

units coming home from an 18-month deployment and then having 

to turn right around and go back again, I just wonder if we are 

going to have to look down the road at increasing our active duty 

force even more than you have projected so that people will be willing to stay in the Reserve for that occasional call-up that we have 

sort of been facing over time. 

Mr. WOLFOWITZ. Two comments. No. 1, one of the reasons we are 

making such a strong push to have more flexibility to hire civilians 

and to make better use of the civilian work force is our estimate 

that we have some 300,000 people in uniform who could be—who 

are basically performing civilian functions. And before we start 

adding to end strength, which is extremely expensive, I think we 

ought to look at whether more of that could be provided from the 

civilian side. 

The second point to make is that I think some of the worse 

stresses in the Reserves come from those units. We developed this 

euphemism in the Pentagon called low-density, high-demand, 

which Rumsfeld says that just means something we didn’t buy 

enough of; and one of the things was a whole lot of units that come 

out of Reserves. So there is no other place to go for them, and we 

need to fix that. We need to have the right kind of density proportional demand, and I think we really need to rethink about some 

of these functions that were put largely or entirely in the Reserve 

forces. 

Mr. SHAYS. Thank you very much, Mr. Secretary. 

31

We will go to Ms. Capps, then Mr. Putnam; and I think, Mr. 

Ford, I might have skipped you. I think you are next, and then it 

will be Mr. Emanuel after that on your side. 

So, Ms. Capps, you have the floor. 

Mrs. CAPPS. Thank you. 

Mr. Secretary, I wish to turn to the conflict between Israel and 

the Palestinians, if I may. I strongly believe that U.S. concerted efforts to resolve the Israeli-Palestinian conflict today would help 

build international support for our efforts to disarm Iraq and to 

fight global terrorism. The biggest obstacle to peace is Palestinian 

terrorism. All forms of terrorism must cease once and for all. 

Another obstacle is Israeli settlement policy. The West Bank and 

Gaza lands given over to settlements make it more and more difficult to envision President Bush’s vision which he articulated 

again last night, and I quote: ‘‘Two states, Israel and Palestine, living side-by-side in peace.’’

Settlements are not only a political issue, but a tremendous drag 

on the Israeli economy and military. Last night, the President said 

very clearly settlement activity in the occupied territories must 

end. Last month, David Ignatius of the Washington Post reported 

that you favor, ‘‘concrete measures’’ such as dealing with Israel settlements. So I would like you to articulate how you think the 

United States can implement the President’s desire to see a halt 

in settlements. 

Specifically, let me ask about one such concrete measure. What 

about linking settlement policy to the loan guarantees that Israel 

has requested from us? 

Now I am likely to support Israel’s request for a substantial 

amount of U.S.-backed loan guarantees and supplementary military aid. Israel’s dire economic straits and security challenges warrant this assistance. There is a proposal circulating in Congress to 

pre-condition the loan guarantees on an immediate credible freeze 

of all settlements. Mr. Secretary, can you just give me your views 

on this proposal? Does the Bush administration support an immediate settlements freeze and how does the President plan to make 

it clear to the Sharon government that settlements must stop? 

Thank you. 

Mr. WOLFOWITZ. Did she run out of her time, I hope? 

Mrs. CAPPS. You wish. 

Mr. WOLFOWITZ. Because, clearly, these are questions—I am 

sorry to cop a plea here. But these are clearly questions that the 

State Department has to answer. Their lives are difficult enough 

without people like me complicating them. 

But as you correctly said before you started to mention them, I 

was going to answer by quoting the President. He was quite clear 

last night. That was a very important statement. And he also said, 

and I don’t—you made the point which many people make. It 

would be easier to deal with Iraq if we could settle the Arab-Israeli 

conflict first. With all respect, we don’t have—I mean, I don’t know 

how long that would take, but we certainly don’t have that kind of 

time. 

Mrs. CAPPS. But, Mr. Secretary——

Mr. WOLFOWITZ. Let me—you can use up the time. 

Mrs. CAPPS. No. Go ahead. 

32

Mr. WOLFOWITZ. OK. The comment works in reverse equally. I 

have always said progress on either one of these issues can help 

on the other. We are on the verge one way or another, peacefully 

still, if possible, or by force, if necessary, of getting rid of Saddam 

Hussein’s weapons of mass terror. And if we get rid of the whole 

regime, think about what the impact of that is going to be on the 

Arab-Israeli peace process. It is not an accident at all that two of 

the biggest breakthroughs we have made in the last 50 years in negotiations between Arabs and Israelis happened after Saddam Hussein’s defeat in 1991. It was right after that that we were able to 

get Arabs and Israelis sitting down face to face in Madrid for the 

first time ever, the first time that anyone except the Egyptians had 

met with the Israelis. 

It is not an accident. When Anwar Saddat made his brave trip 

to Jerusalem 25 years ago, it was Saddam Hussein who organized 

the Baghdad block to oppose him. With Saddam Hussein out of the 

picture, it will be a much better atmosphere for peace and a much 

better atmosphere to consider the kinds of issues that you are talking about. But, hopefully, we might come to some of them in a voluntary way, instead of necessarily by pressure. 

Mrs. CAPPS. But you beg my question and I think you sell yourself short. Because you have been a point person for the administration on Israeli-Palestinian conflicts, and you have made public 

statements. 

Mr. WOLFOWITZ. No, I haven’t. I am sorry. 

Mrs. CAPPS. Well, I have watched your statements, and they 

have been very effective. It is clear that as we handle the Israeli 

request for aid, much as we negotiated with Turkey last week, this 

is directly related, as you mentioned, to our policy in Iraq. You are 

going from the back to the front. I want to start from the front and 

go to the back, and I would appreciate your personal views on this 

matter. 

Mr. WOLFOWITZ. I am not allowed personal views. But let me 

give you views that actually speak for the administration that are 

my deeply held personal views. 

I have spoken quite a few times, including I think near your district in Monterrey or maybe it is in your district. 

Mrs. CAPPS. North, that is close though. 

Mr. WOLFOWITZ. When I talk about bridging the dangerous gap 

with the Muslim world—for 3 years, I was the American ambassador to Indonesia, which has 200 million Muslims, more than any 

other country in the world. And I think fighting the war on terrorism, as the President said, is not only about killing terrorists. 

It is about building a just and peaceful world beyond the war on 

terror. 

There is simply no question that the ongoing, continuing violence 

between Israelis and Palestinians is one of the cancers of the Middle East. It is unquestionably a burden on our policy. You correctly 

said terrorism is a major part of the problem. I think settlements 

are also a problem, as the President said; and we have got to address both. 

Mr. SHAYS. Thank you, Mr. Secretary. 

We are going to go to Mr. Putnam, then Mr. Ford and then Mr. 

Hensarling. 

33

Mr. PUTNAM. Thank you, Mr. Chairman. 

Mr. Secretary, I have—I share Mr. Wicker’s concerns about our 

continued investment in research and development. The Pentagon 

has given us some tremendous innovations that allow us to maintain our battlefield superiority because of investments that were 

made decades ago, so it is important that we continue that. 

By the nature of your high-risk research or the investments in 

that high-risk research, there will be some gray areas. There will 

be some pushing of the envelope by its very nature. And the Senate 

has expressed some concerns over our work on data mining. While 

I don’t necessarily share those concerns I am curious about your 

thoughts on our oversight of high-risk research and whatever cost 

benefits can be applied to that type of high-level, questionable, 

high-risk type work. 

Mr. WOLFOWITZ. OK. I mean, there are many kinds of risks. You 

know, there is the risk that goes into space exploration. We have 

become totally too risk adverse, I think, in a lot of our technology 

developments, to the point where things take much longer, become 

much more expensive and we cancel things because one test went 

wrong. We would never have had many of the most available programs we have if we did that. But I have a feeling when you were 

talking about high risk and you mentioned data mining that you 

are most concerned about a particular project that some people 

think is going to invade American civil liberties. 

Let me be very, very clear. The project that we have in the Defense Advanced Research Project Agency on information awareness 

is not something that goes and procures data from anywhere. 

There is an impression that has been created in the press that this 

is a project to go and secure information on people’s bank accounts 

or their credit card accounts or things of that kind. Those are activities that can only be done under very strict authorities by the 

Congress, either by the Justice Department and appropriate Justice authorities in the case—in domestic cases or, where it is overseas, by the CIA. 

We don’t do it. The Defense Advanced Research Project Agency 

doesn’t do it. At least—let me be more specific—the Defense Advanced Research Project Agency doesn’t do it. We have intelligence 

agencies in DOD, obviously. The project that has gotten so much 

attention and controversy is to develop the kind of software that 

could be used by people who have the legal authority to look at 

that kind of data and to make those kinds of links. It is not data 

mining, therefore, in the sense of going out and securing data. It 

is a kind of data pattern recognition that allows people who have 

a data base, for example, collected by intelligence that puts together dirty telephone numbers of lots of terrorists. 

It is amazing how complicated it gets and how quickly. But if you 

stop and think about it, if you have the ability and a large mass 

of data to recognize that some bad guy has phoned somebody, who 

phoned somebody, who phoned somebody, who phoned somebody 

who has a relative, who phoned somebody else who is another bad 

guy, suddenly, wow, you have got two bad guys connected in a way 

that never really phoned each other. It is that kind of pattern in 

large masses of data that require new computing tools, and that is 

34

what—and that is only what the Defense Advanced Research 

Project Agency is working on. 

And let’s be clear, too—I mean, we are fighting a war on terrorism in order to protect the civil liberties that we love and cherish in this country; and we do not want to, in the course of fighting 

terrorism, destroy those civil liberties. But it is also the case I 

think, that if we don’t aggressively pursue terrorists, and end up, 

as a result, with some kind of catastrophic attack on the United 

States, that will be a much greater threat to civil liberties because 

people will be clamoring and saying, why indulge this kind of thing 

if you don’t have to? 

I mean, just as my friend Jim Woolsey sometimes points out—

just think about it—after the attack on Pearl Harbor, it was three 

of the great American civil libertarians—Justice Hugo Black; Governor, later Chief Justice, of California Earl Warren; and President 

Franklin Roosevelt—every one of them with reputations for civil 

liberties, who agreed to put Japanese in concentration camps. 

When you get a shock afterwards—I mean, I think we have been 

remarkably intelligent and calm as a country in reaction to September 11. I hope we can preserve that calm if something worse 

happens. But it is incredibly important if you want to protect civil 

liberties to prevent catastrophic terrorist attacks. 

Mr. PUTNAM. I am glad you had an opportunity to respond to 

that on the record because I was disappointed that the Senate 

slipped that into the omnibus. I think it is the DNA technology of 

the 21st century. It is something that people will take some time 

to get comfortable with, but it is a necessary law enforcement tool, 

and I am glad you had the opportunity to expand your vision for 

that. 

Mr. SHAYS. Thank the gentleman. 

Mr. WOLFOWITZ. Thank you for the question. 

Mr. SHAYS. We go to Mr. Ford and then Mr. Hensarling and then 

Mr. Emanuel. 

Mr. FORD. Thank you, Mr. Chairman. I will be brief. 

Thank you, Secretary Wolfowitz, for being here. A couple of questions. I know some of them have been asked, and I don’t know if 

I heard the answers altogether. 

This coalition that we are building around the globe and particularly our efforts in Turkey, is the amount that they are asking for, 

is it $15 billion? Is that what it looks like the deal will end up 

being to gain access to their bases or access to their soil? 

Mr. WOLFOWITZ. No, although one of the things we are discussing with them is taking some of the money that we were prepared to provide in cash and enabling——

Mr. FORD. What is the amount, Mr. Wolfowitz? I know our time 

is short. 

Mr. WOLFOWITZ. Well, we are still negotiating. It is in the range 

of—I mean, it is basically—I am hesitant about what is comfortable 

to say in public here. I think the press reports say it is $6 billion. 

Mr. FORD. It is the people’s money, so we might as well say it 

publicly. 

Mr. WOLFOWITZ. Well, I know, but you are in the middle of a negotiation. That is the difficulty. The point is that we are—it is 

roughly $6 billion. But, as we pointed out to the Turks, there are 

35

many other benefits that will come not only from the kind of direct 

expenditures that our troops will make in Turkey. But most importantly of all the big benefit to Turkey is not something we are paying for, not something we are paying the Turks for, it is something 

we are accomplishing by liberating Iraq, by ending the economic 

sanctions. Turkey stands to gain far more than the amounts that 

we are——

Mr. FORD. Does that include the loan guarantees, too, this $6 billion figure? 

Mr. WOLFOWITZ. The $6 billion would be part of securing the 

loans that get you to some of those larger numbers, and I think the 

$15 billion you may have heard is based on borrowing against that 

cash. 

Mr. FORD. I read this morning that we now have a similar arrangement working with Saudi Arabia. Is there a dollar amount attached to that one as well? 

Mr. WOLFOWITZ. I am not aware of us paying the Saudis anything. They are helping us in many ways, and they can afford to. 

Mr. FORD. Let me ask you this, Mr. Chairman. I don’t want to 

ask this to be critical. It just appears—I know it has been said over 

and over again—but this is becoming more of a coalition of people 

bought and paid for. 

Mr. WOLFOWITZ. That is not true. 

Mr. FORD. Well, there is certainly—I appreciate how emphatic 

you and the doctor are in denying that, but there is—that perception certainly exists, and at least in my little district in Memphis 

people are asking the question. 

Mr. WOLFOWITZ. I would love to have a chance to respond, if I 

may. 

Mr. FORD. Sure, but let me finish my question. I hope that that 

is not the case, and I hope that we can indeed move beyond that. 

I would love to hear you answer that question as well one last one 

before we run out of time. 

In my district, the 164th Airlift Wing will play a role on the Reserve and Guard unit side. One of the challenges that we face—I 

saw in the President’s budget there is a proposal for a 20 percent 

cut for the C–17 aircraft. The C–917 will replace the C–5, as you 

well know—and this is all new to me and even new to many in my 

district—the C–5, which in turn will be used to replace the fourdecades-old C–141, which is currently used by the 164th in my district. I would hope as you all think about your expenditures and 

where you allocate dollars at least be aware that the point has 

been made over and over again here on the committee about our 

Reserve units and the antiquated equipment that many of them 

are using. In light of all the other things that are mentioned here, 

the new spending and tax cuts and so forth, I would hope that you 

all would bear that in mind as you ask for monies in the supplemental and even as you look at the budget you presented to this 

Congress and make changes there. 

But I would love to hear your response to this perception which 

you and the doctor emphatically deny. But I can—as much respect 

as I have for the administration and I have for you, Dr. Wolfowitz, 

I am not going to accept you telling me what people in my district 

36

are saying. You can tell me that their impression is wrong. But to 

suggest that I am wrong in what I hear——

Mr. WOLFOWITZ. I didn’t mean to imply that for a minute. I am 

sorry. No, no. I understand where they might have gotten that impression. But, no, I am happy to have a chance to correct it. 

Mr. FORD. Sure. 

Mr. WOLFOWITZ. There are two countries that get a lot of attention, Jordan and Turkey, that are hurting badly and are going to 

hurt worse if there is a conflict. And they need economic support. 

There is no question about that. It is not a matter of being bought 

and paid for. It is a matter of cushioning them from some of the 

effects. 

On the other hand, to name one small country that stood up 

early, Qatar, the small Persian Gulf emirate, is not only giving us 

enormous basing rights but they are paying a very large fraction 

of the cost of expanding those bases for American forces. 

The Gulf Cooperation Council countries who have been very careful because these are countries whose survival could be threatened 

if Saddam Hussein is around 2 or 3 years from now to punish them 

have stepped up and said if there is a conflict they will come to the 

defense of Kuwait. They said that a little while ago. It is a hugely 

importantly step. 

Mr. FORD. We couldn’t convince Turkey that they had the same 

interest as Qatar? 

I know. Yes, sir, Mr. Chairman. I thank you. 

Mr. SHAYS. Yes, sir. 

Mr. WOLFOWITZ. There are some 40-plus countries that have offered us basing rights or overflight rights or troops and——

Mr. SHAYS. Maybe someone from our side of the aisle will give 

you a chance to answer this question. Why don’t we do that, because this is an important question. 

Right now, it is Mr. Hensarling, it is Mr. Emanuel and Ms. 

Brown-Waite. And, Mr. Hensarling, maybe you could give him 

some opportunity to answer that question as well, if that is possible. 

Mr. HENSARLING. Mr. Secretary, continue on. 

Mr. SHAYS. Is that alright, sir? 

Mr. HENSARLING. Yes. 

Mr. WOLFOWITZ. Thank you. 

There are some 40-plus countries that have stepped up to the 

plate here. 

Most recently, I believe the Prime Minister of Latvia, who came 

out openly in our support, got a lot of attention a few weeks ago 

when first some eight heads of NATO governments and then joined 

later by 10 candidate countries came out openly in opposition to 

the French and German position. President Chirac of France told 

them they ought to shut up and behave themselves like good East 

Europeans, and that produced a wonderful reaction from those people. They are doing it because they believe in it. Believe me, we 

aren’t offering them anything. 

If we want to talk about who is bought and paid for, it would be 

worth looking at who has big financial commercial interests in Saddam Hussein’s regime, who are the big importers, who are the big 

oil developers. 

37

I get so tired of hearing chants of ‘‘no war for oil.’’ if we have to 

go to war—and I still hope we don’t have to go to war—this will 

not be a war for oil. If we wanted Iraq’s oil we could have had it 

years ago by dropping all the sanctions on Iraq. It is because we 

are concerned about a threat to the United States, and if we go to 

war it will be to eliminate that threat, and in the process we will 

be liberating Iraqi people. 

It is not accidental that, as she was quoted in the newspaper the 

other day, Angela Merkle, who is a leading figure in the German 

opposition who herself lived in East Germany for many years, is a 

physicist, said to my secretary, well, I am from the ‘‘old’’ Europe, 

but I have some of the ‘‘new’’ Europe in me. She meant by that the 

new Europe, that is, those people who were newly liberated from 

Communist tyranny and understood the importance of liberation. 

It is kind of ironic that you have all of these countries—Latvia, 

Estonia, Poland, Bulgaria, Romania—who know what it is like to 

be under a dictator and because of that are stepping up to support 

the liberation of another people; and it is frankly disappointing 

that France and Germany, who had that experience themselves, 

seem to have other ideas in mind. 

Mr. HENSARLING. Mr. Secretary, if I could go back and refocus 

on some dollars and cents here. I certainly personally believe there 

is nothing more important our Federal government does than protect us and our liberties from all enemies, foreign and domestic. 

But that doesn’t mean that any government entity can’t be more 

efficient with the use of dollars. In your own testimony you speak 

about the need to be more efficient in business practices. You alluded to it in some earlier questioning, but I want to make sure 

that it is very clear to myself and the rest of the committee that, 

in trying to run a more efficient Pentagon, what is it that you 

would need from this particular Congress that you do not have now 

that would allow you to run a more efficient and more productive 

operation? 

Mr. WOLFOWITZ. Let me sketch it in general terms. As we have 

been up around consulting, people say the devil is in the details. 

Show me the details. We don’t have the details until we have done 

this kind of consultation and get some idea from you and your colleagues what is feasible, some idea from the President of what he 

is willing to try to get. 

But there are three principal areas. One is personnel, more flexibility in hiring, more flexibility to reward people for performance, 

more flexibility to manage some of the slightly odd restrictions we 

have on—we would like to be able to keep good performers in the 

senior ranks in the military in their positions longer. We think 

they go—circulate through too fast. 

Then, on the other hand, we think there are instances where 

people are forced to hang on for an unnecessary year or two when 

they ought to retire because of rules. We would like that kind of 

flexibility. 

Secondly, flexibility in the procurement system from a whole 

range of issues. Some of them are enormously controversial and 

may not be doable. But we are looking for ways to deal with them. 

Some of them are self-inflicted by us but in many cases now reinforced by law. 

38

The third area is some flexibility, not very much, in the application of environmental laws or, more importantly, it is not their current application but to protect us from what we think would be excessive extension of things like considering every use of an artillery 

piece on a military base as an act of waste dumping, which is a 

potential threat to our ability to train. 

Those are the three main areas. 

Mr. HENSARLING. Thank you, Mr. Secretary. 

Mr. SHAYS. Thank you, Mr. Secretary, for really trying to cooperate on these 5 minutes here. You have been awesome. 

Going to Mr. Emanuel, Mr. Brown-Waite—excuse me, Ms. 

Brown-Waite and Mr. Scott. 

Mr. EMANUEL. One statement about Turkey and then another 

question about your comments about Saudi Arabia, our troops 

based there as an impetus to al Qaeda. 

You know, in the very week that we negotiated with Turkey, the 

administration also told the Governors there wasn’t any more 

money for education and health care. I appreciate this is aid being 

handled out of the State Department, not so much your area, but 

just so the facts are given, that I contacted CRS. They expect us 

to give about $24 billion in loans and grants, that you—we pay $11 

billion in Pell grants now—so that would be, basically, double the 

size of Pell grants for what we are giving Turkey, as well as you 

could probably provide basic health care to all the working people 

who have no health insurance for over a 5-year period for $24 billion. 

So I would recommend to the Governors that they may want to 

hire the person that has been negotiating for Turkey on their behalf, because he has done a very good job. 

I understand what my colleague hears from Memphis, because 

that is what I am hearing at home. Whether it is true or not true, 

the perception is our negotiators haven’t done a very good job as 

it relates to dealing with Turkey. I do think there is a serious matter as it relates to making sure that we have a, if we have a war, 

a second front here. 

I will tell you, though, for folks that are dealing with issues of 

education, health care, homeland security, what we are doing for 

Turkey vis-a-vis what we are telling our folks back home that we 

have, the two stories don’t exactly gibe, especially in the week in 

which you are negotiating with Turkey and maybe improving the 

offer, telling our Governors who are dealing with police, firefighters, teachers and health care providers, we don’t have the resources—just so you know what we are hearing and you feel the 

same sense of what we are hearing from the people who pay the 

bill. 

And your comments as it relates to troops in Saudi Arabia post 

the gulf war, that that was the impetus behind al Qaeda, which is 

true, my big worry about going into this effort is that if we don’t 

broaden the coalition beyond what is perceived as an AmericanBritish-led effort, perceived American-British-led effort, and we 

have 100,000-plus U.S. troops practicing basically community policing in Baghdad for over a year, that the very thing we are trying 

to snuff out, which is terrorism as well as change the region, is exactly the opposite effect that we will have. 

39

My concern is that if we go in there and occupy, given the size 

of the force of the American—the size of the force without other allies, without the perception of a broader coalition, that the very terrorism we are trying to hit will end up being an impetus for it, just 

like the U.S. troops in Saudi Arabia were for al Qaeda; and, B, the 

type of change we are trying to bring to the region, which I think 

is true and will have that impact, it will be set back because it 

doesn’t seem like the coalition is broader and deeper, as you just 

mentioned the 40 countries. 

Mr. WOLFOWITZ. Let me be quick. 

First—on the first point, I hope our listeners in Turkey picked 

up your comments, because the President told them that what we 

have put on the table is all we can do. We have looked at some 

ways to make it more usable for the Turks, but that—they think 

their negotiators didn’t do very well. 

I have to tell you that that is what the big controversy is in their 

parliament. But we are not trying to bargain. We are trying to 

cover legitimate costs. 

On this other subject, you use the phrase ‘‘American-British-led 

coalition.’’ Well, it was an American-British-led coalition in the first 

gulf war. It was an American-British-led coalition in the Kosovo 

war. There have to be some leaders. We are not even in the sole 

position as leader. Tony Blair has been heroic. 

But I said there are more than 40 countries that are going to 

participate. Many of them are Arab countries who do not want to 

be remembered by a Saddam who survives as somebody who spoke 

out against Saddam. Therefore, until they are absolutely sure 

where we are going, they are going to be cautious. 

But I will tell you, in the aftermath, I think if you want a 

glimpse of what it is going to be like, I would urge you to do what 

I did a week ago Sunday and go to Dearborn, MI, where the largest 

Iraqi-American community in this country lives, some 400,000 I 

was told. There were 300 to 400 people that turned up on a snowy 

Sunday on 4 days’ notice to talk to me. 

The two things that were overwhelming was, first, one personal 

tragedy after another. And later they said, it is worse than we 

would say in public because we are afraid; we are still afraid here 

living in the United States that he may assassinate us. So, many 

people didn’t want to talk; and nobody wanted to take talk openly 

about the widespread use of rape as an instrument of terror and 

yet was overpowering. 

The second thing, and I—these are almost all people who have 

families back in Baghdad. One of them even told of getting a call 

from a friend of his who is a son of a minister in the Iraqi Government. They are just unanimous in their hope that we will help to 

liberate Iraq. These are Arabs, 23 million of the most educated people in the Arab world, who are going to welcome us as liberators. 

When that message gets out the whole Arab world, it is going to 

be powerful counter to Osama bin Laden. 

The notion that we are going to earn more enemies by going in 

and getting rid of what every Arab knows is one of the worst tyrants—and they have many governing them—is just nonsense. To 

the contrary, we will have millions of people witnessing on our behalf; and we will finally be able to stop bombing Iraq every day, 

40

which we have been doing for more or less the last 12 years. It will 

be a great step forward. 

Mr. EMANUEL. Thank you. 

Mr. SHAYS. Thank the gentleman. 

Ms. Brown-Waite and then Mr. Scott and then Mr. McCotter. 

Ms. BROWN-WAITE. Thank you very much. 

Thank you, Mr. Deputy Secretary, for being here today. 

As you know, in Florida, we face many hurricanes; and, historically, the National Guard has been there to help. We are now down 

approximately 5,000 National Guardsmen and -women who have 

been transferred, some within our country, some going overseas. 

Tell me what backup plans you have should the National Guard actually be needed. 

My second question relates to the fact that I have National 

Guard units in my area, including a brand new helicopter unit at 

the Brooksville Airport. As the Department continues its intentions 

to transform the Guard and transform the entire Defense Department, tell me how the Guard is going to fit into this transformation. 

Also, are we going to have enough to—while we are sending the 

Guard overseas, are we going to have enough to help us with 

Homeland Security? 

Mr. WOLFOWITZ. Well, first of all, where the Guard fits in transformation is a crucial piece of it. I mean, we have depended so 

much on the Guard since September 11. We couldn’t have managed 

many of the things we do without them. Clearly, if we are going 

to transform the military, the Guard is part of doing that. I think 

there are many lessons that we are learning already about mobilization procedures, about what kinds of tours we can expect people 

to undertake, about trying to avoided problems that were mentioned earlier of people being in low-density, high-demand units 

and getting called up right away over again. 

Clearly, just because of where they are located and their relationship to State governments the Guard needs to be, I think, one of 

the absolutely critical elements in developing the military’s role in 

responding to attacks on the homeland; and that includes response 

to mass casualty attacks. It is, I guess, not an accident that Gen. 

Eberhart, who is the new commander of the new Northern Command, which is the first time we have had a commander for North 

America, has as his deputy a National Guard general. His links 

into the National Guard are absolutely critical. 

Something we have clearly got to look at is this assumption that 

if there is a war overseas the National Guard—we have been dual 

tasking the National Guard to an extraordinary extent, expecting 

them in wartime to do jobs overseas, in peacetime to be available 

for domestic emergencies. Frankly, before September 11, we didn’t 

think nearly enough about the possibility that these two things will 

happen at the same time, not by accident but because our enemies 

will attack us in both places at once. 

We are facing that, for example, with the Coast Guard. We have 

always depended on the Coast Guard to perform harbor protection 

duties when the Navy deploys in emergencies as they are doing 

now, and we have called up Coast Guard Reservists to fill that gap. 

It may be the right thing to do. The Coast Guard people tell me 

41

that it is very important even for homeland security to have that 

integration with the Navy where the Navy does the long-range protection and the Coast Guard does the close-in. 

But we have got to look at every one of those assumptions where 

we assume that everything is nice and stable at home if we go to 

war overseas. That is not true anymore. 

Let me try for the record to get you a specific answer on where 

Florida stands. I mean, every State has this problem that Guardsmen have been called up. And there is a lot of backup. I don’t know 

to what extent it is also available if there is an emergency. I know 

there are arrangements if there is an emergency in one State to 

provide it from another. 

Ms. BROWN-WAITE. We have been fortunate that we haven’t had 

massive hurricanes since 1992. But it is almost—as you know, it 

is very, very cyclical; and I have had many people just express a 

concern that our numbers on the National Guard have been diminished so. 

Thank you. If you would get that information, I would appreciate 

it. 

Mr. SHAYS. I am sorry. Are we all done? Yes. Thank you. 

We may—Mr. Secretary, you may be able to help us out, because 

we only have three people left. We have Mr. Scott, we have Mr. 

McCotter, and we have Mr. Davis, and I think we would cover everybody. Do you think could you stay like 3 or 4 minutes—oh, I am 

sorry. Mr. Baird. Well, let’s do the four, and then let’s see if you 

can just——

Mr. WOLFOWITZ. I will try to talk fast. 

Mr. SHAYS. I am sorry, Mr. Scott. I took up too much time. You 

have the floor. 

Mr. SCOTT. Was that out of my time? 

Mr. SHAYS. No, it is not on your time. Starting right now. Let’s 

go. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Mr. Wolfowitz, it is good is see you. 

Mr. Secretary, in 1941, President Roosevelt signed an executive 

order prohibiting discrimination in employment in defense contracts. That has been the law of the land for over 60 years. You 

don’t have a problem complying with that, do you? 

Mr. WOLFOWITZ. I sure hope we don’t. 

Mr. SCOTT. Thank you. 

The gentleman from Texas mentioned Impact Aid and concurrent 

receipts. I think you have responded to those. I just wanted to 

share the fact that I have the same concerns and hope we can deal 

with them effectively. 

Yesterday, it is my understanding that the CNO mentioned 375 

as an appropriate level of the number of ships in the Navy. How 

are we doing in closing the gap from where we are now? It is my 

understanding that we are actually decommissioning more than we 

are building. What are we going to do to close the gap? 

Mr. WOLFOWITZ. Well, the decommissioning is in fact to provide 

some money for building. I mean, it is a conscious decision that if 

we go down now we will have some money to go up faster in the 

future. 

42

The 375 number—I would like to see what the context was for 

that. If we ever get to that number, I think it was speculating in 

the context of some of the smaller ships the Navy is looking at for 

what they call the toro combat, close-in combat, where you would 

actually go to smaller ships in order to get higher numbers where 

numbers matter. I think we are still probably a couple of years 

from a decision on whether to buy those kinds of ships and what 

kinds they would be. 

The target, the number that we anticipate in fiscal year 2009 as 

a result of this program will be 305. We dip down to a low in 2006 

of 291. We are going down to 292 in 2004, as low as 291 in 2006 

and then coming back up to 305 in fiscal year 2009. 

Mr. SCOTT. Since we are anticipating the possibility of a war, is 

there any thing in the budget for maintenance of ships after they 

get back? 

Mr. WOLFOWITZ. That, frankly, is one of the costs that we are 

looking at in putting together what the cost of war would be. 

Again, it depends on how many of various kinds of things you send 

over. 

You know, my boss points out regularly that we sent—I don’t 

know, what was it—300,000 people to Desert Storm and all kinds 

of stuff, and we brought 90 percent of it back unused. Gen. Myers 

points out—I am, quite frankly, with Gen. Myers on this one—it 

was a lot better not to have to use it. It may be that sending too 

much sometimes is the key. 

We are trying to get it right. We are trying to make sure we have 

everything we need. We are also trying to make sure that we don’t 

have huge things that—bills that turn out to be unnecessary. But 

there will be some considerable wear and tear, I would say, in the 

single digit billions of dollars to fix things. 

Mr. SCOTT. And that will be requested. 

Mr. WOLFOWITZ. That would have to be part of any Iraq-related 

request, yes. 

Mr. SCOTT. Could you say something about the effect that the 

multi-year procurement is having in helping the shipyards build 

ships? 

Mr. WOLFOWITZ. Dov, do you want to comment on that? 

Mr. ZAKHEIM. Sure. As you know, there was an arrangement 

reached particularly with respect to building amphibious ships 

down in Mississippi and in Louisiana; and then Bath up in Maine 

was going to build the DDGs, the guided missile destroyers. 

Multiyear works well for everyone, simply because it allows the 

corporate planners to have a sense of the type of labor force they 

are going to have and what they need to have on their order books 

from subcontractors. It also allows the Navy to plan. It is an integral part of the plan that the Deputy Secretary just talked about 

that will start ramping us up above 300 ships in the outyears. 

Mr. SCOTT. That is also happening with the Virginia-class submarines. You are doing that with them, too. 

Mr. ZAKHEIM. It certainly is, sir. 

Mr. SCOTT. Thank you. 

Thank you, Mr. Chairman. 

Mr. SHAYS. Thank you. 

43

Mr. McCotter will have about 3 minutes, and then I am just 

going to ask—Mr. Davis and Mr. Barrett want to just make a comment to you before you leave, two wonderful members on the other 

side of the aisle. 

Mr. McCotter, you have 3 minutes. 

Thank you. Mr. McCotter, we have about 3 minutes. If Mr. Davis 

and Mr. Baird want to make a comment. Mr. McCotter, you have 

3 minutes. 

Mr. MCCOTTER. I will limit myself to a quick couple of observations of Dr. Wolfowitz. First, I represent Michigan, I border Dearborn, and I want to thank you for what you did by going down 

there and addressing the community. 

Mr. WOLFOWITZ. They are wonderful people. They are unbelievable. 

Mr. MCCOTTER. Your visit was very helpful. I would like to make 

sure that I reiterate that the Caldean community is especially concerned in post Iraq, that they are allowed to participate in the government to protect their rights and status as a minority. 

Mr. WOLFOWITZ. Can I say for the record, Congressman Moran 

isn’t here, I think it is very important that all communities in Iraq 

be protected, certainly including the Kurds who have suffered horribly over the years. 

Mr. MCCOTTER. I would also like to say that, just for the record, 

my distinction on the question of whether this is a new war with 

Iraq. I believe it is just because military hostilities were stopped, 

ceased in 1991, there was never a real resolution of this war, because Iraq did not disarm, did not show that they had disarmed. 

In short——

Mr. WOLFOWITZ. They did not comply with the conditions of the 

cease fire. 

Mr. MCCOTTER. Yes. I would also like to point out that it is not 

a new war, because it is a new theatre in the continuing war on 

terrorism that started in the wake of September 11. This is the arsenal of al Qaeda, and it will be defeated. But, as all Americans 

must realize, that it is not the end of the war on terrorism with 

the defeat of Iraq, it will be the continuation, sadly. It will be just 

a battle, much as Tara was a stepping stone to eventually being 

able to bomb Japan. 

I am heartened by the fact that everyone is questioning the perception of the coalition. I did not hear anyone say that the coalition 

was bought and paid for, just that they had heard the perception. 

Now, as a firm believer in the fact that perception is not reality 

and the truth will set us free, I trust that after your testimony, everyone will go back to their districts and change that perception so 

that the truth will get out there, and assuage the concerns of our 

shared constituents in this country. 

I would also like to point out on a less glib note, your statement 

about no on data mining to Mr. Putnam. This is a country that was 

founded on the concept of give me liberty or give me death. It is 

not a question of whether we want to infringe civil liberties in protecting ourselves, it is a question that we must not. 

Data mining may have its uses, but all technology is morally 

neutral. It is only as good as those people who utilize it. And I am 

very concerned about data mining, because I think it was Churchill 

44

who said, those who seek to trade liberty for security will receive 

neither. 

So I would just ask that we be very careful with that. I thank 

you for your time. 

Mr. WOLFOWITZ. Thank you. 

Mr. SHAYS. I just say that Mr. Davis and Mr. Baird have been 

here the whole time. And we also have our colleague, Mr. 

McCotter. If they could just make a comment to you, an observation. They have been here the whole time. It won’t be 5 minutes. 

Gentlemen, just real quick. 

Mr. DAVIS. Thank you, Mr. Chairman. I appreciate your indulgence, Mr. Secretary, in letting us make a couple of observations 

to you. Let me make two in just the time that I have. One thing 

that I think explains some of the passion that you saw on this side 

of the aisle about the administration’s indirection of the cost of the 

war is a contradiction that strikes me after being here yesterday 

and today. 

The Secretary of Health and Human Services testified in great 

detail about the amount of money that the administration wants 

for its Medicare program, about $450 billion over 10 years. But the 

administration says it doesn’t know the content of that plan. 

Now, today it is the administration’s position that after spending 

elaborate amounts of time planning and doing various scenarios for 

war with Iraq, and thinking about various contingencies that we 

don’t know the cost. So on one day we know the number, but don’t 

know the plan, today it is the opposite. I think that is what explains some of the passion over here. 

Mr. SHAYS. Mr. Baird, let me just have you make your comment 

too. 

Mr. BAIRD. Mr. Secretary, nonrelated Iraq things. First of all, I 

am very concerned about the transfer of U.S. high technology overseas in the sense of chip manufacturing plants. Current there is 

the one custom chip fab in the United States. Many custom chip 

fabs are being relocated in mainland China. That is an economic 

problem for us, but it is a defense problem for you. I would like to 

work with you to try to correct that. 

Secondly, I have got a number of small contractors, small businesses at the cutting edge of among other things, laser and display 

technologies who are really concerned that the Department of Defense procurement procedures advantage greatly the very large 

military suppliers to the disadvantage of small suppliers, who may 

actually be more cutting edge and more cost effective, and I would 

like to work with you on that as well as I think it is both a defense 

and an economic issue. And I appreciate the chance to work with 

you. 

Mr. SHAYS. I thank the gentleman. 

Mr. Kind. 

Mr. KIND. Thank you. Thank you, Mr. Chairman. Mr. Secretary, 

you have been very generous with your time, I will be brief. Personal observation. To the extent that you have any discussions or 

influence over this, many of our guard units right now are being 

called up, deployed on very short notice. You know, sometimes less 

than 48 hours. 

45

The troops are ready, they are well-trained, well-motivated, very 

impressive. The families, however, are going through a very difficult time. Anything you can do to try to give a little more notification so they can get their family affairs in order, I have been going 

to a lot of the farewell ceremonies. 

And then, finally, I think as we go forward in further hearings 

and testimony from the administration, we do need to be talking 

more about defense modernization, where we can realize some cost 

savings in the budget as far as the new generation of weapons systems that has to occur. 

Otherwise, in defining our country, we are also going to be bankrupting it at the same time. But thank you for your time. 

Mr. SHAYS. Mr. Secretary, let me just say you have been awesome. You have really tried to cooperate with the committee. You 

have spent wonderful time. I would be happy to have you make 

any closing comment you might want to make. But you have been 

a wonderful witness, and more importantly, you have been a terrific deputy secretary. 

Mr. WOLFOWITZ. I would just say quickly, I will compliment the 

questions. They were very good. I will tell Congressman Skelton, 

by the way, that you were nice but you were tough. I think that 

is probably what he wanted. 

If I can just say, very quickly, I share your concern about high 

tech. Let’s see what we can do. The problem is, the most problematic thing is to keep our competitive edge. 

Congressman Davis isn’t here, but I would just say a short answer is every time we go on a briefing on the war plan, it immediately goes down six different branches of what a scenario might 

look like. If we costed every single one of them, we would maybe 

give you a range between $10 billion and $100 billion, you would 

say that is useless and you would right. 

Finally, on the National Guard issue, the Guard and Reserve 

issue, we are very aware, painfully aware that the system has had 

some major bugs in it, frankly it is one of our cold war relics. It 

was designed to get 10 divisions in Europe in 10 days to meet a 

Soviet invasion. This is a more complex thing, and the result has 

been, we have given Guardsmen and Reservists too short a notice. 

The Secretary of Defense has spent several hours of his own time 

working on fixing it. We understand what a big problem it is. 

Thank you, Mr. Chairman. You have been a great chairman. I 

appreciate getting out of here on time. 

Mr. SHAYS. Thank you. We have another witness. And we are 

grateful to that witness. We have Mr. Steven Kosiak. 

And again, Mr. Secretary, thank you. Mr. Kosiak, if you would 

come up we will get you started. Mr. Kosiak, it is very good to have 

you. You are a very respected expert on defense issues, on strategic 

issues. And while we have a few members here, it will obviously 

be on the record. And you are speaking to more than just this room 

as well, I might add. Thank you for being here. Happy to hear your 

statement and then we will have some questions for you. 

[Prepared statement of Mr. Spratt:]

46

PREPARED STATEMENT OF HON. JOHN M. SPRATT, JR., A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF SOUTH CAROLINA

I would like to welcome you to our hearing today, Mr. Kosiak, and we thank you 

for your testimony. The Center for Strategic and Budgetary Assessments is known 

for the high quality of its work on defense budget issues and on defense strategy 

as well, and we look forward to hearing from you.

STATEMENT OF STEVEN M. KOSIAK, DIRECTOR OF BUDGET 

STUDIES, CENTER FOR STRATEGIC AND BUDGETARY ASSESSMENTS 

Mr. KOSIAK. Thank you very much for that very kind introduction. And I would like to tell the committee what an honor it is to 

be asked to testify here today, especially in the same hearing with 

Deputy Secretary of Defense Paul Wolfowitz and Dov Zakheim, two 

individuals for which I have a great deal of respect. 

I have submitted my remarks for the record, and with your permission, would like to summarize them now. I want to focus on 

three important topics related to defense planning, policy, and 

budgeting. The first issue is the current defense plan and the question of whether it is affordable and sustainable over the long term. 

The second question is whether the current defense plan adequately provides for the transformation of the U.S. military. And 

the third question isn’t so such a question, but the third topic I 

want to look at is the cost or potential cost of a war in Iraq, and 

the cost of post-war peacekeeping operations and other related 

costs. 

First, I want to look at the affordability and sustainability of the 

current defense plan. During the 2000 Presidential election campaign, then-candidate Bush suggested that the U.S. military should 

take a different more selective approach to modernization. Specifically, he said that the real goal should be to move beyond marginal 

improvements, to replace existing programs with new technologies 

and strategies. As he put it, to skip a generation of technology. 

That was an approach that the administration also reaffirmed in 

the 2001 Quadrennial Defense Review. However, in its most recent 

budget submission, it really backed away from that, and largely 

abandoned the notion of skipping a generation. 

With the exception of the Crusader artillery system which was 

canceled last year, the administration has basically decided to go 

ahead with all of the major modernization programs it inherited 

from the Clinton administration. 

This is a decision that has enormous implications for the Department of Defense, and enormous implications for the budgetary requirements for the Department of Defense. Under the President’s 

latest plan, funding for the Department would increase to about 

$430 billion by 2009. That is $430 billion in today’s dollars adjusting for inflation. That is a lot of money. That is 22 percent more 

than we spent on average during the cold war, and it is roughly 

equal, in fact, slightly above the level we spent in the 1980s, the 

decade of the Reagan buildup. 

But even those defense budgets would probably not be enough to 

pay for the administration’s long-term defense plan. A recent report 

by the Congressional Budget Office estimated that we would have 

to bring funding up to something like $500 billion a year to implement and execute the administration’s long-term defense plan. 

47

And that is not just bringing it up to $500 billion for the next 

several years, that is bringing it to $500 billion and keeping it at 

roughly that level over a period of decades. 

Achieving that kind of increase, an increase of that magnitude 

and sustaining it over a period of not several years, but over several decades would be really unprecedented historically. It is not 

just historical precedence that suggests that this would be very difficult to accomplish, it is also the existing fiscal environment that 

we face. 

Two years ago we had a projection by the Congressional Budget 

Office that we would see surpluses of some $5.6 trillion over the 

2000–11 period. In the last 2 years, that shrunk to a point now 

where over that same period CBO is now projecting a surplus of 

only $20 billion. So there has been a dramatic change in 2 years. 

It is likely that things will get even worse over the coming decade, because the CBO baseline doesn’t take a lot of important 

things into account. It doesn’t take into account calls for additional 

tax cuts, calls for more funding for defense, calls for more funding 

for homeland security, calls for more spending for prescription drug 

benefits, more spending for domestic programs like education, and 

perhaps most significantly, it only looks out to the end of this decade. 

Around the end of the decade we are going to see the beginning 

of the retirement of the baby boomer generation. This has enormous implications, as you all know, for spending on Social Security 

and Medicare, and it is likely to lead to substantially greater deficits in the years beyond this decade. 

So given that fiscal outlook, which I think is frankly pretty bleak, 

it is probably not wise to assume that we will be able to achieve 

and sustain budgets for the Department of $500 billion a year. It 

is not just achieving them, it is sustaining them over a period of 

decades. Fortunately, I think there is good reason to believe that 

the United States can meet its security requirements at lower 

budget levels than the administration’s plan, projects or would—or 

the Congressional budget office estimates would actually require. 

One important element in this strategy would be for the administration to re-embrace the notion of skipping a generation of military hardware to focus more on selective modernization. 

DOD is, in general, I think, the best equipped to make those 

kind of decisions, but I think one area where they clearly would 

have to make some harder choices than they have made to date, 

is in the area of tactical fighter modernization. 

We are still planning to build some 3,300 aircraft of three different types at a total cost that is likely to exceed $300 billion over 

the next several decades. I think certainly some of that modernization is necessary, but I think there is good reason to believe that 

we could maintain a very effective capability with a reduced number of new aircraft and perhaps even cancelling at least one of 

these three next generation fighters. 

Another critical element that could, over the long term, help the 

U.S. military live within lower, or at least not quite as high defense 

budget levels as are currently projected, would be the transformation of the U.S. military. 

48

Importantly for our discussion today, the ability to transform the 

military over time is likely to help DOD control costs and possibly 

even reduce costs, because by definition a transformed military, if 

it is successfully transformed, should be more cost effective than 

the military it is replacing. 

This notion of transformation, has been a central theme of this 

administration over the past couple of years. But I think there is 

some reason to question whether we are really headed in the right 

direction on transformation, whether we are really spending money 

to support an effective transformation strategy. 

Overall, R&D funding still appears to be very much still tilted 

toward traditional kinds of weapons systems. If you look at spending comparing unmanned aerial vehicles versus tactical fighter 

modernization, the 2004 budget request projects about $870 million 

for UAVs and $5.5 billion for the three manned fighter programs. 

Now, no one would suggest that we should transform the U.S. 

military overnight, or that these ratios should be reversed. But I 

think they still suggest that we are still tilted too far toward traditional systems and not enough toward innovative new kinds of systems. 

The allocation of funding among different R&D budget activities 

also raises questions about the priority given to transformation in 

the 2004 budget request. In particular, the current plan seems to 

underfund science and technology programs. S&T programs are the 

earliest stages of R&D development, and it is widely believed that 

the discovery of new technologies is most apt to happen at that 

stage, and especially the kinds of technology that could really lead 

to dramatic improvements in military capabilities. As a result, 

most advocates of transformation believe it is important to really 

focus a lot of energy on S&T programs. 

But, under the administration’s plan, funding for S&T programs 

would only be increased by about 10 percent in real terms. That 

is adjusting for inflation, there would only be about a 10-percent 

increase between 2001 and 2004. 

And in fact, in this year’s budget, the 2004 budget request would 

represent a slight 6-percent decline from 2003. This very modest 

increase in S&T funding is in stark contrast to funding elsewhere 

in the R&D budget. 

The overall R&D budget is projected under the administration’s 

plan to increase by 42 percent in real terms, between 2001 and 

2004. And the ballistic missile programs are projected to increase—

funding for ballistic missile defense programs is expected to increase by 76 percent over this same period. So this seems to indicate to me a misplaced or a lack of emphasis on S&T programs, 

which, again, I think are a very important facet of developing 

transformational capabilities. 

The last area of R&D I would like to look at is the full scale development phase. Essentially, the administration argues that the 

programs in this phase are transformational oriented, for the most 

part. Some of them I think are, but I think there are some questionable programs in there as well. 

This is an important area, because it is, by far and away, the 

most expensive area of R&D. Perhaps the most questionable programs being funded in this area again are the administration’s—

49

are the three tactical fighter modernization programs. This focus 

on relatively short-range systems seems at odds with recent experience we have had in Operation Enduring Freedom in Afghanistan, 

Desert Fox in Iraq back in 1998, and prospectively the experience 

we may have in Iraq in a few weeks if we do decide to go to war. 

A better approach might be to shift some of the funding allocated 

to full scale development for these kind of traditional short-range 

systems and put more money into developing long range weapons 

systems, and in particular, putting more money at the S&T level. 

The next area I want to talk about—the next and last area—is 

the potential cost of a war in Iraq and its post-war occupation. We 

have done a study at the Center for Strategic and Budgetary Assessments. And what we tried to do is look particularly as costs related to direct military costs of a war and peacekeeping operations. 

So that is what I want to talk about mainly. 

We also did look a little bit, try to get some range of estimates 

for costs, nonmilitary costs for reconstruction and other activities, 

I will talk briefly about those as well. 

One of the important fundings which I think will come to no surprise to the members of this committee, is that there is an enormous amount of uncertainty inherent in trying to make this kind 

of estimate. There is a great amount of uncertainty about the number of troops that will be involved in the conflict, the duration of 

the conflict, the level of hostilities we will meet, the level of allied 

participation. 

And when we have that level of uncertainty about what the fundamentals of the conflict or the peacekeeping are going to look like, 

by definition you are going to have a wide range of estimates on 

what they could cost. Notwithstanding the limitations of doing this 

kind of analysis, we did make a stab at it. 

We looked at three different scenarios, the cheapest and smallest 

scenario was that we have 175,000 troops in the region and the 

war would last a month. The more costly, high-end option was that 

it would require a total of 350,000 troops and the war would last 

6 months. 

Given that range of fundamentals, we estimated that the cost of 

a conflict would range from something like $20 billion to as much 

as $85 billion. 

Occupation costs we found could, and in fact, are likely to exceed 

the cost of the war itself. Again, you have to make some guesstimate about the size of the peacekeeping contingent. We looked at 

again a range of scenarios. Looking at an average of 20,0000 U.S. 

peacekeepers there for a period of 5 years, to a high average of 

90,000 peacekeepers kept there for 5 years. 

Those two scenarios generated cost estimates ranging from about 

$25 billion to $105 billion. Again, that is over a 5-year period. Another important point, I think it is not strictly budgetary, but it is 

important, is that even a relatively small occupation force could 

have a significant impact on the readiness of the U.S. military to 

fight wars elsewhere and to carry out other important missions. 

In Bosnia and Kosovo, we have, in the past couple of years, had 

only about 10,000 peacekeepers in the two countries combined. 

That obviously is a much, much smaller presence than we are likely to see, at least over the first year and possibly several years in 

50

Iraq. And the need to maintain this, as I say, could hurt readiness 

levels, it could also harm the ability of the U.S. military to attract 

and retain quality personnel. 

On the other hand, if we are able to fight a war there and win 

it quickly, we may, in some sense, be able to put up with more reduced readiness levels because we will have defeated one of the 

powers in the region that the U.S. has been most concerned about. 

Although the focus of our study was on direct military costs, as 

I noted earlier, we also took a brief look at trying to estimate some 

of the various nonmilitary costs associated with a war and its aftermath. I will run through these real quickly. These costs include 

something like $6 [billion] to $10 billion potentially for aid to allies 

in the region; $1 [billion] to $10 billion for humanitarian assistance; $5 [billion] to $12 billion for governance activities, like paying 

their police force and civil service for some period of time; and $10 

[billion] to $105 billion for reconstruction and recovery activities. 

In the end, the degree to which one can usefully conduct sort of 

a cost benefit analysis to try to determine the wisdom of launching 

an attack against Iraq is limited, I think. And one reason for that 

is there is a substantial divergence between reasonable low-end estimates of the cost and reasonable high end estimates of the cost. 

There is also the possibility that if an effective and durable peaceful solution to the current crisis cannot be found, that we might ultimately have to fight a war later that could be actually more costly, both in terms of direct military costs and nonmilitary costs. 

Nevertheless, I think speculating about the cost of a potential 

war with Iraq and its aftermath is a useful exercise. Ironically, I 

think that one of the most useful things that comes out of this kind 

of analysis is it just really graphically illustrates just how uncertain going to war is. 

Now, the fact that there is a great amount of uncertainty doesn’t 

mean that we shouldn’t go to war. We operate in an environment 

of imperfect information all of the time, and certainly policymakers 

trying to decide whether to go to war or not, operate generally, operate in that kind of environment. 

But I do think the existence of that level of uncertainty does provide some insights on some things that we may or may not want 

to do. And one thing in particular I think is that one might want 

to be more cautious about signing on to additional tax cuts or 

spending increase than one would otherwise would be when there 

is that level of uncertainty. 

It might make more sense to wait until—if we do have a war—

to wait until the war is over and we have a better idea for what 

the costs of the war itself were, and also what the costs of peacekeeping operations might be and reconstruction activities might be. 

A second insight is simply the importance of support, of gaining 

support from friends and allies. The direct military cost of this operation, unlike the 1991 gulf war, are very likely to be borne by the 

United States alone, and to the extent that we have peacekeeping 

troops there, we are likely to incur those costs as well. On the 

other hand, if we could get more allied participation to help with 

peacekeeping after a conflict, that would obviously reduce the cost, 

and support from friends and allies might be most important in 

51

trying to cover some of the reconstruction and humanitarian assistance and other nonmilitary costs. 

With that, I would like to end my presentation. And I would be 

happy to take any questions. 

[The prepared statement of Mr. Kosiak follows:]

PREPARED STATEMENT OF STEVEN KOSIAK, DIRECTOR OF BUDGET STUDIES, CENTER

FOR STRATEGIC AND BUDGETARY ASSESSMENTS

Mr. Chairman and members of the committee, it is a great honor to have the opportunity to appear before you today to discuss the administration’s fiscal year 2004 

defense budget request and related issues. 

Today we face a remarkable range of challenges to our national security. There 

is the terrorist threat demonstrated so cruelly and tragically on September 11, 2001, 

the threat posed by the proliferation of weapons of mass destruction (WMD), and 

the imminent prospect of a war with Iraq. Figuring out how to effectively meet and 

manage these challenges while also meeting other demands on our national resources, such as preparing for the retirement of the baby boomer generation toward 

the end of this decade, is a complex and difficult task. But it is a task that falls 

very much within the purview of this committee. 

It is my hope that I might be able to help you, in some small way, with this task 

through my testimony today. I would like to focus on three important topics related 

to defense policies, programs and spending. First, the question of whether or not the 

administration’s latest defense plan puts the Department of Defense (DOD) and the 

services on a path that is likely to prove affordable and sustainable over the long 

term. Second, whether the administration’s defense plan adequately provides for the 

transformation of the U.S. military. Third, I want to spend a few minutes talking 

about the cost of a potential war with Iraq, as well as the costs associated with occupying Iraq for some period of time after a war. 

AFFORDABILITY AND SUSTAINABILITY

During the 2000 presidential campaign, then-candidate Bush suggested that the 

U.S. military should modernize its military ‘‘selectively,’’ but that the real goal 

should be to ‘‘move beyond marginal improvements—to replace existing programs 

with new technologies and strategies: to skip a generation of technology.’’ These 

goals were essentially reaffirmed in the 2001 Quadrennial Defense Review (QDR). 

After conducting a series of program reviews, however, the administration seems to 

have decided to largely abandon this approach. With the exception of the Crusader 

artillery system, which was canceled last year, the administration has decided to 

move ahead with virtually all of the major weapons platforms included in the plans 

it inherited from the Clinton administration. 

This decision has enormous implications for United States’ defense spending. Buying all of these new weapons systems in the quantities called for in the services’ 

plans, while simultaneously maintaining the current force structure and high readiness levels, will require dramatically increasing funding for defense over not just 

the next few years, but the coming decade and beyond. 

The administration’s fiscal year fiscal year 2004 request would bring the defense 

budget to its highest level since the early 1990s. The proposed budget would be 

about 13-percent higher than the average cold war budget in real (inflation-adjusted) terms.1 In addition, under the administration’s long-term plan, by fiscal year 2009 DOD’s budget would reach some $430 billion (fiscal year 2004 dollars). This 

would be about 22 percent above average cold war levels and roughly equal to the 

levels sustained during the 1980s, the decade of the Reagan buildup. But even defense budgets of this magnitude are unlikely to prove sufficient to pay for DOD’s 

existing long-term plans. 

A recent report by the Congressional Budget Office (CBO) concluded that—assuming historical rates of cost growth in operations and support (O&S) activities and 

modernization programs—executing existing plans could require substantially higher DOD funding levels, perhaps as much as an additional $60 billion a year.2 This 

would bring defense budgets up to nearly $500 billion (fiscal year 2004 dollars) annually. Furthermore, this level of spending would need to be sustained through 2020 

and beyond. Such a large and sustained boost in spending on defense would be truly 

unprecedented for the United States. 

Moreover, it is not just historical precedent that suggests that achieving and sustaining these budget levels would be difficult. The long-term Federal budget picture 

has dramatically worsened over the past 2 years. Two years ago, CBO projected a 

10-year surplus of about $5.6 trillion over the fiscal year 2002–11 period. By conVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6621 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
52

trast, CBO’s baseline estimate now projects large deficits for the next several years 

and a net surplus over the entire fiscal year 2002–11 period of only about $20 billion. The dramatic change in the government’s fiscal outlook has resulted from the 

enactment of large tax cuts, as well as a weak economy and other factors. Unfortunately, it is likely that the outlook will deteriorate still further in coming years. The 

administration has proposed further large tax cuts at the same time it is proposing 

a large increase in defense spending. In addition, there is strong bipartisan support 

for adding a Medicare prescription drug benefit, and increasing spending on homeland security, as well popular domestic programs, such as education. Taken together, this mix is likely to lead to sizable deficits for the remainder of this decade. 

And at the end of this decade, we will begin to see the retirement of the ‘‘baby boomer’’ generation, with the enormous implications that has for spending on Social Security and Medicare, and for a worsening of the deficit picture in the years beyond 

this decade. 

With this fiscal outlook, is it really reasonable and wise to assume that DOD will 

be able to achieve and sustain budget levels approaching $500 billion a year? Probably not. At best making such an assumption amounts to a very risky approach to 

defense planning. It is risky because, if those funding levels do not materialize or 

prove unsustainable, DOD will have wasted tens of billions of dollars developing 

new weapons systems it cannot ultimately afford to put into production, or which 

it can produce only at very low and inefficient rates. 

Fortunately, there is good reason to believe that United States’ security requirements could be met at lower levels of defense spending than are now being proposed 

by the administration, or would be required to execute the services’ existing plans. 

One important element in this alternative strategy would be for the administration 

to re-embrace the concept of skipping a generation of some weapons systems and 

to adopt a more selective approach to modernization. 

DOD and the services are in the best position to make the kinds of hard choices 

that would be required to implement this approach. But one step in particular 

would almost certainly be necessary: the services’ plans for tactical fighter modernization would have to be significantly scaled back. These plans have been cut 

somewhat over the past few years, but they still remain enormously ambitious and 

expensive. Altogether, the Air Force, Navy and Marine Corps plan to buy some 

3,300 new F/A–22 fighters, F/A–18E/F fighters and Joint Strike Fighters at a cost 

that is likely to exceed $300 billion over the next couple decades. Given the level 

of superiority the United States currently enjoys with its existing air forces, the impressive capabilities of new, and far cheaper, current-generation systems like the F–

16 block 60, and the promise of new kinds of systems such as unmanned combat 

air vehicles (UCAVs), it seems clear that the planned buy of at least one of these 

new, next-generation fighters could be substantially scaled back, or possibly even 

cancelled, without significantly reducing the effectiveness of the U.S. military. 

TRANSFORMATION

Another critical element that could, over the long-term, help the U.S. military live 

within more modest spending levels is the transformation of the U.S. military. The 

need to transform the U.S. military is driven by the notion that advances in technology—especially information technology—and changes in organization and operational concepts could dramatically alter the way wars are fought in the future. This 

revolution in military affairs (RMA) creates both opportunities and challenges for 

the U.S. military. However, transforming the U.S. military is, over time, likely to 

help DOD control or even reduce costs because, by definition, successfully transformed forces should prove more cost-effective than the forces and systems they replace. 

A central theme of the administration’s fiscal year 2004 defense budget request 

is that it would effectively support efforts to transform the U.S. military. According 

to the administration, the proposed budget includes $23 billion in fiscal year 2004 

and $239 billion over the fiscal year 2004–09 period for military transformation. 

Until the DOD provides greater detail concerning which programs are included in 

this estimate, it is difficult to evaluate the reasonableness of this claim. However, 

an analysis of DOD’s fiscal year 2004 request for defense research and development 

(R&D) suggests that—notwithstanding administration assertions to the contrary—

efforts to transform the U.S. military may not be receiving sufficient priority in 

DOD’s plans. 

Although the fiscal year 2004 budget request does contain R&D funding for several programs widely believed to be important for transformation (such as the conversion of four Trident ballistic missile submarines to carry Tomahawk cruise missiles), overall, defense R&D funding still appears to be very much focused on tradiVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6621 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
53

tional kinds of weapons programs. For example, while the fiscal year 2004 request 

includes $870 million for the development of unmanned aerial vehicles (UAVs), it 

includes $5.5 billion for continued development of the services’ three short-range 

fighter programs. No one believes that the U.S. military can or should be transformed overnight, but the magnitude of the tilt in this budget toward traditional 

systems may be inconsistent with an effective transformation strategy. The allocation of funding among different R&D budget activities also raises questions about 

the priority given to transformation in the fiscal year 2004 budget request. 

The Science and Technology (S&T) budget activity includes programs in the three 

earliest phases of R&D. The discovery and development of new technologies promising major leaps in military capability are most likely to be made in these early 

phases of R&D. As a result, many advocates of military transformation believe that 

S&T programs should be given a high priority. Under the administration’s plan, at 

$10.2 billion, funding for S&T programs would be higher in fiscal year 2004 than 

it was in fiscal year 2001. But the level of growth provided is extremely modest compared to the increases provided for the overall R&D budget. Under the new plan, 

S&T funding would be increased by only some $1.3 billion, or 10 percent, between 

fiscal year 2001 and fiscal year 2004. Moreover, the administration’s new plan actually calls for spending 6 percent less on DOD S&T programs in fiscal year 2004 than 

in fiscal year 2003. By comparison, the overall defense R&D budget is projected to 

grow by some 8 percent in fiscal year 2004, and by a total of 42 percent between 

fiscal year 2001 and fiscal year 2004. The level of increase requested for S&T programs also falls far below that projected for specific programs, such as ballistic missile defense (BMD) activities and fighter development. 

The Advanced Component Development and Prototypes budget activity represents 

the middle phase of the R&D process. Compared to S&T programs, which focus primarily on technology development, these efforts place greater emphasis on the development of specific weapon systems and testing under realistic operational conditions. Thus, the potential for major breakthroughs is less, but there is a greater potential for nearer-term payoff. As such, the demonstration and validation phase of 

the R&D process might also be considered important for transformation. Under the 

administration’s plan, funding in this category would grow by $5.1 billion, from $8.1 

billion in fiscal year 2001 to $13.2 billion in fiscal year 2004, or 57 percent. However, this projected increase is almost entirely due to the expansion of BMD programs. Exclusive of BMD programs, funding for advanced component development 

and prototype programs would grow by only some $773 million, or 11 percent, over 

this period. 

The final phase of the R&D process I would like to discuss today is the System 

Development and Demonstration (SDD) budget activity. This is the last phase of 

R&D prior to production, as well as the most costly phase for most programs. Under 

the administration’s plan, SDD funding would increase more than any other category. Between fiscal year 2001 and fiscal year 2004, SDD funding would grow by 

about $7.5 billion, or 81 percent. Altogether, SDD programs account for $15.9 billion 

of the fiscal year 2004 request. The dramatic growth in SDD funding projected in 

DOD’s latest plan essentially reflects the administration’s decision—noted earlier—

to proceed with virtually all of the new weapons systems it inherited from the Clinton administration and to forego the ‘‘skip-a-generation’’ strategy it had earlier embraced. Among the long-planned, next-generation programs included in the administration’s plans are the F–35 JSF, the Comanche helicopter, and the DD(X) destroyer. Much of the funding growth projected for SDD funding is due to the JSF 

program in particular. The decision to move ahead with this short-range fighter will 

cause SDD funding associated with fighter modernization programs to increase by 

$3.6 billion between fiscal year 2001 and fiscal year 2004. 

The administration and the services claim that most of the programs undergoing 

SDD are transformational systems, or at least consistent with a sound transformation strategy. If so, this boost in SDD funding may be appropriate. But at least 

some of the weapons programs being pushed into SDD appear ill-suited for the 

emerging security environment. Perhaps most questionable is the administration’s 

decision to continue to move ahead with all three planned tactical fighter programs. 

This focus on relatively short-range tactical fighters seems at odds with recent experience in Operation Enduring Freedom (Afghanistan, 2001–03), Operation Desert 

Fox (Iraq, 1998) and elsewhere which suggests that, in the future, the U.S. military 

may often have to operate in wartime without access to forward bases. Arguably, 

a better approach would be to shift some of the funding allocated to SDD programs 

to earlier phases of the R&D process, and to focus more on the development longrange weapon systems. 

Another problem is that the administration’s decision to move ahead with so 

many costly traditional programs today might make it impossible to increase fundVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
54

ing for more transformational kinds of systems several years down the road, when 

their feasibility and potential is better proven and they are ready to be moved beyond the early stages of R&D. This is because the level of funding absorbed by traditional weapon systems entering SDD today will grow significantly over the next 

5 years or more, as they move further through the SDD process and into production—potentially crowding out promising, emerging transformation programs. 

Determining the appropriate level of funding for defense R&D is an important 

and challenging task. But even more critical than the question of how much the 

United States should spend on defense R&D is the question of how defense R&D 

dollars should be spent. This is especially true today because of the widespread belief that we are in the midst of an RMA. However, while there is broad support for 

the notion that the U.S. military needs to be transformed, there is substantial disagreement over specifically what transformation means. 

In general, if one believes that the greatest threats to United States’ security are 

relatively near-term challenges, and that the major weapons programs already 

under development by the services are well suited to counter those challenges, or 

one believes that the threat of ballistic missile attacks is the preeminent military 

challenge facing the United States, one may be well satisfied with the administration’s new R&D budget request and its approach toward transformation. As noted 

above, it provides a large increase in SDD funding, as well as an enormous increase 

for BMD programs over the fiscal year 2001–04 period. 

On the other hand, if one believes that the greatest threats to United States’ security are likely to emerge over the longer term, and that many of the major weapons 

programs included in the services’ existing plans will likely prove ill-equipped to 

counter these challenges, or even many of the challenges that exist today, one may 

find the administration’s plan more troubling. As mentioned earlier, the most significant breakthroughs, with the greatest long-term payoff, are likely to come from 

the earliest phases of R&D. But the new defense plan provides only a very modest 

increase in funding for S&T programs over the fiscal year 2001–04 period, and 

would actually reduce funding for S&T activities between fiscal year 2003 and fiscal 

year 2004. Moreover, the effect of buying-in today to the many weapons programs 

in the services’ existing plans may be to crowd out purchases of more transformation-oriented weapons programs later in this decade. 

POTENTIAL COST OF A WAR WITH IRAQ AND ITS POST-WAR OCCUPATION

The last topic I would like to discuss is the potential cost of a war with Iraq and 

its post-war occupation. The Bush administration has made clear that it expects to 

soon begin military operations against Iraq, very possibly within the next several 

weeks. One of the factors that should be considered before a decision is made to initiate a war with Iraq is the likely financial and economic costs of such a war, as 

well as the costs of any post-war occupation, humanitarian assistance and reconstruction activities. In deciding whether to begin this war, it may be appropriate to 

give greater weight to political, strategic and humanitarian interests than to the 

likely financial and economic costs and consequences of the war, but those costs 

should at least be considered. 

I would like to share with you some of findings of a recent CSBA study that attempted to estimate a subset of the potential costs of a war and its aftermath. Specifically, our study focused on the direct military costs to the United States of a war 

with Iraq and the post-war occupation of the country. Although not the focus of our 

study, I will also briefly note some of the non-military costs that might be incurred 

in the aftermath of a war. Among other things our study concluded the following: 

• Given the great amount of uncertainty surrounding the size of the U.S. force 

that will be required, the level of resistance that will be offered, the duration of the 

conflict, the level of allied participation, and other factors, it is impossible to provide 

more than a very rough estimate of even the direct military costs of a war with Iraq 

and its post-war occupation. 

• Based on publicly available information, a reasonable estimate of the number 

of U.S. troops that might ultimately be deployed to the Gulf region would be 175,000 

to 350,000. Assuming the war were to last from one to 6 months, this suggests that 

the direct military costs of the war could range from as little as $18 billion to as 

much as $85 billion, roughly the cost of the 1991 gulf war. 

• Occupation costs could far exceed the direct military costs of the war itself. A 

reasonable estimate of the average number of U.S. troops that would be required 

for occupation and peacekeeping duties after a war might be 20,000 to 90,000 over 

the next 5 years. This would equate to 5-year costs of roughly $25 [billion]–$105 billion. 

55

• Even a relatively small occupation force could greatly exceed the size of past 

U.S. deployments to peacekeeping missions (e.g., in Bosnia and Kosovo, where the 

U.S. military has had an average of about 10,000 troops stationed over the past few 

years). The need to maintain this presence over a period of years could impair the 

ability of the U.S. military to recruit and retain quality personnel, and to carry out 

some other important military missions. On the other hand, the fact that the U.S. 

military would no longer have to plan and prepare for a possible future war with 

Iraq might partially offset the risks associated with lower readiness levels. 

• Although the focus of our study was on direct military costs, it is important to 

understand that those costs could be substantially exceeded by various non-military 

costs associated with the war and its aftermath. By one estimate, those costs include roughly $6 [billion]–$10 billion for aid to allies in the region, $1 [billion]–$10 

billion for humanitarian assistance, $5 [billion]–$12 billion for governance activities, 

$10 [billion]–$105 billion for reconstruction and recovery, and $62 [billion]–$361 billion for debt relief and related costs.3 On the other hand, these costs would almost 

certainly be borne not just by the United States, but by the United States’ friends, 

allies and international financial institutions. 

In the end, the degree to which one can usefully conduct a cost-benefit analysis 

to help determine the wisdom of launching a war against Iraq is limited. There is 

a substantial divergence between reasonable low-end estimates and reasonable 

high-end estimates. There is also the possibility that—if an effective and durable 

peaceful solution to the current crisis cannot be found—the failure to take military 

action today could necessitate waging a war in the future that could be even more 

expensive, both in terms of direct military and non-military costs. Nevertheless, 

speculating about the cost of a potential war with Iraq and its aftermath can provide some useful insights. 

Ironically, what may be the most important insight to be gained from these estimates is related to what may also be their most serious limitation: they show in 

graphic terms just how much uncertainty there is surrounding a war with Iraq and 

its aftermath. The existence of so much uncertainty should not necessarily prevent 

the country from going to war. Policymakers rarely have the luxury of operating in 

an environment of perfect information, especially when trying to decide questions 

of war and peace. At a minimum, however, the existence of so much uncertainty, 

and the possibility that the costs of a war with Iraq and the peace following the 

war could be quite high and be incurred over a period of many years, might suggest 

that policymakers should take a more cautious approach to considering additional 

tax cuts or spending increases than they otherwise might—at least until the war 

is over and we have better idea of what the true costs of the war and its aftermath 

will be. 

A second insight that flows from our study is how critically some of these costs 

are likely to depend on the level of support the United States receives from friends 

and allies. Under any circumstances the United States will undoubtedly have to pay 

for the bulk of the direct military costs associated with the war itself. However, if 

the United States can win the support of a broad range of friends and allies, it 

might be able to significantly reduce the size of the occupation force it needs to 

maintain in Iraq and the level of reconstruction and related assistance it need to 

provide. Conversely, the failure to win broad and deep support among important 

friends and allies could leave the United States with a bill that ranges toward the 

high end of the estimates discussed earlier. 

ENDNOTES

1. Unless otherwise noted, all changes in funding levels noted in this testimony are expressed 

in real terms. 

2. Lane Pierrot and Gregory T. Kiley, ‘‘The Long-Term Implications of Current Defense Plans’’ 

(Washington, DC: CBO, January 2003), p. 5. With cost risk, CBO estimates that executing the 

current defense plan would require an average of $471 billion (fiscal year 2002 dollars) a year 

over the fiscal year 2008–20 period. This is equivalent to roughly $490 billion in fiscal year 2004 

dollars. 

3. Gordon Adams and Steven Kosiak, ‘‘The Price We Pay,’’ The New York Times, February 

15, 2003, p. A31.

Mr. SHAYS. We are going to begin with Mr. Spratt. I will have 

some questions. But, Mr. Scott, I will go to you after Mr. Spratt. 

Mr. SPRATT. Thank you very much for coming. Thank you for 

your testimony. Do you have a copy of your study you can submit 

for the record? 

Mr. KOSIAK. Certainly. 

56

Mr. SPRATT. If you could, I ask unanimous consent that it be 

made part of the record. 

Mr. SHAYS. Without objection so ordered. 

[The information referred to follows:]

POTENTIAL COST OF A WAR WITH IRAQ AND ITS POST-WAR OCCUPATION

The Bush administration has made clear that it expects to soon begin military operations against Iraq, very possibly within the next several weeks. One of the factors that should be considered before a decision is made to initiate a war with Iraq 

is the likely financial and economic costs of such a war, as well as the costs of any 

post-war occupation, humanitarian assistance and reconstruction activities. In deciding whether to begin this war, it may be appropriate to give greater weight to 

political, strategic and humanitarian interests than to the likely financial and economic costs and consequences of the war, but those costs should at least be considered. This backgrounder provides a range of estimates related to a subset of those 

potential costs. Specifically, it focuses on the direct military costs to the United 

States of a war with Iraq and the post-war occupation of the country. It also briefly 

discusses some of the non-military costs that might be incurred in the aftermath 

of a war. 

This analysis finds that: 

• Given the great amount of uncertainty surrounding the size of the U.S. force 

that will be required, the level of resistance that will be offered, the duration of the 

conflict, the level of allied participation, and other factors, it is impossible to provide 

more than a very rough estimate of even the direct military costs of a war with Iraq 

and its post-war occupation. 

• Based on publicly available information, a reasonable estimate of the number 

of U.S. troops that might ultimately be deployed to the gulf region would be 175,000 

to 350,000. Assuming the war were to last from one to 6 months, this suggests that 

the direct military costs of the war could range from as little as $18 billion to as 

much as $85 billion, roughly the cost of the 1991 gulf war. 

• Occupation costs could far exceed the direct military costs of the war itself. A 

reasonable estimate of the average number of U.S. troops that would be required 

for occupation and peacekeeping duties after a war might be 20,000 to 90,000 over 

the next 5 years. This would equate to 5-year costs of roughly $25 [billion]–$105 billion. 

• Even a relatively small occupation force could greatly exceed the size of past 

U.S. deployments to peacekeeping missions (e.g., in Bosnia and Kosovo, where the 

U.S. military has had an average of about 10,000 troops stationed over the past few 

years). The need to maintain this presence over a period of years could impair the 

ability of the U.S. military to recruit and retain quality personnel, and to carry out 

some other important military missions. On the other hand, the fact that the U.S. 

military would no longer have to plan and prepare for a possible future war with 

Iraq might offset the risks associated with lower readiness levels. 

• Although the focus of this analysis is on direct military costs, it is important 

to understand that those costs could be substantially exceeded by various non-military costs associated with the war and its aftermath. By one estimate, those costs 

include roughly $6 [billion]–$10 billion for aid to allies in the region, $1 [billion]–

$10 billion for humanitarian assistance, $5 [billion]–$12 billion for governance activities, $10 [billion]–$105 billion for reconstruction and recovery, and $62 [billion]–

$361 billion for debt relief and related costs.1 On the other hand, these costs would 

almost certainly be borne not just by the United States, but by the United States’ 

friends, allies and international financial institutions. 

• In weighing the merits of military action, it is also important to understand 

that there could be substantial financial costs associated with foregoing or delaying 

military action. It is clear that Iraq’s willingness to accept the return of U.N. weapons inspectors has been due largely, if not entirely, to the existence of U.S. military 

forces in the region and the threat of imminent attack posed by the U.S. military. 

Maintaining this posture could cost $1 billion a month, or more. In addition, over 

time, it could have a deleterious effect on the readiness of the U.S. military. More 

generally, if an effective and durable peaceful solution to the current crisis cannot 

be found, it is possible that the failure to take military action today could necessitate waging a war in the future that would be even more expensive, both in terms 

of direct military costs and non-military costs. 

57

HOW MUCH IS A WAR LIKELY TO COST?

The direct military costs of a war with Iraq can be only very roughly estimated. 

There is substantial disagreement and uncertainty concerning the size of the U.S. 

force that will be required to fight the war, the level of resistance that will be offered, the duration of the conflict, the level of allied participation, and other factors 

that could significantly affect the cost of the war. The approach used in this analysis 

was to generate three different scenarios which appear to represent a reasonable 

range of possible requirements, both in terms of force levels and conflict duration. 

The first scenario assumes the war would involve 175,000 U.S. troops deployed 

to the Persian Gulf region and would last 1 month, about 2 weeks less than the 

1991 gulf war. The second scenario assumes that a total of 250,000 U.S. troops 

would be deployed to the region and that the war would last about 2 months, 2 

weeks longer than the last gulf war. The third scenario, assumes that a total of 

some 350,000 U.S. troops would take part in the war, and that the conflict would 

last about 6 months. Most military experts appear to believe that such a lengthy 

war is unlikely. However, given the level of uncertainty inherent in any major military operation (especially, perhaps, one in which chemical or biological weapons 

might well be used), the possibility of a prolonged conflict should be considered. 

In order to estimate the direct military costs of each of these scenarios two 

sources of data were relied upon. One source is a range of estimates derived by the 

Congressional Budget Office (CBO) concerning the costs of various aspects of a possible military operation against Iraq.2 This data is supplemented by Department of 

Defense (DOD) estimates of the direct military costs of the 1991 gulf war. In both 

cases, the estimates reflect the extra or incremental costs of conducting military operations-costs above and beyond those that would be incurred by DOD as part of 

its normal peacetime operations.3

According to CBO, deploying a force of 250,000–350,000 U.S. troops to the gulf 

region, would cost about $13 billion, the war itself would cost roughly $8 [billion]–

$9 billion for the first month, and $6 [billion]–$8 billion for subsequent months, and 

redeploying troops back to the United States would cost $5 [billion]–$7 billion.4

These estimates suggest that the cost of the scenarios outlined above would range 

from about $15 billion to $68 billion. Another approach to estimating the costs of 

the a war with Iraq would be to assume that it will cost roughly the same amount 

as the 1991 gulf war, adjusted for differences in the size of the U.S. force involved 

and the duration of the conflict. This would suggests that the three scenarios outlined above would incur direct costs ranging from about $22 billion to $100 billion. 

Rather than choosing one of these two approaches, this analysis assumes that actual costs for the three scenarios would range from about $18 billion to $85 billion, 

with these figures representing roughly the midpoint between the estimates derived 

through the two different approaches. In the 1991 gulf war, the United States’ 

friends and allies covered almost 90 percent of the incremental costs incurred during the operation. By contrast, it seems unlikely that contributions from other countries would cover much, if any, of the costs incurred by DOD in a second war 

against Iraq. Table 1 summarizes the three scenarios and the costs associated with 

each one.

TABLE 1.—ROUGH ESTIMATE OF DIRECT MILITARY COSTS OF A WAR IN IRAQ 

Number of troops Duration of war Estimated cost (fiscal year 2003) 

175,000 1 month $18 billion 

250,000 2 months $35 billion 

350,000 6 months $85 billion 

Source: CSBA based on CBO and DOD data. 

HOW MUCH IS THE POST-WAR OCCUPATION OF IRAQ LIKELY TO COST?

As with the costs of the war itself, the direct military costs of occupying Iraq in 

the war’s aftermath can be only very roughly estimated. The level of disagreement 

and uncertainty surrounding the size of the occupation force that may be needed 

in Iraq and the duration of that occupation is, if anything, even greater than the 

uncertainty surrounding the war itself. Among other things, the size and duration 

of the U.S. occupation force required after the war would depend on four factors: 

the attitude of the Iraqi population toward the U.S. presence; the amount of tension 

or hostility between different ethnic groups within Iraq; the degree of participation 

by the United States’ friends and allies in carrying out occupation duties; and the 

58

goals of the occupation—the more ambitious the goals, the larger and longer the occupation that would likely be required. 

According to Bush administration officials, current plans call for a U.S. general 

to be placed in overall charge of Iraq for at least 2 years.5 The administration, has 

not, however, indicated the overall size of the U.S. force that would be needed for 

peacekeeping or the likely length of the occupation. Estimates of the size of the occupation force that might be needed range from about 75,000 to 200,000 troops.6

Past experience in Bosnia, Kosovo, and elsewhere, suggests that the size of the force 

could be reduced over time. Thus, for example, while a force of 75,000 troops may 

be required the first year after the war, it might be possible to cut the size of the 

occupation force to 50,000 troops the second year, and to 25,000 troops over the following 3 years. Such a deployment profile would result in an average of some 40,000 

troops being stationed in Iraq over the next 5 years. 

As in the case of estimating the cost of a war with Iraq, the approach used in 

this analysis to estimate the potential cost of the post-war occupation of the country 

is to consider a range of possible requirements. Table 2 shows the costs associated 

with maintaining average forces of between about 20,000 and 90,000 U.S. troops in 

Iraq over the next 5 years. These averages would be consistent with a variety of 

different possible deployment profiles. The high-end estimate, for example, would be 

consistent with a deployment profile that included 150,000 troops the first year, 

100,000 troops the second year, and 65,000 troops in the third and subsequent 

years. The low-end estimate would be consistent with a deployment profile that included 50,000 troops in year one, 25,000 troops in year two and only some 10,000 

troops by the third and subsequent years. The cost estimates for these force levels 

are based on CBO estimates of the incremental costs of peacekeeping operations.7

As Table 2 indicates, the 5-year costs associated with these different scenarios range 

from about $25 billion to over $105 billion.

TABLE 2.—ESTIMATED 5-YEAR COSTS OF U.S. OCCUPATION OF IRAQ 

Average number of troops Estimated cost (fiscal year 2003) 

20,000 $25 billion 

40,000 $45 billion 

90,000 $105 billion 

Source: CSBA based on CBO and DOD data. 

These figures suggest that the direct military costs associated with the post-war 

occupation of Iraq could exceed the cost of the war itself. They also point to the potential importance of gaining substantial support among U.S. friends and allies for 

a war in Iraq. In Kosovo, for example, the U.S. military fought and won the war 

almost single-handedy, but was able to rely on friends and allies to provide the vast 

majority of the follow-on peacekeeping force. The situation in Bosnia followed a 

similar pattern. In both countries, today U.S. troops account for only 15–20 percent 

of the overall peacekeeping force. It seems doubtful that the U.S. military will be 

able to hand over responsibility for the occupation of Iraq in a similar manner. However, the more support the Bush administration can generate among friends and allies for the attack, the more likely it is that non-US forces will be able to relieve 

the United States of a significant portion of the burden of occupation—and the more 

likely it is that the United States’ costs will range toward the low end, rather than 

the high end, of the estimates provided in this analysis. 

POTENTIAL IMPACT OF THE POST-WAR OCCUPATION OF IRAQ ON THE READINESS OF THE

U.S. MILITARY

In addition to financial costs, the long-term occupation of Iraq by U.S. troops 

could have a negative impact on the ability of the U.S. military to recruit and retain 

quality personnel, and to carry out some other important military missions. During 

the Clinton administration, the U.S. military became involved in long-term peacekeeping missions in Bosnia and Kosovo. Some military leaders and others argued 

that involvement in these operations was causing significant strains in the U.S. 

military. Among other things, they argued that involvement in these operations: resulted in lower mission-capable rates for many weapons systems (because of higher 

usage rates); reduced the time available for combat training; limited the ability of 

the U.S. military to redeploy forces in the event of war; and led to personnel retention problems, as troops had to spend more time away from home. In the 2000 presidential campaign, candidate Bush was among those who raised concerns about the 

impact of peacekeeping missions on military readiness. 

59

If the U.S. peacekeeping presence in Bosnia and Kosovo—which has involved an 

average of about 10,000 troops in recent years—has indeed significantly undermined 

the readiness of the U.S. military, it follows that a long-term occupation of Iraq, 

which might well involve several or even many times that number of troops, could 

do a great deal more damage. Military officials have in the past stated that in order 

to maintain a single unit overseas, another two or three units must typically be 

available as a rotation base.8 In other words, supporting 10,000 troops overseas 

could require a total of as many as 30,000–40,000 troops. If this same metric were 

applied to potential occupation force in Iraq, it would suggest that supporting a 

force of 20,000 to 90,000 troops in Iraq would actually affect the readiness and 

availability for other missions of 60,000 to 360,000 U.S. troops. 

On the other hand, these figures may overstate the impact of a long-term occupation of Iraq on the readiness of the U.S. military. Notwithstanding the concerns 

raised by candidate Bush in 2000 and others throughout the late 1990s, it is not 

clear that U.S. involvement in peacekeeping operations in Bosnia and Kosovo had 

a significant negative impact on military readiness. Overall, the impact of these operations on military readiness appears to have been relatively modest, and in some 

cases, mixed. Perhaps more importantly, if the U.S. military were to defeat Iraq, 

one of the most significant major regional powers against which the U.S. military 

has, for the past two decades, planned and prepared to fight, would disappear as 

a military challenge. The disappearance of this threat might offset at least some of 

the risks associated with the lower readiness levels that might result from the occupation of Iraq. 

POTENTIAL NON-MILITARY COSTS OF REBUILDING IRAQ

Although the focus of this analysis is on direct military costs, it is important to 

understand that those costs could be substantially exceeded by various non-military 

costs associated with the war and its aftermath. By one estimate,9 non-military 

costs incurred over the next 5 years or so could include: 

• $6 [billion]–$10 billion for aid to friends and allies in the region, especially, Turkey, Jordan and Israel. In part, this aid is needed to gain access to bases in the 

region for U.S. forces.10

• $1 [billion]–$10 billion for humanitarian assistance. These funds would, for example, be needed to pay for emergency food and medical supplies for the Iraqi civilian population. 

• $5 [billion]–$12 billion for governance activities, such as paying Iraqi civil service and police salaries. 

• $10 [billion]–$105 billion for reconstruction and recovery. The low-end estimate 

assumes a relatively modest rebuilding program, while the high-end estimate would 

fund something akin to the Marshall Plan with which the United States helped rebuild Europe after World War II.11

• $62 [billion]–$361 billion for debt relief and related costs. The low-end estimate 

represents Iraq’s foreign debt. The high-end estimate also includes both settled and 

unsettled claims, and reparations to Kuwait. 

It is important to understand that these costs would almost certainly not be borne 

by the United States alone. The United State’s friends and allies, and international 

financial institutions would likely bear a substantial portion of these costs. Although 

just how much of these costs the United States could avoid would likely depend, at 

least in part, on how successful it was in gaining broad international support for 

the war. 

Over the long term, at least, Iraqi oil production would be expected to increase, 

and oil production would presumably remain the core of the Iraqi economy for the 

foreseeable future. However, it would probably be a mistake to assume that Iraqi 

oil revenues could be used in the post-war period to reimburse the United States 

for any costs it incurred in waging the war to oust Saddam Hussein, or in the subsequent occupation mission. Depending on how extensively Iraq’s oil production capabilities were damaged during military operations (or intentionally sabotaged by 

Iraqi forces), it could be years before production levels could be increased beyond 

today’s levels. More importantly, given the enormity of Iraq’s reconstruction requirements and the size of its foreign debt, if the Bush administration’s goal is to turn 

Iraq into a stable, pro-United States democracy, it would probably prove counterproductive to use Iraqi oil revenues to reimburse DOD for its costs.12

In addition to the non-military costs outlined above, it is possible that a war with 

Iraq could have broader economic consequences. Estimating these costs is even more 

speculative than estimating the costs of military operations or the cost of rebuilding 

Iraq after a war. Nevertheless, the costs could be significant. By one estimate, if 

a war with Iraq were to substantially disrupt oil supplies, it could cause an ‘‘oil 

60

shock’’ that could result in a reduction in real national income for the United States 

of $175 billion the first year and billions more over the course of the decade.13 Moreover, the oil shock could, in turn, tip the U.S. economy into recession, causing economic losses of another $391 billion.14 On the other hand, if the war is short and 

decisive, the impact on oil prices and the U.S. economy could be very modest, and 

might even be modestly positive.15 Moreover, in the context of a U.S. economy of 

some $11 trillion annually, even a relatively severe oil shock might not prove too 

disruptive or costly. 

POTENTIAL COSTS OF INACTION

In weighing the merits of military action, it is also important to understand that 

there may be substantial financial costs associated with foregoing or delaying military action. It is clear that Iraq’s willingness to accept the return of U.N. weapons 

inspectors has been due largely, if not entirely, to the existence of U.S. military 

forces in the region, and the threat of imminent attack posed by the U.S. military. 

This strongly suggests that sustaining an enhanced inspection regime over the longterm would require maintaining a substantial U.S. presence in the region as well. 

Just how much of a presence would be required is unclear. It might not be necessary 

to maintain a force as large the force the U.S. military now has in the region, which 

consists of perhaps 175,000 service men and women.16 However, even assuming that 

only some 75,000 troops would be required (triple the number of U.S. troop normally 

present in the region), the annual incremental costs to DOD might amount to some 

$10 billion a year.17

In addition, over time, maintaining such a heightened near-war posture could 

have a negative impact on the readiness of the U.S. military—both to fight in Iraq 

and to carry out other missions. By giving the Iraqi military more time to prepare 

for an attack, any delay could also reduce the odds of winning the war quickly and 

decisively, especially if Iraq were to use the time to improve its WMD capabilities. 

More generally, it is possible that the failure to take military action today could necessitate waging a war in the future that would be even more expensive, both in 

terms of direct military costs and the non-military costs discussed in the preceding 

section of this analysis. 

CONCLUSIONS

As the analysis in this backgrounder suggests, the United States is likely to incur 

substantial financial costs if it invades Iraq. Moreover, the cost of occupying Iraq 

after the war could exceed the cost of the war itself. And non-military costs associated with rebuilding Iraq and providing other kinds of assistance could well exceed 

the direct military costs of both the war and the subsequent occupation of the country. However, it is impossible to determine with much certainty and precision just 

how much a war with Iraq would cost, or how much would need to be spent on 

peacekeeping or reconstruction and other non-military activities after the war. This 

is because there is substantial uncertainty surrounding a wide range of variables 

that could affect these costs, such as the size of the U.S. force that would be required for the war and occupation duties, the level of resistance that will be offered, 

the duration of the conflict, and the level of participation by U.S. friends and allies. 

The degree to which one can usefully conduct a cost benefit analysis to help determine the wisdom of launching a war against Iraq is also complicated by the fact 

that there could be substantial financial cost associated with a failure to act, or a 

decision to defer an attack, as well. This does not mean that the financial costs discussed in this analysis have no bearing on the merits of a decision to go to war. 

It does, however, suggest that, by themselves, these considerations do not offer a 

clear-cut answer to the question of whether or not such a decision is in the best 

interest of the United States. Thus, in the end, in making this decision, it may be 

appropriate that political, strategic and humanitarian interests be given greater 

weight than the likely financial and economic costs and consequences of the war. 

Whether those interests provide greater support to those advocating war, or those 

advocating alternative approaches to resolving the current crisis, is of course a question that lies far beyond the scope of this analysis. 

ENDNOTES

1. Gordon Adams and Steven Kosiak, ‘‘The Price We Pay,’’ The New York Times, February 

15, 2003, p. A31. 

2. Dan Crippen, Director of CBO, Letter to Senator Kent Conrad and Representative John 

Spratt concerning the cost of possible military operations against Iraq, September 30, 2007. 

3. Incremental costs include, for example, costs associated with activating reserve personnel, 

operating equipment more intensively than normal, combat pay, and expending munitions in 

61

wartime. They do not include military pay for active duty personnel, the cost of equipping U.S. 

forces, or the cost of regular day-to-day operations, since those costs would be incurred by DOD 

even absent a war. 

4. CBO, pp. 9–10. 

5. Barbara Slavin, ‘‘U.S. General Would Run Iraq,’’ USA Today, February 13, 2002, p. 1. 

6. CBO, p. 5. 

7. Ibid. 

8. The rotation base consists of units preparing for upcoming deployments and recovering from 

past deployments. 

9. Adams and Kosiak, p. A31. These figures represent the authors’ estimates. They were derived from a variety of sources, including the Asia Development Bank, the Center for Strategic 

and International Studies, the Congressional Budget Office, the Council on Foreign Relations, 

the House Budget Committee Minority Staff, the United Nations, the World Bank, and economist William D. Nordhaus. 

10. At the end of February, the United States offered Turkey up to $6 billion in aid plus per- haps $20 billion in loan guarantees for Turkish support in the event of a war with Iraq. 

www.economist.com/agenda/displayStory.cfm?story—id=1591496. 

11. Among other things, these estimates include the cost of repairing and rebuilding Iraqi oil 

production capabilities. The high-end estimate is taken from William D. Nordhaus, ‘‘The Economic Consequences of a War With Iraq,’’ in War With Iraq: Costs, Consequences, and Alternatives (Cambridge, MA: American Academy of Arts and Sciences, 2002), p. 66. 

12. In any case, it is unclear how much Iraqi oil production could or would (given the inverse 

relationship between oil production levels and price) likely be increased after a war. For a discussion of this question, see Nordhaus, pp. 68–73. 

13. Ibid. 

14. Ibid., pp. 74–76. 

15. Ibid., pp. 68–76. 

16. On the other hand, since even the presence of roughly 175,000 U.S. troops in the region 

today has not led Iraq to fully cooperate with U.N. weapons inspectors, it is unclear whether 

a smaller force would suffice. 

17. This assumes that 50,000 more troops would be deployed to the region than is typical in 

peacetime and that the per-troop costs of maintaining this force would be roughly the same as 

the per-troop costs CBO estimates for peacekeeping missions.

Mr. SHAYS. Thank you. Mr. Kosiak, you have provided very helpful testimony. 

I will also ask unanimous that all members may have 7 days to 

submit a written statement for the record. Without objection so ordered. 

Mr. SPRATT. Going down the categories that you have listed as 

potential cost components of the war in the gulf region, you have 

got direct cost of the war itself, of course that includes getting 

there and getting back. You have got occupation costs which are, 

in your analysis, basically the personnel costs of personnel and 

equipment costs of deploying a force. And then you have got additional costs on top of that for reconstruction, for humanitarian assistance, for governance activities, and an enormous number for 

debt relief, as much as $361 billion. 

If you took everything you have got there, all of the categories, 

I can’t quite get it together on the back of an envelope, low end to 

high end, what is the low end of all categories? What is the high 

end of all categories? 

Mr. KOSIAK. I didn’t bring my calculator, so I couldn’t actually 

tell you. I would say that final category, debt relief and related 

costs includes claims, Kuwaiti claim for reparations from Iraq and 

some other claims, contract claims and not just debt relief. But, it 

is a very large number. I honestly can’t—I can’t answer that question. 

Mr. SPRATT. Reparations from Iraq? 

Mr. KOSIAK. Reparations to Kuwait. 

Mr. SPRATT. To Kuwait. 

Mr. KOSIAK. From the 1991 gulf war. 

Mr. SPRATT. You are assuming that those might be exonerated? 

Mr. KOSIAK. We don’t know. If one—and in part, it depends on 

what your real goal is for Iraq. Obviously, if the American goal 

62

there is to essentially oust Saddam Hussein and make sure there 

are no weapons of mass destruction, and then pretty much leave 

the country on its own, then presumably these kind of reconstruction and other debt relief and costs like that would not have to be 

borne or are not borne at the high end of these estimates. 

On the other hand, if your goal is to really establish a long-term 

democracy that is pro western and a country that has a viable and 

growing economy, then one might want to make some of these—

incur some of these costs. 

Mr. SPRATT. In just basic costs for the first two categories, the 

war itself and occupation afterwards, you have got a range of $18 

[million] to $85 million for war itself, and a range of $25 [million] 

to $105 million for occupation. So the low end of the first two categories would be $43 [billion] to almost $200 billion. 

Mr. KOSIAK. Right. 

Mr. SPRATT. You are in Larry Lindsey’s ballpark now. 

Mr. KOSIAK. It is not too difficult to get to that ballpark. 

Mr. SPRATT. Do you have any notions as to how likely any of 

those numbers is, where you would fall? 

Mr. KOSIAK. I mean, I think the—in terms of the war itself, it 

is very difficult to say, because there is a wide range of uncertainty 

as to what a war might look like. What I have seen, this is just 

based on press reports, it looks like we are moving in with something like 250,000 troops into the region. The estimates I have seen 

for the war’s length from people, military experts, seems to be in 

the range of as short as a week to as long as 2 months. 

One of the options we looked at here was a war that involved 

250,000 U.S. troops in the region and lasted 2 months. Our estimate for the cost of that war was about $35 billion just for the war 

itself. 

Mr. SPRATT. Pretty close to CBO then? 

Mr. KOSIAK. Right. A little higher than CBO numbers would suggest. In terms of peacekeeping, it is just very hard to say. There 

was the statement by Gen. Shinseki, where he suggested that several hundred thousand troops might be needed for some period of 

time after the conflict. But, most estimates have been that we 

would have fewer troops in there than that. 

Mr. SPRATT. You mentioned two other problems. No. 1 is transformation which is a long time coming, and it is questionable as 

you look at the accounts where you would expect to see a plus-up, 

the science and technology accounts, and find that they are actually being shaved, whether or not we are laying the basis for transformation. 

I was always a skeptic about transformation because I thought 

it would involve maintaining three levels of Armed Forces, the legacy force, the transition force, and an objective, transformed force, 

more or less all at the same time as you merged toward the eventual day when everything would be transformed. 

But, you see right now, in today’s world that you have got to 

have a legacy force that can fight. You can’t take a transformed 

force over there yet. We don’t have any transitional forces, but you 

have got to maintain a robust legacy force for a long time to come, 

because these transformational items, if ever, may not materialize. 

63

So when we started this process, the chairman of this committee 

was a bit chagrined with the DOD request for an increase for next 

year, because he thought that the transformation meant getting 

more for less. In truth, it will be a long time before we get the less 

for the more, will it not? 

Mr. KOSIAK. Well, I think it is difficult to say. So I think that 

you have to look at it on a case-by-case basis. But I think over the 

long term, I think one thing that is important to remember, if you 

look historically at transformation efforts, and we have done some 

work in this area, you know that a real transformation really is 

transformation, it is not layering on one system on the next. 

When the U.S. Navy transitioned from battle ships to aircraft 

carriers, there was a period of transition. But, ultimately we basically got rid of the battle ships, got these out of the fleet, and were 

focused almost entirely on aircraft carriers. 

Mr. SPRATT. At least until John Lehman came back. 

Mr. KOSIAK. That is right. And so ultimately, and carriers won 

the day, because they were the most cost effective systems. So I 

think ultimately when this force is transformed, and obviously this 

will be a slow process, it might be faster in some areas than in others, but I think ultimately it will lead to a more cost-effective military. 

But, again, you—you kind of have to look at it on a case-by-case 

basis. One of the things that I tried to do in our analysis of transformation funding was to look at—not so much look at the programs, but look at the process. And I think my concern is that 

the—if you look at the R&D budget and look at the categories of 

funding where you would think we should be spending money if 

you are worried about transformation, we don’t seem to be spending. 

Mr. SPRATT. One final point. Let me highlight it about your testimony, because you point to a problem that CBO has raised in a recent study, that is, the sustainability of the programs that we have 

in development at this point in time, the total program, whether 

or not we can bring to fruition with the budget totals that are projected all of the systems that we have now got on our drawing 

boards. 

And you raise a red flag here saying if you look, anybody looks 

at any recent period in defense spending history, it is cyclical. 

There are ups and downs. And if indeed the current wave of spending proves to be cyclical, we could be developing a lot more stuff 

than we can actually bring to fruition; is that your point correctly 

stated? 

Mr. KOSIAK. Yes. I think the concern is that there are risks associated with this strategy, with assuming that you are going to have 

extremely large and sustained increases in funding for defense, and 

the risk is, among other things, that you will spend a lot of money 

developing systems that you ultimately won’t be able to put into 

production, or if you can put them into production, only at very low 

and inefficient production rates. 

So in the end, you actually end up worse off than if you had more 

realistic assumptions, and made harder choices earlier. 

Mr. SPRATT. Thank you very much for your testimony, for bridging the study with you. And I yield back to the chairman. 

64

Mr. SHAYS. I thank the gentleman. I think with three members, 

we can go back and forth too. I would—I would like to ask you to 

comment. You can’t audit the DOD. I mean, there is over a trillion 

transactions that are not auditable yet. That goes back historically 

over all administrations. Inventory control is not like what a modern store would have where you would know what is in and out of 

your inventory on a timely basis. 

Our ability to use IT equipment, we always seem one step behind 

or two. And we have more weapons systems than we can afford. 

And we have a military that really isn’t yet—it is in transformation. But would you—if 10 was all the way there, to 1, you 

know, we really haven’t even begun, tell me where we are in this 

transformation process? 

Mr. KOSIAK. That is an excellent question. I think it is very difficult to answer. I am not sure that I can offer an effective answer 

to that. In certain parts of the defense—some defense plans, we are 

quite far along. In some areas we are quite far along. In other 

areas we are not so far along. I think the area where we have the 

most concern is that we are not developing a capability, we are not 

focusing on capabilities to be able to project power into regions of 

the world where we don’t have—where we don’t have military 

bases, or in wartime where we may not have access to military 

bases, either because of political reasons, or because those bases 

are subject—are put at risk by ballistic missiles or other capabilities possessed by, you know, regional powers. 

And I think one dramatic example of that is our focus on shortrange tactical fighters and how much money we are projecting to 

spend on short-range tactical fighters, when this is an area where 

we really currently have an enormous superiority over any potential foes, and at the same time we are not spending any new money 

or very little new money to develop capabilities to project power 

over great distances. 

For example, stealthy long range, UCAVs, for example. We are 

spending money on UCAVs, but not on stealthy long range ones. 

It is very difficult to say. I mean, and again, part of the reason why 

I focus on looking at, you know, you can find people, there are 

many people who believe in transformation, but obviously people 

have very different views on exactly what that means. 

One of the reasons I focus in my analysis of the R&D budget on 

sort of looking at the process of where the money is going rather 

than specific programs, was to try to get around that problem. But, 

in fact, it is a problem, because people—everybody embraces the 

notion of transformation, but there are dramatic differences about 

what that means. 

Mr. SHAYS. I am not on the Armed Services Committee, like my 

colleague, Mr. Spratt, but when I think of transformation, I think 

of the ability to move, for instance, men and equipment more 

quickly from one place to the other, to not have to be tied down 

with heavy armaments, quick in, quick out. I think of the Predator 

as being an example of moving into new technology that is transforming us. 

Is that the way I should be thinking of transformation? 

Mr. KOSIAK. Well, I think transformation in general is—the notion of transformation is based on this idea that we are in or enterVerDate Feb 1 2002 10:51 Jun 12, 2003 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 X:\HEARINGS\108TH\108-6\HBU058.000 RYAN PsN: RYAN
65

ing a period of revolutionary change in military—the so-called revolution in military affairs. The notion is because of changes and advances in technology and especially information technology, when 

you combine those changes with changes in the way forces are organized and the use of new operational concepts, that the combination of those three things can lead to dramatic increases in capabilities, just like the aircraft carriers did in World War II, or strategic bombing in World War II, or mechanized forces. 

Mr. SHAYS. Bottom line, transformation is critical. The nations 

that are able to transform have extraordinary advantages over 

those that don’t, correct? 

Mr. KOSIAK. Right. And also, again, it is not—I think in general, 

when you see a transformed military, it is not as though militaries 

that have not transformed are necessarily cheaper than those that 

have transformed if you look back historically. 

We shouldn’t feel that we have to break the budget, I think, in 

order to effectively transform the U.S. military. 

Mr. SHAYS. Just one last point. Frankly I don’t know why the administration isn’t able to give us a range of numbers, and we can 

decide whether it is helpful or not. But, you know, for me in this 

whole issue of going into Iraq, we need to go in. If Saddam doesn’t 

disarm, and he shows no intention of doing that, we need to make 

sure that we go in before he has the weapon I most fear, a nuclear 

capability. 

And so I am willing to live with almost any cost. Because I think 

it has to happen. But it is perplexing to me why we are not able 

to nail it down a little bit more. But one of the things you seem 

to talk about that I had originally thought the war would be paid 

for by Iraq. And I was not chastised but corrected quickly by the 

administration. 

It is not a war about oil, this is not a war about their having to 

pay us for our having to come in. The administration made very 

clear, the oil revenues and so on will go to rebuild Iraq, to feed the 

people, to give them the medical care to rebuild their schools and 

to generate their economic activity. 

And so are you excluding that from the cost? Are you also subtracting from that cost what you think the Northern Watch and the 

Southern Watch, when you calculate these costs to us? 

Mr. KOSIAK. Well——

Mr. SHAYS. One is the war and then one is what happens afterwards. 

Mr. KOSIAK. Right. One of the things I didn’t include in my testimony but is something that I looked at in the study, was what is 

the cost of maintaining—I didn’t actually—the cost of Northern and 

Southern Watch is typically a billion, a billion and a half dollars 

a year, something like that. 

So if you didn’t have to pay that, that would be a—you should 

deduct that from these amounts, because I did not do that. Also, 

it is possible that you—if you don’t go to war, you may have to 

maintain a significant presence there, maybe not like the presence 

we have there now, but if you want to maintain a level of threat 

to Iraq that would help enforce an enhanced inspection regime, you 

may have to spend significantly more than we spent on Southern 

and Northern Watch. 

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My own estimate was it could be $1 billion a month, depending 

on how big a presence you felt that you had to keep in the area 

in order to keep the pressure on. So those costs, I did not mention 

those costs when I went through it in my testimony. 

Mr. SHAYS. Let me go to Mr. Scott. Thanks for your patience. 

Mr. SCOTT. Thank you, Mr. Kosiak, for your testimony. It has 

been extremely helpful. Your testimony on page 6 mentioned this 

$361 billion for debt relief and related costs. What does that mean? 

Mr. KOSIAK. Well, part of it is foreign debt owed by Iraq. Part 

of it is. 

Mr. SCOTT. Owed by Iraq to who? 

Mr. KOSIAK. I am not sure to who in particular. To various countries. 

Mr. SCOTT. If we were to satisfy that item, would we have to pay 

or would we just cancel what they owe us? 

Mr. KOSIAK. Well, one option would be canceling what they owe 

us, if it is owed to us. If it is owed to other countries, hopefully 

they would cancel it. Another thing is to refinance the debt so they 

would ultimately still have to pay it back, but of course, that may 

be difficult if you—again, it depends on part on what your real 

goals are for the country, and how much you want to give them a 

boost. 

So you wouldn’t necessarily have to pay those costs, certainly, 

but you might want to pay at least some of those costs to give them 

an economic boost. 

Some of the other costs, that is the last category, and it is, by 

far and away, the most speculative of those categories, I don’t want 

to suggest that we would necessarily have to cover the costs of anything like $360 billion. A lot of that may be debt that we can refinance and not necessarily forgive, for example. And it is not all 

debt by any means. Some of it, as I say, are reparations owed to 

Iraq—to Kuwait based on the——

Mr. SCOTT. What are the prospects that we can get other countries to contribute some of the costs? 

Mr. KOSIAK. I think in terms of the direct military costs, both the 

peacekeeping aspect and the cost of the war itself, I think they are 

very limited. In 1991, of course, allies through cash and in-kind 

contributions covered 90 percent of the incremental cost of that 

war. There is no chance that that is going to happen. There is no 

indication that that is going to happen this time. We are going to 

have to cover the direct military costs of both the war and the 

peacekeeping. 

But where we might be able to get assistance in having, hopefully we would be getting allies and friends to help contribute 

peacekeeping forces, and then also to hopefully take a lead in, or 

at least to contribute to some of these reconstruction and other 

costs. 

Mr. SCOTT. Well, if these expenses, we are going to pay those expense, this is the Budget Committee, we are already running up 

a deficit, what—how are we going to pay for it? Do we add it to 

the bottom line debt? Is there any proposal that we have to cut 

something or raise revenues or what, or just add it to debt? 

Mr. KOSIAK. Well, I certainly——

Mr. SCOTT. From a budget perspective, what is going on here? 

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Mr. KOSIAK. I have not heard any proposals to finance it in any 

way other than—I think the hope is that we will get allies to contribute and friends to contribute to some of it. But other than that, 

I have not seen any indication from the administration that they 

are proposing any kind of—certainly a tax increase or anything to 

cover the cost. So I guess it would add to the debt. That is the 

short answer. 

Mr. SCOTT. Missile defense. Where is that in the budget? And 

where should it be in priorities? 

Mr. KOSIAK. Well, I think, you know, I think there is some strong 

bipartisan support for some level of research and development, and 

probably deployment of a ballistic missile defense program. 

I think, my own concern is that we not lose sight of some of the 

other important priorities. One of things I pointed out this afternoon was that we are spending—we have only had a modest 10-

percent increase in S&T funding overall, which could have enormous impact on military capabilities down the road, but we have 

dramatically increased funding for ballistic missile defense development. 

And I think that may indicate too much of an emphasis, and perhaps going too fast in that area. I think clearly a robust R&D program supporting missile defense should be a priority, whether we 

need to be spending as much as we are now is more questionable. 

Mr. SCOTT. Navy and priority of ship-building, especially aircraft 

carriers. 

Mr. KOSIAK. Well, I think the—you know, maintaining an adequate ship-building production rate is a real challenge for this administration. Over the long term, I think one hope is that we will 

be able to get by with a smaller Navy than we have today. I think 

it is inevitable if you look at the administration’s plans. I think it 

is not necessarily a bad thing. If we can—you know, as we get new 

and better ships, we should be able to get by with a smaller Navy. 

In terms of aircraft carrier production, I think going ahead with 

the new generation of aircraft carriers probably makes sense. But, 

over the longer term, I have real concern about the vulnerability 

of aircraft carriers and the ability to operate and project power in 

an efficient way in different regions of the world. 

So I am not sure. I think we need to look for alternative solutions over the longer term. 

Mr. SCOTT. Except those are what we actually use as opposed to 

some of the other stuff that we spend a lot of money on. And, particularly, in light of the fact that we are having trouble trying to 

find bases to locate on, it is the only way that we can project 

power. 

Mr. KOSIAK. Absolutely. And having a sizeable aircraft carrier 

fleet today is critically important today, no question about that. 

And it gets back to this point of transformation and how transformation occurs. I would certainly not suggest, I think we will 

have carriers in the fleet, a large number of carriers in our fleet 

for years to come. 

My point is only that we need to spend some time and money investigating some alternatives. One of things I think the administration has done right is to finance the funding of—the conversion 

of four Trident ballistic missile submarines to carry Tomahawk 

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cruise missiles. I think more efforts along those lines could, over 

the long term, yield some capabilities that could supplement aircraft carriers. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Mr. SHAYS. I thank the gentleman for his question. Mr. Kosiak, 

I thank you for your patience. I thank you for your very intelligent 

answers and for your contribution to the committee’s work. Thank 

you. 

Mr. KOSIAK. Thank you. 

[Whereupon, at 4:45 p.m., the committee was adjourned.]

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