U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

26–351 PDF 2006

DEPARTMENT OF DEFENSE BUDGET

PRIORITIES FISCAL YEAR 2007

HEARING

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

HEARING HELD IN WASHINGTON, DC, MARCH 1, 2006

Serial No. 109–16

Printed for the use of the Committee on the Budget

(

Available on the Internet: 

http://www.gpoaccess.gov/congress/house/budget/index.html 

(II)

COMMITTEE ON THE BUDGET 

JIM NUSSLE, Iowa, Chairman 

JIM RYUN, Kansas 

ANDER CRENSHAW, Florida 

ADAM H. PUTNAM, Florida 

ROGER F. WICKER, Mississippi 

KENNY C. HULSHOF, Missouri 

JO BONNER, Alabama 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

THADDEUS G. MCCOTTER, Michigan 

MARIO DIAZ–BALART, Florida 

JEB HENSARLING, Texas 

DANIEL E. LUNGREN, California 

PETE SESSIONS, Texas 

PAUL RYAN, Wisconsin 

MICHAEL K. SIMPSON, Idaho 

JEB BRADLEY, New Hampshire 

PATRICK T. MCHENRY, North Carolina 

CONNIE MACK, Florida 

K. MICHAEL CONAWAY, Texas 

CHRIS CHOCOLA, Indiana 

JOHN CAMPBELL, California 

JOHN M. SPRATT, JR., South Carolina, 

Ranking Minority Member 

DENNIS MOORE, Kansas 

RICHARD E. NEAL, Massachusetts 

ROSA L. DELAURO, Connecticut 

CHET EDWARDS, Texas 

HAROLD E. FORD, JR., Tennessee 

LOIS CAPPS, California 

BRIAN BAIRD, Washington 

JIM COOPER, Tennessee 

ARTUR DAVIS, Alabama 

WILLIAM J. JEFFERSON, Louisiana 

THOMAS H. ALLEN, Maine 

ED CASE, Hawaii 

CYNTHIA MCKINNEY, Georgia 

HENRY CUELLAR, Texas 

ALLYSON Y. SCHWARTZ, Pennsylvania 

RON KIND, Wisconsin 

PROFESSIONAL STAFF

JAMES T. BATES, 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, March 1, 2006 ................................................. 1

Statement of Hon. Gordon England, Deputy Secretary of Defense; Admiral 

Edmund P. Giambastiani, Jr., Vice Chairman, Joint Chiefs of Staff; and 

Hon. Tina W. Jonas, Under Secretary of Defense, Comptroller ....................... 5

Prepared statement of Steven M. Kosiak, Director of Budgets Studies, Center 

for Strategic and Budgetary Assessments ......................................................... 16

Prepared statement of Mr. England ...................................................................... 26

Question for the record submitted by Congressman Crenshaw .......................... 27

(1)

DEPARTMENT OF DEFENSE BUDGET 

PRIORITIES FISCAL YEAR 2007

WEDNESDAY, MARCH 1, 2006

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

The committee met, pursuant to call, at 9:30 a.m., in room 210, 

Cannon House Office Building, Hon. Jim Ryun presiding. 

Members present: Representatives Ryun, Crenshaw, Wicker, 

Barrett, Hensarling, Campbell, Conaway, Bradley, Lungren, Ryan, 

Garrett, Hulshof, Spratt, Edwards, Capps, Baird, Cuellar, Cooper, 

Schwartz, and Allen. 

Mr. RYUN [presiding]. Good morning and welcome to today’s 

Budget Committee hearing. Pleased to have with us The Honorable 

Gordon England, Deputy Secretary of Defense, The Honorable Tina 

Jonas, Under Secretary of Defense, and Admiral Edumund 

Giambastiani, Vice Chairman of the Joint Chiefs of Staff. 

I will note that with the very tight schedule of today’s witnesses, 

we have had to begin today’s hearing during the regular Republican Conference Meeting, and as we learned just last week, sandwiched in just prior to the joint session of Congress to meet with 

the Italian Prime Minister. 

Unfortunately, we are not going to have as much time as we 

would like, but, again, we certainly appreciate your joining us, and 

I will do my best to keep my remarks brief so that other members 

can get in their questions as well. 

Today we are here to review the administration’s fiscal year 2007 

budget request for the U.S. Department of Defense (DOD). To put 

this year’s request in perspective, take a quick look at the budgeting of DOD for these past few years. 

Since September 11, and issuing war against terror, this Nation 

and this Congress have shown to be more than willing to provide 

whatever is needed to defend our country and support the need of 

our troops. Starting 12 September 2001, this Congress went fast 

and furious to rebuild New York, our Pentagon, shore up our Nation’s defenses, and assure that further terrorism attacks were not 

at hand. 

From the charts you will get a bit of an idea of our spending. 

Over the past little over 4 years, DOD budget, excluding any of the 

costs of fighting the wars in the Persian Gulf has grown by an average of $22 billion or about 6.3 percent per year. 

This year the President’s request for the DOD military base 

budget is $439.3 billion which is an increase of about $28 billion 

or roughly 6.9 percent from last year’s enacted level. But I think 

2

few would argue that these numbers alone represent an accurate 

picture of our defense spending. 

Could I have the next chart. Since 2001, our Nation has spent more than $383 billion to fund DOD to fight the wars in Iraq and 

Afghanistan, and assuming the President’s most recent supplemental request of $68 billion for DOD passes Congress, we will 

have obligated ourselves to over $451 billion for these conflicts. 

And all of this is money we have spent outside of the Federal budget, via regular, 2-year, two per year, supplemental or emergency request. 

Now let me be clear. I am not arguing that this wasn’t right or 

the needed amount to spend, but I have made no secret in my past 

disappointment with the administration’s ad hoc funding request 

for these wars. This committee is charged with crafting a credible 

and responsible budget for this Nation, and in order to do that, we 

have got to have the best possible information, as to the likely future costs of the Department of Defense, which is one of the largest 

components of our budget. 

I believe we have not had that in the past and that is why for 

the past two budgets, we have included in our budget on the House 

side, a $50 billion placeholder for providing for war costs. 

I am particularly pleased to note that this year, for the first time 

since the war began, the administration included a war-funding 

placeholder of $50 billion in their budget proposal. We know that 

it is probably not going to be the right number, but it is a lot closer 

than zero, and so I certainly think that it is a big step in the right 

direction and I commend the administration for their decision to do 

this. 

As we look back to the past few budgets, there has been, and I 

think rightly so, no greater priority than providing for the defense 

of our country and the needs or our troops. I can tell you now that 

there will be no greater priority in this year’s budget. 

That said, providing for our defense needs isn’t our only priority. 

Even with our enormous entitlement programs such as Medicare, 

Medicaid, and Social Security taken out of the equation, we have 

a limited pie from which we must fund our only—not only defense—but homeland security and every other domestic program 

area such as education, science, environment and agricultural—and 

we have a deficit we have got to deal with as well and to reduce 

that. 

So when we decided that defense is our highest priority, that 

meant that every other domestic program had to be the peril of 

that decision, or in other words, everything else had to do with 

less, so defense could do with more. 

Now let us take a look at what we have since 11 September 

2001. The national defense budget, which we have included 

supplementals, have increased about 70 percent or by an average 

of 11 percent per year, for the past 2 years. 

I would say we have had generous growth for the past previous 

5 years, we have also realized that we have had to put the spending breaks on somewhere. To achieve this we have held non-defense, nondiscretionary spending to 1.3 percent growth in 2004, to 

near freeze last year, and this year the administration has asked 

for actual cut of roughly a half percent to all non-defense, non-secuVerDate 0ct 09 2002 11:06 May 23, 2006 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\DOCS\HEARINGS\109TH\109-16\26351.TXT HBUD1 PsN: DICK
3

rity spending, and I would guess that this Congress will likely follow in that direction. 

Again my purpose in noting this isn’t to say that those decisions 

weren’t the right ones to make, but to recognize that particularly 

when our Nation’s budget is being stressed as it is, every dollar we 

increase in one area, we have got to balance that spending with a 

decrease somewhere else. I think that this puts tremendous pressure on not only the administration and DOD, but also on this Congress to ensure that the money we spend is being wisely spent, judiciously, effectively and with proper planning and oversight. 

I am sure our witnesses today who have asked—will ask—the American taxpayers for roughly $1.2 billion per day for base or 

non-war fighting operations will agree that it is certainly important 

to monitor both the funding and the spending of those funds to ensure we are doing the best job possible to ensure every dollar is hitting its intended target, and fewer and fewer of these dollars are 

being lost to waste, fraud, and abuse. 

So I would appreciate our witnesses today to briefly include in 

their remarks what steps they have taken in the past few years to 

make sure that this is the case. I welcome our witnesses and we 

look forward to your testimony. Mr. Spratt, I turn to you for any 

comments you would like to make. 

Mr. SPRATT. Thank you very much, Mr. Chairman, and let me, 

too, welcome our witnesses. We very much appreciate your coming 

because this is a discussion we need to have. 

For the most part for the last several years, defense has been 

more or less immunized from budget pressures; there has been 

overriding national interests that had to be protected and supported, and you have had support from both sides of the aisle. 

This morning, however, the Senate counterpart to this committee, Senator Judd Gregg is quoted at length in the Congressional Daily as saying that ‘‘to start with massive increases for defense, augmented by emergency funds that do not have to fit under 

budget caps, are becoming too much of a practice.’’

On page 12, he said, ‘‘it is a very strange approach to budgeting 

that they have taken, the DOD, because essentially what they are 

saying is everything else in Government is going to be subject to 

severe limitations and spending. But the area we are most interested in is going to have no budget process at all. It is simply going 

to be done outside the budget process through emergencies.’’

One of the points that he makes is that most Americans would 

agree that the greatest threat we face, the one that is the hear and 

now, closest to us, is the homeland security threat, the threat of 

security to our homeland by terrorists. 

To date, some time ago, the Coast Guard took a look, to take one 

slice of that particular problem, at seaport security and looking at 

very mundane things like lighting and fences and new technology 

to surveil the premises of seaports. They came up with a budget 

of $5.4 billion to be implemented over a period of 10 years, specifically for seaport security, outside their regular budget. 

To date, only $700 million of the $5.4 billion has been provided 

to the best of my information. This is, I think, what the Dubai 

ports controversy is all about. It is not about whether Dubai, as 

Arab and Muslim, and therefore friendly to us, so maybe might enVerDate 0ct 09 2002 11:06 May 23, 2006 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\DOCS\HEARINGS\109TH\109-16\26351.TXT HBUD1 PsN: DICK
4

gage in some kind of clandestine activity or cooperation with our 

enemies. 

It is about whether or not we are really taking seaport security 

as seriously as we should. What we have done for our seaports 

pales in comparison to what we have done for our airports, and 

that is what the Dubai controversy is all about. 

As we look through this budget, we don’t find any new emphasis on homeland security. There is about $40, $50 billion, depending 

on what you want to put in there. About half of that was already 

being incurred before 9/11. There have been increases, obviously, 

but are the increases commensurate to the risks that we are facing? That is the question we would like to explore with you this 

morning. 

The one thing we have consensus on, bipartisan consensus, is 

that homeland security needs more attention. There is also some 

consensus on something else. When Senator Kerry and President 

Bush had their Presidential debate, they were asked what do you 

consider the gravest threat facing the United States today. Both of 

them had the same answer. Both of them said it is nuclear terrorism. They both agreed that terrorists armed with nuclear weapons or nuclear devices or logical dirty weapons pose the gravest 

threat. 

But if you look through this budget and previous budgets since 

2001, you will find precious little increases for what we call cooperative threat reduction (CTR), Nunn-Luger, or the other associated 

programs in Energy and State and elsewhere that come to a little 

over a billion dollars. 

The question we have for you this morning is: given our fixation 

on conventional defense and given our commitment in the Middle 

East, are we ignoring the tiger in our very room, the elephant in 

our room, homeland security and its needs and port security in particular, and are we ignoring or not doing as much as we might to 

mitigate what may be the gravest threat facing us—nuclear terrorism? 

Let me just show you two charts, and then I will end my opening 

statement. This chart indicates the defense increases during the 

Bush administration, run out over the initial 10 years of the Bush 

administration from 2002 through 2011. 

As you can see if you take the fit-up and run it out through its 

period and then you adjust defense spending per CBO for inflation 

thereafter, there has been an increase from $3.6 trillion in January 

of 2001, to $5.3 trillion today. That is an increase of $1.6, $1.7 trillion, a pretty big increase. 

And the question that I have for you is does this budget table 

right here, and almost as it is, capture all the costs that we are 

truly confronting, for example, the costs, the looming liability for 

repair, reconstitution, and replacement of equipment that are either wearing out at a faster rate than typical for ops tempo or 

equipment that we are simply leaving behind because it is not 

worth bringing back to the United States of America? That is the 

question, one of the questions I have for you, and let me show you 

the next chart. 

Just to give you the magnitude of the increases in defense, and 

raise the question, can we get from here to there, can we truly folVerDate 0ct 09 2002 11:06 May 23, 2006 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 F:\DOCS\HEARINGS\109TH\109-16\26351.TXT HBUD1 PsN: DICK
5

low the upper edge of this curve and fund the budget that you have 

more or less planned in your fit up? 

As you can see, from 2000 to 2011, if you add and layer all of 

these costs together, they come to about $600 billion in the year 

2011. We will increase what we are spending on defense by a hundred percent over that period of time. 

My question to you is, is this attainable, and if it is not attainable, what has to give? Is this representative of the kind of budget 

thinking you have got, and if so, do you honestly think, given the 

problems with the deficit of the budge, that we can get there? 

I was here in the 80s. I was here in the 90s, and I’m here again. 

Lord knows what will happen next year, but I saw the budget preferences and priorities shift completely from precedence given to Defense for the first half of the 80s to the precedence given to the deficit in the second half of the 80s, and I can see that happening 

again on the distant horizon, not this year, but in the foreseeable 

future. 

And when it happens, I want to know do we have programs underway and transformation of things. Do we have the wherewithal 

to do what you think we need to do for transformation, for repairing equipment, for personnel and increasing costs of personnel? 

Can we capture all of this and afford it in a budget that also is 

moving the balance? 

Thank you for coming. We look forward to your testimony and 

to the questions we put to you afterwards. Thank you, Mr. Chairman. 

Mr. RYUN. Thank you, Mr. Spratt. Now we would like to go to 

our panel and I would like our first testimony to come from The 

Honorable Gordon England, Deputy Secretary of Defense. 

STATEMENTS OF HON. GORDON ENGLAND, DEPUTY SECRETARY OF DEFENSE; ADM. EDMUND P. GIAMBASTIANI, JR., 

VICE CHAIRMAN, JOINT CHIEFS OF STAFF; HON. TINA W. 

JONAS, UNDER SECRETARY OF DEFENSE, COMPTROLLER 

Mr. ENGLAND. Representative Ryun, thank you. Representative 

Spratt, thank you, and thanks for your comments, and members of 

the committee, good morning. It is a pleasure to be here, and I 

thank you for the opportunity. This is the first time I have testified 

before this committee, and I do look forward to a constructive dialogue and interchange, so I thank you very much for the opportunity for this interchange this morning. 

I have two of my very close colleagues and friends with me today, 

Comptroller Tina Jonas and also the Vice Chairman of Joint Chiefs 

of Staff, ADM Ed Giambastiani. The three of us have been deeply 

involved personally in this process of setting the Department’s priorities and working this budget request. So hopefully we can inform you, and, also answer your questions about any issue dealing 

with the budget. We will certainly try to do that today. 

As you know, this is a very critical time for our country. We are 

a Nation at war, and this war is indeed a daily reality for our men 

and women in uniform who are stationed around the world or serving here at home, defending freedom and liberty along with our 

friends and allies. 

6

Now America is fighting against a dispersed network of terrorist 

extremists. This enemy is adaptable, relentless and will continue 

the attack whenever and wherever he finds the opportunity. We 

did not choose this fight, but we also do not have the option of 

walking away. 

Now the long war is only part of our current national security 

challenge. Hostile states or non-state actors, as you discuss, could 

acquire and use weapons of mass destruction, and they could do 

that to devastating effect. 

Guarding against this threat and preparing for the possible consequences of a WMD event require new technologies, new skills as 

well as enhanced counter-proliferation efforts. 

The Nation also faces a possibility that major or emerging power 

could choose a hostile course. Accordingly, it is important that we 

shape the force to discourage a peer military competitor and be 

able to defeat such a military if necessary. 

Now meeting these potential challenges requires fostering cooperation with emerging powers while hedging against possible 

surprise by maintaining our military superiority. 

Traditional state-based threats are still a concern and they have 

been kept at bay precisely because our Nation has been so well prepared, and I thank the Budget Committee for letting us do that. 

Now, of course, all of these challenges, again as you mention, 

have a bearing on the security of our homeland. Detecting, deterring, and defeating threats far from our shores is the best and likely the only way to keep America safe, but the Department of Defense is also prepared to defend America closer to home as the Department continues to provide support to other agencies of the U.S. 

Government for homeland security missions. 

In short, our Nation faces far more diverse challenges and far 

greater uncertainty about the future global security environment 

than perhaps ever before. And I urge this committee to fully support the President’s national defense budget, including the $50 billion allowance for the fiscal year 2007 war costs. 

The Department is asking you for $439.3 billion this year in the 

President’s budget, and this is, as you have mentioned, almost 7 

percent over the budget that was enacted in 2006, and this is, indeed, a lot of money. However, I would like to put this in perspective. 

We are spending a much smaller percentage of our GDP on defense now than we have in the past. This year’s requesting, including supplementals, is projected to be about 3.7 percent of GDP, but 

it was about 4.6 percent in 1991, during the Gulf War. It was almost 9 percent in 1968, during the Vietnam War, and it was between 11 and 12 percent in 1953 at the height of our involvement 

in Korea. 

So it is a lot of money, but frankly, it is important for the Nation’s defense and it is now about 4 percent, which, in my view, is 

an insurance policy to protect freedom of liberty for our society. 

Now a critical initiative that we do seek and need your help 

with, we need explicit Budget Committee support in our proposed 

change to TRICARE fees, and that is essential if we are to sustain 

the outstanding military healthcare program we have today. 

7

I do want you to know that you have my personal commitment 

and the personal commitment of all my colleagues in the Department of Defense that with the budget you entrust to us, we will 

be diligent in ensuring that we spend these funds wisely. 

We owe it to our men and women in uniform to provide them 

with the resources and the support they need to get the job done, 

and we owe it to our Nation to correctly assess the security challenges we face and to prepare appropriately to meet them, and the 

budget before you responds to these needs. 

Now I do want to comment that meeting these goals will require 

a strong bipartisan consensus on national security of the kind that 

defeated the communist threat which we faced for 40 years across 

many administrations and many congresses. We had a strong bipartisan support for our national security. 

As we go forward, it will also require that unity of effort and a 

sustained will of the Congress and the American people, so this is 

a war of commitment and will, and it is very important that we 

have the resolve, commitment and will over a sustained period of 

time, to prevail in this war. 

With that united will and the hard work and sacrifices of our 

men and women in uniform, the Department of Defense will be 

able to provide the security so inseparable from the freedom we all 

enjoy. 

So I thank you for your commitment to this very, very profound 

endeavor to protect and defend the security and freedom of the 

United States and we do look forward to your questions and your 

dialogue and I would like to now turn it over, if I could, to my colleague, ADM Ed Giambastiani. 

Admiral GIAMBASTIANI. Good morning, Congressman Ryun, Congressman Spratt, Members of the Budget Committee, to all of you, 

I thank you for the opportunity to appear with the Vice Chairman 

for my first time in front of the Budget Committee. 

I am also pleased to be here with my Pentagon shipmates, as I 

will call them, Gordon England and the Comptroller, Tina Jonas. 

We, as a group, with many other senior civilian and military leaders have worked over the last 7 months, since I have returned to 

the Pentagon as a combatant commander, on the many issues that 

bring forward the President’s budget request for the Department of 

Defense for the next fiscal year. 

I would like to make three brief points this morning, and then 

I look forward to answering your questions. First, I would like to 

thank each and every one of you in Congress for your strong support of our men and women in uniform and your continued support 

in the midst of a long war against extremists and terrorists, one 

where the enemy is trying to destroy the resolve of the American 

people. 

We have carefully examined our requirements against available 

resources. We believe that the President’s budget allocation of the 

$439.3 billion maintains a support at the right level. 

I look forward to discussing in more detail the capabilities this 

budget will deliver to our troops. While this is a considerable sum 

of money and we recognize it is a considerable sum of money, it is 

less than we have historically spent during any previous wartime 

period that I am aware of as a percentage of our national wealth. 

8

I, too, along with the Deputy Secretary, am fully committed to ensuring the taxpayers’ money is well spent. 

Second point. We come to you here today, having completed several year-long processes of fundamental importance to the Department. The first one is the Quadrennial Defense Review. The second 

one is something that happens on the military side which is the 

Chairman of the Joint Chiefs’ assessment of our ability to execute 

the National Military Strategy. 

And, finally, of course, the President’s fiscal year 2006 budget development. In all these processes, there has been in my view, unprecedented collaboration and dialogue, not only amongst the senior military, but amongst the senior military and civilian leadership of the Department and not just inside the Pentagon, but from 

our commanders in the field and their staffs, represented by the 

combatant commanders around the world. 

We have spent literally thousands and thousands of hours—I 

have gone through and had my staff calculate this—questioning, 

analyzing and learning together as we work together to recommend 

the way ahead in the Department. In my experience, I have never 

seen this level of collaboration go on, and I have been through a 

lot of these processes and budget developments. 

Based on this, I can tell you categorically that your Armed 

Forces are fully capable of executing every part of your National 

Military Strategy and that this budget supports prosecuting the 

war on terror, accelerating transformation, enhancing joint war 

fighting, and improving the quality of life of our troops and our 

families. 

The final point I would like to make, as we fight this long war 

against a ruthless enemy, is that we are doing so with an all volunteer force, 2.4 million Americans, active and reserve, protecting 300 

million of their fellow citizens. This is significant and we need to 

ensure this commitment is fully recognized, rewarded and valued. 

I know that all of you value this, as I do, and we thank you for 

your support of these men and women in uniform. 

Because this is the first war we have fought with an all volunteer force, attraction and retention of quality people are more important than they have ever been in our history. The fact that it 

will be a long war amplifies this very consideration. 

Although we are on new ground in some respects, experience has 

taught us that we recruit individuals but we retain entire families 

inside the military. The keystone of recruiting and retaining the 

best America has to offer is maintaining the superb healthcare system that Congress authorized for service members and families 

back in 1995. 

As you know, the cost of that benefit has increased substantially 

since it was authorized in 1995. Let me give you some figures here. 

In the last 5 years, from 2001 to 2006, the cost of this has doubled 

from $19 billion to $37 billion, and is projected to increase in 2015 

to $64 billion total. 

Despite this increase, there have been no premium changes in 

this program since 1995, when you instituted it. At that time, the 

cost to the individual was about 27 percent of the actual medical 

cost. Today the cost is about 12 percent. 

9

All of us in the Joint Chiefs of Staff have discussed this in length 

and in great detail. We believe the legislation you passed in 1995 

was superb then, and we believe it is superb today, and we want 

to see this program sustained and going forward. 

Because of that, and our belief that the cost to the individual was 

reasonable in 1995, we recommend that you renorm in 2006 the 

cost shares that we had in 1995, when you instituted this program. 

This will allow us to maintain this superb benefit for not only 

our members, families and retirees, but ensure that it is with us 

20 years from now. 

Some very important points to underscore about this recommendation that are included in the President’s budget. Number 

one, active duty troops are not affected by this request. Number 

two, it only applies to retirees under the age of 65. And number 

three, it maintains the catastrophic cap of $1000 for active duty 

families and $3,000 for retirees. 

So fundamentally our recommendation is to take the benefit, enacted by you in 1995, and update it in fiscal sense to 2006. 

Thank you again for the opportunity to testify here today and to 

represent our men and women in uniform and the civilians and 

families that support them around the world. I look forward to answering your questions, sir. 

Mr. RYUN. Thank you very much. We will go to questions at this 

point. I would like to begin by just saying first of all, I agree with 

the President’s policy that he doesn’t really want to have a time 

certain that we continue to wait as we train up the troops. 

The Iraqi forces, the evidence of that, you know, I have actually 

seen in my district, where at Fort Riley we had a brigade that was 

supposed to rotate out the end of December, but did not because 

it is becoming more clear that the Iraqi forces are becoming more 

ready. 

Now having said that, recently there was a great deal of violence 

at which the Iraqi forces responded to, do you feel that they were 

well enough prepared and are prepared for what might lie ahead, 

and I leave that question to anyone on the panel who would like 

to respond. 

Admiral GIAMBASTIANI. Just about an hour-and-a-half before this 

hearing started, I came off a video teleconference that the Secretary of Defense, the Chairman and I were attending with General Casey, and General Chiarelli, who is the new multi-national 

corps commander, and let me just tell you a little bit about what 

General Chiarelli said to us, and I think it is important to recognize this. 

He served in Iraq for a year and was essentially the Baghdad 

U.S. Commander and left Iraq about 13 months ago. So he has 

been gone for a year. He came back and has been now in command 

for about 6 weeks of the multi-national corps. He relieved Lieutenant General John Vines, who is the head of the 18th Airborne 

Corps. 

And what General Chiarelli told us this morning is he was incredibly pleased, No. 1, with the performance of the Iraqi Army 

and the fact that the Iraqi security forces took the lead after this 

latest round of violence caused by the destruction of the Golden 

10

Dome mosque in Samara and that they were leading this security 

effort inside Iraq, not coalition forces. 

And No. 2, the fact that the Iraqi security forces not only were 

taking the lead, but that they had done it in an exceptional manner. Frankly, he gave a number of quotes, one from an Iraqi commander—it was very impressive—on what he was doing to protect 

certain folks as they were marching in a demonstration. 

Actually the number of attacks that are going on from improvised explosive devices today, are less than they were a number of 

months ago. There is a downward trend here. And the fact that the 

Iraqi security forces are performing well, in particular, the Iraqi 

Army, I think is significant. 

The final point I would make to you is when he left Iraq 13 

months ago, there were only two battalions of the Iraqi Army that 

were in charge of battle space. Today that number has grown by 

somewhere up in the forties. I will have to take a look at the exact 

number, but it is substantial, and this is a big deal, because the 

American forces, coalition forces, were not in the lead here. 

It is a long answer, but I hope that was helpful. 

Mr. RYUN. Well, that helps. I would also insert as a follow up, 

I mean we are seeing improvements. Did he offer any suggestions 

as to how those improvements might be—how you can improve on 

those areas with regard to what the Iraqi security forces could do 

for the future? 

Admiral GIAMBASTIANI. Well, let me just say to you, the strategy 

that we have, we have embedded training teams across the entire 

Iraqi Army. We have got them established. In the fall, the Defense 

Department took over the responsibility for training up the Iraqi 

police force, and now we are bringing in additional folks to embed 

in the Iraqi police forces. 

So this is significant because when we say Iraqi security forces, 

we mean army and police. So we are making a concerted effort to 

bolster, help train up, and work with the Iraqi police forces today. 

The final thing I would say to you along this point is today, 60 

percent of the instructors of the Iraqi Army and Iraqi security 

forces are Iraqis. They are not Americans. And by the end of this 

year, that number will be somewhere around 90 percent. That is 

a pretty significant change, in fact, to make sure that this type of 

training expertise is turned over to the Iraqis, because obviously it 

is their country and it is important they do it right. 

Mr. RYUN. Well, I think I share the President’s view on this, too. 

When the Iraqis take greater ownership, they will have even greater success. And I want to thank you for your answer. At this point, 

I would like to turn to Mr. Spratt for any questions he might have. 

Mr. SPRATT. Thank you and thank you once again for your testimony and for being here today. 

Let me go back to the theme of seaport security, because I really 

think this is at the bottom of all the reaction to the Dubai ports 

issue. It is not that the ownership country will be an Arabian and 

Muslim firm, but that we have sat through briefings, closed and 

open, where the deficiencies and vulnerability in our ports have 

been outlined. 

And there is a widespread suspicion here that we haven’t done 

nearly enough to secure the seaports of this country and that raises 

11

a question as to whether or not we will aggravate these deficiencies 

if we delegate the operation of our ports to a foreign firm. 

Am I correct in reading the Coast Guard’s proposal that they proposed $5.4 billion about 3 years ago for upgrades in our seaports, 

surveillance and fences and very basic stuff, of which only $700 

million has been funded today? 

Mr. ENGLAND. Mr. Spratt, I mean you are going to have to ask 

that question to Department of Homeland Security. I mean that is 

not in our budget, and I am not in the position to comment on that. 

Mr. SPRATT. Were you a member of the Farm and Investment 

Review Committee? 

Mr. ENGLAND. Yes, sir. As a deputy, I am part of that committee, 

yes, sir. 

Mr. SPRATT. Did that issue get discussed in your committee? 

Mr. ENGLAND. It was not discussed as part of this review, no, sir. 

Mr. SPRATT. Whether or not designated, perceived deficiencies 

have been addressed since 2001 and since the Coast Guard rendered its report? That didn’t get addressed at all? 

Mr. ENGLAND. Mr. Spratt, we look specifically—CIFUS looks at 

each specific case. So each case we look at, we don’t look at what 

the funding is on any given—if you look at a specific company, I 

mean your comment—I do want to correct you in one area. We already have a foreign firm. You know, it is a UK firm being replaced 

by the firm from UAE. So this is one foreign firm replacing another 

firm. 

We looked at that specific firm and in the Department of Defense, we had it looked at by 17 departments and agencies within 

the Department of Defense and we had no adverse comments regarding that firm. So we did look at it in great detail, regarding 

the security of the ports for this firm. 

We did not go back and examine the whole approach in terms of 

security. I do know, however, that Homeland Security has an indepth approach, that is, security is not just at a given port, it is 

in depth. 

They actually start at foreign ports and UAE, as you know, was 

one of the very first countries—I believe the first country to join 

us in this initiative to inspect cargo at foreign ports, as opposed to 

waiting for them to get to America. So it is, I think, a much larger 

issue than just this one particular acquisition. 

Mr. SPRATT. Under the law if there are significant national security questions, there is a mandatory 45-day period. It’s a Byrd 

amendment, adopted in 1993. Does this issue then become a DOD 

issue when the 45-day period kicks in and that analysis begins? 

Mr. ENGLAND. Mr. Spratt, how it has worked since the 1990’s, 

I believe about 1996—don’t hold me exactly to that date—but the 

way that has happened at the meetings of the CIFUS committee, 

if there was any comment made, that is, any objection by anybody 

for any reason, it automatically went into the 45 days. 

In this case there were no comments at all that would have triggered the 45 days. Now my understanding is is that the——

Mr. SPRATT. Well, DOD is on the committee. You sit in behalf of 

the Department of Defense. 

Mr. ENGLAND. Yes. 

12

Mr. SPRATT. You had the opportunity to raise national security 

concerns if you had any, and you apparently had none? 

Mr. ENGLAND. No, we had none. Neither did anyone else. Now 

Mr.—so it didn’t go into the 45 days, but Mr. Spratt, understand 

that what will happen is the company has agreed to come back for 

a 45-day review. They will be providing additional information. 

So the committees, when that is refiled by the companies, my understanding is that the committee will rejoin, and we will then 

start another 45-day review to look at new data or any concerns 

raised by the Congress. So this will be an opportunity to a more 

in-depth review to look at new data provided by the company and 

to address any concerns of the Congress. 

So I would suggest—I mean this is a national security issue, not 

a political issue. I mean our obligation is the security of the United 

States of America, as is yours, and with that obligation and that 

from your oversight and us from an action point of view, we would 

be pleased, any concerns any member of the Congress has, to look 

at these, because we do want to make sure——

Mr. SPRATT. Well, one of our concerns is that nearly 10 million 

containers move through our ports every year and that number increases every year. And a minute fraction of those containers is actually cracked open and inspected. 

I have seen the number of 5, 6 percent, but as I understand it, 

that includes dog sniffings as opposed to actually taking a container, opening it up and finding out if the contents correspond to 

the bill of lading and the manifest. 

Mr. ENGLAND. Well, Mr. Spratt, though in reality, we actually 

don’t want to inspect any container in the United States. What you 

want to do is verify what is in a container in a distance port. You 

actually don’t want cargo coming to America you are unsure of. So 

the approach—and now I am going to say this from my own knowledge in helping to put the program together when in Homeland Security—was to inspect ports so the security initiative is to inspect 

ports outside the United States, verify what is in containers and 

on ships, so that we know when they come to the United States’ 

ports, that they are safe. 

What you would like to do is only physically inspect suspect. You 

would like to inspect 100 percent of the suspect containers, but not 

100 percent of the containers that have already been verified. 

So the 5 percent number, frankly, is a little bit misleading because the 5 percent is hopefully 100 percent of the containers that 

cause you concern as opposed to the 95 percent that have already 

been inspected and have a high degree of confidence. 

Mr. SPRATT. My time is up, but if we have further time, I would 

like to come——

Mr. ENGLAND. No, I would be happy to come meet with you on 

this, but I frankly believe that obviously the most knowledgeable 

person here and the most knowledgeable people are the Coast 

Guard, because the Coast Guard is responsible for the port security, and they are obviously the most knowledgeable to discuss this 

subject or the folks from Homeland Security. But hopefully this discussion has clarified this issues somewhat. 

Mr. SPRATT. If I could just have one 30 seconds to share something with you. Years ago, when we were concerned about textile 

13

fraud, shipments coming into this country, we appropriated $3 million and gave money to New York, Miami, and L.A., to intensify 

the inspection of incoming cargo containers and to open up quite 

a few more than they had been accustomed to. They came back in a year’s time with $21 million dollars in fines, 

fees and penalties because of the discrepancies between the manifests, the bills of lading, and the actual contents of the goods coming in, quota evasion, tariff evasion, misdeclaration, and everything 

else. 

And I went up to the New York and met with the customs people 

up there, the room was full of them. They said we have been telling 

our superiors this for years, that fraud is rampant in this business, 

and here is the proof of it. 

And that is my concern. I know you have got 36 different ports 

abroad where you can check everything, but surely you want to 

have the potential shipper of a nuclear device, where it will be 

caught, if not in the foreign port, in the United States when it 

comes here. I would think we would want that second line of defense. 

And particularly given the widespread suspicion that these contents don’t always correspond to the external documents that come 

with the container. 

Mr. ENGLAND. Mr. Spratt, there is a layer of defense, and, again, 

I mean it is a combination of a lot of checks and balances in the 

system, so it is the ports of the United States but it is also the 

ports, the shippers, the personnel, and there is a whole layer of defense system that is in place and not just the ports. 

But, again, I think it would be very appropriate to have this discussion with the folks from Homeland Security. 

Mr. RYUN. And I will encourage you to maybe continue the discussion a little bit later when we perhaps have some more time. 

I will remind members that we have a limited schedule this morning and I know others would like to ask questions, so I would appreciate it if you could stay the clock. 

At this time, I would like to recognize Mr. Crenshaw. 

Mr. CRENSHAW. Thank you, Mr. Chairman, and thank you, Mr. 

Deputy Secretary. Thank you for your work as Secretary of the 

Navy and I assume that is a promotion now that you are the Deputy Secretary, but we welcome you here. 

Mr. ENGLAND. Thank you. 

Mr. CRENSHAW. And I have got kind of a broad question. It is not 

unlike the issues that we face as Members of Congress or on the 

Budget Committee. You know, we are going to appropriate about 

a third of our overall budget in the discretionary spending, and we 

are trying to get a handle on that. 

And we hear a lot of testimony in this committee from folks talking about entitlements, Social Security, Medicare, Medicaid, those 

kind of issues that seem to grow faster than the discretionary 

spending grows. 

And it seems to me that you all face kind of a similar problem 

in the Department of Defense. The request is an awful lot of 

money, as you point out, $439 billion, and you kind of have the 

same situation, where on one hand, you have got the quality of life 

issues, healthcare, pay raises, housing, and I think that was one 

14

of the President’s priorities, and I think we have taken some giant 

steps toward dealing at that. 

On the other hand, one of the priorities is to make sure that the 

men and women have the best equipment there is, modernized, 

procured, all those kind of things. 

So I guess when I hear you talk about healthcare doubling in the last 5 years from $17 to $39 billion, and it is going to be $64 billion 

by 2015, then that is kind of startling trend, because it seems to 

me you are going to have to balance those qualify of life issues with 

the modernization and procurement aspect, because you can have 

a great quality of life, but if you don’t have the kind of equipment 

you need to fight in a modern world, there is a real problem. 

And so we had a hearing, I think, in military quality of life and the entire military budget of Germany is $39 billion and we will 

spend more than that on healthcare. We only spent $11 billion to 

build new ships, I think, this year. 

So if you look out in the future, I mean, I know in this budget 

you talk about some additional fees, enrollment fees and 

deductibles, and that is probably a place to start and have a discussion. 

But how do you plan on dealing because we can’t sustain, just 

like we can’t keep spending money, you know, as a country on 

some of these entitlement programs. And I am not sure we can continue to just automatically fund every Defense request. So can you 

tell us kind of what you are doing other than this good start to 

really deal with this long-range problem of balancing, you know, 

the modernization aspect with the quality of life. 

Mr. ENGLAND. Mr. Crenshaw, you are right, and thanks for the 

opportunity to discuss this. Look, this is a start. I mean frankly we, 

quote, get a lot of help on this subject. I mean we have a lot of laws 

enacted by the Congress that increase benefits. Not always do we 

ask for them. 

So first if you would ask the Congress to help us in this regard 

and moderate your own desires in terms of improving the benefits. 

We have we believe an excellent salary and benefit package for our 

men and women and their families who wear the cloth of our Nation, and but it is important that we not just have this trend that 

just goes up and up. 

Again, as ADM Giambastiani commented, just to reset the cost 

bases back to 1995 or 1996, I believe across our FYDP, that saves 

up $11.2 billion, just in the FYDP for this one relatively small step, 

which is to reset the fees to the original baseline. And then I believe there is another $1.5 billion that accrue savings to the Treasury. So this is close to $13 billion just to reset the fees back to the 

95, 96 baseline when that was first enacted by the Congress. 

So this is a step. And I will tell you this is a large step, that is, 

we now have the support of all of the Joint Chiefs, all of our Service Chiefs, the Chairman and the Vice Chairman, and the civilian 

leadership. So this is, you know, has wide support in the Department of Defense. 

It is very important that the Congress and specifically this Budget Committee, support us in this regard, because if we cannot take 

this step, I mean if we can’t take this step, which is just to reset 

and adjust for the inflation of fees, then there is frankly nothing 

15

else we are going to be able to do except come back to this committee and ask for more money every year. 

So we need your help this year, specifically, in this one small 

step that does indeed save us a lot of money to try to break these 

trend lines. 

The all-volunteer force is an expensive force, but it is also the 

most effective force we have ever had in the country in terms of 

the quality of our men and women who wear the uniform. So this 

is a magnificent force we have. It is a volunteer force; and, therefore, it is important that we pay and reward our people appropriately. 

Mr. CRENSHAW. I think he wanted to add something if he could. 

My time is——

Mr. RYUN. A brief comment, yes. 

Admiral GIAMBASTIANI. If I could very quickly, just to add to 

what the Deputy has mentioned. In the acquisition area, we are 

looking very carefully at life cycle costs of systems, and when we 

look at building aircraft, bombers, ships, we take a look at the life 

cycle and the amount of crews that these take, and if we can reduce crews and get the job done, be as effective, efficient, militarily 

sound as a force, then in the long term, getting the number of personnel costs down is substantial. So I just wanted to tell you in addition to the healthcare and others, these are some areas we are 

focusing on. 

Another very important one is the use of our reserve forces. This 

is both Reserve and National Guard. They are a very effective force 

for us. Clearly we can keep a large number of them around, and 

obviously you get them for a certain amount of time and you don’t 

have to pay the full salaries and the rest while they are doing just 

regular reserve support. 

But what we have done is we are making them an operational 

reserve at the same time they are a strategic reserve. And by combining them on a military side and making them more effective 

when we use them on active duty, that saves us substantial money. 

So there is a significant portion of what we call a total force in how 

you use them. 

I guess the last thing I would say to you is, is that as we look 

at performing functions around the Department, we look at what 

we already have and how we can rebalance it underneath that top 

line as opposed to just asking for more, and we try to use that as 

a last resort if you will. If we need them, we will come up to you 

and we will talk to you about it, but our point is how can we redistribute under that top line to use them more effectively and efficiently. That is all I have, sir. 

Mr. CRENSHAW. Thank you. 

Mr. RYUN. Mr. Spratt, for a brief comment. 

Mr. SPRATT. Mr. Chairman, we were to have Steve Kosiak testify 

today, but then in light of the schedule, we are—would ask simply 

to have unanimous consent for the testimony of Steven Kosiak to 

be entered into the record. 

Mr. RYUN. Without objection, so ordered. 

[The prepared statement of Steven Kosiak follows:] 

16

PREPARED STATEMENT OF STEVEN M. KOSIAK, DIRECTOR OF BUDGETS 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 (FY) 

2007 defense budget request, the 2006 Quadrennial Defense Review (QDR) and related issues. 

Today we face a remarkable range of challenges to our national security. There 

is the terrorist threat, which was demonstrated so cruelly and tragically on September 11, 2001; the ongoing wars in Iraq and Afghanistan; the threat posed by the 

proliferation of weapons of mass destruction (WMD); and the possibility that, over 

time, the United States will face a major power competitor. 

Meeting and managing these challenges effectively while also addressing competing 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. 

My remarks highlight a handful of observations, questions and conclusions concerning US funding for defense and the latest Department of Defense (DOD) plans, 

as reflected in the QDR and the FY 2007 defense budget request. Specifically, I 

would like to emphasize the following: • Funding levels for defense are, today, very high by historical standards, and are 

projected to continue to grow under the administration’s latest plan. • The level of funding provided through special war-related appropriations has 

grown enormously in recent years and now accounts for a major portion of DOD’s 

overall budget. • The true cost of ongoing military operations is unclear, and there is a danger 

that DOD is coming to rely on special war-related appropriations to cover some of 

the military’s peacetime modernization, readiness and force structure costs. • Notwithstanding today’s high defense budget levels, due to cost growth in many 

weapons programs, deficit concerns and other factors, the administration’s defense 

plan is probably not affordable over the long run. • The 2006 QDR includes a substantially revised, and improved, diagnosis of the 

challenges facing the United States, as well as some positive programmatic adjustments. • Unfortunately, taken together, the 2006 QDR and FY 2007 defense budget request would do little to improve the affordability of DOD’s long-term plans. • The administration has deferred most of the hard choices that will eventually 

have to be made to ensure that DOD’s plans, including many of the new initiatives 

outlined in the QDR, are affordable over the long run. 

For the remainder of my time, I would like to discuss and expand upon these 

points. 

TODAY’S DEFENSE BUDGET IS VERY HIGH BY HISTORICAL STANDARDS

The Bush administration has requested some $441 billion to cover DOD’s peacetime modernization, readiness and force structure costs in FY 2007. In addition, the 

administration plans to amend its request to include $50 billion as a down payment 

to cover the cost of military operations next year. Thus, altogether, under the latest 

plan DOD is projected to receive some $491 billion in FY 2007. It is likely that at 

some point in FY 2007, the administration will submit a supplemental request for 

additional war-related funding as well. The administration’s FY 2007 request also 

includes $22 billion for Department of Energy (DoE) and other defense-related programs, bringing the total projected for national defense to $463 billion, exclusive of 

war-related funding, or $513 billion including such funding. 

The administration also recently submitted a $70 billion request for supplemental 

appropriations to pay for military operations in Iraq and Afghanistan in FY 2006. 

Since Congress already provided $50 billion for war costs in the recently enacted 

FY 2006 defense appropriations act, this would bring total funding for military operations this year to $120 billion, and total funding for national defense to some $562 

billion. In real (inflation-adjusted) terms, this would mark the highest level of funding for defense since the height of the Korean War (FY 1952). If the administration 

were to request a similar size supplemental in FY 2007, the defense budget would 

be even higher next year. 

Nor are today’s high defense budget levels solely the result of wartime spending. 

Exclusive of war-related funding, the FY 2007 budget request represents about a 

7 percent nominal and a 4.4 percent real (inflation-adjusted) increase from this 

year’s level. Including the projected $50 billion in war-related funding, the FY 2007 

17

budget for national defense would mark roughly a 50 percent real increase from FY 

1998 (the budgetary low-point of the 1990’s). 

Moreover, under the administration’s new plan, the peacetime defense budget 

(i.e., the defense budget exclusive of funding designated as war-related) would increase in nominal terms by 7 percent in FY 2007 and by an average of 2-4 percent 

annually over the FY 2008-11 period. This is a much slower rate of increase than 

has occurred over the past 5 years. Nevertheless, as a result of this continued 

growth, by FY 2011, funding for defense would, in real terms, be comparable to the 

levels reached during the years of the Reagan administration-historically, the peacetime peak for the defense budget. 

SPECIAL WAR-RELATED APPROPRIATIONS ACCOUNT FOR A GROWING SHARE OF DEFENSE

SPENDING

Since 2001, the administration and Congress have provided DOD a total of about $331 billion for military operations. This includes about $226 billion for Iraq, $76 

billion for Afghanistan and $29 billion for homeland security-related and other activities. As noted above, the administration recently submitted a supplemental request for an additional $70 billion to help cover the cost of military operations in 

FY 2006, and plans to amend its FY 2007 defense budget request to include $50 

billion as a down payment on FY 2007 costs related to military operations. This 

would bring the total amount received by DOD for military operations to some $451 

billion. 

The vast majority of this funding has been provided through special appropriations. Until FY 2004, the funding was provided almost solely through emergency 

supplemental appropriations. However, in FY 2005, to its credit, Congress insisted 

on funding military operations, at least partially, through the annual defense appropriations act. And this committee, of course, played a key role in forcing this change. 

Supplemental appropriations are an appropriate vehicle for covering the cost of unanticipated emergencies, such as natural disasters or the initial phases of combat 

operations. However, when major military operations become long-term deployments 

likely to be sustained over a period of years, the use of supplemental appropriations 

is no longer appropriate. And it is a positive development that the administration 

is also finally showing a willingness to embrace the use of the annual defense appropriations act to cover at least some of the costs of ongoing military operations. 

During the 1990’s, the US military was involved in a variety of different operations, including deployments in Somalia, Haiti, Bosnia, Kosovo and southwest Asia 

(e.g., enforcing no-fly zones against Saddam Hussein’s Iraq). However, in terms of 

troop levels and costs, these were relatively small operations. As a result, on average, during that decade funding for military operations accounted for well under 1 

percent of annual funding for defense. By contrast, since the invasions of Afghanistan and, especially, Iraq, funding for military operations has come to account for 

a major share of DOD’s annual budget. For FY 2006, funding for military operations 

is projected to account for about 20 percent DOD’s overall budget. 

DOD MAY BE USING WAR-RELATED APPROPRIATIONS TO COVER SOME PEACETIME COSTS

Although most of the funding included in war-related special appropriations is 

clearly needed to cover costs directly related to military operations (e.g., costs associated with activating reserve personnel, sustaining combat operations, overhauling 

equipment, and replacing destroyed or worn-out equipment), some of these funds 

are being used to cover essentially peacetime programs and activities of the Department of Defense. 

Just how much of the funding designated for military operations is actually being 

used to cover normal peacetime force structure, readiness and modernization costs 

is difficult to estimate. However, the amount may be substantial. In early 2005, the 

Congressional Budget Office (CBO) projected that sustaining US forces in Iraq and 

Afghanistan at essentially today’s level would require about $85 billion in FY 2006. 

Even excluding $6 billion in DOD funding included in the administration’s latest 

supplemental request to help train and equip Iraqi and Afghan security forces, this 

suggests that the administration’s projected funding total of $120 billion for military 

operations in FY 2006 may be too high by as much as nearly $30 billion. 

Some of this extra funding may be needed to cover costs associated with repairing 

or replacing military equipment worn out or destroyed in Iraq and Afghanistan. But 

it seems unlikely that these costs would absorb all of this additional funding (in a 

March 2005 report, CBO estimated that DOD might have a $13-18 billion backlog 

of equipment needing replacement or repair). 

An example of one program that is currently being funded through supplemental 

appropriations but is clearly not directly related to the war is the Army’s modularity 

18

initiative. This initiative involves increasing the number of deployable combat brigades by reorganizing the Army’s current force structure. Since the modularity initiative is central to the Army’s current plans to transform its forces, and would presumably be carried out whether or not US forces were currently engaged in military 

operations, these costs should, rightly, be funded through the regular annual DOD 

appropriations act, not emergency war-related appropriations. DOD has, implicitly 

at least, conceded this point by stating that, in future years, funding for Army 

modularity will, indeed, be included in DOD’s annual (i.e., peacetime) budget request. 

The fact that some costs unrelated to the wars in Iraq and Afghanistan are being 

covered by funds designated as war-related should be a cause for concern. Among 

other things, it difficult to discern how seriously to take the topline projections for 

DOD’s peacetime budget included in the latest Future Years Defense Program 

(FYDP). In particular it raises the possibility that the Services, if they believe they 

can rely on supplemental appropriations to cover such costs, will develop long-term 

plans that are far less realistic than they might otherwise be. 

DOD FACES SUBSTANTIAL PLANS/FUNDING MISMATCH

Over the past 4 year years, the long-term fiscal picture for the Federal Government has dramatically deteriorated. In January 2001, the Congressional Budget Office projected Federal budget surpluses totaling about $5.6 trillion over the FY 2002-

11 period. By comparison, in its January 2006 report, CBO projects that the Federal 

Government will run deficits totaling some $832 billion over the coming decade. 

Moreover, as CBO acknowledges, its ‘‘baseline’’ projection makes a number of assumptions that may be unrealistic; for example, that tax cuts currently set to expire 

over the coming decade will not be extended. Projections based on more realistic assumptions about tax cuts and other factors suggest that total deficits could total 

some $3-4 trillion over the next 10 years. 

It seems unlikely that Congress will cut the administration’s defense budget request for FY 2007. However, over the longer term, once a decision is made to address seriously the ballooning Federal deficit, history strongly suggests that cuts in 

defense spending-or at a minimum slower rates of growth in defense spending-will 

be part of the solution adopted. The 12 percent real reduction in defense spending 

that occurred between FY 1985 and FY 1990, before the end of the Cold War, in 

large part reflected a bipartisan effort to begin reducing deficits. 

Moreover, even if DOD were able to achieve the funding levels projected in the 

administration’s new plan over the next 6 years and could sustain those funding levels in the face of growing Federal deficits, DOD would probably not be able to execute its very broad and costly modernization and other plans. If history is any guide, 

DOD’s major weapons acquisition programs are unlikely to meet projected cost 

goals. Similarly, operations and support activities (e.g., military pay, health care, 

and a wide variety of operations and maintenance functions) are likely to cost more 

than anticipated. 

Under the administration’s new plan, funding for national defense is projected to 

reach $526 billion in FY 2011, exclusive of war costs. However, estimates by CBO, 

CSBA and others suggest that executing existing plans could require substantially 

higher defense budget levels, perhaps an additional $75 billion or more a year over 

the long term. DOD’s plans are likely to become affordable only if and when decisions are made not only to invest in new forces and technologies, but to divest from 

more traditional forces and programs-decisions which the QDR and the FY 2007 defense budget request have largely deferred. 

THE 2006 QDR INCLUDES AN IMPROVED DIAGNOSIS AND SOME WELCOME NEW

INITIATIVES

In conjunction with the administration’s submission of its FY 2007 defense budget 

request, it has also released the results of the 2006 QDR. The QDR includes a substantially revised diagnosis of the challenges facing the United States, and the US 

military in particular (compared to the 2001 QDR and earlier reviews). Among other 

things, it argues for placing a greater emphasis on irregular warfare and the dissuasion of major power competitors. 

Consistent with these new priorities, the QDR also proposes a number of potentially important programmatic changes, including increasing the number of active 

duty Special Operations Forces (SOF) battalions by one-third and accelerating the 

fielding of a new long-range strike aircraft from 2037 to 2018. These are welcome 

changes. Given recent experience in Afghanistan and Iraq, and the suitability of 

SOF units for certain critical counter-terrorism and other missions, the need to expand our SOF units seems clear. Likewise, the administration’s recommendation 

19

that the acquisition and fielding of a new deep strike aircraft be moved up nearly 

20 years appears to be appropriate. In both of our recent wars in the Middle East 

access to forward bases from which short-range fighters can operate effectively has 

been limited. And it is possible that in a future conflict, for political or military reasons (e.g., the proliferation of cruise and ballistic missiles), such access will be even 

more constrained. Nevertheless, the Services have, for too long, been focused on 

strengthening our short-range fighter capabilities-an area where we currently enjoy 

enormous superiority-and have neglected the need to improve and expand our longrang strike capabilities. 

Unfortunately, there is good reason to question whether the funding required to 

implement these changes will be found, and thus, over the long run, whether these 

new initiatives will ever move from paper recommendations to reality. 

2006 QDR AND FY 2007 BUDGET REQUEST WOULD DO LITTLE TO IMPROVE AFFORDABILITY

OF DEFENSE PLANS

It seems, at best, questionable that many of the new initiatives proposed by the 

administration will ever reach fruition, because the QDR did very little to address 

DOD’s long-standing plans/funding mismatch. It was especially disappointing in this 

regard in terms of major acquisition programs. 

The QDR recommended scaling back or terminating a number of weapons programs, including the J-UCAS unmanned combat aircraft, the E-10 surveillance aircraft and the B-52H standoff jammer. But these are relatively small programs. The 

largest weapons programs, such as the F-22 and F-35 fighter programs, the Army’s 

Future Combat System (FCS), and the Navy’s DD(X) destroyer survived essentially 

untouched. Moreover, as noted earlier, under the latest plan some new acquisition 

programs would be started, including the development of a new (manned or unmanned) deep-strike aircraft nearly two decades earlier than previously projected. 

Overall, under the new budget plan funding both for procurement and R&D would 

increase in FY 2007. Funding for procurement would rise from $76 billion in FY 

2006 to $84 billion in FY 2007, while R&D funding would grow from $71 billion to 

$73.2 billion. Under the administration’s latest plan, funding for procurement is projected to grow substantially over the FY 2008-11 period, while funding for R&D 

would begin to decline in real terms toward the end of the FYDP. In practice, however, it may be difficult for DOD to sustain a substantial increase in funding for 

procurement, given cost growth in military personnel, operations and maintenance, 

R&D and other areas of the defense budget. 

The QDR has proposed some potentially significant reductions in end strength 

and force structure. In particular, the QDR recommends cutting about 40,000 fulltime equivalent military personnel from the Air Force, reducing the number of B52H bombers from 95 to 56, retiring 50 Minuteman ICBMs, and accelerating the 

retirement of the F-117 fighter and the U-2 reconnaissance aircraft. Whether these 

are the right areas of force structure to cut is debatable, but some such reductions 

are probably appropriate. 

Historically, the US military has frequently cut end strength and force structure 

in order to find sufficient funding to pay for its modernization efforts. In many 

cases, the acquisition of new, much more capable (and typically far more costly) 

weapons systems mean that less than one-for-one replacement is necessary. This approach probably makes sense for the Air Force, as well as the Navy. 

However, the personnel and force structure cuts included in the QDR are, by 

themselves, too modest to both substantially alleviate DOD’s existing plans-funding 

mismatch and offset the additional costs associated with the new programs and initiatives included in the QDR. 

CONCLUSION: HARD CHOICES ARE LEFT TO NEXT ADMINISTRATION

As noted at the outset of this testimony, the United States faces a variety of serious security challenges, as well as growing fiscal constraints. Effectively addressing 

both these security concerns and fiscal constraints will, among other things, require 

transforming the US military to make it both more capable and more cost-effective. 

Doing this will, in turn, require making some hard choices. 

The good news is that the latest QDR and the FY 2007 defense budget request 

include some potentially significant and positive new programs and initiatives. The 

bad news is that they fail to recommend the level of divestment in more traditional 

areas that is likely to be necessary to make these new initiatives affordable over 

the long run. 

In other words, transforming the US military to meet irregular, catastrophic and 

disruptive challenges to US security, as recommended in the QDR, is as much about 

divesting from traditional weapons programs and force structure as it is about inVerDate 0ct 09 2002 11:06 May 23, 2006 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 F:\DOCS\HEARINGS\109TH\109-16\26351.TXT HBUD1 PsN: DICK
20

vesting in new technologies and forces. And unfortunately, the latest plan is largely 

silent on the question of divestment. As a result the hard decisions that should have 

been central to this QDR have been largely kicked down the road, where they will 

have to be made by a future administration.

Mr. RYUN. At this time, I would like to turn to Mr. Edwards for 

any questions he might have. 

Mr. EDWARDS. Thank you, Mr. Chairman. Secretary, welcome to 

our committee. Few have said it is an enjoyable experience, but 

welcome here, and as someone who has known you and watched 

you for over two decades, I do want to personally thank you for 

your service to country, in the private sector, the Homeland Security Agency, as Secretary of the Navy and as Deputy Secretary of 

Defense. You truly have been a model of service to country and we 

should all be deeply grateful to you for that. 

Admiral, thank you for being here, and Ms. Jonas, for your leadership as well. 

Mr. Secretary, I am the ranking Democrat on the Appropriations 

Subcommittee that funds the DOD healthcare system and the VA 

healthcare system. So I will be somewhat involved in this debate 

about TRICARE Costs. 

I would like to just put on the table honestly and openly for the 

purpose of letting us know what the challenges are going to be, and 

perhaps at the end of the day, we can find some solution, because 

I do think we have to deal with the serious question of highly, 

quickly escalating defense healthcare costs. 

But so you know the debate, and some of this goes beyond your 

pay grade and my pay grade, but I think for many Democrats’ perspectives, we will recognize the need to address the issue of Defense healthcare costs. I think where we are going to have a problem, at least many members in Congress, will be on the principle 

of shared sacrifice during time of war. 

And in effect what the administration is asking for this year is 

for military retirees, men and women who have served our country 

over the last, well, over a period of 20 years or 30 years, to spend, 

I guess, close $11.2 billion. That is the number that the Admiral 

quoted, $11.2 billion more in the next 5 years, to help pay for Defense healthcare costs. 

At the same time, Members of Congress are going to vote to continue tax cuts and extend tax cuts that give us tax breaks while, 

you know, 40,000 soldiers I used to represent at Fort Hood, have 

put their lives on the line in Iraq. 

And I think the public debate has to address the issue of are we 

being fair to ask a thousand military retirees—I’m sorry—to ask 

222 military retirees to pay 2 years from now an additional thousand dollars extra out-of-pocket expense to cover healthcare costs, 

when those 222 retirees’ contribution will be necessary to pay for 

the tax cut for one American making a million dollars this year in 

dividend income. 

I am not sure most Americans would think it passes the fairness 

test or the principle of shared sacrifice during time of war, an important American principle. Say 222 military retirees should pay 

an extra thousand dollars a year for their healthcare and that will, 

in effect, fund one person’s tax cuts, person making million dollars 

a year in dividend income. 

21

I realize your job isn’t to handle tax policy, but I think as we try 

to seriously and honestly and openly debate this very important 

issue that you brought up, I think the administration needs to be 

aware. That’s a genuine concern of not just many Democrats in 

Congress, but many military retirees and veterans and the American people as well. 

Let me ask you on the issue of healthcare costs——

Mr. ENGLAND. Mr. Edwards, could——

Mr. EDWARDS. As long as it doesn’t take from my time. 

Mr. ENGLAND. No, that is all right. Go ahead. Sorry. 

Mr. EDWARDS. Let me ask you this question, Mr. Secretary. Do 

we have an estimate of how many military retirees will drop their 

healthcare coverage because of the increased premiums? 

And, secondly, is a bipartisan effort to try to look at reigning in 

costs. Has the Department of Defense looked at the public/private 

partnership in the housing program that has worked so well that 

I have strongly supported for over a decade now, and try to see 

whether we could replicate that public/private partnership in building new military hospitals to save taxpayers’ money and provide 

even better quality here at a lower cost for our military servicemen 

and women and retirees? 

Mr. ENGLAND. Mr. Edwards, if I could first maybe change the 

character of the debate on this TRICARE issue. Let me tell you the 

statement we are in. When people leave the military and before 

they are 65, so that category of people only, not active, and under 

65, they typically go out and get other jobs. 

What happens is if you take a job with some major employer in 

the United States, it turns out that major employer, some of them 

today will pay you not to take their health insurance, but rather 

to stay the DOD health insurance. 

So and there are municipalities, there are cities that do not allow 

those retired people to take their health insurance or States to take 

their health insurance. They require them to take the DOD. So basically we find ourselves subsidizing American industry. We find 

ourselves subsidizing States and localities because our coverage is 

so good and our rates are so low. 

So if we just had a rate compatible at an industry group or a 

State or a city, then people would indeed take other healthcare 

that is already offered to them, rather than coming and staying on 

DOD rolls. So this is not a question in most cases of people paying 

more. It is a question of who makes the payment. Do we do it in 

DOD, or does a State, a municipality or a company make the payment as they should do when the person works for them as opposed 

to coming back to DOD. 

So if we could equalize this, it is a question of fairness and equity, except it is fairness and equity among DOD versus private industry, States and local. Otherwise, we are taking money away 

from, as Mr. Crenshaw said, in proving, you know, the effectiveness of our force in terms of other investments we need to make. 

Now the specific question I think Tina Jonas can answer in 

terms of the number of people. 

Ms. JONAS. Mr. Edwards, with respect to the number of people 

that might leave the rolls, I am told that it is about 144,000 in FY 

2011. What the bulk of the savings, about $4.7 billion of that, 

22

would be associated with not attracting those in, as Secretary England has just said. 

Mr. RYUN. The gentleman’s time has expired. I need to move on 

to the next member and give them a——

Mr. EDWARDS. We want to talk about the public/private partnership at a later time. I will call you. 

Mr. ENGLAND. Absolutely. We will meet on that. Thank you, sir. 

Mr. RYUN. I want to encourage members if they have comments 

to keep them brief so they can get to their questions, give the panel 

an opportunity to respond. Mr. Wicker. 

Mr. WICKER. Thank you, Mr. Chairman. It is unfortunate that 

we have the joint meeting, and our questions are going to have to 

be shortened. But I will just follow up on the last two questioners, 

Mr. Secretary and Admiral. 

This is not the first time the Department has made such a suggestion with regard to additional fees in the last 11 years, is it? 

Mr. ENGLAND. Tina, perhaps you can answer. 

Ms. JONAS. I am not aware that we have proposed these type of 

fee structures for healthcare. I may be—we can correct that for the 

record if I am wrong. 

Mr. WICKER. OK. Well, I do know that there has been a reluctance and probably will be a reluctance this year on a bipartisan 

basis to these fee increases. 

Admiral, you graduated from the Naval Academy 36 years ago. 

What was your understanding then with regard to your medical 

benefits at the time? What is the understanding of active duty personnel now who make a decision to make this a career as compared 

to the information and the promise that the United States of America made to those people who are now currently retired and made 

that decision decades ago? 

And if some of you could give us a full example of how these fees 

will work, and it just seems to me—I will make this brief comment 

and it will come out of my time—but I think the measure shouldn’t 

so much be that the retiree was asked to pay 25 percent when the 

program first began. To me the more important figure that I don’t 

know is: ‘‘What percentage of that person’s income was he or she 

having to pay when the program first began as compared to what 

we are asking them to pay now?’’ I just would say I think it is 

going to a tough sell. 

Admiral GIAMBASTIANI. To get to the first question, Mr. Wicker, 

36 years ago, I would like to tell you that I was smart enough to 

think about what my lifetime healthcare was, but I was 18 going 

into Annapolis and, frankly, I never gave it a thought. 

And to be honest with you, a number of our young people who 

come in, don’t think about it at 18, 19, or 20. You start thinking——

Mr. WICKER. But assurances are made. 

Admiral GIAMBASTIANI. But assurances are made, and you know 

you have superb healthcare and you know you have a superb 

healthcare system to take care of you. 

I had a sailor once who left the Navy, went back to New Mexico. 

He was a nuclear electronics technician, and I can still remember 

him telling me this 20 years ago. He wrote me a letter about 2 or 

3 months after he got out, and he said, you know—I was a captain 

23

at the time—and he said, you know, Captain, I have to tell you 

that nobody out here takes care of me like you guys took care of 

me inside the service. 

He said nobody worries about when I am going to get a dental 

exam. Nobody worries about when I am getting my physical and 

the rest of it. So there is an expectation that we will take care of 

our retirees, and I think that is important. 

Now we Chiefs took a look at this, and when we looked at some 

of the premiums, we tried to make a program split out between officers, senior enlisted, and junior enlisted retirees under 65. And 

we said there has got to be a gradation just based on salary. So 

we tried to take some of that into consideration. 

And finally when we looked at the overall premiums compared 

to what a healthcare program would cost on the outside, the State, 

local government or something else, this is still substantially and 

significantly lower than the average that you would pay almost 

anywhere else. So I just wanted to let you know. 

Mr. WICKER. But that wasn’t what I was told, and I speak to you 

as a retiree of the U.S. Air Force and Air Force Reserve myself. But 

that is not what I was told, that if I went the full 20 years and 

became eligible for retirement, that I would have a healthcare program as good as the private sector. Frankly, we were assured that 

we would have a better healthcare program. 

Mr. ENGLAND. The program is a better program, we think, than 

literally any healthcare program in America, and we think it will 

retain it being the best program. That is what I would tell you. 

I don’t think you would see the Chiefs line up for this. You know 

if you think about it, heck, I could be retired tomorrow. I could be 

retired in the next couple of years and fall into the same category 

again. And what I would say to you is, is that, you know, if I wanted to just look at and focus on myself and what type of benefit, why 

would I think this would be a reasonable thing? 

All of us Chiefs looked at this, frankly, from the long-term benefit for our members. My son just transitioned from the active force 

to the reserve. I think about him. I think about all of those children out there who are in service whose folks were in there. I think 

about widows, children, and the rest on this benefit, and it is important for us to continue to structure this to be the best 

healthcare program around, and I think it will be. 

Mr. RYUN. Gentlemen, time has expired. Mrs. Capps. 

Mrs. CAPPS. Thank you, Mr. Chairman, and thank you all for 

being here with us today. Secretary and Admiral, thank you for 

your testimony. 

Secretary England, the administration requests only $50 billion 

for the wars we are engaged in for 2007. Given the current rate 

of spending, this amount is clearly insufficient to finance war operations for the entire year. Is this amount the administration’s best 

estimate of how much will be needed next year? 

Mr. ENGLAND. My understanding this is an agreement between 

the OMB and the Appropriations Committee. And I believe it was 

based on the Congress’s initiative last year to put $50 billion in. 

So I believe it was a follow on to the Congressional initiative, put 

the $50 billion in at the beginning of next year. We will not know—

24

we do not know what the cost will be next year to run the war. 

I mean that is something we——

Mrs. CAPPS. I understand. 

Mr. ENGLAND. We still don’t know today. 

Mrs. CAPPS. But we are involved here in this committee in a 

budget process. Because the administration has not provided any 

estimates of the cost of our efforts in Iraq and Afghanistan, CBO 

has provided its own estimate for projecting the war’s bottom line 

over 10 years so that we can do our work. 

CBO assumes the total force level in support of war operations 

will remain at current levels through 2006, and beyond that CBO 

assumes the forces will reduce to 50,000 troops deployed in support 

of both Iraq and Afghanistan by 2010 and remain at that level 

throughout the remainder of the 10-year budget window. CBO estimates this scenario will cost an additional $391 billion over 2007 

through 2016. 

Now are these force level assumptions at all plausible? 

Mr. ENGLAND. I don’t know, Ms. Capps. Again, it depends on the 

circumstances on the ground. I mean the report you heard today 

was very encouraging from Admiral Giambastiani, but, of course, 

the situation changes. So, again, it is as the situation develops on 

the ground will determine the force levels and the efforts and the 

expenditures. So I just can’t comment on it. I mean it is very speculative to say what is going to be out in 10 years from now. 

Mrs. CAPPS. I know. 

Mr. ENGLAND. I mean that is really a stretch. 

Mrs. CAPPS. I understand, but on the other hand, we are making 

10-year predictions all the time here, and we have also funded this 

war through supplementals which is highly unusual, given our past 

history in Congress. 

But let me address, because I want to stick to my time, the other 

side of our perhaps force reductions—it depends on the Iraqi Army. 

And you spoke about improvements in the Iraqi Army and security 

forces. I assume you are saying that the overall situation in Iraq 

is improving? 

Mr. ENGLAND. Yes. We are getting more and more security, both 

army and I will let Admiral Giambastiani——

Mrs. CAPPS. Why don’t—I am sorry—I should have directed that 

to——

Mr. ENGLAND. Yeah. OK. 

Mrs. CAPPS [continuing]. The Admiral who is closer to this on the 

ground. 

Mr. ENGLAND. Yes, thank you. 

Admiral GIAMBASTIANI. The way I would describe it is this. We 

are very interested in building Iraqi security forces. 

Mrs. CAPPS. I understand. 

Admiral GIAMBASTIANI. We, the United States, because as they 

become more capable and their numbers increase, which is why we 

keep focusing on these number of battalions that can take over battle space——

Mrs. CAPPS. Right. 

Admiral GIAMBASTIANI [continuing]. It is very important. And 

also the police side of this, and then we can slowly draw down. I 

25

think it is significant that we have reduced the number of brigade 

combat teams from 17 down to 15, which is substantial. 

We have a force with a prepare to deploy order, for example. It 

is in Kuwait. It is not in Iraq. These are significant changes, because the Iraqis are building up their forces, so what I would tell 

you is it is not the Chairman, I, or Secretary Rumsfeld, but the 

commanders on the field, who are the ones who are making these 

calls, which is why I thought it was important to let you know 

what the commanders in the field are saying. 

Mrs. CAPPS. Well, yes, thank you. But then when do we see—expect to see—our troop presence in Iraq substantially diminish? 

Admiral GIAMBASTIANI. What I would tell you is, again, it is condition-based, and we feel that we are making good progress with 

the Iraqi security forces, and you will see adjustments as the commanders make the calls and recommend them periodically to the 

Secretary of Defense and then up to the President. 

Mrs. CAPPS. Well, let me ask of your comment on this. I believe 

it was Secretary Rumsfeld who said in December 04, that we would 

be out in 4 years. Is that still the schedule? And if so, will we see 

troop numbers going down this year, and to what degree? This is 

a part of our budget process. 

Admiral GIAMBASTIANI. I can’t tell you. I don’t know what Secretary Rumsfeld said and in what context he said it with regard 

to 4 years or whatever number of years. I just know that we in the 

Armed Forces don’t want to stay in Iraq forever. The United States 

does not want to stay in Iraq forever. 

And the bottom line is, is that we would like to come down as 

quickly as we can come down. And that is why we are so focused 

on training these security forces and why we are now training the 

police and why we are embedding folks in that. 

The important thing that you ought to watch is when we keep 

reporting all of the battle space that the Iraqis have the lead in, 

and it is substantial now across the country. 

Just a month ago, we turned over an area the size of Kentucky 

to the Iraqi security forces, just a month ago. And we are doing 

this constantly. We are turning over bases. We used to have somewhere upwards of around 80 or so bases inside Iraq just a short 

time ago, and actually it was up to a hundred or so. 

And it is now coming down substantially and probably at the end 

of this year, it is going to be at about half of what we started out 

at the beginning of the year. So this is all turnover to the Iraqi security forces. And you will see commensurate reductions, not only 

in Iraq, but in Afghanistan as we do these turnovers. 

Mrs. CAPPS. And finally then, we should be able to base our 

budgeting on what you are saying. 

Admiral GIAMBASTIANI. But remember again, from day-to-day, 

you know, one day we have got folks telling us we are in a civil 

war. Our folks on the ground tell us, look, it is a tense situation. 

We just had——

Mrs. CAPPS. Do you think we are? 

Admiral GIAMBASTIANI. No, I don’t. 

Mr. RYUN. The lady’s time has expired. At this point, as the 

Chair, I am going to make a ruling that the hearing is adjourned 

26

so that members may proceed to the House chamber to receive the 

Prime Minister of Italy. 

I also ask unanimous consent that members who are not allowed 

the opportunity to ask questions of the witnesses, will be allowed 

7 days to submit questions for the record. Without objection, so ordered. 

[Prepared statement of Mr. England follows:] 

STATEMENT OF HON. GORDON ENGLAND, DEPUTY SECRETARY OF DEFENSE

Mr. Chairman, members of the committee, good morning. 

Thank you for the invitation to meet with you to discuss the Department of Defense’s 2007 budget request. This is the first time I’ve met with this committee, so 

I’m particularly pleased to have this opportunity, and I look forward to a constructive exchange. 

With me today are with two of my close colleagues, Comptroller Tina Jonas and 

the Vice Chairman of the Joint Chiefs of Staff, Admiral Ed Giambastiani. The three 

of us have been deeply involved in the process of setting the Department’s priorities 

for this budget request. Hopefully, we can fully inform you about the defense budget 

and answer your questions. 

As you know, this is a critical time for America. We’re a nation at war. This war 

is a daily reality for our men and women in uniform, who are stationed around the 

world or serving here at home, defending freedom and liberty along with our friends 

and allies. 

America is fighting against dispersed networks of terrorist extremists. They know 

they can’t succeed with conventional methods, so they use asymmetric means to 

challenge us and our allies. Their goal is to break our resolve and shatter our way 

of life. This struggle is not likely to end any time soon. The Cold War lasted for 

40 years. 

One of al-Qaeda’s ringleaders, Ayman al-Zawahiri, said in 2001, ‘‘The need is to 

inflict the maximum casualties against the opponent...for this is the language understood by the west, no matter how much time and effort such operations take.’’ 

This enemy is adaptable and relentless, and will continue the attack wherever he 

finds the opportunity. Though we didn’t choose this fight, we don’t have the option 

of walking away. 

Victory in this Long War requires that our military continue to adopt unconventional, irregular, and indirect approaches to eliminate the enemy’s ability to strike. 

But the Long War is only part of the Nation’s security challenge. 

Hostile states or non-state actors could acquire and use weapons of mass destruction, to devastating effect. Guarding against this threat, and preparing for the possible consequences of a WMD event, require new technologies and skills, as well as 

enhanced counter-proliferation efforts. 

The Nation also faces the possibility that a major or emerging power could choose 

a hostile course. China is the country with the greatest potential to compete with 

us militarily, and they are also on the rise as a scientific, technological and economic competitor. 

Meeting these potential challenges requires fostering cooperation with China and 

other emerging powers, while hedging against possible surprise by maintaining our 

military superiority. Traditional, state-based threats are still a concern. They have 

been kept at bay precisely because our Nation has been so well prepared. 

Of course, all of these challenges have a bearing on the security of our homeland. 

Detecting, deterring, and defeating threats far from our shores is the best and, likely, the only way, to keep America safe. But the Department of Defense is also prepared to defend America closer to home, and the Department continues to provide 

support to other agencies of the US Government for homeland security missions. 

In short, our Nation faces far more diverse challenges, and far greater uncertainty 

about the future global security environment, than ever before. The only sure way 

to protect the American people is to make sure that the President has at his disposal as wide a range of options as possible. 

The Department’s portion of the President’s 2007 budget request reflects the Nation’s priorities and the Department’s best responses to the security context I’ve just 

described. It provides essential resources to defend the American people, our homeland, and our way of life. This budget request lets our commanders prepare to meet 

both traditional and asymmetric threats. It maintains conventional military superiority while enhancing irregular warfare capabilities. It positions the Department to 

work closely with partner nations and to help them develop needed capabilities to 

27

address the global threats we face together. This budget reflects the Nation’s firm 

commitment to provide the proper quality of life for our service members and their 

families. Soldiers, sailors, airmen, and Marines who serve so selflessly are the heart 

and soul of our warfighting capacity and capability, and we owe it to them to take 

care of them and their families. 

This budget request is the product of a year’s hard work by our senior civilian 

and military leaders. It reflects the basic tenets of the long-term strategic vision in 

the 2006 Quadrennial Defense Review, which was submitted to Congress a few 

weeks ago. The full effects of the QDR will appear in future budget cycles, but this 

budget request does include some ‘‘leading edge’’ investments, that support the 

QDR’s vision for the future. 

I urge this committee to fully support the President’s national defense request, including the $50 billion allowance for FY 2007 war costs. The Department of Defense is asking you for $439.3 billion this year. This is nearly a 7 percent increase 

over the budget that was enacted for 2006. Now, this may seem like a lot of 

money—and it is. But America is spending a much smaller percentage of GDP on 

defense now than it did in the past. This year’s request is projected to be about 3.7 

percent of GDP, but it was up to around 4.6 percent in 1991 during the Gulf War; 

8.9 percent in 1968 during Vietnam; and 11.7 percent in 1953 at the height of our 

involvement in Korea. You have my personal commitment that with the budget you 

entrust us with, the Department will be diligent in ensuring that the funds are 

wisely spent. 

The initiatives that are reflected in the ’07 budget are part of a longer-term continuum of change and adaptation. The President charged the Department of Defense, in the wake of 9/11, to make the changes necessary to adapt to a more dynamic and less certain world. During the beginning of the long war these past 5 

years, our military has been continually learning and adapting, and this budget request is an important milestone in that process of ongoing transformation. 

You may wonder how the Department of Defense plans to meet a much broader 

array of challenges without doubling or even tripling the size of our force. The answer is that we have worked very hard to improve the flexibility of the force, by 

reorienting existing capabilities, eliminating unnecessary redundancy and improving 

our expeditionary capabilities to allow us to revise our global force posture. An important initiative has been helping partners and allies improve their own capacities 

and capabilities so they can better share the burden. The Department has also 

spent a substantial amount of time making organizations, structures and processes 

more efficient to better realize our strategic vision and to support our warfighters. 

Finally, a critical initiative for which we need explicit Budget Committee support 

is our proposed change to TRICARE fees—essential to sustaining our outstanding 

military health care program. 

At his Inauguration in 1961, President Kennedy told the Nation, ‘‘In the long history of the world, only a few generations have been granted the role of defending 

freedom in its hour of maximum danger.’’ In his own short life, he helped to lead 

one such generation. Our generation has been handed that mantle of responsibility. 

We owe it to our men and women in uniform, to provide them with the resources 

and support they need, to get the job done. And we owe it to our Nation, to correctly 

assess the security challenges we face and to prepare appropriately to meet them. 

The proposed budget responds to these needs. 

Meeting these goals will also require a strong, bipartisan consensus on national 

security, of the kind that defeated the communist threat. It will require unity of effort, and the sustained will of the American Congress and the American people. 

With that united will, and the hard work and sacrifices of our men and women in 

uniform, the Department of Defense will be able to provide the security so inseparable from the freedom we all enjoy. 

Thank you for your commitment to this most profound endeavor.

[Question submitted by Mr. Crenshaw follows:] 

QUESTION FOR THE RECORD FROM CONGRESSMAN CRENSHAW TO DEPUTY SECRETARY

ENGLISH

As a member very interested in the defense community, I have been following our 

need to have an electronic attack aircraft in the future. Recently, funding for the 

Air Forces future standoff jammer was eliminated in the budget request, and yet 

another Electronic Attack Study was directed. 

The EA–6B remains the only electronic attack aircraft in the inventory, and it is 

being used by the Navy, the Air Force, and the Marine Corps in theater at this 

time. We could not operate in Iraq and Afghanistan today without our inventory of 

EA–6B’s. The newest jamming suite (ICAP-III) for the EA-6B would ensure we have 

28

the electronic attack capability in the future, but the Navy has not requested 

enough ICAP III kits in the budget to meet current requirements. 

Would you support increasing the inventory of ICAP-III capable EA-6B’s with the 

$108 million that had been appropriated in FY06 for the B-52 standoff jammer 

while the future of Electronic Attack in the Services continues to be debated? 

Answer: The Navy is planning to award a full-rate production contract in FY 2006 

and has approximately $52M available for 4 Improved Capability (ICAP) III kits. 

The cancellation of the B-52 SOJ program has made additional FY 2006 funding 

available for other purposes, and the Department will consider providing additional 

ICAP III kits for the EA-6B. However, there is no commitment at this time to do 

so, as other DoD priorities may require attention. The Department will keep Congress informed regarding the outcome of deliberations in this matter.

[Whereupon, at 10:56 a.m., the committee was adjourned.]

Æ