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i 

56–863 2010

[H.A.S.C. No. 111–108] 

RESOURCING THE NATIONAL DEFENSE 

STRATEGY: IMPLICATIONS OF LONG 

TERM DEFENSE BUDGET TRENDS 

HEARING 

BEFORE THE

FULL COMMITTEE 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

NOVEMBER 18, 2009 
(II) 

HOUSE COMMITTEE ON ARMED SERVICES 

ONE HUNDRED ELEVENTH CONGRESS

IKE SKELTON, Missouri, Chairman 

JOHN SPRATT, South Carolina 

SOLOMON P. ORTIZ, Texas 

GENE TAYLOR, Mississippi 

NEIL ABERCROMBIE, Hawaii 

SILVESTRE REYES, Texas 

VIC SNYDER, Arkansas 

ADAM SMITH, Washington 

LORETTA SANCHEZ, California 

MIKE MCINTYRE, North Carolina 

ROBERT A. BRADY, Pennsylvania 

ROBERT ANDREWS, New Jersey 

SUSAN A. DAVIS, California 

JAMES R. LANGEVIN, Rhode Island 

RICK LARSEN, Washington 

JIM COOPER, Tennessee 

JIM MARSHALL, Georgia 

MADELEINE Z. BORDALLO, Guam 

BRAD ELLSWORTH, Indiana 

PATRICK J. MURPHY, Pennsylvania 

HANK JOHNSON, Georgia 

CAROL SHEA-PORTER, New Hampshire 

JOE COURTNEY, Connecticut 

DAVID LOEBSACK, Iowa 

JOE SESTAK, Pennsylvania 

GABRIELLE GIFFORDS, Arizona 

NIKI TSONGAS, Massachusetts 

GLENN NYE, Virginia 

CHELLIE PINGREE, Maine 

LARRY KISSELL, North Carolina 

MARTIN HEINRICH, New Mexico 

FRANK M. KRATOVIL, Jr., Maryland 

ERIC J.J. MASSA, New York 

BOBBY BRIGHT, Alabama 

SCOTT MURPHY, New York 

DAN BOREN, Oklahoma 

HOWARD P. ‘‘BUCK’’ MCKEON, California 

ROSCOE G. BARTLETT, Maryland 

MAC THORNBERRY, Texas 

WALTER B. JONES, North Carolina 

W. TODD AKIN, Missouri 

J. RANDY FORBES, Virginia 

JEFF MILLER, Florida 

JOE WILSON, South Carolina 

FRANK A. LOBIONDO, New Jersey 

ROB BISHOP, Utah 

MICHAEL TURNER, Ohio 

JOHN KLINE, Minnesota 

MIKE ROGERS, Alabama 

TRENT FRANKS, Arizona 

BILL SHUSTER, Pennsylvania 

CATHY MCMORRIS RODGERS, Washington 

K. MICHAEL CONAWAY, Texas 

DOUG LAMBORN, Colorado 

ROB WITTMAN, Virginia 

MARY FALLIN, Oklahoma 

DUNCAN HUNTER, California 

JOHN C. FLEMING, Louisiana 

MIKE COFFMAN, Colorado 

THOMAS J. ROONEY, Florida 

TODD RUSSELL PLATTS, Pennsylvania 

ERIN C. CONATON, Staff Director 

ANDREW HUNTER, Professional Staff Member 

JENNESS SIMLER, Professional Staff Member 

CATERINA DUTTO, Staff Assistant 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2009 

Page 

HEARING: 

Wednesday, November 18, 2009, Resourcing the National Defense Strategy: 

Implications of Long Term Defense Budget Trends .......................................... 1 

APPENDIX: 

Wednesday, November 18, 2009 ............................................................................. 37 

WEDNESDAY, NOVEMBER 18, 2009 

RESOURCING THE NATIONAL DEFENSE STRATEGY: IMPLICATIONS 

OF LONG TERM DEFENSE BUDGET TRENDS 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

McKeon, Hon. Howard P. ‘‘Buck,’’ a Representative from California, Ranking 

Member, Committee on Armed Services ............................................................ 2 

Skelton, Hon. Ike, a Representative from Missouri, Chairman, Committee 

on Armed Services ................................................................................................ 1 

WITNESSES 

Berteau, David J., Director, Defense Industrial Initiatives Group, Center 

for Strategic and International Studies ............................................................. 6 

Daggett, Stephen, Specialist in Defense Policy and Budgets, Congressional 

Research Service .................................................................................................. 5 

Donnelly, Thomas, Director, Center for Defense Studies, American Enterprise 

Institute ................................................................................................................ 8 

Goldberg, Dr. Matthew, Deputy Assistant Director, Congressional Budget 

Office ..................................................................................................................... 3 

APPENDIX 

PREPARED STATEMENTS: 

Berteau, David J. .............................................................................................. 93 

Daggett, Stephen .............................................................................................. 65 

Donnelly, Thomas ............................................................................................. 101 

Goldberg, Dr. Matthew .................................................................................... 41 

DOCUMENTS SUBMITTED FOR THE RECORD: 

Dr. Matthew Goldberg’s Letter to the Hon. John Spratt Regarding the 

Annual Incremental Costs for Deploying Troops to Afghanistan and 

Iraq ................................................................................................................. 111 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

[There were no Questions submitted during the hearing.] 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

[There were no Questions submitted post hearing.] 

(1) 

RESOURCING THE NATIONAL DEFENSE STRATEGY: IMPLICATIONS OF LONG TERM DEFENSE BUDGET 

TRENDS 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, Washington, DC, Wednesday, November 18, 2009. 

The committee met, pursuant to call, at 10:07 a.m., in room 

HVC–210, Capitol Visitor Center, Hon. Ike Skelton (chairman of 

the committee) presiding. 

OPENING STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM MISSOURI, CHAIRMAN, COMMITTEE ON ARMED 

SERVICES 

The CHAIRMAN. The hearing will come to order. Ladies and gentlemen, welcome to today’s hearing. Resourcing the National Defense Strategy: Implications of Long Term Defense Budget Trends 

is the subject today. 

In the first week of February 2010, the Department of Defense 

(DOD) will deliver two critical documents to our committee. One is 

the Quadrennial Defense Review, known as the QDR, which will 

outline the National Defense Strategy and some of the major policy 

changes required. 

The second will be the President’s budget request for fiscal year 

2011, the first true budget of the Obama Administration and one 

of the primary mechanisms for adopting the QDR’s recommendations. These documents along with the two ongoing wars are likely 

to dominate the discussions on our committee for the next year. 

The QDR is by design a process that is not supposed to be constrained by the budget. However, the fiscal year 2011 budget request is of necessity so constrained, though also deeply shaped by 

the QDR. So while the QDR will not and should not be limited by 

the budget, we in this committee will be required to confront budget limitations simultaneous to our review of the QDR. It is critical 

that we understand the budget constraints that are likely to shape 

the fiscal year 2011 budget, both in that specific fiscal year and 

over the Future Years Defense Program (FYDP) that will accompany it. 

The picture frankly is not a pretty one. We owe a debt to our colleague John Spratt, who held a hearing on the Budget Committee 

on October 14th to review the questions featuring two of the witnesses we have before us: Dr. Matthew Goldberg of the Congressional Budget Office (CBO), Stephen Daggett of the Congressional 

Research Service (CRS). These two gentlemen shared testimony 

with the Budget Committee about the need for continuing steep increases in defense spending to carry out the current programs of 
2 

the Department, increases that may not materialize unless the 

Obama Administration is able to add funding to the defense budget 

projections left to them by the Bush Administration at a time of exploding deficits. 

These witnesses are joined today by David Berteau of the Center 

for Strategic and International Studies (CSIS) and Tom Donnelly 

now of the American Enterprise Institute (AEI) and formerly of the 

House Armed Services Committee staff. After hearing from them 

we will have a deeper understanding of the implications which rising costs in the area of operations, war spending, health care, personnel, acquisition, and major weapon systems have for the Department of Defense’s future and a better appreciation for the challenges that go into building the fiscal year 2011 budget. 

I now turn to my friend, the gentleman from California, Buck 

McKeon, for his opening remarks. 

STATEMENT OF HON. HOWARD P. ‘‘BUCK’’ MCKEON, A REPRESENTATIVE FROM CALIFORNIA, RANKING MEMBER, COMMITTEE ON ARMED SERVICES 

Mr. MCKEON. Thank you, Mr. Chairman. Today the committee 

meets to receive testimony on Resourcing the National Defense 

Strategy: Implications of Long Term Defense Budget Trends. I 

would like to thank Chairman Skelton for agreeing to hold this 

hearing on this subject, and I would also like to thank our witnesses for being here. Your testimony this morning gives our members an opportunity to understand the impact of Secretary Gates’ 

April 2009 decision to terminate several major defense programs, 

as well as to help the committee prepare for the upcoming defense 

budget and the 2010 Quadrennial Defense Review. 

In May Secretary Gates testified before the House Armed Services Committee on his 2010 budget proposal and on his April 2009 

program cuts and emphasized the need to balance the Department 

and focus on the conflicts in Iraq and Afghanistan. Our concern 

then and what remains our concern today is the tradeoff that came 

along with the April 6th announcement. Secretary Gates assured 

the Congress that his program decisions were the product of holistic assessment of capabilities, requirements, risks, and needs for 

the purpose of shifting the Department in a different direction. 

Today’s hearing will help the committee understand the true impact of these cuts and whether the April decisions have indeed 

taken the Department in the right direction. Many in the Congress 

have a different perspective of the defense budget and believe it is 

not headed in the right direction. In my view, the Secretary’s plan 

for balancing the Department has come at too high a cost. 

As Stephen Daggett’s testimony lays out, the Department’s QDR 

assumes that the base defense budget, not including the war-related funding, will be essentially flat for the next five years, with 

growth sufficient only to cover inflation. In other words, zero real 

growth. It is in an environment of fiscal restraint that the Department will pay for the cost of Secretary Gates’ balance by moving 

$60 billion over the next five years from within the Department to 

pay for programs supporting current operations. 

Equally alarming is that as the defense budget remains flat, 

military personnel costs and operation and maintenance costs will 
3 

consume an increasingly larger share of the budget. This does not 

include the cost of other big ticket items that will command more 

defense dollars, such as the war supplemental costs that will migrate to the base budget or the price of resetting the force as our 

forces return home from theater. 

The pressures on the defense budget that I have just described 

warrant in my view, a higher top line. When one considers the current threat environment and some alarming gaps in our capability, 

the need for more dollars going to defense becomes critical. As we 

saw with the April cuts, a leaner budget resulted in changes to 

longstanding assumptions about the capabilities needed to hedge 

against the risks we face. 

Thank you. I yield back. 

The CHAIRMAN. I thank the gentleman. We have Dr. Matthew 

Goldberg, please. 

STATEMENT OF DR. MATTHEW GOLDBERG, DEPUTY 

ASSISTANT DIRECTOR, CONGRESSIONAL BUDGET OFFICE 

Dr. GOLDBERG. Thank you, Mr. Chairman, Mr. McKeon, and 

other distinguished members of the panel. It is my pleasure to be 

here today to talk about CBO’s analysis of the 2010 defense budget. 

As you probably know, over the past seven years we have taken a 

look at the defense budget, and ordinarily we have access to the 

FYDP, the Future Years Defense Program, which goes out another 

five years, and we form a projection, which is to say if all the programs and all the funding and all the force structure implications 

in the budget in the FYDP were to be fully funded and implemented over that six-year period, what we would project out is for 

another roughly 12 years. Based on that momentum of those programs and plans and policies how much would it take to sustain 

them, sustain those decisions in the current budget and FYDP. 

Of course this year we did not have the FYDP. We were working 

off the 2010 budget and related materials, Secretary Gates’ various 

announcements which we studied, as I am sure you did, Mr. Chairman. 

The 2010 request, putting aside for a moment the overseas contingency operations, the 2010 request was for $534 billion in total 

obligational authority. We have projected that to sustain the programs of record that are reflected in that request it would actually 

cost $567 billion on average between 2011 and 2028. In other 

words, there would be a ramp-up just due to the momentum of sustaining the programs that are in the 2010 budget. 

There are various reasons for this. One is the continued growth 

in pay and benefits for both military and civilian personnel. Even 

the pay raises that are indexed to the employment cost index, the 

ECI, represent a real increase in pay relative to inflation. In other 

words, the real pay raises are built into the budget and we expect 

those to continue. 

In addition, we have observed that systems as they age have 

higher costs of operations and maintenance, and we are also expecting that the newer systems that replace them will probably 

have costs at least as high for operations and maintenance. 

So all these factors contribute to the increase that we foresee. 
4 

In addition, of course there is the overseas contingency operations (OCOs). The Department requested $130 billion for 2010. 

We have not done any analysis beyond that point of what would 

happen in light of the proposed increases in troop levels in Afghanistan. But what we have is sort of a steady state number. If U.S. 

military presence worldwide were to decline to 30,000 in 2013, the 

case we looked at, not specifying whether those troops would be in 

Iraq or Afghanistan, being agnostic about the locations, but declining to 30,000 would require $20 billion in 2010 dollars every year 

to sustain that level of forces overseas. 

We also looked at other reasons why the costs could be higher, 

higher than they are in our base projections. I already indicated 

medical inflation has been higher in the Department of Defense 

than both the Department and analysts have anticipated. If that 

continues, if pay raises above the employment cost index continue 

for another five years, and if the cost of procuring weapons systems 

continues to grow as they have in the past, then we have a higher 

estimate, including what we called unbudgeted costs, costs that are 

not reflected in the budget, but that may be realized for all of these 

reasons. Costs might be as high as $624 billion on average through 

2028 if all those things come to pass, or some 17 percent higher 

than what was in the 2010 request. 

There is a shifting of funds. There is more money in the operation and maintenance and military personnel accounts. We see 

continued growth there because of the pay raises and because of 

the cost to continue supporting weapon systems. But there have 

been declines in the procurement and the Research, Development, 

Test, and Evaluation (RDT&E) accounts, mostly in the procurement accounts, in light of various changes that Secretary Gates announced in April. For example, the cancellation of the Future Combat Systems (FCS), cancellation of the second airborne laser, the 

cancellation of the Presidential helicopter, the Air Force combat, 

search and rescue helicopter, and the Multiple Kill Vehicle (MKV). 

And with those with other changes we are projecting that the need 

for procurement funds could actually—by 2020 would be about $20 

billion less in our current projections than what we were projecting 

last year at this time based on the 2009 FYDP. 

So in other words, we see long-term implications where if all of 

the changes that Secretary Gates proposed in April were made, 

were carried through, that the procurement budget required would 

be lowered by some $20 billion per year by 2020. That is probably 

an overestimate in that some programs have been removed and 

other programs, successive programs, have not yet been formulated 

which would be put in their place. So in reality 2020 is probably 

an upper bound, but we expect to see that if current plans will continue that the amount of funds required for procurement would 

probably be less and there would be migration into the operation 

and maintenance and military personnel accounts. 

I think I am out of time, Mr. Chairman. So I would be happy to 

take your questions when we come around. 

[The prepared statement of Dr. Goldberg can be found in the Appendix on page 41.] 

The CHAIRMAN. Stephen Daggett, welcome. 
5 

STATEMENT OF STEPHEN DAGGETT, SPECIALIST IN DEFENSE 

POLICY AND BUDGETS, CONGRESSIONAL RESEARCH SERVICE 

Mr. DAGGETT. Mr. Chairman, Mr. McKeon, members of the committee, thanks very much for inviting me to testify this morning. 

Mr. Skelton, it is particularly good to see you. It has been some 

time since we had a chance to talk in your office. I look forward 

to doing that sometime again. 

My testimony really focuses on four issues. First of all, by most 

accounts the defense budget is relatively robust right now. It is 

about, if you include war-related funding, it is about 20 percent 

higher than the peak of spending in the 1980s, which in turn was 

the peak of spending in the post-Cold War world except for the 

very highest level of spending during the Korean War. 

At the same time many of the leaders in the military services are 

warning about the need to make very difficult tradeoffs within the 

budget. So the question I addressed is why the discrepancy? Why 

on the one hand by most historical standards does the budget seem 

so high and yet we face these difficult choices? And I provided a 

number of answers to it. 

The basic answer is that the cost of defense has climbed even 

more rapidly than the budget itself, and there are six factors I have 

identified that have increased the cost of defense. 

First is the increase in cost in military personnel. By my account, 

an average service member is 45 percent more expensive in 2009 

than in fiscal year 1998. That is above inflation, after adjusting for 

inflation. 

Second is the trend in operations and maintenance cost. Operation and maintenance per active duty troop continues to grow at 

a rate between two and three percent per year above base inflation, 

which is a trend, by the way, that is starkly at odds with cost of 

doing business in the civilian sector of the economy and which most 

companies have reined in costs have lower costs of operation rather 

than higher. 

A third factor is apparently accelerating increases in cost from 

one generation of new weapons to another. We always expect that 

the next generation of weapons will cost somewhat more than earlier generations, but at a certain point there has to be a limit to 

how far you can go in that direction. You can’t afford to buy weapons and replace the force on a one-for-one basis with a new system. 

Many new weapon systems appear to be dramatically more expensive than their predecessors. 

Fourth factor, and I identify it as an independent factor driving 

up the cost of acquisition, is we tend to systematically underestimate the cost of new programs, resulting in unplanned cost growth 

and scheduled delays. Forty-four percent of new weapons programs, 

according to Government Accountability Office, have had a 25 percent or larger increase in estimated costs above initial projections. 

So we are not doing very well at estimating costs of major programs. 

Total cost growth in most of the major defense acquisition pro- grams in 2007 amounted to about $300 billion across the board, 

which a full year and a half worth of weapons procurement. 

A fifth factor is we have increased demands on ground forces. We 

have increased the size of the Navy and Marine Corps by 92,000 
6 

troops at a cost of $12 to $15 billion per year. In addition, we have 

new equipment requirements that are the result of war for transportation equipment, for communications equipment, for force protection equipment. 

And finally we are preparing for a much broader range of challenges in the international security environment, ranging from traditional to disruptive to catastrophic threats to the homeland to irregular warfare, and we are trying to figure out ways to adjust to 

all of these. 

Second major point is in April Secretary Gates announced a 

number of changes in major weapons programs. How will that affect this disconnect between the growing cost of programs and the 

budget? And my answer is it will help to a certain degree. It would 

help to a larger degree to the extent that these changes represent 

changes in policy that will last over quite a long period of time. We 

seem to have turned away from maximizing the capabilities of systems from multi-role missions and toward systems that will cost 

less because they are aimed at a narrower range of missions. We 

seem to have also turned in the direction in the acquisition phase, 

in the development phase of insisting that at milestone review 

processes we are sure that the technology that we are integrating 

into new systems will actually be available at cost and on the kind 

of schedule that is planned initially. 

Fourth point that I addressed, and I will just skip over it very 

briefly but we can talk about it more in Q and A, is the deficit situation that we face now one is one in the past that has led to constraints on the defense budget over the long term. If the defense 

budget were not to grow over the next 10 years and we had the 

kind of growth we had in military personnel and Operations and 

Maintenance (O&M) accounts in recent years, that would squeeze 

out funding for acquisitions so there would not be enough money 

left by the end of the decade to support a very robust modernization program at all. 

Finally, this QDR it seems to me is likely to come up with a 

number of new requirements for major systems. A number of those 

changes could end up being quite expensive. I gave one example of 

anti-access strategies, which could lead to requirements for different kinds of delivery vehicles to deliver power ashore from forces 

offshore. And the effort to cope with these kinds of new challenges 

it seems to me it is not necessarily a sidebar to the budget. It could 

be a significant budget driver in future years. 

With that, I will be glad to leave it to questions and answers. 

Thanks. 

[The prepared statement of Mr. Daggett can be found in the Appendix on page 65.] 

The CHAIRMAN. Thank you very much, Mr. Daggett. 

Mr. Berteau. 

STATEMENT OF DAVID J. BERTEAU, DIRECTOR, DEFENSE INDUSTRIAL INITIATIVES GROUP, CENTER FOR STRATEGIC 

AND INTERNATIONAL STUDIES 

Mr. BERTEAU. Thank you, Mr. Chairman. I had to find the button here. 
7 

It is a great privilege to appear before you today, and I appreciate the opportunity. My statement actually doesn’t have the same 

level of precision of data as the two colleagues who preceded me 

here today, because I knew that theirs would, and I basically used 

the CBO data and the CRS data for much of our analysis at CSIS 

anyway. So we took advantage of that. 

What my statement does is look at some of the key issues and 

at the process, and I would like to summarize it now and ask the 

full statement be submitted in the record. 

The Pentagon’s biggest problem today is that they are facing 

probably the most significant set of challenges in at least the last 

20 years, perhaps a good bit longer than that, and yet they are not 

recognizing that that is the situation that they are in. We have had 

more money than we have had ever over the last 10 years, and yet 

our shortfalls are actually bigger than they have ever been as well, 

or at least in relevant memory. I think the Korean War probably 

is an exception, but it goes back too far to be relevant today. 

And I think the saddest thing and the most difficult thing for 

this committee to wrestle with is they have quit keeping score. 

There is no longer a process, a rigorous process, inside the Pentagon that tries to capture what its requirements are and what its 

shortfalls are. 

Mr. Goldberg mentioned the absence of a FYDP with the fiscal 

year 2010 budget, and that is actually true, and quite disgraceful. 

But the reality is there has not been a fiscally disciplined FYDP 

put together by the Pentagon since before September 11, 2001. The 

existence of supplementals has made it way too easy to fix a problem by putting it into the supplementals and funding it there. And 

so there hasn’t been a disciplined attempt to figure out what the 

real defense program is what it would cost, what the shortfalls are, 

how do you prioritize across the shortfalls, how do you make the 

tradeoffs necessary, and then how you defend them to the Congress 

so the Congress either accepts them or makes the adjustments necessary that you all would seem to be in place. 

It seems to me the Pentagon should be teeing up these issues 

today and laying out those options, and they are not doing that. So 

the challenge this committee has is how do you assess the options 

and determine the priorities without the data that you would get 

from a physically disciplined FYDP, without the information on acquisitions systems necessary from the selected acquisition reports. 

Well, maybe the QDR will fix this. That is kind of the idea, that 

is why we do a QDR. The impact of the non-disclosure agreements 

of course has made it more difficult for those of us who think we 

like to watch what the Pentagon is doing and make intelligent commentary on it. It has been a little more difficult for us because we 

don’t actually get much visibility than what is going on. There is 

nothing wrong with that as long as we had some comfort and assurance that what is going on is going to produce a QDR that will 

answer the kind of questions that we raise here this morning. But 

I am afraid that much of what we have seen indicates a lack of a 

willingness to wrestle with those questions at the broad level. So 

I think those who believe that the QDR will have all the answers 

may end up being sorely disappointed. 
8 

There are a lot of unspoken risks as well that we are addressing 

today, I suspect we will come back to them during our questions, 

in addition to the issues facing DOD, there are of course a number 

of significant issues facing the industrial base as well, and I would 

be happy to touch on those as we go through the questions. 

I will yield back the balance of my time, Mr. Chairman, and look 

forward to your questions. 

[The prepared statement of Mr. Berteau can be found in the Appendix on page 93.] 

The CHAIRMAN. Thank you very much. 

Tom Donnelly. 

STATEMENT OF THOMAS DONNELLY, DIRECTOR, CENTER FOR 

DEFENSE STUDIES, AMERICAN ENTERPRISE INSTITUTE 

Mr. DONNELLY. Thank you, Mr. Chairman, Mr. McKeon, and 

members of the committee. Mr. Skeleton, you mentioned that I 

used to work for this committee. That still remains the high point 

of my resume. So I am very pleased to come back and talk to my 

old bosses. 

I have three questions that I would like to pose and offer at least 

the sketch of an answer to in talking about long-term budget 

trends. I want to talk not only about defense budget trends per se, 

but I also think it is essential to talk about trends in Federal budgeting and spending overall, because if there is one thing that really 

constrains our defense choices going forward, and I would certainly 

agree with David that we are at a crossroads that we haven’t been 

at in a long time, it is not so much the growth of the debt or the 

deficit per se, although because that has mushroomed that is a 

larger factor than it has been in the past. But it is other forms of 

particularly mandatory spending that are depriving the Defense 

Department of the money it needs to fund its programs. 

Finally, we have to ask the question that the QDR is supposed 

to answer, and that is how much is enough to meet the strategy, 

which is also the title of this hearing. And before I begin one more, 

I very much want to commend the committee for insisting upon 

setting up at least a partially independent panel to review the 

QDR’s work. The Congress has an institutional responsibility. 

Those of us who were on the committee staff were constantly 

pounded by Article 1, Section 8 of the Constitution, so I applaud 

the committee for making that happen and hope that process turns 

out to be a fruitful one. 

To turn to my questions, I also need to use a slightly different 

set of metrics in order to measure things across time. I think that 

using the measurement of percentages of gross domestic product 

are by far the best way to measure the amount of sacrifice or the 

opportunity costs, if you will, to the economy of defense spending 

over the time. And actually if you look at the numbers through 

those lenses, you see exactly the opposite picture from what my colleagues have portrayed. 

Just very quickly to summarize and to distinguish, as we have 

learned to do in recent years between the baseline defense budget, 

the cost of raising, training and equipping the forces, and the wartime costs that we paid through supplementals; that is, the cost of 

actually employing the force, you get again quite a different pic-
9 

ture. And in that regard, the costs of our defense have really gone 

down significantly over the post-World War II period. That would 

be the period where the United States has been the primary guarantor of the international security system. 

In the 1950s our baseline posture cost us about nine percentage 

gross domestic product (GDP). That fell in the 1960s to seven and 

a half percent, and fell even in the 1980s, even allowing for the 

Reagan buildup, to about five or six percent. And in the 1990s it 

fell even further to an average of between three and a half and four 

percent. And if we look at the Administration’s budget plans going 

forward, it is going very quickly to fall to three percent and remain 

there through the projected 10 years of the budget plan that the 

Administration put out earlier this year. 

It is true also that the cost of our wars has gone down. Korea 

cost about an extra three percent of GDP to fight, Vietnam about 

two percent, and our total combined global war on terror or long 

war, whatever term of art you want to use to capture the Iraq and 

Afghanistan experience, has cost on average about one percent of 

GDP rising very slightly to about one point two percent in recent 

years in part because of slower economic growth and the surge in 

Iraq. And if we project that forward, we will wait and see what the 

Afghanistan decision is. 

So overall the burden to the American economy of military—of 

both raising the force and deploying the force has fallen significantly over the course of the last 60 years. 

What has happened inside the pie of the budget? Well, my colleagues have talked a lot about the growth in personnel costs and 

health care costs in particular. So I won’t linger on those, but I just 

want to put that in—take three snapshots of how that has changed 

things. 

In the Reagan years, at the height of the Reagan buildup, and 

of course we are still sort of living off the investments of those 

years, the Pentagon spent about one point four two dollars in procurement for every dollar it spent on personnel. During the 1990s 

after the post-Cold War drawdown and for reasons that were related to the desire to preserve the old volunteer force, the situation 

was almost entirely reversed. The Clinton Administration say in 

1998 spent about one point five five dollars on personnel for every 

dollar that it spent on procurement. So the ratios have been essentially inverted. And even in recent years and with some of the investments that the Bush Administration made, that ratio has only 

been reduced to one dollar for procurement to one point two two 

dollars for personnel. As my colleagues suggested, I think that proportion is only likely to again rise if current trends continue. 

I mentioned that I wanted to talk a bit about the rest of the picture and in particular talk about the portion of defense as an element of Federal spending. I have got a lot of statistics on that in 

my testimony, but let me just kind of use the projections of the Administration, take snapshots again through time to try to suggest 

the relative balance of these things. 

According to the numbers put out by the Office of Management 

and Budget (OMB) earlier this year for 2016, Federal spending 

total will be about 22.4 percent of GDP. Of course the amount of 

borrowing projected over those years will increase the total debt to 
10 

about 70 percent of GDP. So even as entitlement spending grows, 

so will debt service, but to the point where all of those mandatory 

expenditures will themselves account for 22 percent of GDP. So before the Congress authorizes or appropriates a single penny, basically all the money will be gone. And domestic discretionary programs are supposed to grow to about four point two percent of GDP 

and defense is held to three percent of GDP. 

The question I want to leave you with is whether this is adequate, as you were asking in the title of the hearing and as I am 

sure we will get to in the Q and A session, whether this is sufficient to meet our strategic goals. The United States remains the 

guarantor of international security of the remarkably peaceful and 

prosperous and liberal international system that now prevails, although it is under attack and under threat from many quarters. 

And the question that I think needs to be asked of the QDR is not 

whether the risks are balanced, you can always balance risk, the 

question is whether the level of risk is adequate or is too dangerous 

or is a threat to the entire system going forward. 

Thank you for your time. 

[The prepared statement of Mr. Donnelly can be found in the Appendix on page 101.] 

The CHAIRMAN. Thank you, Mr. Donnelly. 

Mr. Daggett, get your crystal ball out. Tell us in your opinion, 

as succinctly as possible, of what does today’s National Defense 

Strategy consist and what should the National Defense Strategy 

consist of tomorrow? 

Not an easy question. 

Mr. DAGGETT. Not an easy question. 

The CHAIRMAN. You are fully equipped to answer it. 

Mr. DAGGETT. Well, there has been a bit of a shift in National 

Defense Strategy in recent years with more of a focus on preparing 

for irregular warfare. The big change in strategy has been that. 

The increase in size of ground forces in particular in order to provide a rotation base for deployment of a pretty substantial number 

of forces abroad in contingency operations like that in Iraq and Afghanistan. 

Beyond that I see a little bit of a shift in defense strategy in the 

direction of maritime forces, and part of that is the shift in focus 

away from Europe, which would have been primarily a ground theater of operations, and to the Pacific, which is mainly maritime. 

The two have created—the fact that we shifted in two directions, 

one which has led to a substantial increase in ground forces and 

the other which emphasizes and reemphasizes naval forces and 

also to a degree long range power projection forces in the Air Force, 

means we are really committed to adding capability in pretty much 

every dimension in the force. 

So it hasn’t been simply a matter of making tradeoffs between 

one set of priorities and another. We have tried to add capabilities 

pretty much across the board, and that is one reason why I think 

the budget has been driven up in the direction it has been driven, 

why we see shortfalls. We are trying to meet a much broader range 

of requirements. And I see new requirements emerging in the future, particularly to cope with what is called hybrid warfare, and 

that is that even enemies at the lower end of the spectrum of con-
11 

flict will be equipped with pretty high-technology weaponry like 

Hezbollah and Hamas, including anti-ship cruise missiles and more 

precise munitions of other kinds and also a shift in the direction 

of what the Administration terms high-end asymmetric warfare, 

and that is the notion that future foes of whatever capability will 

try to challenge the United States in areas in which we are relatively weak, and that means to me even potentially attacks on the 

homeland, attacks on communication systems, as well as efforts to 

drive U.S. power projection forces further offshore. 

So all of these to me are driving requirements up, and it becomes 

more difficult to make choices between various systems. You know, 

I also think that you are correct, that we are going to have to cope 

with budget constraints, we are going to have to figure out how to 

set priorities in a situation in which there is not enough money to 

do all of the above, and as evidence of that let me just make a final 

kind of closing point, and that is that to me the big change that 

is going on in the international security environment doesn’t have 

to do with military forces. It has do with financial power, and the 

financial shifts are all away from the United States and toward 

Asia. The projection used to be that China would have a larger 

economy than the United States in 40 years or so. Now it is down 

to about 30 years or so after this last financial crisis, and that has 

to affect the dynamic of U.S. planning. 

In the past we could assume that we could build up military capabilities to such a degree that it would dissuade potential future 

foes from trying to challenge us in building up military capabilities. 

I am not sure how long that is doable given the shift of financial 

resources toward the East. So it puts an emphasis to me in building cooperative relations with potential future foes to the extent 

that we can in areas like protecting the global economy, including 

maritime, but also cyberspace and things of that sort. 

That is a beginning of an answer to your question. 

The CHAIRMAN. Thank you very much. A quick follow-up. 

In recent days I have heard the phrase used Pax Americana, and 

I think aptly so. When in your crystal ball will that begin to shift 

away from us, if it ever does? 

Mr. DAGGETT. I think we are in the midst of a shift away from 

American military predominance towards something different. I 

mean we are still for several years clearly going to be technologically predominant in military capabilities. How long we will 

have the ability to do all of the above, to project power of every 

kind—of ground forces, maritime forces, air forces—I don’t know, 

but it is eroding slowly over time, and the more we can we can 

rely, it seems to me, on allies to do a part of that work for us, the 

better off we will be in the long term, and the more we can avoid 

conflict the better we will be in the long term. 

I don’t know if that is a precise answer to your question, but I 

think—you know, the days of the American century were really the 

last 50 years of the 20th century, and the 21st century is turning 

slowly into something different, which is much more balance in the 

international security environment. The U.S. can still shape that, 

and it is still the main power shaping what the global environment 

will look like. So you can call it a Pax Americana for the foreseeable future just in that way, but our shaping in the environment 
12 

has to be in a direction that I think leads to more cooperation with 

allies and an effort to build kind of an agreement with rules of the 

road with potential future—what we have regarded in past as potentially future foes like China. 

The CHAIRMAN. Thank you. Mr. McKeon. 

Mr. MCKEON. Thank you, Mr. Chairman. 

In meetings I have had with defense contractors recently they 

have had a great concern about our industrial base. Would you 

please, each of you, describe what you would see as the impact on 

the industrial base as regard to the recent cuts in the defense 

budget? 

Dr. GOLDBERG. If you would like me to start, sir. Certainly the 

procurement cuts that Secretary Gates has announced and that are 

starting to be built into 2010 budget and presumably the 2011 

budget will have an effect on defense contractors. 

I should point out a few things, that some of the programs that 

have been cut will inevitably be followed by some other program 

that has not yet been formulated. For example, the Presidential 

helicopter, there will be some sort of platform. The Future Combat 

System, the Secretary in his announcement left open the possibility 

of reformulating the ground vehicles program, but in a way different from the program inherited from the previous Administration. 

So it is not as though we are going to zero in on all the programs 

that we cut. 

I should also point out that the contractor base, as I am sure you 

know, is much more than the big 5 or 10 Lockheed Martin, Northrop Grumman, Boeing, et cetera. I looked up some numbers in 

2008. The Department of Defense contracted a total of $390 billion. 

Not only is most of the procurement budget and much of the 

RDT&E budget contracted, but much of what goes out of the operations and maintenance budget is contracted, six billion a year to 

Logistics Civil Augmentation Program (LOGCAP) to support the 

troops in Iraq and increasingly in Afghanistan. Many other contractors do base construction, military construction, support of the 

bases, provide security on bases here in the U.S., Information Technology (IT) support. Every time you walk into a base or Pentagon 

or visit a base you see contractors. 

So I think taking a broader view, the Department is very reliant 

on contractors in a way that is probably more permanent and sustainable than just looking at the big, big procurement programs 

that have been cut in the 2010 budget. 

Mr. DAGGETT. I think I would begin to address the question by 

looking at different elements of the industrial base. One is look at 

aircraft in general. There are now really only two major—in the 

long term there are really two major production lines for fighter 

aircraft, F–18s and F–35s. The defense industry is therefore understandably concerned that they will lose the capacity to develop new 

systems, because the kind of opportunity for design teams to develop new kinds of fighter aircraft is diminishing. I think that is 

true in that area. In other areas it is less true. 

I see, given the growth of requirements to deal with high-end 

asymmetric threats and things of that sort, increasing demand for 

new designs of advanced systems for Command, Control, Commu-
13 

nications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) and lots of other areas to some degree offsetting 

those kinds of changes. 

On shipbuilding in general it has long been the case that the 

U.S. shipbuilding industry depends pretty much strictly on military 

production. The changes that Secretary Gates announced in Navy 

shipbuilding won’t in my view lead to any substantial decline in 

the budget for Navy ships; it will lead to it being focused on a 

smaller number of ship designs and actually I think that could lead 

to some cooperative effort with the defense industry to improve the 

efficiency of shipbuilding production and maybe increase numbers 

by doing it that way. 

In other areas the industrial base is not as robust. Helicopters, 

for example, most recent helicopter programs that we have had 

have been based on European design helicopter frames with electronics built by the United States, reflects the fact that the Europeans have been building more helicopters for a long time for commercial as well as other purposes. Electronics and things of that 

sort, again I see a relatively high demand, if there is a shift, it will 

be away from platforms and towards C4ISR in the military. So that 

may be a relatively robust area in the future. 

To some degree it depends on the top line. If as I said the Defense budget is frozen for the next 10 years, then that leads to a 

decline in acquisition which I think would make it very difficult for 

defense industry to sustain the kind of design capabilities that we 

have looked to it for in the past. I don’t necessarily foresee that 

happening. But, you know, instead we would look at, if necessary, 

cuts in the size of the force and certainly increases in the top line 

to sustain some level of defense acquisition, but that is an outside 

possibility that there could be simply a decline in the industrial 

base. 

Mr. BERTEAU. Mr. McKeon, I think there are two parts to your 

question, one which is specifically what you asked, which is what 

is the impact. The second implied part is what can we do about it, 

because ultimately that is the real challenge. The industrial base 

has had a lot of money flowing into it in the last 10 years. Procurement for hardware, procurement and research and development 

(R&D) for hardware is up about 60 percent since 2001. Contracts 

for services, and there is a whole services industrial base which I 

think we have to keep our eyes on as well, has doubled in that period of time. 

But the future doesn’t look nearly as good, and I think from the 

point of view from the hardware side, the procurement and R&D, 

all of the testimony this morning is consistent with our analysis, 

which is that will be shrinking both potentially in real terms and 

certainly in relative terms to the requirement. 

It is also getting harder and harder for defense to use commercial variants. In theory it would be you would save money and time 

by starting with a commercial platform and then militarizing that 

platform. The study we did as part of a defense science board task 

force that I was on showed that it is pretty hard to find cases 

where it did actually save us time and money. So our ability as a 

nation to use the power of the commercial industry, both here and 

around the world, has been diminished over time. 
14 

There is a question of what do we do about it. Congress has a 

clear law in place that says DOD needs to consider the industrial 

base impact of decisions on major weapon systems. Consider, of 

course, is a very soft word here, and in our study I think we have 

yet to find in recent years any single decision which was changed 

as a result of the consideration of the industrial base. In other 

words, the documentation basically said we have made the decision, how do we line up the industrial base impact to be consistent 

with that decision? 

The bigger challenge is it doesn’t look at the whole industrial 

base; it just looks at the piece necessary for that particular weapon 

system. And you can always define the universe in such a way, you 

say we will have enough, we will be able to get what we need, materials, technology, skills, et cetera. Over the long run, though, nobody has taken a look at the comprehensive impact and what it 

will do for the industrial base as a whole. 

Mr. Daggett noted that we are down in many cases to a single 

provider for an awful lot of systems and subsystems. And yet we 

all know that only when you have good competition do you not only 

get better price control and schedule control but you get better 

technology development, because that is where the technology 

comes from is a competitive environment. 

If we are at the point where the only place we can get competition is by going global, then that raises a whole set of new issues. 

And I think DOD still operates under the idea that 95 percent of 

all good new ideas are being developed in America. That may be 

true in the very narrow defense part of the universe that Defense 

Advanced Research Projects Agency (DARPA) looks at, for instance, 

but I don’t think it is true in terms of where global technology is 

going at all. I don’t think we have a lock on new technology anymore. And so that delicate balance of how do you balance competition, domestic protection, with globalization is one that hasn’t been 

wrestled with. 

I think all of those are critical questions. 

Mr. DONNELLY. I agree with essentially everything that my colleagues have said, but just to gild the lily a little bit, it is worth 

remembering that there was a significant round of industrial consolidation in the 1990s after the end of the Cold War, but that actually didn’t go as far as some people wanted to make it go, because people were reluctant to sort of take apart the arsenal of democracy on the chance that we would need to use that again. It has 

been about 15 years since that happened, and the fundamental imbalance between the structure of the industry and the amount of 

work that the industry has to do is leading us I think to the situation that we see before us and inevitably another round of industrial consolidation. 

We have kept two nuclear submarine shipyards open because 

they are regarded as national treasures, but we have never had 

enough work to justify those two yards and have come up with all 

kinds of Rube Goldbergesque arrangements to keep both—some 

work going into both yards. 

The further canary in the coal mine here is the question of the 

industrial workforce, which has a huge demographic hole in its 

middle. You have the people who are now relatively senior who 
15 

have spent their careers in the defense industry reaching the end 

of their careers and because of the financial constraints there was 

essentially a hiring freeze, or close to it, during those late 1990s 

or early 2000 years. So what you have is a very immature workforce, if you will, at the bottom and a very small, the kind of, you 

know, ballistic missile pocket protector generation that is reaching 

the end of its career at the top end and very little experienced middle management in between. And there are bound to be consequences of that going forward that will probably lead to further 

snafus in program management and the inability particularly to integrate large-scale efforts, even if they involve as many electronics, 

as they do, platforms. 

Mr. MCKEON. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. McKeon. 

We are under the five-minute rule, Mr. Ortiz. 

Mr. ORTIZ. Thank you, Mr. Chairman. I can remember during 

the first Bush I war with Iraq that we were having problems with 

our allies because they could not really help us, because we were 

so advanced technology-wise that we didn’t get much help from 

them. Sometimes I wonder whether we are spending a lot of money 

on weapons that we don’t need to fight a war with. Maybe I am 

wrong, this is only my personal belief. But then we talk about how 

the benefits to our soldiers and pay has gone up. But what bothers 

me is that when you look at the big picture and you look at the 

two theaters, war theaters in Iraq and Afghanistan, when you have 

got more contractors than you have troops, that bothers me. 

And I know that this has created a problem because some of the 

soldiers that we are trying to get out—their time ended, they spent 

time and they were getting out and here comes the backdoor draft 

and they wanted to come out because they were going to get a job 

with the contractors and they were going to get paid $130,000 or 

$140,000 a year. For the specialists they were making $45,000. I 

don’t know. And then we have all this equipment that has been destroyed. And when you go and you visit the National Guard units 

and the reserve units you will find that most of the equipment that 

they had before the war has been left behind in Iraq or Afghanistan. And we have to realize that they fight or they answer to two 

masters, the Federal Government and the states. 

So looking at this problem that I have mentioned, the contractors, the pay increases, the weapons that maybe we don’t need, 

how can we grasp it and bring it in, rein it in so that we can reduce some money? I throw these questions to you, and maybe I am 

wrong, but I see a lot of things that need to be done, but how do 

we rein them in to do what is best for our troops and for the taxpayer? 

And now I leave it in good hands. 

Dr. GOLDBERG. Mr. Ortiz, a very interesting set of problems that 

you raise and I have a few comments coming from a couple of different directions. One argument that we have made at CBO in 

terms of contractors may actually be a cheaper solution than increasing the force structure for a couple of reasons. 

One is that many of the contractors who hired in the theater are 

either host country nationals, Iraqis, or third country nationals 

who get paid a lot less than the American expatriates, the Amer-
16 

ican veterans, who hired at some of the high salaries that you mentioned. A lot of the third country nationals are paid considerably 

less because they don’t have the options that we have here. 

And another thing about contractors is—the advantage of contractors is they are temporary. When you don’t need them, terminate the contract. Whereas if we wanted to have our U.S. Army 

units perform a lot of those functions, we would have to build presumably permanent end strength and we have to provide dwell 

times for each battalion that we deploy to the theater. We have a 

battalion or two here in garrison recuperating. So you multiply the 

cost of increasing force structure of two or three when you consider 

dwell time. 

So contractors in many cases can be an effective solution. You 

don’t have to maintain a garrison here, you don’t have to maintain 

a rotation base, and when the war is over you just end the contract 

and that is it. 

As far as the equipment, that is an important concern, the equipment that is been worn out, and we have done some estimates 

early in the year. Equipment reconstitution costs; that is, replacing, repairing the equipment that was worn out, damaged, lost, 

during the war will probably take an extra two years, even after 

the conflict in Iraq ends. So we see costs going out as late as 2013 

to get the force, including the National Guard, their equipment 

back to the state where they were again ready to perform all their 

missions. 

Mr. DAGGETT. I will just make one point echoing that. We have 

a couple of reports that have looked at new information that DOD 

is providing recently on use of contractors, specifically in Iraq and 

in Afghanistan. As Matt said the bulk of the contractors, particularly in Afghanistan are third country nationals, neither U.S. nor 

Afghan, and they perform a lot of the basic functions. 

So use of contractors now appears to be built into the way in 

which the U.S. deploys forces abroad for good or real, but a lot of 

it is the people who get attention are contractors for security functions and things of that sort. The bulk of the contractors are not 

for those purposes. They are for food services and transportation 

and things of that nature, which otherwise would be more expensive if they were handled by U.S. military personnel. 

Mr. ORTIZ. You know, and the numbers I am giving you from 

what I understand are not contractors from those countries. 

Mr. DAGGETT. Yes. 

Mr. ORTIZ. I am talking American contractors who are paid hundreds of thousands of dollars. 

Mr. DAGGETT. Well, they are contracted by American firms generally, but the people they hire for most of these activities, again 

food services and transportation, very undramatic kinds of things, 

are mainly nationals of other countries. The high-profile contractors really are Blackwater and things of that sort. They have gotten the bulk of attention. Those people to tend to be considerably 

higher paid, Special Forces, American Special Forces personnel 

have been leaving the force to join those kinds of contractors, and 

that has presented a problem in retention in Special Forces, yes, 

but that is a relatively smaller part of contractor pool. 

Mr. ORTIZ. My time is up. 
17 

The CHAIRMAN. I thank the gentleman. 

Mr. Bartlett. 

Mr. BARTLETT. Thank you very much, I have three quick concerns. Let me express them. 

Mr. Daggett, you mentioned the asymmetric warfare that we are 

involved in and that we will be attacked where we are weak and 

perhaps here in the homeland. I would suggest that one of our 

greatest vulnerabilities, not just in the homeland but our military, 

is our susceptibility to—our vulnerability to electromagnetic pulse 

(EMP). We may avoid that, sir, but what we may not avoid is a 

major solar storm of the Carrington magnitude. A high official in 

Federal Energy Regulatory Commission (FERC) told me that if 

that happened our grid would come down, cascading bring down 

some of the major transformers, it would be perhaps several years 

before the grid was back up. I asked him the consequences of that. 

He said probably 80 percent of our population would die. I see no 

activity on the part of either the military or the Homeland Security 

that addresses this enormous threat to life as we know it. 

Secondly, Mr. Berteau, you mentioned unaddressed risks, I read 

just recently China developed and is now fielding an anti-ship missile. If that is a cruise missile, supersonic, we have no defense 

against that. We would have to stand off 1,200 miles from any land 

where an enemy had that kind of a weapon. 

I see no indication that we are addressing that and reordering 

our military for the future to that reality, which is here and will 

increase. 

And thirdly, Mr. Donnelly, you mentioned that our military expenditure today is less in terms of GDP than it has ever been. I 

would suggest there is no shortage of money. What there is a shortage of is our ability to convince the American people that we need 

more money. The American people will support any level of funding 

of the military which is necessary to address our national security 

interests. 

Am I wrong in having these concerns? 

Mr. DAGGETT. On EMP, I know that you have been involved in 

a commission that has been studying electromagnetic pulse (EMP) 

issues. I have to say I haven’t looked at it as thoroughly as I think 

I probably should. I have taken a look at some—lots of different 

studies of potential future asymmetric threats. 

I discussed one—— 

The CHAIRMAN. Would you get just a little closer to the microphone? 

Mr. DAGGETT. Yeah. I discussed one set of those challenges in 

the testimony, which is access denial kinds of challenges, which I 

am convinced is an increasing problem for U.S. Naval forces. But 

the United States is beginning to address that. The decision to terminate DDG–1000 and use, instead, DDG–51 as a basis for bluewater forces reflects, I think, in part a decision that it is more difficult to maintain a ship of the size of the DDG–1000 in littoral 

waters given area denial strategies by the Chinese and by others 

than in the past. And that can include not just antiship cruise missiles, as you mentioned, but also smart mines, even precision-guided ballistic missile capabilities and things of that sort, let alone 

small boats with suicide bombers on board. 
18 

So there are a lot of those kinds of challenges. And EMP is one 

of them. But there are a number of other asymmetric challenges 

which we are going to have to cope with in the future. And, as I 

said, I think they could in the future become a pretty significant 

budget driver. 

Mr. BERTEAU. Mr. Bartlett, let me respond to both your first two 

points there. 

On the vulnerability on the grid, I would urge you as you are 

looking at defense next year also to notice that it used to be, 15 

years ago, that much of the defense infrastructure in the U.S. had 

its own independent power sources. Today, that is no longer true. 

We have now privatized, and DOD is largely dependent on the 

commercial grid. 

Mr. BARTLETT. Sir, we have gone in the wrong direction, haven’t 

we? The military ought to be able to island itself. We have a bunch 

of our electric production which cannot do a black start; it has got 

to have electricity to start if it if goes down. We will now be incapable of that. 

And wouldn’t it be a good idea if the military could island itself 

so it could be a starter for this? 

Mr. BERTEAU. And I suspect there is a third option there from 

a technology point of view that ought to be looked at. 

From the unaddressed risk things, particularly the one you 

raised—and we can’t talk about much about it here in an open session. But I actually think the QDR has done a better job on these 

sets of risks than in many other areas, and I suspect that you will 

be able to see some of the results of that when the QDR is released. 

Mr. DONNELLY. Mr. Bartlett, apropos of your last question, I 

agree wholeheartedly. The willingness of the American people to 

fund an adequate defense is quite remarkable. 

Just to pick a rather—almost unhappy, but I think illustrative 

example, the Congress, and even including many Members who 

disagreed with President Bush’s war policy in Iraq, fully funded essentially every request to support the forces in the field that was 

made, over dozens and dozens of votes. 

So if there is strong and articulate leadership on the part of our 

politicians, I am quite convinced that Americans will do what is 

necessary, particularly when they rightly and properly understand 

that the cost isn’t nearly as great as some measures make it appear to be, and that the costs of not doing so are as dire as they 

obviously are. 

The CHAIRMAN. I thank the gentleman. 

Mr. Taylor, the gentleman from Mississippi. 

Mr. TAYLOR. Thank you, Mr. Chairman. 

And thank you, gentlemen, for being here. Three questions: 

How much a month to run the United States effort in Iraq? 

How much a month to run the United States effort in Afghanistan, DOD dollars? 

And lastly, I am looking at your report, and if I have read it correctly, you say that about 20 percent of our budget, DOD budget, 

is procurement, 15 is R&D, 35 is O&M, and 25 percent is military 

personnel. I am curious how that tracks historically. 

If we were to go back 10 years, 20 years, 30 years, is that about 

how it has always been, or is one portion of this getting out of kil-
19 

ter? And I am particularly interested in rate of return for our R&D 

money. Are we getting what we are paying for there? 

So I will open that up to the panel. First is the hard numbers 

on Iraq and Afghanistan, whoever can provide those. 

Dr. GOLDBERG. Mr. Taylor, I am better prepared to talk about 

Iraq. We did a study recently on the President’s plan to draw down 

from Iraq. I would refer you to that study. And we are showing 

that the Administration’s plan, which would take out about three 

brigades per month, would total 156 billion to complete the operations in Iraq through—— 

Mr. TAYLOR. That wasn’t the question, sir. 

The question was how much per month DOD money for the 

United States effort in Iraq and same question for Afghanistan? 

Dr. GOLDBERG. The monthly burn rate now, we are looking at 

about five billion a month. 

Mr. TAYLOR. In Iraq? 

Dr. GOLDBERG. Total Iraq and Afghanistan. 

Mr. TAYLOR. For both? 

Dr. GOLDBERG. For both. 

Now, what we have not done yet—because we haven’t gotten a 

request, Mr. Taylor—is to look specifically at whether the cost of 

operations in Afghanistan, how they would differ for the same 

troop level, or per troop, from what we see in Iraq. I suspect it 

would be more expensive to conduct operations in Afghanistan because of the terrain and the geography, but I don’t have those numbers. That is something we have not yet looked at at CBO. 

Mr. TAYLOR. Okay. How about the DOD budget pie and the percentages that I gave you? How does that track historically going 

back 20, 30 years? 

Dr. GOLDBERG. The numbers you gave are indeed our numbers. 

And there has been a trend, going back, say, through 1980—I have 

the chart, and it is in our testimony; there was a big bulge in procurement in the early 1980s during the Reagan years, and much 

smaller during the 1990s during the Clinton years. And right now 

we are at about the percentage or close to the percentage that we 

had during the Reagan years when you include the procurement 

that was in the supplementals as well as in the base budget. 

Military personnel has been growing, and operations and maintenance have been growing, particularly since about 2000. It was in 

2000 when a lot of the changes were enacted, the repeal of the 

REDUX retirement, in other words making retiring at 50 percent 

rather than 40 percent of base pay, the concurrent receipt of veterans’ benefits, et cetera. 

A lot of those changes were passed in 2001—time frame, 

TRICARE for Life. So the military personnel costs have really been 

increasing since about 2000–2001, and that has taken a bite out of 

procurement, and it has taken a bite out of the RDT&E budget. 

That is really the main thing I see. 

How the future is differing from the past is, we have a momentum in military personnel and in operations and maintenance to 

the extent that civilians get paid out of that account that is squeezing out the procurement accounts. 

Mr. TAYLOR. Is the ratio of R&D to procurement, has that been 

constant, say, over the past 20 or 30 years? 
20 

Dr. GOLDBERG. It has not been. R&D has been pretty constant 

in sort of real dollar terms, but procurement has fluctuated a lot. 

So the ratio of R&D to procurement was low during the Reagan 

years when procurement was high. I think it is easier to say it the 

other way around. Procurement was the dominant factor in the 

1980s, less so in the 1990s, when RDT&E was pretty flat and procurement came down. And then, more recently, since 2000, procurement has been up again and RDT&E kind of flat, so procurement has been a higher fraction. 

Mr. TAYLOR. Okay. 

Mr. BERTEAU. Mr. Taylor, if I could add two things to that from 

our CSIS work, two anomalies, I think, are worth your paying attention to here. 

Everything that Mr. Goldberg says is correct. But the growth in 

the percentage of O&M over the last 10 years has been historically 

unprecedented; and absent changes in getting that under control, 

that is going to continue to be the most significant unfunded shortfall. 

Mr. TAYLOR. Now, that is a huge thing. So is that medical, is 

that housing, is that equipment repair? 

Mr. BERTEAU. It is a combination of increased pay for civilians, 

increased use of contractors, and supplemental costs from the war. 

Mr. TAYLOR. Okay. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank the gentleman. 

Mr. Franks. 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

Thank all of you here today. 

Mr. Donnelly, if it is all right, I am going to start with you. You 

know, I know the Administration continues to talk about the nominal increase in the defense budget, but you point out so effectively 

that that is not a reflection of the actual increases as a part of 

GDP. 

And the service chiefs tell us all the time that they need more. 

And I think that their challenge is complicated by the fact that so 

much of the time their baseline budget is being eaten up by personnel issues. 

And there is a major shift. And Mr. Taylor, I think, was trying 

to get at that point. And if I can just be very direct here, it seems 

this Administration finds massive amounts of money for bailouts 

and economic stimulus packages, but not enough to fund the basic 

money needed for the defense hardware and the equipment reset 

for this country. And there is, of course, a point—I won’t say of no 

return—but where it becomes very difficult to undo all of that because we reach a tipping point and our future capability is diminished. And with all respect to Mr. Daggett, I think that we too casually consider a future where America’s military capability and our 

influence is diminished and more balanced in the world. And I 

think that has pretty profound implications for the future and for 

freedom itself. 

And so, with that, when do you think or do you think we are actually facing some critical junctures here where if we don’t react, 

there could become some tipping points in our future that would 

be very difficult to recover from? 
21 

And I will ask that generally, and hope I will have time for another question. 

Mr. DONNELLY. Well, I will try to be succinct then. 

I really believe that the coming year is very much a point of deflection. We have not only the Quadrennial Defense Review, but 

the Nuclear Posture Review and the Space Review; we have a new 

budget, the first fully vetted or the first budget that will fully reflect this Administration’s priorities. And the path that we are on, 

I think is pretty clear. So the conversation, particularly in the Congress this coming year, is going to be really quite critical. 

I would just conclude with, I don’t believe that the ebbing of the 

Pax Americana is anything like inevitable. And I think it would be 

ahistorical to suggest that there is an ironclad connection between, 

you know, slice of global GDP and strategic preeminence. Great 

Britain at the height of the Pax Britannica never accounted for 

more than nine percent of global GDP, yet they were still able to 

rule the waves and essentially establish the international order. 

So I think that issue needs a lot more reflection and work than 

is often given. 

But again I would say that this coming year and the decisions 

that we will see enumerated in the various reviews and the numbers that we will see in the budget and FYDP presented to Congress really mark a fork in the road for us. And if we—we should 

think very hard before we go down that path. 

Mr. FRANKS. I suppose, if all philosophies at the table were of 

equal import or equal effect in the world, it wouldn’t bother me so 

much. You know, I wouldn’t mind handing over some of this responsibility to China if I had the confidence that they would take 

care of freedom. Given their own record, it makes even the most 

casual among us a little concerned. 

And you know, I am also—it seems like there is an old saying 

that there is nothing so tragic in the world as a beautiful theory 

that becomes totally destroyed by an unruly set of facts. And the 

realities in the world, I think, that we face are pretty significant. 

And when two airplanes hit two buildings it cost our economy two 

trillion dollars, which is about four times our Defense Department 

budget at the time. So I am just concerned that the more pressure 

we put on our military and our defense capability, that the more 

significant those risks could grow in the future, and that we ask 

very noble people to do things that are really almost impossible to 

do. And we keep handing them that equation. 

So let me ask you, what do you think the proper percentage of 

GDP should be for the military, and the fact that, if it is a percentage of the GDP, it increases as the economy grows? What should 

that percentage be? 

Mr. DONNELLY. I don’t think that the GDP metric tells us what 

is affordable or not. If it were so high that it would cripple the ability of our economy to grow, that would be—I think that is when 

you really begin to worry. But whether it is, you know, four percent 

or five percent, it is clearly consistent with historical patterns of 

economic growth and higher defense spending. 

So I think the question is whether it is adequate to meet the 

strategic requirement or achieve the goals that we have set for ourselves. I think that is highly debatable at this point. 
22 

But if you are asking, can we afford a sufficient defense, I also 

think that is a no-brainer kind of question too. Four cents out of 

our dollar, five cents out of our dollar won’t beggar us and won’t 

prevent our economy from growing, but it could quite clearly close 

a number of these gaps that my colleagues have mentioned. 

The CHAIRMAN. Thank the gentleman. 

Mr. FRANKS. Thank you, Mr. Chairman. 

The CHAIRMAN. Dr. Snyder. 

Dr. SNYDER. Thank you, Mr. Chairman. You all have given us a 

lot to think about today. 

I want to be brief in my question and let each of you discuss the 

answer in the time that I have. We are talking today about the Defense budget, but we probably would be smarter as a country if we 

were talking about the national security budget. 

Mr. Daggett, you referred several times to you think the future 

is—I believe your words were—‘‘cooperative relationships.’’ The 

Secretary of Defense has been probably the leading spokesman in 

the last year or two of the Bush Administration about the need to 

increase our investment in diplomacy, and the State Department— 

State Department budget, State Department employees, U.S. Agency for International Development (USAID), USAID budget—and 

yet in the process we have here on the Hill we don’t really balance 

a line of helicopters versus the budget for USAID. In our budget 

process it will be basically a top line versus a top line on the floor 

of the House, which I don’t think gets at all to the kind of weighing 

that we should have. 

Let me start with you, Mr. Donnelly. How should we, as Members who are trying to sort this out, look at the overall national security budget that is much broader than just Defense? And much 

broader, by the way, than just State Department and USAID. We 

have veterinarians and the Ag Department and—— 

Mr. DONNELLY. I am absolutely sympathetic to your basic approach. And if you start using the kind of metrics that I used about 

the Defense budget relative to other elements of Federal spending 

or our economy as a whole, certainly our ability to afford better 

statecraft or create other elements of ‘‘national power,’’ to use the 

silly term of art, to be able to do a better job of state building in 

Afghanistan or Iraq, again our ability to afford those things is quite 

clear. Again, the limiting factor, it seems to me, is not the size of 

the economy or the relative size of the Defense account or the State 

Department’s budget, but the thing that is squeezing everything 

out is the mandatory spending for entitlements and debt service. 

So to solve the long-term problem, to build the capacity that you 

refer to, which I think is essential, we really need a larger dose of 

broader fiscal discipline. To rob the Defense Department to create 

a more responsive set of diplomats or USAID seems to be kind of 

a zero-sum approach from where I sit. 

Mr. BERTEAU. Mr. Snyder, if I could add a couple things to that, 

you will recall that the President, in announcing his initial Afghan 

strategy back in March, part of the element of that was what I believe he referred to as the ‘‘civilian surge.’’ And it is interesting to 

compare what civilian surge capability is with what military surge 

capability is. And the orders of magnitude are wildly different. You 

can triple the capacity or the delivery of certain USAID services in 
23 

Afghanistan and you are still talking fewer than 30 people. If you 

triple the military surge capacity, you are talking 100,000 people. 

So I think that the orders of magnitude are so different that we 

have a lot of work to do in terms of not only building the resources 

and putting them in place, but building the capacity and the capability to use those resources. That is a very significant challenge. 

It is one of the best responses to the strategy issues that Mr. 

Daggett laid out in response to Chairman Skelton’s question, but 

it is going to take us a good while to get there. And I am not even 

sure we have really started yet. 

Mr. DAGGETT. I have been thinking about exactly the issue you 

raised. How do you even begin to think about the role of Defense 

in conjunction with the other agencies of government in setting 

global policy in this international environment? And I think there 

is a starting point for talking about it, and it is actually work done 

by the Intelligence Community (IC). 

The National Intelligence Council (NIC) every five years does a 

report called Global Trends. The latest is Global Trends 2025. So 

it looks out 15 years. And it is a really pretty thorough look at the 

evolving international security environment. 

And they emphasize a number of things. They do take a look 

really at military challenges, of the changes in military technology 

and how that is affecting security. But they discuss changes in financial power as well. They talk about the growth of ideological extremism, Islamic—you know, extreme Islamic fundamentalism as a 

persistent issue. 

They also discuss things like energy policy, access to other kinds 

of resources, limitations on water resources as a potential source 

of conflict in many areas of the globe, regional conflicts over various other kinds of issues, the potential impact of climate change 

on all of the above, which tends to overlap where there are already 

potential bases for conflict in other areas. 

So it is a good starting point for thinking about what are the 

kinds of problems the country as a whole needs to address, and 

then what agencies of the government are most appropriate to take 

the lead in addressing those kinds of challenges. 

Dr. SNYDER. Thank you. 

The CHAIRMAN. Thank the gentleman. 

Mr. Conaway. 

Mr. CONAWAY. Thank you, Mr. Chairman. 

I have got a couple comments unrelated to anything you guys are 

even remotely responsible for, but they do tie in. All of these numbers that you churn around and play with are unaudited and 

unauditable. DOD across the system does a great job of thinking 

they know what the money is and where it is going, who is doing 

it. But they don’t, they can’t audit it, and so I am going to continue 

to beat on the Administration to continue this effort to get the 

numbers correct. 

Now, at 50,000 feet, which is what we are talking about right 

now, it would take a spectacular error to sway these numbers 

much. But every one of those dollars we spend gets appropriated 

one at a time, even though en masse, and they get spent one at 

a time. And the DOD, along with the Intelligence Community, neither one of them can show us that they know for sure where all 
24 

this money is going. So we will keep pounding on them, with an 

acknowledgment that the basis for the conversation might not be 

as firm as we would like to have it. 

Mr. Daggett, you had mentioned that the growth in compensation, regular military compensation, is about 45 percent above rate 

of inflation, which I think is reflective, if you look at Mr. Daggett’s 

chart, of underpaying our military for a long, long time. 

We made a concerted effort before I got here to try to right that 

ship. If you take a look at this chart, it looks like we are closing 

the gap. We still haven’t closed it entirely. 

While that is a factor, I think we need to recognize that in 1998 

they were underpaid. And today I think they are probably reasonably compensated for what we are asking them to do. 

But, Mr. Chairman, I want to yield back my time because I don’t 

have any comments beyond that, other than to just thank you for 

having this hearing this morning. Thank you. 

The CHAIRMAN. I thank the gentleman. 

Mr. Kissell. 

Mr. KISSELL. Thank you, Mr. Chairman. 

And thank you, gentlemen, for being here today. Just a couple 

quick questions. 

Mr. Berteau, you had mentioned something about, that our 

thinking sometimes excludes the technical advances that are made 

elsewhere in the world. I just wonder if there are any glaring examples there that we have overlooked. 

Mr. BERTEAU. I think one of the primary areas was already referred to by Mr. Daggett, and that is in the rotary wing industry, 

in the helicopter industry, where the technological capacity from an 

avionics perspective, from a drive train perspective, from a turbine 

engineering perspective has evolved more dramatically with the 

commercial industry on the European side than it has on the U.S. 

side. 

And I think, there we are being put at risk of future technology 

developments in the rotary wing industry, not from the electronics 

packages, from an equipment package point of view, from a mission 

package point of view, but from a platform capability point of view, 

or we run the risk of the Europeans leaving us behind dramatically 

there. 

Mr. KISSELL. Do you think that is because we just didn’t see the 

need for this or just somehow missed it altogether? How did that 

come to be? 

Mr. BERTEAU. About 20 years ago we had the idea that we could 

push in the defense industry what we called ‘‘dual-use technology,’’ 

that we could simultaneously have companies that were satisfying 

our highest-level military needs, and at the same time use much 

of the same fundamental core business base to satisfy commercial 

needs. That has proven to be a much more elusive objective than 

we thought it would be in the early 1990s. 

I have not done a thorough assessment of this. Off the top of my 

head, I would say it is that, in part, the gap in Europe and the gap 

elsewhere in the world between military use and military technology and commercial use and commercial technology, is a more 

narrow gap elsewhere than it is in the U.S. In the U.S. it is a bigger gap. 
25 

We are always pushing for the latest technology edge. That 

makes it harder for our guys to bridge that dual-use gap there. It 

is an issue worth further study. 

Mr. KISSELL. And, Mr. Goldberg, and if anybody else has any 

ideas on this, we passed a pretty sweeping piece of legislation, the 

Weapon Systems Acquisition Reform Act (WSARA)—get rid of the 

waste, let’s do this better. But I have heard in different comments 

that you all have made that, you know, we still don’t have a way 

of accounting for this, we still don’t keep score, and all the things 

that we were wanting to address in that legislation. 

Mr. Goldberg, do you see that legislation being effective towards 

helping this budget process? 

Dr. GOLDBERG. Mr. Kissell, I am assuming you are referring to 

the legislation this session, the Weapons Systems Acquisition Reform? 

Mr. KISSELL. Yes. 

Dr. GOLDBERG. I think it is a little too early to tell, but I think 

there is great potential in that legislation, particularly redesignating the Cost Analysis and Program Evaluation office, the socalled CAPE, in DOD, which has the potential at least, if implemented correctly, to get more realistic estimates of cost and schedule not only internally to the Pentagon, but to the Congress, much 

earlier in the procurement process so there can be much better 

oversight. 

So I think there is a potential there, if that office and that program is implemented correctly, for a lot of reform. I don’t think it 

will solve any—I don’t think it will solve all the problems; it is not 

a panacea. But it would give greater visibility and greater congressional oversight, so I think it has a lot of potential. 

Mr. KISSELL. Any other thoughts on that? 

Mr. BERTEAU. I would add one thing, sir. 

At CSIS we are actually tracking the implementation of the 

Weapons Systems Acquisition Reform Act. And I will be glad to 

send you a copy of our report card when it is done. 

On that particular point that Mr. Goldberg raised, better cost 

analysis, the Congress has just confirmed the new director of that 

position, and so—she will be in position shortly. They have yet to 

fill the billets of the additional staff, and they right now don’t have 

the capability in place to do the additional cost estimates required 

by the law. 

Mr. KISSELL. I would appreciate that information. 

I yield back my time, Mr. Chairman. 

The CHAIRMAN. Thank the gentleman. 

We have Lamborn—wrong list. Mr. Wittman. 

Mr. WITTMAN. Thank you, Mr. Chairman. 

Gentlemen, thank you so much for joining us today. I have a couple of questions for Dr. Goldberg and Mr. Daggett. 

The decision has apparently been made to move on our aircraft 

carrier construction cost centers from four years to five years. And 

as we know, if you look at the cost of production there, those overhead costs haven’t changed; they are going to continue along the 

lines. 

My concern is that as you look at those overhead costs and that 

capacity, those costs are still going to be there. Those yards then 
26 

are going to have to look to distribute those costs elsewhere. And 

they also build other ships; my concern is, those costs might be 

shifted to the construction of other platforms. 

We have also recently been unable to get a commitment out of 

the Under Secretary of the Navy concerning the commitment of the 

production of two Virginia class submarines per year. So if we go 

to a one-sub-per-year build, that concerns me also about the overhead costs, also those up-and-down cycles in manpower. 

As you know, the folks that construct our nuclear subs and nuclear aircraft carriers are highly skilled individuals. If we are up 

and down on a roller coaster ride both with cost and with availability of personnel, that gives me some concern. 

So I just wanted to get your perspective, if you can speak to 

those issues and give us your perspective on consistency in decision-making, whether it is on cost centers or whether it is on commitments on the number of subs that are being built. 

Dr. GOLDBERG. Well, I think ultimately the decision to reduce the 

carrier force has been made on the basis of more strategic decisions, how many we need to meet the mission, and in particular, 

with the Fleet Response Plan and the way the Navy can get carrier 

presence, the feeling that they can get by with less. It does lead 

to volatility and a problem in covering overhead. Undoubtedly—I 

don’t have estimates of those numbers, but undoubtedly, some of 

the costs of maintaining that capability at the yards will be passed 

on. We do not completely avoid those costs by reducing the frequency of the carrier purchases, and similarly with the submarines. 

Mr. DAGGETT. Yeah, just a very general comment. 

We haven’t looked directly at allocation of overhead costs in shipbuilding for some time. My colleague, Ron O’Rourke, did a pretty 

detailed study of the shipbuilding industrial base some time ago, 

but it is getting pretty old at this point. So it might be time for 

another look at it, given the changes in requirements in the Navy. 

In general, you know, a big issue for the shipbuilding industrial 

base has been, the Navy has been trying to put pressure on shipbuilders to invest in improvements in efficiency. And to my way of 

thinking, the more you have predictability in the shipbuilding plan, 

the more you can insist on that. So it is important for the Navy 

to settle on a pretty long-term sustainable shipbuilding plan. 

And I can only think that the recent decisions will help to some 

extent in that regard. At least it is identified, we are going to build 

one carrier every five years. And as long as we follow through on 

that commitment, we can plan on that basis. It would be helpful 

from the point of view of the shipbuilding industry to get up to two 

submarines a year if possible. 

But we are also now, you know, we know at least—I think, after 

the QDR, we will know whether we are going to go back to some 

version of DDG–1000 or, instead, rely on DDG–51 hull for most of 

the other—most surface-combatant basic designs. And it appears 

likely to be DDG–51 as the basic design. So that will rationalize 

that as well. 

And you know, the comment I made in my testimony is, to the 

extent that we do have relatively long production runs of fairly stable designs of major ships and other systems as well, then we can 
27 

focus on efficiency-improving measures, including encouraging the 

industry to make more investments in those areas. So, you know, 

it could be a positive step in that direction, but we will have to see 

where it goes. 

Mr. WITTMAN. One additional question to you both. Do you see 

the current course that we are on with strategic planning, authorization, and budget being in the proper balance to make sure that 

we provide for the robustness in our fleet, in our capability, but 

also making sure that we are looking at sustainability as far as our 

industrial base to meet those needs? 

Dr. GOLDBERG. Sustainability is a big issue. And I guess I don’t 

have any recommendations for how to do it differently. 

One thing we didn’t get this year was the Navy’s annual shipbuilding plan, which helps us. We generally do an annual forecast 

of the sustainability of the program and the resources it would require, which we could not produce this year. 

Again, I think, to echo what Mr. Daggett said, having a predictable plan that doesn’t change year to year would be a good thing 

in terms of sustaining the industrial base and giving the yards a 

basis for forecasting their workforce. So I would hope that we could 

reach that state. 

Mr. DAGGETT. Again, very much in general, since the end of the 

Cold War, we have really been in flux in terms of defining what 

the strategy is. And I do see a long-term trend. 

I think if you read—if you start with the base force in 1990 and 

the Bottom-Up Review in 1993 and then the Quadrennial Defense 

Review since then, you see a progression. And the progression has 

been actually in the direction of broadening the kinds of challenges 

that we think we face. And that has led to—in turn, to really 

changes in our strategic plans and setting strategic priorities, the 

latest big change being an increased emphasis on ground forces, 

when all the trend previously had been moving away from that and 

making ground forces more deployable. 

I am not sure we have reached the end of that discussion by any 

means. I mean, I think this QDR appears to be addressing some 

pretty far-reaching decisions about future threats that might be 

quite unique. So, you know, on the one hand we do want stability 

in shipbuilding and areas like that; we want to get there. But the 

discussion of strategy has really been moving in a direction that I 

think is coming to grips with actual—you know, real changes in the 

international security environment that we need to continue. And 

they are evolving and changing over time. There are new threats 

that we are facing, and we are going to have to figure out how to 

deal with that and how to shift investments in the Defense accounts in order to do that as well. 

So I don’t see us at the end of it by any means. 

Mr. WITTMAN. Thank you, Mr. Chairman. 

The CHAIRMAN. Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. Let me start with Mr. 

Donnelly, and then I will work my way to the left. And that would 

be that a concern of mine that we are so focused right now on 

asymmetric warfare or counterinsurgency operations that require 

very light forces. 
28 

Are we losing our focus on maintaining the type of conventional 

deterrence that is necessary with a resurgent Russia, with Iran, 

with China, with North Korea? 

Mr. Donnelly. 

Mr. DONNELLY. Honestly, I don’t think so. You know, to talk to 

people in the Air Force or the Navy, you get much greater concern 

about, say, the rise of China and the growth of the PLA military 

capacity or, you know, lots of discussions about what an Iran campaign might look like. 

However, you know, I think that it is true that in the political 

world the focus has been lost on that. And particularly wrestling 

with the Chinese challenge is just very difficult for people to come 

to grips with. 

So it would be better if we could have an out-loud conversation 

about these things. And that would, I think, advance all our understanding, and we would probably come to some sensible answer 

and be able to balance these things appropriately. 

But I am less concerned about the dialogue inside the Pentagon 

than I am sort of amongst the rest of us. 

Mr. COFFMAN. Mr. Berteau. 

Mr. BERTEAU. Sir, I think we are okay for now. I think the bigger 

question is, what does the longer-term structure look like and what 

are we willing to invest over the long term? And we really just 

don’t have the visibility that we need to have into the Pentagon’s 

thinking today to be able to answer that. 

I am going to be cautiously optimistic for a little while until I see 

numbers that make me pessimistic. If I don’t see numbers that sustain cautious optimism by next February, though, I am going to 

start turning more pessimistic. 

Mr. COFFMAN. Mr. Daggett. 

Mr. DAGGETT. Yeah. The argument you referred to, it seems to 

me, is mostly within the Army. It is really how the Army should 

be organized as much as anything else. 

And, you know, it faces some difficult issues. Does it focus mostly 

on capabilities for irregular warfare or does it try to maintain, you 

know, large armored forces with offensive capabilities and so on, 

which some argue are becoming less relevant? And it is really a 

very vigorous debate going on inside the Army over how to square 

the circle essentially. 

And, you know, I think what the Army—what I see the Army is 

coming down to is trying to maintain across-the-board capabilities 

and really struggling with the best way to do that. And I am not 

sure that they are at the end of the debate. I am not sure the answer they have come up with is the right one. 

But for the present it appears to be that the basic unit will still 

be a brigade combat team. We will have a balance of heavy and 

light forces. And brigade combat teams in cases like Iraq and Afghanistan will be augmented to be able to carry out training with 

foreign militaries, but they will still be the basic unit. We are not 

going to build separate units specifically for training of foreign 

militaries. We will have some of those capabilities in Special 

Forces, but otherwise the all-purpose forces are going to have to remain all-purpose forces. 
29 

You know, whether that is sustainable or not, I am not sure. I 

am not sure you can train everybody for everything all the time. 

So, you know, it is a big issue. 

Beyond that, the Air Force and the Navy are still focused on 

high-end combat. 

Mr. COFFMAN. Dr. Goldberg. 

Dr. GOLDBERG. Mr. Coffman, I would agree it is principally an 

Army issue. The promise that was put forward for Future Combat 

System (FCS) was that we would have a force that is lighter, faster, more easily deployable, and make some trade-offs in terms of 

less armor versus greater informational awareness. And the Army 

itself, narrowly, as well as in the QDR process, is rethinking that 

whole strategy, what kind of manned vehicles they want. And I 

think that is really where the debate is. 

I don’t know how it is going to turn out. But in the next few 

years, as we see what the successor is to the FCS program, the 

Army ground combat program, we will get a better idea. 

Those considerations of lighter, faster, more deployable, I think, 

are very important because we don’t know where we’ll be—nobody 

knew we would end up—15 years ago that we would end up in Iraq 

and Afghanistan. And the fact that we have great mobility assets 

and some lighter forces has turned out to be fortuitous. 

Mr. BERTEAU. Mr. Coffman, could I add one thing to that? 

Mr. COFFMAN. Please. 

Mr. BERTEAU. Both my colleagues to the right indicated this is 

primarily a ground forces or an Army issue. I think it is important 

to keep sight of the lift problem as well. 

For much of my career we have had more Army than we could 

move on the timetable. That was the whole driver behind the FCS. 

And if we do rethink that, the role of the Navy and the Air Force 

is going to be very, very powerfully affected here in terms of both 

sealift and airlift. And it is pretty easy to project scenarios in 

which we don’t have nearly enough of either. 

Mr. COFFMAN. Thank you. Mr. Chairman, I yield back. 

The CHAIRMAN. Thank the gentleman. 

You know, in talking with the Army leaders, they are trying to 

train and build for a full-spectrum Army, and I have indicated to 

them there are only two problems with that: One is time and one 

is money. And I think it might be very difficult to train a soldier 

to be a first-class individual in the mountains doing Special Operations-type and then a platoon sergeant backing up an armored division across a plain. And I just don’t see how that can happen. 

Do you have recommendations for the Army along this line, Mr. 

Daggett? 

Mr. DAGGETT. No. If I may, I think you have put your finger on 

precisely the issue; and I have to say I am not in the position to 

be able to judge how much training you can do. 

The Army does insist that in Afghanistan and Iraq the brigade 

combat teams are quite capable, when augmented appropriately, of 

carrying out the training mission. And you know, I can understand, 

in particular in Iraq, that they are almost forced to come to that 

conclusion because if you are going to have a training presence still 

in Iraq, you don’t want to rely strictly on the Iraqis for force protection. You want to have that organic to the training unit itself. And 
30 

if you are going to have a large self-protection capability, well, you 

may as well have a full brigade team with all the combat capabilities that go along with it. 

So assigning your regular unit to do the training is quite likely 

the right answer in Iraq. Now, does that apply also elsewhere in 

the world or is the training mission more specialized than that, requiring, you know, particular people with particular experiences? 

And the answer to that is maybe. That may be the case. 

It may not be universally applicable elsewhere, but I don’t see it 

as necessarily being the wrong answer under current circumstances, though. 

Mr. DONNELLY. Mr. Skelton, if I could toss in two sentences. My 

colleague, Fred Kagan, and I did a whacking big study a couple 

years ago on sort of the future of American land power. So I want 

to recoup that investment briefly, if I could. 

Actually, I think overall the Army is doing a pretty good job of 

adapting to an immensely wide variety of challenges. I mean, the 

kinds of operations that the Army has conducted in land forces 

more broadly over the last—since 9/11 ranges all the way from the 

most traditional kind of mounted armored—you know, the march 

to Baghdad in three weeks was, you know, arguably the best expression of blitzkrieg that there has ever been in terms of distance 

covered and so on and so forth. 

But that same force has adapted quite remarkably to quite different irregular warfare challenges. And we have also learned that 

the best—that all kinds of training are not the same. Training, say, 

a Filipino counterterrorism unit as opposed to standing up an Iraqi 

Army or an Afghan Army while they are in the midst of fighting 

a war are quite different challenges. And when it comes to the 

Iraqi and Afghanistan experience, unit partnering has proved to be 

the most efficient and the most effective means of increasing the 

capacity of our partnering forces, which sort of throws you back 

onto the brigade combat team as, actually, a quite useful tool in 

this regard, although it needs enablers of all kinds to be able to do 

this. 

So when you are talking about the full spectrum of operations, 

I think that is just the reality. And the Army is not buying a lot 

more heavy tank units as it adds forces. And even now it is shifting 

a number of heavy brigade combat teams (BCTs) to Strykerequipped BCTs. So the balance of the force is slowly shifting, but 

the broad capabilities that it retains have all been employed at 

very high rates in recent years. 

The CHAIRMAN. Thank the gentleman. 

I have Mr. Spratt, and then as I understand it Mr. Bartlett has 

a second-round question. 

Mr. Spratt. 

Mr. SPRATT. I am sorry to be late in arriving. I heard from half 

the team before because we had a similar hearing on the Budget 

Committee and had a briefing this morning. 

This may be redundant to what you have already discussed, but 

there is lots of talk now about how much it costs to deploy one 

troop, one combat trooper, to a theater like Afghanistan or Iraq. 

And the number being bandied about now is a million dollars incremental cost. 
31 

Do you think that is a valid estimation? And if not, what is the 

proper way to calculate on the back of an envelope the incremental 

costs for deploying troops to theaters like this on an average annual basis? 

Dr. GOLDBERG. Mr. Spratt, I would have to take that for the 

record. 

We have not at CBO done an explicit study, particularly of the 

conditions in Afghanistan, as opposed to the combined Global War 

on Terror (GWOT) Central Command (CENTCOM) operations, 

which were the basis for our previous estimates. So I don’t really 

have it at this time. And I entertain a request from either this committee or the Budget Committee to do a more detailed analysis of 

the cost of operations in Afghanistan. I don’t have that at the 

present time. 

[The information referred to can be found in the Appendix on 

page 111.] 

Mr. SPRATT. Okay. 

Mr. Daggett. 

Mr. DAGGETT. Can I say we have looked at it, just as you said, 

just as a really back-of-the-envelope calculation. And the calculation is pretty straightforward. 

The most recent estimate of costs in Afghanistan is, it is about 

$68 billion in fiscal year 2010, and that is for roughly 68,000 

troops. So the math is pretty simple; it is about a million dollars 

per troop. But that is really just taking the top-line, total amount 

of spending that is allocated to Afghanistan and scaling it to the 

number of boots on the ground in Afghanistan. 

And if you make an incremental change in the number of troops, 

does it scale one-for-one? And the answer is, a big part of it does. 

Eighty percent of that is military personnel and operation and 

maintenance, and that likely would scale pretty closely. 

There are some parts of it that don’t. Afghan Security Forces 

Fund, the amount of equipment we provide to equip the Afghan 

Army wouldn’t necessarily change with the size of the U.S. force. 

It changes with the size of the Afghan force, but not with the size 

of the U.S. force. And there are some overhead activities which 

might not have to increase quite in proportion to the increase in 

the size of the force. 

But that said, if it is not a million dollars per troop it is not far 

off, I think. 

Again, it would be phased in over time, so it wouldn’t be a million dollars the first year. But in the end, that is probably not far 

off from what the sustainment costs of a troop would be, I think. 

Mr. SPRATT. Mr. Berteau. 

Mr. BERTEAU. Similarly, sir, we have not looked at that specific 

question. 

But I think that I would probably agree with the front end of Mr. 

Daggett’s calculation, but not necessarily the back end. I think that 

the marginal change up or down for troops is actually quite dramatically different. And my own estimate, based upon the costs we 

have looked at, is that drawing down would not save you anywhere 

near a chunk of a million dollars per person. Increasing will cost 

you a little bit closer to that. 
32 

That is just the estimate. I think we would have to look at that 

further as well. 

Mr. SPRATT. Mr. Donnelly. 

Mr. DONNELLY. Very briefly—and I would never want to try to 

outdo my colleagues on the actual arithmetic of this, but I think 

there is one important conceptual thing to keep in mind in making 

these calculations, and that is, where do the costs of mobilizing 

Guardsmen and Reserve people, get accounted for? 

There is certainly a large part—I mean, one of the reasons that 

we have done this is because we have been able to slough off personnel costs of mobilization into emergency supplementals and not 

increase active duty on the book’s end strength. We have had more 

than 100,000 folks mobilized pretty much every day since 9/11. So 

certainly in Afghanistan, since Guard brigades have, for example, 

been responsible for the Afghan Army training mission, one of the 

things that you would want to pick apart, to understand where the 

money is actually going, is how much of it is going to mobilize 

Guardsmen and Reservists who account for active duty shortfalls? 

Mr. SPRATT. One final question. We have got a Defense budget 

at historic highs. And when you look at the components of it, they 

are all swelling. 

There is no single component that is driving this. The O&M costs 

and personnel costs due to the deployment of the troops to, and expeditionary forces, and the extraordinary wear and tear and the 

harsher environmental conditions on equipment, that is one factor. 

And then you have got the increase in size of the personnel, 

92,000 troops being added to ground forces, and increased costs per 

troop because of the benefit increases that we have effected over 

the last 10 or 15 years. 

And then, of course, you have got acquisition costs, which are 

substantial with the Army redoing its forces, the Navy rebuilding 

its surface ship Navy, and the Air Force buying the F–35 and other 

airplanes. 

Where do you look for savings in a budget like this at the present 

time? 

Dr. GOLDBERG. I would say you really have to look hard at procurement, because all the personnel compensation changes are already built into the numbers. 

In other words, so many improvements have been enacted to the 

point where I think we have achieved pay comparability and we 

have improved benefits and improved housing; and there is a momentum that carries those benefits forward. And there is no way 

to cut the benefits that have already been enacted. 

And similarly in O&M, to the degree that O&M is funding civilian salaries, which tend to get parity pay increases with military 

personnel, and for other reasons—O&M has, so to speak, its own 

momentum—I would think the area with the most latitude for cuts 

would be the procurement accounts. 

Mr. DAGGETT. Traditionally, when the budget has been declining, 

the part of the budget that has disproportionately been affected has 

been acquisition, has been procurement and R&D. They have declined—you know, they have declined very rapidly when the budget 

has declined marginally; they have increased very rapidly when the 
33 

budget has increased even marginally. So that is the variable part 

of the budget. 

That said, by no means would I give up on looking at O&M as 

a potential place for savings. I would be very leery of projections 

that O&M costs are going to level off in the future. Historically, 

when the Defense Department has projected that, it hasn’t worked 

out. And in the end, year after year, DOD ended up taking money 

out of the procurement accounts in order to pay ‘‘must’’ bills in 

O&M. 

But again, it is not a reason not for looking very hard at it. You know, we spend something like $20 billion a year just on fuel. If 

you could reduce that by 10 percent, that is a pretty substantial 

saving right there. We spend about $27 billion a year on base operation support activities. So if you can improve efficiency even in operating your facilities by 10 percent, that is another two point five 

to three billion dollars. 

So there are certainly areas you can look at in the O&M accounts 

to try to achieve some savings. 

And I also think, frankly, if the budget is going to be constrained 

over the long term, one area in which there will have to be a discussion is whether we can sustain the increases in the size of the 

force we have agreed on recently. I see that as very much on the 

agenda. It is a difficult thing to take on, but if the budget is going 

to be constrained by the deficit situation in the long term, at some 

point it is almost unavoidable that you have to take a look at that, 

for good or ill. 

The CHAIRMAN. Thank the gentleman. 

Wrap it up, Mr. Bartlett. 

Mr. BARTLETT. Thank you very much. 

There is a reality that is very hard to avoid, and that is that the 

urgent almost always sweeps the important off the table—this dynamic, along with the assumption that the EMP threat is a very 

esoteric threat, probably coming only from a Russia or a China, 

which would result in all-out war and therefore very unlikely to 

happen, so we are not addressing this threat. 

Let me suggest that it will probably come from a nonstate actor 

or a state masquerading as a nonstate actor. All that they need is 

a tramp steamer, a Scud launcher, which they can buy on the open 

market, and a crude nuclear weapon, perhaps one loosed from the 

Soviet Union dissolution or one from Iraq or Afghanistan. And, you 

know, if they miss their target by 100 miles it won’t make any difference. 

Now, this can’t reach the center of our country, 300 miles high, 

and therefore take down our whole country, but it could take down 

all of New England, which would be Katrina 10 times over. And 

we are not certain but what the cascading effects of the collapse 

of the grid there would take down the grid in the rest of the country, damaging some transformers so that we could not bring the 

grid back up. 

I know that the military is now taking a new look at EMP, thank 

God, because during the Clinton years we waived EMP hardening 

of all of our weapons systems. I asked why. As Solomon Ortiz says, 

we don’t need any of this high-tech stuff to fight the enemies we 

are now fighting. And when we will need is against a peer or near- 
34 

peer, and one of the first things they do—it is in all of their war 

games, all of their open literature. One of the first things they do 

is an EMP lay-down, which will deny us the use of all of the equipment that is not EMP-hardened, which is essentially all of our 

equipment. 

I understand now that the Pentagon is taking a new look at 

EMP. But they are looking at either the 30 or 50—it is not clear 

to me which—kilovolts per meter. The Russian generals told the 

EMP Commission that the Soviets had developed and they had a 

weapon which would produce 200 kilovolts per meter at the center, 

which was 100 kilovolts per meter at the margins of our country. 

And we have not, as I understand it, built or tested anything at 

that level, which would mean that what we think is hardened is 

not hardened, and about all we have hardened now is our command and control. It is a little bit like me having my brain and 

spinal cord work and my arms and legs won’t. 

I don’t understand what good I would be in fighting a war if that 

is true. Are my concerns unrealistic? 

Mr. BERTEAU. I have to say, Mr. Bartlett, that I came in here 

today with a long list of things that I was worried about. You have 

added one to that list. And I am going to have to tell you that I 

don’t have a response to the challenge you have laid out there. It 

certainly seems to me to be worthy of more attention than I have 

seen it get. 

Mr. BARTLETT. By the way, sir, the tramp steamer they launch 

that from will be sunk. There will be no fingerprints on it. You 

know, this is a huge, huge vulnerability. It would, in fact, end life 

as we know it in this country. 

And I am very concerned that the urgency of processing these 

two wars have swept this really important defense off the table. 

The CHAIRMAN. No comment? 

Mr. DONNELLY. I am no EMP expert either. But in addition to 

a pulse that would be generated by a nuclear weapon—and this 

may reflect my limited understanding of the technology, but I think 

it is also becoming increasingly aware that there may be other 

means for generating for sort of tactical purposes—— 

Mr. BARTLETT. You are exactly right, sir, directed energy weapons. 

The thing I mentioned in the previous question was, there is an 

absolute certainty there will be another major solar magnetic 

storm, perhaps of the Carrington magnitude; and if that happened, 

FERC tells me it would take down our grid, and it would cost a 

trillion to $4 trillion, I think, to bring it back, and take perhaps 

several years. 

I asked them the consequences of that to our country. This is the 

magnetic storm. By the way, the same thing you do to protect 

against that protects you against EMP. And I asked, what would 

be the consequences of that? 

He said probably 80 percent of our population would die. You are 

totally immune to EMP. You wouldn’t even know it was happening 

if you looked in the opposite direction. But, you know, you can’t 

eat. If there is no electricity, there is no anything in our culture. 

You know, I just think that we are permitting the urgency of these 
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immediate problems to sweep really important things off the table, 

and this is one of them. 

There are others, but this is a major one. 

The CHAIRMAN. Certainly thank the gentleman. 

And if there is no further business, we appreciate the excellent 

testimony of our panel, and we look forward to seeing you again. 

[Whereupon, at 12:01 p.m., the committee was adjourned.] 

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