National Security Report

Background and Perspective on Important National Security and Defense Policy Issues,

Written and Produced by

From the Chairman...

 Defense In Decline

$250

$275

$300

$325

$350

$375

$400

$425

1986 1989 1992 1995 1998

Fiscal Year

Constant FY1998 Dollars

Defense Spending

Source: President’s FY 1998 Defense Budget

Thirteen Consecutive Years of

Decline in the Defense Budget

The past few

years have

been frustrating for

those of us who

oversee the Department of Defense

and the nation’s

national security

policy. I view it as

a failure on the part

of both the President and the Congress

that the American public has no sense that

its military is confronting some of the most

critical challenges and fundamental

decisions since the end of World War II.

Yet to the extent that any debate has

occurred, it has been here, inside the

beltway.

Since the American public assumes that

all is well with its military, and since the

public’s attention is focussed on more dayto-day economic and social concerns, there

is neither broad public controversy nor

political consensus over the direction in

which the nation’s military forces are

continued on page 3

headed. As hard as we in the Congress

try, the nation’s only true “bully pulpit”

is being used to further neither the public

debate nor to forge a consensus.

Against such odds, trying to address

the services’ deepening readiness, quality

of life and modernization problems will

require great resolve. It will also require

strong bipartisan leadership if we are to

hold out any hope of sustaining the longterm commitment of resources necessary

to ensure that our military remains secondto-none.

 Such an effort will, by definition, be

swimming against a popular political tide

that is increasingly characterized by the

push for smaller federal government and

less federal spending. Maintaining a strong

defense requires a strong federal role and,

after thirteen consecutive years of

declining defense budgets, additional

Volume 1, Issue 2 April 1997

U.S. Defense Budget:

Walking the Tightrope Without a Net

The Clinton administration’s

defense budget request of $265.3

billion for Fiscal Year (FY) 1998

represents a 2 percent real decrease from

current (FY 1997) spending. As such, it

continues a 13-year-long trend of real

defense spending decline and it marks a

38 percent real reduction in spending from

defense budgets in the mid-1980s.

The FY 1998 defense budget request

represents 3.1 percent of the nation’s

gross domestic product, down more than

50 percent from the 1985 level of 6.4

percent. The FY 1998 defense budget

request, when measured in constant

dollars, represents the smallest defense

budget since 1950.

Indeed, cuts from the defense budget

have provided a substantial contribution

to reductions in the federal deficit in the

1990s. In fact, defense cuts account for

the vast majority of deficit reduction to

date that is attributable to the

discretionary budget.

Based on the president’s FY 1998 budget,

between FY 1990 - 2000,

entitlements and domestic discretionary outlays will increase

substantially, while

outlays for defense will

decrease 32 percent

(see chart on p.2). So

the trend contintinues.

From the standpoint

of military capability,

the administration’s FY

1998 defense budget

request perpetuates the mismatch

between defense strategy and resources

– the widening gap between the forces

and budgets required by the national

military strategy and the forces actually

paid for by the defense budget. In

January 1997, the Congressional Budget

Office (CBO) estimated the president’s

defense budget to be underfunded by

approximately $55 billion over the course

of the next five years. However, many

independent analyses, including that of

the General Accounting Office, assess the

shortfall to be much greater.

The FY 1998 defense budget request

also reflects the administration’s

continued pattern of cutting long-term

investment funding necessary for the

modernization of aging equipment in

order to pay for near-term readiness

shortfalls. The FY 1998 procurement

request of $42.6 billion is actually less

than current (FY 1997) procurement

spending levels and approximately 30

Chairman, House National Security Committee
2 National Security Report

percent below the procurement spending

level identified by the Joint Chiefs of Staff

as necessary to modernize even the

smaller military of the 1990s. Since 1995,

the administration has vowed to end the

“procurement holiday,” but its plan to

increase modernization spending is

skewed heavily toward the later years of

the five-year defense program, with the

bulk of the proposed increases projected

to occur beyond the end of the

President’s second term in office.

The inability to field new systems is

highlighted by the administration’s lack

of funding for missile defenses. Six years

after the Gulf War, which demonstrated

both the strategic and military importance

of effective ballistic missile defenses, the

administration continues to shortchange

spending for such programs, cutting the

national missile defense program to

protect the American people from the

threat of ballistic missile attack by over

$300 million from current (FY 1997)

spending levels.

One of the primary reasons

modernization spending continues to be

reduced and used as a “billpayer” for

shortfalls elsewhere in the defense

budget is the administration’s persistent

underestimation of readiness and operational requirements. The FY 1998 defense

budget request includes $2.9 billion less

for procurement and $5.2 billion more for

operations and maintenance (O&M)

spending than was projected for FY 1998

by the administration just last year. This

miscalculation results from the

Pentagon’s underestimation of its own

infrastructure and overhead costs as well

as from the continuing high and costly

pace of manpower-intensive

peacekeeping and humanitarian

operations.

The diversion of troops, equipment,

and resources from necessary day-to-day

training in order to support these ongoing

operations means that even those O&M

funds being requested are not purchasing

the kind of readiness central to the

execution of the national military strategy.

Although the administration contends

that the post-Cold War defense drawdown

– a drawdown that has cut the nation’s

military by one-third since 1990 — is

nearly complete, the FY 1998 defense

budget request reduces both the Navy

and Air Force below the personnel levels

mandated by law and below the levels

called for by the national military strategy.

While military forces are shrinking to

dangerously low levels, the pace and

duration of contingency operations are

increasing. These conflicting trends are

hurting military readiness, are eroding

quality of life, and are certainly not

conducive to maintaining a high quality,

all-volunteer force in the long run.

1990 Level

1998 Level

Changes in U.S. Military Force Structure

(1990-1998) 18

10

Army Divisions

(Active)

Reserve

Component

Brigades

57

42

Navy Battle

Force Ships

Aircraft Carriers

(Active and Reserve)

Air Force

Fighter Wings

(Active and Reserve)

346

546

20

36

12

16

Fiscal Year

End Strength

(in thousands)

DOD Active Duty Military Endstrength

(including Full Time Guard and Reserve)

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

1300

1550

1800

2050

2300

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Defense Only Major Spending Category

to Decline from FY 1990 to FY 2000

(Percentage Real Change in Outlays)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Source: FY 98 President’s Budget

Mandatory

Outlays

INCREASE 36%

Domestic

Discretionary

Outlays

INCREASE 14%

Defense

Discretionary

Outlays

DECREASE 32%

DOD Active Duty Military Endstrength

(including Full Time Guard and Reserve)

Defense Only Major Spending Category to

Decline from FY 1990 to FY 2000

(percentage Real Change in Outlays)
National Security Report 3

$258

$262

$266

$270

$274

$278

FY 97 FY 98 FY 99 FY 00 FY 01 FY 02

FY 98 President's Budget (as scored by OMB)

FY 98 President's Budget (as scored by CBO)

The Outlay Gap

CBO estimates that the President’s FY 1998 budget understates

defense outlays by $13.9 billion from 1998 through 2002

Billions of Dollars

$5.6 billion

$4.2 billion

CBO - OMB Outlay

Dispute

A particularly critical problem facing

the administration’s FY 1998 defense

budget request is the divergence in

“scoring” between the Office of

Management and Budget (OMB) and the

CBO. The CBO recently reported that the

administration has underestimated the

amount of defense outlays – funds

actually obligated during the fiscal year

and therefore critical to deficit reduction

calculations – by approximately $5.6

billion in FY 1998 alone. In other words,

the CBO estimated that the president has

underfunded his own defense budget

request by $5.6 billion. The primary

problem, according to the CBO, is that

the administration has underestimated the

rate at which procurement and research

and development (R&D) funding

approved in prior years is actually being

spent. The administration’s calculations

of these rates of spending are lower than

underfunded defense budget –

reductions required to address the

accounting discrepancies between OMB

and the CBO.

those computed by the CBO. One

potential implication of this complex

outlay scoring problem could actually be

reductions to the president’s already

federal resources. While the last two years were

unprecedented from the perspective that, for the

first time in the twenty plus year history of the

Budget Act Congress used the congressional budget resolution to

increase a president’s defense budget, one cannot help but wonder if

what we are doing is simply moving around deck chairs on the Titanic.

 No matter how much resolve Congress brings to the task of

maintaining a strong defense, we cannot help the administration if the

administration does not want the help. Despite obvious and compelling

evidence of shortfalls, each of the last two years the administration

has aggressively opposed Congress’ decision to add funding to the

president’s defense budget. We have been accused of adding funds

that “the Pentagon” never asked for and does not need. And we have

been pilloried both in and by the press for “increasing” defense

spending when, in fact, defense spending continues to decline even

when you consider the additional resources provided by Congress.

 It is a stunning commentary on the depth to which the defense

budget is being cut when Congress can add $8-$10 billion a year to a

president’s budget and the nation still ends up with a budget that fails

to even keep pace with inflation. Yet each of the past two years the

president has ultimately signed these increases into law, only to turn

around within months and propose using the added funds he opposed

to pay for the inevitable operational and readiness shortfalls endemic

to his own budgets. As I said, it has been a frustrating couple of

years.

 Once again, the defense budget request before us does not appear to

offer many solutions. Instead of representing a bridge to the 21st

century for our military, the budget looks more like the same old

tightrope without a safety net. In the years ahead, the global demands

on our military will continue to grow, which guarantees that personnel

and operational tempos will stay high. Yet the topline continues to

drop, attainment of even modest modernization spending is once

again pushed further to the right and cuts in endstrength below the

minimum Bottom-Up Review levels are assumed

in the president’s budget.

 In the months ahead, we will all hear the familiar refrain that a

particular issue will be addressed in the Quadrennial Defense Review

(QDR). Yet much like the Bottom-Up Review, the context for the

QDR is largely set. It assumes essentially fixed budgets and will,

therefore, most likely end up presenting the services with the dilemma

of choosing between further reductions in force structure and

endstrength if they hope to free-up resources necessary to modernize.

It is not a choice any service secretary or chief should have to make.

Nor is it a choice that will be based on threat or mission-driven

requirements. Nonetheless, we all suspect it is coming.

My deepest suspicion is that the services will be faced with exactly

this kind of untenable choice and, as a result, that the force will shrink

further as our military leaders desperately try to end what CBO has

termed the “procurement holiday.” However, my fear is that any

force structure or endstrength reductions compelled by the QDR will

not come close to funding the kind of recapitalization needed to take

even the smaller military of the mid-1990s into the 21st century with

unquestioned technological superiority.

The result is just apt to be a smaller force, spread thinner than

today and still struggling to find ways to modernize their 1970s and

1980s era equipment. It is a road fraught with peril and one,

unfortunately, that this nation has already been down with disastrous

consequences several times this century.

The National Security Committee will continue to work long and

hard, and in a bipartisan fashion, to address as many of the shortfalls

in this budget as we can. Frankly, it would be a nice change of pace if

this effort included the administration.

continued from page 1

From the Chairman...

— Opening statement of Chairman Spence,

 Posture Hearing with Secretary Cohen &

 General Shalikashvili, February 12, 1997
4 National Security Report

Update

 In Bosnia... In the United States... In Russia...

SFOR officials decide to dismantle anumber of checkpoints in northern

Bosnia in order to allow greater freedom

of movement for local residents. The

removal of checkpoints will also allow

more troops to patrol the zone of

separation established by the Dayton

accord. An SFOR spokesman states,

“The goal – if everything goes well – is

to dismantle all of the checkpoints, but

there’s no specific timeline.”

•

A psychological study conducted bythe Army of U.S. soldiers

participating in Operation Joint Guard

reportedly indicates that their combat

skills, readiness, and morale deteriorate

markedly after six months of

peacekeeping duties. The results of the

study are to be published in the fall.

•

SACEUR General George Joulwan saysthe “return of refugees will be the

biggest challenge” to ensuring the peace

in Bosnia this year. He expresses concern

with the slow pace of civilian rebuilding

efforts, noting, “The longer these issues

are unresolved, the more difficult it will

be to maintain stability in the Balkans after

NATO departs in June 1998.”

•

Bosnian Serbs destroy additionalMuslim houses in Gajevi as SFOR

troops are unable to prevent the attacks.

The latest destruction follows a weeklong “cooling off” period established by

SFOR after several Muslim homes in the

hamlet were demolished by Bosnian

Serbs. This is the third time in four months

that such attacks have occurred in Gajevi,

which is located in the zone of separation.

•

SFOR troops confiscate rifles, machineguns, and ammunition from three

Bosnian Serb weapons storage sites. An

armored vehicle intended to be used by

U.N. troops is also seized at a storage

site in Karakaj, in northeast Bosnia.

Congressman Kasich and a bipartisangroup of House members introduce

a bill calling for the withdrawal of U.S.

troops from Bosnia by the end of the year.

House National Security Committee

chairman Floyd Spence, a co-sponsor,

declares, “Achieving a sustainable peace

in Bosnia is unlikely under any realistic

time frame. The U.S. should begin to work

immediately toward a policy that permits

the orderly withdrawal of U.S. ground

forces.” Defense Secretary Cohen says

he “strongly opposes” such legislation,

noting that it “will undercut the NATO

organization....It will cause some

dissension. It will fracture relations to

some degree. I think it’s unnecessary.”

•

President Clinton pledges that U.S.ground troops will leave Bosnia as

scheduled in June 1998, declaring that

“we all understood that we couldn’t have

an international security presence in a

country forever.”

•

Bosnian President Alija Izetbegovic,in a visit to the United States, warns

that the situation in Bosnia is not yet

stable. He states, “If the civilian aspects

of the Dayton agreement are not

implemented, its military results will be

null as if they never even were. We could

again have war.” He also accuses Bosnian

Serbs of failing to abide by arms control

agreements and says the United States

has failed to fulfill its commitment to arm

and train the Bosnian army.

 In the Pacific...

 In Helsinki...

President Clinton and RussianPresident Boris Yeltsin sign

agreements on arms control and security

issues, including future strategic force

reductions, the relationship between

theater missile defenses and the 1972

Anti-Ballistic Missile Treaty, and

conventional force levels in Europe.

According to an alleged top secret CIAreport leaked to the press, Russia is

constructing yet another deep

underground facility designed to survive

a nuclear war, even as it continues

construction of several other new nuclear

bunker complexes. The article notes

concern that the construction activity

reflects the Russians’ continued cold warand nuclear fighting attitudes. A DOD

spokesman states, “We do not regard the

program as a threat,” but admits, “We

don’t understand why they’re continuing

to do this, but they are.”

•

Russian President Boris Yeltsin, urgesCIS countries to form a single

integrated economic space with Russia

to protect themselves from Western

financial predations. Yeltsin also

repeatedly refers to the CIS as the “postSoviet space” and asserts that “the

consolidation of anti-integration and antiRussian tendencies” on Russia’s borders

“is absolutely unacceptable.”

For the fourth year in a row, the jointUnited States - South Korean “Team

Spirit” military training exercise is

cancelled.

•

Three Chinese warships makeunprecedented visits to U.S. ports

in Hawaii, Washington, and California.

The visits take place on the one year

anniversary of China’s military exercises

in the Taiwan Strait.

•

China and Russia reach an agreement for China to purchase at least two

Russian Sovremenny-class cruise missile

destroyers. Many observers believe

these ships will significantly enhance

China’s naval strike capabilities and

increase the operational range of China’s

navy.

The National Security Report is archived on the world wide web site of the House National Security Committee at: http://www.house.gov/nsc/. Additional background information

may be obtained from Tom Donnelly (x65372), David Trachtenberg (x60532), or Will Marsh (x56045) on the committee staff.