Volume 2, Issue 1 February 1998

National Security Report

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

Written and Produced by

From the Chairman...

Chairman, House National Security Committee

The President’s FY1999 Defense Budget:

The Risks Continue to Grow

The President’s budget

proposes $100 billion in new

domestic spending, but not

one dime to increase defense

spending...

My colleaguesin the House

and many in Washington may be tired

of hearing the same

old refrain on the

seriousness of the

problems confronting our military. But as the problems

get worse and solutions get harder to

come by, the frustration level rises.

I am frustrated that the President devoted only one sentence in a lengthy

State of the Union speech to the need

to maintain a ready and modern force.

The President warned in a recent

speech at the National Defense University that “we must never, never take our

nation’s security, or those who provide

it, for granted.” He went on to say that

“our obligation to our servicemen and

women is to do all we can to help them

succeed in their missions; to provide

the essential resources they need to get

the job done.” I am frustrated that the

gap between rhetorical promises and

budget and operational reality is growing.

I am frustrated that the President is

either unaware of, or has chosen not to

acknowledge, the seriousness of readiness, quality of life and modernization

problems the military services and the

congressional defense committees confront on a daily basis. I am frustrated

that the President’s federal budget sub-

— continued on page 3 —

— continued on page 4 —

President Clinton’s defense budgetrequest of $270.6 billion for fiscal year

(FY) 1999 represents a real decline of 1.1

percent from current spending levels and

continues a 14-year trend of real decline

in defense spending — over 39 percent

decline from mid-1980s levels. It also represents a continuation of the defense

budget “status quo” – much-needed,

long-term investment to recapitalize the

U.S. armed services are being mortgaged

to pay for short-term underfunded operating and sustainment needs.

The FY 1999 defense budget request

represents approximately 3.1 percent of

the nation’s gross domestic product,

down by more than 50 percent from the

mid-1980s level of 6.3 percent. Continuing a downward trend, the FY 1999 defense budget request, when measured in

constant dollars, represents the smallest

defense budget since the beginning of

the Korean War in 1950. These downward trends will continue, and indeed be

exacerbated by the proposed growth in

domestic spending in the President’s federal budget request. Under the President’s

budget proposal, entitlements and domestic discretionary outlays will

enjoy substantial real increases, while outlays for

defense will suffer real decline in the years ahead.

Within the defense

budget topline, there

have been marginal adjustments to major budget accounts from current

(FY 1998) spending levels, but almost all are

slated to decline when

measured in constant

dollars. The FY 1999 budget request includes: $70.8 billion for military personnel, compared to the $69.7 billion appropriated by Congress in FY 1998; $94.8 billion in operations and maintenance, versus $94.4 billion enacted last year; $48.7

billion in procurement, versus $44.8 billion last year; $36.1 billion in research and

development versus $36.6 billion enacted

last year; $4.3 billion in military construction, versus $5.1 billion in FY 1998; and

$3.5 billion in family housing, versus $3.8

billion appropriated last year. The request

also includes $12.9 billion for Department

of Energy defense programs versus $12.7

billion enacted last year.

The administration’s FY 1999 defense

budget request also fails to redress the

mismatch between the national military

strategy and the forces and budget resources necessary to support it. Indeed,

the demands of the national military strategy continue to grow even as the defense

budget continues to decline. As reflected in the Pentagon’s Quadrennial

Defense Review, the national military

$250

$275

$300

$325

$350

$375

$400

$425

19861987198819891990199119921993199419951996199719981999

Fiscal Year

Billions of FY1999 Dollars

Defense Spending

FOURTEEN YEARS OF

DECLINING DEFENSE BUDGETS

Source: President’s FY 1999 Defense Budget
National Security Report 3

Contingency Operations: Billion-Dollar Asterisks

President Clinton’s FY 1999 defensebudget request is as notable for what

it does not contain than what it does.

When it comes to paying for the peacekeeping, humanitarian relief and similar

“contingency” operations that have become an increasing burden for U.S. military forces in recent years, the President’s

budget request once again contains a

number of asterisks.

The single biggest and most expensive

asterisk is the likely bill for next year’s

operations in Bosnia. Defense Secretary

William Cohen recently testified

before the House

National Security

Committee that

the expected cost

of U.S. military operations in Bosnia

for FY 1999 is approximately $2 - $3

billion. Although

the fiscal year will

not begin until

October, and the

Administration

has understood

for some time that

the Bosnia mission would be extended, no funding for Bosnia operations was included in the defense budget request. The Administration has announced plans to submit a budget

amendment in the coming months for

Bosnia expenses in FY 1999.

Though this allows the Administration

to request additional funds above the levels for defense called for by the Balanced

Budget Act of 1997, it may compel Congress to choose between breaking the

budget agreement or accommodating the

unfunded Bosnia costs by dramatically

cutting an already underfunded defense

budget. This problem of the costs of next

year’s Bosnia operations being excluded

from the defense budget request will also

be compounded by the Administration’s

announced plan to submit a request for

supplemental appropriations for the current fiscal year (FY 1998) for ongoing operations in Bosnia and Southwest Asia.

It is likely that this supplemental request

will exceed $1 billion. The

Administration’s supplemental request is

expected to be submitted with an “emergency” designation, which means it will

not include spending offsets.

A combination of the Administration’s

expansive foreign policy that requires the

sustained commitment of U.S. military

forces abroad, matched with a defense

budget which fails to adequately budget for such operations has resulted in

neglected modernization programs and

deteriorating force readiness. These

problems are not new, they are simply

growing. Since 1993, the cost of

unbudgeted contingencies has been

approximately $13 billion. By comparison, the Marine Corps’ total procurement budget over the same time period

has been only $4 billion. The Army’s

FY 1999 costs for operations in Bosnia

will exceed its planned expenditure for

major procurements such as wheeled

and tracked vehicles, or aircraft, or missiles.

Indeed, the involvement of U.S. military forces in unbudgeted contingency

operations has been a persistent feature

of the Administration’s foreign policy.

Operations in Bosnia and Southwest Asia

have become established long-term presence missions and have been provided

for partially in defense budget requests.

But the Administration has not fully covered these costs and has consistently

relied on requests for supplemental appropriations. It is

these unanticipated requests

which have been

offset by decreases to other

defense programs that contribute to the continuing migration

of resources from

necessary longterm investment

accounts.

These peacekeeping, peacemaking, humanitarian relief and

similar contingency operations

have cost over

$15 billion from

1991 through

1998. This number is likely to grow by

billions of dollars when the level of U.S.

military presence in Bosnia after June 1998

is determined, and as a result of the deepening crisis with Iraq. Operations in the

former Yugoslovia alone account for $7.1

billion through June 1998. And these

costs are rivaled by the costs in Southwest Asia since the Gulf War. To date,

prior to any possible future strikes against

Iraq, these operations have cost $4.7 billion since 1991. Among other contingencies, Haiti and Cuba account for $1.4 billion, and several smaller operations, such

as those in Somalia and Rwanda, account

for the remaining $1.9 billion.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1991 1993 1995 1997

Haiti/Cuba

Other

Southwest Asia

Former Yugoslavia

Fiscal Year

Billions of Dollars

COSTS OF CONTINGENCY OPERATIONS

Total = $16 billion from 1991 to 1998

Source: HNSC Staff
National Security Report 3

mission proposes more than $100 billion

in new domestic spending above the

spending caps, but fails to propose one

dime in increased defense spending.

Although the Administration has allowed the Department of Defense keep

approximately $21 billion dollars worth

of inflation windfall and to allow the Department not to budget what I suspect

will be $10-$15 billion dollars over the

next five years in Bosnia costs, I am frustrated that this budget continues to “rob

Peter to pay Paul.”

This year’s request for the procurement

of new weapons systems is $2 billion

dollars less than was projected for fiscal

year 1999 at this time last year. And it is

about $5 billion dollars less than was projected for fiscal years 1999 and 2000. This

year’s research and development request

is $600 million dollars below current

spending levels and is projected to decline by 14 percent over the next five

years. In the military construction accounts, this budget is $350 million dollars less than was projected for fiscal year

1999 at this time last year, is $1.4 billion

dollars below current spending levels,

and is an astounding $600 million dollars

below even last year’s request. The unfortunate and all-too-familiar bottom line

is that the long-term investment accounts

are once again paying for short-term

underfunded operating and support requirements.

Though the FY 1999 defense budget

request is the President’s responsibility,

this year Congress also takes on a larger

share of responsibility for the lack of viable solutions. Along with a majority of

my colleagues, I voted for the budget

agreement which locked in the

President’s low defense spending numbers starting in fiscal year 1999. As I

said at the time, I believed the budget

agreement was a step in the right direction for the nation’s long-term economic

security, but a step backwards for our

national security.

As I continue to struggle with these

frustrations, I found particularly interesting a recent Washington Post op-ed by

Robert Samuelson. He observed that the

balanced budget is largely the result of

some recent economic luck and, on the

spending side of the ledger, of more than

a decade of real cuts in defense spending – i.e., the “peace dividend” has

played a major role in producing our economic fortune and balanced budget.

Samuelson rightly argued that the reason cuts in defense have been largely

ignored in discussions of how the balanced budget has been achieved is because they are “politically inconvenient”

since, among other things, the cuts may

have gone too far.

I think all of us who are struggling to

address the services’ shortfalls are confronting this political “inconvenience.”

As Speaker Gingrich indicated in a recent National Review article, fixing what

is wrong with defense will require more

than reform-generated savings – it will

require increased spending. But increasing the defense budget will be “inconvenient” as politicians of both parties and

in both branches of government seek

additional debt reduction, tax cuts, more

social spending or some combination of

all three in a balanced budget environment.

And if the President refuses to use his

“bully pulpit” on the issue of defense

shortfalls, increased spending will also

prove to be “inconvenient” for many of

us. Not knowing that our military is having problems, average Americans — our

constituents — are far more likely to see

an immediate short-term benefit from a

tax cut or increased social spending than

they are from increasing the defense budget. In a world where politics and policymaking are increasingly driven by polls,

addressing serious defense shortfalls

unfortunately does not even rate an

“honorable mention.”

Despite the growing frustration and the

magnitude of the problem, our responsibility to continue to seek solutions to

these problems, even if “inconvenient,”

has not lessened.

It may be, with neither the President

nor the Congress willing to commit additional resources to an underfunded defense program this year, that the real defense debate is about to begin. It also

may be that by trying to fix some of the

services’ problems through the unprecedented step of increasing the President’s

defense budget these past three years,

Congress dared to put problem-solving

ahead of polling data. It may be that longterm solutions to quality of life, readiness

and modernization problems will not be

found until the force “breaks” somehow

– let us hope not in a serious defeat and

tragic loss of American life — and public

opinion demands that we fix it, regardless of cost. In this politically-charged

and fiscally-constrained environment,

there is a lot of concern and frustration,

but also an ominous lack of commitment

to take the steps necessary to solve the

problem. I certainly do not have the answers right now, but neither, I believe,

does the President’s budget.

What we are then left to face is not the

task of strengthening our military power

in order to protect and promote the

nation’s global interests and ensure its

superpower status. Instead, we are confronted with the challenge of having to

manage the growing risk associated with

a shrinking force being asked to do more

with less. This strategy is reactive, not

proactive. And it is not the foundation

from which a viable post-Cold War security strategy can be built.

From the Chairman: Put

Problem-Solving Above Polling

— continued from page 1 —

Opening statement of Chairman Spence,

Posture Hearing with Secretary Cohen

and General Shelton,

February 5, 1998
National Security Risks Continue to Grow...

— continued from page 1 —

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Source: FY 99 President’s Budget

Mandatory

Outlays

INCREASE 35%

Domestic

Discretionary

Outlays

INCREASE 15%

Defense

Discretionary

Outlays

DECREASE 33%

DEFENSE ONLY MAJOR SPENDING

CATEGORY TO DECLINE FROM

FY 1991 TO FY 2001

Percentage Real Change in Outlays

strategy now acknowledges the need to

“shape the international environment”

through multiple and prolonged peacekeeping missions, the need to prepare

now for an uncertain future dominated

by rapidly changing technology, and the

traditional requirement to be able to fight

regional wars in Southwest Asia and in

Korea. Studies done

for the defense review

indicate that U.S.

forces would not be

able to maintain their

current pace of operations and respond to

regional crises in a

timely fashion.

In addition, the FY

1999 defense budget

request does not

match the defense

review’s rhetoric when

it comes to preparing

for the future. The request continues the

neglect of long-term

investment programs

necessary to modernize aging equipment

as they continue to be

cut to pay for nearterm readiness- and personnel-related

shortfalls. For example, the FY 1999 procurement request of $48.7 billion is $2.0

billion less than the administration’s own

estimates from last year indicated would

be necessary in FY 1999. Additionally,

this year’s procurement request includes

items not traditionally funded in procurement accounts, such as strategic sealift.

Such reclassification has the effect of artificially inflating the administration’s procurement request.

Given past patterns, it is likely that

funds will continue to be stripped from

the modernization accounts to offset

readiness shortfalls. As a result of Defense Secretary William Cohen’s Defense

Reform Initiative, the FY 1999 defense

budget request includes “negative funding wedges” in the operation and maintenance accounts – savings in anticipation of yet-to-be implemented managerial changes and infrastructure reductions. Should these changes not be

implemented or should they fail to deliver the anticipated savings, the requirement to move additional modernization

funds into operation and maintenance

accounts will increase. This perpetual

“tax” on modernization resources is also

likely to be exacerbated by the unresolved issues of additional funding for

increased operations in Southwest Asia

and for the continuing U.S. military presence in the former Yugoslavia [see

page 2].

Beyond uncertainty over the funding

of contingency operations, another

source of uncertainty about the

President’s defense budget request is the

so-called “outlay scoring” dispute between the Congressional Budget Office

(CBO) and the Office of Management

and Budget (OMB). While technical in

nature, this problem could force the Congress to cut billions of dollars from the

President’s defense budget request.

Once again, CBO has disagreed with the

lower defense outlay projections of OMB.

Preliminary estimates from CBO indicate

that the administration may have underestimated the level of defense outlays in

FY 1999— funds actually expended in the fiscal year and thus the

key to deficit or surplus

calculations — by at

least $2.5 billion (and

possibly as much as $4

billion). The primary

cause of the dispute

appears to be a disagreement over the

rate at which prior year

appropriations are

spent. The OMB calculations result in

lower outlay spending

estimates than is the

case with CBO.

Although OMB and

CBO have frequently

disagreed over the correct level of defense

budget outlays, the

magnitude of the disagreement has

grown significantly larger during the past

two years. Since defense spending levels are now capped by the 1997 Balanced

Budget Act, OMB’s outlay estimates permit the Administration to claim its defense

budget is consistent with the spending

caps contained in the Act. But CBO is

likely to score the President’s budget request as exceeding the Balanced Budget

Act’s spending caps. Since the Congress

traditionally has abided by CBO estimates,

the defense committees may have to cut

the President’s defense budget request

by billions of dollars in order to bring defense outlay estimates into compliance

with the limitations imposed by the Balanced Budget Act of 1997.

The National Security Report is archived on the House National Security Committee website at: http://www.house.gov/nsc. Additional background

information may be obtained from Tom Donnelly (x65372), David Trachtenberg (x60532), or Michelle Spencer (x53036) on the committee staff.

4 National Security Report